CarMax Inc.

04/15/2026 | Press release | Distributed by Public on 04/15/2026 10:13

Annual Report for Fiscal Year Ending 2/28, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the accompanying notes presented in Item 8. Consolidated Financial Statements and Supplementary Data. Note references are to the notes to consolidated financial statements included in Item 8. Certain prior year amounts have been reclassified to conform to the current year's presentation. All references to net earnings per share are to diluted net earnings per share. Amounts and percentages may not total due to rounding.
OVERVIEW
See Part I, Item 1 for a detailed description and discussion of the company's business.
CarMax is the nation's largest retailer of used vehicles. We operate in two reportable segments: CarMax Sales Operations and CarMax Auto Finance ("CAF"). Our CarMax Sales Operations segment consists of all aspects of our auto merchandising and service operations, excluding financing provided by CAF. Our CAF segment consists solely of our own finance operation that provides financing to customers buying retail vehicles from CarMax.
CarMax Sales Operations
Our sales operations segment consists of retail sales of used vehicles and related products and services, such as wholesale vehicle sales; the sale of extended protection plan ("EPP") products, which include extended service plans ("ESPs") and guaranteed asset protection ("GAP"); advertising and subscription revenues; and vehicle repair service. We offer competitive, no-haggle prices; a broad selection of CarMax Quality Certified used vehicles; value-added EPP products; and superior customer service. Our omni-channel experience provides a common platform across all of CarMax that leverages our scale, nationwide footprint and infrastructure and empowers our customers to buy a vehicle on their terms, whether online, in-store or through a seamless combination of both. Our associates, stores, technology and digital capabilities seamlessly tied together enable us to provide the most customer-centric car buying and selling experience, a key differentiator in a large and fragmented market.
Our customers finance the majority of the retail vehicles purchased from us, and availability of on-the-spot financing is a critical component of the sales process. We provide financing to qualified retail customers through CAF and our arrangements with industry-leading third-party finance providers. All of the finance offers, whether by CAF or our third-party providers, are backed by a 3-day payoff option.
CarMax Auto Finance
In addition to third-party finance providers, we provide vehicle financing through CAF, which offers financing solely to customers buying retail vehicles from CarMax. CAF allows us to manage our reliance on third-party finance providers and to leverage knowledge of our business to provide qualifying customers a competitive financing option. As a result, we believe CAF enables us to capture additional profits, cash flows and sales. CAF income primarily reflects the interest and fee income generated by the auto loans held for investment and auto loans held for sale less the interest expense associated with the debt issued to fund these loans, a provision for estimated loan losses on loans held for investment and direct expenses. CAF income does not include any allocation of indirect costs. After the effect of 3-day payoffs and vehicle returns, CAF financed 42.4% of our retail used vehicle unit sales in fiscal 2026. As of February 28, 2026, CAF serviced approximately 1.0 million customer accounts in its $16.37 billion portfolio of auto loans.
Management regularly analyzes CAF's operating results by assessing the competitiveness of our consumer offer, profitability, the performance of its auto loans, including trends in credit losses and delinquencies, and CAF direct expenses.
Revenues and Profitability
The sources of revenue and gross profit from the CarMax Sales Operations segment for fiscal 2026 are as follows:
Net Sales and
Operating Revenues 		Gross Profit
A high-level summary of our financial results for fiscal 2026 as compared to fiscal 2025 is as follows (1):
(Dollars in millions except per share or per unit data) 2026 Change from 2025
Income statement information
Net sales and operating revenues $ 25,881.1 (1.8) %
Gross profit $ 2,806.6 (3.2) %
CAF income $ 562.7 (3.3) %
Selling, general and administrative expenses $ 2,453.4 0.7 %
Net earnings $ 247.3 (50.6) %
Unit sales information
Used unit sales 780,684 (1.1) %
Change in used unit sales in comparable stores (2.0) % N/A
Wholesale unit sales 538,203 (1.1) %
Per unit information
Used gross profit per unit $ 2,253 (2.5) %
Wholesale gross profit per unit $ 974 (4.9) %
SG&A per total unit $ 1,860 1.8 %
SG&A as a % of gross profit 87.4 % 3.4 %
Per share information
Net earnings per diluted share $ 1.68 (47.7) %
Adjusted net earnings per diluted share (2)
$ 2.91 (11.0) %
Online sales metrics
Digitally enabled transactions (3)
81 % - %
Omni sales (4)
68 % 2 %
Online retail sales (5)
13 % (2) %
Unit buys information
Total vehicle purchases 1,137,810 (1) %
Vehicles purchased from consumers 987,191 (2) %
Vehicles purchased from dealers 150,619 4 %
(1) Where applicable, amounts are net of intercompany eliminations.
(2) Adjusted net earnings per diluted share is a non-GAAP measure. See "Non-GAAP Financial Measures" below for a reconciliation of this measure to the most comparable GAAP measure net earnings per diluted share.
(3) A digitally enabled transaction is defined as either an omni retail sale or an online retail sale, as defined below.
(4) An omni retail sale is defined as a sale where customers complete at least one, but not all, of the four activities listed in note (4) below online, or additional steps that can be completed online, including pre-qualifying for financing, setting appointments and signing up for notifications of cars coming soon.
(5) An online retail sale is defined as a sale where the customer completes all four of the following activities online: reserving the vehicle; financing the vehicle, if needed; trading-in or opting out of a trade-in; and creating an online sales order.
Refer to "Results of Operations" for further details on our revenues and profitability. A discussion regarding Results of Operations and Financial Condition for fiscal 2025 as compared to fiscal 2024 is included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended February 28, 2025, filed with the SEC on April 11, 2025.
Non-GAAP Financial Measures
To provide additional transparency, we disclose certain non-GAAP financial measures, which adjust for items as presented below. We believe this information is useful in providing period-to-period comparisons of the results of our operations. The reconciliations of SG&A expenses, SG&A as a percent of gross profit, SG&A per total unit and net earnings per diluted share (GAAP financial measures) to adjusted SG&A expenses, adjusted SG&A as a percent of gross profit, adjusted SG&A per total unit and adjusted net earnings per diluted share (non-GAAP financial measures) are as follows:
Years Ended February 28 or 29
(Dollars in millions except per share and per unit data) 2026 2025 2024
SG&A expenses $ 2,453.4 $ 2,435.4 $ 2,286.4
Restructuring charges (1)
(49.8) - -
Litigation settlement proceeds (2)
- - 67.2
Adjusted SG&A expenses $ 2,403.6 $ 2,435.4 $ 2,353.6
Gross profit $ 2,806.6 $ 2,897.9 $ 2,713.2
SG&A as a percent of gross profit 87.4 % 84.0 % 84.3 %
Adjusted SG&A as a percent of gross profit 85.6 % 84.0 % 86.7 %
Used units sales 780,684 789,050 765,572
Wholesale unit sales 538,203 544,312 546,331
Total unit sales 1,318,887 1,333,362 1,311,903
SG&A per total unit $ 1,860 $ 1,827 $ 1,743
Adjusted SG&A per total unit $ 1,822 $ 1,827 $ 1,794
Net earnings per diluted share $ 1.68 $ 3.21 $ 3.02
Impairment charges (3)
0.96 0.08 -
Restructuring charges (4)
0.35 - -
Litigation settlement proceeds (2)
- - (0.42)
Income tax impact of non-GAAP adjustments (5)
(0.08) (0.02) 0.10
Adjusted net earnings per diluted share $ 2.91 $ 3.27 $ 2.70
(1) Includes the portion of costs related to severance costs for our CEO change and workforce reductions as well as costs related to the abandonment of our Edmunds lease that have been recorded in SG&A expenses.
(2) Represents the receipt of settlement proceeds in a class action lawsuit related to the economic loss associated with vehicles containing Takata airbags.
(3) Includes the goodwill impairment charge recorded in fiscal 2026 and the Edmunds lease impairment charge recorded in fiscal 2025.
(4) Includes all costs related to severance costs for our CEO change and workforce reductions as well as all costs related to the abandonment of our Edmunds lease.
(5) Calculated using the blended statutory tax rate for each period.
Liquidity
Our primary ongoing sources of liquidity include funds provided by operations, proceeds from non-recourse funding vehicles, and borrowings under our revolving credit facility or through other financing sources. In addition to funding our operations, this liquidity has been used to fund our capital expenditures and the repurchase of common stock under our share repurchase program.
Our current capital allocation strategy is to focus on our core business including investing in digital capabilities and the strategic expansion of our store and capacity footprint, pursue CAF's expansion into the full credit spectrum, pursue new growth opportunities through investments, partnerships and acquisitions and return excess capital to shareholders. We continue to take a disciplined approach to our capital structure, including managing our net leverage to preserve efficient access to the capital markets for both CAF and CarMax overall. With leverage slightly above our targeted range, and as we focus on improving the business during this transitional period, we paused our share buybacks during the fourth quarter of fiscal 2026. We believe we have the appropriate liquidity, access to capital and financial strength to support our operations and continue investing in our business for the next 12 months and thereafter for the foreseeable future.
Strategic Update and Future Outlook
Our omni-channel experience provides a common platform across all of CarMax that leverages our scale, nationwide footprint and infrastructure and empowers our customers to buy a vehicle on their terms, whether online, in-store or through a seamless combination of both experiences. While we expect our online and omni sales to grow over time, our goal is to provide the best experience whether in-store, online or a combination of the two. As a result, online, omni and in-person sales can vary from quarter to quarter depending on consumer preferences and how they choose to interact with us. We believe consumers in the used vehicle industry will increasingly prefer optionality that seamlessly connects digital and physical experiences.
We possess a beloved brand with national scale, the combination of an unmatched physical footprint and strong digital infrastructure and an award-winning culture. Despite these advantages and after decades of industry leadership, based on recent results, it is clear CarMax needs change. In November 2025, we announced a change in leadership. Effective December 1, 2025, Bill Nash stepped down from his position as CEO and as a member of the board. David McCreight, a member of the board, was named Interim President and CEO and Tom Folliard, Chair of the Board, was appointed Interim Executive Chair of the Board. Effective March 16, 2026, Keith Barr was appointed President and CEO to lead the company in its next chapter. We are focused on driving sales and earnings, maximizing the benefits of our omni-channel experience, strengthening our brand, improving operations and championing our culture in order to capture the tremendous opportunity ahead of us.
During the fourth quarter of fiscal 2026, we made progress on the priorities noted above. We improved sales trends by lowering our prices, investing in acquisition marketing and deploying an initial set of digital enhancements designed to drive conversion. We also continued to streamline our cost structure and lower the cost to bring cars to market, helping us offer more affordable vehicles. Concurrently, we made progress on our SG&A reduction goals, CAF full spectrum ambitions and EPP redesign.
Looking ahead to fiscal 2027, while we work to update our strategy and long-term objectives, our initial priorities, in addition to the items noted above, are to:
•Make CarMax the obvious and easy choice for customers by consistently delivering the three things that matter most to them: a fair, competitive price, access to a broad selection of high-quality vehicles and an end-to-end experience that meets their needs.
•Use technology to drive more differentiated experiences and efficiencies by using software, data and AI in practical ways that make it even easier for customers to buy and sell cars and for our associates to serve them.
•Act with more urgency and intention, while ensuring there is alignment across the organization. We plan to change what is not working, double down on what is and keep evaluating opportunities and risks as we move with speed to build a durable, long-term growth engine.
Regarding SG&A expenses, our goal is to achieve $200 million in exit rate savings in SG&A expense by the end of fiscal 2027, which is an increase from our previous goal of $150 million. However, the year-over-year savings within fiscal 2027 are expected to be offset as we annualize over materially reduced corporate bonus and share-based compensation expense in fiscal 2026, which offsets approximately half of the anticipated savings in fiscal 2027. The savings will also be impacted by inflationary pressures and new location growth. We expect the full impact from these savings to occur in fiscal 2028. We took our first significant step toward these savings during the third quarter of fiscal 2026 with an approximately 30% reduction in our CEC workforce, which we expect will result in annualized savings of approximately $35 million. We completed additional restructuring changes during the fourth quarter of fiscal 2026, which we expect will result in annualized savings of
approximately $60 million. In addition to offsetting cost pressures, these ongoing savings are expected to enable additional flexibility to reinvest in areas that directly drive sales, while also serving as a tailwind to our earnings.
SG&A as a percent of gross profit increased to 87.4% in fiscal 2026 compared with 84.0% in fiscal 2025, driven by the decline in gross profit and impacted by the restructuring charges noted above. Adjusted SG&A as a percent of gross profit was 85.6% in fiscal 2026. Moving forward, we will focus our SG&A efficiency metric on total units instead of gross profit dollars. We believe this metric has stronger alignment to driving unit volumes. In fiscal 2027, we expect to leverage SG&A per total unit when excluding the restructuring charges incurred in fiscal 2026.
We also remain focused on driving down our cost of sales by pursuing incremental efficiency opportunities that we have identified across our logistics network and reconditioning operations. We achieved savings of approximately $125 per unit in fiscal 2025. Due to our recent sales performance, our savings in fiscal 2026 were slightly below our goal of another $125 per unit. These efficiencies support affordability as we pass savings on to our customers and also support our margins.
For fiscal 2027, we expect to take a more dynamic approach to margin management. We expect used margins for the full fiscal year to decline at a rate broadly in line with the year-over-year trend for the fourth quarter of fiscal 2026, although this may vary as we continue to optimize performance. We expect the first quarter of fiscal 2027 to reflect the largest year-over-year decline at close to $300 per unit, as we lap record margins in the prior year. This outlook reflects our pricing actions and our ongoing efforts to reduce logistics and reconditioning cost of sales in support of more competitive pricing and stronger sales.
During fiscal 2026, we tested EPP product enhancements that focused on increasing penetration and margin per unit. We expect to achieve nationwide rollout of these products by the second quarter of fiscal 2027, which we anticipate will result in an increase in EPP margin per unit of approximately $35 in fiscal 2027. We expect this increase to ramp throughout the fiscal year, driven by the rollout plan.
In calendar 2025, we estimate we sold approximately 3.6% of the age 0- to 10-year old vehicles sold on a nationwide basis, a decrease from 3.7% in calendar 2024. External title data indicates that while we gained market share in the first half of calendar 2025, sales and market share were pressured in the second half of the year.
As of February 28, 2026, we operated 256 used car stores located in 110 U.S. television markets, which covered approximately 85% of the U.S. population. The format and operating models utilized in our stores are continuously evaluated and may change or evolve over time based upon market and consumer expectations. During fiscal 2026, we opened six stores and four stand-alone reconditioning/auction centers. During fiscal 2027, we anticipate opening four stores as well as two stand-alone reconditioning/auction centers and two stand-alone auction facilities. We are utilizing our stand-alone reconditioning and auction locations to balance capacity and drive efficiencies across the network.
While we execute both our short- and long-term strategy, there are trends and factors that could impact our strategic approach or our results in the short and medium term. For additional information about risks and uncertainties facing our company, see "Risk Factors," included in Part I, Item 1A of this Form 10-K.
CRITICAL ACCOUNTING ESTIMATES
Our results of operations and financial condition as reflected in the consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. Preparation of financial statements requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues, expenses and the disclosures of contingent assets and liabilities. We use our historical experience and other relevant factors when developing our estimates and assumptions. We regularly evaluate these estimates and assumptions. Note 1 includes a discussion of significant accounting policies. The accounting policy discussed below is the one we consider critical to an understanding of our consolidated financial statements because its application places the most significant demands on our judgment. Our financial results might have been different if different assumptions had been used or other conditions had prevailed.
Allowance for Loan Losses
The allowance for loan losses represents the net credit losses expected over the remaining contractual life of our auto loans held for investment. Because net loss performance can vary substantially over time, estimating net losses requires assumptions about matters that are uncertain.
The allowance for loan losses is determined using a net loss timing curve method ("method"), primarily based on the composition of the portfolio of auto loans held for investment and historical gross loss and recovery trends. Due to the fact that losses for loans with less than 18 months of performance history can be volatile, our net loss estimate weights both historical
losses by credit grade at origination and actual loss data on the loans to-date, along with forward loss curves, in estimating future performance. Once the loans have 18 months of performance history, the net loss estimate reflects actual loss experience of those loans to-date, along with forward loss curves, to predict future performance. The forward loss curves are constructed using historical performance data and show the average timing of losses over the course of a loan's life. The net loss estimate is calculated by applying the loss rates developed using the methods described above to the amortized cost basis of the auto loans held for investment at inception of the loan.
The output of the method is adjusted to take into account reasonable and supportable forecasts about the future. Specifically, the change in U.S. unemployment rates and the Black Book wholesale used vehicle retention index are used to predict changes in gross loss and recovery rate, respectively. An economic adjustment factor, based upon a single macroeconomic scenario, is developed to capture the relationship between changes in these indices and changes in gross loss and recovery rates. This factor is applied to the output of the method for the reasonable and supportable forecast period of two years. After the end of this two-year period, we revert to historical experience on a straightline basis over a period of 12 months. We periodically consider whether the use of alternative metrics would result in improved model performance and revise the model when appropriate. We also consider whether qualitative adjustments are necessary for factors that are not reflected in the quantitative methods but impact the measurement of estimated credit losses. Such adjustments include the uncertainty of the impacts of recent economic trends on customer behavior. The change in the allowance for loan losses is recognized through an adjustment to the provision for loan losses.
Determining the appropriateness of the allowance for loan losses requires management to exercise judgment about matters that are inherently uncertain, including the timing and distribution of net losses that could materially affect the allowance for loan losses and, therefore, net earnings. To the extent that actual performance differs from our estimates, additional provision for credit losses may be required that would reduce net earnings. To demonstrate the sensitivity of credit loss assumptions and macroeconomic scenarios used in our estimated allowance for loan losses, we compared our February 28, 2026, modeled allowance base case scenario to a downside scenario. Relative to the base case, the downside scenario assumed 10% worsening in loss performance, U.S. unemployment rates and the Black Book wholesale used vehicle retention index. This sensitivity analysis resulted in a hypothetical increase in the allowance for loan losses of approximately $51.8 million.
While this analysis may be useful in considering how changes in certain macroeconomic assumptions could impact our estimated credit losses, it should not be relied upon as a forecast of how our allowance for loan losses is expected to change in a different macroeconomic scenario. The analysis does not reflect changes in other adjustments to the quantitative calculation, which would be influenced by the qualitative judgment management applies to reflect the uncertainty and imprecision of estimated lifetime credit losses based on then-current circumstances and conditions.
See Notes 1(H) and 4 for additional information on the allowance for loan losses.
RESULTS OF OPERATIONS - CARMAX SALES OPERATIONS
NET SALES AND OPERATING REVENUES
Years Ended February 28 or 29
(In millions) 2026 Change 2025 Change 2024
Used vehicle sales $ 20,702.4 (1.8) % $ 21,079.7 0.8 % $ 20,922.3
Wholesale vehicle sales 4,504.6 (1.8) % 4,587.5 (7.8) % 4,975.8
Other sales and revenues:
Extended protection plan revenues 448.7 (0.7) % 451.7 12.4 % 401.8
Third-party finance fees, net (8.7) (477.6) % (1.5) 74.4 % (5.8)
Advertising & subscription revenues (1)
144.5 3.7 % 139.3 2.6 % 135.8
Other 89.7 (7.4) % 96.8 (8.8) % 106.2
Total other sales and revenues 674.2 (1.8) % 686.3 7.6 % 638.0
Total net sales and operating revenues $ 25,881.1 (1.8) % $ 26,353.4 (0.7) % $ 26,536.0
(1) Excludes intercompany sales and operating revenues that have been eliminated in consolidation.
UNIT SALES
Years Ended February 28 or 29
2026 Change 2025 Change 2024
Used vehicles 780,684 (1.1) % 789,050 3.1 % 765,572
Wholesale vehicles 538,203 (1.1) % 544,312 (0.4) % 546,331
AVERAGE SELLING PRICES
Years Ended February 28 or 29
2026 Change 2025 Change 2024
Used vehicles $ 26,121 (0.6) % $ 26,273 (2.8) % $ 27,028
Wholesale vehicles $ 7,942 (1.0) % $ 8,019 (7.9) % $ 8,707
COMPARABLE STORE USED VEHICLE SALES CHANGES
Years Ended February 28 or 29 (1)
2026 2025 2024
Used vehicle units (2.0) % 2.2 % (6.7) %
Used vehicle revenues (2.5) % (0.4) % (10.6) %
(1) Stores are added to the comparable store base beginning in their fourteenth full month of operation. We do not remove renovated stores from our comparable store base. Comparable store calculations include results for a set of stores that were included in our comparable store base in both the current and corresponding prior year periods.
VEHICLE SALES CHANGES
Years Ended February 28 or 29
2026 2025 2024
Used vehicle units (1.1) % 3.1 % (5.2) %
Used vehicle revenues (1.8) % 0.8 % (9.2) %
Wholesale vehicle units (1.1) % (0.4) % (6.6) %
Wholesale vehicle revenues (1.8) % (7.8) % (16.9) %
USED VEHICLE FINANCING PENETRATION BY CHANNEL (BEFORE THE IMPACT OF 3-DAY PAYOFFS)
Years Ended February 28 or 29 (1)
2026 2025 2024
CAF (2)
44.9 % 45.0 % 45.8 %
Tier 2 (3)
16.7 18.0 18.9
Tier 3 (4)
8.3 7.1 7.0
Other (5)
30.1 29.9 28.3
Total 100.0 % 100.0 % 100.0 %
(1) Calculated as used vehicle units financed for respective channel as a percentage of total used units sold.
(2) Includes CAF's Tier 2 and Tier 3 loan originations, which represent approximately 2% of total used units sold.
(3) Third-party finance providers who generally pay us a fee or to whom no fee is paid.
(4) Third-party finance providers to whom we pay a fee.
(5) Represents customers arranging their own financing and customers that do not require financing.
CHANGE IN USED CAR STORE BASE
Years Ended February 28 or 29
2026 2025 2024
Used car stores, beginning of year 250 245 240
Store openings 6 5 5
Used car stores, end of year 256 250 245
During fiscal 2026, we opened six stores (Tuscaloosa, AL; El Cajon, CA; Hagerstown, MD; Tulalip, WA; Rogers, AR; and Florence, KY). We also opened four stand-alone reconditioning/auction centers located in El Mirage, Arizona, supporting the Phoenix metro market; Midlothian, Texas, supporting the Dallas metro market; New Kent, Virginia, supporting the Richmond metro market; and Frederick, Maryland, supporting the Washington D.C/Baltimore metro market.
Used Vehicle Sales
Fiscal 2026 Versus Fiscal 2025. The 1.8% decrease in used vehicle revenues in fiscal 2026 was driven by a 1.1% decrease in used unit sales and a 0.6% decrease in average retail selling price, or approximately $150. The decrease in used units included a 2.0% decrease in comparable store used unit sales.
The decrease in average retail selling price in fiscal 2026 primarily reflected a shift in the mix of our sales by vehicle age, partially offset by an increase in vehicle acquisition costs.
Wholesale Vehicle Sales
Vehicles sold at our wholesale auctions are, on average, more than 11 years old with more than 100,000 miles and are primarily comprised of vehicles purchased through our appraisal process that do not meet our retail standards. Our wholesale auction prices usually reflect trends in the general wholesale market for the types of vehicles we sell, although they can also be affected by changes in vehicle mix or the average age, mileage or condition of the vehicles being sold.
Fiscal 2026 Versus Fiscal 2025. The 1.8% decrease in wholesale vehicle revenues in fiscal 2026 was driven by a 1.1% decrease in unit sales and a 1.0% decrease in average selling price, or approximately $80.
The decrease in average selling price in fiscal 2026 primarily reflected shifts in the mix of our sales by vehicle age, partially offset by an increase in vehicle acquisition costs.
Other Sales and Revenues
Other sales and revenues include revenue from the sale of ESPs and GAP (collectively reported in EPP revenues, net of a reserve for estimated contract cancellations), net third-party finance fees, advertising and subscription revenues earned by our Edmunds business, and other revenues, which are predominantly comprised of service department sales. The fees we pay to the Tier 3 providers are reflected as an offset to finance fee revenues received from the Tier 2 providers. The mix of our retail vehicles financed by CAF, Tier 2 and Tier 3 providers, or customers that arrange their own financing, may vary from quarter to quarter depending on several factors, including the credit quality of applicants, changes in providers' credit decisioning and external market conditions. Changes in originations by one tier of credit providers may also affect the originations made by providers in other tiers.
Fiscal 2026 Versus Fiscal 2025. Other sales and revenues decreased 1.8% in fiscal 2026, primarily reflecting an increase in net third-party finance fees driven by higher Tier 3 volume, for which we generally pay a fee, as well as lower Tier 2 volume, for which we generally receive a fee.
GROSS PROFIT
Years Ended February 28 or 29 (1)
(In millions) 2026 Change 2025 Change 2024
Used vehicle gross profit $ 1,759.0 (3.5) % $ 1,823.2 4.1 % $ 1,752.0
Wholesale vehicle gross profit 524.1 (6.0) % 557.6 0.1 % 556.8
Other gross profit 523.5 1.2 % 517.1 27.9 % 404.4
Total $ 2,806.6 (3.2) % $ 2,897.9 6.8 % $ 2,713.2
(1)Amounts are net of intercompany eliminations.
GROSS PROFIT PER UNIT
Years Ended February 28 or 29 (1)
2026 2025 2024
$ per unit (2)
% (3)
$ per unit (2)
% (3)
$ per unit (2)
% (3)
Used vehicle gross profit $ 2,253 8.5 $ 2,311 8.6 $ 2,288 8.4
Wholesale vehicle gross profit $ 974 11.6 $ 1,024 12.2 $ 1,019 11.2
Other gross profit $ 671 77.7 $ 655 75.4 $ 528 63.4
(1)Amounts are net of intercompany eliminations.
(2)Calculated as category gross profit divided by its respective units sold, except the other category, which is divided by total used units sold.
(3)Calculated as a percentage of its respective sales or revenue.
Used Vehicle Gross Profit
We target a dollar range of gross profit per used unit sold. The gross profit dollar target for an individual vehicle is based on a variety of factors, including its probability of sale and its mileage relative to its age; however, it is not primarily based on the vehicle's selling price. Our ability to quickly adjust appraisal offers to be consistent with trends in the broader trade-in market and the pace of our inventory turns reduce our exposure to the inherent continual fluctuation in used vehicle values and contribute to our ability to manage gross profit dollars per unit. Gross profit per used unit is consistent across our omni-channel platform.
We systematically adjust individual vehicle prices based on proprietary pricing algorithms in order to appropriately balance sales trends, inventory turns and gross profit achievement. Other factors that may influence gross profit include the wholesale and retail vehicle pricing environments, vehicle reconditioning and logistics costs, and the percentage of vehicles sourced directly from consumers and dealers through our appraisal process. Vehicles purchased directly from consumers and dealers generally have a lower cost per unit compared with vehicles purchased at auction or through other channels, which may generate more gross profit per unit. In any given period, our gross profit may also be impacted by the age mix of vehicles sold, as older vehicles are generally more profitable. We monitor macroeconomic factors and pricing elasticity and adjust our pricing accordingly to strike the right balance between optimizing unit sales and profitability while also maintaining competitively priced inventory.
Fiscal 2026 Versus Fiscal 2025. Used vehicle gross profit decreased 3.5% in fiscal 2026, driven by the $58 decrease in used vehicle gross profit per unit, which reflects deliberate actions to drive improved sales performance taken during the fourth quarter, as well as the 1.1% decrease in total used unit sales.
Wholesale Vehicle Gross Profit
Our wholesale gross profit per unit reflects the demand for older, higher mileage vehicles, which are the mainstay of our auctions, as well as strong dealer attendance and resulting high dealer-to-car ratios at our auctions. The frequency of our auctions, which are generally held weekly or bi-weekly, minimizes the depreciation risk on these vehicles. Our ability to adjust appraisal offers and quickly move vehicles to our standalone auctions in response to the wholesale pricing environment are key factors that influences wholesale gross profit.
Fiscal 2026 Versus Fiscal 2025. Wholesale vehicle gross profit decreased 6.0% in fiscal 2026, driven by a $50 decrease in wholesale vehicle gross profit per unit as well as a 1.1% decrease in unit sales.
Other Gross Profit
Other gross profit includes profits related to EPP revenues, net third-party finance fees, advertising and subscription profits earned by our Edmunds business, and other revenues. Other revenues are predominantly comprised of service department operations, including used vehicle reconditioning. We have no cost of sales related to EPP revenues or net third-party finance fees, as these represent revenues paid to us by certain third-party providers. Third-party finance income is reported net of the fees we pay to third-party Tier 3 finance providers. Accordingly, changes in the relative mix of the components of other gross profit can affect the composition and amount of other gross profit.
Fiscal 2026 Versus Fiscal 2025. Other gross profit increased 1.2% in fiscal 2026, primarily driven by an $18.4 million improvement in service department margins, partially offset by an increase in net third-party finance fees, as discussed above. The increase in service department margins was driven by cost coverage measures that we have implemented and increased efficiencies.
COMPONENTS OF SG&A EXPENSES AS A PERCENTAGE OF TOTAL SG&A EXPENSES
Fiscal Year 2026
Fiscal Year 2025
COMPONENTS OF SG&A EXPENSES COMPARED WITH PRIOR PERIODS (1)
Years Ended February 28 or 29
(In millions except per unit data) 2026 Change 2025 Change 2024
Compensation and benefits:
Compensation and benefits, excluding share-based compensation expense
$ 1,292.4 0.2 % $ 1,289.7 5.1 % $ 1,226.8
Share-based compensation expense 93.4 (26.4) % 126.9 11.3 % 114.1
Total compensation and benefits (2)
$ 1,385.8 (2.2) % $ 1,416.6 5.6 % $ 1,340.9
Occupancy costs 305.5 7.1 % 285.3 5.1 % 271.4
Advertising expense 283.0 8.6 % 260.7 (1.4) % 264.4
Other overhead costs (3)
479.1 1.3 % 472.8 15.4 % 409.7
Total SG&A expenses $ 2,453.4 0.7 % $ 2,435.4 6.5 % $ 2,286.4
SG&A per total unit $ 1,860 1.8 % $ 1,827 4.8 % $ 1,743
SG&A as a % of gross profit 87.4 % 3.4 % 84.0 % (0.3) % 84.3 %
(1)Amounts are net of intercompany eliminations.
(2)Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales. See Note 13 for details of share-based compensation expense by grant type.
(3)Includes IT expenses, non-CAF bad debt, insurance, preopening and relocation costs, travel, charitable contributions and other administrative expenses.
Fiscal 2026 Versus Fiscal 2025 (Increase of $18.0 million or 0.7%). Factors contributing to the net increase include the following:
•$22.3 million increase in advertising expense to support our new brand positioning campaign and to invest in acquisition spend. Advertising spend in fiscal 2026 was slightly above fiscal 2025 at approximately $200 per total unit.
•$20.2 million increase in store occupancy costs driven by charges related to the abandonment of our Edmunds lease.
•$2.7 million net increase in compensation and benefits, excluding share-based compensation expense, as severance costs for both the CEO change and the reductions in workforce were offset by a decrease in the corporate bonus accrual.
•$33.5 million decrease in share-based compensation expense, primarily related to cash-settled restricted stock units, as the expense associated with these units was primarily driven by the change in the company's stock price during the relevant periods.
Excluding the $49.8 million of restructuring charges, which impacted compensation and benefits and occupancy costs, adjusted SG&A decreased $31.8 million or 1.3%.
SG&A as a percent of gross profit increased to 87.4% in fiscal 2026 compared with 84.0% in fiscal 2025, driven by the decline in gross profit and impacted by the restructuring charges noted above. Adjusted SG&A as a percent of gross profit, which excludes these charges, was 85.6% for fiscal 2026.
Interest Expense
Interest expense includes the interest related to short- and long-term debt, financing obligations and finance lease obligations. It does not include interest on the non-recourse notes payable, which is reflected within CAF income.
Fiscal 2026 Versus Fiscal 2025. Interest expense of $110.4 million in fiscal 2026 was relatively consistent with $107.9 million in fiscal 2025.
Goodwill Impairment
We recorded a non-cash goodwill impairment charge of $141.3 million during the fourth quarter of fiscal 2026, driven by the combination of a significant decline in market capitalization resulting from the decrease in our share price, pressured financial performance during fiscal 2026 and downward revisions to our forecasted financial outlook relative to the prior year's outlook.
Other Expense (Income)
Other expense of $7.1 million in fiscal 2026 was relatively consistent with $11.6 million in fiscal 2025.
Income Taxes
The effective income tax rate was 35.5% in fiscal 2026 compared with 25.2% in fiscal 2025. The increase in effective income tax rate was primarily driven by the goodwill impairment charge, which is a non-deductible item.
RESULTS OF OPERATIONS - CARMAX AUTO FINANCE
CAF income primarily reflects interest and fee income generated by auto loans held for investment and auto loans held for sale less the interest expense associated with the debt issued to fund these loans, a provision for estimated loan losses on loans held for investment, direct CAF expenses and income related to the sale of auto loans. Total interest margin primarily reflects the spread between interest and fees charged to consumers and our funding costs. Changes in the interest margin on new originations generally affect CAF income over time. Increases in interest rates, which affect CAF's funding costs, competitive pressures on rates charged to customers or reducing higher risk accounts in our origination strategy, could result in compression in the interest margin on new originations.
The provision for loan losses reflects the estimated lifetime loan losses on new originations as well as changes in the estimated allowance for remaining loan losses on the existing portfolio. Changes to the allowance are primarily driven by loss and delinquency experience as well as economic factors related to our outlook for net losses expected to occur over the remaining contractual life of the loans held for investment.
CAF's portfolio is composed primarily of auto loans originated over the past several years. Trends in auto loan growth and interest margins primarily reflect the cumulative effect of changes in the business over a multi-year period. Current period originations reflect current trends in both our retail sales and the CAF business, including the volume and credit mix of loans originated, current interest rates charged to consumers and loan terms. Loans originated in a given fiscal period generally impact CAF income over time, as we recognize income over the life of the underlying auto loan, or upon sale of the loan.
We typically use securitizations or other funding arrangements to fund loans originated by CAF. Certain pools of loans may be sold in such a way that CAF relinquishes all, or nearly all, of its continuing financial interests in the loans. These loans are classified as held for sale on our consolidated balance sheet until they are sold. On September 24, 2025, we executed a non-prime securitization transaction. The structure of the transaction resulted in the sale of approximately $930 million of auto loans, inclusive of accrued interest, in exchange for consideration in the form of cash and beneficial interests. The beneficial interests represent the 5% interest in the rated notes and residual certificate that we retained as the sponsor of the transaction. We recognized a gain on sale of $26.9 million from the transaction, net of transaction expenses, in the third quarter of fiscal 2026. As servicer, CAF continues to be responsible for managing collections and performing other servicing activities for the sold auto loans and earns servicing income as compensation for these activities. We expect to receive approximately $40 million to $45 million in CAF income related to servicing fees and the retained beneficial interest over the life of the transaction. We expect this additional funding lever, as well as other off-balance sheet funding vehicles under consideration, will provide us with significant flexibility and allow us to mitigate risk while focusing on our growth plan.
During fiscal 2025, CAF began testing its new full-spectrum credit scoring models and corresponding strategies across the Tier 1, Tier 2 and Tier 3 spaces. During fiscal 2026, CAF began a measured expansion by recapturing profitable portions of Tier 1 originations that we had shifted to our Tier 2 lenders as we tightened lending standards as well as testing expanded lending with a focus in the top half of the Tier 2 space. This is a first step on the path towards our initial goal of increasing CAF penetration to 50%. We continue to learn from our new underwriting models and corresponding tests currently in place in order to capture additional origination volume. We will monitor consumer behavior and the broader economy and adjust our origination
strategy as needed. We would expect each additional percentage point of CAF penetration to generate $10 million to $12 million in lifetime pre-tax income per year of origination, net of the impact to finance partner participation fees. Our pre-tax income expectations will be impacted by the volume of loans originated, interest rates charged to customers, loan terms, loss rates, average credit scores, funding strategy, loan sales and the broader macroeconomic and lending environments. We believe our unique finance platform with a full-spectrum in-house lending operation, along with our complementary network of partner lenders, will strengthen our competitive advantage.
Historically, CAF has originated a small portion of auto loans to customers who typically would be financed by our Tier 2 and Tier 3 finance providers, in order to better understand the performance of these loans, mitigate risk and add incremental profits. The targeted percentage of Tier 2 and Tier 3 originations has fluctuated over the past several years. With the testing of the new full-spectrum credit scoring models, we continued our investment in this space during fiscal 2026, but remained within the target of originating less than 15% and 5% of the total Tier 2 and Tier 3 loan volume, respectively. In fiscal 2027, we intend to increase the target originations for Tier 2 to approximately 30% of the total volume across the Tier 2 spectrum, with a continued focus on the top half of the Tier 2 space. We do not plan to increase our target originations for Tier 3 in fiscal 2027. Any future adjustments in Tier 2 and Tier 3 will consider the broader lending environment, which includes funding availability, along with the long-term sustainability of the change. These loans have higher loss and delinquency rates than the remainder of the CAF portfolio, as well as higher contract rates.
CAF income does not include any allocation of indirect costs. Although CAF benefits from certain indirect overhead expenditures, we have not allocated indirect costs to CAF to avoid making subjective allocation decisions. Examples of indirect costs not allocated to CAF include retail store expenses and corporate expenses.
See Note 3 for additional information on CAF income and Note 4 for information on auto loans held for investment, including credit quality.
SELECTED CAF FINANCIAL INFORMATION
Years Ended February 28 or 29
(In millions) 2026 2025 2024
Interest margin:
Interest and fee income $ 1,864.2 $ 1,853.9 $ 1,677.4
Interest expense (769.2) (763.2) (638.7)
Total interest margin $ 1,095.0 $ 1,090.7 $ 1,038.7
Provision for loan losses $ (391.2) $ (334.7) $ (310.5)
CarMax Auto Finance income $ 562.7 $ 581.7 $ 568.3
Average auto loans outstanding (1)
$ 17,165.8 $ 17,683.9 $ 17,313.2
Total interest margin as a percent of average auto loans outstanding 6.4 % 6.2 % 6.0 %
(1)Includes auto loans held for investment and auto loans held for sale.
CAF ORIGINATION INFORMATION (AFTER THE IMPACT OF 3-DAY PAYOFFS) (1)
Years Ended February 28 or 29
2026 2025 2024
Net auto loans originated (in millions)
$ 7,992.7 $ 8,254.5 $ 8,270.0
Vehicle units financed 331,380 336,595 328,704
Net penetration rate (2)
42.4 % 42.7 % 42.9 %
Weighted average contract rate 11.2 % 11.3 % 11.2 %
Weighted average credit score (3)
723 723 719
Weighted average loan-to-value (LTV) (4)
89.7 % 89.6 % 88.7 %
Weighted average term (in months)
68.5 67.6 65.4
(1)Includes auto loans held for investment and auto loans held for sale.
(2)Vehicle units financed as a percentage of total used units sold.
(3)The credit scores represent FICO® scores and reflect only loans with obligors that have a FICO® score at the time of application. The FICO® score with respect to any loans with co-obligors is calculated as the average of each obligor's FICO® score at the time of application. FICO® scores are not a significant factor in our primary scoring model, which relies on information from credit bureaus and other application information as discussed in Note 4. FICO® is a federally registered servicemark of Fair Isaac Corporation.
(4)LTV represents the ratio of the amount financed to the total collateral value, which is measured as the vehicle selling price plus applicable taxes, title and fees.
LOAN PERFORMANCE INFORMATION
As of and for the
Years Ended February 28 or 29
(In millions) 2026 2025 2024
Ending auto loans held for investment $ 16,271.9 $ 17,594.6 $ 17,391.8
Average auto loans held for investment $ 16,930.8 $ 17,683.9 $ 17,313.2
Allowance for loan losses $ 453.0 $ 458.7 $ 482.8
Allowance for loan losses as a percentage of ending auto loans held for investment 2.78 % 2.61 % 2.78 %
Net credit losses $ 396.9 $ 358.8 $ 334.9
Net credit losses as a percentage of average auto loans held for investment 2.34 % 2.03 % 1.93 %
Past due accounts as a percentage of ending auto loans held for investment 5.11 % 4.85 % 5.44 %
Average recovery rate (1)
45.5 % 47.2 % 53.0 %
(1) The average recovery rate represents the average percentage of the outstanding principal balance we receive when a vehicle is repossessed and liquidated, generally at our wholesale auctions. While in any individual period conditions may vary, over the past 10 fiscal years, the annual recovery rate has ranged from a low of 45% to a high of 71%, and it is primarily affected by the wholesale market environment.
Fiscal 2026 Versus Fiscal 2025.
•CAF income decreased $19.0 million, or 3.3%, due to an increase in the provision for loan losses and a decrease in average auto loans outstanding, partially offset by an increase in the interest margin percentage and the gain recognized on the sale of auto loans.
•Total interest margin increased as a percentage of average auto loans outstanding to 6.4% in fiscal 2026 compared with 6.2% in fiscal 2025. The increase was due to higher customer rates primarily driven by our Tier 2 expansion, partially offset by higher funding costs.
•Provision for Loan Losses
◦The current year provision of $391.2 million increased from $334.7 million in the prior fiscal year.
◦The increase in the provision for loan losses in fiscal 2026 was primarily driven by unfavorable loss performance, primarily within loans originated in 2022 and 2023, when average selling prices were elevated and these customers were later challenged by the inflationary environment. As a result of the previously disclosed tightening of CAF's underwriting standards, loans originated after April 2024 are performing in line with expectations.
◦There was also a reduction in the provision in fiscal 2026 due to the release of $42.2 million for the allowance recorded for loans that were previously classified as held for sale and subsequently sold during the third quarter of fiscal 2026.
◦The allowance for loan losses as a percentage of auto loans held for investment was 2.78% as of February 28, 2026 compared with 2.61% as of February 28, 2025. The allowance percentage increased from the prior year primarily due to unfavorable loss performance, partially offset by the release of a portion of the allowance previously recognized on auto loans held for sale.
•Loan Performance
◦The decline in net loan originations in fiscal 2026 resulted from decreases in the average amount financed, used unit sales and net penetration rate.
◦CAF net penetration decreased 30 basis points in fiscal 2026. During fiscal 2026, we made underwriting adjustments that translated to approximately 200 to 300 basis points of growth, but this growth was offset by lower application volume in the Tier 1 credit segment as well as an increase in penetration for Tier 3 third-party finance providers. We expect our penetration growth, targeting the top half of the Tier 2 space, will accelerate in fiscal 2027.
PLANNED FUTURE ACTIVITIES
We anticipate opening a total of eight locations in fiscal 2027, including four stores, two stand-alone reconditioning/auction centers and two stand-alone auction facilities. We currently estimate capital expenditures will total approximately $400 million in fiscal 2027, a decrease from $541.0 million in fiscal 2026. Planned capital spending in fiscal 2027 largely consists of spending to support our future long-term growth in offsite reconditioning and auction facilities, as well as our new stores. This spending is expected to be at a reduced rate as compared with the prior year due to significant investments made in fiscal 2026 as well as slowed growth in store openings in upcoming fiscal years.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1(Y) to the consolidated financial statements for information on recent accounting pronouncements applicable to CarMax.
FINANCIAL CONDITION
Liquidity and Capital Resources
Our primary ongoing cash requirements are to fund our existing operations, store and capacity expansion, store improvement, CAF, strategic growth initiatives and our share repurchase program. Our primary ongoing sources of liquidity include funds provided by operations, proceeds from non-recourse funding vehicles and borrowings under our revolving credit facility or through other financing sources.
Our current capital allocation strategy is to focus on our core business including investing in digital capabilities and the strategic expansion of our store and capacity footprint, pursue CAF's expansion into the full credit spectrum, pursue new growth opportunities through investments, partnerships and acquisitions and return excess capital to shareholders. We continue to take a disciplined approach to our capital structure, including managing our net leverage to preserve efficient access to the capital markets for both CAF and CarMax overall. With leverage slightly above our targeted range, and as we focus on improving the business during this transitional period, we paused our share buybacks during the fourth quarter of fiscal 2026. We believe we have the appropriate liquidity, access to capital and financial strength to support our operations and continue investing in our business for the next 12 months and thereafter for the foreseeable future.
We have historically managed leverage based on a number of factors, including internal financial forecasts, consideration of CAF's operational and capital needs, external peer benchmarking, requirements of our debt agreements and macroeconomic conditions. Generally, we expect to use our revolving credit facility and other financing sources, together with stock repurchases, to maintain a leverage profile that ensures operating flexibility while supporting continued investment in the business.
We are party to contractual obligations involving commitments to make payments to third parties. These obligations impact our liquidity and capital resource needs. Our contractual obligations primarily consist of long-term debt and related interest payments, leases, purchase obligations and commitments, income taxes and defined benefit retirement plans. See Notes 12 and 16 for amounts outstanding as of February 28, 2026 related to debt and leases, respectively.
Our contractual obligations related to income taxes represent the net unrecognized tax benefits related to uncertain tax positions. See Note 10 for information related to income taxes. Our contractual obligations related to defined benefit retirement plans represent the funded status recognized as of February 28, 2026. See Note 11 for information related to these plans.
Purchase obligations and commitments consist of certain enforceable and legally binding obligations related to third-party outsourcing services, advertising and real estate purchases. As of February 28, 2026, our purchase obligations and commitments were approximately $599.2 million, of which $170.3 million are due in fiscal 2027. The majority of the remaining purchase obligations and commitments are due within the next three years.
Operating Activities. During fiscal 2026, net cash provided by operating activities totaled $1.78 billion compared with $624.4 million in fiscal 2025.
As of February 28, 2026, total inventory was $4.14 billion, representing an increase of $202.4 million, or 5.1%, compared with the balance as of the start of the fiscal year. The increase was primarily due to an increase in average cost resulting from higher vehicle acquisition costs, partially offset by shifts in the mix of vehicles.
Our operating cash flows are significantly impacted by changes in auto loans held for investment and auto loans held for sale, which combined increased $131.8 million in fiscal 2026 compared with $565.6 million in fiscal 2025. A significant portion of the changes in auto loans held for investment and auto loans held for sale are accompanied by changes in non-recourse notes payable, which are issued to fund auto loans originated by CAF. Net payments of non-recourse notes payable were $1.29 billion in fiscal 2026 compared with net issuances of $252.8 million in fiscal 2025 and are separately reflected as cash from financing activities. Due to the presentation differences between auto loans held for investment, auto loans held for sale and non-recourse notes payable on the consolidated statements of cash flows, fluctuations in these amounts can impact our operating and financing cash flows without significantly affecting our overall liquidity, working capital or cash flows. In addition, operating cash flows in fiscal 2026 were impacted by proceeds of $908.9 million resulting from the sale of auto loans in connection with our non-prime securitization transaction completed in the third quarter.
The increase in net cash provided by operating activities for fiscal 2026 compared with fiscal 2025 primarily reflected the proceeds from the sale of auto loans and the net change in auto loans held for investment and auto loans held for sale, as discussed above, partially offset by the net impact of volume and timing-related changes in accounts receivable and accounts payable.
Investing Activities. Net cash used in investing activities totaled $540.0 million in fiscal 2026 compared with $461.0 million in fiscal 2025. Capital expenditures were $541.0 million in fiscal 2026 versus $467.9 million in fiscal 2025. Capital expenditures primarily included construction costs to support our growth capacity initiatives and new store openings as well as investments in technology. We maintain a multi-year pipeline of sites to support our store and capacity growth, so portions of capital spending in one year may relate to locations that we open in subsequent fiscal years.
Financing Activities. Net cash used in financing activities was $1.34 billion in fiscal 2026 compared with $453.5 million in fiscal 2025. Included in these amounts were net payments on non-recourse notes payable of $1.29 billion in fiscal 2026 compared with net issuances of $252.8 million in the prior year. Net payments on non-recourse notes payable during fiscal 2026 were impacted by the non-prime securitization transaction completed during the third quarter as the transaction was structured such that off-balance sheet treatment was achieved. Non-recourse notes payable are typically used to fund changes in auto loans held for investment and auto loans held for sale (see "Operating Activities").
During fiscal 2026, cash used in financing activities was impacted by net borrowings on our long-term debt of $624.6 million as well as stock repurchases of $642.8 million. During fiscal 2025, cash used in financing activities was impacted by net payments on our long-term debt of $313.8 million as well as stock repurchases of $428.5 million.
TOTAL DEBT AND CASH AND CASH EQUIVALENTS
(In thousands) As of February 28
Debt Description (1)
Maturity Date 2026 2025
Revolving credit facility (2)
June 2028 $ 840,800 $ -
Term loan (2)
November 2030 499,271 699,773
4.17% Senior notes April 2026 200,000 200,000
4.27% Senior notes April 2028 200,000 200,000
Financing obligations Various dates through February 2059 483,633 487,676
Non-recourse notes payable Various dates through February 2033 15,827,609 17,119,758
Total debt (3)
$ 18,051,313 $ 18,707,207
Cash and cash equivalents $ 122,826 $ 246,960
(1)Interest is payable monthly, with the exception of our senior notes, which are payable semi-annually.
(2)Borrowings accrue interest at variable rates based on SOFR, the federal funds rate, or the prime rate, depending on the type of borrowing.
(3)Total debt excludes unamortized debt issuance costs. See Note 12 for additional information.
Borrowings under our $2.00 billion unsecured revolving credit facility are available for working capital and general corporate purposes, and the unused portion is fully available to us. The credit facility, term loan and senior note agreements contain representations and warranties, conditions and covenants. If these requirements are not met, all amounts outstanding or otherwise owed could become due and payable immediately and other limitations could be placed on our ability to use any available borrowing capacity. As of February 28, 2026, we were in compliance with these financial covenants.
See Note 12 for additional information on our revolving credit facility, term loan, senior notes and financing obligations.
CAF auto loans held for investment and auto loans held for sale are primarily funded through our warehouse facilities and asset-backed term funding transactions. These non-recourse funding vehicles are structured to legally isolate the auto loans, and we would not expect to be able to access the assets of our non-recourse funding vehicles, even in insolvency, receivership or conservatorship proceedings. Similarly, the investors in the non-recourse notes payable have no recourse to our assets beyond the related loans, the amounts on deposit in reserve accounts and the restricted cash from collections on auto loans held for investment. We do, however, continue to have the rights associated with the interest we retain in these non-recourse funding vehicles.
As of February 28, 2026, $13.50 billion and $2.33 billion of non-recourse notes payable were outstanding related to asset-backed term funding transactions and our warehouse facilities, respectively. During fiscal 2026, we funded a total of $7.52 billion in asset-backed term funding transactions. As of February 28, 2026, we had $4.02 billion of unused capacity in our warehouse facilities.
We have periodically increased our warehouse facility limit over time, as our store base, sales and CAF loan originations have grown. See Notes 1(G) and 12 for additional information on the warehouse facilities.
We generally repurchase the loans funded through our warehouse facilities when we enter into an asset-backed term funding transaction. If our counterparties were to refuse to permit these repurchases it could impact our ability to execute on our funding program. Additionally, the agreements related to the warehouse facilities include various representations and warranties, as well as covenants and performance triggers related to events of default. If these requirements are not met, we could be unable to continue to fund loans through the warehouse facilities. In addition, warehouse facility investors could charge us a higher rate of interest and could have us replaced as servicer. Further, we could be required to deposit collections on the related loans with the warehouse facility agents on a daily basis and deliver executed lockbox agreements to the warehouse facility agents.
The timing and amount of stock repurchases are determined based on stock price, market conditions, legal requirements, cash flow dynamics and other factors. Shares repurchased are deemed authorized but unissued shares of common stock. As of February 28, 2026, a total of $2 billion of board authorizations for repurchases was outstanding, with no expiration date, of which $1.31 billion remained available for repurchase. See Note 13 for more information on share repurchase activity.
Fair Value Measurements. We recognize money market securities, mutual fund investments, certain equity investments, beneficial interests in non-consolidated securitizations and derivative instruments at fair value. See Note 6 for more information on fair value measurements.
CarMax Inc. published this content on April 15, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 15, 2026 at 16:13 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]