Dandy Barrett, Assistant Vice President of Investor Relations Austin Ligon, Chairman, President & Chief Executive Officer Keith Browning, Executive Vice President & Chief Financial Officer

Matthew Fassler, Goldman Sachs Sharon Zackfia, William Blair & Co. Scot Ciccarelli, RBC Capital Markets Bill Armstrong, CL King & Associates Mike Heifler, Deutsche Bank Matthew Nemer, Thomas Weisel Partners Tom Thompson, Thompson, Siegel & Walmsley, Inc.

Dandy Barrett, Assistant Vice President, Investor Relations: Thank you Michelle, good morning. On the call today are Austin Ligon, our President and Chief Executive Officer; and Keith Browning, our Executive Vice President and Chief Financial Officer. Before we begin, please let me remind you that our statements today about the Company's future business plans, prospects and financial performance, including any statements or factors regarding expected sales, margins or earnings, are forward-looking statements that we make relying on the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current knowledge and assumptions about future events. They involve risks and uncertainties that could cause actual results to differ materially from our expectations. For additional information on important factors that could affect these expectations, please see the Company's annual report on Form 10-K for the fiscal year ended February 28, 2005, and our quarterly and current reports on file with the SEC. Now I will turn the call over to Austin. Austin Ligon, President, Chief Executive Officer: Good morning and thanks for joining us. Let me start out this morning by talking about fourth quarter sales. Fourth quarter total sales and revenues increased 19%, including a 6% increase in total units and a 3% decrease in comp store used units. The decline in these comps reflected the difficult comparisons we had against last year's 12% increase. They were at the lower end of our expected range primarily due to a decline in our subprime-financed sales. The narrowing of eligible vehicles by our subprime provider that we mentioned in the release coincided with some of our highest demand cars, so we chose to limit this business and avoid unprofitable cannibalization. Wholesale sales increased 51%, driven by exceptionally strong unit increases and strong wholesale pricing environment. Wholesale units were up 26%, reflecting strong increases in both appraisal traffic and our buy rate, as well as a larger store base. As far as gross profit goes, our Q4 total gross profit per unit increased roughly $300. Our used car gross profit per unit was up slightly from last year but remained under some pressure because of the higher wholesale prices we saw through most of this year. Our wholesale gross profit was up -- per unit was up substantially. Wholesale pricing, which normally is strong in the spring, was particularly strong in the older and higher mileage segment that makes up the bulk of what we sell-off at our wholesale auctions. We believe as do others in the wholesale industry that Hurricane Katrina contributed significantly to the disproportionate rise in the value of these older wholesale cars. Our wholesale pricing gross margin also benefited from record dealer attendance at our auctions to buy those cars. A comment I will make is that each year, we gain a more granular understanding of the elements of our overall business. This allows us to get better and better at managing the way that we optimize overall results either in a rising or falling wholesale pricing environment. And in particular, our wholesale business can act as a complement to our used car sales and earnings. Our successful modifications and our store appraisal strategy has enhanced this capability over the last year and a half. When wholesale prices are rising as they did in the past two years, our wholesale profits can expand and help offset the impact of higher used car acquisition costs that are pressuring our retail used vehicle sales and profits. Conversely, when wholesale prices are falling as they did three and four years ago, it can allow our used car sales and profits to expand at a time when wholesale profits are likely to be under pressure. We have learned to manage this better over the last year, year and half than we have in the past, part of our continuing learning process. Gross profit on other sales and revenues also improved. This is primarily from third-party finance fees and ESB sales, both of which carry 100% margins. Third-party finance fees benefited from having fewer of the subprime financed sales. As far as CarMax Auto Finance income was up 26%, benefiting from growth in sales and managed receivables as well as a $0.02 per share benefit primarily related to the favorable valuation adjustment on previously securitized portfolios. For the quarter, the gain on loans originated and sold was 3.6%, slightly above our original expectations. The gain spread last year was 3.7. The SG&A ratio was 10.2% this quarter, down 10 basis points from the last year. We benefited from lower-than-expected healthcare costs and property taxes. Absent these items, the SG&A ratio would have been up slightly, reflecting the decrease in comp unit sales and a higher percentage of immature stores in our base this quarter. As far as earnings for both the quarter and full year, we are obviously pleased to be reporting a 36% increase in fourth quarter EPS and a 30% increase in full year EPS in what was clearly a challenging environment. Even stripping out the $0.09 per share of favorable cap items for the entire year, earnings per share grew 24%. As far as our growth plan goes, we continue to go forward on the growth plan. We opened a total of nine stores in FY '06, representing a 16% increase in our store base. For FY '07, we'll add approximately 11 superstores, another 16% increase. As noted in the release, we have made one minor change since what we said in December. The timing for our new L.A. satellite in Torrance has slipped into fiscal '08, so we expect to be able to accelerate the opening date of another superstore and we'll name that when we're a little more certain of which one we will be able to accelerate. We currently expect to open four stores in first quarter, three in the late third quarter, and four in the late fourth quarter. Capital spending is currently expected to total roughly 300 million in 2007. The increase over last year primarily reflects a higher level of real estate purchases for store development in future years and the timing of construction activities. In fiscal 2006, several of the future year sites we acquired were in the form of ground leases versus purchases, thus reducing our capital expenditure. As far as FY '07 expectations, we expect used unit comp growth in the range of 2% to 8%. I know this is a wide range, but it reflects what we think is a still very uncertain market environment, particularly I think as you could all agree, a very uncertain environment for where the major domestic new car manufacturers are going. And as we have seen in the past, rapid changes in their strategy can be disruptive to the wholesale market and the retail market. So far in March, the sales run rate has trended at a rate that would put us at or slightly above the midpoint of this 2 to 8% range. However, we saw a strong start in March last year before experiencing volatility in the rest of the year, so we continue to take a conservative outlook. Total sales growth should be less than in FY '06, reflecting a difference in the timing of store openings. In FY '06, openings were skewed to the first half of the year, whereas in FY '07, they are more heavily weighted in the second half. We typically expect little to no contribution to sales and profits for stores that are opened in the fourth quarter. Based on the learning we've achieved and the changes we have made to manage our wholesale operations, we believe that the first half of fiscal '07 we’ll see wholesale gross profits per unit increase and wholesale sales grow at about the same rate as our retail sales. During the third quarter, we expect wholesale sales to continue to grow but gross margins to moderate in comparison to the unusual circumstances of last year's third quarter. And in the fourth quarter, we expect to see wholesale sales growth and margins moderate on a comparative basis. Overall, we expect wholesale sales and gross profits to increase in line with retail sales growth. Assuming wholesale pricing moderates, we expect this could modestly improve our used vehicle gross profit per unit. We have already seen some of this moderation in wholesale pricing during March. CAF income will likely be slightly below the FY '06 level, which included the $0.09 per share of favorable items. In the first half, we anticipate CAF gain spreads will again be at the low end of the normalized 3.5 to 4.5% gain spread range. The gain spread could increase modestly in the second half of the year depending on where interest rate trends ago. Our SG&A leverage opportunity in FY '07 will largely depend on our comp sales performance. If we are at or above the midpoint of the expected comp range, we could expect a slight bit of leverage for the full year before the impact of accounting for stock-based compensation. SG&A costs this year will include approximately 5 million associated with completing the move of our datacenter out of Circuit City into a standalone datacenter operated by a third-party. Before the new accounting for stock-based compensation, we expect FY '07 EPS to be in the range of $1.45 to $1.65, which represents growth in the range of 4% to 19%. Excluding the $0.09 of favorable CAF items last year, this would give us an EPS growth rate in the range of 12% to 27%. We are adopting, as is everyone, 123R, the new accounting rule on stock-based compensation, effective at the beginning of FY '07. We will be restating prior period results to enhance comparability. We estimate the restatement will reduce FY '06 earnings per share by approximately $0.12 to $1.27. We expect the impact of the new accounting on FY '07 results will be in the range of $0.18 to $0.20. There are several reasons for the larger impact in FY '07. The first is me, my pending retirement. The expense related to all of my invested options, which vest on retirement will have to be booked in FY '07. The second is, some of the other older guys around here were also required to accelerate the expensing for associates who are currently or will become retirement eligible. That doesn't mean they're all running out the door, it just means they are eligible, over the vesting period of any newly issued options this year. So as a result, several members of our senior team will actually have their option expensing accelerated this year. In addition, for new option grants, the stock price on the grant date affects the amount of expense to be recognized. And as you know, our stock price has popped up, which has had some effect on this. Including stock-based compensation expense, we currently expect FY '07 EPS in the range of $1.25 to $1.47. This range does not include any effect of any stock-based grant that might be given to a new CEO. It represents EPS performance in the range of negative 2 to plus 16, compared to pro forma FY '06 results. Excluding the $0.09 of favorable CAF items in FY '06, it would represent an EPS growth in the range of plus 6 to plus 25%. So with that, I would be glad to take any questions. Dandy Barrett, Assistant Vice President, Investor Relations: Michelle, we can open the line for questions now.

Q - Matthew Fassler: Thanks a lot and good morning. A - Austin Ligon: Good morning Matt. Q - Matthew Fassler: I would like to focus on just a couple of small issues. First of all, can you talk about the CAF adjustments, the $0.09 you had over the course of this year? I mean, in a sense they are nonrecurring, but they have recurred pretty consistently. So to the extent that you were to see the same patterns emerge, would you have continued adjustments? In other words, do you need incremental improvement in your credit experience to drive additional adjustments, or if you kind of run similar to where you have to date, which I guess is better than some of your long-term assumptions, would you have additional adjustments? A - Austin Ligon: I will let Keith answer. A - Keith Browning: Yeah I mean, Matt, we actually -- it is challenging because part of the favorability that we have made the adjustments on is related to the new scorecard we've put in 2003, and then part of it is due to the overall economic environment. And then also recovery rates, for example, in the fourth quarter, were at an all-time high. So to the extent recovery rates were to repeat, that could produce further adjustments that would be favorable. We're not forecasting that. We don't have the ability. We forecast basically average recovery rates going forward. We think we have done our best estimate of what the impact of the 2003 scorecard is. So we currently don't anticipate further adjustments. If we did have incremental favorability, we would have to make further adjustments. But we take our best shot each quarter at forecasting losses in the future and try to consider the various factors that influence those. Q - Matthew Fassler: So the adjustments, Keith, in essence reflect not only your past experience, but your flowing through of your – of that recent experience to your assumption of future results? A - Keith Browning: Right. A - Austin Ligon: Based on everything that we understand, and so you can say this $0.09 to us this year was a true surprise. Q - Matthew Fassler: And the -- by recovery rates, you're talking effectively about repossessions? A - Austin Ligon: Correct. Q - Matthew Fassler: Okay. Secondly, you talked in the quarter that just ended about some favorable swings on the benefit front. If you could just quantify that for us and tell us how much that helped the SG&A rate? A - Keith Browning: The benefit fees, I mean we were actually trending unfavorable to our budget for the full year, first three quarters and experiencing pressure like most throughout the world. And it actually ended up favorable to the trend and favorable to our targets. I would say that at least 1/10th, if not 2/10ths of the SG&A swings. Q - Matthew Fassler: Was there anything funky about that, or was it good management if you will, or something…? A - Keith Browning: We haven't had the ability to control the level of illness of our employee population, and it was an honest surprise. Q - Matthew Fassler: There is no true-up or a catch-up embedded in that swing? A - Keith Browning: No. Q - Matthew Fassler: Okay. A - Keith Browning: We try to true it up as best we can each quarter and adjust our IBNR and feel like we're very consistent on that basis. Q - Matthew Fassler: Gotcha. A third quick question. To the extent the store openings are pushed back a bit probably from a lot of our assumptions, can you talk about what is transpiring in your real estate pipeline that led to that? Is that total coincidence, did the projects get delayed? A - Austin Ligon: I think that what transpires are landowners who are slower to conclude deals than we expected, communities that are slower to issue permits than expected, weather that doesn't cooperate and construction that sometimes takes longer. Every once in a while, we will have something accelerate; that's pretty rare. And, just so happened this year that we had more of it slip than usual, so it's pretty coincidental. It is -- in any given year, we try to spread these things out so that the pressure on the operating team is reasonably balanced. And one of the things that that results in is things that you plan for the third quarter; if they slip, they're going to slip to the fourth quarter. You might remember that once upon a time Circuit City used to try to front-load. The problem with front-loading is, if you don't have problems, then you suddenly have more stores than you can actually open with your team. So this is just one of the vagaries of the real estate process and nothing unusual about it. Q - Matthew Fassler: And finally, Austin, not that you haven't earned it, but just trying to get a sense of how much of the incremental options impact related to your retirement just as we try to calculate likely options impact on a go forward basis? A - Austin Ligon: About $0.04. Q - Matthew Fassler: Okay. A - Austin Ligon: Cheap at twice the price, right Matt? Q - Matthew Fassler: Thank you very much. A - Dandy Barrett: We can go to the next caller Michelle.

Yes ma'am. And your next question comes from Sharon Zackfia. Q - Sharon Zackfia: Hi good morning. A - Austin Ligon: Hi Sharon. Q - Sharon Zackfia: On the CarMax car buying center, can you give us some more details about that? Any idea how much that's going to cost to build and run and what radius it will service? A - Austin Ligon: We have lots of guesses but no real clue, is the honest answer. What we're doing is, we are leasing – it’s used to be a service station. So it's 1.5 acre site, it's on a corner, it's on a very high traffic auto trade area that has actually grown a lot. It's closest to our Norcross store, it's in an area called Peachtree Industrial Boulevard. And it's the next strongest auto trade area compared to our Norcross area after Norcross. And it's probably too close for us to have a build a store on. But it has really developed over the last few years. All of the dealers have torn down their old buildings and built new ones. There is a Lexus franchise there that looks like the biggest Lexus franchise I've ever seen. So it's a very attractive trade area, one that we are unlikely to get into from a sales point of view. And we thought it was a great place to go test getting into the middle of the deal flow, if you will, with a local appraisal center. We have done the numbers to understand what percentage of -- how much lower is our penetration rate from people who seem to be shopping there than from people who are shopping in the trade area around our Norcross store. But it's really kind of hard to guess, which is why we want to open one, how much business it will do and we have a wide range I guess. So what we have done is done the economics that tell us that we don't have to do a whole lot to make it worth doing. So we suspect pretty strongly that this will work, but we also suspect that like everything else you do for the first time, there are all sorts of things we're going to learn from the consumer once they start coming in in terms of the facility, the process, does it help us sell any cars, is there a different mix of retail versus wholesale there versus at the store, what's the speed of the process. So it's really a learning lab. And the next logical question would be, when are you going to build another one? And the answer is, after we learn something that helps us understand what should we do next. Q - Sharon Zackfia: So at this location, it will just be staffed by car buyers and then they will be reconditioned at Norcross? A - Austin Ligon: The ones that are reconditioned and the ones that are going to be wholesale will be wholesale at Norcross. Q - Sharon Zackfia: Okay, and is there anything different about Atlanta, in terms of the appraisal traffic you get there versus other regions? A - Austin Ligon: Atlanta has probably been a little bit lower, but that's not why we picked it. We picked it because that’s where we found the site. We looked in three or four different markets. We identified trade areas we would like to find a site in, and this was the first one we found one in, so we went forward with it there. Q - Sharon Zackfia: Okay, and then for the drive impact in the fourth quarter, I mean, what should we expect going forward? I would expect that it's less of a drag on comps, but should we still expect some sort of drag from DRIVE? A - Keith Browning: Yeah, I mean. We have adjusted our expectations to take a lower level of DRIVE, but the other thing we've also done is, as we’ve been experimenting with other finance companies, we've actually added to our overall selection. So we don't think that from a sales impact that we’ll see a sales shortfall because we are adding other non-prime providers that seem to add enough unique approvals that will supplement and offset the DRIVE shortfall. We're going to continue testing with DRIVE. They're working on a new scorecard and we will see how it goes with that. Q - Sharon Zackfia: How many non-prime providers are you up to now, excluding DRIVE? A - Keith Browning: We are up to 5. Q - Sharon Zackfia: Everywhere? A - Keith Browning: Oh six, I am sorry there. A - Austin Ligon: And, we continue to run experiments with folks and look at other folks who come along who have some credibility that they could offer something different. Q - Sharon Zackfia: Okay, and then lastly, and then I'll let someone else ask a question. On wholesale margins, I mean it sounds like you have some execution and some wind at your back here as well. I mean, are you looking for something still in the mid-teens for fiscal '07, or are we going to be dropping closer to the 12% you did a couple of years ago? A - Keith Browning: Yeah I think the way we described it is right. We’ll see a different pattern but I think mid-teens is a fair expectation. Q - Sharon Zackfia: Okay, thank you. A - Austin Ligon: Thanks a lot.

Your next question comes from Scot Ciccarelli. Q - Scot Ciccarelli: Hey guys, how are you? A - Austin Ligon: Fine Scot, how are you? Q - Scot Ciccarelli: Good, just a follow-up on the wholesale margins. Are you guys really looking at the -- have you changed how you look at that side of the business, Austin? I mean, I know you have always talked about it as kind of a breakeven operation. Can you just tell us kind of philosophically if there has been a change there? A - Austin Ligon: Yeah, there has been several. And a lot of times, necessity is the mother of invention, and that has always been true for us. So one of the things that we learned over the last couple of years is, gee, there are things going on in the wholesale market that we don't understand. Actually, if you go back three or four years, at the very beginning, wholesale was a necessary evil that cost us money, and we did it to enable our sales offer. And over time, we added fees to that to make sure we were recovering our cost and as they got bigger and bigger, we recognized, gee, we need to make sure we are recovering our physical facility cost because this takes up a lot of room. Hence what we found is a combination of things. One, our wholesale business got more and more efficient so that the number of dealers we have attending each auction per car sold became a significant positive multiple compared to anybody else in the industry, and we got more and more cars. So that over time what we found is, not only have we’ve been able to fully recover our cost, but in fact, we suspect and we haven't proven this, but we suspect that we actually realize a higher price for an older wholesale car sold at one of our auction than any other auction environment that it can be sold in. So one of the things is happened is, we have recognized that, gee, there is some dollars there that we can take as profit and still be offering people what’s consistent with what anybody else could offer them in the marketplace. The other thing we've discovered is, in a rising price environment or a volatile price environment, if you have to make a trade-off, and we did a lot of testing to understand this, it may often be the right trade-off to make to offer a little less on wholesale cars and use some of that margin to reduce your pricing on retail cars. And we've been very careful and thoughtful about how we do that and it's really a trade-off in the business. But it's something that we think in the environment that we have seen over the last year, a year and a half has actually served us well. Obviously, and then the environment we saw a few years ago where prices were plummeting, it would've been a different dynamic. So philosophically, we still want to give the consumer a fair price for their car and something pretty close to what true wholesale value is. But that doesn't necessarily mean what we can sell it for in the auction, but really what could somebody else sell it for. We’ve also learned that we need to become a little more sophisticated in terms of understanding how much risk we take on which kinds of cars and how much flexibility there is on pricing on different kinds of cars in terms of making the best overall offer to all our customers. So a lot like we did with pricing maybe five or six years, seven years ago, we have found that it's actually something that with a lot of data analysis and a lot of testing, we can do -- we can perform more optimally for the overall business both in sales and margin than with the old approach that we were taking to it. Q - Scot Ciccarelli: Okay. So, would it be fair to assume that, instead of saying used units is really the key metric here, because I know that's something you've emphasized, we should be looking at more of a total basis both on a sales and profit contribution basis because now you guys are really balancing your retail sales versus your wholesale sales and where can you get the greatest net impact, is that fair? A - Austin Ligon: Sort of. Retail sales always come first. Retail sales are by far the most important to us and the biggest profit producer. But wholesale, what you can look at is wholesale has really become a more powerful tool in helping us both drive our retail sales and balance our profitability. So wholesale has become more important, but I would still say, the single most important thing you want to look in day-in and day-out is used unit comps. And it's -- as we have over the years, it's great that we've discovered a new tool that gives us a little balance and maybe some more flexibility in terms of how can we help drive sales in a difficult period. Q - Scot Ciccarelli: Okay. The growth in the wholesale business, which has obviously been a pretty good lever for you guys, does that create conflicts at all with any of the houses, the auction houses that you already deal with? A - Austin Ligon: It doesn't really create conflicts. They have all proposed to us that they sell our cars instead. We have tested with all of them. They are all great folks, but they are really specialists in another kind of car. Q - Scot Ciccarelli: Okay. A - Austin Ligon: And, we can sell these old age units for better prices at lower cost at our store than anyplace else they can be sold. So, but we're not going into competition with Mannheimer (phonetic) or Dessa (phonetic). Their core business are the higher value unit. They'd love to do this business, and if they could ever prove to us that they could do it better than we could, we would let them do it. But we've tested with all of them and they know that the economics don't work. Q - Scot Ciccarelli: Okay. A - Austin Ligon: We're still their biggest customers and we're good buddies with all of them. Q - Scot Ciccarelli: Got it and then the last question is, is there something that DRIVE learned about their business with you guys that made them change their parameters? Because it sounded like, if anything, some of the statistics you had gotten from CAF, et cetera, and because how you price your cars, I thought the business with those guys could actually expand, and it seems like they're pulling back. Is there something that they kind of discovered that they weren't happy with? A - Austin Ligon: We thought that's true but -- we thought that as well, but I will let Keith talk about it a little bit. A - Keith Browning: The real key is, is when they looked at the contribution by state. There are several states where there are rate caps and since the losses were enough favorable to offset the rate caps imposed by the states, their returns were inferior on those and so they were really just trying to balance the portfolio to reflect and to try to minimize their losses in the rate cap states by being very, very selective on cars that wouldn't have as much depreciation. And when they did that, the cannibalistic impact on high probability cars just made no sense for us to continue an offer in those particular states. In the other states, I think the relationship is strong. We are still working with them on trying to enhance the relationship and buy deeper. It's where they have a limit on what spread they can get to offset their very high loss rates, even with us. Q - Scot Ciccarelli: Okay, great. Thanks guys. A - Austin Ligon: Sure, thank you.

Your next question comes from Bill Armstrong. Q - Bill Armstrong: Hi, just a follow-up to that last question. Could you tell us which states are subject to those interest rate caps? I understand Florida is one of them. Are there other ones? A - Keith Browning: The two largest ones were Texas and Florida. With the broadest number of stores impacted by it. A - Austin Ligon: Texas and Florida are also our two lowest credit rating states. I mean they are states that have the most opportunity for secondary finance. Q - Bill Armstrong: Right. With the buying center, is the idea at least partially to increase wholesale volume? A - Austin Ligon: Well, the first and foremost idea is to sort of, if you step back and think about it, if you are shopping for -- particularly if you're shopping for a new car and you have a trade-in, it's absolutely irrational for you to go in to a dealer if there is a CarMax in your market without the appraisal in your hand from CarMax. You are going without the single most important piece of information that will help you negotiate. And we recognize that we're not going to sell all of the cars. Some people want to buy a new model car and that's what their heart is set on, but we absolutely want to appraise all of the cars out there. And we find that for sheer convenience reasons, a lot of people go shopping for a new car. They don't come -- they don't leave the trade area they are shopping in. 40% of the people buy a car at the first store they walk into. So first and foremost, it's to try to further penetrate that portion of the market that's not coming to us for an appraisal. What do we get out of it? One, we get a chance to buy a retail car that will diversify our inventory, it helps over the long-term, reduce our dependence on auctions, so that we have maximum flexibility there. Two, it can provide a wholesale car for our wholesale auction and we have always found kind of perversely that if you're going to buy stuff you don't want, buying more of it is better than buying less of it, because the more you have, the more dealers you will get, the better price realization you will get. And three, even if we don't buy a car, we get a piece of information that helps us to evaluate the tone of the market in terms of -- every time somebody rejects an offer, that tells us something about where is the market right now for that type of car. And when you aggregate all of that data, it really helps us to understand the used car market. And finally, it helps keep all of the other dealers honest by not allowing them to, what's known in the trade as steal the trade. That is, undervalue the trade to the consumer. And when we raise our competitors' cost on trade-ins, it forces them to not be able to play as many games on other things. So our view is, it's got a whole variety of positive effects. It may well have some corollary positive effects in terms of getting some people who come in, they see the offer, they like CarMax and they think, well gee, do you have a store nearby, maybe I should go shop with you. That would be pure gravy. It's primarily those wholesale-related effects and the acquisition-related effects, but it's not just to buy cars for the wholesale lot. And it's that totality of effects that makes us so excited about doing it. Q - Bill Armstrong: Okay. With the buying center, what metrics will you use to gauge its success? A - Austin Ligon: Do we buy enough cars and generate enough gross margin to pay for the cost? It would be one. And if you don't do that, then we would ask ourselves why not, because as we have looked at the economics, it seems like that ought to be pretty doable and we will look at where are we currently drawing appraisals from without this, what did we add to it, is there anything in terms of our marketing effort? Are peoples' awareness that's there. If we do achieve that, then the question really becomes, how many can you buy, what's the mix, what can we learn about, is this too small, should we have a bigger site? There was a bigger site down the road that we could have chosen, cost a lot more money. We decided to go with the less expensive test. It would be a great thing to learn that we should have bought the bigger, more expensive site. So, sort of everything you can think of there, but the first thing is: will it cover its own cost? That's kind of the first hurdle. Q - Bill Armstrong: How will you be able to measure if the buying center isn't simply cannibalizing appraisals from your other CarMax stores in the Atlanta market? A - Austin Ligon: Well, we track every appraisal we do. We know what ZIP codes they come from. And so one of the things, we won't be able to track it exactly, but one of the things we will be able to look at is, how is the performance at Norcross in particular, which is the nearest store, going from the ZIP codes that it's currently attracting from, and how many of the appraisals in this new location are coming from people who are in those existing ZIP codes versus people who are in ZIP codes where we get very little business. So we're usually pretty good at getting plus or minus 5 or 10% accurate on what cannibalization is. And secondly, I'm sure we'll do some surveying to understand where else have you shopped, where else did you consider, how much of this is true incremental business of people who are only going to shop new cars in that area. But I think we're pretty confident of our ability to sort it out. Q - Bill Armstrong: And will these cars just feed the Norcross store, or will it be spread out amongst your other Atlanta market stores as well? A - Austin Ligon: No, we will spread them, although they will probably be processed at Norcross. Hopefully, we are going to buy so many cars that Norcross won't be able to process all of them. But we'll actually distribute the cars according to where our inventory model says they would sell best. As far as the auction cars, I think most of them will be sold through Norcross, but it really depends on the volume. Q - Bill Armstrong: Okay, just two more quick questions if I could. You said earlier, Austin, that you suspect although you cannot prove that your auctions get higher prices than other peoples' auctions. What sort of makes you suspect that? A - Austin Ligon: When I say can't prove, what I mean is we can't -- we have not yet quantified to our satisfaction that we're willing to share the data. What makes us believe that is, first and foremost, the dealer to car ratio. Something that is generally true in auctions is the number of bidders there are per item being sold has a strong effect on pricing, and we find that across our own auctions. So we know that an auction that has two bidders per car is not going to get as good a price realization as an auction that has three or four bidders per car across our own auction environment. So we see variations and price realization across our own auctions. And we also know a lot about the other auctions. We have tested cars there, we have seen what our price realization is when we take them other places. So we're actually fairly confident that there's a difference there. It's really quantifying that difference that we're not ready to do right now. And I am not sure that, even if we could do it, that we would share it with you. It may remain one of those little secrets of our own. Q - Bill Armstrong: And just finally, the $5 million cost to move your data center. Just for modeling purposes, what quarter or quarters do you think that those costs will hit? A - Keith Browning: We don't have it in front of us right now. A - Austin Ligon: We don't have it in front of us. Originally, it was supposed to hit last year. So it is starting to hit the beginning of this year. This is a holdover from last year. It's something that we expected to get done last year and it has just taken longer. A - Keith Browning: I guess the transition costs, the bulk of those will hit the first of the year and then the rest is depreciation and having duplicate servers, et cetera, that is going to have a higher cost. A - Austin Ligon: So the bigger chunk of it will probably be the first half of the year. Q - Bill Armstrong: Thank you.

Your next question comes from Mike Heifler. Q - Mike Heifler: Thank you, good morning everyone. A - Austin Ligon: Good morning. Q - Mike Heifler: I just like to delve a little bit more into this 2 to 8% comp guidance range. It just seems like GM and Ford, they're reducing their capacity, they are talking about reducing incentives. It seems like the new vehicle pricing environment is moving to more stability. And then also when we look at the wholesale pricing, it seems like you guys expect that to moderate. So why shouldn't we be thinking that you guys should be at the middle to high-end of this range? Why is there a two in that range? A - Austin Ligon: If you can, if you can guarantee me that Ford and General Motors are actually able to execute these strategies, and that from your lips to God's ears in terms of the new car environment. Two years ago, that’s what everybody thought too, and that's how we got thrown such a curve ball is GM absolutely believed they were going to be able to increase sales and raise prices. I think the challenge is that for all their best efforts, it’s been very difficult for them to predict 90 days down the road what they're actually going to do. And I dearly hope they are successful because they need to dramatically decrease production. I, like a lot of folks, think they're probably not moving fast enough on that and so one of the things I suspect is that market forces will intervene and cause them to accelerate their plans. I may be wrong, but I think any reasonable person would look over the last several years and say, while what you say is true in concept, it's very difficult to predict how large organizations with large unionized work forces in an extraordinarily competitive environment are going to react. And we have seen in the last two years some extreme behavior and this price war has been going on since '97 now. So I agree with you that if those things would happen, if the wholesale market would moderate, if Rick Wagner and Bill Ford's plans go forward smoothly and they negotiate a deal with the unions and they reduce production pretty quickly and the economy stays healthy and nobody else is too aggressive, we may get a more docile environment. And you would think that in that environment, we ought to be at the midpoint or above based on everything we know. Q - Mike Heifler: So it's just an extra measure of conservatism that you guys are expanding the range? A - Austin Ligon: Sure, and expanding it primarily downward because we're just saying, look, the market has -- the new car guys have proven that they can throw curve balls nobody expects, and we're getting better at adjusting to them, but that doesn't mean we're perfect. Q - Mike Heifler: Okay and just on the SG&A, you guys talked about some of the moving parts here. There is a $5 million year-over-year increase from the data center. You also talked about in the fourth quarter that there were some positives from healthcare and property tax. Could you kind of like go through what are the big moving pieces here on a year-over-year basis on the SG&A when we look at '07 versus '06? A - Austin Ligon: Well, I think you just talked about two of them, and I don't know if Keith has anything else he wants to mention. A - Keith Browning: I don't think there is anything. I think that the one challenge we have is with the fourth quarter openings next year, you're going to get a lot of SG&A but not a lot of sales. So that’s probably the only other thing worth mentioning. A - Austin Ligon: But the real bottom-line is, each point of comp sales makes a big difference. And if we were able to finish above the midpoint of the range or even at the high end of the range, that would overwhelm everything else in terms of SG&A impact. Q - Mike Heifler: Okay, then just one last one, Austin. Do you have any comments in terms of the status for the CEO search? And, is there an update on the timeframe there? A - Austin Ligon: Yeah, well. Obviously if there were, we would have announced it because its public information for everybody. And the answer is, we think it's going well. We're talking to candidates, but we don't have anything to announce yet. Q - Mike Heifler: Is there a shortlist right now? A - Austin Ligon: I wouldn't comment on that. Q - Mike Heifler: Okay, thanks. A - Austin Ligon: Sure.

Your next question comes from Matthew Nemer. Q - Matthew Nemer: Good morning everyone. A - Austin Ligon: Hi Matt. Q - Matthew Nemer: Just a quick question on wholesale prices. It seems like you guys have done a great job of taking advantage of rising prices, particularly in the wholesale segment. And I am wondering if the supply factors increased in the back half of this year and in 2007, how do you see that -- and prices come down, how do you see that impacting your business? Is there as much leverage moving in the other direction? A - Austin Ligon: Well, our general belief would be, to the degree that prices come down, the averages that everybody looks at hide a much more complex reality. Last year, it looked like wholesale prices were going up or staying flatter in a fairly moderate way. What was really going on is that SUVs were in total collapse and compacts and mid-size were showing unprecedented strength we've never seen in any other year. To the degree that we saw prices fall in a way that it created some real opportunities in the marketplace, then what we guess is that would help sales and hurt wholesale some. But that is almost always a great trade-off in our experience is, that what you give up in wholesale, if it helps sales is almost always a big positive. So, I would love to see a return to some segments where you have some inventory that is priced at levels where we can offer very attractive sales compared to new cars on inventory that we can sell better than anybody else. Historically, a good example of that kind of inventory is Mitsubishi, which is not as well known a brand name. But when we put a good quality Mitsubishi car on our lot next to a Honda, a Toyota, a Ford and a Chevrolet, and people see the price value at times when those cars have really been driven down in the marketplace, we've literally been able to sell them like proverbial hotcakes. There was about a four or five month period of time where Grand Cherokees fell into that spot, Explorers have been there before. So it really depends not just on the average pricing environment, but specifically what happens on individual chunks of cars, and is there softness that we can really take advantage of to drive sales. And to the degree there is, that usually correlates with less of an opportunity in wholesale. Q - Matthew Nemer: Okay. And just to take that a step further, if there is an environment where prices are declining across the board because off-lease returns to the market and the rental guys have a lot of cars that they are flowing back into the wholesale market, does it make as much sense to have a separate car buying center? And then as a second question, can you participate in any direct upstream remarketing where you can buy these cars without going to the auctions? A - Austin Ligon: And absolutely, we test the car buying center independent of the wholesale environment over the last two years. I mean, in many ways, you might say, what took us so long because it's a great idea in any environment because it's a great place to get retail cars, particularly the unique retail cars. So even though the off-lease and off-rental cars are out there and they give you pricing opportunities, you will never get a Honda Odyssey minivan with low miles out of a lease or a rental fleet. You won't get it with any miles out of those fleets. You buy those from the customers, and expanding our ability to buy from customers makes sense. So we'd do this in any environment. In terms of direct purchase, we talk to everybody. We're the biggest buyer out there. They all know us and they all know that we are able to write a check for any quantity of cars we want to buy any day. When it comes to manufacturers, their remarketing departments are often tempted to deal directly with CarMax. But when they do and it gets to be a large quantity, usually you have a revolt in the dealer ranks. So from time to time, we see opportunities there. I don't believe that it's ever going to change and become something that we could consistently skirt the auction system with. The second thing is, they see us as a big buyer and this is where buyers and sellers always have a challenge is they like us to pay more and we'd like to pay less. And that's why we often meet at the auction because that's often the best place for us to come to a common view. But we certainly -- rental companies, off-lease companies and manufacturers, we talk to them all of the time. And when they have something that they want us to look at, we always look, and from time to time there is an opportunity to buy in quantity. Q - Matthew Nemer: Okay, and then the last question is, you guys I think developed the gold standard in inventory management, and now there are a few players that have attempted to come up with an off-the-shelf version of inventory management. And I am wondering if you have seen any of these pieces of software and what your impression is? A - Austin Ligon: Well actually, I think the first piece of software that somebody brought in to show us has probably been four or four and a half years ago now. And the basic logic of what we do is pretty straightforward and it's actually some of the logic we stole from other folks who were doing it on pencil and paper. I mean the logic of tracking your inventory and trying to figure out what sells better and what sells less well seems to make sense. It's amazing that not more people do it. I think the software that is out there now is, as far as we have seen so far, is a step more sophisticated. The challenge is really, the software has to integrate into an operating environment. You have to have a used car manager who is willing to provide all of the completely honest and transparent data on what cars he has, how old they are, what their true cost is. He has to know what their true cost is and that often gets confided in the whole trade-in charade in a dealership. And he has to be willing to manage to what that data tells him. And it's really more the willingness of management to use these tools than it is the availability of the tools that has been the holdup. There have been people out trying to market these tools for a good four years now. Having said that, it doesn't mean we don't take it seriously. We're looking at all of these things and we obviously are going to be curious about how willing are people to discipline themselves in this arena. Historically, there has not been a lot of willingness for self-discipline and if you really get into and understand the incentives for individual used car managers, and how they run their business, and the, let's say the advantages of having less than full information available to the store manager or the ultimate owner, there's a lot of resistance. That's what most people have always told us is the real resistance comes from the used car manager because he doesn't want to change the way he does things. He is in charge and he likes having control of the data. And to the degree you take that away from him, it dramatically changes the way things are run. It's also extraordinarily difficult to have a true cost picture in a negotiated environment. So we are certainly watching these things and we are conscious of them as competitive forces out there. But historically, the actual take-up in used rate has been fairly low. The efforts are getting bigger though, that's for sure. Q - Matthew Nemer: Okay, thanks very much. A - Austin Ligon: Thank you.

Your next question comes from Tom Thompson. Q - Tom Thompson: Thanks, Austin, thanks an awful lot for the great detail and your tremendous insight on the business. I hope that it continues under the new management. A - Austin Ligon: Remember, most of the insight comes from other people who work here. I'm just the person who gets to talk. Q - Tom Thompson: Well, I learn a lot every time I listen to you. My question is, when do you expect the Charlottesville store to open, and what can you tell us about the parameters: physical, economic, expected returns, that sort of thing? A - Austin Ligon: I think it's the third quarter in the fall. In terms of size, it's going to be roughly the size of the first satellite store we opened, about 13,000 square feet. The configuration will be a little different and it will be designed to have a slimmed-down management team appropriate to the 100, the 175-car range that you might be able to sell in a market like that. In terms of return expectations, the return expectations would be within the same model range that we would have. To be honest, we're kind of pushing the envelope here in terms of historical sales experience, because if we achieve the same sorts of market share that we achieved in Richmond, it will be profitable and offer a return, but not a huge one. One of the things we want to learn about small markets, some of our small markets have really overperformed in market share and in pace to that market share by going to a market that's much smaller. One of the questions is: Will everybody in Charlottesville know we are there in four weeks, and will our market share accelerate, and can it go even higher, will we get 100% cross-shopping from everybody in the market? Probably not, but I mean trying to learn things like that is one of the key things we want to learn. It also, just learning how to operate a store with a smaller management team of the sort that we would need either in a small market or in a small trade area of a large market. We think we will learn a lot out of that and it will help us understand how to do all our small stores, including our small satellite stores, more profitably. Q - Tom Thompson: Thanks. A - Austin Ligon: Okay. Thanks very much, I think that's the last question. Thanks very much for joining us.

Ladies and gentlemen, this now concludes today's CarMax fourth quarter earnings conference call. You may now disconnect.