Collapse of Carvana; Is this the end of Bronco ADM

[AZ_Liberty]

This has nothing to do with ADM on new vehicles. This is a USED car seller versus Ford, a NEW car seller with a product that is high in demand. How would their demise mean that a high volume new vehicles ADm would go away????????

Carvana mostly sells very lightly used vehicles. And they have been selling (or at least listing) Broncos (some with under 100 miles) for 15-20k over new MSRP.

These are not independent markets.

If Carvana collapses completely, that means a ridiculous number of "used" vehicles will hit the market at an adjusted wholesale rate.

That will drive down the market price for used vehicles, which in turn will pull down the market price for new ones.

But, they only have about 160 Broncos listed. So I wouldn't expect a huge impact.

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[Area51BS]

Will have no effect. I was just this morning ready to head into dealer for a 47k Bronco. They sent me the price and info. Upon setting up appointment before driving 3 hours I was informed it will be an additional 20k because it’s the only one they have.

 

[springer]

My understanding is that Carvana’s real issue is HOW it does its business more than anything

To oversimplify it, they’re basically the GameStop of used cars. They pay for a used vehicle…sometimes too much, and resell as high as possible. Similar to Carmax, but without any of the good things that Carmax has to offer.

Over time, they build a business model that was dependent on higher than normal margins.but never really profit.

As the used car market has dried up, they’ve lost access to their cheap inventory and they’re having to purchase at values far higher than normal, and actually overpaying for cars, hoping to be able to sell at overinflated prices, but in the end, shrinking their margins beyond what can be sustained.

There have also been many accusations that Carvana has some “questionable” business practices as well

I'm shocked, shocked that a car dealer would be accused of having questionable buisness practices. Just shocked indeed.

 

[springer]

I'm shocked, shocked that a car dealer would be accused of having questionable buisness practices. Just shocked indeed.

 

[Lowcountry Bronco]

I'm shocked, shocked that a car dealer would be accused of having questionable buisness practices. Just shocked indeed.

I'm shocked, shocked that a car dealer would be accused of having questionable buisness practices. Just shocked indeed.

Wow, doubly shocked!

 

[jaboticaba]

Might be some inventory coming soon.

“Since announcing its quarterly results on Nov. 3, Carvana (CVNA) shares have lost 44% of their value and are currently trading at $8.06 versus $14.35 on that day. This translates into a decline in market capitalization of approximately $1.1 billion in two weeks. Carvana currently has a market value of $1.43 billion.”

https://apple.news/AM2671y5OTTuHTrTG7jvcfA

Carvana is actually a grain of sand in the Ford Bronco or new car market ocean

 

[Bronc_Bronc]

This might affect used car prices if Carvanna stops over paying for cars sight unseen. I could have had a dead body in the back of my car when I sold it to Carvana and it would have sat there until the car was sold again.

I don't think Carvana was ever interested in buying/selling cars. I think a good comparison to Carvana would be Movie Pass, which was buying movie tickets at full price and then giving its subscribers unlimited movie tickets a month for $10. They bought enough full price movie tickets to buy the Empire State Building seven times over.

Movie Pass never intended to make money from subscriptions/membership fees. They were only interested in securing enough from venture capitalist to pivot into something else - which they almost succeeded in doing by becoming Movie Pass Films and creating their own content like Netflix and Hulu. What they didn't expect is for the theaters to block their ticket usage and the company crumbled because subscribers dropped like flies because they were no longer given what they were promised (even though they were still paying for the membership with only one movie a month.) Bad press followed and venture capitalists moved on.

Had that not happened, or Movie Pass been on top of monetizing their member data it would still be around. Possibly with it's own movie theaters.

Maybe Carvana and Movie Pass can merge and turn Carvana car lots into drive-in movie theaters where you watch a movie in a used car.... DM me if you're interested in investing!

 

[j930]

carvana is not affecting the cost of broncos. its lack of parts to build things as fast as we were before covid. when supply catches up to demand all things will be back to the way it was. with inflation rising as it is and interest rates back to pre covid levels that will also start to eliminate the market adjustments. and then you throw in the fact that the free money being handed out over the past two years has dried up.. I would bet by late spring early summer dealers will be negotiating again on cars. money has been basically free for the past 2 years. those times are done for now. dealers that were screwing customers on there broncos by not honoring deals and raising costs will be choking on inventory again.. nothing lasts forever.

 

[Jay1Clarke]

Unfortunately it will likely be a while before Carvana inventory hits the market at a largely reduced price. They can operate under bankruptcy protection for a long time. They may drop prices a little more (they are a bit lower than they have been for Broncos), but I think a more likely scenario is someone else buying their platform while they are heavily distressed. If a Penske, Hendricks, Sonic, etc were to snatch them up they wouldn't undercut their existing franchises by liquidating the Carvana inventory at a huge discount.

Now if no one steps in to buy Carvana at a huge discount, Carvana themselves may be forced to drop prices much more than they have been. Watch what they are buying (or really what they are not buying) to get a glimpse into how quickly this may happen.

If you look at Carvana’s portfolio and recent acquisitions you’ll find this is more than just their dealerships and buying cars. They recently acquired the 2nd largest auto auction. They have cash for sure, but these threads seem to be misinforming, as they are bigger and had bigger plans than any response shows here.
They are in a tough position and will take a lot to get them out of that.

 

[LostInArizona]

My understanding is that Carvana’s real issue is HOW it does its business more than anything

To oversimplify it, they’re basically the GameStop of used cars. They pay for a used vehicle…sometimes too much, and resell as high as possible. Similar to Carmax, but without any of the good things that Carmax has to offer.

Over time, they build a business model that was dependent on higher than normal margins.but never really profit.

As the used car market has dried up, they’ve lost access to their cheap inventory and they’re having to purchase at values far higher than normal, and actually overpaying for cars, hoping to be able to sell at overinflated prices, but in the end, shrinking their margins beyond what can be sustained.

There have also been many accusations that Carvana has some “questionable” business practices as well

Your understanding of their business model is a bit misinformed. Like almost every other dealership they make more money in the financing, extended warranties, etc., than the margins on the cars. Those margins really have very little effect on their overall financials, relatively speaking. Availability obviously has an effect, but only because more selection means more traffic, i.e. more buyers financing.

Having worked there, I wouldn't say their business practices are "questionable." I would be more inclined to say that, due to the fact that much of they do is automated, it's very impersonal and a lot of people think they're intentionally getting screwed when it was just a glitch in the system, or a mistake on behalf of individuals that have likely never talked to a customer.

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