Imagine buying a used car without ever test driving it, touching it, or experiencing it in any other way other than looking at pictures of it on the Internet.
That’s the premise behind Carvana, a Phoenix-based auto dealer founded in 2013 with a facility in Atlanta that has room for 2,000 used cars on its grounds along with additional distribution centers in Charlotte and Nashville. The retailer expects to take in $50 million in sales in 2014.
“Anytime you buy anything online, you have some degree of cost savings because you’re cutting out physical infrastructure, you’re cutting out labor costs,” CEO Ernie Garcia says. “It really becomes a lot about the experience of being online and the ease of transacting. The average dealership spends about $2,300 per car sold on labor, physical infrastructure,” though Garcia would not specify where he got that $2,300 figure from.
Here’s how it works: Shoppers go to Carvana’s web site, Carvana.com, and search for the car they want. Once they click on it, they’ll be able to get a 360-degree view of the outside and inside of the car. They can also see what it looks like under the hood. Detailed information about each car is easily available, including any physical imperfections such as nicks and scratches. For example, when checking out a 2013 Volkswagen Routan with over 25,000 miles on it that Carvana is selling for $22,000, customers will see several yellow triangles alerting them to imperfections. Click on each imperfection and you’ll get a detailed description of it complete with a picture of the damage. Garcia says because customers aren’t able to test drive the vehicles before purchasing them, it’s important that Carvana provide as much information as possible so that site visitors can make an informed decision before purchasing.
“We have patent pending photography technology that gives customers a great experience being able to spin the car around, being able to zoom into the interior, being able to see the imperfections,” he says. “Many used cars have small imperfections. We want to be totally transparent and honest with what they’re going to get.”
Customers are able to do everything from obtaining financing and a warranty to paying for the vehicle online, a process that the company says takes around half an hour. The company has three options when it comes to financing, including allowing a customer to go through Carvana for financing, for a customer to go through their own bank, or to pay for the vehicle in cash.
“We had to build tools that were easy enough and intuitive enough that customers can walk themselves through it,” says co-founder Ryan Keeton.
In lieu of a traditional dealership test drive, Carvana gives customers a seven day, money back guarantee designed to ensure that customers are sure that the car they bought online is the right one for them.
Of course, delivering a used car to someone isn’t as easy as simply putting it in the mail.
The company offers free delivery to shoppers within a 75-mile radius of Atlanta, Charlotte and Nashville, and charges $199 for delivery to locations that are between 75 and 250 miles of those locations. Customers who live outside of the 250 mile radius will pay a varying amount depending on distance to have the car delivered to their home. Or, they can choose to pick their car up from a secure “vending machine” in Atlanta. The vending machine itself isn’t like a traditional vending machine, where you enter some cash and your product comes out. Rather, it’s more like a secure garage where the company will park a car for a customer to pick up.
The company says it will offer any customer $200 towards the cost of a flight to Atlanta to pick up the car and drive it home. Once the customer arrives, a Carvana representative will pick them up and take them to the vending machine where their car will be waiting. The customer will be given a secure four digit code and they’ll be able to drive their car home from there.
“Some customers for example don’t know our company that well and they’d rather come to us as opposed to us come to them,” Keeton explains. “It allows us an alternative to those direct shipment. It’s a white glove service that we offer our customers.”
Garcia says the company gets its inventory from trade-ins, auctions, and other means. So far, they’ve sold cars to customers in 30 different states.