CarMax cut its prices to bring back buyers. It just reported a $121 million loss

CarMax has seen its sales fall in recent quarters, as consumers have viewed it as too expensive an option. In December, the company announced plans to reduce prices (2) and eliminate hundreds of jobs.

"Based on recent results, it is clear CarMax needs change," Interim CEO David McCreight said on the company's earnings call in December. "Our average selling prices have drifted upward and appear to be less attractive to customers. To ensure that CarMax is a preferred choice, we will work to shrink the gap between our offering and the marketplace."

In a statement to Moneywise, CarMax maintained the price cuts are working, as the sales trends showed an improvement over the Q3 comps. (They were, however, still 1.9% below levels seen during the same period in the fiscal fourth quarter of 2025.) The $121 million loss, the company says, was impacted by restructuring costs, an early exit from underused office space and accounting charges.

Investor pressures

CarMax has also been under pressure (3) from activist investor Starboard Value, which holds a $350 million stake in the company, to adjust the company's pricing and streamline its digital trade-in experience.

"We believe a more dynamic pricing framework is required," Starboard wrote. "Historically, CarMax managed toward relatively stable gross profit per unit targets, which has proved too rigid during periods of market volatility such as 2025 and 2026. … We believe modest price reductions (which may be temporary based on higher priced purchased inventory) of approximately $100 to $300 per vehicle and combined with a more responsive, data-driven pricing system that adjusts in real time to local market conditions can restore competitiveness."

Dynamic pricing, however, often meets with even stronger customer pushback. Wendy's backtracked (4) on plans to raise prices during periods of high traffic in 2024 and Walmart is facing customer wrath after winning two patents (5) that would give computer algorithms an expanded role in product pricing.

The high cost of driving

While CarMax has come under pressure, used car costs on the whole have been climbing steadily for some time. In March of this year, prices hit their highest level since the summer of 2023, according to Cox Automotive's Manheim Used Vehicle Value Index (6). Prices in March were 6.2% higher than a year ago and 1.4% higher than February.

The average listed price of a used vehicle was $25,287 as of February, according to Cox. That compares with new vehicles which posted an average price of more than $49,100.

At the same time, drivers are having to budget for steeply higher gas prices. In the past month-and-a-half, the average price per gallon has jumped from less than $3 per gallon to about $4.10.

That one-two higher price punch is going to put additional pressure on CarMax as well as its new CEO Keith Barr, who got the job in February, following the termination of CEO Bill Nash toward the end of 2025.

Article Sources

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CarMax (1); The Wall Street Journal (2); Starboard Value (3); Yahoo Finance (4); New York Post (5); Cox Automotive (6)