America’s Car-Mart notes ongoing ‘affordability crisis’

The cost of food and childcare is a financial constraint on many folks trying to buy used cars. That’s part of the assessment from America’s Car-Mart President and CEO Doug Campbell, who recently offered insight into the consumer from the company’s perspective.

In a July 3 note to shareholders that was made public on July 18, Campbell outlines economic factors faced by the buy here, pay here auto dealer and its customers.

Campbell’s note comes after the company’s fiscal fourth-quarter net income fell by 79.9% to $416,000 in the quarter that ended April 30, from $2.07 million in the same period last year. Revenue fell by 5.8% to $364.67 million. Total vehicle sales in fiscal year 2024 fell 8.8%, and the company’s market capitalization fell by 20% in the first half of 2024.

Improving vehicle affordability is the “largest challenge” facing the entire used-car sector, Campbell said in his note.

“The largest drivers behind our losses are the escalating prices of food, auto insurance, housing and childcare. These costs are reflected in the average overall income levels observed on credit applications. While the most important factors vary regionally across the country, there is a general consensus that average vehicle selling prices need to be 8-10% lower by the end of the fiscal year to stem the affordability crisis,” he wrote.

Campbell said in the “persistent inflationary environment of the past year,” the company made the difficult choice to tighten lending standards rather than “roll struggling customers into new loans with even longer terms.”

“We kept as many of our existing customers in their cars, while prospectively originating loans to customers based on new, tighter credit standards. These twin duties demanded both large-scale change management and wide-spread adoption,” Campbell further explained.

Inflation has declined since April 30, but it may take several more quarterly reports to determine whether the Car-Mart consumer is able to rebound and whether the company’s strategy will help stem losses, improve sales and reduce past-due accounts.

At the end of the fourth quarter of fiscal 2024, Car-Mart had 154 dealerships, down two from the same time in the previous year.