CarMax (KMX) is facing significant hurdles in the used-car market.

The company is struggling to source late model used vehicles due to lower lease volumes, with only ~3 million cars leased in 2021 and 2022 compared to ~6 million in 2019 and 2020. (Leased vehicles typcially hit the used car market after 3 years). This shortfall is expected to reduce availability by about 2.9 million units through 2025.

Intense competition from franchised dealers and Carvana compounds these sourcing difficulties. We talked about the success of CVNA earlier this month.

Declining new vehicle prices for the eighth consecutive month and high interest rates make new cars more attractive to consumers, putting CarMax, which relies heavily on used-car sales, at a disadvantage.

A web traffic comparison illustrates CarMax’s struggle.

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