CarMax offers its customers financing info at the start

Used-car retailer CarMax this year started showing consumers the level of financing they qualify for before they start their online car shopping.

The new feature means shoppers using carmax.com and CarMax’s app will know within minutes their specific payment terms and annual percentage rate for used cars in the company’s national inventory. This gives them an idea of what they can afford before they start shopping, the Richmond, Va., retailer said in a statement.

CarMax Finance and third-party lenders will “create a pre-qualification capability where customers get quick credit decisions from multiple lenders on vehicles across our nationwide inventory with no impact to your credit score,” said Jim Lyski, executive vice president for corporate strategy, product and marketing for CarMax.

“Pre-qualification decisions are personalized for each customer based on their credit profile, with vehicle and financing options that are curated just for them with more than 95 percent of customers receiving approvals,” Lyski said.

Once pre-qualified, customers can shop on CarMax.com with their personalized finance terms.

CarMax started building new enhancements to its online finance capabilities about a year ago, Lyski told Automotive News.

The company tested the pre-qualification feature in key markets before launching it nationwide.

“We know from our data insights that most consumers want to shop by personalized monthly payments,” Lyski said.

The company has more than 230 stores, sells online and offers a hybrid selling model.

CarMax retailed 169,884 vehicles in the fourth quarter, down 13 percent from fourth-quarter 2021. It saw a 57 percent drop in net income to $69 million, while revenue fell 26 percent to $5.72 billion from fourth-quarter 2021. Its retail gross profit per vehicle rose 3.7 percent to $2,277.

With the new pre-qualification feature, most CarMax customers receive results in minutes. Feedback within five minutes is somewhat unique, Sharon Zackfia, an analyst for Chicago investment firm William Blair and Co., told Automotive News.

“What’s different is the speed and transparency of the process,” Zackfia said. “Typically, you can get pre-qualified across other operators, but it may be a process that takes much longer than CarMax.”

Zackfia said CarMax has worked over the last five years to alleviate friction for consumers buying a car. “This is another step in that direction,” she said, “allowing consumers to figure out what they need and how to get it and not make it more difficult for them.”