CarMax, Inc (KMX), Group 1 Automotive, Inc. (GPI), America’s Car-Mart, Inc. (CRMT): Should You Invest in Used Cars?

Page 1 of 2

So, I just bought myself a car. Note that I don’t say that I bought myself a NEW car, but just a car. It’s a Chevy Impala with all the bells and whistles and, like a lot of guys with new cars, I’m very pleased with it. It’s got a lot of bells and whistles that my old one didn’t. Heck, I’m still figuring out what all of the buttons on the console do. It comes with everything.

Bullish options in play as CarMax shares popWhat it also comes with is a previous owner. I bought it used. I know the old trope is still out there that buying a used car is a terrible risk, and the image of the slimy used car salesman trying to steer an unsuspecting buyer is a persistent one. In my experience, however, it doesn’t really apply anymore. At least it doesn’t if the buyer (me, in this instance) is doing things the right way. There’s no longer any reason to buy a used car that’s anything other than reliable and backed by a solid guarantee.

Yes, I could have gone to some seedy roadside used car place. But I didn’t. I went to a CarMax, Inc (NYSE:KMX) dealership here in South Carolina and got to test drive several models at my own pace and without pressure. It was, overall, a positive experience. Just like the way I’ve bought several cars from various used car dealerships in the past. That’s what got me thinking about the way the industry has grown and changed over the years.

CarMax, Inc (NYSE:KMX)

Carmax is probably the most visible sign of the change in the used car business over the years. A buyer can look online, decide on a model and options and arrange to look at cars at his or her convenience. CarMax, Inc (NYSE:KMX) even makes it easy to trade in one’s old car if necessary. The firm has a good business model and a better way of handling customers.

In terms of investing, I think CarMax, Inc (NYSE:KMX) is a good buy. The firm’s stock has grown more than 50% since last June, and insiders have been buying it back for themselves. I wish it paid a dividend, like I always do, but I think the growth will offset that. The P/E of 21.01 indicates to me that others think there’s still some growth inside Carmax.

America’s Car-Mart, Inc. (NASDAQ:CRMT)

A bit different, America’s Car-Mart, Inc. (NASDAQ:CRMT) has a larger focus on older used vehicles. It also makes a significant amount of its profit through financing the cars it sells. I like the way the entire arrangement is integrated. That’s not unique to America’s Car-Mart, Inc. (NASDAQ:CRMT), of course. However, it’s a positive sign whenever a business has the sense to try to control all aspects of a transaction.

The company posted a profit recently that beat expectations, and shares have jumped on the news. With a P/E below 15, that might indicate that the value is slipping away for a new investor for a while. Combine that with a wild ride for the firm’s shares over the last year, which has left the stock flat for the last 12 months, and I’d be cautious in investing for anything but the five year+ time frame.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!