Carvana’s ‘used-car vending machine’ is a novel idea (that makes us nervous)
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Backed by the used-car dealership network DriveTime, Carvana has been quietly selling cars online since January and delivering them to buyers in metropolitan Atlanta. Now, it’s inviting anyone in the country to pick up their purchased cars at a minimally staffed three-bay garage, sort of how you’d pick up a UPS package after not being able to sign for a delivery. People who come from more than 250 miles away even get a $200 travel voucher toward one-way transportation to Atlanta and can be dropped off at the Carvana garage. After a signature, the car is paid for, titled, and registered. If you don’t like your new vehicle, you can return it for a full refund within a week.
For buyers looking at late-model used cars who don’t want to risk bidding on eBay or visiting a mega dealer like CarMax, Carvana’s novel concept promises to cut out uncertainty. Each specific car is photographed with a 360-degree camera inside and out, and surprisingly, the dealer even marks the dings and lets you zoom close to inspect them on your screen. As of today, Carvana has 351 cars for sale, all of them purchased at dealer auctions. Paperwork is done behind the scenes, and the company lacks the overhead costs of salesmen or physical buildings—save for their new garage. The company says it therefore saves $1500 on every car it buys and reflects that amount in the price. It also includes a 100-day warranty, even for the cars still covered by the factory. But Carvana doesn’t share the breadth of CarMax, which can pull any car out of a national inventory and ship it to the customer’s nearest store, and it won’t take trade-ins.
But while the idea may work for people with a strong sense of trust, we wouldn’t buy any used car online—even certified pre-owned examples—without taking it to an independent inspector and taking it for a test drive. Carvana says it doesn’t collect payment until the buyer signs off on the purchase, but folks who arrange delivery rather than pickup (delivery is mandatory for distant buyers) will have to contend with a flatbed driver waiting at their home while they go out for a test run. In that scenario, we’d argue there’s just as much pressure—if not more—than at a dealer, especially without the time to have the vehicle inspected by a mechanic. And should they dislike the car, buyers who finance their purchase will have more paperwork headaches trying to cancel a bank loan, car insurance, and recouping sales taxes and other registration fees.