Carvana Review: A New Way to Buy Your Next Car?

By now, you’ve certainly seen the commercials or—if you’re in one of the now 118 markets served by Carvana—one of their giant automotive “vending machines” next to a major highway. Standing nearly 100 feet tall, these vending machines look like every automotive fantasy you ever had when you were putting your Hot Wheels into their carrier. Carvana’s vending machines are the architectural manifestation of their promise to bring the public a “new way of buying a car.”

But is their new way any better? As a journalist, I wanted to know. And as someone who realized they didn’t need both a pickup truck AND a minivan, I also wanted to know.

So, I took one for the team and found out, the hard way. Which turns out to have not been so hard after all.

It all started online late one night—as most great adventures do—when the realization began to sink in that, although I liked my 2015 Ram Promaster City minivan, owning both it and a half ton pickup was a bit redundant. Then there was the Suddard Boy, all smug and gasless with his fancy electric car. Seeing Tom’s Nissan Leaf at the office daily made me miss the days when I drove a Chevy Volt and filling up meant electrons at $.10 per Kwh instead of hydrocarbons at $3.00 per gallon.

Just as I was deep in thought, a Carvana commercial came on, promising great deals, an easy transaction, and peace in our time.

Pshhh. Bullcrap!” I exclaimed. Probably. Since I say that a lot anyway. “Anything that seems too good to be true probably is.”

Moments later, I found myself on Carvana’s easy-to-navigate website looking at Nissan Leafs.

Prices were a bit steep compared to other segments of the market. Larger used car retailers like CarMax or Autonation seemed to be a few percent below what Carvana was looking for—and private party sales were cheaper still—but the Carvana choices seemed uniformly nicer and lower mileage. Plus, the search functions were quick and intuitive. Best of all, every facet of the pricing was laid out on each car’s page, so I knew exactly what I was getting into when I was shopping.

Then I entered my trade info, which consisted of the VIN from my Promaster, and a few simple questions about its mileage, condition and options. I hit a button, and their system spit back an offer for my trade.

It was… fair. Generous, even. While they were asking high-book for the Leaf I was shopping for, they were also offering high-book for my trade, which was more than any other retailer had offered and as much or more likely than I’d be able to get on the open market, with the added bonus of not having to deal with the assembly line of idiots from Craigslist.

As it turns out, paying a premium for trades and stock acquisitions was not an isolated incident for us in the Carvana world. In hearing from associates in the auction business, they uniformly report that Carvana reps at the auctions are professional and courteous, but not at all shy about outbidding their competition on quality cars.

And that auction scene was even the genesis for the entire concept of the company. We spoke with Amy O’Hara, Carvana’s Associate Director of Communications, and she made the connection from the wholesale market to the retail concept. “Our founder, Ernie Garcia, comes from a background in auto retail. He was used to going to an auction and making transactions on cars in a matter of seconds with little hassle and wanted to find a way to bring the best parts of that streamlined experience to the consumer.”

So far, so good. At this point I was impressed with their offer on my trade, satisfied with their price on my purchase, and even delighted with their in-house financing rates, which were only about half a percentage point more than I was currently paying with my credit union. Sure, you can bring your own financing or cash, but the difference was a few bucks a month, and for that I didn’t want to further complicate what seemed like a fairly easy process by getting another party involved. Plus, at this point I was basically committed to living or dying by the full Carvana experience. For you, the reader. It should be noted that I—possibly a rarity among automotive journalists—have really good credit. I can’t speak to the rates for someone who’s run into some snags along the way, but typically in-house financiers like this are not as kind to the credit challenged.

Now, we play the waiting game.

My new Leaf—which I had confirmed through a VIN search was a one-owner, just-off-lease car from the Atlanta area—was coming from within Carvana’s ‘free delivery’ area. Delivery fees for in-stock vehicles ranged from free to about $700 to ship a car all the way across the country. Additionally, I scored a $500 off “coupon” merely by posting on a Reddit thread that I was looking to buy a Carvana car. A previous customer contacted me and shared a loyalty code that got me the discount and got her a small kickback as well. I was also within 100 miles of one of Carvana’s signature “vending machine” delivery centers, so I was eligible for free personal delivery of the new car and pickup of my trade. Outside that 100-mile radius, customers have the option of traveling to a delivery center or having the Carvana transporter meet them somewhere within the 100-mile radius.

During the time before my delivery, I contacted Carvana a few times to clear up some “surely this is too good to be true” questions. Their reps answered all my concerns thoroughly and professionally.

When you deliver the car, how long do I get to inspect it? What if it sucks?” Customers get up to 60 minutes to evaluate their purchase upon delivery, including a 15 minute test drive. At any time, the customer can pull the plug on the transaction with no obligations whatsoever.

What if my trade is worse than I said it was? Will the deal change?” Like the consumer, Carvana can also call the deal off on your trade if they show up and there’s a family of marmosets living in it that you failed to mention previously. While you’re evaluating your purchase, the delivery driver will also be looking over your trade to confirm it’s what you said it was. Once your trade is loaded and hauled away, though, the value is locked. There’s no getting it back to the mothership then trying to renegotiate.

I never really got to test drive this car. I’ve had it three days and have now realized something I hate about it.” Well, that’s not really a question, but Carvana does give you a seven-day, 400 miles, no questions asked return policy. The only cost you’d be liable for is delivery outside the normal 100-mile free delivery radius if applicable. The one other catch is that if you return three cars, you’re put on hold for 90 days before you can buy another one, which seems like an entirely reasonable policy.

Still, even with all these generous safety valves in place, O’Hara told us that fewer than 10% of cars are either refused at delivery or returned inside the free-return window.

On delivery day, it all basically went according to plan. The delivery driver showed up at the appointed time, and I let him know that I’d be using every second of my allotted inspection time. I probably have better resources to inspect a car than most folks—the driver did admit this was the first time one of his deliveries has been thrown on a lift and had all four wheels removed and a WiFi dongle hooked to the OBDII port before someone even heard the stereo—but there was no pressure to make a hasty decision, and it was reinforced that I was under no obligation to take a car I wasn’t 100% satisfied with.

In the end, though, I was satisfied, and the driver was satisfied with my trade, even complimenting its cleanliness and presentation. The paperwork was signed in about 10 minutes, and a few minutes later, my new car was in my driveway while my old van was leaving it.

And so, my experience, while limited to a sample space of one, was certainly positive. Could I have found a cheaper deal on a car from a private seller? Sure. Probably. But how much effort and time would I have expended to research, shop, negotiate and acquire that deal? Would that deal have come with a no-questions-asked week long guarantee? A 100-day warranty? No and no.

Is this the better mousetrap? It was certainly not much more hassle than buying some speaker cable on Amazon, and by far the least stressful car purchase I’ve ever been involved in. In fact, much of the stress of the process was me calling or chatting Carvana reps basically asking them “Really? Is it really this easy?” With the answer mostly being “Sir, this is a Wendy’s, I think you have the wrong number.”

The other question, from an industry perspective, is whether or not this business model is sustainable. So far in their early history, Carvana appears to be in startup mode, working hard to build a culture and customer loyalty, not worrying much about profits. Some financial commentary outlets were reporting that every car they sold was costing them over $1000 in their early days. But O’Hara—and their latest shareholder reports—tell us that trend is reversing and heading rapidly toward the black. Additionally, much of their focus at the moment is on changing the culture of car buying as much as the process. O’Hara said that their hopes are to not only be delivering upwards of 2,000,000 cars a year to consumers in the foreseeable near future, but they also want to demystify and democratize the car buying process, eliminating much of the needless complexity that lies between the consumer and the product.

Ultimately, my new Leaf was probably even better than I was expecting. Their photography process is thorough, but the photos aren’t the greatest, and certainly not as flattering as I’d expect from someone trying to “sell” me a car. But I guess that says more about my expectation of how the process should be rather than how Carvana is actually doing it. The car that showed up seemed cleaner than it did in the photos, and the paint chip that was referenced in the listing was barely even noticeable in person. Honestly, if I had been selling that car, I’d have probably not have even mentioned the chip, and I’d have dramatically photographed the hell out of the thing like it was going on the next cover. But that’s me coming from a frame of reference that Carvana is specifically trying to leave in the past.

Would I buy a ‘specialty’ car this way? Not sure. If I were looking for my next track or autocross car, it would probably have a very specific set of options that I’d want to examine and confirm in person. Likewise, when questioned about the possibility of expanding into specialty or collector markets, O’Hara made it clear that Carvana wanted to focus first on the widest possible marketplace before adapting the business model for more specific niches, although she didn’t rule out that the business model could be adapted for more specialized markets.

But would I buy my next daily driver through this process? Heck yeah. Shopping for non-fun cars is a hateful process. Anything that can be done to decrease that misery is a win in my book. In the meantime, if anyone wants a loyalty code for a discount, just hit me up.

Join Free Join our community to easily find more Nissan articles.
Comments
View comments on the GRM forums
AnthonyGS
AnthonyGS HalfDork
4/9/19 12:46 p.m.

After my wife’s CX-9 was stolen, I used Carvana to get her VW.  It was the most painless car buying experience ever.  It was easy, fast, clean, and no stupid add ons and upcharge attempts galore.  

 

 

gnichols37
gnichols37
4/9/19 1:55 p.m.

What a load.  This rig is nothing more than a Japanese vertical parking lot with glass sides.  And you, of all folks, should know that buying a vehicle without sitting in it  - and taking it for a test ride - is perhaps the dumbest idea ever for buying a vehicle.

Ian F
Ian F MegaDork
4/9/19 2:08 p.m.

In reply to gnichols37 :

Hmm... obviously didn't read the article and first post is trolling... frown

Vigo
Vigo UltimaDork
4/9/19 2:14 p.m.

I liked the write up, and i'm going to look at their website. I know a lot more about Carvana now than i did before reading this. Sounds like mission accomplished to me, and i didn't even get a Leaf!

Ashyukun (Robert)
Ashyukun (Robert) UberDork
4/9/19 2:59 p.m.

We saw a lot of signs advertising them on our drive to and from IoP for Spring Break last week and I was planning on checking them out to see if it was a viable option for replacing the Dancer's ailing Mariner. Good to hear that it might be a workable option- though we would need to check a few things in general (like if what she usually needs to transport will fit as easily as it does into the Mariner) in person on a model of SUV in general. 

AnthonyGS
AnthonyGS HalfDork
4/9/19 3:20 p.m.

My wife drove 4 different SUVs at Carmax.  Carvana had a cleaner better equipped one, lower miles and lower price.  It was a no brainer at the time.  You can also return the car if you don’t like it and you take a test drive before signing the dotted line.

Brett_Murphy
Brett_Murphy UltimaDork
4/9/19 4:18 p.m.
gnichols37 said:

Spot the traditional car salesperson.

 

Busajeff
Busajeff
4/9/19 4:27 p.m.

Last time I shifted cars I went to the carvana site and their offer for my trade was about 25% of what I could find anywhere else. It really didn't matter what they had for sale, I never made it past the trade evaluation stage. I eventually traded it in for approx the value I found pretty much everywhere else. I'm well aware that any dealer can shift discounts on the new car to add money onto the trade but carvana was so so so far off....

JG Pasterjak
JG Pasterjak Production/Art Director
4/9/19 5:24 p.m.
Busajeff said:

Last time I shifted cars I went to the carvana site and their offer for my trade was about 25% of what I could find anywhere else. It really didn't matter what they had for sale, I never made it past the trade evaluation stage. I eventually traded it in for approx the value I found pretty much everywhere else. I'm well aware that any dealer can shift discounts on the new car to add money onto the trade but carvana was so so so far off....

That's not what I've experienced. After I bought my Leaf, we were curious what my wife's 2016 Mazda CX-5 was worth to them, so I did an appraisal and their offer on it was also surprisingly high. To the point where we've got an alert set up for 2016+ Chevy Volts with them. Now, I'm sure there are a ton of factors that go into the appraisal beyond just teh car itself, like geography and current market conditions, so maybe I just had two cars they really wanted to add to their inventory in my area at the moment. At any rate, it's good to hear other experiences.

JG Pasterjak
JG Pasterjak Production/Art Director
4/9/19 5:27 p.m.
gnichols37 said:

What a load.  This rig is nothing more than a Japanese vertical parking lot with glass sides.  And you, of all folks, should know that buying a vehicle without sitting in it  - and taking it for a test ride - is perhaps the dumbest idea ever for buying a vehicle.

I'll admit that I'm in a somewhat unique position as a journalist in that I get to drive a lot of cars. So a test drive of a specific car isn't as important to me, since it's probably a car I've already driven out of the press fleet. So my priorities become condition of the specific example I'm buying. Knowing I could call off the deal at any time made me feel a lot better about having a limited window to review the particular car I was getting. 

As for the rig, yeah, that's exactly what it is. So? It allows them to pack a buynch of cars onto a much smaller footprint than a traditional dealership. Sounds fairly efficient to me.

Jonwithnoh
Jonwithnoh
4/10/19 4:49 a.m.

You wrote I never really got to test drive this car. I’ve had it three days and have now realized something I hate about it.”

What did you hate?

Ian F
Ian F MegaDork
4/10/19 6:15 a.m.

In reply to Jonwithnoh :

Read the article again...  frown

z31maniac
z31maniac MegaDork
4/10/19 6:25 a.m.

I checked yesterday for fun. Of the one dealership I've talked to, they were spot-on on offering a trade value (which I still think is low considering mileage/condition and the fact the car has been ceramic coated). 

But the cars I was looking at, while seemingly also very clean, very low miles cars........they seemed a bit pricey. 

I think there was on '14 or '15 Miata GT with an asking price of like $21-22k. That still seems a bit on the steep side. But to be fair, it only had like 6k miles on it.

dowroa
dowroa New Reader
4/10/19 6:55 a.m.

The problem with this experience is the fact that the cars are only relatively modern, and to the written point, for the masses. 

As an older buyer, I am looking for specific car types that aren't new, as frankly, new cars are over burdened with with features that are unneeded and over priced.

While this is a good service for those that want appliances, which I think are most people, I don't find this to be a good service for someone wanting even a moderately vintage or specific car.

For example, looking just for `Subaru` and `Manual` returned 13 options. And of those, I know I can do better on price than what was returned without trying too hard. 

 I get this article isn't about this point, but as someone looking for those specialty cars or specific marks in a specific spec... things aren't as rosy as they once were.

 

Thank you for the article.

MyOtherCar
MyOtherCar None
4/10/19 7:09 a.m.

You mentioned that you would be unsure about buying a "specialty vehicle" this way. I went all in and did just that at the beginning of March. I bought a C7 Grand Sport from Carvana that I will be campaigning in SSR this year. (SCCA Autocross)

The front splitter was damaged during delivery, but they are paying to have it replaced. Other than that minor inconvenience, I had the same great experience you did, and got the exact car I wanted at a very competitive price, from the comfort of my desk chair. Their financing rate was better than any I was able to secure from a 3rd party as well.

I would definitely buy from them again. It was the easiest and least stressful car buying experience I've ever had.

CobraSpdRH
CobraSpdRH Reader
4/10/19 8:04 a.m.

This almost seems like a new take on CarMax, with CarMax serving as the "Blockbuster" and Carvana serving as the "RedBox/Netflix" lol

It seems like this could benefit a lot of people and remove a lot of the hassle and stress of car buying. I see their offerings come up in my searches regularly and don't think they are too overpriced in comparison to others. I wonder if you are able to go and test drive vehicles in those displays without actually arranging all the financing?

I see one of the vending machines off I-4 when we head in and out of Orlando, seems neat and good Marketing.

NorseDave
NorseDave Reader
4/10/19 9:26 a.m.

I think if I was going to buy a vehicle from them, I'd definitely want to get it from the vending machine.  I'd just like to see one of those in action (other than on YT).

AngryCorvair
AngryCorvair MegaDork
4/10/19 10:19 a.m.

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

Robbie
Robbie UltimaDork
4/10/19 10:26 a.m.
AngryCorvair said:

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

yeah its like there's a bunch of disgruntled canoes up in here. 

JG Pasterjak
JG Pasterjak Production/Art Director
4/10/19 10:54 a.m.
dowroa said:

The problem with this experience is the fact that the cars are only relatively modern, and to the written point, for the masses. 

As an older buyer, I am looking for specific car types that aren't new, as frankly, new cars are over burdened with with features that are unneeded and over priced.

While this is a good service for those that want appliances, which I think are most people, I don't find this to be a good service for someone wanting even a moderately vintage or specific car.

For example, looking just for `Subaru` and `Manual` returned 13 options. And of those, I know I can do better on price than what was returned without trying too hard. 

 I get this article isn't about this point, but as someone looking for those specialty cars or specific marks in a specific spec... things aren't as rosy as they once were.

 

Thank you for the article.

I think one of the reasons this process can work is that cars—in general—are pretty good these days. I don't mean they're all exciting and soul-stirring, but more that one Camry is pretty much as good and reliable as any other Camry. When I buy a computer, I don't scour the inventory for a particular example. I order one with the specs I want and assume it's going to be as good as any other computer with those specs. Cars are getting very close to those levels of reliability and standardization. 

 

JG Pasterjak
JG Pasterjak Production/Art Director
4/10/19 10:58 a.m.
MyOtherCar said:

You mentioned that you would be unsure about buying a "specialty vehicle" this way. I went all in and did just that at the beginning of March. I bought a C7 Grand Sport from Carvana that I will be campaigning in SSR this year. (SCCA Autocross)

The front splitter was damaged during delivery, but they are paying to have it replaced. Other than that minor inconvenience, I had the same great experience you did, and got the exact car I wanted at a very competitive price, from the comfort of my desk chair. Their financing rate was better than any I was able to secure from a 3rd party as well.

I would definitely buy from them again. It was the easiest and least stressful car buying experience I've ever had.

I think the "not being comfortable buying a specialty car this way" feeling is more me wanting the process of buying a "fun" car to be more engaging and personal. But, yeah, in most cases one GS is going to be as good as the next GS. If I was looking for anything modern like that I'd definitely feel this was a viable option.

Shopping for a '68 Camaro, though? Not sure. I think the Carvana model works great for modern cars which are generally built to a higher standard and level of reliability than at any other time in history. I'd be really interested to see if this model could be adapted for the collector/enthusiast market.

JG Pasterjak
JG Pasterjak Production/Art Director
4/10/19 11:00 a.m.
AngryCorvair said:

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

Yeah this has definitely ruffled some feathers. Not sure I'd have ever believed that people would stan so hard for the traditional car dealership model, but here we are...

Ovid_and_Flem
Ovid_and_Flem SuperDork
4/10/19 11:01 a.m.

In reply to JG Pasterjak :

Carvana?  PFFTTT...Pretty soon only way to buy a car is via Amazon with drone delivery.wink

 

Seriously, in our information driven society/shop from phone/service industry world I think the traditional dealership or even used car entities are on their way out. Or at least waning.

Case in point on a smaller scale in different industry. Even in my little small suburban community I'm amazed at the number of carry out food delivery services (grub hub, et al) in restaurants is proliferating.

alfadriver
alfadriver MegaDork
4/10/19 11:05 a.m.
AngryCorvair said:

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

Without posting Robbie's nautical picture, I thought that was interesting, too.

RevRico
RevRico PowerDork
4/10/19 11:07 a.m.

In reply to Ovid_and_Flem :

Soon enough.

For an appliance though, I think carvana may be on to something, just wish I could see one of those vending machines in person.

alfadriver
alfadriver MegaDork
4/10/19 11:08 a.m.
CobraSpdRH said:

This almost seems like a new take on CarMax, with CarMax serving as the "Blockbuster" and Carvana serving as the "RedBox/Netflix" lol

It seems like this could benefit a lot of people and remove a lot of the hassle and stress of car buying. I see their offerings come up in my searches regularly and don't think they are too overpriced in comparison to others. I wonder if you are able to go and test drive vehicles in those displays without actually arranging all the financing?

I see one of the vending machines off I-4 when we head in and out of Orlando, seems neat and good Marketing.

Interesting choice of companies to choose, and I bet that was intentional.  

Blockbuster was pretty much the same as any other video rental store out there, just on a national scale.  Like CarMax is to selling used cars.

RedBox and Netflix changed the interaction between the video and consumer, in many ways- mostly in the delivery of the product.  Like Carvana is to selling used cars.

And currently, how many Blockbuster stores do you see, compared to RedBox boxes, let alone the media giant Netflix is.  One wonders if Carvana changes the game so much to have the same general effect.

Ian F
Ian F MegaDork
4/10/19 12:34 p.m.
JG Pasterjak said:

I think the "not being comfortable buying a specialty car this way" feeling is more me wanting the process of buying a "fun" car to be more engaging and personal. But, yeah, in most cases one GS is going to be as good as the next GS. If I was looking for anything modern like that I'd definitely feel this was a viable option.

 

When the car you're shopping for is essentially an appliance and have similar levels of reliability, a similar method of purchase and delivery is a viable business model.  That said, I can imagine there is a lower limit to the sale price where the profit margin does not support the infrastructure. Much the same way Car Max typically does not sell inexpensive cars (it looks liek the cheapest cars on Car Max are some Smart cars between $6 & $7K).

David S. Wallens
David S. Wallens Editorial Director
4/10/19 1:45 p.m.
alfadriver said:
One wonders if Carvana changes the game so much to have the same general effect.

Years ago--several, in fact--I was talking with a COO of a car company. It's one that many of us hold dear. I might have been drinking as it was during a press intro.

"No matter how good your car is," I might have said, "the buying process usually stinks." 

The video rental analogy is a good one. The mom-and-pop video rental shops were replaced by Amazon. Then we had Redbox. And today it's all streaming. But at the end of the day, people still want to watch movies. 

nutherjrfan
nutherjrfan UltraDork
4/10/19 8:44 p.m.

bit of a car jack.  I mean thread jack but I came upon an article about new cars and Costco a few days ago. I'll link below.

With Carvana they only had four door Altimas and no coupes.  That could simply be the age of the youngest coupe starting to get up there and also I've never seen a pampered one mostly beat ones unfortunately.

I could of course use their alert system JG mentions.  I have a weird like for these cars and believe me unless I was buying one for any more than $5k I'd want a good one with a no hassle purchase too. smiley

now for the Costco article. not a Canoe.

ShawneeCreek
ShawneeCreek Reader
4/11/19 7:58 a.m.

Hey J.G. I noticed in the article you mentioned plugging an OBDII reader into the Leaf. Being a pure electric car, was there even anything there to see? On a gas car it's all parameters related to engine and emissions, but the Leaf shouldn't have emissions...

JG Pasterjak
JG Pasterjak Production/Art Director
4/11/19 10:14 a.m.
ShawneeCreek said:

Hey J.G. I noticed in the article you mentioned plugging an OBDII reader into the Leaf. Being a pure electric car, was there even anything there to see? On a gas car it's all parameters related to engine and emissions, but the Leaf shouldn't have emissions...

TONS of data available with this app:

http://www.electricvehiclewiki.com/wiki/leaf-spy-pro/

Condition of each battery cell, overall battery capacity, total number of cycles on each cell, all kinds of stuff. It's a $20 app that I would never inspect a Leaf without. 

GCrites80s
GCrites80s Reader
4/11/19 11:12 a.m.
AngryCorvair said:

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

 

The auto industry has gotten into sock puppets big time. Like over at J--------k a ton of the comments have taken on that kind of "nasty PR" tone where the person kind of seems like an idiot but also has a certain business acumen to their tone that an actual idiot doesn't. Normally that doesn't happen here, but an "industry-wide" type of article such as this will attract them in a way that an autocross tire shootout won't.

The0retical
The0retical UberDork
4/11/19 1:38 p.m.
alfadriver said:
AngryCorvair said:

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

Without posting Robbie's nautical picture, I thought that was interesting, too.

Probably has something to do with search rankings for Carvana + review. Googles search algorithm prefers newer content, from sites with a high domain authority, with a good sized word count. All items this site and article have.

Interesting review JG. I can't say I'd be opposed to trying it as I also detest the normal car buying process. I'm going to be stealing the "assembly line of idiots" line.

ddavidv
ddavidv PowerDork
4/12/19 7:01 a.m.

Carvana has billboards around here. Didn't know what they were about as a business until I read this article. Well done.

Anything that sticks another needle in the withering balloon that is the Universal Car Selling Method will be embraced by me. Unfortunately I'm probably not in their demographic as I don't spend more than $10k on daily driver dullsville cars. The general populace, however, will adore this business model once the word gets out.

sleepyhead
sleepyhead Mod Squad
4/12/19 9:13 a.m.
GCrites80s said:
AngryCorvair said:

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

The auto industry has gotten into sock puppets big time. 

I've been hands-off with those accounts so far... and figured with it being J.G.'s article, that it was his judgement call to make.  But, I'm happy to drop the hammer if requested.

GCrites80s
GCrites80s Reader
4/12/19 8:16 p.m.

My feeling is that the more sock puppets get called out rather than just deleted it lends a permanence to their illegitimacy. Obviously if they are saying offensive things of if things get really out of hand they need to go. Usually the reason they are dispatched is that their position has a chance of becoming weaker. I could be wrong though... there's always the "as long as it was said, it's legitimate" school of thought that seems to be popular among some people.

Also, sock puppets prefer article comments sections over forums since articles tend to drop off of Google results quickly and don't see the kind of long discussions that can take years to play out that forums do. Here, comments sections and forums are one and the same. So don't be surprised if we don't hear from them again in this thread.

 

Anyway... as it stands right now Carvana does seem like a cool company that can help people get cars from their entire region rather than just their own town quite easily. But, their willingness to pay top dollar at auctions could eventually raise the price of cars for the average individual. On the other hand, they might be able to accept a lower margin on cars since they don't have all that real estate to deal with and a lot of support staff to pay.

GCrites80s
GCrites80s Reader
4/12/19 8:39 p.m.

For J.G. and others that have used the service, what were the F&I proposals you received, if any? That stuff is a big profit center for traditional dealerships and I was wondering how that was handled by Carvana.

JG Pasterjak
JG Pasterjak Production/Art Director
4/12/19 10:00 p.m.
GCrites80s said:

For J.G. and others that have used the service, what were the F&I proposals you received, if any? That stuff is a big profit center for traditional dealerships and I was wondering how that was handled by Carvana.

There was really only one "built-in" option and that was financing with Carvana's in-house finance arm, which is called Bridgeview, or Bridgecrest or something like that. You can bring your own financing, but it lengthens the process a bit since there's more paperwork that has to cross more desks. 

I filled out the app and was offered a rate that was about .6% over what I was paying with mt credit union (4.0% vs 3.4% for 60 months). It was the difference of like $6 per month on the loan, and I'm going to pay it off more aggressively than the actual terms anyway (I'll pay it off in about two years at my curent rate). If I ever get really bugged by not having the absolute best rate possible I can always just refi with my credit union. I tend to go for a little longer term and keep my base payments down, then just get really aggressive on the payments when i can. But being married to a teach who has no paycheck in the summer, it's always nice to have the option of a really reasonable base payment as we get deep into that period before school starts back up.

JG Pasterjak
JG Pasterjak Production/Art Director
4/12/19 10:02 p.m.
sleepyhead said:
GCrites80s said:
AngryCorvair said:

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

The auto industry has gotten into sock puppets big time. 

I've been hands-off with those accounts so far... and figured with it being J.G.'s article, that it was his judgement call to make.  But, I'm happy to drop the hammer if requested.

Yeah, I'd say leave them for now unless they start getting nasty. It's good that they're getting called out, and I think it actually adds another layer of intrigue to the story having them be so obviously here to stir poo. Or maybe they're real? I'm sure there's just TONS of people willing to go to bat to defend that much-beloved, hallowed institution known as traditional car dealerships.

Bent-Valve
Bent-Valve Reader
4/15/19 2:17 p.m.
Ian F said:
JG Pasterjak said:

I think the "not being comfortable buying a specialty car this way" feeling is more me wanting the process of buying a "fun" car to be more engaging and personal. But, yeah, in most cases one GS is going to be as good as the next GS. If I was looking for anything modern like that I'd definitely feel this was a viable option.

 

When the car you're shopping for is essentially an appliance and have similar levels of reliability, a similar method of purchase and delivery is a viable business model.  That said, I can imagine there is a lower limit to the sale price where the profit margin does not support the infrastructure. Much the same way Car Max typically does not sell inexpensive cars (it looks liek the cheapest cars on Car Max are some Smart cars between $6 & $7K).

Never again. Until the next time...

Oddly I was thinking that a startup would fill this low priced niche for used car dealers someday. A database of used cars bought via the web with used car lots buying into the program in the same way used parts are listed for savage yards. The shipping and paperwork could be standardized across dealerships. It would snag customers that wouldn't surf every used dealership website in 100 mile radius.

As an aside, I have started to see the Carvana trucks, both rollbacks and large carriers, here in the midwest recently.

MadScientistMatt
MadScientistMatt PowerDork
4/15/19 4:07 p.m.
GCrites80s said:
AngryCorvair said:

4 new users since this article was posted, and their only posts are in this thread.   fascinating.

 

The auto industry has gotten into sock puppets big time. Like over at J--------k a ton of the comments have taken on that kind of "nasty PR" tone where the person kind of seems like an idiot but also has a certain business acumen to their tone that an actual idiot doesn't. Normally that doesn't happen here, but an "industry-wide" type of article such as this will attract them in a way that an autocross tire shootout won't.

Now I'm picturing a flashing alarm displaying a big Carvana logo going off deep in the bowels of the office of a shadowy conspiracy of traditional car dealers, and a battalion of salesmen with polyester ties and stiffly moused hair rushing through the halls to their keyboards to bang out troll posts.

GCrites80s
GCrites80s Reader
4/15/19 9:44 p.m.

I think the reality is more like some unemployed neckbeards getting a Google alert, but your description plays to my '90s sensibilities. I also picture outdated mustaches and fast gum chewing.

MyOtherCar
MyOtherCar New Reader
4/18/19 11:59 a.m.

In reply to AngryCorvair :

I created my account specifically to reply to this article as someone with recent firsthand experience. 

The existing dealership model with commission based sales is arduous and off-putting. By the time I get to a dealership, I know what I want, and how much I'm willing to pay for it. It's time for that model to go the way of the dodo.

GCrites80s
GCrites80s Reader
4/18/19 2:54 p.m.

You weren't one of the users targeted with that post; "SSR Corvette" is going to get you out of that one for sure.

MadScientistMatt
MadScientistMatt PowerDork
4/18/19 3:30 p.m.
GCrites80s said:

I think the reality is more like some unemployed neckbeards getting a Google alert, but your description plays to my '90s sensibilities. I also picture outdated mustaches and fast gum chewing.

My own bet would be that they're either from a country that has a good supply of English speakers and a short supply of good wages, like India or Nigeria, or the posts are created by a computer running an artificial stupidity algorithm. Reality often isn't nearly as amusing as imagination. But Carvana is welcome to my idea if they want to take the scenario in my head and play it on your television.

dyintorace
dyintorace PowerDork
8/2/19 9:28 a.m.

I read this article last night and it made me think of this thread. Interesting to learn the background of the founders.

How An Ex-Con Became A Billionaire From Used Cars

In April, Ernest Garcia II, a 60-year-old convicted felon, stood next to his son as Ernest Garcia III rang the bell of the New York Stock Exchange. For decades, Garcia had been careful to stay out of the public eye, but with the initial public offering of Carvana he was ready to openly celebrate a crowning achievement.

Garcia’s business career has included personal and corporate bankruptcies, overseeing a stock market debacle, and many years of selling used cars and making subprime auto loans. His 1990 criminal fraud conviction stemmed from the small role he played in the Charles Keating scandal involving Lincoln Savings & Loan.

Today, Garcia operates DriveTime Automotive, the fourth-biggest used car retailer in the country, and he is separately the biggest shareholder of Carvana, a used car e-commerce company with a hot stock. He borrows big money from the nation’s largest banks, owns an apartment in Trump Tower, and has struck relationships with the likes of former U.S. Vice President Dan Quayle and Mark Walter, one of the most powerful billionaires on Wall Street.

Incredibly, Garcia himself is now a billionaire. Forbes estimates his net worth at $2.5 billion. DriveTime, which sells used cars and is in the sometimes-controversial business of making auto loans to low-income consumers, has seen its business grow 19% annually in the last decade. With shares of Carvana up 46% since its April IPO, Garcia’s stake in Carvana alone is worth $1.5 billion.

With Garcia’s son, Garcia III, as CEO, Carvana has been promoted as the “Amazon of cars,” a Phoenix-based technology platform for buying and selling used cars. Consumers can use its web site to buy used cars, obtain financing and arrange for vehicle delivery. Carvana also has eight glass tower vending machines that are as high as eight stories located in cities like Atlanta and Houston, where customers can inspect and pick up purchased used cars.

With revenues of $594 million in the first nine months of 2017, up 130% from the same period last year, Carvana is growing fast. It also lost $57 million in the first three quarters of 2017 and is burning through cash, forcing it to continue raising money. Wall Street short sellers are betting big that the stock will collapse. But other large financial players have bought into Garcia’s latest stock market play and keep providing it with fresh cash injections. Garcia declined to comment for this story.

The son of a liquor store owner who was for a while also the mayor of Gallup, New Mexico, Garcia was on the golf team at the University of Arizona. He dropped out of school before graduating to become a stock broker and eventually turned to real estate development in Phoenix. One of his lenders was Lincoln Savings & Loan, which was controlled by Charles Keating. Its failure sparked a political scandal because of Keating’s connections and interactions with five U.S. senators.

At 33, Garcia pleaded guilty in 1990 to a bank fraud charge related to his dealings with Lincoln Savings & Loan. He was sentenced to three years of probation, agreeing to cooperate with U.S. government lawyers prosecuting Keating. Both Garcia and his firm filed for bankruptcy protection.

Garcia’s financial comeback started with Ugly Duckling, a rental car chain he bought for less than $1 million. After failing to turn the business around, Garcia merged it with a tiny finance company and built it as a seller and financer of used cars for people with poor credit histories. As the stock market roared in the 1990s, Garcia had Ugly Duckling raise $170 million by conducting an IPO and then issuing more shares.

Forbes first wrote about Garcia in 2001, as he was preparing to take Ugly Duckling private after its stock priced crashed from $25 to $2.50. Garcia ended up with full control of Ugly Duckling, buying the shares he didn’t own for $18 million. At the time, the company had annual revenues of $600 million. He hired Raymond Fidel, who eventually became CEO, and renamed the company DriveTime Automotive. Fidel also pleaded guilty to a felony charge connected to the Keating scandal.

The deal has been a huge winner for Garcia. DriveTime now generates annual revenues of some $2.5 billion and is extremely profitable. Garcia recently declined offers to buy DriveTime for just under $1 billion, according to an individual familiar with the matter. The company has securitized billions in auto finance receivables and has bank lines with Wells Fargo and Citigroup.

Some consumer protection advocates have argued that companies that both finance and sell used automobiles too often put consumers in cars they cannot afford. The average DriveTime customer makes between $37,000 to $50,000 a year and has poor credit history. In the recent past, at least 45% of DriveTime’s auto installment contracts were delinquent at a given time, prompting DriveTime’s 370 or so collection employees in the U.S. and Barbados to start calling consumers behind on their payments.

DriveTime certainly gives some people their best shot at owning a car so they can get to their jobs and other places. But the Consumer Financial Protection Bureau said three years ago that DriveTime “harmed consumers by making harassing debt collection calls and providing inaccurate credit information to credit reporting agencies.” The federal consumer protection agency brought an enforcement action against DriveTime in 2014, forcing the company to pay an $8 million civil penalty. For Garcia, it was a speed bump.

Garcia’s son, Garcia III, joined DriveTime after earning his engineering degree from Stanford University. He started building Carvana as a subsidiary of DriveTime in 2012, buying most of its used car inventory from its parent, which purchased Carvana’s loans and supplied it with other financial support and technological assistance. DriveTime later spun off Carvana, which no longer purchases vehicles from DriveTime. In order to keep his controversial past away from Carvana, Garcia did not become one of its directors or officers, but Garcia and his son remain close. They even live directly next door to each other in Phoenix.

Garcia III, 34, is Carvana’s CEO, and owns $600 million of Carvana stock. His dad remains the company’s biggest shareholder and the duo have full control due to their super-voting shares. Another major shareholder is Mark Walter, the billionaire CEO of Guggenheim Partners, the financial firm with $295 billion of assets under management. Walter’s CVAN Holdings started buying convertible debt of Carvana when it was a private company in 2015 and converted it into shares at the IPO that are now worth $300 million. Another entity Walter controls, Delaware Life Insurance, has provided financing, buying $23 million of securities backed by Carvana automobile finance receivables.

With help from big banks like Wells Fargo and Bank of America, Carvana raised $225 million in its IPO. The company transferred $35 million to Garcia’s investment firm to repay a loan that carried a 12% interest rate. At the same time, former U.S. Vice President Dan Quayle, who has a relationship with Garcia, hopped on Carvana’s board.

Bloomberg News noted in June that Garcia’s felony conviction was not disclosed in Carvana’s Securities & Exchange Commission filings. Although he is not an officer or director of the company, the Bloomberg News report implied that maybe Garcia’s conviction should have been included in securities filings. Carvana has also agreed to pay Garcia, Walter and other pre-IPO shareholders 85% of the tax benefited associated with the IPO, estimated at $1 billion, Bloomberg also reported.

After finishing September with $142 million of cash, Carvana was back raising funds by selling preferred stock in a private placement, $100 million this time from Tom Dundon, the Dallas businessman who made a fortune making subprime auto loans. Separately, Dundon just struck a deal to buy a majority interest in the Carolina Hurricanes of the National Hockey League.

Still, there is plenty of skepticism of Carvana on Wall Street. There are 9.7 million shares sold short, making the short interest a whopping 70%. Those betting against the stock have focused on Carvana’s cash burn and big financial losses. Carvana is directly up against giants like CarMax and well-funded start-ups like Vroom. Beepi, an online used car marketplace based in Silicon Valley, shut down this year after burning through $150 million. Carvana has been spending cash aggressively to incentivize customers to buy cars—for example giving $200 for those wishing to fly to a town with a Carvana vending machine and inspect a car before purchasing it. The company has also been spending big dollars on TV advertising. In online pieces, the shorts have also focused on Garcia and the stock collapse of Ugly Duckling.

“Dealerships generally can kind of get up and running and get to profitability fairly quickly because they have heavy variable costs and relatively low upfront investment costs,” Carvana CEO Ernie Garcia III said at a Goldman Sachs investor conference in September. “We've got a lot of upfront investment costs and then very low variable costs.”

Garcia himself seems to be a believer. He has funded Carvana with at least $100 million of start-up capital, SEC filings suggest. After Carvana’s stock plunged immediately following its IPO, he purchased another 465,000 shares at prices between $8.19 and $8.92. The stock recently changed hands for $21.87.

Fueled by Caffeine
Fueled by Caffeine MegaDork
8/2/19 9:34 a.m.

In reply to dyintorace :

Still the land of opportunity.. cool story

noddaz
noddaz SuperDork
8/2/19 10:28 a.m.

I work at a dealership an mostly dread anytime I have to deal with a salesperson.  Something has to change for this sales format to survive.  And Carvanna?  All I know is Carvanna spams the heck out of CL local to me.

jj
jj HalfDork
8/2/19 11:23 a.m.

Just checked Carvana website for a car my wife wants.  They want $18,400 for 2013 BRZ.  That's about $3,000 over high book.

Yikes!  No thank you.  But I will keep checking back because the process seems so painless.

z31maniac
z31maniac MegaDork
8/2/19 12:05 p.m.
jj said:

Just checked Carvana website for a car my wife wants.  They want $18,400 for 2013 BRZ.  That's about $3,000 over high book.

Yikes!  No thank you.  But I will keep checking back because the process seems so painless.

You're paying for the convenience of it. Just like buying a gallon of milk at the gas station vs going into the grocery store. 

jj
jj HalfDork
8/2/19 12:26 p.m.

In reply to z31maniac :

I understand.  I could see $500-$1000 over book depending on everything else.  But for sure not $3000 over book.

It looks like they put a high premium on lower mileage cars.

MadScientistMatt
MadScientistMatt PowerDork
8/2/19 12:32 p.m.
dyintorace said:

I read this article last night and it made me think of this thread. Interesting to learn the background of the founders.

I had a somewhat eccentric economics professor whose favorite name drop was that he'd taught one of the Keating Seven. Can't remember which one, though. He also insisted Michael "Junk Bond King" Milken was framed.

My brother just bought a BMW i3 from Carvana, but he's now setting up a return because it turns out the seats have some ergonomics issues. I'll let you know if the process goes smoothly or if anything goes wrong.

CobraSpdRH
CobraSpdRH Reader
8/2/19 12:35 p.m.

They are great for valuing a trade-in. I'm not sure if that is a tactic to get people "in the door" with them but when we were in the purchasing phase for my wife we made sure to do the CarMax and Carvana (and Vroom) valuations just so we had something in hand that the dealer we would purchase her XC90 from would/could match.

Carvana came in the highest on her 2010 RX350, with CarMax not that far off at about $600 lower. The dealer ultimately split the difference of the two offers on trade-in, but that may explain why they charge a little more (outbidding CarMax for market share) for the cars they are selling (that and the convenience).

Steve_Jones
Steve_Jones Reader
8/2/19 7:33 p.m.
Fueled by Caffeine said:

In reply to dyintorace :

Still the land of opportunity.. cool story

Drive Time is a predatory lender, if this guy made his money from a payday loan place, would you still think it’s a cool story? That’s pretty much what he is/was.

Our Preferred Partners
1F6SfGxpLlxiSplEllz5zgeCB06mzph1L9kS1H8ziz7OP03mePgcGp770ocF4Rv7