CarMax is currently facing several major lawsuits: a California consumer protection settlement over late vehicle titles, a federal securities fraud class action brought by investors, a Department of Justice settlement over illegal repossessions from military servicemembers, and a class action challenging the company’s advertised 125-point inspection. These sit on top of earlier federal and multistate enforcement actions over undisclosed safety recalls that still bind how CarMax sells cars today.
California Title-Transfer Settlement
On March 24, 2026, a Santa Clara County Superior Court judge entered final judgment against CarMax Auto Superstores in a case brought jointly by the district attorneys of San Francisco, Santa Clara, Sonoma, Los Angeles, Ventura, and Riverside counties. Prosecutors alleged CarMax violated California’s Unfair Competition Law by repeatedly missing the 30-day deadline for submitting vehicle registration and title paperwork to the DMV after a sale. The Sonoma County District Attorney’s office said the failures occurred in “thousands of instances” going back to 2019.
The practical harm to buyers was real. Without a title, a customer cannot prove ownership, resell the car, refinance the loan, or use the vehicle as collateral. Prosecutors also alleged that when the DMV returned paperwork for corrections, CarMax often failed to resubmit it promptly.
CarMax agreed to pay $1.1 million without admitting liability: $900,000 in civil penalties, $150,000 for the district attorneys’ investigative costs, and $50,000 in cy pres restitution for statewide consumer protection enforcement.
The judgment also imposes new compliance obligations. CarMax must place a hold on any used vehicle if it does not have the title in hand or a clear path to getting it within 30 days. Smog checks and VIN verifications must be completed before sale. The company must train salespeople on the hold policy and put an employee at the regional senior manager level or above in charge of compliance.
Investor Securities Fraud Class Action
Investors have accused CarMax and three top executives of misleading the market about the company’s performance in 2025. Two related cases were filed, and in January 2026 the U.S. District Court for the District of Maryland designated Cap v. CarMax, Inc. (No. 1:25-cv-03602) as the master file, appointed pension fund investors as lead plaintiff, and approved Robbins Geller Rudman & Dowd LLP as lead counsel.
The complaint names CarMax, CEO William D. Nash, CFO Enrique N. Mayor-Mora, and Executive Vice President Jon Daniels. It brings claims under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, along with Section 20(a) controlling-person claims against the individual executives.
What Investors Say CarMax Hid
On the June 20, 2025 first-quarter fiscal 2026 earnings call, executives described strong comparable-store sales and told investors CarMax had “levered SG&A almost 700 basis points” in the quarter. Investors allege those statements were misleading because the sales bump was driven by consumers rushing to buy vehicles ahead of anticipated tariffs, not by organic growth. The complaint further alleges CarMax failed to disclose that its 2022 and 2023 vintage auto loans were underperforming, that its loan-loss reserves were inadequate, and that an early-2025 oversupply had caused substantial inventory depreciation. The result, according to the lawsuit, was materially overstated receivables, inventory values, and earnings.
The Two Stock Drops
The first corrective disclosure came on September 25, 2025, when CarMax reported second-quarter adjusted earnings of $0.99 per share against expectations of $1.05, and revenue of roughly $6.6 billion versus estimates of $7.02 billion. Nash called the quarter “challenging” and pointed to tariff-driven pull-forward buying and inventory depreciation. CarMax also reported a sharp increase in its provision for loan losses, figures the complaint puts at $142 million overall and $71 million tied specifically to 2022 and 2023 loans. The stock fell roughly 20% that day to $45.60.
The second drop followed on November 4, 2025, when CarMax announced the board had terminated Nash as CEO and warned of further sales declines. Shares fell more than 24%. Board member David McCreight was named interim president and CEO effective December 1, 2025, and former longtime CEO Tom Folliard returned to a hands-on board role during the transition. The board said neither would be a candidate for the permanent job.
Where the Case Stands
As of spring 2026, no class has been certified and no trial date has been set. A scheduling order was entered in March 2026, and no motion to dismiss has appeared on the docket.
DOJ Settlement Over Repossessions From Servicemembers
On February 23, 2026, the Department of Justice announced that CarMax would pay nearly $500,000 to resolve allegations that it illegally repossessed vehicles from military servicemembers in violation of the Servicemembers Civil Relief Act. The SCRA requires lenders to obtain a court order before repossessing a servicemember’s vehicle.
The DOJ alleged CarMax repossessed at least 28 vehicles from servicemembers between March 2018 and October 2023 without the required court orders. In some cases, the repossessions happened even after owners had told CarMax about their military service. The DOJ also alleged CarMax failed to extend SCRA protections to reservists who had received activation orders and failed to check the Defense Manpower Data Center database before repossessing charged-off vehicles.
Under the settlement, CarMax agreed to pay at least $420,000 in damages to the 28 affected servicemembers and a $79,380 civil penalty to the United States. The company must revise its policies, procedures, and training materials to ensure future SCRA compliance. CarMax did not admit wrongdoing.
The 125-Point Inspection Class Action
A separate suit targets one of CarMax’s central marketing claims: that every vehicle it sells passes a “125+ point inspection.” In Pilcher v. CarMax Auto Superstores, Inc. (No. 1:24-cv-00854), filed in July 2024 in the U.S. District Court for the Eastern District of California, plaintiff Douglas Pilcher alleged the inspections were never actually performed and that CarMax falsely certified them to drive sales. Pilcher said he bought a Lexus RX350 F-Sport and an Acura RDX marketed as having passed inspection, but the vehicles had transmission problems, a leaking radiator, a nonfunctional backup camera, and, in one case, a car advertised as all-wheel drive that was not.
In January 2025, the court partially granted CarMax’s motion to compel arbitration and stayed the case. After more than a year in arbitration, the parties filed a notice of settlement on May 26, 2026. A magistrate judge ordered final settlement documents to be filed by June 25, 2026. The settlement terms have not been publicly disclosed.
Recall-Disclosure Orders Still in Effect
Two earlier enforcement actions continue to shape how CarMax must sell used cars, and both matter to buyers checking a specific vehicle today.
In 2017, the Federal Trade Commission finalized a consent order (Docket C-4605) settling charges that CarMax promoted its inspections while failing to disclose that some vehicles were subject to unrepaired safety recalls. The order bars CarMax from claiming its vehicles are safe, repaired, or rigorously inspected unless the cars are free of open recalls or the company clearly discloses them. It runs 20 years and requires periodic compliance reporting.
In December 2022, a coalition of 35 state attorneys general led by New York’s Letitia James reached a separate $1 million settlement over the same core issue. Under that agreement, CarMax must give buyers a standalone written disclosure of any open recalls and get the customer’s signature on it before presenting any other sales paperwork. The company must provide hyperlinks to recall information on its online listings, post QR codes linking to recall data on vehicles on its lots, and use NHTSA’s VIN lookup tool to supply recall information. CarMax is barred from calling its vehicles “safe” or claiming they have no safety issues. These obligations stay in place as long as CarMax sells used cars with open recalls.