[DrWumbo]

I'm curious how long a local small business used car dealership could last if it was unprofitable. This seems like another example of how technology doesn't 'disrupt' markets via savvy new ways of operating, so much as injecting venture capital and loss leading disrupts markets. I know car dealers that were struggling to maintain inventory during the pandemic because Carvana was driving up the price of cars at the auctions. It's a shame because it's big investors taking that inventory out of the hands of small businesses only to turn around and sell the car at a loss.

[WalterBright]

Most small businesses are unprofitable for years after they get started. Running a small business successfully is pretty darn hard. It's a lot harder than just working 40 hr/week for The Man.

Running a small business is a 24/7 operation. You don't get no vacation nor sick leave nor any sort of benefits. Everyone has their hand out to you, usually thinking that since you're a businessman you've got lots of money they can squeeze out of you.

[ralph84]

I'm playing the world's tiniest violin for car dealers who have spent the last two years gouging consumers with "additional dealer markup" as their value-add. At least Carvana bidding up the price of used cars benefited consumers selling their car. Carvana aside, the dominant players in used cars are publicly-traded dealership groups like CarMax, AutoNation, and Penske which certainly don't qualify as small businesses.

[rootsudo]

No, there is no loss. No one is selling at a loss, NADA book values increased because of more buyers, more demand from pandemic and increased marketing channels with the news saying production stopped, etc. Then the "chips" stopping production as well.

A dealership, small pop or carvana does not go into used car auctions to overbid, to sell at a loss. Car Dealerships also operate trade in strategies to grab cars to resell at below market price.

[DrWumbo]

If a small dealership has higb fixed costs and they only turn a small profit per car, and don't sell enough volume they are operating at a loss. Sure each car might not be a loss, but if you can't keep the lights on then what's the point?

Carvana is losing money. In one year their losses for q3 increased by 200 million. You can apply all the fancy metrics you want about how much profit each car generates, but you still have a company that shouldn't be able to continue business without huge investor backing.

[leonth]

A business can be EBITDA positive but cashflow negative, or vice versa. However healthly your margin is, it is game over if you are unable to service your debts (including employee salary) before you receive cash from customers/investors.

On the other hand, if you are operating at a loss, you will be able to continue doing so indefinitely via continuous cash infusion by investors (which might include the public in case of a public company)... until the cash does run out.