Despite the “massive losses and negative cash flow” that Carvana has experienced within the past few years, the used auto retailer is making a comeback with better numbers as well as new advances in technology. Since making it onto the New York Stock Exchange two years ago, the company has been able to stay relevant in the automotive world despite significant losses and it continues to work towards fulfilling its mission to “change the way people buy cars.”
Carvana was founded in 2012 and has had its ups and downs in terms of finances, but in the company’s Q4 2018 results announcement, founder Ernest Garcia recently stated the company has confidence that it will get to a point where it is selling two million cars per year. No timeline for this projection was given, but the company’s leadership seems pretty positive about its outlook.
Carvana’s stock has fluctuated throughout the years, soaring to $70 in September 2018 and then tanking to $30 within the next few months. On April 12, 2019, however, the stock was back up to $60. Due to the sharp drops the stock has experienced, short sellers have become big investors in Carvana. In fact, the company has even made it onto the Russell 3000 Index’s most-shorted security list, making investors nervous.
Neil Weinberg and Tom Metcalf of Bloomberg reported that a part of Carvana’s business includes originating and selling auto loans but that some of these are being offered to buyers with lackluster credit and nobody is quite sure who they are. The article noted one buyer is Delaware Life, but not much is known about others. What is known, however, is that regardless who’s buying, the company’s executives have become worth a lot of cash.
Garcia and his son, Ernest III, are now worth $6.7 billion combined. This is surely a proud time for Garcia, seeing as he has found massive success after filing for bankruptcy protection and narrowly avoiding prison time after his involvement in the 1990 Charles Keating scandal. After the scandal, he struggled maintaining the rental car chain Ugly Duckling but was able to partner with Raymond Fidel to turn it into the now-prevalent DriveTime Automotive and further into Carvana.
Garcia mostly stayed out of the spotlight until Carvana went public, but he has always been trying to improve consumers’ automotive experiences. Now, this includes changing the method people use to buy cars.
Unsurprisingly, most people despise car shopping. It eats up a massive amount of time and research, plus there’s always the usually-annoying salesperson and, not to mention, vehicles are expensive. Luckily, Carvana has started offering a method of car shopping that might not be as bad: vehicle vending machines.
Similar to the new check-in and ticketing processes at airports, an agent/salesperson is no longer required to buy a used car from Carvana. Before the company went public in 2017, Caitlin Huston of Market Watch reported that Carvana had even raised $225 million to expand its “vending machine” operations. Within three years of starting the service in Atlanta, Georgia, Carvana reported it had sold around 27,500 vehicles using this method.
The vending machines are revolutionary and Carvana boasts that they allow customers to buy a car in just ten minutes if they want. Understandably, many people are leery about this method of car buying because they cannot be totally sure they are getting a reliable used car; however, Carvana states that it only sells accident-free vehicles that don’t have any damage to their frames. Also, each car must go through a 150-point inspection before being listed for sale.
Carvana customers can search for the car they want online and subsequently go pick it up at one of the various coin-operated (yes, coin-operated) vending machines. Alternatively, delivery is available, including several markets that offer next-day delivery.
Labeled “the Amazon of Auto,” Carvana has high hopes for its future. No longer do consumers need to visit multiple dealerships and haggle with annoying salespeople to purchase a car; instead, they can now simply browse for a car online and have it dispensed out of a machine. Seeing as the vending machines have brought significant growth to the company, it is expected that more machines will become available and the process behind used car sales will continue to be transformed.