How does Carvana make money? – VatorNews

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Despite seeing revenue more than double in 2021, Carvana is still not profitable

Many years ago, my mother was buying a car from a dealership that had been on display for other people to look at and test drive. When she got the bill, she saw they had added something called a “destination fee,” which was ridiculous since the car was already on the lot! Of course, she argued with them (“what did you drive it, 50 feet?”) but I don’t remember if she ultimately paid it or not. 

The point of the story is that the car buying experience has long been broken. Nobody likes it, and it seems like everyone, ultimately, feels like they got ripped off, one way or another, to the point where around 40% of people who have bought a new car have regrets about the purchase.

Given those conditions, it’s not all that surprising that people would gravitate toward a company like Carvana, which not only digitizes the process, but also promises to be more transparent about the process. 

“We are transforming the used car buying experience by giving consumers what they want – a wide selection, great value and quality, transparent pricing and a simple, no pressure transaction. Each element of our business, from inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose,” the company wrote in its S-1 filing with the SEC, prior to its 2017 IPO.

“We provide a refreshingly different and convenient car buying experience that can save buyers time and money.”

On the Carvana platform, consumers can research and identify a vehicle, inspect it using the company’s vehicle imaging technology, obtain financing and warranty coverage, purchase the vehicle and schedule delivery or pick-up, from their desktop or mobile devices. 

The company uses algorithms to optimize its inventory vehicles, inspect and recondition them  on its “Carvana Certified” 150-point inspection process, and operate its own logistics network to deliver cars directly to customers as soon as the next day. Carvana has also rolled out vending machines for people to pick up their car.

The company has three revenue arms, the biggest being sales of its used vehicle sales directly to its customers through its website or app, which is recognized when the vehicle is either delivered or picked up.

In 2021, Carvana’s revenue totaled $12.8 billion, an increase of 129% year-to-year, and $9.9 billion of that, or 77%, of that total came from uses car sales. That was a 107% increase from 2020. The company sold over 425,000 vehicles in 2021, a 75% year-to-year increase.

The company also makes money by selling vehicles, primarily from customers who trade-in their existing vehicles when making a used vehicle purchase, and …….

Source: https://vator.tv/news/2022-08-19-how-does-carvana-make-money


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