TikToker Reveals Surge in CarMax Repossessions, Sparking Economic Concerns

TikToker Cheese documents a surge in repossessed CarMax vehicles at auctions, with many customers defaulting on loans. The trend sparks debate about CarMax's lending practices and potential economic consequences.

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Nitish Verma
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TikToker Reveals Surge in CarMax Repossessions, Sparking Economic Concerns

TikToker Reveals Surge in CarMax Repossessions, Sparking Economic Concerns

A recent report by TikToker Cheese has raised alarm bells about CarMax's lending practices and their potential impact on the broader economy. Cheese, a car dealer, has been documenting a significant increase in repossessed CarMax vehicles appearing at auctions, with many customers defaulting on their loans.

Why this matters: The surge in repossessions could have far-reaching consequences for the economy, including a decrease in consumer spending and a rise in delinquencies. This trend could also lead to a reevaluation of subprime auto lending practices and their impact on vulnerable consumers.

In a recent video, Cheese walks through a lot filled with repossessed cars, pointing out the trend of customers who purchased vehicles from CarMax but were unable to keep up with the monthly payments. "More carmax repos at the auction. People are defaulting on their loans and getting their vehicles repossessed," Cheese states in the video, which includes an overlay text reading, "Carmax is in big trouble."

The video, which shows a wave of late-model repossessed CarMax vehicles bearing "repo" stickers, has sparked a heated debate about the company's lending practices. One TikTok user, claiming to work for CarMax, commented, "I work at carmax they're just giving out cars to make a buck." Another user speculated that CarMax knowingly gives out cars to people who can't afford them, with the intention of repossessing the vehicles and selling them again.

The surge in repossessions may be linked to the economic "bubble" that occurred during the COVID-19 pandemic, which led to skyrocketing car prices. Inflation and supply chain issues have further exacerbated the problem, making it increasingly difficult for customers to afford their car loans.

CarMax's stock has been volatile, with a 1-year low of $59.66 and a 1-year high of $88.22. The company reported $0.32 earnings per share (EPS) for the quarter, missing the consensus estimate of $0.45 by $0.13. CarMax's revenue was down 1.7% on a year-over-year basis, with a net margin of 1.81% and a return on equity of 7.26%.

While some users defended CarMax, saying the company helped them secure a vehicle despite poor credit, others expressed concerns about the potential impact on the broader economy. The increase in repossessions could lead to a decrease in consumer spending and a rise in delinquencies, creating a ripple effect throughout the economy.

As the debate surrounding CarMax's lending practices continues, the company faces increased scrutiny from analysts and investors. With three equities research analysts rating the stock as a sell, five giving a hold rating, and five issuing a buy rating, the company has an average rating of Hold and a consensus target price of $77.42. The surge in repossessions at CarMax auctions, as revealed by TikToker Cheese, serves as a stark reminder of the potential risks associated with subprime auto lending and its far-reaching consequences for both consumers and the economy as a whole.

Key Takeaways

  • TikToker Cheese reports surge in repossessed CarMax vehicles at auctions.
  • Repossessions could lead to decreased consumer spending and increased delinquencies.
  • CarMax's lending practices face scrutiny amid concerns of subprime auto lending.
  • Economic "bubble" during COVID-19 pandemic and inflation contributed to the issue.
  • CarMax's stock is volatile, with a 1-year low of $59.66 and a 1-year high of $88.22.