CarMax sold more used cars. The part that made me stop was what it earned on each one.
In results released September 29, the company reported stronger sales and earnings for its fiscal second quarter. Yet gross profit on the average retail used vehicle slipped by $111 from a year earlier.
That sounds like a contradiction until the dealership, the finance desk and the price tag are separated.
So is this a healthier used-car business, or one working harder for each sale?
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Key Takeaways
- For the three months ended August 31, 2026, CarMax (NYSE: KMX) reported retail used-unit sales up 13.8% and total revenue up 19.5% to about $7.9 billion.
- Gross profit per retail used vehicle fell from $2,216 to $2,105. More units nevertheless lifted aggregate retail used-vehicle gross profit by 8.1% to $478.6 million.
- Diluted earnings per share rose from $0.64 to $1.16, but that result also reflects finance income, other profit streams and expense leverage—not a fatter margin on each car.
- One quarter does not prove a lasting industry recovery. The next test is whether volume can hold up without further pressure on per-car profit or auto-loan quality.
Original chart from CarMax FY2027 Q2 results released September 29, 2026; figures checked October 1, 2026.
More cars, less gross profit on each one
The company's earnings release gives a useful little puzzle. CarMax sold 227,391 retail used vehicles in fiscal Q2, compared with 199,729 a year earlier. Average retail used-vehicle gross profit was $2,105, down $111. Multiply the units by the per-unit figure and you get roughly $478.6 million of retail used-vehicle gross profit, versus about $442.6 million last year. The total rose because many more cars passed through the business even though each one contributed less gross profit.
CarMax says its lower per-unit profit reflects pricing actions intended to support sales. The average retail selling price also rose 6.3% to $27,623. That does not mean the company simply kept more of a higher sticker price: the spread between selling price and vehicle cost is the relevant measure here. In other words, higher prices, higher unit volume and a thinner gross profit on each car can all be true at once.
Why did earnings rise faster than retail car profit?
Retail vehicles are only one line of the story. CarMax's Auto Finance division reported $135.6 million of income, up 32.1% year over year. The company said a lower loan-loss provision than a year earlier helped, and it also recorded a $16.6 million gain on the sale of auto loans. Extended protection plans and service contributed to other gross profit. Meanwhile, selling, general and administrative expense per combined retail-and-wholesale vehicle fell by $157, even though total SG&A spending increased.
Those moving pieces help explain why diluted EPS reached $1.16 versus $0.64 a year ago. I would be careful with the shorthand “used-car margins recovered.” CarMax's reported gross profit per retail car actually declined. Nor is a finance-income boost automatically permanent: credit performance and funding costs can change. Its allowance for loan losses was 3.07% of auto loans held for investment at August 31, up from 2.95% at May 31, another reason to keep watching the loan book.
Related Companies
CarMax (KMX, NYSE) is the direct subject of the results. Its business turns a vehicle acquisition into a retail or wholesale sale, and often into financing or a protection-plan relationship. The investment question is not simply “Did unit sales rise?” but whether volume, gross profit per vehicle, credit losses and operating costs together produce durable earnings and cash flow. The company also plans to resume share repurchases in its next fiscal quarter; that is a plan, not a repurchase already made in the reported quarter.
Carvana (CVNA, NYSE) belongs here only as an industry comparator, not a beneficiary of CarMax's quarter. Carvana's own July 29 release reported 197,325 retail units sold in the quarter ended June 30, up 38% year over year. The companies have different models and the quarter-end dates differ, so a straight margin comparison would be misleading. CarMax's September numbers cannot tell us what Carvana will report for its next quarter.
Investment Watchpoints
The next CarMax report should answer whether its pricing approach keeps drawing buyers without pushing retail gross profit per unit down further. I would also compare comparable-store unit growth with total unit growth, watch wholesale margins and finance-loss provisions, and look at expense per vehicle. Together, those figures show whether scale is improving the business rather than merely making the revenue line bigger.
The counterargument is simple: buying more sales with thinner per-car economics works only while enough volume, ancillary income and cost control remain. Higher vehicle prices can also discourage buyers, and financing conditions can turn. This is an explanation of the reported business mechanics, not a recommendation to buy or sell KMX or CVNA.
Appendix. What “gross profit per unit” leaves out
Retail used-vehicle gross profit per unit is the gross profit on retail used vehicles divided by the number of those vehicles sold. It is not earnings per share, net income or cash generated per car. Finance income, protection plans, wholesale operations, corporate expenses, taxes and share count all sit elsewhere in the earnings picture. That is why a falling per-car figure can coexist with higher total profit for a quarter.
Sources and Update
- CarMax fiscal second-quarter 2027 earnings release, September 29, 2026; quarter ended August 31, 2026.
- Carvana second-quarter 2026 earnings release, July 29, 2026; quarter ended June 30, 2026.
- Reuters coverage of the CarMax results, September 29, 2026.
Sources checked October 1, 2026. This article recovers a missed September 30 publishing slot; it does not describe a new October 1 earnings release.
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