Is Carvana going out of business? The 'Amazon' of cars tumbles

https://www.themanual.com/auto/is-carvana-going-out-of-business/

31 47 4 years ago

Back in April of this year, they bought my 5-year-old car for $600 more than I had paid for it new. Anecdotal, sure, but somehow I’m not surprised their business is struggling.

Edit: another anecdote: https://twitter.com/willmanidis/status/1569763363357396994

echelon2• 4 years ago

I knew I should have shorted them. One of my biggest investing regrets.

Beyond the MoviePass-like prices they paid for used cars, the core concept of the company makes no sense to me. Who wants to buy a car without looking at it? Without getting inside and feeling how it handles? Cars aren't trivial $10 Amazon purchases.

bee_rider2• 4 years ago

I’m pretty sure a friend of mine bought a car from them (could have been a different service, but there aren’t a ton, right?). There was at least a trial drive through the neighborhood.

pengaru• 4 years ago

Who wants to buy a car without looking at it? Without getting inside and feeling how it handles?

Have you met young adults in the US recently?

I see a surprising number of Carvana license plate bezels on the streets here in CA. The core problem Carvana is facing is they're a predatory lender who happens to use cars as the fodder for the loans. With a recession and high interest rates, there's just not many takers for the loans so their business is coming to a grinding halt.

darrenf• 4 years ago

At least in the UK (with Cazoo, Cinch, etc) you get 7-14 days to return the car - they come back and collect it. Much longer than just a test drive.

https://www.cinch.co.uk/returns

https://www.cazoo.co.uk/7-day-money-back-guarantee/

yawnxyz• 4 years ago

funny enough, we sold our old Civic for 2.5x Carvana's asking price. In cash, nonetheless!

fy202• 4 years ago

I think one of their key selling points was you could return the car within 30 days - and they'd cover the cost of the return and refund you everything. From a buyer's perspective this is a nice idea, as you often can't tell what's wrong with a car or if you really like it until you start driving it.

gambiting2• 4 years ago

>Who wants to buy a car without looking at it? Without getting inside and feeling how it handles?

Apparently, most people nowadays. I spoke to my Volvo salesguy that I bought my car from just before the pandemic, and he said the biggest change with the market post-pandemic is that customers in general just don't care about test drives. They either ring up and order what they want, they order using an online form, or if they come in they just go "the one like this one here please". It's weird to me too, but apparently that's what happens nowadays.

namdnay• 4 years ago

Maybe their pitch deck was “Zillow for cars”

duped3• 4 years ago

To be fair you probably could have gotten a similar deal on the rest of the market. Used car prices have been insane.

highwayman473• 4 years ago

I never understood what was so special about this business. It's a used car dealership.

HyperSane• 4 years ago

They had the "car vending machine" gimmick.

highwayman473• 4 years ago

I recall, but that can't have much an impact on bottom line.

hn_user2• 4 years ago

Searching through a bunch of listings online with fixed prices and then having it delivered once you chose is not like any car dealership I have been through. Forget just the haggling on price, you have to spend 2 hours in with "finance" declining all sorts of things including their own loan options--and sometimes (not all) this finance person attempts "hard sells". Last time I was back in this room it felt like a timeshare presentation and sales pitch that just didn't let up.

No thanks. I'll take fixed pricing and a car drop-off any day over that. I'll even pay more for it--well, slightly more.

highwayman473• 4 years ago

I would never buy a used car sight-unseen. When I bought my current car used, I had financing already lined up through my bank, flew 4 states down to get it, inspected it, and drove it back. I had the cost of travel built in as a discount. I have put 140,000 miles on that car and had no major issues.

fasthands9• 4 years ago

The last time I ought a used car I did so from a Toyota dealership. I went to two different dealerships and both times the stats they listed online were different from the actual stats of the cars. I don't know if Carvana is actually better at this but it would be nice to a) buy from an entity that has incentive not to sell you lemon b) buy from entity which is transparent.

duped3• 4 years ago

Not mentioned is that they've been forced or sued to halt sales operations in multiple states multiple times (Colorado, Illinois, Michigan, Florida) and had reported issues in California, Texas (among others, these are just the ones I remember). I believe it's all been for the same reason - in most states, car dealers have to send you a title within a certain time frame (like 30 days) of the purchase, and Carvana has been incapable of doing that.

This is total speculation, but it seemed like they were purchasing cars and selling them before they had titles on them. I believe some people never received their titles. I wonder how many of them were stolen vehicles fenced through a startup too concerned with scale to comply with the law.

fy202• 4 years ago

Why are used cars sold without a title in the US?

In my country you need a green registration card (equivalent of the title) and a secret code from the equivalent-of-the-DMV (to prevent selling stolen cars) in order to register a vehicle in your name. Nobody would pay for a car without getting those at the time of sale, as you can't register the car, so it's effectively not yours - a sales contract means nothing if you don't get them.

iudqnolq• 4 years ago

I'm not sure that's common. When I bought a used car in Colorado I was handed the title at the time of purchase and still had a massive pain registering in time. (My apartment complex contracts with a predatory towing company that makes money by finding reasons to tow your car and charging you for the car's return. One of their excuses is not registering fast enough)

whakim3• 4 years ago

The reason this happens likely isn't negligence, but is instead a fundamental flaw in any kind of two-sided car marketplace. First, you have to buy the vehicle, and in many cases when you buy a car you have to pay off the seller's loan. In this case you don't get the title immediately - you have to wait to receive it from a financial institution. But you can't sit on a car until you actually have that title in hand - used car margins are razor-thin and cars depreciate incredibly quickly - so you need to sell the car first and hope you receive the title in time. This entire process is made even more complicated by the vast array of small banks and credit unions you have to deal with during the payoff process - many of whom have byzantine processes and can't possibly conceive of a car dealership that doesn't operate like the local auto lot.

I have no particular love for Carvana but I am sympathetic in this particular instance.

duped3• 4 years ago

I don't discount inefficiencies in the market or would call it negligence, other than I don't think it is legal to sell a vehicle without the title. What is to prevent fraud?

c4ptnjack2• 4 years ago

You gotta love how a roughly %3 decrease in year-to-year revenue leads to a %97 decrease in the stock price and an increase in the net loss from ~$30 million to ~$300 million

Despite the concentration of highly intelligent and educated folks who make up the stock traders of the world... they make remarkably bad bets on the future of markets more often than not.

I couldn't fathom the idea of me being any better playing the market vs pros -- but this really illustrates the fact that in the long run the only effective, proven way to consistently beat the market is investing in index funds.

The stock market is a particularly fickle bitch and mostly zero-sum-game.

TheAlchemist2• 4 years ago

This is only partially true. For day traders and short term gamblers - yes.

But a lot of those highly intelligent folks are making a lot of money - I think there are roughly 2 big groups:

- some kind of algorithmic trading (market making for sell side, arbitrage for prop trading) - mostly playing on market inefficiencies and technicalities

- long term, value investors - Buffett etc.

Most of the other guys are just chasing some impossible dreams.

I really recommend to anybody interested in finance and investing to study Warren Buffett and Charlie Munger - their wisdom is simple yet amazing.

kbenson• 4 years ago

long term, value investors - Buffett etc.

Isn't Buffett's (Berkshire Hathaway's) strategy to actually take over companies where they see a way to cut expenses, change direction, synergize with other companies, etc and markets to make them more profitable?

If so (and I admit to having mostly a vague understanding of the specifics of Berkshire Hathaway's strategy), and if that's indicative of that group, then it's interesting that those groups making money aren't really making "bets" as much as they're actively working to make their investments pay out.

senttoschool• 4 years ago

consistently beat the market is investing in index funds.

How can you beat the market by buying index funds?

Did you mean consistently not underperforming the market by investing in index funds?

yccs27• 4 years ago

You gotta love how a roughly %3 decrease in year-to-year revenue leads to a %97 decrease in the stock price and an increase in the net loss from ~$30 million to ~$300 million

It's not that surprising. Revenue is worth nothing without a healthy margin, and that's where Carvana seems to have a problem. This quickly turns a company which could be profitable if it didn't invest as much into the future, into a company that is bleeding money and might be headed for bankruptcy. It explains a big part of the change in valuation.

c4ptnjack2• 4 years ago

Not surprising, just indicative of how insane and wild the bull market got over the last decade.

I can't help but think that a lot of businesses which could've ended up as profitable, sustainable market leaders over the long term have been, or will be, decimated by this misalignment of investment priorities. .

monetus• 4 years ago

Have any thoughts on Michael Burry saying there is an index fund bubble?

nicolashahn• 4 years ago

Despite the concentration of highly intelligent and educated folks who make up the stock traders of the world... they make remarkably bad bets on the future of markets more often than not.

Looking forward to seeing how well this ages wrt Carvana.

boeingUH60• 4 years ago

Note: Carvana's founder cashed out over $3.6 billion of shares during the bull market, over double the company's current market capitalization...he can probably buy the company using money he got from selling his shares earlier on.

https://www.wsj.com/articles/ceos-dad-gets-a-3-6-billion-sto...

drumhead2• 4 years ago

There's a saying on Wall Street, if the ducks quack, feed them. Investors lost their mind again with the internet and started valuing any old rubbish at astronomical values.....again. but it's not uncommon, and if it wasn't the internet it would have been something else, like Crypto for example. I'm sure we'll see internet bubble mk3 at some point in the next 10-15 years.

dang• 4 years ago

Collapse of Carvana, the 'Amazon of Used Cars', Continues - https://news.ycombinator.com/item?id=33678700 - Nov 2022 (9 comments)

Carvana to cut 1,500 jobs as online auto dealer’s troubles mount - https://news.ycombinator.com/item?id=33658716 - Nov 2022 (91 comments)

Carvana, which bought my car for more than I paid new, has lost 98% of its value - https://news.ycombinator.com/item?id=33630970 - Nov 2022 (15 comments)

Carvana laid off 2,500 employees today via a pre-recorded message through zoom - https://news.ycombinator.com/item?id=31332365 - May 2022 (27 comments)

drumhead2• 4 years ago

I was listening to a podcast where a car dealer was talking about Caravana. They weren't really checking the cars they were buying properly so people were selling them any old junk and the company was paying top dollar for it. It sounds like a classic case of mis-pricing. I don't think the company will last too long.

nunez• 4 years ago

That's unfortunate. We purchased a car from Carvana and it was an awesome experience.

Is Carvana going out of business? The 'Amazon' of cars tumbles

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