RICHMOND, Va. -

CarMax Auto Finance is comfortable enough booking subprime paper that it’s going to continue the practice into another fiscal year.

Through the close of its 2015 fiscal year, CarMax Auto Finance originated $72.2 million of receivables through its test of financing subprime loans; a pilot program that started last January. During the fourth quarter of its most recent fiscal year, CarMax booked $15.5 million in subprime loans with customers who typically would be financed by its third-party subprime providers.

CarMax executive vice president and chief financial officer Tom Reedy indicated the company plans to extend this subprime program test at a similar rate of originations while continuing to evaluate the performance of these loans. The company had an original target of booking $70 million in loans during a fiscal year.

“Recall that our primary goal for this investment was to gain knowledge regarding this space, and we expect these learnings will prove invaluable,” Reedy said when CarMax conducted a conference call to share its Q4 and full fiscal year financial report.

“While performance to-date is in line with our expectations, we believe allowing the receivables to get deeper into their life, including maturing through a full tax season, will better equip us to assess our long term strategy,” Reedy continued according to the call transcript available from SeekingAlpha.

“On average, the terms of these contracts is nearly 70 months, and at fiscal year end, the average time on our books for loans is less than seven months,” Reedy went on to say. “We are comfortable continuing to originate at the current target volume which is 5 percent of CarMax's subprime sales or a little less than 2 percent of CAF originations.”

The subprime originations helped the CarMax finance company’s income rise by 11.8 percent to $90.4 million during Q4, driven by an increase in auto loan receivables, partially offset by a lower total interest margin. For the fiscal year, CAF income climbed 9.3 percent to $367.3 million.

The company indicated CAF income continued to benefit from favorable loss experience. Average managed receivables grew 17.8 percent to $8.30 billion.

Officials added the total interest margin, which reflects the spread between interest and fees charged to consumers and its funding costs, declined to 6.3 percent of average managed receivables in the most recent quarter from 6.6 percent in last year’s fourth quarter.