As Carvana crashes, used car dealers, not buyers, stand to win big
businessinsider.com
businessinsider.com
I hope they can fix their financial issues (sounds like they just "bought high and are selling low") and their operational issues (in some places word got out that it was cheaper to just "buy" a Carvana car and then return it < 7 days rather than getting a car rental), because, at least for me, their purchasing experience was great.
regulatory capture + dishonest sleazy sales practices = happy middleman, but suffering consumer and car manufacturer
They care more about government then literally anyone else in the area, and nobody else has as strong a financial incentive to politically push back on what they want.
I remember seeing the ads for them hiring delivery drivers and it amounted to "have a pulse? friendly? We'll train you to drive a large commercial vehicle and load/unload cars, wooo!"
If I remember correctly they were banned from car sales in multiple states, in some cases states banning them multiple times: https://www.google.com/search?q=carvana+banned+in+what+state...
Transferring an out of state title in NC hits you with a road tax up to a defined upper limit ($400 I believe is the absolute highest) based on car value and state you transfer from, so they likely did this to avoid paying that sales tax themselves before selling the car. It's shady as hell.
1. What makes you think car dealerships run on thin margins?
I don't know what typical margins are, but the owners seem to do pretty well. This may be despite low margins. But I'm reluctant to accept your claim without proof.
2. What qualifies as low margin? 1%? 10%?
3. It is entirely possible to make billions on low margins.
A dealer that makes $1000 per car can make $1 billion profit by selling 1 million cars. If the average car sells for $15k, a $1k profit would be a < 7% margin. See question 2 about low margins.
A little mom-and-pop lot in a very small town can sell 5-10 cars per month. It doesn't seem unreasonable for a huge national online dealership to sell 1 million cars.
4. What timeframe are we talking? Five years?
Carmax financials say they do more than $5 billion in a single quarter.
can you disrupt used cars given all the logistics of the physical world? maybe, I don't know, but people here report both carmax and carvana having severe business issues, why?
As supply costs are so thoroughly controlled, the biggest way to increase margins is increasing prices either directly or through service contracts and/or financing. There is a slight economy of scale to owning fleets of car transports and the like, but the actual competitive advantage of those things over smaller dealerships is pretty minimal and I don't doubt is completely cancelled out by the extra administration overhead smaller dealerships don't have.
Carmax used to mark up cars $2000 over auction price. That isn't pure profit though. They have to pay to transport the cars from the auction to their dealership. They have to pay for the building/lot and administration. They have to pay for any necessary repairs. They have to pay interest on the vehicles as they are leveraged on the vehicles they buy (one reason they resell so fast, but may lose money that must also be made up elsewhere). Most significantly, they have to pay the sales team.
By the time you're done, they probably make more like $100 or less per vehicle directly and the rest indirectly through warranties, service deals, and loans.
The story is always the same with this type of company: take a mature industry that is profitable on a unit basis because it’s boring and unpleasant, then build a narrative around some strategy to make it exciting (giant vending machines!) and get buy-in to spend huge amounts of money in pursuit of the narrative but eventually discover the only way to be profitable is to do what the mature industry players already discovered — but now you’ve got so much debt to service you have to cut even more corners and somehow manage to spend billions on becoming a worse version of what already existed and whatever goodwill you earned is burned.
There’s lots of room for businesses to improve on the boring legacy industries with low margins — like car buying and selling — but it requires careful iteration, it requires taking the established understanding and then building on it. Subsidising the cost of good-but-unprofitable service using investment dollars (Carvana was losing thousands per sale pre-pandemic) doesn’t build a sustainable business unless it’s part of a strategy.
Guess what? Buying cars for too much money and selling them for too little money means they go out of business.
That's literally the opposite of what the GP said:
> The buying experience was simply excellent for me, and I couldn't be happier with the car I bought. I figured I probably could have gotten a comparable deal slightly cheaper somewhere else, but I would have wasted a ton of time
I mean this politely, but did you really read what you were replying to?
Its not, though. Its true the upthread poster focussed on “buying experience” not “price”, but the adverse parts of the typical used car buying experience are a highly evolved optimization for drawing people in with advertised prices while optimizing actual prices without driving buyers off. Carvana’s better buying experience is neither “opposite of” nor even orthogonal to their failure to optimize price, its a direct consequence of them deciding they didn’t need to.
It was a totally hands off experience; I will pay extra to not be talked to by someone. The checkout wizard was nearly as easy as buying something on Amazon. Which car? Enter your bank account number and social security. Agree to this loan rate. Sign over power of attorney so they can get your first year of registration and plates taken care of. They drive up to my apartment building; drop it off; "take it for a spin, I'll wait"; come back 30 minutes later; looks awesome; done.
I've taken that car to the local Audi dealer for service. They upsell you on everything. They pressure you. "Hey, while you're waiting, why not take this new 2022 A4 for a spin, no problem man my treat." "Yeah your car is in great shape; we could give you $15,000 for it right now, that'd take care of your down payment on this new one, its nice isn't it, don't worry about the monthly we can discuss that later" Just stop talking to me. I will pay so much more to not be talked to (and, really, compared to most dealers nowadays; its hard to say if Carvana is even "more expensive").
I feel extremely, EXTREMELY, confident in saying that this attitude has sold Teslas to three people in my bubble. You can start the process to buy a Tesla with Apple Pay. Seriously. Their new delivery process involves ZERO people; you drive to the store, the app tells you the ID of the car which corresponds to a piece of paper hanging in the windshield, you walk around the parking lot looking for it, if there are issues then people get involved; otherwise you drive away. That's it. I am buying a Tesla right now, even though I rather like the Mach E, because they make it so dangerously easy, and I have no clue how to buy a Ford. What's their delivery estimation? Is the price quoted on the site what I'll actually pay? Do I call someone? God, I gotta actually talk to someone? I gotta drive to the dealer? In person? Screw that, Tesla makes it easier, they get my $60,000.
Carvana made mistakes. But their model wasn't some VC abbaration like so many SV companies. They actually struck on something new, in an industry that needed that innovation, and that discovery has since (or maybe, in parallel) been applied by other companies in the industry. They screwed up, but I'll miss them.
The problem with Carvana was that by offering auto loans to buyers as well as taking out loans to buy cars from sellers, they became excessively levered in a time of rising interest rates and falling demand for used cars. On the upswing they massively invested, thinking this was business success and not shocking leverage, and the downswing wiped them out.
Whoever the carvana replacement is going to be, they should subcontract out the business of offering auto loans and they should borrow less to fund acquisition of cars, because the auto business is cyclical and they need to be able to survive the downturns, which requires less rapid growth during the boom. But the overall business model can be fixed, even if Carvana can't.
I think Carvana did make mistakes; but I also think the industry as a whole is very deeply suffering right now. And we only hear about Carvana because they're a VC SV darling.
Alternatively, could they hedge their exposure somehow?
The pain is that people get pulled into negotiations that mix in a bunch of different things (purchase price, trade-in, financing, add-ons) and it's all a bit more than they can comfortably afford.
I bought an electric car recently and only put up with the minimal haggle of an MSRP cash deal because I was on a sabbatical and had more time than usual. But my partner and I were ready to go for Carvana before my sabbatical or if we couldn't find a dealer willing to stay low-bullshit with us. I ended up calling 6 dealerships and asking my partner to clear her evening just for the one dealership that offered us a low-bullshit deal.
Because I want to save money? It literally took about 5 minutes to ask them to add the ~$1500 price of some factory-installed options to my trade-in price and they had a deal.
It wasn't completely frictionless but far and away the main hassle was just car availability. Had I been willing to take a similar vehicle they had on the lot it would have been quicker.
There is a bit of a paperwork dance--also insurance--but, as you say, that's hard to eliminate totally.
My Tesla was ordered online (Apple Pay) and dropped off at my driveway. The only human interaction was the friendly Tesla delivery associate that had a couple papers for me to sign.
Audi, Volvo and Mercedes all had people trying to sell us last years model, adding packages we didn’t want or completely out of inventory on the vehicle we did want.
It’d be great if the Carvana sales model could be adjusted to market pricing, so the customer experience is the same but would be a profitable business.
Did you get to inspect the vehicle before you signed the papers? Have heard numerous stories about that, where people either don't get a chance to do so, or when they do find concerns, are pressured by the delivery associate to accept it, "and we'll fix things at the Service Center".
Similarly, my Audi dealer has never tried to run the numbers on trading my car in when I've been in for a service visit, and the only vehicles they've tried to put me in is a loaner vehicle if the service time will be 2 hours or more (and unlike Tesla, they -always- have a loaner for you, even if it's one from the lot).
The Audi, Volvo and Mercedes dealers may have been directing you at sub-optimal cars, but they were available to drive off the lot that day. If you're willing to wait 3 months, you can certainly order the latest Audi or Mercedes model with the exact specs and options you want. You can even pick it up at the factory in Germany and take it for a spin on the Autobahn.
Really? That would be a 100% show-stopper for me. They absolutely don't need to know such highly private information.
I'll stick with cragislist and paying cash, which is how I've bought every car I've bought in the last ~16 years.
The experience of buying a car at a dealership is a fucking nightmare. It’s awful. It’s the worst customer experience you can have in the United States.
There’s been some serious issues with the used car market fluctuating over COVID but it’s very reductive to now say “oh they were bad the whole time just another unprofitable unicorn”
Carvana has done the same thing, 20 years later.
Car dealerships, for the most part, have not evolved at all or even tried. The experience is still a huge pain in the ass, and they know it.
Unfortunately that summarizes a fairly large fraction of the presentations aimed at VCs.
It's ironic that free market types are completely for subsidies when the private industry does it, although public and private subsidies both have issues.
At least government subsidies have a benevolent intent usually. VC subsidies are usually about hiding the true market value of a product to attract customers who otherwise wouldn't have shown interest until it's time to crank the money milker.
People didn't seriously upend their lives to drive for Uber until they retire. The people who were hurt by Uber were people who bought taxi medallions and suddenly found themselves competing with unlicensed taxis.
But on that point, as much as it sucks for them, their monopoly status meant the service was overpriced and didn't innovate. Uber might have been underpriced when it was subsidized, but it's still cheaper than taxis and makes rid hailing easier. Don't forget that even after the reality of things set in, Uber is still a $50B company. There's a real business there.
A more benevolent reading of this is that the VC money is used to make the product more affordable at small scale. Many times products become cheaper/affordable at larger scales. Young companies use the VC $$ help to get them across that inflection point.
This logic breaks down when the product cost doesn’t get lower with more scale. Customer service oriented companies usually fall in this category.
This analogy is strange. Free market types aren't against private investors throwing private money at bad investments nor would they want any regulations against it.
"At least government subsidies have a benevolent intent usually."
Government subsidies aren't known for wasteful spending? They don't hide the real value of a product (like healthcare)?
They're free to do so, but isn't it cheating when it undercuts competitors while propping up unsustainable businesses in the long run? Subsidies that support predatory pricing don't sound fair.
I don't see why anyone would characterise some people choosing to spend and lose their money as "cheating".
If the government damages the economy with subsidies, those responsible might have more difficulty getting elected. If a VC firm dumps a juiced bag on S&P index fund buyers while causing a bunch of trouble for taxi companies and first time homebuyers, are any of their clients going to be pissed? My guess is they'll probably congratulate them on a job well done.
But I want to emphasize, I would have gone to Carvana even if it were considerably more. The trusted, online-only buying experience is just something I'm totally willing to pay for, especially given how extremely awful the normal used-car buying experience is.
At its core, my argument is that there is a sweet spot in which you can get great service from these "boring industry + technology + money" companies but that's because they're actively pursuing good customer service at any cost with no consideration for making money. As soon as the company (or its investors) realise this behaviour is unsustainable, they forget all about their narrative and go all in on making money -- which is when the quality of the service slips.
The amount you pay to Carvana (more or less than you'd pay elsewhere) doesn't have a relationship to the quality of service you will receive, because it's not a "normal" business.
There can be positive consumer outcomes from companies that approach business like Carvana: in the short term, customers get investor-subsidised products, and in the long term, other players in the industry get to learn from consumer reception (e.g: CarMax probably learned about demand for higher quality service from what Carvana demonstrated early on) but Carvana specifically is doomed to failure because it isn't a sustainable company that made a bad decision during the pandemic... it's been unsustainable its entire life.
I am not theorising about their costs, rather, I am referencing their own financials. Per their financials, they must achieve >$4,500 in gross profit per car sold in order to break even on a sale because the cost of providing their service is around $4,500 per car. As far as I know, they have never achieved this and they have only come close during periods where the second hand car market was at its most ridiculous supply-chain induced peaks.
You could start an online second hand car dealership today, with the same online purchasing that Carvana offer, and a better quality of service, and build a great business with great unit economics... if that was your strategy from the first day. Many such companies exist! There are lots of upmarket car dealerships that'll give you excellent service -- and it'll cost you less than $5k over market.
Carvana can't just undo a decade of bad mistakes, they can't just switch from "losing money" to "making money" because every foundational decision about the business was made in the context of "who cares about money, we want growth". You should not think of a company as an implementation of a business model, a company is so much more. Carvana has something like 20,000 employees: at that scale, radical change is basically impossible.
People keep complaining about how flying has become so much more unpleasant.
But other than a small minority, the customers almost always pick lower prices over any improvements in service.
And the same is probably true for buying a used car. Folks may talk about how the experience is poor, but at the end of the day price is what will drive their purchase. So whoever gives the lowest price, which often translates to a worse experience, will succeed in the marketplace.
Sidecar was the "3rd company" that did ride-sharing in my city in 2014-2015, after Lyft and Uber. Somehow they were selling rides from any point in the city to any other point in the city for $1. I suppose it was getting subsidized by VC money; and I took probably $500 worth of rides for a year or so until it shut down.
I'm sure I didn't get close to the best price, but I got better than dealership sticker for the make/model/year, and I lost zero time to the transaction.
Places like Carmax buy a car, mark it up $2k, and sell it making most of their money on financing and warranty/service stuff. They mark vehicles down something like $500 each month for two months then put it right back on the auction if it doesn't sell (so you'll generally get better deals from vehicles that have been on-lot a while). This is why they refuse to negotiate price.
You may get a slightly better price than the dealership, but not by much when you consider every single factor.
If you want the best possible deal, know the car you're looking for and offer a fixed finder's fee to a mom and pop used dealership to buy it for you. A lot of these smaller dealers will give you a good, fixed rate because it's guaranteed money to them without that normal overhead. It may not be strictly allowed (due to NDAs and such), but some may even allow you to help pick out the vehicle to bid on.
The problem is, there's a lot more lemons on the market then there's great deals. Nobody wants the car that doesn't start twice a week or that's been in an accident and has its chassis skewed.
These sites start out by promoting seller karma or something but even the best sellers have lemons to get rid of. At the start they probably just sell them elsewhere to keep their rating high. Eventually as these sites get so big you can't avoid them, the quality will inevitably drop because they capture too big of a market which just includes a lot of crap.
At the same time investors will want to see that exponentially skyrocketing line continuing so they'll be pushing to cut corners left right and center just as things get difficult.
I don't know Carvana as I don't drive much anymore but I assume the same story supplies here at least in some ways.
Initially, you grow like crazy and with great user reviews, as you're able to pick and choose the highest quality items.
Unfortunately, at some point you exhaust the supply at a given quality level, but your valuation mandates continued growth.
So you lower your quality requirements to obtain more supply, which only buys you a bit more time until you hit the next supply limit.
The only winning move seems to be stay private and accept there's a near-term cap on your revenue growth, after which you will grow much more slowly (at the natural supply expansion rate).
And at the same time you start burning all the goodwill that make you so popular to begin with.
Thanks for explaining it more clearly, I don't really have a business head.
Or go multi-brand, and introduce cheaper brands for the lower quality properties, to maintain the goodwill for the higher quality brands. Many hotels do this with many different brands under the same organization that segment their customers on price and quality expectations.
I always thought that Uber/AirBnB etc should be more aggressive in creating more brand separation between their cheaper options and their higher quality options.
AirBnB absolutely needs to, given the vast quality range of their current supply.
But hey, if you feel that attached to a Hampton Inn as opposed to a Home2 or a Hilton Garden Inn I guess it makes sense. It's all the same to me though and seems like just a waste of paperwork and administrative tasks to continue the facade of three brands in the same building.
I couldn’t get a local dealership to give me the sticker price of a car on their website without showing up in person. I expected all the extra fees they throw in to be hidden but all they would post was MSRP and to call for the price. I call and they pretend to not know the car I am talking about and need to go there to see the specific car. This was multiple dealers.
Carvana though showed me the price, shipping if any, taxes, tag, title before I even tried to buy it.
No doubt, because a company that operates at a loss on VC money and passes the savings on to the consumer, can easily provide a great experience/price.
Take advante of those companies while they exist, but be clear that they can't continue for very long. Either VC money runs out and they disappear or they go public and must start making a profit by increasing prices and slashing service.
2007 Toyota Highlander hybrid MPG: ~28mpg. Same vintage year prius mileage: a bit shy of twice that.
I have no idea why you are comparing a small hybrid SUV to a full-size truck...of course the HYBRID suv is going to get more MPG.
Personally, I found it easier to move 2x4s or anything longer than approx. 5 feet (fishing poles) in my Prius because the Tacoma I had, had such a short bed. Otherwise I was sticking crap through the Tacoma window which was super jank.
Oh the irony.
But I didn't buy it for hauling lumber, it was way more practical imo than an suv for camping and moving furniture and basically moving anything that isn't really long and thin. And full size pickup trucks are no better.
But yes, ironically, if the main thing you move is small quantities of 8' lumber, a sedan is better
IMHO, with a Taco, you really need to pick an option.
Option 1: I carry people more than things, in the city. Double cab + 5ft bed (aka the common one)
Option 2: I carry things more than people, in the city. Access cab + 6ft bed
Option 3: I carry things and people, and am willing to access the turning radius and parking compromises. Double cab + 6ft bed
Honestly, for urban trucks I always liked the Honda Ridgeline (Gen 1, not sure if they still do) openable divider style. Because most long stuff isn't wide... just long. So it's fine putting it up over the center console.
...at roughly the same price as a full size truck which is pretty much a non-starter for anyone who cares.
The Colorado actually fills that niche at an acceptable price poiont.
The Tacoma costs what a fullsize truck does and you buy one if you don't want a half ton for image reasons but also won't buy domestic because that's what upper middle class people have been trained not to do.
>probably more people that have big pickups would have all their needs met with a tacoma sized one.
People buy full size trucks because if they did their "once a month max usage" routine with a smaller truck you would be chastising them for "being unsafe" instead.
How did a bunch of paid professionals in their leadership not see this coming/account for this happening?
Same reasons selling pet food online at a loss drive the crash of 2000.
Capitalism rewards efficiency of resources. Idiots are punished harshly.
Not a commentary on Carvana in particular, I know nothing about them, just an observation I've made over the years.
Could I have made more selling privately? I don't know, but I can tell you that Carvana paid very handsomely to do all the work involved with buying your car.
Carmax never loses money. Carvana has never earned a profit. It's sort of a big difference!
However in buying cars from them, everything seems a overpriced compared to the local market.
My understanding of it is that they make money by doing used car arbitrage. They knew they could make money on the cars I sold them by shipping them across the country. And I think people are willing to pay a little more to buy a car from them because of all of the guarantees and how painless it is.
This is not only bad for Carvana and their cash flow, but bad for the buyer too, who just has to keep the money sitting there forever in case Carvana fixes the glitch and tries to transfer the money.
I guess at least if they go bankrupt they can finally assume no one is coming for the cash...
My expectation would be that the liquidator is immediately going to start chasing those people, hard. Carvana may not be competent to organise collecting monies owed, but the folks managing bankruptcy? Hell no.
Often the paperwork has been misplaced or lost.
You won’t get a title without making the payments…
It doesn't happen often, but it does happen.
Never once charged. Two years later, company was shutdown. Ten years ago now.
I'm not sure what the folks at Carvana were thinking, but it seems like even with a wild used car market and high inflation, this shouldn't reasonably be possible. Or at least, their sales associates shouldn't be pushing it.
>Who invested in Carvana? Carvana has 3 investors including JPMorgan Chase & Co., Ally Financial, and Citi.
And of course it turns out that car companies are actually going to keep making cars.
https://www.motor1.com/news/621947/carvana-title-registratio...
National chains like CarMax handle this paperwork just fine and Carvana should've invested more in the back office staff rather than overpaying for used Jettas, you know to move fast and break things.
I’m really surprised to have had to have scrolled down this far to see their registration hijinks mentioned…
What was interesting was that when the temporary tabs expired, rather than extending them, they put her -in a rental- for two -months- and paid those two months payments, -and- gave her $300 for her trouble.
I feel really sorry for people who bought some of those 340s and M3s.
It’s just too easy to unload junk cars on companies like Carvana. Dealerships have the tools to sniff this stuff out during trades.
But part of that was there was probably a period where you had buyers who were desperate for vehicles, any vehicle, that would get them to work or the store.
I think the biggest issue is that you've taken a business which has notoriously low margins (used cars) and you're operating on the lowest margin end on both sides. On the sell side you're buying cars that would otherwise be sold private party - i.e. from the most price-conscious sellers. On the buy side you're competing against dealerships on price but also offering a more premium/white-glove experience which eats into your margins.
If I know I can get a better deal, I’m not going to use Carvana or OpenDoor. If I know there is something wrong with my car/house I’m going with Carvana/OpenDoor.
I listen to a lot of economic podcasts and subscribe to Ben Thompson’s Stratechery newsletter/podcast. I couldn’t remember where the theory came from.
In theory, Akerlof's lemon theory could lead to a situation in which Carvana has to underpay to account for all the lemons they're buying to the point that sellers aren't willing to take the hit. In practice, I think this just isn't a big deal - they aren't buying enough lemons to move their offer prices much, and the convenience factor is worth quite a lot of money to sellers. If this was truly a major issue I think we'd see it with CarMax who are wildly successful.
The last car buying experience I had the brick and mortar dealerships listed so many bait cars that online shopping was scammy/pointless.
Buying from dealerships is not something I ever want to do again.
Maybe this episode - https://www.npr.org/sections/money/2013/02/12/171814201/epis...
I likely don’t have the skills / patience necessary to get a better deal from a dealership anyway so just buying a car in my price range without the games works pretty well.
We bought our son a 2010 Jeep Liberty from there in 2020. It constantly had little problems that they would fix without a hassle for the first few months.
Out of the blue, they called me and offered to reimburse me for one months payment on top of offering reimbursement on a car rental - they didn’t have to do either.
We ended up turning down the car rental since I was working remotely by then and I just let him use my car.
Or ask why they offer a warranty if the car’s so good. The answers are always amusing.
There are way too many nuances involved in such transactions that used car dealerships and the traditional real estate transaction model is never going away.
If there were any indication of it going the other way, used car dealerships would have gone out of business long ago. After all, you have been able to buy a used car privately through tons of websites or listing services without a middle man taking a profit for years. But the risk of doing so is too great.
Their sales is still pretty strong, so I hope they're able to restructure their debt with creditors.
In 1991, García bought Ugly Duckling, a bankrupt rent-a-car franchise, for under $1 million and merged it with his own fledgling finance company, and turned it into a company selling and financing used cars for sub-prime buyers with poor credit history.[5] Garcia took the company public on the NASDAQ exchange in 1996, trading under the ticker "UGLY".[6] In 1999, Garcia was involved in six lawsuits alleging he had "abused his position to profit" from a real estate deal where he ultimately acquired 17 company properties at a 10% discount.[5] In 2002, Garcia and the former Ugly Duckling CEO, Gregory Sullivan, took the company private and renamed it DriveTime.[7]
Give it a year or two, it’ll all come out.
It is reminiscent of an attempt to corner silver or something. I’m sure the insiders cashed out.
I never looked into carvana but there are many small dealers that don't need you to have a good credit or even a job to get a car. They could use carvanna as cloud service, vehicle-as-a-service VaaS if you will lol.
I can't imagine buying a car at carvanna, I don't care much about test driving or getting pressured to buy by a used car salesman but the quality and pricing is too high and you can't bargain with carvanna but I can tell some no name used car lot salesman how I will be back and how much I need it, how I will bring people to him,etc... and get some flexibility.
I suppose it is the same people that get their cars repaired at name brand shops and at dealers that buy this way. I need a guy that only accepts cash for whatever reason and build rapport with that person so he won't mess it up to charge more. i do that because they usually "find" parts somehow (usually just salvage) and avoid expensive parts or b.s. charges because if who their customer base is.
I am used to this stuff then there are people trying to pass laws to limit cash usage! What a world.
Juicero yes, Paleton probably, electric scooter depends on infrastructure?
The problem is that involves a lot of stuff that self-styled hyperscalers are garbage at: quality checks, human interaction, and such.
Or maybe this is better actually, since it’s much clearer for investors: With Zillow, as an investor maybe I didn’t want to be in the home buying business at all. And now Zillow is burning my money by getting into it. If I had wanted to get into the home buying/flipping business I could have just bought Homevana stock. Carvana is clearly doing one thing. And if you want to do that thing you buy their stock.
> as Carvana was able to undercut its brick-and-mortar competition with vehicle prices.
that I’m not sure how to make sense of it.
Right before Covid I was shopping for a used car, and I remember their prices being outrageously higher than dealerships. I’m talking saving a few thousands dollars just by taking the dealer’s initial price without negotiating.
Similar scenario just a couple of months ago, I was looking to sell and again reading how well they pay I got a quote… and it was less than half of the first number a dealer threw out (this was a really old and cheap car tbf, I don’t expect it to be that bad for more expensive ones).
Either way, I always wondered how they possibly stayed in business, since it seemed weird that so many people would pay so much for the privilege of being ripped off a lot by some far away corporation, instead of having a person in front of you ripping you off a little.
I deeply hate the dealership experience, but the bad feeling/buyer’s remorse wears off in a couple of days and I’d rather enjoy the extra money in my pocket.
It’s very illuminating to me seeing the comments in this thread shedding some light into what people liked about Carvana and how they were being too generous with returns and losing money at scale. That makes some sense at least. But whenever articles talk about their good prices, it feels like a buried ad.
What a business model.
I'm intrigued...
It's near the offramp for the dealer's row in my town, so I suspect that the Cadillac, BMW, or Mercedes dealership will buy it for pennies on the dollar as an advertising billboard.
Check out the short seller report -- https://www.sprucepointcap.com/carvana-co-update/
Most of the problems with Carvana are the same problems you get at any used car dealer, just magnified by scale. All of the title/registration problems. Financing. Availability. Communication. No better or worse than any random dealer.
My first car ever (25+ years ago) I received the wrong plate from the dealer. My dad and I noticed it and ran back to the dealer a day or two later. Good thing they didn't give away the plate they were supposed to give us.
But months pass and they don’t pay it off..
Then, after escalating, they pull a fresh payoff amount directly from your bank and pay that.
Leaving the buyer with either:
a) late payment marks on their credit from the old loan not being kept current with monthly payments, or
b) several months of lost monthly payments towards the loan for a vehicle that is no longer in the buyers possession
They send you into a revolving door of phone associates.
Like comcast, but for cars