An Influential Investor Proposes CarMax Lower Prices on Pre-Owned Vehicles

Highlights

• CarMax, a major player in the used-car market, will soon welcome a new CEO. The company has been facing a significant drop in its stock price over the past year, and activist investor Starboard Value has proposed several strategies to help CarMax regain momentum.

• Among Starboard's recommendations is lowering prices by a few hundred dollars and adopting a more flexible pricing approach to boost competitiveness and capture greater market share.

Starboard Value, an activist investor, believes that reducing prices could help CarMax sell more used vehicles.

CarMax (KMX) shares recently climbed about 2%, after surging up to 8% earlier in the day. The rise followed news that Starboard Value nominated two new board members. In a letter to Keith Barr, CarMax's incoming CEO, Starboard expressed support for his leadership but noted that the company's recent results have not matched its true potential. While CarMax's stock has increased this year, it remains over 40% lower compared to the previous 12 months, whereas rival Carvana (CVNA) has seen its shares soar.

Why This Is Relevant

Many shoppers looking for used cars aim to maximize their savings. Starboard Value’s suggestion to lower prices could make CarMax’s offerings more attractive. Buyers can also benefit from expert advice, such as sticking to a budget and securing loan pre-approval.

Starboard’s proposals include enhancing CarMax’s digital trade-in process, cutting reconditioning expenses, and tightening cost controls. However, the most direct recommendation is to reduce prices. Starboard argues that CarMax’s profit targets per vehicle have been too inflexible, limiting its market share. The investor suggests lowering prices by $100 to $300 per car and implementing a pricing system that responds to local market data.

Starboard emphasized, "We expect you to stay disciplined and protect margins, but the market’s increased transparency may require more dynamic pricing to sustain sales volume."

Although price adjustments may not dramatically alter your decision-making or reaction to a sticker price, CarMax’s average selling price last year was just over $26,000. That number decreased in 2025, while the number of units sold went up.

CarMax commented, "Our discussions with Starboard have been constructive, and we look forward to ongoing collaboration. We’re glad Starboard agrees that Keith is the right person to unlock the company’s potential."