CarMax shares are cratering Thursday after the used car dealer posted one of its biggest earnings misses ever. CEO Bill Nash was very clear in the company’s earnings release where he cast the blame: “We believe a number of macroeconomic factors impacted our second quarter unit sales performance, such as vehicle affordability challenges that stem from widespread inflationary pressures, as well as climbing interest rates and low consumer confidence.” Earnings per share were 43% below estimates — a 60 cent miss. The shortfall ranks only behind a quarter during the 2008 financial crisis and then at the start of the Covid pandemic. Shares are down about 23% after setting a 52-week low of $155.98. The stock is down down more than 48% since the year began. In its fiscal second quarter ended Aug. 31, demand was lower. Same-store unit sales fell 8.3%, which was a far bigger drop than the 3.6% decline expected by Wall Street. “Vehicle affordability challenges.” That’s the phrase generating all the headlines, but it’s not the first time CarMax has used that line. It said it back in its June earnings report , too – when the company posted a 7-cent earnings beat. At the time, CarMax talked about a challenging environment, but remained fairly optimistic. Clearly though, the worst was yet to come. During Thursday’s earnings call, Nash said sales steadily weakened over the last three months. The decline became more pronounced in July and culminated in a mid-teen decline in August. So what’s causing all the struggles? Is it that used car prices have suddenly gone through the roof, making purchases unaffordable? Or is it a change in consumer sentiment – with customers becoming more selective about their purchases? It does not seem like a sudden pricing problem. Yes, car prices are much higher than pre-pandemic, but prices have been elevated for about a year. Look at CarMax’s average selling price. It has been around $28,000 to $29,000 for about four quarters now. Nothing drastically changed in the latest period. CarMax’s acquisition costs don’t seem to be out of line either. Gross profit per unit was $2,282 – slightly above the StreetAccount estimate of $2,268, and a bit higher compared with a year ago, too. CarMax’s big earnings miss appears to be coming from lackluster demand. That means it’s probably a function of a more tightfisted consumer in the wake of soaring gas prices and food inflation, not to mention higher interest rates, which are boosting the cost of borrowing. It’s possible more people are resorting to fixing their cars and putting off a replacement car purchase. Recall that car parts retailer and repair shop operator AutoZone reported strong fiscal fourth-quarter results last week thanks to solid demand. Look at the change in tone from CarMax’s last two earnings calls. Three months ago, executives said “the consumer is absolutely a little softer,” but management emphasized that “there’s still some demand out there.” Fast forward to Thursday’s call. Executives said, “consumers are having to make decisions. Groceries are higher than ever. I think we’ve seen more interest rates increases. … So I just think consumers are prioritizing their spend a little differently.” Unfortunately for CarMax, things aren’t looking very good to start the current quarter as well. As disclosed during the earnings call, executives said, September saw “the same softness that we saw in August.” And they added, “And I would tell you even more recently, just given the hurricane, as you can imagine, that’s contributing to additional softness as well” with 20-22 stores closed at the moment.