What would be your future plans for new or used vehicle purchases?
What is Carvana?
Carvana Co. is an e-commerce platform for buying and selling used vehicles. Founded in 2012 and based out of Phoenix, Arizona, Carvana's platform is like a magical kingdom for car enthusiasts! You can research, finance, purchase, and trade-in vehicles online with just a few clicks. In fact, Carvana has made shopping for vehicles so simple it operates several car vending machines throughout North America, which are basically like giant gumball machines for cars. Just make your purchase online and receive your car at one of their 34 vending machine locations or have it delivered straight to your home. Carvana went public in 2017 and is currently traded on The New York Stock Exchange (NYSE) under the ticker symbol CVNA. As of recently, the stock has been in a nose dive and there have been rumors of a merger or a buyout of the company.
So why hasn't Carvana been doing so well lately? Up until 2021, Carvana had been growing rapidly, expanding into new markets, and reporting strong financial results. But, during COVID-19, the production of new vehicles slowed down, creating a higher demand for the used vehicle market, which was initially great for Carvana. However, with quick interest rate hikes by the FED, there became less demand for new and used vehicle purchases, and Carvana got stuck with hundreds of thousands of vehicle inventory which they paid more than what they could sell for.
Why is this important to you? If you’ve been thinking of buying a new or used vehicle, this is something you might want to consider. There are several possibilities of what may happen in the near future, but if Carvana files for bankruptcy, this could potentially lead to a huge liquidation sale of their inventory, flooding the market with hundreds of thousands of lower priced used vehicles, which in turn, would drive used and new vehicle prices down.
One major company who has already dropped the prices of their vehicles is Tesla, with price cuts of nearly 20% to their lineup. Although the Model 3 didn’t receive quite as big of a price cut, it is worth noting that their new price has fallen below the threshold for the iZEV Transport Canada program.