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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

#31

Post by dangrossman »

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 webpage is the simplest part of the business. They need drivers to pick up and deliver cars from every address in the nation. They have a fleet of hundreds of custom car-hauling trucks to maintain. They inspect, appraise, repair, detail and take 3D photographs of half a million cars a year -- that's thousands of mechanics, detailers, photographers. They deal with vehicle registration, state inspections and titling in 50 different states and all the 3000+ counties within. At any given time they have 50-100K vehicles all around the country to track, with lots of them in motion at any given time, a big 24/7 logistics and regulatory problem.

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

#33

Post by judge2020 »

orangepurple wrote: post #20
syspec wrote: post #17

Earlier quoted context omitted.

Meh, looks like a bunch of regulatory capture by existing auto-dealerships.

Failure to transfer title would make me extremely mad as a customer

> “The State of Illinois has charged me because Carvana delivered a car to a customer’s home,” Breaux said in a statement provided by Carvana.

Sounds like they transferred the title but it wasn't "by a dealer", so it was illegal. In addition:

> In a separate filing on May 12, the agency charged Breaux with two counts of Carvana operating as an unlicensed used-vehicle dealer.

You can of course look up the relevant code on Illinois' wonderful online legislation document: https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=0625...

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

#34

Post by rhino369 »

parkingrift wrote: post #29
twblalock wrote: post #18

Earlier quoted context omitted.

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?

Because they need to keep the cars on their lots on their books. If car prices drop 25% they lost 25% of the value of their inventory.

Not that car values have crashed 25% or will.

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

#35

Post by twblalock »

parkingrift wrote: post #29
twblalock wrote: post #18

Earlier quoted context omitted.

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?

They will lose money if used car prices drop because they will have to sell their inventory for less than they paid for it.

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

#36

Post by doctoboggan »

davewritescode wrote: post #25
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.

You can return the car in within first 7 days for any reason.

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

#37

Post by eddsh1994 »

davewritescode wrote: post #25
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.

I bought a Nissan Rogue two months ago with Carvana - it had a 7 day no questions refund, free repairs for a year, and we got to test drive for 30 mins before they signed it over to us. Overall I felt very comfortable with this purchase, much more than a small local dealership or even worse a stranger on some FB group.

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

#38

Post by indymike »

1123581321 wrote: post #24
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.

> There isn’t going to be a fire sale.

That depends on the interest to carry a car in inventory. Contracting margins plus increasing "floorplan" (what dealers call the line of credit they use to buy inventory) rates can be devastating.

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

#39

Post by QuarterReptile »

gbronner wrote: post #30

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.

I was just looking into the market for my own comparison. I bought a 9 year old minivan back in January, and I can't find any deals quite as good as what I got (granted, I spent a few weeks finding that.) So I guess in my area (Virginia) I upgraded at a good time.

I'll confirm your sale anecdote though. I sold a 16 year old car in May for 19% more than I paid for it in 2018, having driven it about 45,000 miles over that time (120K -> 165K)

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

#40

Post by reaperducer »

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…

This is less of a tech layoff story and more of an overlevered business with crashing asset values against very difficult short term liabilities

You say "potato," I say "potato."

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