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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

#221

Post by phphphphp »

markatto wrote: post #218
phphphphp wrote: post #197

Earlier quoted context omitted.

Depending on exactly when you bought your car from Carvana, Carvana likely lost between $2,000 and $5,000 on your purchase. Carvana has never made money on selling cars. If you're willing to pay $5,000 more for a used car because you'd like good service, then there are a great deal of options available to you. The simplest option is to go to a reputable dealership that focuses on customer service (which have existed…

Why do you think the unit economics of Carvana have to be worse than a traditional dealer? Maybe they have to do more shipping of vehicles around, but they are less reliant on storefronts/sales staff. It seems likely to me that they overspent on marketing/gimmicks/badly timed top-of-market inventory, but that doesn’t mean that the business model fundamentally can’t work.

A higher cost higher quality service can succeed, but that's not the Carvana business model. The Carvana "business model" was "sell as many cars as possible and work out the economics later" and it's now "try to lose less money by any means necessary" (including by sacrificing quality of service).

I am not theorising about their costs, rather, I am referencing their own financials. Per their financials, they must achieve >$4,500 in gross profit per car sold in order to break even on a sale because the cost of providing their service is around $4,500 per car. As far as I know, they have never achieved this and they have only come close during periods where the second hand car market was at its most ridiculous supply-chain induced peaks.

You could start an online second hand car dealership today, with the same online purchasing that Carvana offer, and a better quality of service, and build a great business with great unit economics... if that was your strategy from the first day. Many such companies exist! There are lots of upmarket car dealerships that'll give you excellent service -- and it'll cost you less than $5k over market.

Carvana can't just undo a decade of bad mistakes, they can't just switch from "losing money" to "making money" because every foundational decision about the business was made in the context of "who cares about money, we want growth". You should not think of a company as an implementation of a business model, a company is so much more. Carvana has something like 20,000 employees: at that scale, radical change is basically impossible.

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

#222

Post by mardifoufs »

listenallyall wrote: post #214
Karrot_Kream wrote: post #179

Earlier quoted context omitted.

That's still a lot of work. If I have cash for MSRP why do I have to deal with "minimal haggle"? Can I not just buy the asset? There is definitely an audience of people who know what they want and how much they want to spend and Carvana is able to meet it. I think there's definitely more demand for effortless purchases than just CarMax. I bought an electric car recently and only put up with the minimal haggle of an M…

If you want to walk up to a dealer and announce that you have cash and want to pay full sticker, they will be happy to roll out a red carpet for you. But you still can't just "buy the asset." Local governments require all kinds of documentation and registration "bullshit" that it sounds like you are blaming the dealer for.

Not really. They will still try to upsell you tons and tons of features.

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

#223

Post by gmd63 »

kodyo wrote: post #211
gmd63 wrote: post #192

Earlier quoted context omitted.

Whether an VC firm engages in subsidies for its clients or whether a government engages in subsidies for its electorate, money is being spent to distort market prices and that adds friction to accurate market pricing. It's weird to identify issues with the tactic and then arbitrarily say one entity doing it is bad when its OK if the other one does it. If the government damages the economy with subsidies, those respon…

It's none of my business when rich people waste their money. It is my business when the robbers and murderers in the government waste my money on my behalf.

The government most of the time is acting on the behalf of the people who elected them. There are plenty of rich people who have stolen their riches. Neither is a perfect "voice of the people" or "true meritocracy"

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

#224

Post by Karrot_Kream »

ghaff wrote: post #202
Karrot_Kream wrote: post #179

Earlier quoted context omitted.

That's still a lot of work. If I have cash for MSRP why do I have to deal with "minimal haggle"? Can I not just buy the asset? There is definitely an audience of people who know what they want and how much they want to spend and Carvana is able to meet it. I think there's definitely more demand for effortless purchases than just CarMax. I bought an electric car recently and only put up with the minimal haggle of an M…

>If I have cash for MSRP why do I have to deal with "minimal haggle"? Because I want to save money? It literally took about 5 minutes to ask them to add the ~$1500 price of some factory-installed options to my trade-in price and they had a deal. It wasn't completely frictionless but far and away the main hassle was just car availability. Had I been willing to take a similar vehicle they had on the lot it would have b…

Sure, I don't doubt that there's a market for people who want to save money. I'm saying there's probably enough demand for a low hassle car purchase at higher price points that CarMax won't be the only player in town. If my area can have 10 auto dealerships of a single manufacturer, I hesitate to think that only CarMax is able to absorb the demand of low-hassle purchase.

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

#225

Post by alex504 »

jeffbee wrote: post #157
birken wrote: post #51

Earlier quoted context omitted.

I sold two cars to Carvana in the last year and in both cases the offers from Carvana (which included them picking up the car from my driveway) were multiple thousands of dollars better than Carmax or dealerships. Could I have made more selling privately? I don't know, but I can tell you that Carvana paid very handsomely to do all the work involved with buying your car.

The success of Carmax has long been that they are just better on the buy side than anyone else. They are just a large used car dealer with excellent auction buying strategy. It makes sense to buy from Carmax but it doesn't make a ton of sense to sell there. You know they are trying to squeeze you on that side of the deal. Carmax never loses money. Carvana has never earned a profit. It's sort of a big difference!

Its funny because my experience has been the exact opposite. I have sold three cars to them in the past 2 years (long story) and all of them were several thousand above what other dealers in the area or carvana/shift/vroom were willing to pay. Every time I got one of their offers I was like, "Huh. Ok".

However in buying cars from them, everything seems a overpriced compared to the local market.

My understanding of it is that they make money by doing used car arbitrage. They knew they could make money on the cars I sold them by shipping them across the country. And I think people are willing to pay a little more to buy a car from them because of all of the guarantees and how painless it is.

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

#226

Post by godzillabrennus »

hnburnsy wrote: post #59
godzillabrennus wrote: post #3

Doesn’t help they seem to have played so fast and loose they lost the legal ability to register vehicles in the name of their buyers: https://www.motor1.com/news/621947/carvana-title-registratio...

One of Carvanas major problems is titleing and registering cars doesn't scale. It is in most stares a manual, paperwork driven process. Example, Ohio has 88 County Clerks of Courts Title. Source, family member who worked there.

Ohio has electronic titling now for dealers.

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

#227

Post by friendly_deer »

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 was pattern matching Carvana to a company called Sidecar[0] this summer when I heard my friend say he bought a car for something like $5k less than any dealership in town was offering it for.

Sidecar was the "3rd company" that did ride-sharing in my city in 2014-2015, after Lyft and Uber. Somehow they were selling rides from any point in the city to any other point in the city for $1. I suppose it was getting subsidized by VC money; and I took probably $500 worth of rides for a year or so until it shut down.

[0] https://en.wikipedia.org/wiki/Sidecar_(company)

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

#228

Post by kodah »

donw wrote: post #26
kodah wrote: post #6

Earlier quoted context omitted.

The new car market is also probably contributing. I just bought a house and sold my hybrid for a Tacoma. I walked into a dealership lot to buy a '20 with 40k miles on it. I left with a brand new Tacoma with zero miles and a better package for $10k less. I was able to do this because the dealership needs to move inventory to get new cars from Toyota and hybrids are very in demand.

Why'd you go for the Taco over a Tundra?

I didn't need the size a Tundra has but I do need to be able to haul a trailer or things in the bed. The Taco 4x4 off-road also comes with a nifty electrical system which I plan to use at multi-day festivals.

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

#229

Post by robertlagrant »

ElevenLathe wrote: post #217
robertlagrant wrote: post #212

Earlier quoted context omitted.

I don't quite follow why you're saying that, but as per my brief previous comment, I'm not saying it's a natural law, nor a game.

Sorry, I thought you were implicitly calling it as a game (which is IMO the correct and true view), since cheating can only happen in a game where there are established rules.

Not particularly; I think you can call almost anything a game if you like. But I don't think it's especially a game, nor a natural law.

I don't see why anyone would characterise some people choosing to spend and lose their money as "cheating".

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