Behind the Wheel with Phil Lebeau

America’s Car-Mart Soars on Low-End Sales

The subprime auto market continues to churn out strong results for the largest U.S. dealership chain focused exclusively on “buy here/pay here” auto sales.

America’s Car-Mart, which operates 116 used-car dealerships in the South and Midwest, reported first-quarter earnings of 83 cents per share on $110 million in revenue. The results were slightly below Street estimates.

America’s Car-Mart last quarter saw 6.4 percent growth, below the pace of its earnings growth of 11 percent from last year.

Shares of CRMT were up 6 percent ahead of the earnings report.

America’s Car-Mart operates used car dealerships in smaller cities like Cape Girardeau, Missouri. Selling to buyers with poor credit records who need a car and providing cars “as is” to customers is only part of how the company makes money. It’s the finance side of the business that is just as important.

Charging annual interest rates between 11 percent and 19 percent (avg. 14.8 percent at the end of April), America’s Car-Mart finances loans to customers who agree to make payments on the same day they get paid at work; in some cases that means weekly or bi-weekly payments. Last year, the average retail sales price at America’s Car-Mart was $9,675.

The “buy here/pay here” business model is controversial because of the interest rates being charged and the strict terms buy here/pay here dealers set for customers. Those who are delinquent and miss payments face repossession. And the repo process is not dragged out—it happens quickly. Critics say buy here/pay here dealers are preying on people with weak credit records.

America’s Car-Mart says referrals are a big part of its business and the vast majority of its customers succeed in paying off their loans.


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