A year ago, CarMax Auto Finance, the financing arm of the nation's largest used-car retailer, took the defensive step of raising its provision for loan losses, based on an "unfavorable loss experience" in its loan portfolio.
But this year, with losses more in line with its forecasts, CarMax Auto Finance has reduced its provisions for losses.
The lender lowered its provision for loan losses 7.8 percent in the quarter that ended Aug. 31, to $32.9 million from year-earlier levels.
That helped to push the finance arm's profits up. Separately, the company said sales of extended service contracts grew faster than retail unit sales, while it saw rising loan applications from both the high and low end of the credit spectrum.
Overall, the company's net profit grew 12 percent to $181.4 million in the fiscal second quarter, as revenue rose 9.7 percent to $4.39 billion, CarMax Inc. said in an earnings statement on Friday, Sept. 22.