CarMax exiting new-vehicle retail business

CarMax is getting rid of its two remaining franchised dealerships — both Toyota stores — to focus on its core business of selling used vehicles.

Last week, Sheehy Auto Stores of Virginia announced the acquisition of CarMax Laurel Toyota in Maryland. CarMax, the nation's largest used-vehicle retailer, confirmed to Automotive News in an email that it expects to finalize the sale of its other Toyota outlet, in Kenosha, Wis., this year. CarMax said it expects to keep its location in Kenosha to continue selling used vehicles and that the buyer of the Toyota business would operate out of a proposed new dealership.

For CarMax, the exit from the franchised business comes after a quarter-century selling new vehicles. The new-vehicle share of the company's business has dwindled over time, and CarMax's energy is now fully behind the expansion of its used-vehicle business, particularly online.

CarMax completed the rollout of its omnichannel retail platform last year and is beginning a marketing push to promote its digital capabilities. Omnichannel retailing refers to having the technology and processes in place to give consumers the ability to seamlessly shop for and buy a vehicle online or in a physical store — or in a combination of the two places.

The coronavirus pandemic has validated digital investments and omnichannel strategies for companies such as CarMax as online and remote sales became more important to all auto retailers. At the same time, competition in used-vehicle sales has soared with the growth of online rivals such as Carvana Co. and Vroom Inc.

"With the rollout of our omnichannel offering complete, we see immense opportunity to serve our core customers who are looking to buy and sell used cars on their terms — from home, in-store, or a seamless combination of the two," Darren Newberry, CarMax's senior vice president of store operations, said in a statement to Automotive News.

CarMax has owned new-vehicle operations since at least the mid-1990s. The company caused a stir in 1995 when then-Chrysler Corp. announced it would award CarMax a new-vehicle franchise.

At the time, CarMax was still a division of Circuit City Stores Inc. A 1995 article in Automotive News noted that the auto retail sector had historically been an independent, entrepreneurial one, but that CarMax's new Chrysler operation would instead answer to a board of directors. This publication wondered, "With a Chrysler franchise in hand, could Chevrolet or Ford be far behind for CarMax?"

The company's tactics shifted by 2003, and it began to sell some new-vehicle stores and moved others tied to used-vehicle supercenters to standalone locations. As of March 2006, CarMax's franchised store count was down to six, and then-CEO Austin Ligon talked about why the retailer stayed in the new-vehicle business.

"We maintain these franchises because we want to keep an exposure to the new-car business," Ligon told Automotive News at the time. "And we want to keep our relationship with some of the new-car companies."

As of its most recent quarterly regulatory filing in December, CarMax had 220 used-vehicle locations in the U.S., plus the two remaining Toyota franchises.

The company's new-vehicle operations consisted of only those two Toyota locations for the last several years. It started its fiscal 2016 with four new-vehicle franchises but divested two of them that year.