Carmax to Lose 5,000,000

Carmax to Lose $75,000,000

What’s going on youtube family welcome to automotive life my name is lucky and today we’re gonna be going over carmax’s second quarter numbers we’re going to go over why carmax is expecting to lose 75 million dollars we’re going to take a deeper dive on what these numbers mean and what it actually is pointing to where the automotive market is actually going because

Carmax is a relatively very progressive automotive company and they do a lot of things to kind of steer away from pitfalls and if carmax is struggling now what does that mean for carvana vroom and some of these other manufacturers and automotive companies so stay tuned to the end it’s very important there’s gonna be a lot of crazy stuff we’re going to discuss and if

You’re new to the channel make sure you squeeze the like button also please uh subscribe we post great stuff like this all the time and if you have any questions or any comments always put them in the comment section below i try to answer as many as i can or if you have an opinion that’s different for mine or you’d like to share anything i love to hear from you guys

So let’s go ahead and get in the video a lot of financial institutions are talking about carmax now carmax is the largest used car our retailer in the united states they sell over 200 000 cars a year now the second quarter numbers are extremely important because this is going to tell us where the used car market is going and if a company like carmax is struggling

In this current climate and economy what does that mean for somebody like carvana in vroom so a lot of people don’t know this but carmax actually makes money three different ways from retail units from financing and wholesale we’re going to go over numbers for all three we’re going to go over carmax’s retail numbers and then we’re going to talk a little bit about

Them on what they actually mean so the retail unit sales are down by 6.4 percent so far gross profit per unit was 2282 which was an increase of 97 per unit um that’s on a total of two hundred and sixteen thousand nine hundred and thirty nine units so what this means is we know that retail cells are down and it’s not because of supply carmax is running at 93 of

What they normally are so they have more than enough cars if you drive by any carmax and most dealerships you will see they have a lot of cars the reason why is because it’s the softening of the market credit is getting harder to get people are not getting qualified for much and to be honest with you a lot of the retail customers are flat out tired of these over

Inflated prices over inflated costs and they just don’t want to do it plus the the fear of missing out the fomo is gone people know that the car market is softening and they’re waiting they’re being intelligent they’re holding off so we’re going to see sales declines like this pretty often some of the newer car manufacturers i think it was kia and hyundai we’re

Talking about a 13 to 14 decrease just this year alone and they’re expecting it to get into the low 20s by december so we want to keep track of these numbers and see how it’s going but carmax like i said is the largest used carpenter so if they’re slowing down by 6.4 percent it’s going to be probably a lot bigger for companies like carvana in vroom now we’re going

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To talk about finance and i’m truly shocked this is not headline news this is very important if anything tells the way auto loans are trending on the down and basically reinforced what we talked about nine months ago this is definitely indicative of that carmax auto finance income has decreased by 8.6 percent to 182 million dollars driven by a 40 million dollar

Year-over-year swing and provisions for loan losses so what does this mean well part of cecl is you’re required to put x amount of dollars away for expected losses all financial companies do this to offset their risk and offset their debt it’s part of a regulation that came out i believe in 2017 or 18. top nugget bailed out by other companies or the government

Now this quarter’s loan provision was 75.5 million dollars compared to last year’s 35 million dollars so that just shows you how far the delinquencies have gotten how crazy it’s been how over inflated the numbers got and how much they over lent on people’s cars they’re expecting a 75 million dollar loss hence that’s why i got the name for the title now the reason

Why this is so important is because we talked about auto loan deficiencies in multiple videos and people freaked out and they said it’s not that bad there’s not that many repos they don’t see them at the auction every single financial institution google cecl are talking about this massive banks wells fargo bank of america ally everybody is extremely worried on the

High risk and high rise of deficiencies deficiencies are currently right now at the same rates of 2008 it’s hard to believe now deficiencies mean you’re late or you’re you know you’re a few days late you’re back whatever 60 days it does not mean that they’re being repoed right now so that just shows you there’s a lot more people that are not making their payments

On time and what happens little by little they’re late but then they get 60 days 90 days and then it goes out for repo so everything is spelling repos in the upcoming future which is gonna basically soften the market even more and hopefully bring down prices let’s go over the third way carmax makes its money and that’s wholesaling cars now a lot of people didn’t know

Carmax actually wholesales more cars than they actually retail and back in the day they actually made more money from wholesaling than they did retail but not anymore let’s look at the new numbers um total wholesale units have decreased by 15 gross profit per unit of 881 one dollars is a decrease of a hundred and twenty four dollars per unit and they wholesaled

About 322 543 units now the reason why it’s decreased i believe is because of people like carvana vroom and all these other clowns that are coming up we buy cars come see us are massively overpaying on vehicles now i see a total decrease of wholesale units 15 i don’t see that as a bad thing when it comes to carmax because carmax like i said is a little bit more

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Forward thinking i feel that they’re not overpaying for cars they’re being more conservative so therefore they’re not losing as much money as somebody compared to like carvana or vroom where they’re just overpaying for ridiculous stuff now they lost about 124 dollars per unit this just shows another thing of the market softening and a lot of retail people and

Regular people and consumers don’t know this every carmax that you see usually has an auction house attached to it and here in vegas on thursdays is carmax day so we actually go down there and we check out the cars now the reason why so many people love carmax auctions is because they’re very transparent when it comes to their cars some of you guys may have good

Experiences some of you may have bad experiences i’ll go over the pros and cons of each so when you buy a car from carmax carmax will be like hey runs and drives but transmission feels weird or caution transmission slipping they will tell you what it is and then if you get a car and let’s say the transmission is bad but they didn’t say anything a lot of times carmax

Will buy it back from you which is a very good thing so a lot of dealers will go to carmax take bigger shots and bigger risks on cars because they know the carmax will take it back if they have any major problem so how does that help carmax and how does that hurt dealers well it helps carmax because a lot of these dealers will overspend at some of these cars they

Will buy and take bigger risks on these vehicles and how does this actually hurt carmax well a lot of people will do it they’ll buy a car try to retail it for a week or two and if they can’t flip it wholesale or do whatever they’ll take it back and say there’s some sort of issue keep pushing and eventually sometimes carmax will fold and take it back and just run

It back through the lane now a lot of people don’t know this on the retail end but carmax is where a lot of the kicked out or burned dealers go to purchase cars and this is why a lot of the prices are over inflated when it comes to carmax cars um when you get what’s called kayode which means you’ve either burned a bank burned an auction house like manheim odessa

You get put in this book called the kale book and that means you are not allowed to shop at either carmax let me see me uh manheim or odessa so the only place these dealers have left to go to buy cars is carmax and you may think that well there’s probably not a lot of dealers that that are that have burned other auction houses and burned banks there are a lot so we

Always make the jokes of the biggest buyers at carmax are usually the people they got kicked out of all the other auctions and carmax is the last place they can purchase cars now carmax is starting to take more and more different floor plans or flooring lines or lines of credit for accepting of payments when i used to buy there about seven ten years ago they didn’t

Take that stuff they wanted cash so we got really good deals but they got smart saw the other auction houses were doing and they were financing 100 of what they were buying at the auction even if it was over retail they would pass it on to the lines of credit or the flooring lines and they would get stuff with these payments so the fact that there are increased i

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Mean excuse me their profit is down 124 dollars per unit shows that there’s less confidence in dealers because this whole mystique of people saying oh cars are still overpriced everything else dealers will only sell the cars what they’re into them for so a lot of these guys are still over buried in these cars so they refuse to take down the uh prices but on the

New cars they’re purchasing this is where you’re going to see the price reductions they’re not paying as much for them you can look at numbers like this you can look at numbers like on black book wholesale or mmr which is on mannheim’s website cox automotive you can see that it’s trending downwards so this number tells me that one like i said carmax is getting

Smarter they’re not buying as many units they’re wholesale units yes they’re losing a little bit of money but it’s not that bad now just imagine somebody like carvana carvana overpaid massively and they bought odessa to run their crappy cars through every dealer knows when the car runs to the auction it says carvana they’re just going to keep lowballing it because

They know eventually they have to get rid of their units because they’re not retailing enough and we’re going to be making a video about carvana and vroom here very shortly i’m waiting for the numbers to come out for them i guarantee you it’s going to be absolutely horrendous i’m not a financial advisor but i am personally going to be shorting these people because

I know it’s going to spell doom for both of these people i know both their stocks are in the in the mud anyways i know how much lower it can go but i’m sure it can go even lower but anyways i want to thank you guys so much for watching um it means a lot to me if you put something in the comment section below what are your thoughts and opinions of the current

Market what are your thoughts and opinions of carmax are they doing good are they doing bad what do you guys think carvana’s gonna what’s gonna happen to carvana in vroom when their second quarter numbers come out i believe it’s going to be in the beginning of november which once those come out i’m going to make a really big video and i’m going to get a lot of my

Financial buddies to get on the the line with me so we can talk more about what this means and how their debt hollow is going to basically explode in their face and how they’re going to be facing bankruptcy because i’ve been saying it forever i know a lot of people thought i was crazy about it six months to a year ago but everything we talked about literally is

Coming to fruition so i can’t wait but anyways i want to thank you guys so much for watching and we’ll see you next video foreign

Transcribed from video
Carmax to Lose $75,000,000 By Lucky Lopez