An Important Investor Has an Idea for CarMax: Charge Less for Used Cars

Key Takeaways

• A new CEO is set to take over at used-car buyer and seller CarMax later this month. Activist investor Starboard Value has a few ideas for the company, which hopes to reverse a substantial share slide over the past year.
• One of its suggestions: Clip a few hundred bucks off its prices and shift to more dynamic pricing in order to make it more competitive for market share.

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An activist investor has an idea for selling more used cars: charge less for them.

Shares of CarMax (KMX) were recently up about 2%, after rising as much as 8% earlier Wednesday following news that activist firm Starboard Value had nominated two directors to the used-car seller’s board. In a letter to incoming CarMax CEO Keith Barr, who was named last month and is set to take over in a few days, the firm offered support for the company’s new chief but also said its “recent performance has fallen well short of its underlying potential.” CarMax shares are up this year but off more than 40% over the past 12 months, while competitor Carvana’s (CVNA) stock has raced higher.

Why This Matters to You

Some used-car buyers like to battle for every dollar and cent they can. An investor in popular used-car buying and selling service CarMax has an idea that might help: trim prices a bit to make its offerings more competitive. Experts have a range of other tips for buyers, including sticking to a budget and getting pre-qualified if you’re using a loan.

Starboard’s suggestions included updating the company’s digital trade-in experience; reduce reconditioning costs; and focusing further on cost controls. But it also suggested something comparatively straightforward: trimming prices. Starboard believes the company’s per-unit gross profit targets have been “too rigid,” hurting market share, and it suggested reducing prices by $100 to $300 per vehicle and using a data-driven pricing system more attuned to local markets.

“Make no mistake,” Starboard wrote. “We expect you to remain disciplined and expect you to protect and expand margins. That being said, the market has become more transparent, which may require more dynamic pricing to maintain transaction volume.”

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Money is money; still, the adjustments Starboard suggests might not change your car-buying calculus—or, at least, your initial response to a sticker price—too much. The company’s average selling price last year was a bit above $26,000.; that figure fell in 2025, while unit sales rose.

“Our engagement with Starboard to date has been productive and we remain focused on continued constructive conversations,” CarMax said Wednesday. “We are pleased that Starboard agrees with our Board that Keith is the right leader to deliver on the potential of this business.”

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