[HN Gopher] Carvana to cut 1,500 jobs as online auto dealer's tr...
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Carvana to cut 1,500 jobs as online auto dealer's troubles mount
Author : shaburn
Score : 77 points
Date : 2022-11-18 17:52 UTC (5 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| bwi4 wrote:
| I find it interesting that Carvana's CEO is the son of
| DriveTime's CEO.
|
| https://www.forbes.com/sites/nathanvardi/2017/12/18/how-an-e...
|
| edit: space
| mattw2121 wrote:
| I've purchased 2 vehicles through Carvana, and honestly the
| process was fantastic. I feel I got a fair deal on both vehicles,
| the quality was good, and everything as advertised. I did all the
| paperwork online and when I showed up to pick the car up was in
| and out in just a few minutes.
|
| The only problem I had was that the delivery tower didn't work
| when I dropped the coin in both times. First time the car was for
| me and I didn't really care. The second time it was for my son I
| would have really liked their gimmick to work.
| davewritescode wrote:
| This is completely anecdotal but there's been a couple of times
| during COVID when I was stuck at a light next to a Caravana
| truck on it's way to drop off a car and I noticed what appeared
| to be non-trivial issues underneath the car.
|
| I just don't get how people can buy a used car without seeing
| it or sending over a professional to look at it first.
| doctoboggan wrote:
| You can return the car in within first 7 days for any reason.
| lastofthemojito wrote:
| Doesn't it feel a bit insane to do things in that order
| though?
|
| Most car sellers I've encountered will allow a prospective
| buyer to take a car to their mechanic to to be looked over
| BEFORE purchase.
|
| The biggest downside here is if you trade your existing car
| into Carvana. Sure you've got 7 days to get that newly-
| purchased car inspected, but what happens when you get the
| inspection results back and decide you want to unwind the
| transaction - Carvana will take back the car you purchased
| but they will not bring your trade-in back to you. Not to
| mention the general paperwork hassle and the hit to your
| credit score (if you're financing), all for a car you're
| not keeping.
| eddsh1994 wrote:
| I bought a Nissan Rogue two months ago with Carvana - it had
| a 7 day no questions refund, free repairs for a year, and we
| got to test drive for 30 mins before they signed it over to
| us. Overall I felt very comfortable with this purchase, much
| more than a small local dealership or even worse a stranger
| on some FB group.
| tbihl wrote:
| I buy older cars than Carvana seems to deal in, but I love
| the Craigslist and FB cars.
|
| I get to the meetup point early (better if it's at their
| house where I can make judgments from that), and then I
| watch them drive up. Talk to them for a while, see if
| they're knowledgeable, etc. Then inevitably you get a name
| over the course of messaging/texting/email, and you can get
| more insight about their background. You get to talk to
| them for a while and find out why they're getting rid of
| it. If you've gotten to the point of trusting them
| (otherwise, you're long gone), ask specific questions about
| car history, and you can have reasonable hopes that they'll
| tell the truth.
|
| Anyway, the car's been great, and he told me some problems
| that I would have taken 6 months to discover on my own.
| drewzero1 wrote:
| It's been a while since I bought a car, but this approach
| has worked out very well for me as well with every
| vehicle I've bought from a private party. Meet the
| previous owner, talk enough to decide if you trust them
| (walk if you don't), and learn about what the car's gone
| through. I'm much more nervous to buy a car from a dealer
| who usually has no idea what the car's been like aside
| from the state in which they brought it in.
|
| If there's a specific model or models I'm shopping for, I
| do some research (reviews and forums) to try to get to
| know their quirks and pitfalls so I can check for them
| when I go to see the car. I tend to over-research big
| decisions but with cars it's useful to know what I'm
| getting into and what to watch for in the future.
| dwater wrote:
| When I was shopping for a used car in late Summer 2020, Carvana
| was priced 10-20% above traditional dealerships in the area for
| same make/model/trim/year/mileage. The traditional dealership
| process sucks so some people will pay the premium for a better
| experience, but as everyone's financial calculus has changed
| recently it may be that the number of customers who want to pay
| for that experience is receding.
| matt_s wrote:
| I hate traditional dealerships, I usually would take an
| entire day off work to do the silly price/trade-in/finance
| dance because without exception it takes the better part of a
| day. The cost of using a vacation day (for a SW person) is
| close to a wash with the overhead cost of Carvana, Vroom,
| etc. They have much more selection on colors, trims, mileage,
| etc. than any local dealership and decent used cars have been
| scarce the past couple years.
|
| With the 7day/100day cushion (100 days or some # miles for
| mechanical/safety repairs like brakes) I thought they might
| be losing money because the car had issues which their repair
| firm had to take care of. Not many local used car lots are
| going to do that. Maybe they were scooping up less than ideal
| inventory and its eating away their profits with the repairs.
| disgruntledphd2 wrote:
| As an aside, it's kinda sad that you need to cost your
| vacation days (unless you're a contractor). One of the
| better EU laws is that you must take your holidays and
| can't just cash them out, which is better overall, I think.
| SoftTalker wrote:
| Just buy directly from a private seller. I've never haggled
| more than 10 minutes over the price of a car (hint, most of
| them don't like it any more than you do). Make a fair
| offer, hand over the cash, and drive home. It's the only
| way I do it now.
| benatkin wrote:
| I've had numerous heavily subsidized Lyft and Uber rides, and
| it was pretty great. I'm currently a member of WeWork All
| Access, and it is pretty great.
|
| Edit: I think I misinterpreted your review as glowing, but it
| was just stating your experience. The towers not working is
| pretty sad. It reflects the company operating in la-la land
| though.
| wcunning wrote:
| https://archive.ph/99DvI
| nlvbkdfsaldsa2 wrote:
| Had a pretty bad experience trying to sell a car to them so not
| surprising
| zachshefska wrote:
| Carvana is destined for acquisition or bankruptcy. They have WAY
| too much inventory that they overpaid for. Consumer demand has
| plummeted and new car supply is bouncing back (up 78% year over
| year). They have too much debt on their books to make the model
| work. Good thing the CEOs dad cashed out when he did.
| gbronner wrote:
| The concept is great. But the volatility in the used car market
| has been historically unprecedented, and there's no easy way for
| them to hedge this.
|
| As an FYI, I sold a car this spring for 8% over what I paid for
| it 6 years prior, i.e. it was worth about 85% of orig price
| adjusted for inflation. Today, edmunds appraises it for 45% of
| orig price adjusted for inflation.
|
| That is an insane move on a durable asset.
| bagels wrote:
| Very similar experience selling my car to Carvana last fall. I
| wish I put the obvious pieces together sooner about how they
| can't keep overpaying for cars and stay solvent.
| tbihl wrote:
| I was just looking into the market for my own comparison. I
| bought a 9 year old minivan back in January, and I can't find
| any deals quite as good as what I got (granted, I spent a few
| weeks finding that.) So I guess in my area (Virginia) I
| upgraded at a good time.
|
| I'll confirm your sale anecdote though. I sold a 16 year old
| car in May for 19% more than I paid for it in 2018, having
| driven it about 45,000 miles over that time (120K -> 165K)
| wilsonnb3 wrote:
| The concept is great but I never really saw the point of
| Carvana when CarMax already exists.
|
| Unless your plan is just to leverage easy capital to push
| CarMax and traditional dealers out of the business like Uber
| and taxis.
| gunapologist99 wrote:
| Carvana did deliveries to your home (apparently), while
| CarMax would deliver to their nearest lot, which might be a
| long way away.
| mh- wrote:
| I scrolled through Carvana inventory, picked a used car,
| purchased it, and it was delivered to my driveway like a
| week later. I live very far from any decent-sized car
| dealership.
|
| I did all this laying in bed on my phone.
|
| I have some complaints about the quality of their service,
| but the value prop is pretty amazing.
| dylan604 wrote:
| Did you get the real/legit title of the car signed over
| to you?
| txsoftwaredev wrote:
| I purchased a car from CarMax earlier this spring online
| and it was an easy process. Filled out some forms online,
| went through some questions on the phone and then had a car
| dropped off in my driveway a few day later.
| shaburn wrote:
| Carmax is an Amazing operator. Shift has now cut test drives
| at home.
| bagels wrote:
| Carvana came to my house and picked up the car I was selling.
| It was all done in a few minutes. I didn't have to take any
| pictures, just describe it on the web form, and sign some
| papers when they showed up.
| bilsbie wrote:
| Getting a quote just by entering your license plate was
| also brilliant.
| lancesells wrote:
| Certainly shocking that they are struggling with excess
| inventory and need to cut jobs.
| dylan604 wrote:
| Have you looked to see if they followed through with the
| paperwork with the state to ensure the state no longer
| thinks you own the car? One of the complaints I've seen is
| that they are woefully behind in areas like this so that
| the new "owner" isn't really the legal owner because some
| paperwork hadn't been completed by Carvana
| wcunning wrote:
| This is less of a tech layoff story and more of an overlevered
| business with crashing asset values against very difficult short
| term liabilities and no ability to refinance in a rising interest
| rate market. The real question for normal people is if Carvana
| sells off a huge chunk of its inventory at fire-sale prices, does
| that accelerate the crash in used car prices? Is March of 2023
| the right time to pick up that fun sports car since it'll be
| super affordable?
| celestialcheese wrote:
| Probably more like July.
|
| It's going to take a long time for these loans to get
| liquidated, and then processed through the repo markets.
|
| And likely the lenders will hold the repo'd asset longer if
| they can to not create a glut of vehicles. The way this really
| get's great for buying repo'd sports cars is if we get forced
| liquidations from the lenders.
|
| It's going to be a bloodbath.
| nfriedly wrote:
| According to some video I saw on YouTube, there's already a
| large number of repossessed vehicles that banks are being
| very slow to release to the market, because they want to keep
| the prices high.
| davewritescode wrote:
| That's something that works when repossessions are still
| relatively low. Right now, most people are still employed
| and car payments are pretty high on the list of must pay
| bills, right behind mortgages. It's the same thing hedge
| funds do when taking or exiting a big position, move slowly
| to avoid spooking the market.
|
| If someone like Carvana has to liquidate cars at a loss to
| keep the lights on, you're going to see a FLOOD of cars hit
| the market as you'll have a rapidly depreciating asset and
| nobody will want to hold.
| dylan604 wrote:
| >Is March of 2023 the right time to pick up
|
| I hope so. I've been without a car since just before lockdown
| in 2020, and it has been long enough (by some time now). It's
| just an insane time to buy a car, so the time without continues
| to extend. I _might_ be able to survive another 6 months ;)
| twblalock wrote:
| If that was the case, why isn't the same thing happening to
| Carmax and Vroom and the other Carvana-style used-car dealers?
|
| Used car prices are falling and I assume it would hurt all of
| them, but it seems to be hurting Carvana more than the others.
| parkingrift wrote:
| Pardon my ignorance, but why would used car prices
| necessarily impact a used car dealer? Surely these dealers
| have to pay more to buy these cars and so their margins
| should be unchanged? Or is the issue that they are buying
| used cars and prices are falling so fast that their margins
| are shrinking?
| shaburn wrote:
| Supposedly Carvana went crazy and overbid everyone for cars
| sight unseen online. This massive inventory is now
| depreciating at full percentage points on a weekly basis
| with volume way down.
| rhino369 wrote:
| Because they need to keep the cars on their lots on their
| books. If car prices drop 25% they lost 25% of the value of
| their inventory.
|
| Not that car values have crashed 25% or will.
| twblalock wrote:
| I bet they will crash 25%. On the wholesale market, that
| might have already happened.
|
| I was seeing 20-year-old Ford Rangers and Chevy S-10s
| with 200k miles listed on Craigslist for $10k a month
| ago. If you adjust for inflation that is actually more
| than they cost when they were new! Pick pretty much any
| make and model of car and you will see the same thing.
|
| Even just from looking at Craigslist occasionally I have
| noticed a significant drop in prices for used vehicles in
| the past month.
| twblalock wrote:
| They will lose money if used car prices drop because they
| will have to sell their inventory for less than they paid
| for it.
| avgDev wrote:
| Not sure about Vroom, but carmax actually performs proper car
| inspections before purchase. They are not moving fast and
| breaking things.
| reaperducer wrote:
| _Not sure about Vroom, but carmax actually performs proper
| car inspections before purchase._
|
| Those CarMax inspections are so valuable that vultures
| patrol the parking lot, and if you leave without selling
| your car, they'll follow you home and make an offer on your
| car.
|
| It happened to me. CarMax said the car was worth $8,500. I
| wanted to bring in my other car for an evaluation to decide
| which one to sell. A guy followed me to the grocery store
| across the street, approached me in the parking lot and
| started his pitch with, "I'll give you a thousand dollars
| more than whatever CarMax offered you."
|
| I asked him if he wanted to look under the hood and take it
| for a test drive or anything, and he said he didn't need
| to, because CarMax had already done the hard work for him.
|
| (My life situation changed shortly thereafter and I didn't
| end up selling either car.)
| SilasX wrote:
| Haha. In Austin I hear radio ads from a chain dealer
| (Henna) where they promise to pay you $500 more than
| whatever Carmax appraised your car at.
| SoftTalker wrote:
| Is there any evidence of this? I assumed they buy cars at
| wholesale auctions, maybe wash/clean them, and put them on
| sale, like any used car dealer does.
|
| I have asked a couple of used car dealers (not CarMax
| specificially as there isn't one near here) if they do
| anything to these cars to prepare them for sale. They just
| laugh. The margins are not there to repair any problems, so
| what is the point of inspecting them?
| avgDev wrote:
| Of course there is.
|
| I detailed cars at a dealership and my friend detailed
| cars at carmax when we were young.
|
| Used car dealers are bottom feeders in the car sales.
| They generally have crappier cars than big dealers. I'm
| sure there are exceptions. When I worked at one they did
| shady fixes and would never purchase car from one.
|
| CarMax performs multi point inspection. They have their
| own detailers, paint and repair shops. CarMax knows
| exactly what they are doing and their business model is
| sustainable.
|
| Purchasing cars ala carvana is insane. In the car groups
| people often talk about offloading cars with issues to
| carvana and them sending a tow truck to pick it up. Zero
| inspections.
| dwater wrote:
| I don't haven't been following CarMax, but CarLotz was
| another new entrant to the field that went public via an SPAC
| IPO in 2020 at a value of $1.9B that now has a market cap of
| around $24M. They are also trying to merge with Shift, which
| is in a similar state.
| dylan604 wrote:
| Noticing a trend in these "disruptors" in that they can't
| survive. I'm really not sure how CarMax and these other
| vendors are even being considered in the same category.
| shaburn wrote:
| Yes.
| rozap wrote:
| Maybe. Yes, the constrained supply caused a lot of people to
| overpay for cars, and the average monthly payment for a car
| surged over the last year. The deep sub prime folks will be
| struggling, especially as layoffs happen and people with no
| savings are stuck with a $700/m car payment. Repossessions have
| already started picking up, and there are reports of huge
| parking lots being filled with repo'd cars, and those cars
| failing to sell at auction. Obviously, if the big players can
| control supply enough, then I don't think there will be a fire
| sale. But it remains to be seen if they can accomplish that
| (I'd be surprised, I'll bet they'll have to liquidate and like
| you say, it'll all come crashing down). In any case, the
| Carvanas and Carmax type places, as well as unemployed
| consumers that have a big car payment on a soon-to-be-worth-a-
| whole-lot-less car are really in deep shit. Smells kind of like
| 2008, but this time with cars instead of houses.
|
| Source: https://www.consumerfinance.gov/about-us/blog/market-
| monitor...
| xnx wrote:
| Any reason those cars wouldn't sell at the going (probably
| high) used car rate at the time? e.g.
| https://publish.manheim.com/content/dam/consulting/ManheimUs...
| reaperducer wrote:
| _This is less of a tech layoff story and more of an overlevered
| business with crashing asset values against very difficult
| short term liabilities_
|
| You say "potato," I say "potato."
| 1123581321 wrote:
| There isn't going to be a fire sale. Their margins per car are
| positive and have only contracted about 20%. The margin isn't
| enough to sustain their business, but the cars are priced in
| line with the market. Worst case, they would restructure in
| chapter 11 and continue to operate retail as normal.
| femto113 wrote:
| The value of their inventory is plummeting and those margins
| will continue to contract for however long it takes the last
| couple of bubble years to work their way through the system.
| Maybe the brand would survive a bankruptcy, but the equity
| definitely won't, and the bondholders are going to take a
| serious haircut too.
| gopher_space wrote:
| Pandemic quality builds of large, expensive internal
| combustion vehicles at a time of soaring gas prices,
| limited parts, and rising labor costs.
|
| Parting them out might make sense.
| nradov wrote:
| Is that a joke? Parting out cars is very labor intensive
| and only makes economic sense in limited circumstances.
| Outside the HN bubble, most US consumers still want
| internal combustion vehicles regardless of gas prices.
| indymike wrote:
| > There isn't going to be a fire sale.
|
| That depends on the interest to carry a car in inventory.
| Contracting margins plus increasing "floorplan" (what dealers
| call the line of credit they use to buy inventory) rates can
| be devastating.
| 1123581321 wrote:
| If they can't carry their inventory, they'll go to another
| retailer through wholesale auction or direct buy, and show
| up for sale elsewhere at market prices. Carvana even owns
| an auto auction chain, which they bought to secure access
| to inventory but now might use to preferentially liquidate.
| indymike wrote:
| If Carvana isn't moving cars fast enough and is trying to
| liquidate inventory, just who is going to buy them?
| nradov wrote:
| Every other used car dealer will buy them. The auto
| auction market is highly liquid. Buyers have money.
| sys_64738 wrote:
| Why does an online car webpage need 18k+ employees? I don't get
| why they are so huge in employees.
| thatguy0900 wrote:
| The engineers make a fuss when you ask them to clean and
| appraise cars and make the website at the same time
| sumtechguy wrote:
| Rather detail a car sometimes than deal with Jira.
| orangepurple wrote:
| Kids these days...
| dangrossman wrote:
| The webpage is the simplest part of the business. They need
| drivers to pick up and deliver cars from every address in the
| nation. They have a fleet of hundreds of custom car-hauling
| trucks to maintain. They inspect, appraise, repair, detail and
| take 3D photographs of half a million cars a year -- that's
| thousands of mechanics, detailers, photographers. They deal
| with vehicle registration, state inspections and titling in 50
| different states and all the 3000+ counties within. At any
| given time they have 50-100K vehicles all around the country to
| track, with lots of them in motion at any given time, a big
| 24/7 logistics and regulatory problem.
| BillSaysThis wrote:
| Not every address in the nation. No availability in Hawaii,
| at least not on the Big Island.
| kotaKat wrote:
| I'd be curious to see what amount of the staff is actually
| lost and from what divisions. I doubt it'll be anyone working
| on the actual vehicle side of the business.
|
| Carvana is a DriveTime spinoff, and leverages their existing
| infrastructure for all used vehicle processing -- massive
| warehouse-style facilities designed to process those vehicles
| as rapidly as possible and stage them around.
| jchonphoenix wrote:
| Carvana likely has very few engineers. Most of the employees
| are in operations facilitating car purchasing, inspecting,
| pricing, etc.
| plgonzalezrx8 wrote:
| Bro, are you kidding me? How the cars get to the dealers? How
| is the inventory managed? Delivered? Purchased? Service
| Centers? Customer Service? Legal? Etc etc etc.... Its not "Just
| a website" and your incredible oversimplification is atrocious.
| throwaway2729 wrote:
| Can one negotiate with Carvana?
| WalterSobchak wrote:
| No.
|
| https://www.carvana.com/help/carvana-inventory/are-carvanas-...
| throwaway2729 wrote:
| That's a bummer. Wonder how many cars are sitting unsold.
| sbate1987 wrote:
| woeirua wrote:
| All of the iBuyer like companies are going bankrupt. Turns out
| there just no way to cut costs enough to make a profit in these
| low margin, capital and asset intensive industries. The idea that
| Carvana, OpenDoor, Redfin, Zillow, etc. were ever going to
| achieve something like a monopoly over their respective industry
| was laughable at best. Doomed from the moment they opened the
| doors.
| nlvbkdfsaldsa2 wrote:
| Carmax is very successful, not sure what they have to do with
| these tech companies
| woeirua wrote:
| Whoops, didn't know that they were that profitable. My bad.
| joezydeco wrote:
| They've been shut down in Illinois twice and they're still in
| legal hot water. Blame interest rates and inventory yadda yadda
| but they've been moving fast and breaking things too long. Their
| VP is facing _50+_ criminal charges in this state alone.
|
| https://jalopnik.com/carvanas-legal-counsel-ordered-to-appea...
| [deleted]
| syspec wrote:
| Meh, looks like a bunch of regulatory capture by existing auto-
| dealerships.
| orangepurple wrote:
| Failure to transfer title would make me extremely mad as a
| customer
| gbronner wrote:
| I had the same issue with Beepi. Had a friend who worked
| there -- I got the sense that complying with a bunch of
| interstate car sales was rather tricky and they often had
| issues getting through the state DMVs.
| judge2020 wrote:
| > "The State of Illinois has charged me because Carvana
| delivered a car to a customer's home," Breaux said in a
| statement provided by Carvana.
|
| Sounds like they transferred the title but it wasn't "by a
| dealer", so it was illegal. In addition:
|
| > In a separate filing on May 12, the agency charged Breaux
| with two counts of Carvana operating as an unlicensed used-
| vehicle dealer.
|
| You can of course look up the relevant code on Illinois'
| wonderful online legislation document: https://www.ilga.gov
| /legislation/ilcs/ilcs4.asp?DocName=0625...
| jmpman wrote:
| That's a huge impact to the Phoenix job market, which isn't quite
| as robust as the bay.
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