CarMax (KMX) is the largest used car dealer in the US with an approximate 3.3% market share of 0-10 year used vehicle sales (in units). In the markets that CarMax operates in the firm estimates that it has about 4.4% market share, with access to about 76% of the US population through its brick and mortar footprint. The used car market is mature and unit growth results from market share capture. CarMax also earns revenue through wholesale auctions. The wholesale inventory is purchased at CarMax dealerships from potential customers and is typically 10 years old or older. CAF underwrites about 43% of used vehicle financing internally and ultimately issues 'non-recourse notes'. The non-recourse notes require outside investor funding. The notes are packaged as asset-backed securities and sold to investors. However, accounting rules require the notes to be listed as debt on the balance sheet with an offsetting loan receivable on the asset side. This accounting rule causes financial statement complexity, bloats the balance sheet, and is potentially the source of equity mispricing.

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