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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

#131

Post by bombcar »

thejteam wrote: post #30
cramjabsyn wrote: post #11

Good riddance. Their shady, shady, practices took full advantage of the trust customers need to have in a full service used car dealer. The execs should face legal penalties

Not going to defend Carvana... but most people trust used car dealers about as far as they can throw a full size pickup. Most of the problems with Carvana are the same problems you get at any used car dealer, just magnified by scale. All of the title/registration problems. Financing. Availability. Communication. No better or worse than any random dealer. My first car ever (25+ years ago) I received the wrong plate fr…

That’s a relatively minor one compared to what I’ve heard tell of - imagine buying a new car to only realize they gave you one that didn’t match VINs with all your paperwork - because they had two on the lot and you don’t notice u til you go to sel it years later.

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

#132

Post by kevin_thibedeau »

Finnucane wrote: post #117
xnx wrote: post #38

The car vending machines are such a monument to failure, at least here in the Chicago area where all the ones I see are totally empty.

I didn't even think those were real. I'd seen pictures, but I thought it was just for show. Like who would actually build that?

They're used for ordinary parking facilities in dense cities.

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

#133

Post by coredog64 »

Finnucane wrote: post #117
xnx wrote: post #38

The car vending machines are such a monument to failure, at least here in the Chicago area where all the ones I see are totally empty.

I didn't even think those were real. I'd seen pictures, but I thought it was just for show. Like who would actually build that?

They spent 18 months building one near my house, only to finish it as the company really started to go into the dumpster.

It's near the offramp for the dealer's row in my town, so I suspect that the Cadillac, BMW, or Mercedes dealership will buy it for pennies on the dollar as an advertising billboard.

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

#134

Post by jacquesm »

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…

> Subsidising the cost of good-but-unprofitable service using investment dollars (Carvana was losing thousands per sale pre-pandemic) doesn’t build a sustainable business unless it’s part of a strategy.

Unfortunately that summarizes a fairly large fraction of the presentations aimed at VCs.

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

#135

Post by ShredKazoo »

rsj_hn wrote: post #105
015a wrote: post #100

Earlier quoted context omitted.

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…

This is what I was saying before on here (and getting downvoted). Carvana's value add was selling used cars to people who don't like the experience of buying used cars. It's a good idea and someone else can take their place. The problem with Carvana was that by offering auto loans to buyers as well as taking out loans to buy cars from sellers, they became excessively levered in a time of rising interest rates and fal…

>Whoever the carvana replacement is going to be, they should subcontract out the business of offering auto loans and they should borrow less to fund acquisition of cars, because the auto business is cyclical and they need to be able to survive the downturns

Alternatively, could they hedge their exposure somehow?

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

#136

Post by ShredKazoo »

Aunche wrote: post #67
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…

Carvana definitely lost money when I sold to them. The car had a lot of minor problems that needed to be addressed if they ever wanted to sell it. When it came to reporting the quality, there were only 3 options. I chose the middle option even though it needed thousands of dollars worth of repairs. The person who picked up my car basically told me that they have no incentive to care so long as if you're obviously bei…

Maybe there is a role for humans in the used car business for the foreseeable future, just because any automated method for assessing used car value runs into the "winner's curse" problem? (Essentially the only people who sell their cars to the automated system are the ones where the automated system offers them the best price, because there's a problem with the car that the automated system isn't picking up on.)

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

#137

Post by vkou »

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?

The same way that your local real estate development firms own your town's politics.

They care more about government then literally anyone else in the area, and nobody else has as strong a financial incentive to politically push back on what they want.

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

#138

Post by dragonwriter »

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…

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

Its not, though. Its true the upthread poster focussed on “buying experience” not “price”, but the adverse parts of the typical used car buying experience are a highly evolved optimization for drawing people in with advertised prices while optimizing actual prices without driving buyers off. Carvana’s better buying experience is neither “opposite of” nor even orthogonal to their failure to optimize price, its a direct consequence of them deciding they didn’t need to.

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

#139

Post by coredog64 »

_8j50 wrote: post #87

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…

I worked in this space at the turn of the century (Cobalt Group, now part of ADP). Dealers would grant access to their (usually) ADP backends that we'd scrape for inventory and then aggregate on websites (usually their own and maybe a larger hub). Today I'd say something like FB marketplace or Craigslist does that work. Smaller dealers post their inventory to Craigslist every day (or every week) and then Craigslist is the search engine. Unfortunately, at this price point, there's not enough margin for things like delivering cars, transferring across lots, etc.

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

#140

Post by faddypaddy34 »

tptacek wrote: post #88
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.

I have bought almost all of my cars from CarMax in the last decade. Even going into their dealerships in person is not a typical experience. There is no negotiation on price and the only "upsell" was their extended warranty. They are also hemorrhaging money currently and hopefully don't go the way of carvana.
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