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northeastern Ohio | I listened to a podcast the other day that talked about the impending bankruptcy of the Carvana company and how it will effect used car prices. Carvana failure may be caused by their success. They sold a bunch of cars last year and was unable to find employees to complete the paperwork on titles. Because of this, several states pulled Carvana's dealer licenses and so now they have a huge number of inventory that they lost market to. I think he said they also purchased the wholesale auction Adessa and other dealers quit buying there.
He claimed that Carvana currently owns over 100,000 vehicles and paid too much for them based on the current market. That has them at a disadvantage as their inventory gets older, and their competitors prices are more reflective of the current market (softened slightly in the past few months). If Carvana lowers their prices, they lose money. If they don't lower prices, they are stuck with inventory that continues to decrease in value. Lose either way.
So he predicts that Carvana will go bankrupt and there will be a sudden flood of used cars on the market which will crash prices. Probably true, but he never mentioned WHEN it would happen. I would guess it would take a year before a court ordered liquidation could take place, so no relief on used prices soon. | |
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How firm are dealer prices on used vehicles
