--- title: "What the tape said: CarMax Auto Finance" url: https://lendriskanalytics.com/insights/carmax-stress-signals.html publisher: LendRisk Analytics series: What the Tape Said issue: 2 published: 2026-06-17 kind: Stress signal description: "A read of what is publicly visible about CarMax Auto Finance right now: a $71.3M lifetime-loss revision on 2022 and 2023 vintages, an allowance that climbed after management called the peak, and a nonprime shelf whose structure is quietly tightening. Straight from the filings, with every figure sourced." html: https://lendriskanalytics.com/insights/carmax-stress-signals.html --- # What the tape said: CarMax Auto Finance [← All insights](https://lendriskanalytics.com/articles.html) What the Tape Said · Issue 2 Stress-signal brief · 11 min read Stress-signal brief · CarMax Auto Finance # What the tape said: CarMax. Public record through June 17, 2026 · LendRisk Analytics Last issue I pulled apart a company that had already failed. This one is different, and I think it is the more useful exercise. CarMax is open, profitable, and still selling bonds every quarter. So the question is not what went wrong. It is quieter than that: *what is the public record already telling us, before anyone calls it a problem?* I went and read the filings so you do not have to, and I want you to be able to see what I saw. $71.3M Lifetime-loss revision on 2022 and 2023 vintages, in one quarter 2.61 → 3.02% CAF allowance, Feb to Aug 2025 603 → 613 WA FICO, first to latest nonprime deal 9.85 → 8.42% Excess spread, consecutive nonprime deals ## Bottom line Here is the thing I want you to take away before any of the detail: the CarMax prime book is not broken. If you came here for a collapse story, this is not one. What the filings show is narrower and, honestly, more relevant to your own book. The stress is sitting in two specific places, and both of them are things you can go check in your own portfolio this week. First, the loans CarMax wrote in 2022 and 2023, when used cars were near their peak price, are aging worse than the company expected, and management said so on the record. Second, CarMax has been deliberately walking down the credit spectrum since 2024, and the *structure* of its newer nonprime deals, more cushion on every tranche while the built-in margin shrinks, tells you what the rating agencies quietly think is coming. None of that is a siren. It is drift, and the mechanism behind it, peak-price collateral meeting a used-car market that corrected, is not unique to CarMax at all. If you originated used-vehicle paper in 2022 and 2023, it is your story too. The read The single most interesting thing in this whole file is not a number. It is a sequence. In June 2025 management told the market the worst of the provisioning was behind them. **One quarter later they added $71.3 million in lifetime losses on the exact vintages they said were handled.** That gap is twelve weeks, and it is the cleanest reminder I can give you that even a team with full access to its own tape could not see the seasoning curve coming. If they could not, you should assume you cannot either, and reserve like it. ## The four signals I ranked these the way I would if I were reading CarMax as a counterparty: most actionable first. Where I am reasoning past what the filing literally says, I label it as an inference, so you always know which is which. ### Signal 1. Management called the peak, then missed it On the Q1 FY2026 earnings call in June 2025, the head of CarMax Auto Finance told analysts that Q1 would be the **"high watermark"** for provisioning, that the adjustment on the older vintages had been made, and that they felt good about the reserve. That phrasing is straight from the call. Three months later, the Q2 FY2026 release on September 25, 2025 disclosed a **$71.3 million increase in lifetime-loss estimates,** pinned specifically to the 2022 and 2023 vintages. The allowance went from $474.2 million (2.76% of auto loans held for investment) at the end of May to $507.3 million (3.02%) at the end of August. I am not putting words in anyone's mouth here. The "high watermark" line is from a public transcript. The $71.3 million is from a public SEC filing. The market noticed the gap: the stock fell roughly 20% on the Q2 print, and by early November a securities class action had been filed over the provision miss. I am citing that as context, not as a verdict. CarMax also said in the same release that these vintages "remain highly profitable," which is true and which matters. This is a reserve-adequacy story, not a solvency one. **Inference**A lender that tightened underwriting in April 2024 because the older vintages were already turning, then told the market in June 2025 the reserve was set, then revised lifetime losses on those same vintages in September, is telling you the original number was light. Not dishonest. Light. The honest takeaway is humility about how late the loss curve on 2022 and 2023 paper actually shows up. ### Signal 2. Watch the allowance arc, not the single quarter Any one quarter's allowance number is noise. The shape across six quarters is the signal, and the shape is what I want you to look at here. It climbed into the August 2025 spike, eased, and is climbing again, but for a different reason the second time. CAF allowance, % of auto loans held for investment Management's "high watermark" call landed at the May 2025 reading. The line went up anyway, then turned over, and is now rising again on new lower-tier growth rather than the old vintages. Source: CarMax quarterly earnings releases (8-Ks on SEC EDGAR), Q4 FY2025 through Q1 FY2027. | Quarter end | Allowance | % of HFI | Source release | |---|---|---|---| | Feb 28, 2025 | $458.7M | 2.61% | Q4 FY2025 | | May 31, 2025 | $474.2M | 2.76% | Q1 FY2026 | | Aug 31, 2025 | $507.3M | 3.02% | Q2 FY2026 | | Nov 30, 2025 | $474.8M | 2.87% | Q3 FY2026 | | Feb 28, 2026 | $453.0M | 2.78% | Q4 FY2026 | | May 31, 2026 | $475.0M | 2.95% | Q1 FY2027 | One honest caveat: the Feb 2025 figure was reported against "ending managed receivables," and from Q1 FY2026 on, the denominator is "auto loans held for investment," because some nonprime loans moved to held-for-sale. So do not read this as one perfectly clean line. The direction is real; the exact slope is not apples-to-apples end to end. The second climb, from 2.78% back up to 2.95% in early 2026, is the more forward-looking part. By the company's own Q1 FY2027 disclosure, that move is being driven by growth into the lower-credit Tier 2 space, not by the old 2022 to 2023 vintages. In plain terms: the first hump was the past catching up. The second is the future being priced in as CarMax writes more thin-credit paper on purpose. ### Signal 3. The nonprime shelf is telling on itself In June 2024 CarMax did something it had never done in 76 prior prime securitizations: it launched a dedicated nonprime shelf, the CarMax Select Receivables Trust. The first deal, CMXS 2024-A, was $666.6 million of loans to borrowers with a weighted-average FICO of 603, an average APR of 16.06%, and 31% of the pool in older, higher-mileage "ValuMax" cars. That is a real subprime book, and ring-fencing it protects the prime investors. Good structural hygiene. But it also creates a new surface to watch, and the way that surface has evolved across deals is the signal. Where the cushion is going on the nonprime shelf Between two consecutive deals, the arranger demanded more hard credit enhancement on the senior class while the deal's own built-in margin, its excess spread, shrank. When protection has to be added and earned margin falls at the same time, that is the market telling you what it expects from the collateral. **Class A credit enhancement (left) **Excess spread (right) Source: S&P Global Ratings presale commentary via Asset Securitization Report, June 2026. Class B, D and E enhancement rose on the same deal (21.10 to 25.25, 5.60 to 8.50, 3.50 to 4.50). **Inference**More credit enhancement and less excess spread at the same time is a one-way signal. It means expected losses on the collateral are rising faster than the deal's own yield can absorb. These bonds are still printing at investment grade, so this is not the market panicking. It is the market quietly repricing the same risk you are carrying if you have moved down-spectrum to keep volume up. ### Signal 4. Some of the risk is now off the balance sheet In September 2025 CarMax upsized its second nonprime deal to **$900 million** and, for the first time, sold most of the residual interest to outside investors. That earns off-balance-sheet treatment: CarMax booked a $27.0 million gain on sale, and those loans, and their losses, no longer sit on its held-for-investment book. The Q1 FY2027 release in June 2026 confirmed CAF income was down slightly precisely because of that, fewer loans outstanding after the residual sale. This is completely standard, and CarMax disclosed it plainly. I am flagging it for one reason only, and it is a reason that matters to you if you benchmark yourself against CarMax: the allowance percentage everyone quotes, 2.95% as of May 2026, is calculated only on the loans still on the balance sheet. The growing nonprime pool that moved off-sheet is serviced by CarMax but is not in that denominator. So the headline reserve ratio will keep looking cleaner than the total book of credit CarMax is actually managing. If you are using their number as a yardstick, add the off-sheet book back in your head before you do. ## The securitization record CarMax is not improvising here. It has 30 years of issuance history. What is new is the second shelf, and the recent shape of it is worth a look on its own, because the nonprime program scaled hard and then pulled back. Nonprime shelf, deal size by issuance The program launched at $666.6M, peaked at $900M in September 2025, then stepped down across the next two deals. The prime shelf, for scale, has run a steady $1.2B to $1.6B per deal the whole time. **Nonprime deals **Most recent (CMXS 2026-B) Source: SEC EDGAR FWP filings and Asset Securitization Report. 25-B shown at its upsized $900M size with residual sold off-balance-sheet. | Deal | Issued | Size | Shelf | |---|---|---|---| | CAOT 2022-1 | Jan 19, 2022 | $1.60B | Prime | | CAOT 2022-4 | Oct 31, 2022 | $1.38B | Prime | | CAOT 2023-2 | Apr 19, 2023 | $1.50B | Prime | | CAOT 2023-3 | Jul 26, 2023 | $1.20B | Prime | | CAOT 2024-2 | Apr 24, 2024 | $1.60B | Prime | | CMXS 2024-A | Jun 26, 2024 | $666.6M | Nonprime · new shelf | | CMXS 2025-A | Mar 26, 2025 | $800M | Nonprime | | CAOT 2025-3 | Jul 23, 2025 | $1.45B | Prime | | CMXS 2025-B | Sep 24, 2025 | $900M | Nonprime · off-B/S | | CMXS 2026-A | Feb 18, 2026 | $750M | Nonprime | | CMXS 2026-B | Jun 2026 | $600M | Nonprime | The prime book is range-bound. All of the growth, and then the recent pullback, is on the nonprime side. Three straight smaller nonprime deals do not fit the 2024 to 2025 growth story, and I would not over-read it, but it is worth watching whether that is market conditions, an origination-volume call, or the shelf bumping a ceiling. ### The prime pool actually got better, and that is the fair part of the story I do not want to leave you thinking this is all one direction. The April 2024 underwriting tightening worked, and it shows up cleanly in the prime collateral. The weighted-average FICO on the prime deals climbed deal over deal, with the 2025 vintage landing far above where the troubled 2022 and 2023 paper was written. Prime shelf, weighted-average FICO at issuance The 2022 and 2023 deals (FICOs in the low 700s, written at peak car prices) are the cohorts that produced the $71.3M revision. After tightening, the 2025 pool came in materially stronger. Source: Fitch presale reports via Asset Securitization Report and SEC FWP filings. 2025-3 FICO is approximate. So the picture is honest in both directions. The new paper is cleaner. The old paper is still seasoning, and it is the old paper that surprised management. Both things are true at once, and you need to hold both to read the book correctly. ## What I could not nail down I would rather tell you the edges of what I know than pretend the file is airtight. Three things I deliberately left soft or out: The exact cumulative net-loss curves by vintage live in the loan-level ABS-EE filings on EDGAR, and building them means parsing XML across dozens of monthly reports. I did not do that here. This brief leans on management's own admission of vintage underperformance rather than my own curve extraction. If you need deal-level precision, that extraction is the logical next step. I dropped a recovery-rate figure that was floating around an earlier draft of this analysis (a roughly 38% cumulative recovery on one 2022 deal) because I could not source it to a primary filing cleanly. What I can stand behind: Fitch's subprime recovery index was running near 33% late in 2025, against a pre-pandemic average closer to 44%. That structural gap, not any single deal's number, is the point. Recoveries are simply worth less than your old loss model probably assumes. And a weighted-average LTV figure on the latest nonprime deal showed up in secondary commentary but not in a primary filing I could open, so I left it out. The Signal 3 argument does not need it; it rests on the credit-enhancement and excess-spread numbers, which are confirmed. ## What this means for your book CarMax is a $16 billion-plus managed book run by the biggest used-car retailer in the country. You are probably not that. Which is the whole point: if peak-vintage stress and recovery compression can surprise a team with that much scale and history, the same mechanics at your size, with less structural cushion and no off-balance-sheet release valve, will show up harder and with less warning. So here are the three questions I would actually go ask of my own portfolio this week. **1. What do my 2022 and 2023 vintages look like at 24 to 36 months of seasoning?** That is the window where used-vehicle losses tend to peak. Your blended delinquency rate can look calm while a specific cohort underneath it is accelerating. The aggregate hides exactly the thing you need to see. Pull the cohort, not the total. **2. What am I really recovering at auction versus 2021?** If your loss model still assumes 45 to 48% recovery and you are actually getting 35 to 40%, your net loss per default is materially higher than the model says, and your reserve is quietly short. The shortfall stays invisible until the book seasons enough to expose it. Go check the actual number. **3. If I am reaching down-spectrum to hold volume, is my reserving moving with me?** CarMax added cushion to every nonprime tranche while its excess spread fell. That is the market telling them the new collateral is riskier. The question for you is whether your internal reserve assumptions reflect that, or whether you are quietly assuming the new, weaker business performs like the old business did. It will not. None of this is a reason to panic about CarMax, and I have tried hard not to dress it up as one. It is a reason to go read your own tape the same way, before someone else reads it for you. **Sources & notes** The $71.3M lifetime-loss revision, the $507.3M / 3.02% allowance, the prior-quarter figures, the 2022 and 2023 vintage language, and the April 2024 tightening are all from CarMax's [Q2 FY2026 earnings release (September 25, 2025)](https://www.sec.gov/Archives/edgar/data/1170010/000117001025000115/q2fy26earningsrelease.htm), filed as an 8-K on SEC EDGAR and corroborated across BusinessWire and Morningstar. The "high watermark" management comment is from the CarMax Q1 FY2026 earnings call (June 2025), per published transcripts. Quarterly allowance figures (Feb 2025 through May 2026) are from the respective CarMax earnings releases, each filed as an 8-K. CMXS 2024-A collateral (FICO 603, APR 16.06%, LTV 97%, ValuMax 31%, $666.6M, 32,816 loans) is from Fitch via [Asset Securitization Report](https://asreport.americanbanker.com/news/carmax-select-receivables-trust-to-raise-625-million). CMXS 2026-B structure (FICO 613, excess spread 8.42% vs 9.85%, credit enhancement by class) is from S&P Global Ratings via [Asset Securitization Report (June 2026)](https://asreport.americanbanker.com/news/carmax-raises-600-million-from-used-vehicle-contracts). Deal sizes and dates are from SEC EDGAR FWP and 8-K filings. The Fitch subprime recovery index (~33% late 2025 vs ~44% pre-pandemic) is from Fitch Ratings commentary. The $900M upsized CMXS 2025-B, the $27.0M gain on sale, and off-balance-sheet treatment are from CarMax's Q2 and Q3 FY2026 and Q1 FY2027 releases. The securities class action reference is from public filings reported in October and November 2025 and is cited as context, not as any finding of wrongdoing. **Where this brief reasons beyond what a filing literally states, it is labeled as an inference.** LendRisk Analytics is an independent research publication with no position in, and no affiliation with, any company mentioned, and this is not investment, legal, or accounting advice. Have a question about the market, or a different view? [Send it through →](https://lendriskanalytics.com/contact.html). LR LendRisk Analytics Independent market research Continue reading [What the Tape Said · Issue 1 What the tape said: *Tricolor Holdings*](https://lendriskanalytics.com/insights/tricolor-tape.html) [Vol · 09 · Sector note Buy-here-pay-here *grew up*](https://lendriskanalytics.com/insights/bhph-institutionalized.html)