Is Carvana Going Out of Business?
Nowadays, if you don’t feel like buying a used car from a dealership, you have several other options. Many online vehicle dealerships handle the entire process virtually, and can even ship the car to your home. Some skeptics might (justifiably) wonder: is it really safe to buy a vehicle that you can’t test-drive until you actually buy it?
For a while, it seemed like Carvana could deliver quality cars with minimal customer complaints. However, recent events have dealt a massive blow to the company’s reputation. Could Carvana go out of business soon?
Carvana’s recent layoffs
According to a document from the Securities and Exchange Commission, Carvana just laid off 2,500 workers. The company claims that it made this decisions to achieve a “better balance between its sales volumes and staffing levels.”
However, Fox Business gives us some info that may indicate otherwise. Throughout the early days of the pandemic, Carvana focused on expansion since it was receiving massive jumps in sales.
While it utilized low-cost borrowing, this practice eventually landed the company in debt with expensive interest fees to repay. Additionally, Carvana has a practice of accounting for the profits of auto loans before selling them off to investors.
This resulted in an overestimation of revenue for the company. According to an email sent to Carvana employees, the company had also always hired more workers before they were actually needed. This strategy was apparently successful every year “until this one”.
The decision to ultimately cut 12% of Carvana’s workforce free may have also been due to its plummeting stock. According to the Motley Fool, Carvana’s stock fell by 18% last week. An analyst downgrade, new interest hikes from the Federal Trade Commission, and a shift in market sentiment were all to blame.
Carvana’s stock continues to decline by the day, currently sitting at just $37.61. This most recent decline also probably had something to do with Carvana’s reported net loss of $260 million. Since breaking the news in April, its stock has fallen by over 60%.
Carvana’s horror stories speak for themselves
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Carvana has also been struggling because of several negative experiences reported by customers. In February, it was revealed that Carvana had sold one Denver man a stolen car.
The car apparently had multiple open titles on it, but it was originally stolen from an airport in Memphis. The driver expressed his humiliation to news outlets as he watched the vehicle get towed away.
Authorities eventually released the car back to the buyer. However, their research concluded that the car had actually been declared a total loss before the buyer purchased it. Carvana supposedly performs a 150-point inspection on each of its cars before they go up for sale.
This isn’t the only instance where Carvana has failed to inspect its cars. Selling a car without a state-required suspension caused the company to lose its selling privileges in North Carolina for several months. The company also reportedly failed to properly verify insurance and didn’t always issue 30-day tags.
Carvana also doesn’t have the best customer service, even when serious issues need to be addressed. When one woman received her Honda Pilot, it had 40,000 extra miles on the odometer compared to what its title claimed. Carvana reportedly never answered the woman’s calls for concern or tried to return them.
Is Carvana really going away?
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Many Carvana customers still report positive experiences, and Carvana could bounce back from its recent losses. For these reasons, we wouldn’t say Carvana is going out of business just yet.
Even so, its recent financial issues combined with ongoing registration and selling violations don’t exactly paint a hopeful picture. If you’re looking to buy a car online soon, you may want to consider other alternatives.
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