Car shoppers really don’t like negotiating. That’s allowed fixed price retailers like Carmax and Carvana to take an increasingly larger slice of the used car market. Carmax is still performing well, but the real mover and shaker is Carvana. The company is opening new stores and experiencing substantial growth. Carvana vending machine, coming to a city near you? Probably.
Carvana works like any other online retailer. You find whatever car you want online, buy it, pay for it, and wait for delivery. Or you can pick it up yourself. That’s undoubtedly one of the reasons why it’s so popular. All of the paperwork is completed online too, unless you finance through your own financial institution. There’s a 7 day money back guarantee if you don’t like your purchase. That last part is definitely crucial to Carvana’s growth, as the company operates without any retail locations whatsoever, unlike Carmax.
Carvana is putting more effort into buying cars too. That effort has probably contributed to increased sales too. Again, buyers don’t have to leave their house to get a viable offer from the company. Based on a limited test of cars owned by my family, Carvana’s trade in offers seem more than fair. Plus, the odds are good that the average buyer is within Carvana’s operating range. The company now serves 146 markets and can accommodate 67 percent of the American population. Their revenue has grown by 100 percent every quarter since 2013. Carvana brought in $1.1 billion in revenue last quarter, a figure that beat expectations.
Carvana is currently worth about $14 billion. It’s not clear if that figure will rise substantially, but investors are anxious that the company has yet to turn a profit. That’s not as bad as it sounds, because the company is still expending significant capital to sustain its growth. They’re also getting closer to being in the black each day despite the continued push. In any event, there is still room to grow. The American used car market is extremely fragmented. According to The Motley Fool, the top 100 automotive retailers account for just 7 percent of the overall market. Carmax is the largest retailer and even they’re only at 2 percent.
The situation seems similar to how pizza restaurants operate in the NYC metropolitan area. Basically, pizza demand is so high that there’s plenty of room for corporate chains and independent establishments to coexist. Carvana probably won’t slow down anytime soon. But the question remains: Will these relatively new used car retailers fundamentally alter the used car market? Based on the available data, that seems unlikely. That being said, they do offer customers increased access to used cars and a viable alternative to buying cars at a traditional dealership. CC’s own Kyree Williams purchased his 2015 Jeep Grand Cherokee from Carvana. With the company’s trajectory, he probably won’t be the last.
If they had something I was looking for at the right price, I’d check ’em out. There’s one less than a mile from the Chevy dealer where we bought our last Equinox.
Well, I can vouch for Carvana on the sell side. I sold my 9k mile 2013 Mustang Boss 302 to Carvana this past July. They actually gave me a very reasonable price for the car…almost $5K higher than the highest offer I got from a local dealer and only $500 less than what I was thinking I’d ask for the car in a private sale. So it was a no-brainer to sell it to Carvana and avoid all the hassle of trying to sell it privately. The only hitch was, since I’m not w/in the 100 mile radius of a Carvana facility they require for car pickup, I had to tow my Mustang about 2 hours away to meet the Carvana rep. Not a big deal since I already owned a car hauler. Anyway, we met up with the rep, he inspected the car, went for a short drive, my wife and I signed over the title, he gave us a check. Done. Except for having to get my car to them it couldn’t have been an easier transaction. Worth checking out if you’re looking to sell a car but as with anything, YMMV.
Sounds good! Seems a shame to lose that sweet Boss, though.
I really liked the premise of the company, but learning who actually owns/runs Carvana makes me apprehensive at best. They are an offshoot or holding of the same company as JD Byrider. It seems that when buying cars at auctions and such, the “better” cars go to Carvana, with the higher earning demographics, while the “not as nice” cars go to the JD Byrider lots for the buy here/pay here market. Apparently, if you have a service issue with a Carvana vehicle, they send you to the nearest JD Byrider for service.
Financially, it all makes sense. But it really concerns me that a company not known for the best ethics in sales is running the company.
Honestly, I wish them well, and I hold no ill will to them, as they seem to be doing what CarMax is doing, and giving used car dealers a run for their money by offering better service.
My son bought a Mazda 3 from Carvana a year or so ago. The blind spot detectors wouldn’t work and Carvana had him take it to a Mazda dealer for repair. After the dealer disassembled the back of the car it was evident that the car had been in an accident. Carvana guarantees no accidents and my son alerted them. Carvana promptly came and took the car and paid for a rental while they found him another Mazda 3. It was all very professional and he is very happy with the replacement.
That’s great! The Nissan dealer that I bought my last Nissan from didn’t disclose that it had been in a wreck. The bumper covers were a very close but different shade of paint and I didn’t catch that until I was washing it myself on a sunny day. Both the front and rear bumper covers were that way. That completely soured me on that dealer and it felt deceptive.
As far as I can tell, Carvana is CarMax without the inventory and real estate. And, without those fixed costs they can probably operate on thinner margins, thus benefiting both buyers and sellers.
Used cars are funny, at a few months old they are pretty close to commodities but become markedly less so as they age. Buying a 1 or 2 year old car would not seem to be much of a risk, except for original owners who do not follow good maintenance practices. Is there a way to check on this?
There is one near me and I find the whole thing a fascinating concept, for sure.
I believe carfax report maintenance done at dealers. Of course, you have poeple like me who change their own oil that it wouldn’t show there. So, absence of data wouldn’t guarantee no maintenance, but if it does show on there, at least you know it was serviced regularly.
Carvana has inventory and real estate too, though they can hopefully pay less for the realestate as it can be in any old industrial/business zoned area away from the central business core, instead of auto row in a city.
Interesting concept for sure, but I’m too old fashioned not to look at a car before I buy it. While they may have low overhead, I wonder how much you are paying for the gimmicky car vending tower.
Businesses like this only exist because of the ways that “traditional” car dealers treat customers. And that makes me happy.
Their Yelp reviews are some cause for concern, but then Yelp has been accused of some credibility issues as well.
I’m in the process of buying a 2015 Leaf from them. Where I’m at, there were only a few Leaf’s for sale within 100 miles of me. The first one I picked out was scheduled for delivery but developed a cracked radio display just before delivery so they told me I could cancel, wait for them to fix it, or pick out something else. I picked out a different Leaf and then got an email saying they didn’t get it charged up in time to be delivered and it would be delayed. I expressed a little frustration and got a $250 credit for my troubles. Everyone I spoke with was polite and friendly and very easy to talk to. The car is supposed to be here Wednesday and I’m pleased so far.
Buying a car from them could not be easier. You literally pick it out and put it in your cart then check out. I financed through them and got a great rate. I ended up not selling them my old car because their offer was thousands less than what I can get selling it myself, but it was pretty close to what another dealer would have given me.
Buying a hard-to-find car from them was a no-brainer. I would not have (probably could not have in my case) bought from someplace else around where I live. If I was looking for a Camry or F150 or something, I might have tried a local dealer or private party first, but it’s just so darn easy with Carvana. I’m looking forward to my 7 days with the Leaf to see if I like it or not!
My experience with Carvana has not been positive. When looking for a car, I found that their prices were higher than the local dealers. When I asked for an appraisal of my current car, they came back $4K less than the book value (which is what I sold it for on CL). I wouldn’t object if they offered slightly less than its real value, since they need to make a fair profit, but that was too much of a difference. Maybe my experience is just the bugs being worked out of a new way to shop. Hope so, since I dislike the old dealer model. Glad to see that they have a lot of happy customers.
Call me old fashioned or just old but I just can’t come to grips with buying something like a car online w/o seeing it in person and driving it. Yes I know they have a return policy and that is fine when it is a car you are paying cash for. However if you have a loan unwinding that seems like a big mess. If you went with their financing they there will almost certainly be pressure to replace rather than refund.
If I’m buying a late model used car I’m going to a new car dealer for that brand/mfg, or at least a new car dealer as that is where you will find the best cars most of the time.
Most of the time 1-3 year old cars end up on the market by being traded in at a new car dealer and the MFG leases are also usually returned there. The best of the best stay at the dealer they were traded in at. The mfg lease vehicles that the grounding dealer doesn’t keep go the the respective mfg’s lanes at the local auction. Only the cars that the mfg’s dealers didn’t buy end up in the general purpose lanes for places like CarMax and Carvana.
I suspect that they only work with very low mileage, very recently built cars, perhaps less than four years old or something like that?
Probably not a good option for those of us that seek out and drive clean 15+ year old cars.
I know I’m considered a freak for it, but I have a policy of not doing business with anybody or any company that lies openly on craigslist. Even if I was in the market for a late model used car, they’re on my “no shop” list. It takes more time, but it’s always possible to find an honest (or at least not openly dishonest) seller.
Do they have flat nationwide pricing? If so, that would be a big plus for me. Here in Denver, good use cars are scarce, if a car’s what you want. Crossovers and pickups are what sells here, and what becomes our used car stock. And God help you if you want a used Subaru. Several dealers have told me that market has the US’s highest used value for Subarus, so it pasy to buy one at a distance, or to just get a new one instead.