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Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

bloomberg.com

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Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#21

Post by avgDev »

twblalock wrote: post #18
wcunning wrote: post #3

This is less of a tech layoff story and more of an overlevered business with crashing asset values against very difficult short term liabilities and no ability to refinance in a rising interest rate market. The real question for normal people is if Carvana sells off a huge chunk of its inventory at fire-sale prices, does that accelerate the crash in used car prices? Is March of 2023 the right time to pick up that fun…

If that was the case, why isn't the same thing happening to Carmax and Vroom and the other Carvana-style used-car dealers? Used car prices are falling and I assume it would hurt all of them, but it seems to be hurting Carvana more than the others.

Not sure about Vroom, but carmax actually performs proper car inspections before purchase. They are not moving fast and breaking things.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#22

Post by orangepurple »

thatguy0900 wrote: post #14
sys_64738 wrote: post #10

Why does an online car webpage need 18k+ employees? I don't get why they are so huge in employees.

The engineers make a fuss when you ask them to clean and appraise cars and make the website at the same time

Kids these days...

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#23

Post by dwater »

twblalock wrote: post #18
wcunning wrote: post #3

This is less of a tech layoff story and more of an overlevered business with crashing asset values against very difficult short term liabilities and no ability to refinance in a rising interest rate market. The real question for normal people is if Carvana sells off a huge chunk of its inventory at fire-sale prices, does that accelerate the crash in used car prices? Is March of 2023 the right time to pick up that fun…

If that was the case, why isn't the same thing happening to Carmax and Vroom and the other Carvana-style used-car dealers? Used car prices are falling and I assume it would hurt all of them, but it seems to be hurting Carvana more than the others.

I don't haven't been following CarMax, but CarLotz was another new entrant to the field that went public via an SPAC IPO in 2020 at a value of $1.9B that now has a market cap of around $24M. They are also trying to merge with Shift, which is in a similar state.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#24

Post by 1123581321 »

wcunning wrote: post #3

This is less of a tech layoff story and more of an overlevered business with crashing asset values against very difficult short term liabilities and no ability to refinance in a rising interest rate market. The real question for normal people is if Carvana sells off a huge chunk of its inventory at fire-sale prices, does that accelerate the crash in used car prices? Is March of 2023 the right time to pick up that fun…

There isn’t going to be a fire sale. Their margins per car are positive and have only contracted about 20%. The margin isn’t enough to sustain their business, but the cars are priced in line with the market. Worst case, they would restructure in chapter 11 and continue to operate retail as normal.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#25

Post by davewritescode »

mattw2121 wrote: post #13

I've purchased 2 vehicles through Carvana, and honestly the process was fantastic. I feel I got a fair deal on both vehicles, the quality was good, and everything as advertised. I did all the paperwork online and when I showed up to pick the car up was in and out in just a few minutes. The only problem I had was that the delivery tower didn't work when I dropped the coin in both times. First time the car was for me a…

This is completely anecdotal but there's been a couple of times during COVID when I was stuck at a light next to a Caravana truck on it's way to drop off a car and I noticed what appeared to be non-trivial issues underneath the car.

I just don't get how people can buy a used car without seeing it or sending over a professional to look at it first.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#26

Post by dwater »

mattw2121 wrote: post #13

I've purchased 2 vehicles through Carvana, and honestly the process was fantastic. I feel I got a fair deal on both vehicles, the quality was good, and everything as advertised. I did all the paperwork online and when I showed up to pick the car up was in and out in just a few minutes. The only problem I had was that the delivery tower didn't work when I dropped the coin in both times. First time the car was for me a…

When I was shopping for a used car in late Summer 2020, Carvana was priced 10-20% above traditional dealerships in the area for same make/model/trim/year/mileage. The traditional dealership process sucks so some people will pay the premium for a better experience, but as everyone's financial calculus has changed recently it may be that the number of customers who want to pay for that experience is receding.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#28

Post by [deleted] »

joezydeco wrote: post #12

They've been shut down in Illinois twice and they're still in legal hot water. Blame interest rates and inventory yadda yadda but they've been moving fast and breaking things too long. Their VP is facing 50+ criminal charges in this state alone. https://jalopnik.com/carvanas-legal-counsel-ordered-to-appea...

[deleted]

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#29

Post by parkingrift »

twblalock wrote: post #18
wcunning wrote: post #3

This is less of a tech layoff story and more of an overlevered business with crashing asset values against very difficult short term liabilities and no ability to refinance in a rising interest rate market. The real question for normal people is if Carvana sells off a huge chunk of its inventory at fire-sale prices, does that accelerate the crash in used car prices? Is March of 2023 the right time to pick up that fun…

If that was the case, why isn't the same thing happening to Carmax and Vroom and the other Carvana-style used-car dealers? Used car prices are falling and I assume it would hurt all of them, but it seems to be hurting Carvana more than the others.

Pardon my ignorance, but why would used car prices necessarily impact a used car dealer? Surely these dealers have to pay more to buy these cars and so their margins should be unchanged? Or is the issue that they are buying used cars and prices are falling so fast that their margins are shrinking?

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#30

Post by gbronner »

The concept is great. But the volatility in the used car market has been historically unprecedented, and there's no easy way for them to hedge this.

As an FYI, I sold a car this spring for 8% over what I paid for it 6 years prior, i.e. it was worth about 85% of orig price adjusted for inflation. Today, edmunds appraises it for 45% of orig price adjusted for inflation.

That is an insane move on a durable asset.

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