So long, cash for clunkers. We hardly knew ye.
One month after the government's ballyhooed "Car Allowance Rebate System" (CARS) ended, the number crunching has begun. Winners are starting to emerge. And one of the biggest reported earnings just this morning.
CarMax is no clunker
- Sales rose 13%, to $2.1 billion.
- Comps grew 8%.
- Earnings per share simply exploded -- up more than sevenfold to $0.46 per share.
But how much of this was actually due to CARS? CEO Tom Folliard attributed a "spike in traffic in late July and August" to the program. Yet while CarMax hawks new jalopies at some of its shops, the company has always focused more on selling high-quality, recent-year model used cars. And here, CarMax really shined.
I mean, you'd expect that with so many people busily trading in clunkers for new cars, used car sales would take a hit, right? Far from it. In fact, CarMax says unit sales of used cars leapt 10% in Q2. And wholesaling of used cars increased 5% by unit volume as well.
What's the frequency, Kenneth?
So what's behind the strength in used car sales? I've got a hunch (but only a hunch.)
We all know about the robbing-Peter-to-pay-Paul paradigm in car sales. When major manufacturers like GM and Ford
Logically, all this should increase the value of used vehicles already on the market. And CarMax confirms at least the latter half of this equation, noting a "continued appreciation in used car wholesale values since January 2009." And so far, CarMax is reaping the benefits.
The longer the automakers coast, the better things will be for CarMax and peers like America's Car-Mart
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