Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Brian Nagel – UBS.
Brian Nagel – UBS
With respect, you mentioned in your prepared remarks and your press release, that you routed more of your financing applications to your third-party providers. First, have your third-party partners changed lending standards more than CarMax Auto Finance and if they have has that resulted in more declined applications and hence weaker sales at your stores?
Keith Browning
The answer is that varies by lender but I can tell you that we carefully consider what they are currently underwriting and their approval rates and actually got feedback from them about their willingness to take on more loans before we made those decisions. So this is kind of an interim process we are working on and we are carefully measuring our sales to apps and trying to monitor the success of this strategy while maintaining and maximizing sales. Generally speaking everyone has tightened including CAF. That is understandable in the market. But, the good news is that for us the tightening is not as significant for our third-party lenders outside of CarMax.
Tom Folliard
The one thing I would add there is that in terms of the total result of the customer flow, I mentioned that our traffic was actually down a little more than our comp sales so even in this difficult environment our store teams have done a great job of executing the customer flow they have. So when you add it all together with applications, approvals, whether it is prime or non-prime we actually improved our execution in the quarter year-over-year a little bit.
Brian Nagel – UBS
You mentioned in the press release your third party financing declined 58%. Can you further explain what is causing the shift there?
Keith Browning
One of the key factors there is that one of our third-party lenders was acquired by [Roadlend] so we went from a fee-paid basis to where we are paying a rather substantial discount on a percentage of our loans. We had a choice not to do that but we believe those are generally incremental sales and so we are not willing to walk away from that business. It is a matter of what the market is driving from a risk perspective and risk profile.
Brian Nagel – UBS
With respect to gas prices, you talked a lot over the last few quarters when gas prices were rising what impact that was having on your business. Clearly gas prices have come down significantly. Sales are still weak. Are you seeing any other shifts in demand trends at your stores as the result of much lower gas prices?
- To read the full transcript on Seeking Alpha, click here »
