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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

#141

Post by xyzelement »

scarface74 wrote: post #80
whakim wrote: post #52

Earlier quoted context omitted.

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…

The problem is that like with OpenDoor, asymmetrical information favors the seller. If I know I can get a better deal, I’m not going to use Carvana or OpenDoor. If I know there is something wrong with my car/house I’m going with Carvana/OpenDoor.

Btw I think you are describing "adverse selection"

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

#142

Post by gmd63 »

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…

I think you can generalize even further and say that this story applies to most companies flooded with investor capital. Take Uber for example. The VC subsidies convinced a significant portion of people to upend their lifestyles and attempt to make money in an ecosystem where prices were artificially juiced by VC money.

It's ironic that free market types are completely for subsidies when the private industry does it, although public and private subsidies both have issues.

At least government subsidies have a benevolent intent usually. VC subsidies are usually about hiding the true market value of a product to attract customers who otherwise wouldn't have shown interest until it's time to crank the money milker.

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

#143

Post by twelve40 »

freeopinion wrote: post #94
moralestapia wrote: post #66

Earlier quoted context omitted.

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 billi…

not the parent, but they probably meant "compared to typical vc-funded startup expected margins". most faangs don't need to ship tons of steel to anybody and their margins are around 25%.

can you disrupt used cars given all the logistics of the physical world? maybe, I don't know, but people here report both carmax and carvana having severe business issues, why?

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

#144

Post by gmd63 »

gmd63 wrote: post #142
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…

I think you can generalize even further and say that this story applies to most companies flooded with investor capital. Take Uber for example. The VC subsidies convinced a significant portion of people to upend their lifestyles and attempt to make money in an ecosystem where prices were artificially juiced by VC money. It's ironic that free market types are completely for subsidies when the private industry does it,…

There really should be a law against this. It's jarring to the economy to confuse people with artificial prices when your sole goal is to snap a customer base into some long term reliability on a platform or product that isn't necessarily any different after the subsidy runs dry and it needs to become self-sustainable.

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

#145

Post by freeopinion »

twelve40 wrote: post #143
freeopinion wrote: post #94

Earlier quoted context omitted.

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 billi…

not the parent, but they probably meant "compared to typical vc-funded startup expected margins". most faangs don't need to ship tons of steel to anybody and their margins are around 25%. can you disrupt used cars given all the logistics of the physical world? maybe, I don't know, but people here report both carmax and carvana having severe business issues, why?

Typical vc-funded startups have negative margins.

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

#147

Post by rippercushions »

bombcar wrote: post #118
015a wrote: post #113

Earlier quoted context omitted.

I love talking to people. I don't like being talked to.

Remember the bad old days of having to dodge hordes of salesmen just to try to buy some computer parts?

No? But then again, I've always done my pre-Internet computer parts shopping at obscure specialist shops that are tucked away in semi-derelict shopping malls and are run by misanthropic neckbeards.
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