Carmax Inc · NYSE:KMX
Carmax — Investor Day (October 2024)
24 slides from Carmax's investor day presentation, Oct 15, 2024
Slide 1: CarMax Credit Investor Day
CarMax Credit OCTOBER 15, 2024 Investor Day
Slide 2: Our Credit Platform Drives Value at SCALE
Our Credit Platform Drives Value at SCALE “Tier 1” - CarMax Auto Finance (CAF): Typically 40-45% of all CarMax retail vehicle sales ($8+ Billion annually) Exclusive view and first decision on all applications GOAL: Capture finance income but also drives sales “Tier 2” - Broad set of lenders pa
Slide 3: Our Credit Platform Drives Value at SCALE
Our Credit Platform Drives Value at SCALE APR Range/ FICO* “Tier 1” - CarMax Auto Finance (CAF): Typically 40-45% of all CarMax retail vehicle sales ($8+ Billion annually) 7-18% Exclusive view and first decision on all applications 727 GOAL: Capture finance income but also drives sales “Tier 2
Slide 4: CAF penetration has been relatively stable, but efforts are underway to support growth
CAF penetration has been relatively stable, but efforts are underway to support growth. Percentage of Sales by Tier 50.0% CAF volume has stayed relatively consistent but can 45.0% flex as needed. 40.0% 35.0% Higher credit customers often bring cash or have a 30.0% credit union affiliation. 25.0% 20.
Slide 5: Our Credit Platform Drives Value at SCALE
Our Credit Platform Drives Value at SCALE “Tier 1” - CarMax Auto Finance (CAF): Typically 40-45% of all CarMax retail vehicle sales ($8+ Billion annually) Exclusive view and first decision on all applications GOAL: Capture finance income but also drives sales “Tier 2” - Broad set of lenders pa
Slide 6: CAF portfolio Net Interest Margin has stabilized at ~6.0%
CAF portfolio Net Interest Margin (NIM) has stabilized at ~ 6.0% following a period of rapidly decreasing and increasing interest rates. Historical Norms Stabilized 6
Slide 7: CAF contribution has grown over time, with outsized growth in high NIM periods
CAF contribution has grown over time, with outsized growth in high NIM/lower provision periods. 7
Slide 8: The provision has increased as credit losses have grown from pandemic lows
The provision has increased as credit losses have grown from the low levels seen during the pandemic period. 8
Slide 9: Loss Performance
Loss Performance 9
Slide 10: Credit bureau data illustrates industry-wide worsening in auto loan performance
Credit bureau data illustrates the industry-wide worsening in auto loan performance, which is accentuated in the Used space. 10
Slide 11: Industry-wide performance worsening seen in Prime and non-Prime segments
Industry-wide performance worsening can be seen in the Prime and non-Prime segments. 11
Slide 12: Newer ABS deals show slight improvement, but still have pre-tightened vintages
Newer ABS deals show slight improvement, but these securitizations still have pre-tightened vintages as a sizeable piece of each deal. 12
Slide 13: Newer ABS deals are benefitting from tightening: 2023-3
Newer ABS deals are benefitting from tightening: 2023-3 A breakdown of recent ABS deals by monthly origination vintage illustrates the impact of the April 2023 tightening. Vintages originated pre-tightening (solid lines) are experiencing significantly higher loss rates than those originated post-tig
Slide 14: Newer ABS deals are benefitting from tightening: 2023-4
Newer ABS deals are benefitting from tightening: 2023-4 Pre: 34% Post: 64% Pre/Post represents the % of receivables in each deal at closing. 14
Slide 15: Newer ABS deals are benefitting from tightening: 2024-1
Newer ABS deals are benefitting from tightening: 2024-1 Pre: 20% Post: 80% Pre/Post represents the % of receivables in each deal at closing. 15
Slide 16: Newer ABS deals are benefitting from tightening: 2024-2
Newer ABS deals are benefitting from tightening: 2024-2 Pre: 12% Post: 88% Pre/Post represents the % of receivables in each deal at closing. 16
Slide 17: Full Spectrum
Full Spectrum 17
Slide 18: Our Credit Platform Drives Value at SCALE
Our Credit Platform Drives Value at SCALE “Tier 1” - CarMax Auto Finance (CAF): Typically 40-45% of all CarMax retail vehicle sales ($8+ Billion annually) Exclusive view and first decision on all applications GOAL: Capture finance income but also drives sales “Tier 2” - Broad set of lenders pa
Slide 19: Underwriting the entirety of the credit spectrum requires a segmented approach
Underwriting the entirety of the credit spectrum requires a segmented approach. % of App Volume CAF’s core originations 100% TIER 1 20+ years of underwriting experience 95%+ of origination volume CAF testing in Tier 2 since 2022 Test TIER 2 Can be either exclusive and/or head-to-head Mus
Slide 20: CAF has been testing in the higher portion of Tier 2 leveraging the Tier 1 model
CAF has been testing in the “higher” portion of Tier 2 leveraging the Tier 1 model. 750+ 750 - 700 700 - 650 650 - 600 600 - 550 550 - 500 <500 20
Slide 21: CAF's new model allows testing across the entirety of Tier 2
CAF’s new model allows for testing across the entirety of Tier 2 as well as updating the current Tier 3 strategies. 750+ 750 - 700 700 - 650 650 - 600 600 - 550 550 - 500 <500 21
Slide 22: CAF may find value in the entirety of Tier 2 & Tier 3, or in distinct pockets
CAF may find value in the entirety of Tier 2 & Tier 3, or in distinct pockets, complementing our partners’ offers to drive additional sales. 750+ 750 - 700 700 - 650 650 - 600 600 - 550 550 - 500 <500 22
Slide 23: Full-spectrum dual securitization strategy brings added capacity and flexibility
The full-spectrum dual securitization strategy executed in Q2 brings added capacity and flexibility. The new full-spectrum models realize the value from this added capacity and flexibility. Historic New Highlights of dual securitization strategy: Prime Securitization Securitization Higher Prime Tier
Slide 24: Q&A
Q&A 24