Am I being too hard on them?

I don’t think you’re being to hard on them. Those are all valid points.

One thing I think we want to consider when comparing them against the entire used car market is that they are only selling product in a defined range within that entire market. For example, a quick search of their entire inventory shows nothing in inventory with more than 130k miles. On the latest call they reference several times the less than 6yr old car market being pressured and the used car market shifting to the greater than 10yr old vehicle for affordability reasons. They also said the 0-4yr is their “bread and butter”. They said overall they are not having a problem sourcing inventory in general but they are challenged with sourcing older more affordable inventory that meets their “Car Max standards”.

I don’t foresee them lowering their standards much to go after the greater than 10yr market so that leaves waiting on the market to balance the price/affordability equation of less than 6yr old cars. Maybe they can tweak their algorithm and pay up for some of the higher priced product on offer but that puts their margin and turn at risk. I’m content selling puts here to see how it plays out for now.

You mentioned Auto Nation as a comparator. I’m hesitant to make a real direct comparison to anyone that is selling new autos as well. The auto makers can push a lot of discount dollars through the channel when it’s in their interest that can have a significant effect on what their dealers are doing on trade ins. KMX does not have that benefit so whatever they pay for a piece of inventory is where they are locked in. It’s definitely something to watch though because in general more new sales should take the price pressure off the used market to the benefit of KMX.

Jeff