Carvana is a racket!

[PDXSSCE]

Originally Posted by DrLove38

Local GMC dealership offer me $11,000 for my 2013 SS/RS with 2500 garage kept miles Camaro.

Is that two thousand five hundred miles?

[DSMer1]

Originally Posted by Overflow

Went to go see... Carvana offered me $12,000. NADA offered $15,500. KBB offered $16,500.

Originally Posted by Overflow

No one said KBB or NADA purchase cars. But 9/10, dealerships base car trade in values on either KBB or NADA.

Very few dealerships, less than 1 out of 10 base trade in value on kbb or nada consumer guides. It was common to use Black book. Now it's more common to use MMR. This is a online system that allows you to review the recent weeks results from Manheim auto auctions (the biggest chain of auto auctions in the US) on the exact same or similar cars to what you are evaluating. You see this gives closer to a actual cash value, that way if they needed to unload it for whatever reason (not selling, not the right kind of car for their lot, they need the cash flow), this is close to a number they can actually get for it at the auction. Furthermore, this is a number closer to what they can go to a auction and buy the car for. They don't want to pay much more than they can sell it for or buy it for at the auction. There's a little room there to close a deal on another unit and savings in buying cost and transport costs but this generally what a good used car manager bases his numbers on.
Both black book and access to MMR data is something the general public dosen't have access too.
This might not be the way most people have decided it works in their head, but it is the facts of how this part of the business is done

Carvana probably has some algorithm that factors black book values, MMR reports and then errors on the low side to spit out a instant number

I'm not trying to argue with you, just providing real hard facts about how the business works. I know a little bit about this ��. My information is based on doing it for many years, for large cooperate dealerships and small time one location Independents.

[Mydivorcegift]

Originally Posted by DSMer1

Very few dealerships, less than 1 out of 10 base trade in value on kbb or nada consumer guides. It was common to use Black book. Now it's more common to use MMR. This is a online system that allows you to review the recent weeks results from Manheim auto auctions (the biggest chain of auto auctions in the US) on the exact same or similar cars to what you are evaluating. You see this gives closer to a actual cash value, that way if they needed to unload it for whatever reason (not selling, not the right kind of car for their lot, they need the cash flow), this is close to a number they can actually get for it at the auction. Furthermore, this is a number closer to what they can go to a auction and buy the car for. They don't want to pay much more than they can sell it for or buy it for at the auction. There's a little room there to close a deal on another unit and savings in buying cost and transport costs but this generally what a good used car manager bases his numbers on.
Both black book and access to MMR data is something the general public dosen't have access too.
This might not be the way most people have decided it works in their head, but it is the facts of how this part of the business is done

Carvana probably has some algorithm that factors black book values, MMR reports and then errors on the low side to spit out a instant number

I'm not trying to argue with you, just providing real hard facts about how the business works. I know a little bit about this ��. My information is based on doing it for many years, for large cooperate dealerships and small time one location Independents.

Truth.

Kbb and nada are way off for what a dealer has in a used one. The “rough trade in” value is a much closer offer. There’s exceptions of course but for what we are looking at (Around 08 Jeep Liberties and 07-10 Dodge Nitros) with 100-150k miles on them no way they have more than 2-3k in them.

Now in some cases there’s other costs. Maybe they changed the oil, maybe they had to put tires on it, a detail of your lucky.

DSMer1 I love to hear your thoughts. Pm me if better.

[DSMer1]

I haven't even touched on trying to steal the trade!
You see the number they show you that your getting for your trade is very seldom the actual cash value of the car (the real number your getting that you will never know).
Very often they show you more for your trade than the acv, this in the end is a discount on the unit you are buying that you don't see.
Example;
Your trade is worth 12500 acv
You close the deal with them showing you 14000 trade in
The car your buying is 20000 after you negotiate
You actually got 12500 for your trade and paid 18500 for the new car but if it makes you feel better they will present the number to you as 14000 for your trade and the new car is 20000. Whatever it takes to make the numbers work for you. It is all the same when you break it down.

There are other times you can steal the trade to increase you gross profit. Say the used car manager hits the car with a acv of 14k, you show the customer 10,581. He negotiates and gets you up to 12k for the trade. The acv is still 14k and you just increased you gross profit in the deal 2k. The salesman is typically paid a percentage of the gross profit unless your at one of these pansy ass order taker no negotiation dealers. Than your salesperson is really just a order taker and someone to talk to, at best. But don't be confused, they still do all the same things an the no haggle dealers, usually a harder penetration on the trade in. They salesperson just isn't being cut in as well on the profit. The desk manager and up is still making good money.
There is nothing wrong with any of this, it is business. Be informed so you can try your best to level the playing field.
The funny thing is, when you go to Best buy and buy a TV, they are most likely doubling their money on it, gross. Walmart, you better believe they are doubling their money at a minimum. Nobody complains about that. A car dealer stocks 20,000-100,000 per unit inventory trying to avarage $2500+ gross front end profit each and people act like they are the devil, lol.
Every customer wants to screw the car dealer and they get mad when the car dealer wants to screw them harder.

[pyroguy]

Part of the reason why I say Carvana is a racket is because of a "real world example" I have. My Dad traded in his 2010 Ford Flex on a "certified pre-owned" 2015 Ford Flex. Before going into the dealer with his 2010 Flex he had 2 new tires on it (with the others being nearly new), had the interior detailed, and had a slew of service records showing the meticulous maintenance record on it. With all of that, the sales guy said that the car was literally ready to be put on the lot with a quick once over in the shop just to make sure nothing was hiding mechanically, but with the car already detailed and ready to go he gave my Dad "high" trade in value, approximately $7,500. Obviously a dealership needs to make money and it costs money to run the car through the shop for a quick once over, put the vehicle into inventory, etc. A day or two later my Dad saw his Flex sitting on the lot for $11,000 or $11,500 (I only remember the $11k part for certain). Your natural reaction is to be upset that they're now selling his car for $3,500-$4,000 more until you think about what they actually "have in it" and what they will likely end up settling for, likely somewhere around $10k if negotiated well. The car sold that afternoon.

Not every used car has a story like this obviously. However, Carvana is a "no haggle" site, with no sales people, no sales managers, no finance people, very few lots and the ones they have are small towers of cars so small amounts of real estate, minimal overhead, and yet they want to take an $8,000+ bite (45% margin) out of the value of my car, as the example for Carvana, and this is supposed to be acceptable because we can buy and sell a car while binge watching tv? That's one hell of a convenience tax and incredibly STUPID (for the consumer) to buy a car without seeing it, test driving it, and likely not even paying full attention to what you're doing IF you really are watching tv while buying your car.

[BMR Sales]

If a Dealership doesn't make money they are out of business. Should you be upset if they Asking $3500 for your Dad's Flex - No. Whether you think they didn't need to run the car through shop doesn't matter, it still needs to be done. There is Overhead, Floorplan Monies for the cars, processing Costs when it sells, etc.

Individual Car Flippers make profits without the Overhead!

[pyroguy]

Originally Posted by BMR Sales

If a Dealership doesn't make money they are out of business. Should you be upset if they Asking $3500 for your Dad's Flex - No. Whether you think they didn't need to run the car through shop doesn't matter, it still needs to be done. There is Overhead, Floorplan Monies for the cars, processing Costs when it sells, etc.

Individual Car Flippers make profits without the Overhead!

That was my point. $3,500 is one thing, $8,000+ for a place like Carvana that doesn't have anywhere near the overhead is outrageous.

[Iron Lung Jimmy]

If Carvana's margins are outrageous and nobody deals with them they will either lower their margins or go out of business.

Apparently what they are doing is working for them so far.

The problem here - if you want to call it a problem - is that you, by your own admission were never going to sell them your car. You, for whatever reason, just wanted to see what they would give you for it. And when they came in with a low number you were personally insulted.

And I get that.

But to Carvana your car is nothing special... just a vehicle they can make money on. As much money as possible. That's what they do. If someone doesn't like it they can move on. Don't take it personally.

[pyroguy]

Originally Posted by Iron Lung Jimmy

If Carvana's margins are outrageous and nobody deals with them they will either lower their margins or go out of business.

Apparently what they are doing is working for them so far.

The problem here - if you want to call it a problem - is that you, by your own admission were never going to sell them your car. You, for whatever reason, just wanted to see what they would give you for it. And when they came in with a low number you were personally insulted.

And I get that.

But to Carvana your car is nothing special... just a vehicle they can make money on. As much money as possible. That's what they do. If someone doesn't like it they can move on. Don't take it personally.

I never said that I was offended. I can see how it comes across as that, but my point was that they are outrageous in their model and the margins they are making are genius in a business sense. People are becoming dumber, lazier, or both if they are willing to let their cars go for that much of a loss for not selling them themself or even going to a traditional dealership.

My intent with posting was to let people know that if they’re thinking of selling their car with them that their margins are ridiculous and that you are leaving substantial amounts of money on the table by using Carvana. IMO, it is far worth selling a car on your own first to gain a few thousand dollars (if selling a 5th gen Camaro) or at minimum multi hundred dollars if selling something else on your own or going with a traditional dealer trade in. My dad’s car example was for a traditional trade in example, but it is similar for any scenario.

Do not mistake me as being anti-capitalism or having my feelings hurt that I got a low offer on my car. Bravo for someone for coming up with this business model and making it work. I am just astounded that people leave 45%+ of their car’s value on the table simply because they want to have an “easy transaction”. That to me just doesn’t make any sense. Hopefully as Camaro family this could help someone out to avoid a costly mistake.

[BMR Sales]

Originally Posted by pyroguy

That was my point. $3,500 is one thing, $8,000+ for a place like Carvana that doesn't have anywhere near the overhead is outrageous.

but smaller lots without the Volume need to make $$ to keep the doors open

[qcman]

I'm just curious if the OP included mods such as the Cam in the info he provided? If so I could see them low balling the car due to the fear of mods affecting its resale. I'm sure they would prefer a totally stock car for their business model & intended customer base. Or perhaps he didn't say it was modded but I'm just curious.

[pyroguy]

Originally Posted by BMR Sales

but smaller lots without the Volume need to make $$ to keep the doors open

The lot I was referencing was one of the biggest in the region. It’s great if you can make $1 million selling 1 item, but you’ll make the same money making $1 million selling 1 million items.

Originally Posted by qcman

I'm just curious if the OP included mods such as the Cam in the info he provided? If so I could see them low balling the car due to the fear of mods affecting its resale. I'm sure they would prefer a totally stock car for their business model & intended customer base. Or perhaps he didn't say it was modded but I'm just curious.

I did mark it as having aftermarket parts. That was the extent it asked for was if it had aftermarket parts. I could have had only a cold air intake or have a 3,000 hp race car and the option to show how many modifications is the same on their page.

[Mydivorcegift]

Originally Posted by BMR Sales

but smaller lots without the Volume need to make $$ to keep the doors open

Understood.

But what I've run into lately is just ridiculous at these small lots. They are basically sitting around waiting on a sucker to come in (which may never) vs taking some profit now. The longer a car sits, the more it costs.

I went and looked at a car yesterday...priced at $6995. $700 over clean NADA retail. It was "ok" but nothing to write home about with regards to condition. Figured based on "the books" he had bought the car for $3000-$4000 at auction. Small lot....maybe 15 cars. I offered him $5000 cash and told him I'd right a check for the TTL. He said no...asked him for his best price. Said he'd have to $6500 plus TTL. It's his business and he can asks what he wants but I'm not "that guy".

So instead Saturday, Monique if flying to Ohio to buy the same car. Has 8k more miles but is 3 model years newer. So in terms of "book value" it's a wash. Buying the car for $5000 plus TTL, plus $288 flight, $100 in gas to drive back, and maybe $100 food for the trip. About $5900 all in.

I worked for a man one time who had a saying....

"We don't starve from profit".

[PDXSSCE]

Originally Posted by BMR Sales

but smaller lots without the Volume need to make $$ to keep the doors open

Which is the reason they remain small lots struggling to keep the doors open. If they reduced the margin and flipped more product, not only would they make more money, the business would grow.