CarMax Just Lost $121M — Here's What It Means for Used Car Prices in 2026

The nation’s largest used car retailer just posted a $120.7 million loss in its fiscal fourth quarter — a swing from $89.9 million in profit a year earlier. CarMax also replaced its CEO, wrote down $141.3 million in goodwill, and paused its share buyback program. This isn’t just one company having a bad quarter. This is a flashing warning light for the entire used car market.

Used car prices in 2026 are caught in a strange tug-of-war: retail prices are softening, but wholesale values are rising. Dealers are cutting prices to move metal, but buyers are stretched thin on financing. And behind the headline numbers, there’s a subprime lending expansion that should make everyone pay attention.

Here’s what’s actually happening — and what it means for you if you’re buying a car right now.

Used Car Prices Are Softening — But Don’t Expect a Crash

CarMax’s average retail selling price dropped ~$110 per unit to $26,019 in Q4. They cut prices and still couldn’t drive volume — retail used unit sales fell 0.8%, with comparable store sales down 1.9%.

Gross profit per retail used vehicle dropped $207 to just $2,115. That’s the margin they earned on each car after acquisition costs. It’s thin, and it’s getting thinner.

But here’s where it gets complicated. At wholesale auctions, prices are moving in the opposite direction. The Manheim Used Vehicle Value Index hit 215.3 in March 2026 — the highest reading since summer 2023, up 6.2% year-over-year.

Auction conversion rates are running at 68.2%, nearly five points above the three-year average. Dealers are competing hard to acquire inventory.

So why are retail prices softening while wholesale prices climb? Two forces are colliding.

First, dealers are absorbing higher acquisition costs instead of passing them fully to buyers — because buyers are tapped out. Second, tariffs on new vehicles have pushed average new car prices up 10.4% year-over-year, according to Kelley Blue Book. That’s driving more shoppers into the used market, keeping demand — and wholesale prices — elevated even as retail sticker prices edge down.

The bottom line: you’re not going to see a used car price collapse. Cox Automotive projects the Manheim index will finish 2026 roughly 2% above current levels. But there is real room to negotiate at the retail level, especially with dealers sitting on aging stock.

CarMax Is Lending to Riskier Buyers — And That Should Worry Everyone

Here’s the number buried in CarMax’s earnings that deserves the most attention: Tier 3 financing penetration surged from 7.9% to 9.8% year-over-year. That’s subprime — buyers with weaker credit who pay the highest interest rates.

CarMax didn’t grow volume by finding more qualified buyers. They grew it by lending deeper into the risk pool. Their weighted average contract rate sits at 11.1%.

They also completed a $900 million non-prime securitization and designated another $100 million pool of non-prime loans as held for sale. That’s a company that knows it’s holding risk and is trying to move it off its books.

This isn’t happening in a vacuum. According to the New York Federal Reserve, auto loan serious delinquencies (90+ days past due) hit 5.2% in Q4 2025 — the highest since 2010. Total auto loan balances have swelled to $1.67 trillion.

The average used car loan interest rate is running above 11% APR according to Bankrate, with deep subprime borrowers facing rates above 16%.

Put differently: one out of every 19 auto loans in America is seriously delinquent. And the industry’s response is to write more loans to riskier borrowers at higher rates to keep the volume machine running.

CarMax’s own loan loss allowance now stands at $453 million — 2.78% of their portfolio. Their CarMax Auto Finance income dropped 9.8% to $143.7 million even as they pushed further into subprime.

They’re earning less on more risk.

What This Actually Means If You’re Buying a Used Car Right Now

CarMax’s SG&A expenses hit 101% of gross profit in Q4 — meaning they spent more selling cars than they earned from selling them. That’s not sustainable, and it tells you something about the leverage buyers have right now. When the nation’s largest used car retailer is losing money per transaction and scrambling to restructure under a new CEO, the balance of power is shifting toward the buyer.

Here’s how to use that leverage:

Prices are negotiable. The gap between wholesale acquisition costs and retail asking prices is getting squeezed. Dealers need to move inventory. Used vehicle days supply is around 49 days nationally, but vehicles priced above $25,000 are sitting longer.

If you’re looking at a car that’s been on the lot 45+ days, you have room to push. Check how long it’s been listed — and don’t be afraid to make an offer below asking.

Don’t let financing erase your price win. This is where the trap lives. You can negotiate $1,500 off the sticker price and then lose $3,000 or more to an inflated interest rate over a 72-month loan. Used car APRs vary wildly by credit score — from 6.8% for top-tier borrowers to over 21% for subprime, according to Bankrate data.

Get pre-approved through your bank or credit union before you set foot on a lot. Compare that rate against the dealer’s offer. Most buyers don’t, and most buyers overpay on financing as a result.

Avoid the 72- and 84-month loan. Extended terms are how dealers make high monthly payments look manageable. But they almost guarantee you’ll be underwater on the loan within 18 months — owing more than the car is worth. When used cars are averaging over 70,000 miles at the time of sale, you do not want to be five years into a loan on a vehicle that’s approaching 140,000 miles.

Watch the tariff spillover. New car prices are elevated and likely staying that way. The tariff situation has added an estimated $5,000 to $8,900 to the cost of imported vehicles and $1,600 to $2,000 to domestically assembled ones, per CBT News. That’s propping up used car values from below — if new cars are unaffordable, used cars retain more value.

Factor that into your timing. If you can wait for a specific model, you might benefit from seasonal softening later in summer. But don’t expect a dramatic drop.

Know the dealer’s position before you negotiate. This is the single biggest advantage you can have. The CarEdge Dealer Transparency Index shows you how dealers in your area price and negotiate.

The cost of ownership tools show you the real long-term cost of any vehicle — not just the sticker. And OTD pricing data shows you what other buyers are actually paying.

The Market Is Talking — Are You Listening?

CarMax’s earnings are a report card for the entire used car industry. A $120.7 million loss, a CEO ousted, margins collapsing, subprime lending expanding, and a company spending more to sell cars than it earns from selling them. That doesn’t happen when the market is healthy.

But stress in the market creates opportunity for prepared buyers. Dealers have less pricing power than they’ve had in years. The data is available. The leverage is real.

The question is whether you use it. Start your search with real pricing data — find your next car on CarEdge for free.