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As Carvana crashes, used car dealers, not buyers, stand to win big

businessinsider.com

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Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#81

Post by Retric »

whakim wrote: post #52
davewritescode wrote: post #16

The problem is with buying cars site unseen. I follow some car groups that revolve around tuning BMW engines for lots of power. It became a meme to post before and after pictures of heavily modified, drag strip/race prepped cars and then on the back of Carvana trucks some months later. 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 Carvan…

I don't actually think buying cars sight unseen is the main obstacle here, because what you're describing (folks taking advantage of the system) represents a tiny percentage of transactions. 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…

It’s a tiny percentage of the market, but if you’re not doing due diligence then it’s going to be a large problem for you.

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#82

Post by SoftTalker »

moralestapia wrote: post #66
hn_throwaway_99 wrote: post #55

I bought a used car from Carvana before the pandemic, and this is pretty sad news to me because after that purchase I vowed that all my future cars would come from Carvana. 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, and still would ha…

The problem with Carvana's valuation is that car dealerships run on thin margins. It's very hard to make billions out of that.

This is the problem when SV startup approaches hit the world of physical products. This isn't software. To sell a car, you first have to buy one. You cannot create them out of bits and sell more at nearly zero marginal cost. Your inventory has a carrying cost. You're playing in a market. Carvana got caught buying high and having to sell low. Was there any securities trading firm or auto retailer experience on their management team or board?

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#83

Post by xxpor »

lokar wrote: post #77
mr90210 wrote: post #61

Earlier quoted context omitted.

Look up Joshua Fluke on YouTube, on one of his last videos he talks in details about the legal issues that Carvana has had.

I’ve heard that before, and always wondered: how dealership owners are able to buy so much power in state capitals?

Outside of large cities, car dealership owners are usually some of the people with the most money. See also: beverage distributers

https://patrickwyman.substack.com/p/american-gentry

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#84

Post by linksnapzz »

lokar wrote: post #77
mr90210 wrote: post #61

Earlier quoted context omitted.

Look up Joshua Fluke on YouTube, on one of his last videos he talks in details about the legal issues that Carvana has had.

I’ve heard that before, and always wondered: how dealership owners are able to buy so much power in state capitals?

A century of practice.

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#85

Post by rodgerd »

Waterluvian wrote: post #47
rodgerd wrote: post #40

Earlier quoted context omitted.

> 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.

Bankruptcy companies are like Star Wars backwater scrapyards. Might not seem sexy or high profile but man do they know how to strip a company down quickly and effectively.

If anything, they'll err in the other direction when chasing unpaid money: people won't be getting a free car because the recordkeeping and collections were a mess, people are going to be fighting with debt collectors over having paid their bills, but Carvana being a mess means that the debt collector will have no evidence of that.

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#86

Post by treeman79 »

MuffinFlavored wrote: post #41
altacc wrote: post #4

The problem seems to be that they sold too many cars with a negative margin. I've heard stories of people selling their cars sight unseen to Carvana for above market value and it seems they were left holding too many cars as the second hand car market normalized and prices decreased. Like a lot of VC funded companies, they were blinded to market realities by the cash each funding round produced. If they'd had to purc…

> The problem seems to be that they sold too many cars with a negative margin. I've heard stories of people selling their cars sight unseen to Carvana for above market value and it seems they were left holding too many cars as the second hand car market normalized and prices decreased. How did a bunch of paid professionals in their leadership not see this coming/account for this happening?

Guessing their bonuses and KPIs were based on volume. Not profit.

Same reasons selling pet food online at a loss drive the crash of 2000.

Capitalism rewards efficiency of resources. Idiots are punished harshly.

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#87

Post by _8j50 »

How about allowing smaller used car dealers to sell carvana inventory. Lot space is expensive but a lot of people shop online or on magazines before going in person anyways. It will be a good lure, just have the dealer make them wait until he gets the car from carvana while they checkout existing inventory. Carvana breaks even -ish and dealers make money on the financing side (they never make money on actual sale of the car only on interest anywayd).

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.

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#88

Post by tptacek »

hn_throwaway_99 wrote: post #55

I bought a used car from Carvana before the pandemic, and this is pretty sad news to me because after that purchase I vowed that all my future cars would come from Carvana. 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, and still would ha…

For what it's worth, I felt the same way about Carmax, last year. Bought online, they drove the car out to me, and when a better trim of the same car popped up on their site 2 weeks later, I just traded it sticker-for-sticker no questions asked.

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.

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#89

Post by AmVess »

KennyBlanken wrote: post #68
bigtex wrote: post #42

Earlier quoted context omitted.

Is the Tundra Hybrid even available yet? I love my 2007 but that thirsty V8 gets awful gas mileage.

That overcompensating giant flat angry looking grill (I'm not being hyperbolic, that's literally why they style them that way: https://www.bloomberg.com/news/articles/2021-03-11/the-dange... ) and far too large/heavy body is why your truck has poor gas mileage, not because it has a "thirsty" V8. 2007 Toyota Highlander hybrid MPG: ~28mpg. Same vintage year prius mileage: a bit shy of twice that.

2nd gen Tundra weighs a LOT more than Highlander and has low final drive gearing for towing. The 4.7L and 5.7L V-8's are thirsty no matter the platform. Also, that model Tundra doesn't have a giant grill. Further, much of the weight in the Tundra comes from the giant components they bolt onto it to make it suitable for towing. For instance, a 2007 Tundra will pull 7000lbs more than a 2007 Highlander Hybrid.

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.

Re: As Carvana crashes, used car dealers, not buyers, stand to win big

#90

Post by GekkePrutser »

hn_throwaway_99 wrote: post #55

I bought a used car from Carvana before the pandemic, and this is pretty sad news to me because after that purchase I vowed that all my future cars would come from Carvana. 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, and still would ha…

I wonder if it's possible for these concepts to really go big.

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.

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