By on November 2, 2020

Carvana dealership, Image: CarvanaAs other used car retail outfits like Shift go public in an attempt to grow their number of stores and break into the (lucrative?) used-only dealership market, established player Carvana has a different issue on its hands: There just aren’t enough used cars to buy these days.

The 2020 pandemic has restricted the supply of used cars. Consumers work from home, cancel or curtail time away and vacations, and spend money on their homes instead of that shiny new whip. Hey, those used rides are fine if they largely sit in the garage.

It’s created a problem for Carvana, which needs a lot of used cars to make its business function properly – especially as it’s been growing rapidly. New additions to the Carvana portfolio include inspection/reconditioning centers outside Columbus, Ohio, and Orlando, Florida. The company has a total of 10 such centers nationally, and by end of the year, there should be 11 in operation. In Q3 of 2020, Carvana sourced more cars than it sold, but it still wasn’t enough to fill the lots.

Carvana has grown retail sales and revenue this year but is still losing money overall. In its latest shareholder call, the company reported a 39 percent increase in Q3 sales over Q2, to 64,414 cars. Revenue was also up 41 percent, to $1.54 billion. Overall though, the company still experienced a net loss of $17.7 million. That figure was considerably better than the pre-pandemic time (remember that?) of Q3 2019 when there was a net loss of $92.2 million.

Spurned by the growth operational scale, investors are also focused on Carvana’s promising increases in profitability. At the start of 2020, the company’s stock was worth $93.81 a share, but at market close on October 30th shares stood at $185.26.

With the national supply of used cars at a low point, dealers are eager for that trade-in and will pay top dollar. But that means used car shoppers are looking at inflated prices across the board. It might be the time to stretch the life on that jalopy a bit longer, much to Carvana’s chagrin.

[Image: Carvana]

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53 Comments on “Carvana Seeks Growth of its Inventory, as Pandemic Causes Used Car Contraction...”


  • avatar
    CKNSLS Sierra SLT

    As stated-this is a problem for all car dealer both new car dealerships trying to replenish their used car inventory-and used car (only) dealerships. I was shocked to see what my 2018 Silerdao (KBB) value is on trade in. Selling it private party it depreciated even less.

    That new RAM is very tempting…………..

    • 0 avatar
      johnnyz

      My 2019 Ram has moisture in the right headlight, chrome coming off of one rim – no road rash and Chrysler will not replace the wheel! A problem with the rear brakes squeaking – the dealer replaced the pads. The tailgate does not seem to close squarely.

      Mine has air suspension and the 48 volt hybrid system. I do not want to own it out of warranty. Traded it for a Ford. See below.

      • 0 avatar

        Moving from Ram to Ford for quality is a lateral move at best.

        • 0 avatar
          johnnyz

          My last truck a 2016 F150 2.7TT, ran w/o one problem for 36k miles, until I traded it.

          I’m 53 years old, I’ve owned Chevys, Fords and Mopars. I have concluded that Ford makes the best truck.

          • 0 avatar

            Haven’t heard as many issues with the last few years of Fords, but my friends and neighbors with 5-10 year old 5.4 and 5.0 F150’s all seem to have engine issues. Really for Ram GM or Ford the real key is having a good dealer that will take car of the issues. Build quality is pretty similar. If you want no issues your better off with a Tundra, but that had it’s own set of trade offs.

          • 0 avatar
            Art Vandelay

            Im at 70k on my 15. I noticed condensation in the passenger side tail light when I got home from a long trip this week. That is my only issue with it so far if you call that an issue.

      • 0 avatar
        CKNSLS Sierra SLT

        johhnyz-
        I would not get the etorque motor, nor the large touchscreen and air suspension. All those items have widespread issues.
        The replacement of the brakes pads are not a big deal-and the tailgate should have been caught on your pre-purchase inspection. However-the body shop should be able to fix it.

        • 0 avatar
          johnnyz

          Yes, I agree that the air suspension is a long-term liability. I do not like it how it is constantly adjusting even when the truck isn’t running.

          Also, I do not like the electric running boards. You do not realize how often you go into your truck everyday and have that mechanical device go up and down.

          both features are great parlor tricks and good show offs for your friends. but yes, long-term reliability will no doubt suffer.

          Those issues and the uneven wearing tires on 22-in wheels are the primary reasons I’m trading for a F-150 without as many bells and whistles.

        • 0 avatar
          johnnyz

          Even the cheaper trucks now have a 8-in screen, the higher end has a 12-in screen.

          My new Ford will have 18-in wheels, not 22s. Conventional suspension not air.

          No stupid electric running boards.

          However I did splurge on the automatic cruise control – once you have it you will love it!

          Also, Ford wants an extra approximately $1,000 to make your car upgradable next year when the drives by itsself programs are available. I’m not going to invest in a package that I can’t even test drive. Plus there’s probably a monthly subscription f that.

  • avatar
    SCE to AUX

    They’re very close to profitable, so no worries there.

    The Big Three should be reading the tea leaves, which say that people are gravitating toward the no-hassle, no-dealer sales model. Carvana and Tesla – for instance – were perfectly equipped to deal with sales during the pandemic, while the traditional dealers couldn’t cope. Carvana is basically a DoorDash for car sales.

    Meanwhile, the NADA pursues a PC more-than-equal opportunity agenda, just to please unknown benefactors.

  • avatar
    volvo

    Whenever a business or employer says that they cannot find needed materials or trained people it means to me they are unwilling or unable to pay the amount needed to get those resources.

    Maybe their business model might not be sustainable when forced to pay the true market price for those used cars.

    As you state in the article who is purchasing a new car when the replacement is not needed for one’s current business or lifestyle.

    It wouldn’t surprise me if a long term effect of this pandemic is a return to one car families with the car only really needed for shopping and leisure travel.

    A new car means new payments, higher insurance, plus increased use taxes and registration fees.

    • 0 avatar

      But it also means brand new car with latest design and technologies and smell of a new car.

    • 0 avatar

      Car sales are actually doing pretty good considering unemployment etc. Instead of going one car lots of families seem to be buying trucks to pull RVs and boats. Plus lots of former transit users are buying cheap used to cars to avoid riding the bus.

    • 0 avatar
      watersketch

      Not ready to go to a 1-car family but we did drop down to a 2-car family and have had no drawbacks so far.

      Did notice that the Carvana prices were pretty good compared to other used car prices and would use them next time. Ended up selling privately but it was only barely worth the hassle.

    • 0 avatar
      Imagefont

      Carvana, the latest Ponzi scheme. Legitimizing the seedy, sticky, slimy world of used car sales. Buy low, sell high is the name of the game, at all costs.
      This reminds me of the world of coin collecting where companies were selling slabbed pre-graded coins. In fact, all the grades assigned were one grade higher than they should have been, because that’s how you make money – you steal it.

      • 0 avatar
        indi500fan

        Carvana advertises heavily on Craigslist around here and their prices are at least 20% above market. Are people that gullible to grab for the “vending machine” and the delivery trucks?

        • 0 avatar

          About 6 months ago Carvanna pricing was pretty competitive near me, now they seem over priced. Seems like they have the volume now trying to get the profits to work.

          • 0 avatar
            28-Cars-Later

            I’ll point out if they sat on inventory from earlier in the summer and there was a price correction, yes they would be “over priced” post correction. No idea who manages their inventory but I doubt each location has a UCM, so it would be very easy for a regional or even national UCM team to overlook age of inventory in some locations. I would simply filter based on acquisition date in a query or Excel and dump non-niche product after say 50 days, but ya know I’m a dinosaur and all.

      • 0 avatar
        CKNSLS Sierra SLT

        johhnyz-
        I would not get the etorque motor, nor the large touchscreen and air suspension. All those items have widespread issues.
        The replacement of the brakes pads are not a big deal-and the tailgate should have been caught on your pre-purchase inspection. However-the body shop should be able to fix it.

  • avatar
    jkross22

    For anyone leasing a car, check the residual value in the contract. If your lease is coming due in the next few months, there’s a good chance to pocket a few grand by selling the car for market value.

    You’ll also be giving someone a better deal than what they would have gotten at a dealer

    • 0 avatar
      Scoutdude

      Good point, lots of leases are probably worth buying out, either to keep, sell for a “profit”. Especially if you haven’t been driving it much for the last 6 months as it is likely that you haven’t used up all the miles you payed for in the lease.

  • avatar
    jack4x

    I just plugged two of my cars into their instant offer tool and in both cases got offers back below 70% of the NADA average trade in value.

    They sure don’t seem very desperate to me.

  • avatar
    Tele Vision

    I’m 50 years old and have only owned one new car. Even before YouTube it was fairly easy to effect most repairs with a decent set of tools and some time and a swear jar. In these days of $100,000 trucks it’s insane to not keep an older car running well. Financially and environmentally you’re ahead of the game; especially with no 96-month note on a depreciating asset that will keep you upside down forever.

    • 0 avatar
      Imagefont

      Man you said it. I’ve got a garage full of tools and I can pretty much fix anything. I travel for a living but usually on an airplane and I’ll be darned if I’m going to buy an expensive new car so it can depreciate in an airport parking lot.

    • 0 avatar
      CKNSLS Sierra SLT

      Tele Vision-
      I get rid of my cars before they hit 100,000 miles for both resale purposes, and because I don’t wish to “wrench” nor pay for repairs.

      On my of my vehicles-because you have to partially disassemble the top end of the motor to change 3 rear plugs-the dealer charges $400.00 for a plug change (parts included) at 100,000 miles.

      • 0 avatar
        Tele Vision

        @Imagefont and @CKNSLS Sierra SLT

        Both valid points to me.

        I like working on cars so it’s usually no big D – unless it’s transmissions: I haven’t gotten that far. A good floor jack; some jack stands and ramps; and $400 worth of tools have saved me thousands in paid repairs. Tens of thousands, perhaps.

        That said, my Dad had worked on most of his cars since his first one in Ireland: an MG TD. I remember helping install headers on a Chevy van when I was 12, for instance. Plugs and wires on station wagons; oil changes on everything; etc. Myriad part replacements. When he retired he became a dealership fan, weirdly. His stated reason was that it placed all onus on the dealer but I think he was just old and rich enough to be able to afford dealer rates and not have to slide under his now-new cars on a creeper. A complete 180 degree turn from what I’d grown up with.

        tl;dr – I respect both schools of thought. Wholeheartedly.

  • avatar
    johnnyz

    I’ve had a 2019 Ram Laramie Longhorn- loaded, air suspension, electric running boards, four-wheel drive, hybrid system,. 22″ dubs etc. Pd $57k. That was 26 months ago. 27k miles.

    I just took it to my Ford dealer, got $45.5k trade in on a 2021 F150 Lariat level 3- loaded but without the gizmos on the Ram. Being built and hopefully deliver it by New year’s.

    11500 cost for 27 months, that’s $425 per month depreciation. Not too bad for a vehicle of that stature.

  • avatar
    Lie2me

    “With the national supply of used cars at a low point, dealers are eager for that trade-in and will pay top dollar. But that means used car shoppers are looking at inflated prices across the board.”

    Doesn’t this make it a wash? I just bought a used car. I traded my old car in. Although I paid what I thought was a fair, but not super-bargain basement price for the car, I got a generous trade-in for my old car. Bottom line out the door was a pretty good deal. Isn’t that what matters?

    • 0 avatar
      redgolf

      Time to watch the movie Used cars – ” Rudy Russo Sells a Centurion”, he lures a customer in from the lot across the street with a $10 bill on a fishing line! ;-) YouTube
      https://www.youtube.com/watch?v=ZQiTRQTiMGY&ab_channel=IanDenchasy

    • 0 avatar

      It depends. Buying your first car or not trading in stinks right now. It’s not really a wash in most cases.

      • 0 avatar
        jh26036

        It’s really highly dependent on what you buy.

        You want a SUV or truck that is in high demand, then yes, you’re fighting for inventory.

        Economy car/sedans, there are still deals to be had both price and aggressive finance rates.

        • 0 avatar
          Lie2me

          True, I was trading equals, an older version for a newer version of the same car. Had I been trading an old sedan on a newer Jeep or truck I doubt if the deal would have been as good

        • 0 avatar

          Even the cars are getting dragged up in the used market, I have been on and off looking for a cheap used commuter and it took a while but prices are now trending up on those too. 8-9k 4cyl sedans are now priced at 10k or a little over.

          • 0 avatar
            jh26036

            I mean I don’t know how old of a car you’re looking at.

            But in my area, a brand new 2021 Corolla LE is selling for $18,500. A 2020 Elantra base model in the mid $15s range.

            These are excellent value for a brand new commuter with full suite of safety features.

  • avatar
    Jeff S

    I bought a used 2008 Ford Ranger late last June for a very good price but it needed a paint job, rear bumper, and new tires. Since I bought it the same truck is near double what I paid for it.

  • avatar
    JMII

    Per CarGurus used car values are up 7% year over year. My C7 is worth the same as when I bought it two years ago due to lack of C8 inventory. Since new car sales are down used inventory is low. So trading in an old car and getting a new one in the current market is advantageous. Plus the whole buy online & avoid interacting with people has put Carvana in a good place.

    • 0 avatar

      Yes was going to say this one of the bright spots is if your buying brand new with a trade in. It’s really the used stuff that’s overpriced. Like my inlaws looking for a 2-4 year old 3/4 ton, told them I would wait a while pricing is crazy.

  • avatar

    I agree new sedans are still a value but a year ago I was seeing low mileage under 50k 3-4 year old sedans like Elantras etc trading well under 10k (like 7-8k) now they are 10-12k and it makes more sense to go new like you said. In fact my neighbor just got two new Kias swapping his wife’s and his Hyundai’s at the same time because they gave them great trade in and great deals on the new ones.

    • 0 avatar
      jh26036

      I always find it a little tough buying used Korean cars, it has to be significantly cheaper than new to be justifiable. You immediately lose out on the 10 year powertrain warranty unless you buy a CPO, which ends up jacking the price back up. At that point, might as well go new and enjoy some cheap financing while you’re at it.

      • 0 avatar

        For me it’s about depreciation since I pile on the miles. I prefer trucks so if I’m getting a car, I prefer to have some nice options in them or sporty. With a compact car new a mid to high trim gets you to 20-23k out the door. If you can pick up a used one 4 years old with less then 50k miles for 10k and your driving to 150k miles, at 20k miles a year you will have a $3500 car when your done. If you did the same with a new one bought at 20k, you will have a $5,000 to $6,000 at the end. So you end up saving 6-7k over the use of the car. Now with used cars more expensive and new ones staying the same and financing thrown in, that’s alot closer. I’m in no rush so I will wait for deal, I also work on my own cars so the Warranty is worth a bit less to me. If some one just wanted a basic car and didn’t do their own work steering them to the cheapest version of the new car as possible makes more sense.

  • avatar

    Pricing algorithms on used cars must be a pain in the ass. I mean I used to do pricing for used boats back in the day and man it’s tough to keep track of anything outside a local market. Although I suppose there are plenty of data points to pick from with cars. I know there is an old saying about dealers moving old inventory cheap, but around me most don’t seem to care much. There are some exceptions (my previous XC-70 the dealer for sure wanted to move and even mentioned paying off the floorplan when we made a deal) but I think since many of the dealers have been around for ever and own the real estate etc, they have less sunk costs and floor-plan less. Very few seem to want to move on cars that have sat on for 6 months. Our pilot sat for almost 6 months and we did get a good deal they really weren’t as aggressive and it took alot of back and forth to get there.

    One dealer less then a mile from me is notorious for this he owns the realestate and hardly ever floorplans. He deals in mostly 1/2 ton and larger tucks about 8-15 years old, always priced high. I have watched a staggering number sit for 6 months sometimes well over a year and he won’t mark them down. But eventually they do sell, or sometimes not he has a back row of trucks he seems to keep when they don’t sell. Last time I drove by he had a 2000 ram 3/4 ton gas in mint condition he tried to sell for a couple years but now sits in the back row. A family member who works at a wholesale auction once mentioned he seems to mark the trucks 30-40% over what he pays for them so I assume when they do sell he makes good coin but it seems a poor business model.

  • avatar
    Sigfried

    I recently upgraded my wife’s car. I started out looking for a 3-4 year old car with 30-40,000 miles so I could pay off a 5 year note before it hit 100,000 miles. What I found was that dealer’s typically were asking 80% of the price of a new car for the three year old model. If you figure a 10 year life span that means spending 80% of new for 70% of the life of the car. Or to put it differently, holding the car till it’s 10 years old without taking into account residual value, buying a used car for $24,000 meant paying $3500 a year for seven years of use while buying new for $30,000 meant paying $3,000 a year for ten years of use. After I decided buying used wasn’t a better value than buying new, my wife got a new 2021 Honda Pilot EX.

    • 0 avatar
      volvo

      I agree.

      If you are buying rather than leasing and plan to keep the car for say 10 years then current used car prices do not make that much sense. In your example the only reason for buying the used is if you absolutely cannot afford that extra 20-30% price tag. This has been a problem for a number of years. As a buyer you almost always can get a better discount on a new car compared to a used car of the same make/model.

      Even then that 3 year old car will not have the warrantee protection against unexpected failures that the new car will and might have a questionable usage history.

    • 0 avatar

      Funny similar here but different result. Started off looking for my normal cheap car for cash decided market sucked looked at 5-6 year old cars for my wife. Decided she wanted a Pilot. Looked for a while and considered new (lease deals were better then purchase deals in my area.) But since my wife does not like to change cars often (last one she drove for 11 years and 95k miles) and no warranty does not bother me we bought a 2016 EXL for $18.5k with 75k miles instead of 35k new so half off. Also a consideration is my state charges property tax on cars and new vs used would be almost another 800 bucks a year in property tax.

      • 0 avatar
        Sigfried

        As a cash deal that’s workable. Half of new for half the life of the car, albeit the half with no warranty, lower reliability and higher maintenance costs. Adding in saving on capitalization expense and personal property tax makes it a wash.

        I started out wanting to get something 3 years old with 36,000 miles for $18k. That’s the deal I achieved with my 2013 Outback 4 years ago. But what I found in the current market for $18k was more like what you got – 5 years old with 75,000 miles. In my case I had about $5k cash and a trade worth $2,000. That wasn’t enough to get me anything appreciably better than what I had. So an $18k car would have meant payments until the car was well past its prime. I can afford payments or I can afford repairs but I hate having both at the same time. As I worked my way up the ladder I found the late model car I wanted was more in the $24,000 range for a base trim or closer to $29,000 in a higher trim level. After two months of searching I came to the conclusion that what I wanted didn’t exist for the price I wanted, so I resigned myself a new one as the better value even though it was a higher price.

        • 0 avatar

          I think alot has to do with what you see as acceptable risk. So this was my first car I have financed and first over about $6500 bucks. I normally buy cars for cash and drive until they are dead or close to dead. The Pilot replaced a 20 year old Durango we had owned for 11 of those years with almost 200k miles on it. Given that most of our cars over the past 20 years have been 10-15 years old with no warranty a 4 year old car with a 6 month warranty was a big improvement. Given that repair costs on a 20 year old Daimler Chrysler product were under 500 bucks a year the risk on a 4 year old Honda seems low. I put down around 5k and financed the rest, it gets driven about 7k miles a year so we will have a year of payments (maybe less) still when it hits 100k miles but we will be no where near underwater so that matters little to me. I have driven lots of older cars, and everything I have owned built after about 1990 has lasted to 150k miles with little major trouble (other then the AC system on the Durango) so again acceptable risk.

          I actually did try to push my wife into leasing a new one( which over 3 year of ownership would run remarkably similar) but she said she did not want to change cars every 3 years and preferred to buy what she wanted and not worry about lease turn in. Buying new would have made the monthly payment more then I would have wanted.

  • avatar
    Sigfried

    It’s all about trade-offs. I give up this to get that. There is always some feature or nicety that only costs a little bit more. But once you start up that path it’s tough to know where to draw the line.

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