CarMax Used Car Market Analysis
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AI Summary
This report provides an individual analysis of the used car market, specifically focusing on CarMax, Inc. It begins with an executive summary highlighting CarMax's performance and position in the market. A situation analysis delves into the industry overview, noting the strong growth in both new and used car markets since the 2009 recession. The report then segments the used car market, identifying key demographics (students, families, baby boomers, singles) and psychographics, emphasizing the importance of technology features and fuel efficiency. A marketing mix section focuses on CarMax's product strategy, highlighting its competitive advantages and product offerings tailored to different market segments. The report concludes with references to various sources, including CarMax's financial reports and Edmunds' market analyses, supporting the findings and conclusions presented.
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Running head: Individual Analysis 1
Individual Analysis
On
Used Car Market(CarMax)
Goutham Jalakam
Texas A&M University-Commerce
Dr. Chris Myers
April 7, 2017
Individual Analysis
On
Used Car Market(CarMax)
Goutham Jalakam
Texas A&M University-Commerce
Dr. Chris Myers
April 7, 2017
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Individual Analysis 2
Table of Contents
Executive Summary.........................................................................................................................3
Situation Analysis............................................................................................................................3
Industry Overview & Sector Description....................................................................................3
Segment information.......................................................................................................................5
Demographic characteristics of Market:......................................................................................5
Psychographic characteristics:.....................................................................................................5
Behavioral characteristics:...........................................................................................................6
Marketing Mix.................................................................................................................................6
Product strategy...........................................................................................................................6
Table of Contents
Executive Summary.........................................................................................................................3
Situation Analysis............................................................................................................................3
Industry Overview & Sector Description....................................................................................3
Segment information.......................................................................................................................5
Demographic characteristics of Market:......................................................................................5
Psychographic characteristics:.....................................................................................................5
Behavioral characteristics:...........................................................................................................6
Marketing Mix.................................................................................................................................6
Product strategy...........................................................................................................................6
Individual Analysis 3
Executive Summary
CarMax, Inc. (NYSE: KMX), is a public traded company with $14 billion revenue and
United states largest used cars retailer. Company founded in 1993 and its headquarters located in
Goochland County, Virginia. CarMax registered one million used vehicle sales both from retail
and wholesale stores in a fiscal year and sold over 6 million cars overall. The company operates
173 stores and differentiates itself from competitors in the used car space by providing a wide
selection of high-quality vehicles, low prices, friendly sales consultants, and buyers can sell a car
without buying a car (CarMax).
Overall U.S auto industry growth is very strong since few years and grown significantly
post 2009 recession. Based on Edmunds report (Used-Car report, Edmunds), Used car sales
increased over the past 6 years and in 2016 slightly performed (0.6%) better compared to 2015 in
overall sales. Because of low gas prices, larger vehicle segments are performing better compared
to compact cars(Edmunds, 2016). Because of used-car demand, CarMax outperformed many
competitors with its net income rose 8.2 percent with net earnings of $152.6 million on a solid
rise in used-vehicle sales.
Market segments for used cars are students, families, baby boomers and singles.
Millennials, who are of age 18 to 34, mostly students, singles and low-income households are
potential target segments for used car market. 78% of the used cars are purchased by Millennial
last year and whereas adults over 35 purchase percentage are 68% new and old cars
together(Edmunds,2015). Students and Singles look for vehicles which are fuel efficient, less
price, style and works for long trips. Families and baby boomers look cars based on their life
style and mostly cars which are safe and comfort. Also, with the technology advancements, most
of the customers looks for advanced technology features in cars. 80% of the car shoppers (4 out
of 5) say it is important to integrate their smartphone features. So, providing used cars with these
options will helps to increase market share (Shopping behaviors, Edmunds, 2015).
Product strategy looks for the trends or direction of the used car industry and strategized
based on the potential growth of the market. Some of the key used car products(vehicles) of
Compact vehicle segment are Toyota Corolla, Mazda 3 and Honda Civic. These products target
market segments like Students and Singles looks for major features like good fuel efficiency,
Adaptive Cruise Control, Dual-Zone Automatic Climate Control, Forward-Collision Alert with
Automatic Braking, Infotainment System, Lane-Departure Warning(Compact car features).
Market segments like Families and Baby boomers look for Jeep compass and Honda HRV which
comes under Compact Crossover SUVs and this segment looks for features which provide safety
and comfort like room space, blind spot monitoring, anti-lock brakes.
Situation Analysis
Industry Overview & Sector Description
For the past 6 years, U.S. auto industry has strong growth in both new and used car
markets. After 2009 global financial crisis, the auto industry has grown by massive 68%. With
Executive Summary
CarMax, Inc. (NYSE: KMX), is a public traded company with $14 billion revenue and
United states largest used cars retailer. Company founded in 1993 and its headquarters located in
Goochland County, Virginia. CarMax registered one million used vehicle sales both from retail
and wholesale stores in a fiscal year and sold over 6 million cars overall. The company operates
173 stores and differentiates itself from competitors in the used car space by providing a wide
selection of high-quality vehicles, low prices, friendly sales consultants, and buyers can sell a car
without buying a car (CarMax).
Overall U.S auto industry growth is very strong since few years and grown significantly
post 2009 recession. Based on Edmunds report (Used-Car report, Edmunds), Used car sales
increased over the past 6 years and in 2016 slightly performed (0.6%) better compared to 2015 in
overall sales. Because of low gas prices, larger vehicle segments are performing better compared
to compact cars(Edmunds, 2016). Because of used-car demand, CarMax outperformed many
competitors with its net income rose 8.2 percent with net earnings of $152.6 million on a solid
rise in used-vehicle sales.
Market segments for used cars are students, families, baby boomers and singles.
Millennials, who are of age 18 to 34, mostly students, singles and low-income households are
potential target segments for used car market. 78% of the used cars are purchased by Millennial
last year and whereas adults over 35 purchase percentage are 68% new and old cars
together(Edmunds,2015). Students and Singles look for vehicles which are fuel efficient, less
price, style and works for long trips. Families and baby boomers look cars based on their life
style and mostly cars which are safe and comfort. Also, with the technology advancements, most
of the customers looks for advanced technology features in cars. 80% of the car shoppers (4 out
of 5) say it is important to integrate their smartphone features. So, providing used cars with these
options will helps to increase market share (Shopping behaviors, Edmunds, 2015).
Product strategy looks for the trends or direction of the used car industry and strategized
based on the potential growth of the market. Some of the key used car products(vehicles) of
Compact vehicle segment are Toyota Corolla, Mazda 3 and Honda Civic. These products target
market segments like Students and Singles looks for major features like good fuel efficiency,
Adaptive Cruise Control, Dual-Zone Automatic Climate Control, Forward-Collision Alert with
Automatic Braking, Infotainment System, Lane-Departure Warning(Compact car features).
Market segments like Families and Baby boomers look for Jeep compass and Honda HRV which
comes under Compact Crossover SUVs and this segment looks for features which provide safety
and comfort like room space, blind spot monitoring, anti-lock brakes.
Situation Analysis
Industry Overview & Sector Description
For the past 6 years, U.S. auto industry has strong growth in both new and used car
markets. After 2009 global financial crisis, the auto industry has grown by massive 68%. With
Individual Analysis 4
growing consumer appetite for used cars, there is constant growth in the used car industry.
Based on Edmunds report (Used-Car report, Edmunds), Used car sales increased over the past 6
years and in 2016 slightly performed (0.6%) better compared to 2015 in overall sales.
The average price of the used car is around $19,189 which is 3.4% higher year over year.
Consumer preference is more for larger SUV and trucks because of lower gas prices and their
transactional prices are more. Conversely, some of the vehicle segments registered less growth in
transaction prices because of its demand, as shown below(Edmunds, 2016).
The used-car industry is showing no signs of slow down and CarMax benefit from
consumer preference for a used vehicle. if the same trend continues in the coming years used-car
companies like CarMax, AutoNation and Penske Automotive could be interesting to watch and
all these companies experienced revenue growth rates in their most recent years. Below chart
represents the current market share of CarMax and its competitors based on April 7th report
(Morningstar).
Market
Cap(mil)
Net
Income(mil)
5-Yr
Rev(CAGR%)
Med Oper.
(Margin%)
Interest
Coverage
CarMax Inc 10,852 615 11 6.7 28.8
AutoNation
Inc (USD) 4,069 430 9.3 4.2 4.7
Penske
Automotive
Group Inc
(USD)
3,801 342 12.8 2.9 4.7
growing consumer appetite for used cars, there is constant growth in the used car industry.
Based on Edmunds report (Used-Car report, Edmunds), Used car sales increased over the past 6
years and in 2016 slightly performed (0.6%) better compared to 2015 in overall sales.
The average price of the used car is around $19,189 which is 3.4% higher year over year.
Consumer preference is more for larger SUV and trucks because of lower gas prices and their
transactional prices are more. Conversely, some of the vehicle segments registered less growth in
transaction prices because of its demand, as shown below(Edmunds, 2016).
The used-car industry is showing no signs of slow down and CarMax benefit from
consumer preference for a used vehicle. if the same trend continues in the coming years used-car
companies like CarMax, AutoNation and Penske Automotive could be interesting to watch and
all these companies experienced revenue growth rates in their most recent years. Below chart
represents the current market share of CarMax and its competitors based on April 7th report
(Morningstar).
Market
Cap(mil)
Net
Income(mil)
5-Yr
Rev(CAGR%)
Med Oper.
(Margin%)
Interest
Coverage
CarMax Inc 10,852 615 11 6.7 28.8
AutoNation
Inc (USD) 4,069 430 9.3 4.2 4.7
Penske
Automotive
Group Inc
(USD)
3,801 342 12.8 2.9 4.7
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Individual Analysis 5
Segment information
To perform effective marketing, a company should identify different market segments to
target and promote the product offerings. Students, Families, Baby Boomers and Singles are
focused Market segments. Students are more of price conscious and prefer stylish cars. Because
of they are young and also, they normally change the cars more often. The Families look for cars
which are safe, reliable, durable, comfortable for kids and comfortable for long trips. Also,
families with their income range look for more economical to a luxury car which suits their
requirement. Singles, normally look for stylish cars and based on their economic status they
choose to buy the high-quality cars or low pricing cars according to their requirements (Business
Plans). Baby Boomers, who are of ages between 54 and 64 looks to simplify their life and
downsize the vehicles and prefer vehicles like compact SUVs and crossovers (Edmunds, 2014).
Demographic characteristics of Market:
Students, working professional who are single and some of the married low-income
households with age group 18~34 are considered as Millennials and they prefer used cars more
than new cars. 78% of the used cars are purchased by Millennial last year and whereas adults
over 35 purchase percentage are 68% new and old cars together. Also, Millennials accounted for
significant percent of all traffic to used car pages on Edmunds.com last year(Edmunds,2015).
After 2009 recession, even though the economy got stabilized and the unemployment rate
is reduced, because of lower income compared to previous generations, there is no surprise that
these group of younger adults are not able to buy new cars at the same rate as their predecessors
(Edmunds, 2012). So, most of the Millennials and low-income households prefer used cars
compared to new cars.
Psychographic characteristics:
The psychographic characteristics for used cars are best described through its targeted
marketing statement. Students and singles are economical and sporty who look for compact cars.
Whereas, families and baby boomers with simplifies life style and safety conscious and so, look
for crossover SUVs. Customers can select and compare multiple vehicles to check comfort,
entertainment amenities, and performance. If customers find more than one vehicle which meets
requirements, CarMax helps customers to look their features and determine how well each one
would support lifestyle requirements(CarMax).
Behavioral characteristics:
The majority of the market segments carry smartphones and are looking cars which has
technology enables features. So, car shoppers looking for technology features when they buy a
car. 80% of the car shoppers (4 out of 5) say it is important to integrate their smartphone
features. 62% are willing to pay more if the vehicle has Wi-Fi enabled. 72% considered buying a
Segment information
To perform effective marketing, a company should identify different market segments to
target and promote the product offerings. Students, Families, Baby Boomers and Singles are
focused Market segments. Students are more of price conscious and prefer stylish cars. Because
of they are young and also, they normally change the cars more often. The Families look for cars
which are safe, reliable, durable, comfortable for kids and comfortable for long trips. Also,
families with their income range look for more economical to a luxury car which suits their
requirement. Singles, normally look for stylish cars and based on their economic status they
choose to buy the high-quality cars or low pricing cars according to their requirements (Business
Plans). Baby Boomers, who are of ages between 54 and 64 looks to simplify their life and
downsize the vehicles and prefer vehicles like compact SUVs and crossovers (Edmunds, 2014).
Demographic characteristics of Market:
Students, working professional who are single and some of the married low-income
households with age group 18~34 are considered as Millennials and they prefer used cars more
than new cars. 78% of the used cars are purchased by Millennial last year and whereas adults
over 35 purchase percentage are 68% new and old cars together. Also, Millennials accounted for
significant percent of all traffic to used car pages on Edmunds.com last year(Edmunds,2015).
After 2009 recession, even though the economy got stabilized and the unemployment rate
is reduced, because of lower income compared to previous generations, there is no surprise that
these group of younger adults are not able to buy new cars at the same rate as their predecessors
(Edmunds, 2012). So, most of the Millennials and low-income households prefer used cars
compared to new cars.
Psychographic characteristics:
The psychographic characteristics for used cars are best described through its targeted
marketing statement. Students and singles are economical and sporty who look for compact cars.
Whereas, families and baby boomers with simplifies life style and safety conscious and so, look
for crossover SUVs. Customers can select and compare multiple vehicles to check comfort,
entertainment amenities, and performance. If customers find more than one vehicle which meets
requirements, CarMax helps customers to look their features and determine how well each one
would support lifestyle requirements(CarMax).
Behavioral characteristics:
The majority of the market segments carry smartphones and are looking cars which has
technology enables features. So, car shoppers looking for technology features when they buy a
car. 80% of the car shoppers (4 out of 5) say it is important to integrate their smartphone
features. 62% are willing to pay more if the vehicle has Wi-Fi enabled. 72% considered buying a
Individual Analysis 6
hybrid or electric vehicle (Shopping behaviors, Edmunds, 2015). Gas prices also have a huge
impact on buying pattern and so, the demand for SUV increased because of low gas prices.
Marketing Mix
Product strategy
CarMax has more than 100 outlets in 27 states and one of the major used car retailers that
buy used vehicles without requiring a purchase. CarMax trade-in prices are typically better than
at a traditional dealership. CarMax provides key products and features that differentiate with
competitors which help the customers to choose and select a product for their requirements
(CarMax).
Some of the key used car products of Compact vehicle segment are Toyota Corolla,
Mazda 3 and Honda Civic. These Compact cars provides features like good fuel efficiency,
Adaptive Cruise Control, Dual-Zone Automatic Climate Control, Forward-Collision Alert with
Automatic Braking, Infotainment System, Lane-Departure Warning(Compact car features).
Market segments like Families and Baby boomers look for Jeep compass and Honda HRV which
comes under Compact Crossover SUVs. These products(vehicles) provides features like safety
(blind spot monitoring, anti-lock brakes) and comfort like room space.
Product strategy looks for the trends and direction of the used car industry and strategized
normally based on growth potential of the vehicle segments and market segments. With current
trends, the average age of retail used vehicle (products like Honda HRV, CRV, Toyota Corolla,
Honda civic) sold is 4 years during 2016 and maximum age of Off-lease vehicle is 3 years. Also,
because of the continuous increase in lease vehicle categories, including compact crossovers,
large SUVs and large trucks. Used car prices will be higher in 2017 as well (Used-Car report,
Edmunds).
hybrid or electric vehicle (Shopping behaviors, Edmunds, 2015). Gas prices also have a huge
impact on buying pattern and so, the demand for SUV increased because of low gas prices.
Marketing Mix
Product strategy
CarMax has more than 100 outlets in 27 states and one of the major used car retailers that
buy used vehicles without requiring a purchase. CarMax trade-in prices are typically better than
at a traditional dealership. CarMax provides key products and features that differentiate with
competitors which help the customers to choose and select a product for their requirements
(CarMax).
Some of the key used car products of Compact vehicle segment are Toyota Corolla,
Mazda 3 and Honda Civic. These Compact cars provides features like good fuel efficiency,
Adaptive Cruise Control, Dual-Zone Automatic Climate Control, Forward-Collision Alert with
Automatic Braking, Infotainment System, Lane-Departure Warning(Compact car features).
Market segments like Families and Baby boomers look for Jeep compass and Honda HRV which
comes under Compact Crossover SUVs. These products(vehicles) provides features like safety
(blind spot monitoring, anti-lock brakes) and comfort like room space.
Product strategy looks for the trends and direction of the used car industry and strategized
normally based on growth potential of the vehicle segments and market segments. With current
trends, the average age of retail used vehicle (products like Honda HRV, CRV, Toyota Corolla,
Honda civic) sold is 4 years during 2016 and maximum age of Off-lease vehicle is 3 years. Also,
because of the continuous increase in lease vehicle categories, including compact crossovers,
large SUVs and large trucks. Used car prices will be higher in 2017 as well (Used-Car report,
Edmunds).
Individual Analysis 7
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References
CarMax Reports Fourth Quarter and Fiscal Year Results, April 06, 2017
http://investors.carmax.com/news-releases/news-releases-details/2017/CarMax-Reports-Fourth-
Quarter-and-Fiscal-Year-Results/default.aspx
Edmunds, used vehicle market report, 2017
https://static.ed.edmunds-media.com/unversioned/img/car-news/data-center/2017/feb/used-car-
report/used-car-report-q4.pdf
Used Vehicle Market Report - Special NADA Edition, 2016
https://www.edmunds.com/industry-center/analysis/used-vehicle-market-report-special-nada-
edition.html
Millennials, shopping 2015
https://www.edmunds.com/about/press/millennials-claim-they-are-better-car-shoppers-than-
their-parents-reports-edmundscom.html
CarMax, research and reviews
https://www.carmax.com/articles/12-car-buying-tips
MILLENNIAL Car Shopping Behaviors
https://static.ed.edmunds-media.com/unversioned/img/industry-center/analysis/march-2015-
millennial-car-shopping-behaviors-2015.pdf
What Makes CarMax Different
http://media.carmax.com/phoenix.zhtml%3Fc%3D232927%26p%3Dirol-products
Financial morning star
http://financials.morningstar.com/competitors/industry-peer.action?t=KMX
Used Auto Sales Business Plan
http://www.bplans.com/used_auto_sales_business_plan/market_analysis_summary_fc.php
Edmunds, Who's Not Buying New Cars?
https://www.edmunds.com/industry-center/analysis/whos-not-buying-new-cars.html
References
CarMax Reports Fourth Quarter and Fiscal Year Results, April 06, 2017
http://investors.carmax.com/news-releases/news-releases-details/2017/CarMax-Reports-Fourth-
Quarter-and-Fiscal-Year-Results/default.aspx
Edmunds, used vehicle market report, 2017
https://static.ed.edmunds-media.com/unversioned/img/car-news/data-center/2017/feb/used-car-
report/used-car-report-q4.pdf
Used Vehicle Market Report - Special NADA Edition, 2016
https://www.edmunds.com/industry-center/analysis/used-vehicle-market-report-special-nada-
edition.html
Millennials, shopping 2015
https://www.edmunds.com/about/press/millennials-claim-they-are-better-car-shoppers-than-
their-parents-reports-edmundscom.html
CarMax, research and reviews
https://www.carmax.com/articles/12-car-buying-tips
MILLENNIAL Car Shopping Behaviors
https://static.ed.edmunds-media.com/unversioned/img/industry-center/analysis/march-2015-
millennial-car-shopping-behaviors-2015.pdf
What Makes CarMax Different
http://media.carmax.com/phoenix.zhtml%3Fc%3D232927%26p%3Dirol-products
Financial morning star
http://financials.morningstar.com/competitors/industry-peer.action?t=KMX
Used Auto Sales Business Plan
http://www.bplans.com/used_auto_sales_business_plan/market_analysis_summary_fc.php
Edmunds, Who's Not Buying New Cars?
https://www.edmunds.com/industry-center/analysis/whos-not-buying-new-cars.html
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