Back in April of this year, they bought my 5-year-old car for $600 more than I had paid for it new. Anecdotal, sure, but somehow I’m not surprised their business is struggling.
I knew I should have shorted them. One of my biggest investing regrets.
Beyond the MoviePass-like prices they paid for used cars, the core concept of the company makes no sense to me. Who wants to buy a car without looking at it? Without getting inside and feeling how it handles? Cars aren't trivial $10 Amazon purchases.
> Who wants to buy a car without looking at it? Without getting inside and feeling how it handles?
Have you met young adults in the US recently?
I see a surprising number of Carvana license plate bezels on the streets here in CA. The core problem Carvana is facing is they're a predatory lender who happens to use cars as the fodder for the loans. With a recession and high interest rates, there's just not many takers for the loans so their business is coming to a grinding halt.
> The core problem Carvana is facing is they're a predatory lender who happens to use cars as the fodder for the loans.
This is the business model of every used car dealer ever. It’s a sound plan insofar as it is profitable, ethics aside.
Where Carvana went wrong is with trying to make it scale. Independent used auto lots are a thing for a reason. The amount of red tape involved with selling cars is massive, and multiply it by trying to comply with every state and locality in the country, you quickly have an intractable level of complexity. And government agencies can’t be shuffled off to a support email like a SaaS customer. Every single car sold requires hours of high touch work by a real human. And when your margins are so razor thin from all the overhead with an operation like this, a tiny downturn can be ruinous.
I will add that there isn't a great return on scaling a car dealership like this. There aren't sufficient arbitrage opportunities to outweigh the costs of transporting cars around and complying with a hodgepodge of state laws.
I’m pretty sure a friend of mine bought a car from them (could have been a different service, but there aren’t a ton, right?). There was at least a trial drive through the neighborhood.
Even if so, I would feel somewhat guilted into buying a car that I waited for them to drive to me on a flatbed truck. Even if I know that's their trick. Maybe that's just me? It's why I avoid getting into setups like this.
At a dealership I can hop into dozens of different cars and look at different configuration packages. Or walk next door to the other neighboring dealerships. There's not only no contractual commitment, there's no emotional commitment either.
I'd feel exhausted in waiting for Carvana and it would probably make me willing to overlook minor grievances with whatever car they brought. Not so with a dealership.
Looking at it objectively — the delivery guy gets paid either way, right? And the extent to which their business model exploited that feeling of guilt, is the extent to which it is kind of… unethical feels like not quite the right word, but it is bad to expect people to take a worse deal because they feel guilty.
Yeah, sometimes that guilty feeling is pretty obvious too and people will exploit it substantially. The price of people saying no is built into the business model.
Depending on your market it could make them more money even if you don’t buy the car, as the next buyer might pay a premium over what they would have sold it elsewhere? I don’t know how they would do that arbitrage but in theory it could work.
I think one of their key selling points was you could return the car within 30 days - and they'd cover the cost of the return and refund you everything. From a buyer's perspective this is a nice idea, as you often can't tell what's wrong with a car or if you really like it until you start driving it.
>>Who wants to buy a car without looking at it? Without getting inside and feeling how it handles?
Apparently, most people nowadays. I spoke to my Volvo salesguy that I bought my car from just before the pandemic, and he said the biggest change with the market post-pandemic is that customers in general just don't care about test drives. They either ring up and order what they want, they order using an online form, or if they come in they just go "the one like this one here please". It's weird to me too, but apparently that's what happens nowadays.
The distance selling regs with cars in the UK have always been a bit funny. Basically yes, they apply, and yes, you can test the car once you receive it, but put anything more than a dozen miles on it and dealers will argue(sucessfully!) that the car no longer fulfils the "must be in the same condition you received it in" criteria. Also distance selling regs don't apply to custom items, so if yours was built to order, you don't get that at all.
Basically with Cazoo you get 7 days, but also a certain mileage, and they won't ask any questions within that time or distance, they will just accept the return. You could probably try forcing them to take the car back within 14 days based on the distance selling regs, but if you've driven the car at all, in my experience you're going to have a really tough time doing so.
Built to order is not the same as a custom item. You'd probably need to pick a full, specific set of options for it to perhaps be custom. Just picking a colour out of a short list provided to you probably isn't a custom-made order. But yes, many companies try to claim that made to order means no return rights.
Anyway, it seems to me that Cazoo is not abiding by the regs with their 7 day policy [1], which additionally exposes them to more honerous consequences (because it's misleading and not telling customers that they have a 14 day legal period to return goods gives customers 12 months to cancel)