CarMax Auto Finance's revenues from extended service contracts grew 23 percent, reflecting both an increase in used unit sales and an increase in the percentage of consumers purchasing the contracts, CarMax CEO Tom Folliard told analysts during the company's quarterly conference call on Tuesday.
Added Tom Reedy, CarMax CFO: "We believe our finance offers continue to optimize overall sales and profits for CarMax."
Average managed receivables grew 24 percent to $6.52 billion, driven by an expansion of the CarMax Auto Finance's loan penetration rate, retail unit sales growth and higher average amounts financed, Reedy said.
He also said the allowance for loan losses grew to $66 million or approximately 1 percent of ending managed receivables vs. 0.9 percent a year earlier. Net loans rose 32 percent to $1.1 billion and net penetration was 41 percent, up from 37 percent in the same period last year.
Third-party subprime lenders accounted for about 18 percent of CarMax's sales in the quarter, up from 15 percent a year earlier.
CarMax Inc.'s net profit rose 26 percent to $140.3 million in the quarter vs. the year-earlier period, as revenue grew 18 percent to $3.25 billion.