CarMax (KMX 0.83%) is the largest used vehicle retailer in the U.S. and one of the largest operators of wholesale auctions for used vehicles. It's also a publicly traded company, meaning anyone with a brokerage account can buy CarMax stock.
CarMax is known for its no-haggle pricing, with salespeople receiving the same commission no matter what vehicle you buy. Its financing division finances roughly 43% of vehicles purchased through CarMax.
But CarMax has struggled recently as new car prices have dropped, and the used car supply remains tight. Higher interest rates have also put pressure on CarMax's sales. Despite these challenges, could CarMax stock be a buy? Continue reading to learn about who should consider investing in this stock and who should stay on the sidelines.
Stock
How to buy
How to buy CarMax stock
Because CarMax is a publicly traded company, anyone can buy shares. To buy stock in CarMax or any other company that's listed on a major U.S. stock exchange, follow these steps:
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Should I invest?
Should I invest in CarMax stock?
Automotive stocks, such as CarMax, are cyclical in nature. When consumers have less money to spend, they'll often keep their older vehicles longer. Because CarMax finances almost half of the vehicles it sells, the company is also vulnerable to loan losses if customers can't afford their car payments.
Investing in CarMax could make sense if:
- You're comfortable investing in cyclical stocks and would stay the course during a downturn.
- You believe that CarMax's heavy investment in its omnichannel platform gives it a wide economic moat.
- You already own a diversified portfolio and want more exposure to consumer discretionary stocks.
- You believe CarMax can grow its market share for used car sales.
- You think CarMax will benefit from President Donald Trump's tariffs because more customers will buy used vehicles instead of new ones.
Investing in CarMax is best avoided if:
- You believe high interest rates will stick around for a long time and continue to put pressure on CarMax's sales.
- You're worried that a recession is imminent.
- You predict that new car prices will hold steady or decrease, prompting customers to favor new vehicles over used ones.
- You're seeking investment income and know that CarMax has never paid a dividend.
Profitability
Is CarMax profitable?
Yes, CarMax was profitable in its most recent fiscal year, which ended in February 2025. The company reported a gross profit of almost $2.9 billion for the fiscal year, a 6.8% increase from the previous year.
CarMax reported diluted net earnings per share (EPS) of $3.21, up from $2.75 the previous year. EPS for its fourth quarter was $0.58, a spike of 81% from the final quarter of the previous fiscal year. However, the stock's price crashed by 17% in a single day because it still fell slightly short of analyst expectations.
One factor that apparently rattled investors was CarMax's decision to withdraw its timeline for achieving its targets of $33 billion in annual revenue, 2 million used vehicle sales per year, and a 5% market share on sales of used vehicles more than 10 years old. The company aimed to hit these goals between 2026 and 2030.
During an earnings call, CEO Bill Nash said the decision "wasn't pessimistic." He added, "Why put a target out there that's really speculative, not knowing exactly where this environment is going to go?"
Trump's tariffs are a looming source of uncertainty for CarMax. Some analysts have speculated that auto tariffs could be a boon to CarMax if customers turn to used cars due to the skyrocketing prices of new cars. But higher used car prices mean that CarMax also pays more to acquire used vehicles, which would likely squeeze CarMax's profit margins, as would paying more for car parts due to tariffs.
If tariffs and an ongoing trade war plunge the economy into a recession, both new and used vehicle sales would likely tank. A tighter credit market and higher auto loan default rates would likely hit CarMax hard, considering it finances about 43% of the vehicles it sells.
Dividends
Does CarMax stock pay a dividend?
CarMax has never paid a dividend, and investors shouldn't expect this to change anytime soon. According to its 10-K filing, the company intends to retain earnings for operational costs and to expand its geographic reach. The report states that management doesn't expect to pay a dividend in the foreseeable future.
ETF options
ETFs with exposure to CarMax
If you're unsure about buying individual shares of CarMax, you could invest in an exchange-traded fund (ETF) that provides exposure to CarMax. An ETF is a collection of many different stocks that trade as a single security on stock exchanges.
Exchange-Traded Fund (ETF)
The advantage of investing in an ETF is that you spread your risk across many companies, so you're less likely to sustain steep losses. There are many different ETFs with exposure to CarMax. Here are a few to consider:
- First Trust S-Network E-Commerce ETF (NYSEMKT:ISHP): This ETF invests in e-commerce stocks with a minimum market capitalization of $100 million. CarMax has been included in its 60 holdings and had a weighting of 1.46% as of mid-2025. The ETF's expense ratio is 0.60%, which translates to fees of $60 if you invest $10,000 in the fund.
- Invesco S&P 500 Equal Weight Consumer Discretionary ETF (NYSEMKT:RSPD): This fund invests in the consumer discretionary stocks represented in the S&P 500 index, assigning each company an equal weighting. CarMax has been among its 51 holdings. The fund has a 0.40% expense ratio, which means you'd pay $40 in fees on a $10,000 investment.
- SPDR S&P Retail ETF (NYSEMKT:XRT): This ETF invests in an index of retail stocks and had 76 holdings as of mid-2025. Automotive retail stocks, including CarMax, represent about 21% of the fund's holdings. The expense ratio is 0.35%, so if you invested $10,000, you'd pay $35 in fees.
Stock splits
Will CarMax stock split?
CarMax split its stock once in March 2007, after its board of directors voted on a 2-for-1 stock split. A company typically splits its stock to make its share price more affordable for retail investors. Given that CarMax shares were trading for less than $70 in mid-May 2025, an upcoming stock split is unlikely.
Related investing topics
The bottom line on investing in CarMax
CarMax has made significant investments in its omnichannel platforms, enabling customers to handle much of the process of shopping for a vehicle, obtaining financing, and trading in their vehicle online. Its no-haggle shopping is another way it differentiates itself from other used car retailers.
While CarMax has a unique business model, it will continue to deal with the challenges other used car retailers face, including higher interest rates and inflation, both of which could cause potential customers to hold off on trading in their vehicles. If you want to invest in CarMax, be prepared to hold the stock for the long term.
FAQ
Investing in CarMax FAQ
Can you buy stock in CarMax?
Yes, you can buy stock in CarMax because it's a publicly traded company. To buy shares, you'll need to open and fund a brokerage account.
Is CarMax a good investment?
CarMax could be a good investment if you believe used car sales will rebound and interest rates will eventually drop. However, investors should be aware that CarMax is a cyclical business, which means it's hit hard during a recession or times when consumers have less discretionary income.
Who is the largest shareholder of CarMax stock?
The largest institutional shareholder of CarMax stock is the Vanguard Group, which owns 11.85% of outstanding shares. CarMax CEO William Nash is the largest individual shareholder, with 181,683 shares as of December 2024.
What is the stock ticker for CarMax stock?
The stock ticker for CarMax stock is KMX. The stock trades on the New York Stock Exchange.
