A customized Carvana truck, used for home pickup and delivery.
Carvana, the e-commerce platform for buying and selling used cars, bounces back strongly in terms of sales volume and margins after recent, industrywide reversals in the used-car space.
In the third quarter, Carvana sold its 2 millionth used vehicle, since launching in January 2013.
“It took us nine years to reach 1 million. It took two-and-a-quarter years to sell the next million,” said Ernie Garcia III, Carvana chairman, president and CEO.
Phoenix-based Carvana reported retail unit sales of 108,651 cars and trucks in the third quarter, a 34% increase vs. the same quarter a year ago. Year-to-date through September, Carvana retail sales were 301,969, up 27.5%, the company said in an Oct. 30 earnings report.
Nationwide, the used-car space has been through a lot of volatility. To a great extent, the turbulent used-car market is a result of the drop in new-vehicle production since 2019, due to COVID-19 shutdowns, and resulting supply-chain problems, especially a shortage of computer chips.
Fewer new cars being built means fewer trade-ins to be resold, fewer “nearly new” used cars on the market, and more new-car customers buying used cars instead. Those factors all drove used-car prices to record highs.
That was good news for selling used cars, but bad news for buying them, and selling them for a profit. Wholesale used-car prices have gradually come down from those record highs in the last two years, and for the industry, that’s helping retail margins on used vehicles. However, wholesale prices are still high relative to before the pandemic.
Carvana’s quarterly retail unit sales peaked in the first quarter of 2022, then mostly fell before turning around this year.
While Carvana is known for its e-commerce platform, with no traditional used-car dealerships, it has a much bigger physical infrastructure than meets the eye, behind the online customer interface.
Carvana’s used-car “vending machines” are an important part of the brand image. They were in 39 locations as of July 31, 2024, the company says. Its customized flat-bed trucks, which customers can opt to use for home pick-up and delivery, are also becoming a familiar sight in many markets.
“Us selling 2 million cars means we are also buying 2 million cars from the customer. This experience plays a role in the speed at which we deliver this experience to customers,” Garcia said.
As of Oct. 23, Carvana said it offers same-day delivery in parts of 16 states. In addition, home delivery and pick-up of purchases and trade-ins is offered in more than 300 U.S. markets, the company says.
In Feburary 2022, Carvana bought 56 wholesale, used-car auction facilities of the ADESA auction firm, from KAR Auction Services Inc., for $2.2 billion. That greatly expands Carvana’s ability to store, distribute, and recondition used cars for resale. KAR was later rebranded to OPENLANE.
“We need to grow our infrastructure,” Garcia said.
“Our part of that is the goal of getting access to that infrastructure — to support scale, and being closer, physically closer, to our customers. We can launch same-day delivery in a market if we are sufficiently close to them. That’s checking every box. It’s also great for business, if we don’t have to move cars so far,” he said.
