Carvana’s success relies on used car loans

0

Online used car dealership Carvana Co., known for its vehicle vending machine tricks, has a secret sauce to its business success: a revenue-boosting auto loan management.

The company became a market darling during the pandemic, benefiting from huge demand and high prices for used vehicles. Its stock has climbed more than 1,000% since the depth of the Covid-19-related liquidation in March 2020 and is now valued at over Ford Motor Co. at around $ 63 billion.

Part of the attractiveness to investors: Selling cars is only part of what makes Carvana money. In the second quarter, about 36% of the company’s gross profit per unit came from the sale of loans it had made to customers to buy the cars. Retail sales accounted for 39% of gross margin per unit, Carvana’s preferred profit measure. Other types of income, including vehicle maintenance contracts, made up the remainder.

In the last quarter, increased loans enabled Carvana to achieve its first-ever quarterly profit.

The company suffered a setback last week when North Carolina suspended Carvana from selling cars in the Raleigh area until January after determining it had not delivered titles to the Department of Motor Vehicles and sold cars without state inspections. Carvana said he was happy to reach a solution, following an investigation by the state’s Motor Vehicle Division.


Source link

Share.

About Author

Comments are closed.