CAF provides financing to qualified retail customers purchasing vehicles from CarMax. CAF provides us the opportunity to capture additional profits, cash flows and sales while managing our reliance on third-party finance sources. Management regularly analyzes CAF’s operating results by assessing profitability, the performance of its auto loans, including trends in credit losses and delinquencies, and CAF direct expenses. The CODM reviews CAF income to assess CAF’s performance and make operating decisions, including resource allocations.

We typically use securitizations or other funding arrangements to fund loans originated by CAF, as discussed in Note 1(G). On September 24, 2025, we executed a non-prime securitization transaction. The structure of the transaction resulted in the sale of approximately $930 million of auto loans, inclusive of accrued interest, in exchange for consideration in the form of cash and beneficial interests. The beneficial interests represent the 5% interest in the rated notes and residual certificate that we retained as the sponsor of the transaction. We recognized a gain on sale of $26.9 million from the transaction, net of transaction expenses. As we were not the primary beneficiary of this securitization trust, it is not consolidated and the sold auto loans are no longer recognized on our consolidated balance sheets. As servicer, CAF continues to be responsible for managing collections and performing other servicing activities for the sold auto loans and earns servicing income as compensation for these activities.

CAF income primarily reflects the interest and fee income generated by auto loans held for investment and auto loans held for sale less the interest expense associated with the debt issued to fund these loans, a provision for estimated loan losses on auto loans held for investment, direct CAF expenses and income related to the sale of auto loans. CAF income does not include any allocation of indirect costs. Although CAF benefits from certain indirect overhead expenditures, we have not allocated indirect costs to CAF to avoid making subjective allocation decisions. Examples of indirect costs not allocated to CAF include retail store expenses and corporate expenses. In addition, except for auto loans held for investment, which are disclosed in Note 4, and auto loans held for sale, CAF assets are not separately reported nor do we allocate assets to CAF because such allocation would not be useful to management in making operating decisions.


	Years Ended February 28 or 29
(In millions)	2026		2025		2024
Interest margin:
Interest and fee income	$	1,864.2	$	1,853.9	$	1,677.4
Interest expense	(769.2)		(763.2)		(638.7)
Total interest margin	1,095.0		1,090.7		1,038.7
Provision for loan losses	(391.2)		(334.7)		(310.5)
Total interest margin after provision for loan losses	703.8		756.0		728.2


Servicing income	9.7		—		—
Direct expenses:
Payroll and fringe benefit expense	(80.4)		(75.9)		(66.5)
Depreciation and amortization	(17.6)		(17.1)		(16.5)
Other direct expenses	(79.9)		(81.3)		(76.9)
Total direct expenses	(177.9)		(174.3)		(159.9)
Gain on sale of auto loans	26.9		—		—
Fair value adjustments on beneficial interests	0.2		—		—
CarMax Auto Finance income	$	562.7	$	581.7	$	568.3