CARVANA = ripoff. Tough road ahead.

J

Jarpin

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It's really hard to disguise profit margins and fees in car sales, and for a still relatively new AmazonISH player like Carvana...the chickens are coming home to roost. WHO PAYS for their difficulties and exaggerated baloney advertising??!! No surprise...YOU WILL when you get fleeced, and have to put up with mediocre BOT infused customer service after the sale.

www.bloomberg.com

Used Cars Become an Expensive Problem for Online Dealers Like Carvana

The very business model that was a winner during the pandemic is now scaring investors.
www.bloomberg.com www.bloomberg.com
 
The question is not that Carvana lost 95% of its market cap.

The real question is was it rational for Carvana's market cap to skyrocket last year.

Based on many threads on BITOG, buying a used car is worse than having a root canal without Novocain if buying from a retail dealer. I suspect buying a used from Carvana is a much less painless experience then buying a used car from a local Hyundai dealer.

And of note, Carvana's main business is packaging and selling bonds (made up of car loans), and servicing car loan payments. Carvana selling cars allows Carvana to bypass retail dealers in their core business to acquire mass quantities of car loans.

Carvana can sell every vehicle at a "loss", and still be highly profitable. Years ago the most profitable part of Ford and Chrysler businesses was their finance division, not their car sales division. The money for many in a vehicle sale is in the finance of the car, not in the car itself.
 
billt460 said:
It's amazing to me how many people don't know or realize this. It covers a lot when you can manufacture a severely depreciating asset, and sell it and collect interest in the process.
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I'll even go a step further and say before these crazy dealer markup and "market adjustments" we're seeing now - a brand new car dealer really didn't make anything on new car sales. They made money on financing the new car and marking up / financing your trade in.

I sold my Subaru to Carvana last year for $16900 IIRC. Not too bad considering it was right around $22k new. No A/C, one "accident" (still not sure on that one). I did find it for sale in July of this year for $23000. Still hasn't sold. Carvana sent it right to auction due to the "accident".

Have read a lot of horror stories of people buying from carvana and taking a month or two to get a title. That's pretty crazy! But I got my payment pretty quickly
 
Back in the '70's I worked selling cars at a Chrysler/Plymouth dealership.
The owner once told me that the real money maker was the service department because Chrysler/Plymouth cars were so bad.
We also sold Mazda's and Triumphs.
The Triumphs were the worst but we did not sell many of them.
 
I bought my 2011 Ranger last year from a new-car dealer. It had been a trade-in and was basically clean, ran great, everything worked, and when new it had been rustproofed and undercoated. I paid about $12K total for it, financing part. You could argue I paid too much, but it's what I wanted and Rangers were quickly shooting up in price. Even beaten, rusted-out examples that were 15 years older were going for $5K+. If I were to sell, I could probably get more than my total cost. But...

Carvana wants $20K+ for 2009–2011 Rangers in comparable shape to mine. That's not sustainable. You could buy a new Mitsubishi for that money.
 
billt460 said:
It's amazing to me how many people don't know or realize this. It covers a lot when you can manufacture a severely depreciating asset, and sell it and collect interest in the process.
Click to expand...

Same with the airlines, they make so much money on their rewards/credit cards then they do flying people around.
 
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billt460 said:
It's amazing to me how many people don't know or realize this. It covers a lot when you can manufacture a severely depreciating asset, and sell it and collect interest in the process.
Click to expand...
I don't know if it matters. Vehicles when purchased usually requires financing. You should get the best rate you are qualified for. Who cares who gets the "profit" on your loan. The Credit Union, Bank, etc. Why does it matter? Whether a Dealer makes a profit on the initial sale of the vehicle is a zero concern to me personally.

I had to take the factory financing to get the rebate when I purchased my Silverado. I refinanced it three months later-and then again another two months later when I found an even cheaper rate. Just cut a check two weeks ago to pay it off 14 months early.

As far as Carvanas market cap, how many Internet driven companies with initial public offerings go crazy? They are not alone.
 
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Caravan proved out a concept that selling cars online works effectively.

They can streamline their business to continue a version of model or someone else will take their idea into profitable model.
 
Lots of dealers have cars for sale at a halfway decent price but you have to finance the car. If you pay for the entire car with your money it costs more and that proves they make a lot of money from the loan. I always pay for my vehicles and do not finance them.
 
ekrampitzjr said:
I bought my 2011 Ranger last year from a new-car dealer. It had been a trade-in and was basically clean, ran great, everything worked, and when new it had been rustproofed and undercoated. I paid about $12K total for it, financing part. You could argue I paid too much, but it's what I wanted and Rangers were quickly shooting up in price. Even beaten, rusted-out examples that were 15 years older were going for $5K+. If I were to sell, I could probably get more than my total cost. But...

Carvana wants $20K+ for 2009–2011 Rangers in comparable shape to mine. That's not sustainable. You could buy a new Mitsubishi for that money.
Click to expand...
I haven't priced new Rangers. But whats a nice new one $40,000.00plus ? That's why they can get those amounts for used ones.
 
joekingcorvette said:
Lots of dealers have cars for sale at a halfway decent price but you have to finance the car. If you pay for the entire car with your money it costs more and that proves they make a lot of money from the loan. I always pay for my vehicles and do not finance them.
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I'm the same. I always have to laugh when I hear these people talk about what a "great deal" they got on their new car. I ask if they financed it, and they always say, "of course". I leave it at that knowing they got anything but a, "good deal".
 
Carvana lost half a billion dollars last quarter. I don't think they're ripping anyone off. It's just a bad unsustainable business model that no one is forced to participate in. I just traded in a '19 CRV and got almost $2k more from the dealer than Carvana offered and within $400 of the CarMax offer. With the tax break it was the right thing to trade it to the dealer. I had it advertised for a week on Craigslist and Facebook for thousands less than the dealer will ask, but people must be leary of private party sales. At some point Carvana has to crash and burn, I believe.
 
measureman said:
Back in the '70's I worked selling cars at a Chrysler/Plymouth dealership.
The owner once told me that the real money maker was the service department because Chrysler/Plymouth cars were so bad.
We also sold Mazda's and Triumphs.
The Triumphs were the worst but we did not sell many of them.
Click to expand...
Not much has changed with dodge.
 
Aichiguy said:
Carvana lost half a billion dollars last quarter. I don't think they're ripping anyone off. It's just a bad unsustainable business model that no one is forced to participate in. I just traded in a '19 CRV and got almost $2k more from the dealer than Carvana offered and within $400 of the CarMax offer. With the tax break it was the right thing to trade it to the dealer. I had it advertised for a week on Craigslist and Facebook for thousands less than the dealer will ask, but people must be leary of private party sales. At some point Carvana has to crash and burn, I believe.
Click to expand...
I did Carvana, vroom, KBB on our 19 CRV last week. Kbb was offering $26k for a two accident, 30k mile CRV. We bought it brand new for 28 or 29 back in 2019. Lol
 
Aichiguy said:
Carvana lost half a billion dollars last quarter. I don't think they're ripping anyone off. It's just a bad unsustainable business model that no one is forced to participate in. I just traded in a '19 CRV and got almost $2k more from the dealer than Carvana offered and within $400 of the CarMax offer. With the tax break it was the right thing to trade it to the dealer. I had it advertised for a week on Craigslist and Facebook for thousands less than the dealer will ask, but people must be leary of private party sales. At some point Carvana has to crash and burn, I believe.
Click to expand...
I think the problem with private sales is that a significant portion of people shopping for cars want to trade their old one in on the newer one. Can’t do that with a private sale. They would rather take the hit for the convenience of not having to sell it themselves, or they are stretched so thin they can’t float the cost difference until it sells.
 
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