CarMax Lending Platform

Virtual Analyst Day

January 20, 2022
 The Platform

2
 Our Strength Lies in our Platform
250K

 Robust roster of partners

provides sustainability
200K
and helps deliver the best
customer experience
$832

TIER 1
CAF Income per
47%
r etail unit sold  Originations have grown
150K substantially
$589
Units Sold

CAF Income per

r etail unit sold  CarMax testing in Tier 2

 Economics have improved

TIER 2
AUTO FINANCE
100K
22% over time due to strong
$0 CAF performance,
renegotiated fees, and
($57)
3 rd Par ty Fees per
8%

TIER 3
r etail unit sold

3 rdPar ty Fees per

AUTO FINANCE
favorable macroeconomic
50K r etail unit sold
conditions

NON-FINANCED
Cash, Credit Unions, Other
Non-Partner Lenders
23%

0K
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
FY19 FY20 FY21 FY22
Financing penetration figures are from March 1, 2021 through November 30, 2021. The 47% represents CAF across all Tiers, while 22% & 8% represent Tier 2 & 3 without CA F. 3
CarMax Auto Finance Income per retail unit sold and Third-party finance fees per retail unit sold were calculated for March 1, 2018 through November 30, 2018 and March 1, 2021 through November 30, 2021.
Platform Enables Approvals for Nearly All Customers
RISK CUMULATIVE APPROVALS
LOWER

36%
TIER 1

AUTO FINANCE

+47%
TIER 2

+14%
AUTO FINANCE
TIER 3

HIGHER

97%
of credit
applications
Total A pproval Rates are from March 1, 2019 through December 31, 2021 and includes applications
received online, in CECs, and in store.
approved 4
 TIER 1 – CAF

Every Lender Finds Their Own Niche

TIER 2 – FINANCE PARTNERS & CAF
TIER 3 – FINANCE PARTNERS & CAF

Partner A

Partner E

Partner B

Partner D Partner F

Partner C

Partner G

FICO© 5
Bands:
750+ 750 - 700 700 - 650 650 - 600 600 - 550 550 - 500 <500
 CarMax Auto Finance

6
CAF Across All Tiers
% of App Volume

 CAF’s core originations

TIER 1

100%  20+ years of underwriting experience

 Exclusive

 CAF currently testing in Tier 2

TIER 2

Test  Can be either exclusive and/or head-to-head

 Must balance economics, funding, customer experience & partnerships

10%  CAF has been in Tier 3 since 2014

TIER 3

 Doubled app volume in early FY22

Target  Exclusive volume split with other main partner

7
CAF’s Originations Aligns with CarMax Sales
900,000

800,000

700,000

600,000

500,000
Units

400,000

300,000

200,000

100,000

0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Net Retail Units Sold CAF Originations (Units)

Represents CAF Originations in both Tier 1 and Tier 3 as of FYE February 28, 2021.
8
CAF’s ABS Program has Scaled as Needed

1999
Securitization Volume by CY

7 4
first ABS transaction

66
3
5

Issuance Volume ($B)

# of Deals
total transactions since inception
4
2

$64B
3

2
total issuance 1

$10B+
0 0
1999
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
public ABS notes outstanding
Issuance Volume # of Deals
Through 2021-4 transaction that closed September 22nd, 2021
“A BS” stands for A sset Backed Securitization.
9
CAF Recognizes Income Over Time
How is income earned over time?
5% 40% 30% 15% 10%

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Year 1 earnings impacted due to full provision

for all future expected loss.

Annual Income Generated From Different Vintages within a Year

Diversifies the Earnings Contribution & Optimizes Economics

How does this translate?

CARMAX METHOD
Income FY X FY X-1 FY X-2 FY X-3 FY X-4
within a
given
Fiscal ALTERNATIVE FUNDING METHODS
Year FY X ?
“X”

Alternative approaches such as gain on sale, whole loan

sale, etc. would likely achieve less lifetime economics
The graphs above are strictly illustrative and do not reflect CA F’s actual financials. than CarMax method depending on the arrangement 10
CAF P&L
(in millions) FY19 FY20 FY21
Interest Income $973 $1,104 $1,142
Interest Expense $(289) $(358) $(314)
Net Interest Before Losses $684 $746 $828

Provision for Losses $(154) $(186) $(161)

Net Interest Margin $530 $560 $667

Total Expenses $(91) $(104) $ (102)

Total Contribution $439 $456 $563

Average Receivable $12,150 $13,105 $13,463

11
Loss Reserve Examples
Increasing Loss Decreasing Loss
Perfect Forecast
Scenario Scenario
(A) Starting Loss Reserve $400M $400M $400M
(B) Anticipated Loss $40M $40M $40M
(C) Actual Loss $40M $50M $35M
(D) Excess Loss (C - B) $0M $10M $(5M)
(E) Remaining Reserve (A – C) $360M $350M $365M

(F) Loss Expectation Adjustment $0M ADD $10M + $20M REDUCE $5M +$15M
(Increase for Unfavorable (Reduce for Favorable
Actuals + Worsening Future Actuals + Improved Future
Outlook) Outlook)

(G) Reserve for New Originations (H * I) $50M $60M $40M

(H) New Receivables $500M $500M $500M
(I) Expected Loss Rate 10% 12% 8%

(J) Required Prov ision (G +/- F) $50M $90M $20M

(K) Final Reserve (E + J) $410M $440M $385M
Loss reserve figures from table above are strictly illustrative for the above example and do not reflect CA F’s actual financials. 12