crack in pricing start? Carvana

[Jasonb543]

Yup...$65k 2020 GT500s by this time next year and I've had people scoffing at my prediction for months now.

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[Seanuf99]

wait wait wait wait. The kool-aid drinkers over in the Shelby forum said "nobody regrets buying a Shelby no matter how much they paid (eg. ADM) and prices were never going to come back down."

Were they wrong?

Careful Shogun... the cancel culture proponents over there may find this post and demand you be banned for saying something they disagree with.

 

[KingKona]

When Ford is building more vehicles than dealers can store on their lots, they we'll be in business again.

Right now labor shortages mean vehicle production is slowed. Gotta get past the labor bottle-neck.

 

[AZlb5.0]

Because Carvanas inventory size once they go belly up it’s going to cause waves across the used car market. But it has also come to light that investment groups like Blackrock and Vanguard are starting to buy up smaller dealerships that are over leveraged as well. So Wall Street is getting in the game as we speak. Let’s see how this plays out.

 

[Bikeman315]

wait wait wait wait. The kool-aid drinkers over in the Shelby forum said "nobody regrets buying a Shelby no matter how much they paid (eg. ADM) and prices were never going to come back down."

Were they wrong?

Maybe. 425 GT350's available now. Only 5 GT350R's and 234 GT500's.
https://www.cars.com/shopping/resul...350&sort=list_price&stock_type=used&zip=29579

 

[Cobra Jet]

Their business model (or those running it) was flawed, and they've only been kept afloat by their Lenders. Lenders get pissed when they aren't being paid back or have lended so much $$$ with little to no returns.

Example:
You can't pay nearly $50k+ for a used S550 Mustang GT, then try to resell it for nearly $60k when brand new GT's are MSRPing for nearly the same $$$ or less. Not only the GT example, but ANY used vehicle they were buying and trying to beat the Car Dealers at a game, that can't be won...

Carvana also has to be on the losing end of the vehicle delivery aspect. Fuel costs, maintenance costs, insurance costs, labor costs for the delivery trucks with inconsistent delivery destinations. I mean think about it. It's not like they can trailer out 6 cars at once and hit different areas along the way - they have to do it one by one. Leave, deliver, return, pick up, leave, delivery, return. etc.... That alone is an inefficient practice and definitely a huge loss racking up on their books.

I thought originally Caravana deliveries were "free" (or at least absorbed into the price of the vehicle), but I'm seeing Delivery fees now tacked on if out of a delivery radius. Even so, they're not making any $$$ on delivery or the logistics of it.

If car dealerships BEFORE Carvana existed thought that business model of delivering a vehicle was lucrative, don't you think all car dealerships would have been doing it?

Plus let's add in the costs associated with building giant "car candy machines" that are basically storage Skyscrapers not collecting tenant rent... That there has to be a huge loss too and excessive overhead, for what? A glass building X-stories high with vehicles collecting dust inside of it?

The only way they can recover, if possible, is to cut losses. To me that would be:
- Cease the car candy towers, bring it back down to earth like a normal Dealership. Convert them back into tenant income producing sites. Even if Carvana kept the buildings, at least they would be income producing instead of giant dust collectors.
- Start unloading stagnant inventory at lower prices to get rid of it to decrease the liabilities and get $$$ back in your Lenders pockets.
- Restructure the delivery model and get 18-wheelers or transporters that can deliver more than 1 car at a time and establish a route where the truck route is one that can deliver multiple vehicles along the way, but ends up at the next Carvana location to pick up and deliver again.
- Cut the top Exec slackers and work your way down by keeping the productive ones in the Corp.
- Stop paying exorbitant above average prices for used vehicle trade ins or outright purchases.

 

[Bikeman315]

LOL, 0% interest just means you paid for the interest up front, not over time. Which the finance companies much prefer.

I would respectively disagree. I bought my car for a price. Financing was not part of the discussion until after the deal was done. At that point I took the 0%. I could have paid cash but why. My money is sitting earning interest while Ford is paying for my cars financing.

 

[Cobra Jet]

wait wait wait wait. The kool-aid drinkers over in the Shelby forum said "nobody regrets buying a Shelby no matter how much they paid (eg. ADM) and prices were never going to come back down."

Were they wrong?

LMAO.... oh... that's funny... it's the same principle for those who think because a car sells for 6-figure+ on XYZ Auction show or site that everyone with that vehicle has "Barrett Jackson Gold" sitting in their garage.... ah... nope.

 

[shogun32]

- Stop paying exorbitant above average prices for used vehicle trade ins or outright purchases.

when your inventory/floorplan loan rate is 7-15% instead of "zero" a LOT of stupid gets cut out right quick. And the floorplan guys are ruthless.

 

[Seanuf99]

I love Carvana for 1 reason. They paid me thousands more for my then 7 year old truck than I paid for it 7 years prior.

 

[shogun32]

0% finance is an abomination. The time value of money is never zero, even in a <3% inflation environment let alone in a >12% environment. It only came about so people could "afford" the monthly nut on a rapidly climbing MSRP. Actually one hand washes the other - you pick which one is chicken, vs egg.

Now if <5% finance continues to be offered in this developing economic climate it's because the manufacturer is desperate to move units and is prepared to book varying degrees of losses in the process.

 

[ORRadtech]

I would respectively disagree. I bought my car for a price. Financing was not part of the discussion until after the deal was done. At that point I took the 0%. I could have paid cash but why. My money is sitting earning interest while Ford is paying for my cars financing.

I did much the same thing. I put a fairly large portion of the sales price in an investment account and set it up to make the payments from that. The car will be paid for in February and I will only have to add about $350 to the initial investment to finish it off.

 

[KingKona]

LOL, 0% interest just means you paid for the interest up front, not over time. Which the finance companies much prefer.

Nope.

 

[ORRadtech]

Clark Howard?

Yes, he does a couple of short consumer advice/info/warning type things on the radio news each morning. The car thing was this morning.

 

[KingKona]

0% finance is an abomination. The time value of money is never zero, even in a <3% inflation environment let alone in a >12% environment. It only came about so people could "afford" the monthly nut on a rapidly climbing MSRP. Actually one hand washes the other - you pick which one is chicken, vs egg.

Now if <5% finance continues to be offered in this developing economic climate it's because the manufacturer is desperate to move units and is prepared to book varying degrees of losses in the process.

Are you talking about dealership inventory finance rates? Or retail loan finance rates?

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