CarMax Latest Warning – “People Stopped Buying Used Cars”

CarMax is cutting more jobs as used-car affordability continues to deteriorate, and economy and housing commentator Michael Bordenaro says the problem now goes well beyond one company because many Americans are simply deciding they cannot justify replacing the vehicles they already own.

In a recent video, Bordenaro said CarMax eliminated 145 corporate positions, representing about 4% of its white-collar workforce, after previous rounds of layoffs that cut roughly 350 jobs last October and another 230 in January.

He tied those cuts to weakening profitability, slower sales and a used-car market where the average transaction price has climbed back above $27,000, while insurance, fuel and financing costs make the real monthly expense much higher.

“People just aren’t buying those cars,” Bordenaro said, arguing that many consumers are now keeping older vehicles for as long as possible because every alternative looks expensive.

CarMax Is Cutting Costs as Profitability Weakens

Bordenaro said CarMax generated roughly $25.9 billion in revenue during the fiscal year ending February 28, but that figure was still down about 2% from the year before.

He also cited a roughly 2.5% decline in gross profit per retail vehicle to about $2,253.

When both volume and profit per vehicle are under pressure, he argued, companies have few attractive options beyond cutting operating expenses, accepting lower margins or finding a way to persuade financially stretched customers to take on more debt.

Bordenaro was especially critical of longer auto loans, saying seven-, eight- and even ten-year terms may lower the monthly payment enough to make a deal look manageable, but can leave buyers paying for a vehicle long after its value and reliability have fallen sharply.

That concern becomes even more serious when interest rates are high.

Used Cars Are No Longer the Cheap Alternative

The average used vehicle sold for about $27,239 in August, according to figures Bordenaro cited from Kelley Blue Book, which he said was the highest average since late 2022.

At that price, a buyer financing the vehicle could easily face a payment around $500 to $600 per month depending on the rate and loan term.

And that is before insurance, gasoline, registration and maintenance.

Bordenaro contrasted that with his own experience leasing a well-equipped new Jeep in 2019 for about $550 per month, using it as an example of how much the market has changed in only a few years.

The used market originally benefited when new-vehicle prices moved above $50,000 and shoppers who could no longer afford new cars shifted down into used inventory.

But that migration pushed used prices up too.

Now, Bordenaro says, both ends of the market have become expensive enough that many buyers are simply stepping away.

That is a notable shift because used cars traditionally act as the fallback option when new vehicles become too costly.

If the fallback becomes unaffordable too, the consumer has nowhere obvious to go.

Dealers Say Good Trade-Ins Are Disappearing

Bordenaro then turned to Brandon from the channel Car Questions Answered, who described what he has been seeing at dealer auctions.

Brandon said the biggest problem is not only price but quality.

He gave the example of an older Toyota Camry with high mileage that might normally sell cheaply and still be useful transportation.

In the past, owners of those vehicles might have traded them in after deciding to upgrade.

Now, if that old Camry is paid off and still running, the owner often looks at the price of a new replacement and decides to keep driving the old one instead.

That means many of the better-quality used cars never make it to auction.

According to Brandon, the vehicles that do get traded are increasingly the ones with expensive problems that owners can no longer justify fixing.

Dealers then have to spend money on tires, brakes, mechanical repairs or bodywork before putting those cars back up for sale.

That raises costs even when wholesale prices are easing.

At the same time, truly good used vehicles have become scarce enough that dealers may have to bid aggressively for them, which keeps retail prices high.

Financing Is Locking More Buyers Out

Bordenaro said financing has become one of the biggest barriers for would-be buyers.

He cited an average used-car interest rate around 11.3%, which he called extremely expensive.

At rates like that, a large portion of the monthly payment goes toward interest rather than principal, especially early in the loan.

The problem is compounded by existing debt.

Bordenaro said Americans collectively owe about $1.67 trillion on more than 100 million auto loans, while serious delinquencies have climbed to around 5.6%, well above historical norms.

That creates pressure on both consumers and lenders.

Some buyers owe more on their current vehicle than it is worth, meaning they would have to roll negative equity into the next loan.

Others cannot qualify for financing at all because their credit, income or existing debt load no longer meets lender standards.

Bordenaro said that is one reason weak used-car sales should be seen as a broader consumer warning.

People are spending more of their income on groceries, utilities, rent and basic living costs, leaving less room for a new car payment.

Insurance and Fuel Make the Monthly Math Worse

Even buyers who can afford the payment may be stopped by the cost of everything surrounding the vehicle.

Bordenaro pointed to rising insurance premiums, especially in places such as Florida, where coverage can add hundreds of dollars per month.

Fuel prices are another factor.

He said buyers are becoming more hesitant to purchase large trucks and SUVs when gasoline remains expensive because they do not want to lock themselves into high fuel costs.

That combination matters because affordability is not really determined by the sticker price alone.

A $27,000 used car may look manageable until the buyer adds an 11% loan, expensive insurance, fuel and maintenance.

By that point, keeping an older vehicle and paying for the occasional large repair can look like the less painful option.

Bordenaro said even a $2,000 repair bill can make more financial sense than taking on a new $600 monthly payment.

Wholesale Prices Are Falling, but Buyers May Not Feel It

There is at least one sign of relief.

Bordenaro said the Manheim Used Vehicle Value Index showed wholesale prices down about 0.4% from a year earlier.

That could eventually allow dealers to buy inventory more cheaply.

But he also described it as a double-edged sword.

Lower wholesale prices reduce the value of vehicles already sitting on dealer lots, which can force sellers to accept losses if the market moves down before those cars are sold.

And because lower-quality trade-ins require more reconditioning, cheaper auction prices do not necessarily translate into cheaper retail prices.

Brandon also noted that good cars remain scarce and therefore continue to command premium prices.

This creates a strange market where average values can soften while the vehicles people actually want remain expensive.

Even Carvana Is Warning About the Second Half

Bordenaro said Carvana has been performing better than much of the traditional used-car industry because customers like the convenience of skipping the dealership process.

But even Carvana recently gave full-year guidance suggesting the second half of 2026 could be less profitable than previously expected.

For Bordenaro, that suggests the slowdown is not limited to CarMax.

Large chains, online dealers and smaller independent sellers are all seeing some version of the same problem: buyers are stretched, financing is expensive and inventory quality is uneven.

That does not mean no one is buying cars.

It means the market has become much less forgiving.

Vehicle Ownership Is Approaching $13,000 a Year

Bordenaro closed with new AAA data showing how expensive vehicle ownership has become more broadly.

He said the annual cost of owning and operating a new vehicle is now close to $13,000, or nearly $1,100 per month when financing, depreciation, insurance, fuel and other expenses are included.

That was up by roughly $1,200 from the previous year.

Depreciation alone accounted for about $4,422 annually in AAA’s estimate, according to Bordenaro.

He also highlighted hybrids as the most economical vehicle type in the study, saying they offered strong fuel savings without some of the higher ownership costs associated with fully electric vehicles.

The larger warning, though, was not about which car to buy.

It was that more households are choosing not to buy at all.

CarMax’s layoffs, rising loan delinquencies, fewer quality trade-ins and weaker dealer profitability all point in the same direction: the used-car market is no longer functioning as an easy refuge for buyers priced out of new vehicles.

For many Americans, the cheapest choice now is simply to keep the car they already have and hope it lasts.