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

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

#91

Post by avalys »

phphphphp wrote: post #76
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 good experience you had early on and the bad state of the company now are closely linked. The story is always the same with this type of company: take a mature industry that is profitable on a unit basis because it’s boring and unpleasant, then build a narrative around some strategy to make it exciting (giant vending machines!) and get buy-in to spend huge amounts of money in pursuit of the narrative but eventual…

Yeah, exactly. "I loved Carvana because I bought a great car from them at a better price than the legacy players!" and "I loved Carvana because they bought my used car at a really good price!"

Guess what? Buying cars for too much money and selling them for too little money means they go out of business.

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

#92

Post by maria2 »

avalys wrote: post #91
phphphphp wrote: post #76

Earlier quoted context omitted.

The good experience you had early on and the bad state of the company now are closely linked. The story is always the same with this type of company: take a mature industry that is profitable on a unit basis because it’s boring and unpleasant, then build a narrative around some strategy to make it exciting (giant vending machines!) and get buy-in to spend huge amounts of money in pursuit of the narrative but eventual…

Yeah, exactly. "I loved Carvana because I bought a great car from them at a better price than the legacy players!" and "I loved Carvana because they bought my used car at a really good price!" Guess what? Buying cars for too much money and selling them for too little money means they go out of business.

> "I loved Carvana because I bought a great car from them at a better price than the legacy players!"

That's literally the opposite of what the GP said:

> 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

I mean this politely, but did you really read what you were replying to?

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

#93

Post by adrr »

rodgerd wrote: post #40
jedberg wrote: post #25

I'm not surprised. I've heard multiple stories from multiple people about Carvana just forgot to collect money from them. They bought a used car, the car showed up, and Carvana just never took the money from them beyond the deposit. This is not only bad for Carvana and their cash flow, but bad for the buyer too, who just has to keep the money sitting there forever in case Carvana fixes the glitch and tries to transfe…

> 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.

They could always get in writing that they don’t owe Carvana any money and it will be very hard to collect as a debt.

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

#94

Post by freeopinion »

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.

I have several issues with your comment.

1. What makes you think car dealerships run on thin margins?

I don't know what typical margins are, but the owners seem to do pretty well. This may be despite low margins. But I'm reluctant to accept your claim without proof.

2. What qualifies as low margin? 1%? 10%?

3. It is entirely possible to make billions on low margins.

A dealer that makes $1000 per car can make $1 billion profit by selling 1 million cars. If the average car sells for $15k, a $1k profit would be a A little mom-and-pop lot in a very small town can sell 5-10 cars per month. It doesn't seem unreasonable for a huge national online dealership to sell 1 million cars.

4. What timeframe are we talking? Five years?

Carmax financials say they do more than $5 billion in a single quarter.

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

#95

Post by ethbr0 »

GekkePrutser wrote: post #90
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 elsewher…

Aka the AirBNB problem. In a nutshell, that you can't have a high quality growth company forever in an industry with a fixed supply of high quality items.

Initially, you grow like crazy and with great user reviews, as you're able to pick and choose the highest quality items.

Unfortunately, at some point you exhaust the supply at a given quality level, but your valuation mandates continued growth.

So you lower your quality requirements to obtain more supply, which only buys you a bit more time until you hit the next supply limit.

The only winning move seems to be stay private and accept there's a near-term cap on your revenue growth, after which you will grow much more slowly (at the natural supply expansion rate).

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

#96

Post by bluedino »

maria2 wrote: post #92
avalys wrote: post #91

Earlier quoted context omitted.

Yeah, exactly. "I loved Carvana because I bought a great car from them at a better price than the legacy players!" and "I loved Carvana because they bought my used car at a really good price!" Guess what? Buying cars for too much money and selling them for too little money means they go out of business.

> "I loved Carvana because I bought a great car from them at a better price than the legacy players!" That's literally the opposite of what the GP said: > 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 I mean this politely, but did you rea…

I think he was quoting the typical Carvana customer, not the parent poster

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

#97

Post by kreitje »

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 bought one from them about 3 months ago and it was excellent.

I couldn’t get a local dealership to give me the sticker price of a car on their website without showing up in person. I expected all the extra fees they throw in to be hidden but all they would post was MSRP and to call for the price. I call and they pretend to not know the car I am talking about and need to go there to see the specific car. This was multiple dealers.

Carvana though showed me the price, shipping if any, taxes, tag, title before I even tried to buy it.

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

#98

Post by version_five »

ctime wrote: post #78
version_five wrote: post #46

Earlier quoted context omitted.

A lot of people want a pickup but don't need a full size truck. Tacoma fills this niche - probably more people that have big pickups would have all their needs met with a tacoma sized one. Though it feels like all trucks have scaled up massively over the past 20 years and a 2020 tacoma is probably as big as a 2000 F150.

Most Tacomas seem to sell with a 5’ bed these days, but otherwise yes, trucks are larger than ever. Personally, I found it easier to move 2x4s or anything longer than approx. 5 feet (fishing poles) in my Prius because the Tacoma I had, had such a short bed. Otherwise I was sticking crap through the Tacoma window which was super jank. Oh the irony.

Similarly, I had a compact sedan which could easily hold 2x10s angled from trunk to front passenger windshield area. My Tacoma had a 6' bed but I still either has to put lumber of the roof rack (of my truck cap) or just angle it out over the tailgate if going a short distance.

But I didn't buy it for hauling lumber, it was way more practical imo than an suv for camping and moving furniture and basically moving anything that isn't really long and thin. And full size pickup trucks are no better.

But yes, ironically, if the main thing you move is small quantities of 8' lumber, a sedan is better

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

#99

Post by SturgeonsLaw »

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?

Just because someone is in a leadership position, doesn't mean they're competent.

Not a commentary on Carvana in particular, I know nothing about them, just an observation I've made over the years.

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

#100

Post by 015a »

avalys wrote: post #91
phphphphp wrote: post #76

Earlier quoted context omitted.

The good experience you had early on and the bad state of the company now are closely linked. The story is always the same with this type of company: take a mature industry that is profitable on a unit basis because it’s boring and unpleasant, then build a narrative around some strategy to make it exciting (giant vending machines!) and get buy-in to spend huge amounts of money in pursuit of the narrative but eventual…

Yeah, exactly. "I loved Carvana because I bought a great car from them at a better price than the legacy players!" and "I loved Carvana because they bought my used car at a really good price!" Guess what? Buying cars for too much money and selling them for too little money means they go out of business.

That's... not what anyone is saying. I bought an Audi from Carvana. It was more expensive than anyone else (~2-4% more). The price they paid for my trade-in wasn't as good as some competitors. I did not interact, in any way, with one of their vending machines. I'd still do it again.

It was a totally hands off experience; I will pay extra to not be talked to by someone. The checkout wizard was nearly as easy as buying something on Amazon. Which car? Enter your bank account number and social security. Agree to this loan rate. Sign over power of attorney so they can get your first year of registration and plates taken care of. They drive up to my apartment building; drop it off; "take it for a spin, I'll wait"; come back 30 minutes later; looks awesome; done.

I've taken that car to the local Audi dealer for service. They upsell you on everything. They pressure you. "Hey, while you're waiting, why not take this new 2022 A4 for a spin, no problem man my treat." "Yeah your car is in great shape; we could give you $15,000 for it right now, that'd take care of your down payment on this new one, its nice isn't it, don't worry about the monthly we can discuss that later" Just stop talking to me. I will pay so much more to not be talked to (and, really, compared to most dealers nowadays; its hard to say if Carvana is even "more expensive").

I feel extremely, EXTREMELY, confident in saying that this attitude has sold Teslas to three people in my bubble. You can start the process to buy a Tesla with Apple Pay. Seriously. Their new delivery process involves ZERO people; you drive to the store, the app tells you the ID of the car which corresponds to a piece of paper hanging in the windshield, you walk around the parking lot looking for it, if there are issues then people get involved; otherwise you drive away. That's it. I am buying a Tesla right now, even though I rather like the Mach E, because they make it so dangerously easy, and I have no clue how to buy a Ford. What's their delivery estimation? Is the price quoted on the site what I'll actually pay? Do I call someone? God, I gotta actually talk to someone? I gotta drive to the dealer? In person? Screw that, Tesla makes it easier, they get my $60,000.

Carvana made mistakes. But their model wasn't some VC abbaration like so many SV companies. They actually struck on something new, in an industry that needed that innovation, and that discovery has since (or maybe, in parallel) been applied by other companies in the industry. They screwed up, but I'll miss them.

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