The used car market continues to see progress as seen in the fourth quarter 2023 results of CarMax, the country’s largest used car dealer, as the effects of inflation and consumer credit delinquencies continue to overshadow the sector. Seeking stability against the macro headwinds inside.
CarMax CEO Bill Nash, who reported fourth-quarter 2023 earnings results on Tuesday (April 11) on the earnings call, said that dealers are improving their omnichannel offerings and digital tools to make faster credit decisions and improve customer confidence. He said the steps taken in recent quarters to improve the experience have paid off.
While pointing to “broader inflation, rising interest rates, tighter lending standards, and affordability pressured by prolonged low consumer confidence” as disincentives, Nash said the efficiency of the operations carried out has been undermined. Acknowledging the effort, it highlighted how CarMax is working to increase sales by improving the customer experience. Omnichannel shopping to credit.
Regarding the retail consumer shopping experience, Nash told analysts and investors that in the fourth quarter, CarMax completed the nationwide rollout of its financially-based shopping (FBS) pre-qualification product, increasing quarterly online retail sales to 11%. He said it has grown from 14% to 14%. Meanwhile, omnichannel retail sales were 52% for him, down from 55% for him a year earlier.
Credit pre-screening removes friction
CarMax Auto Finance (CAF), FBS’s pre-qualified product, will give customers the flexibility to receive fast credit decisions digitally from the majority of lenders across their vehicle inventory, said Nash. Over 80% of our customers use this online tool to initiate the credit process.”
He also said that CarMax is leveraging more data science, automation and artificial intelligence (AI) to help “customers complete critical transaction steps on their own and move back and forth between assisted help and self-promotion.” It makes it even easier to do things like that.” These tools drive online sales and allow customers to easily select Express Pickup, a delivery option that can complete the transaction in “just 30 minutes” at his CarMax stores.
Against this backdrop, CarMax CFO Enrique Mayor-Mora said the pace of new store openings has slowed in 2024, with five new stores, including two additional CarMax stores in the New York City subway market. He added that there are also plans to open a As the first offsite production base in the Atlanta subway market. “Our nationwide footprint and logistics network continue to be his CarMax competitive advantage,” he said.
Regarding consumer credit, John Daniels, senior vice president of Carmax Auto Finance, said: Interest rates and arrears can lead to these adjustments. ”
Daniels said the broader rollout of CarMax’s Finance Based Shopping (FBS) experience will come at a time when used car prices remain high and consumer financial stability is in a difficult second year in the current inflationary environment. , added that it resonates with consumers.
“What really sets this product apart in the used car industry is that it computes over 6 million unique credit decisions every minute from multiple financial sources, each leveraging their own credit model to make these offers. It’s our ability to make it digitally available to our customers, whether they’re shopping in our home store or anywhere they walk a lot.”
Reconfirm the strength of omnichannel
CarMax has firmly established itself as an omnichannel innovator in used car sales and has strengthened its alignment with digital shopping behavior. Mr Nash said: -Provide progression features for all customers. ”
“As we evolve our omnichannel experience, we are also updating our operating model to improve store efficiency. Enhanced e-signature functionality.
Nash adds: Our ability to integrate digital and physical transactions is a key differentiator, both in the experience we offer and in the overall addressable marketplace available to us. ”