RICHMOND, Va. -- CarMax, Inc. the nation's largest retailer of used cars, reports that searches on carmax.com
for smaller, more fuel-efficient vehicles increased in June. According to
carmax.com, search frequency rankings for several vehicles with higher
estimated miles per gallon (mpg) have increased.

    — The Mazda3, with an estimated 24/32* mpg, leaped from 39th in March
to 16th in June.

    — The Toyota Corolla, with an estimated 28/37* mpg, jumped from 9th to
4th place over the same time period.

    — Outside the top 20, the Volkswagen Beetle, with an estimated 21/28*
mpg made a big leap from 71st place to 40th since March.

    “With gas prices continuing to rise, fuel efficiency has increased in
importance for many shoppers,” said Ann Yauger, director of carmax.com. “On
carmax.com, we offer a robust research section that allows consumers to
find the best car for their needs.”

    Of the three makes and models highlighted, there are a combined total
of nearly 1,000 of them, as of this release, available on carmax.com for
sale and can be transferred to the nearest CarMax store.

    The CarMax website can be used to research information on vehicles of
various makes and models. Online shoppers can search the company’s
inventory of more than 25,000 new and used cars. The website showcases
vehicles with multiple photos, the no-haggle price, and information on
features, options, fuel economy and customer reviews. Visits to carmax.com
continue to increase, and approximately 70 percent of in-store customers
visit the website before coming to the store.

Tate Attia, finance manager at Easterns Hyundai of Leesburg, has heard and seen the recent trend of people trading in their SUVs for more economical cars — but he can also speak from personal experience.

“I live 40 miles from work, and every three days I was spending $75 on gas, so I traded in my SUV for a smaller car,” Attia said. “I now pay $50 once a week [on gas].”

Attia took a hit of $7,000 trading in his SUV for his new four-door sedan – but to him, it was worth it.

“No dealer wants to buy a SUV,” he said, speaking from his dealership position. “We have removed all profit on used SUVs because we don’t even want them on the lot. We are lucky if we can give them away at invoice [pricing].”

The selling of hybrid vehicles is a different story.

When Easterns Hyundai gets any hybrid cars in stock, buyers at Easterns’ 16 showrooms in the metropolitan area are ready to pounce.

“We get hybrids rarely,” said Attia, “but when we do get some in, it turns into a bidding war.”

Cars still moving

Over at CarMax Auto Superstore headquarters in Richmond, revenues for the first quarter of 2008 have risen, but the company has seen declines in both customer foot traffic and buyers’ ability to get the credit to purchase a vehicle.

“The slowdown in the economy, the dramatic rise in gasoline and food costs, and the related impact on consumer spending adversely affected our first-quarter performance,” said Tom Folliard, CarMax president and chief executive officer. “For the first time in more than two years, we experienced a modest decline in customer traffic in our stores. Additionally, credit availability from our third-party nonprime lenders declined slightly during the quarter.”

Folliard added, “Despite the slower-than-expected sales, our data indicates that we continued to gain market share in the late-model used vehicle market.”

The declining market for the once-popular SUVs has had an impact on CarMax’s business.

According to the company’s first quarter earnings report, “wholesale industry prices for SUVs and trucks declined nearly 25 percent, which is approximately four times the normal depreciation expected over this period and well in excess of the depreciation expected over a full year.”

As of June 30, CarMax had 1,375 SUVs available, both new and used, ranging from $7,998 to $70,296.

Folliard said, “This is the most rapid depreciation of any vehicle segment that we have experienced in our 15 years.”

The earnings report also stated that if the current trends persist, “results for the full year [of the company's earnings] could be significantly below the bottom of our original earnings guidance range.”

CarMax had only two hybrid cars available June 30 – a 2006 Lexus RX 400h for $35,998 (31K) and a new 2008 Toyota Highlander for $36,816.

Great deals on SUVs

“With SUVs, [a buyer] can get a good enough deal that outweighs the $1 more in gas,” said Eric Kaiser, sales manager at Moore Cadillac Hummer.

He said the big sport utility vehicles have dropped in price significantly.

Kaiser said last week was a busy week for the dealership because of the deals the store has going on – 0 percent interest for 72 months vs. the typical 6.9 percent interest.

“This deal saves a buyer $15,832 over the life of the loan,” he explained.

Having Cadillac as part of the dealership has helped the store during these hard economic times, Kaiser said.

“We are able to maintain the same client customer base, but we are nowhere near where sales used to be,” he said.

Contact the reporter at lwolstenholme@timespapers.com

Car-Mart, the Bentonville-based used-car retailer, jumped almost 43 percent in the second quarter, the best performance of the largest 20 publicly traded companies in Arkansas.

America’s Car-Mart, which closed at $ 17. 92 on Monday, reported better-than-expected earnings in its most recent quarterly report, including a 30 percent rise in same-stores sales. On Monday the company was added to the Russell 3000 index, one of the Russell Investments indexes that often are used by investment managers and institutional investors for index funds and as benchmarks for investment strategies.

“The bad news on the economic front could be good news for America’s Car-Mart,” said Chris Harkins, senior vice president and managing director of Delta Trust Investments Inc. in Little Rock.

Because of the rise in bankruptcy and foreclosure rates and a decline in consumers’ credit scores, alternative car lots can offer a solution, Harkins said. America’s Car-Mart focuses on the buy here-pay here segment of used car sales — the buyer returns to the store where he bought the car to make regular payments.

“Consumers are struggling and the demand for these services has increased,” Harkins said.

Interestingly, while CarMax, (the car company Buffet love) stocks trade about $15 Car-Mart is trading at $18.00. Any idea why? Drop your answer in the comment box below

But for now, he added, CarMax can’t give investors any meaningful guidance for the rest of 2008.

Richmond, Va.-based CarMax does have an innovative growth proposition, and its concept has drawn a lot of attention since the company began in 1993 as a unit of Circuit City Stores Inc. before being spun off six years ago.

Contrasting with the adversarial sales tack used by most dealers, CarMax takes a “no haggle” approach that aims to develop customer loyalty and foster repeat business. Its sales people make the same commission, regardless of what vehicle they sell, so they have no incentive to badger customers to buy pricier, higher-margin models.

CarMax competitors have found that idea tough to copy.

In the current roiled auto markets, though, it may be difficult for any used-auto dealer to have a friendly transaction with customers. Wholesale prices for larger vehicles have fallen by about 25 percent this spring, or four times the typical pace of depreciation, according to CarMax’s first-quarter report.

On average, someone trading in a large SUV now is getting $3,100 less than two years ago, says Jessica Caldwell, manager of pricing and industry analysis at Edmunds.com, which tracks auto industry trends.

Making matters worse, a large number of such vehicles are bought with dealer financing. “People just can’t afford to write a multithousand-dollar check to get out of [owning] a sport utility” and switch to a hybrid, CarMax’s Folliard said in the conference call.

Still, there are many reasons to think that CarMax will weather the storm and perhaps emerge stronger.

The U.S. used-car market is highly fragmented, comprising some 21,500 franchised new-car dealerships and 43,000 independent used-car dealers.

With annual sales of more than $8 billion, CarMax still has a relatively modest share of a $340 billion used-car market, and that share has continued to grow despite the sagging market.

The company has been expanding into new markets around the country with new superstores, which total more than 90. That growth will continue, executives said.

And despite ongoing jitters in parts of the credit markets, CarMax recently found the asset-backed bond market receptive to a $742 million auto loan securitization. That makes it easier for the company to maintain its lending business.

Justin Fuller, an equity strategist at Morningstar Inc., has been watching for CarMax shares (KMX) to cheapen up, expecting swelling new-car inventories to pressure—and take demand away from—the used-car market. Such developments would make the shares a long-term buy, he said.

“CarMax is a big company. It has a lot of financial resources, and it can live through this,” Fuller said. Many smaller used-car dealerships probably won’t, he added.

Carmax Inc the largest U.S. retailer of used cars, said on Wednesday quarterly profit fell by 55 percent as a slowing economy and falling resale values for fuel-hungry light trucks and sports utility vehicles brought lower than expected sales.

The company suspended its earnings forecast for its fiscal year, citing tough economic conditions, and its shares tumbled about 12 percent in premarket trading.

“For the first time in more than two years, we experienced a modest decline in customer traffic in our stores,” said Chief Executive Tom Folliard in a statement.

The U.S. auto business has been hammered by a slowing economy and tighter consumer credit, as well as slumping demand for trucks and SUVs because of record high gasoline prices.

The Richmond, Virginia-based company said profit for its fiscal first quarter, ended May 31, fell to $29.6 million, or 13 cents per share, from $65.4 million, or 30 cents a share, a year earlier.

Net revenue rose 2.9 percent to $2.21 billion.

“If current trends persist, results for the full year could be significantly below the bottom of our original earnings guidance range,” Folliard said, noting that sales activity has slowed further since the U.S. Memorial Day holiday on May 26.

The company had previously called for full-year profit of 78 cents to 94 cents per share. The bottom of that range would represent a 6 percent drop in profit from last year.

CarMax shares fell to $16.20 in premarket trade. (Reporting by Scott Malone; Editing by Steve Orlofsky)