CarMax noted a slowdown in its stores’ foot traffic during its fiscal third quarter, resulting in a decrease in same-store used-vehicle sales.

However, the retailer still tallied an increase in overall used-car sales with its new rooftops added in the last year.

In fact, the company sold over 154,000 used units overall last quarter, resulting in its best-ever Q3 used unit sales total.

That averaged out to roughly 340 cars sold per month for each store.

Getting into specifics, CarMax president and chief executive officer Tom Folliard pointed out during the company’s mid-December conference call that although used unit sales in comparable stores fell by 0.8 percent in the third quarter, total used units increased by 3.2 percent.

“As you saw, we had a challenging third quarter, due primarily to slightly negative used-unit comps,” Folliard said.

“Our lower used-unit comps were primarily a result of modestly lower traffic in our stores, partially offset by better conversion,” he continued.

CarMax attributed the slowdown in traffic to the following:

• A decrease in supply of 5- to 10-year-old vehicles
• Very aggressive promotions and lease offerings on new vehicles that appear to pressure sales of zero- to 1-year-old cars
• An increase in the wholesale prices of SUVs and trucks, so some don’t represent a “good value” for its customers
• A shift to fewer lower-credit customers and more prime-credit customers

Eighty-four percent of CarMax’s sales were zero- to 4-year-old vehicles in Q3, compared to 74 percent a year ago. SUVs and trucks made up 23 percent last quarter, down from 25 percent by the same metric a year ago.

During the company’s conference call, one analyst asked if the lower number of SUVs and trucks sold was due to a higher number of leases, resulting in fewer of the vehicles making it back to auction and thus becoming available to CarMax. Folliard noted that too many leases couldn’t hurt CarMax’s options at the auction because there are far too many for dealers to take on.

“Well, it’s something we’ve lived through before, in terms of percent of new-car sales that are leased. I think the number now is around 30 percent,” Folliard said. “It’s been this high, at times, before. Generally, what that means is that two or three years down the road, those cars will come back to the market in kind of a more organized way, and dealers won’t be able to absorb the volume that comes back and a lot of those cars end up at auction.

“That’s what’s happened historically, and we’ve been able to take advantage of that in the past. I never look at a high-lease environment as a negative for us when you think of supply two or three years later,” he continued. “If you think about the cycle of people getting out of a new car, if it remains that people get out of that car every three to five years, it really doesn’t make any difference whether it comes back through a lease channel or it comes back as an individual car, eventually they end up in the open marketplace, and we have an opportunity to buy them.”

CarMax did point out that good examples of trucks and SUVs, at favorable prices, were hard to come by in Q3, due to their high values at auction. Folliard doesn’t believe it will be that way forever.

“Prices were pretty high during the quarter. As you know, we buy a lot of cars at the auction and our buyers are trying to make sure we always deliver a great value to our customers,” he said. “There were times during the quarter where we just didn’t think it was worth overpaying at the expense of giving a great value to the consumer.

“You know, I think this is probably short lived. Obviously it’s been driven by low gas prices. We’ve seen bigger increases in new-car sales as it relates to SUVs and trucks compared to the used-car market increases. But, you know, ultimately all of these cars will come back into the market at some point.”

Plenty of stores on tap

CarMax opened two stores in existing markets in the third quarter, including its sixth store in Houston and its second store in Minneapolis. The company also relocated one store to the Washington D.C. and Baltimore market, with two more joining the Boston market shortly after the close of Q3.

In addition to those two Bostonian stores opened in December, CarMax plans to open three more stores in its fourth fiscal quarter (which ends Feb. 29) and an additional 11 stores in the next fiscal year.

To check out CarMax’s full Q3 results, click here.