CarMax Auto Owner Trust 2022-2: 10-K Review and Investment Outlook

Introduction

Asset-backed securities (ABS) are a popular way to tap into cash flows generated by diversified consumer or commercial receivable pools. On May 23, 2025, CarMax Auto Owner Trust 2022-2 (“the Trust”) filed its Form 10-K with the U.S. Securities and Exchange Commission. Unlike a typical corporate 10-K, this report is furnished under General Instruction J of Form 10-K for ABS issuers, meaning core sections like Business, Risk Factors, MD&A, and detailed financial statements have been omitted. Our goal is to sift through the available information to determine whether the Trust’s notes offer a compelling investment.

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What You’ll Learn

• Structure and purpose of CarMax Auto Owner Trust 2022-2
• Underlying collateral characteristics
• Servicing, compliance, and legal landscape
• Credit enhancement (or lack thereof)
• Performance and cash flow dynamics
• Key strengths, risks, and deal considerations
• Final investment score and bottom-line verdict

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Trust Structure and Issuer Details

Issuing Entity: CarMax Auto Owner Trust 2022-2 (CIK 0001921745) Depositor: CarMax Auto Funding LLC (CIK 0001259380) Sponsor & Servicer: CarMax Business Services, LLC (CIK 0001601902) Indenture Trustee: U.S. Bank Trust Company, National Association Closing Date: April 1, 2022

In a typical securitization, an originator like CarMax Auto Funding LLC sells a pool of retail auto loans to a bankruptcy-remote trust (the Issuing Entity). The Trust issues multiple classes of notes to investors, who receive interest and principal payments sourced from underlying loan payments made by consumers. CarMax Business Services, LLC retains the servicer role, collecting receivables and performing administrative functions under a Servicing Agreement.

Key structural highlights:

• The Trust holds a rotating or static pool of auto loans originated by CarMax dealerships.
• No single obligor constitutes more than 10% of the pool, ensuring broad borrower diversification.
• No external credit enhancement providers are involved; the deal relies entirely on internal subordination (overcollateralization) and excess interest spread.
• No derivatives or liquidity facilities; the notes are strictly paid from loan cash flows.
• The transaction closed in April 2022 and issued several classes of fixed-rate notes (ratings presumed from agency reports, not in the 10-K).

Exhibit Highlights

The 10-K incorporates by reference key governing documents filed on prior Form 8-K and registration statements:

• Indenture and forms of notes
• Trust Agreement
• Sale and Servicing and Receivables Purchase Agreements
• Administration and Asset Representations Review Agreements
• Servicing Compliance and Attestation Reports

These exhibits confirm that all servicer and trustee obligations are in place, but the 10-K omits quantitative schedules and detailed financial statements by instruction.

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Underlying Collateral & Credit Enhancement

Asset Pool

Although the 10-K omits a breakdown of the collateral (due to Regulation AB), we know from standard CarMax ABS deals:

• The pool consists of used-auto retail installment sales contracts (RISCs).
• Weighted average loan term typically ~60 months.
• Average original loan size and credit quality trends (prime/subprime mix) are found in offering circulars, not this filing.

Credit Enhancement

Crucially, the Trust has no external credit enhancement. Instead, structural credit support is provided by:

1. Subordination: Higher-risk tranches absorb losses first.
2. Excess Interest Spread (EIS): The difference between borrower coupon rates and note rates creates a cash flow cushion to cover delinquencies or defaults.

Without third-party guarantees or letters of credit, the Trust leans on CarMax’s underwriting and the servicing platform to sustain collections. While overcollateralization and EIS can be substantial initially, those buffers erode if borrower performance deteriorates.

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Servicing, Compliance & Legal Proceedings

Servicing Parties

• CarMax Business Services, LLC is the servicer, responsible for billing, collections, default management, and borrower communications.
• U.S. Bank Trust Company, N.A. serves as indenture trustee and owner trustee under separate Trust and Indenture Agreements.

Compliance Reports

Under Item 1122 of Regulation AB, both servicer and trustee provided compliance and attestation reports. Neither identified any material noncompliance with applicable servicing criteria.

Legal Proceedings

Item 1117(b) confirms no pending or threatened material litigation against the Sponsor, Servicer, Indenture Trustee, or the Issuing Entity. This clean legal slate reduces counterparty risk in the securitization waterfall.

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Key Risks and Missing Disclosures

The 10-K omits major sections pursuant to General Instruction J. This is standard in ABS filings but limits visibility:

• Management Discussion & Analysis (MD&A): No commentary on portfolio performance, delinquencies, or loss reserves.
• Quantitative Risk Disclosures: No interest rate sensitivity, prepayment speeds, or stress‐testing data.
• Financial Statements: Balance sheet, income statement, and cash flow statement are absent.
• Risk Factors & Legal Risk: No standalone section, although general ABS‐related risks (prepayment, credit, structural) apply.

Without these critical details, investors must rely on offering supplements, rating agency surveillance reports, or ongoing trustee disclosures for performance data. For a potential ABS investor, this elevates due diligence costs and information asymmetry.

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Performance & Cash Flow Considerations

Because the Trust’s 10-K lacks financials, we turn to typical ABS metrics and external sources:

1. Cash Flow Generation: Historical CarMax ABS deals have been net cash flow generators due to conservative underwriting and CarMax’s robust platform.
2. Delinquency Trends: Used auto loan delinquencies have spiked in broader markets, but CarMax’s proprietary credit scoring often outperforms industry averages.
3. Loss Severity: Recoveries on repossessed vehicles tend to net 50–70% of loan balance.
4. Prepayments: Volatile prepayment speeds can accelerate principal return but reduce interest yield.

Given no red flags in compliance reports and clean legal disclosures, we assume stable servicer execution thus far. Yet macro headwinds (inflation, rising rates) could stress borrowers and compress EIS buffers over time.

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Investment Merits

1. Diversified Collateral: No single obligor >10% of pool balances.
2. Strong Servicer Platform: CarMax is a leading used‐car retailer with deep underwriting data and volume advantages.
3. Clean Legal Footprint: No material lawsuits or contingent liabilities cited.
4. Structural Protections: Subordination and excess spread provide initial loss absorption.

Investment Risks

1. Information Gaps: Absence of MD&A and financials in 10-K demands reliance on third-party disclosures.
2. Lack of External Enhancement: No third-party liquidity or credit support means collateral performance is the sole backstop.
3. Macro Sensitivity: Rising interest rates and economic downturn could elevate delinquencies.
4. Prepayment/Reinvestment Risk: Faster prepayments may force reinvestment at lower coupons.

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Net Profit / Loss

As a pass-through securitization, the Trust itself does not report net income like a corporation. Instead, interest and principal are remitted to noteholders after servicing fees. In this 10-K, net profit or loss figures are not presented.

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Conclusion & Investment Score

CarMax Auto Owner Trust 2022-2 is a straightforward auto‐loan securitization supported by a top‐tier servicer and diversified collateral. However, the complete absence of financial statements and MD&A in the 10-K means investors must chase external performance reports. Additionally, the lack of third-party credit enhancement concentrates credit risk on borrower performance.

For investors comfortable with ABS analysis and willing to dig into offering circulars and rating agency updates, the deal could offer attractive yields relative to similarly rated auto ABS. For more conservative or information‐averse investors, the structural opacity and macroeconomic pressures may outweigh the benefits.

Final Investment Score: 3.5 / 10