RICHMOND, Va. -

CarMax Auto Finance still is steadily originating subprime paper through its own test program as company executives continue to monitor the performance of this portfolio segment they launched last year.

During the third quarter of its 2015 fiscal year, CarMax Auto Finance originated $12.3 million of loans through its subprime financing program. That amount represented 0.5 percent of the company’s total Q3 retail unit sales.

As of Nov. 30, CarMax Auto Finance reported total of $56.7 million of loans had been originated in this subprime program, which had an initial first-year objective of $70 million.

When asked during the company’s latest quarterly conference call, CarMax executive vice president and chief financial officer Tom Reedy indicated “it’s still a bit early,” to give a complete evaluation of how the company’s subprime endeavors are performing. Before launching this program, CarMax previously had their subprime customers obtaining financing solely from its third-party subprime providers.

“We’re seeing the first vintages that we originated kind of across a six-month time frame, and we really need to go through a full tax season, a full cycle with this product before we can make any conclusions,” Reedy said.

“So what I can say is that we have not seen anything negative and unexpected that would lead us to dial back or not continue to test,” he continued. “Like I said, we’d like to get through tax season and continue through the test that we have, and figure out where we go from there at the end of the year.

“We’ll probably have something to say about where we’re going because we’re likely to use up that initial $70 million during the quarter,” Reedy went on to say according to the transcript available from SeekingAlpha.com.

During Q3, CarMax Auto Finance reported that its income increased 6.9 percent year-over-year to $89.7 million, driven by an increase in average managed receivables, partly offset by a lower total interest margin percentage.

The finance company’s average managed receivables grew 17.9 percent to $8.03 billion as CarMax Auto Finance’s originations have continued to grow.

“The total interest margin, which reflects the spread between interest and fees charged to consumers and our funding costs, declined to 6.4 percent of average managed receivables in the current quarter from 6.8 percent in last year’s third quarter,” CarMax officials said.

When asked later during the company’s conference call to describe how the subprime auto finance market is behaving in general, Reedy noted that he hadn’t spotted any specific changes.

“What I can speak to is we have seen over the past several months is relatively stable behavior from our subprime lenders,” Reedy said. “We saw the big correction last year as they adjusted their behavior, but if we look at conversion of customers that were given acceptances, I think it would be fair to say that the behaviors have been relatively consistent over the last several months.

“As to where that goes going forward, we want them to run a good and sustainable business, and we’re going to encourage them to do that, and things will shake out the way they do,” he continued.

“There’s really nothing beyond that I can really say about the bounce back, other than we feel like we’ve been in a pretty stable place for the last several months,” Reedy went on to say.