Is Buying A Car On Carvana Worth It?

Buying a second-hand car is a risky business, whatever method you use. Private sellers usually don’t offer any warranty, and the vehicle undergoes no pre-sale inspection. Buying through a dealer has its own pitfalls. The car might look good, but are there hidden defects or previous damage repairs?

Second-hand car dealers may be totally honest, but as a breed, they don’t have great reputations. So, buying online is an option that could work well. Is buying a car on Carvana worth it?

Overview of Carvana

Carvana is an online retailer specializing in the sale of second-hand cars, SUVs, and trucks. It was founded in 2012, is the fastest-growing online car retailer in the USA, and was listed on the New York Stock Exchange in 2017.

Carvana sold 244,111 vehicles in 2020 and over 425 000 in the following year. It received a considerable boost from the impact of Covid on traditional car dealers. Sales were also boosted by low interest rates and stimulus packages introduced by the government to assist hard-hit consumers.

Post-pandemic, however, there was a dramatic shift, and  Carvana was rated by Forbes as the worst-performing company in 2022. As of December 2022, there were strong rumors that Carvana might declare insolvency. At the time of writing, the company continues to operate, and it is still possible to buy a car on Carvana.

There are also legal issues affecting the company, with some states suspending operating licenses due to illegal practices, including failure to provide titles timeously, failure to keep adequate records available for inspection, and various other violations of state vehicle codes.

Benefits Of Buying A Car On Carvana

The concept of buying a car online is now well-accepted by buyers, and for several reasons:

• Carvana has a stock of thousands at any time, which gives buyers a wider choice than they’ll have anywhere else.
• Prices of Carvana cars are very competitive compared to similar stock sold through dealers. With fewer sales staff, fewer overheads, and high sales volumes, Carvana can afford to sell cars below the recommended retail price.
• Carvana is a one-stop shop for buyers, with cars, finance, and trade-ins all being offered in-house.

The pros and cons of using Carvana will be discussed in detail a little later, but these three benefits are the pillars on which Carvana has built its competitive edge.

What To Consider Before Buying A Car On Carvana

If you’re considering buying on Carvana, it’s essential to know precisely what it offers and how it compares.

Researching Carvana’s Inventory

Much of Carvana’s inventory of cars has been purchased from customers as trade-ins. They are then thoroughly inspected, put through an in-house reconditioning and repair process, and then made available to prospective buyers with a full report.

You will find Carvana’s inventory on their website and on the pages of other online dealers like Autotrader. You can research by year, price, make, mileage, or several different criteria. The cars that match your requirements will appear with full 360-degree visuals, a written feedback report of the 150-point test, and a link to CARFAX, which gives the full history of the car, with maintenance and repair details, previous owners, recorded mileage, and accident history.

No Carvana stock is more than 10 years old, and most are low-mileage cars less than 5 years old, with no accident damage and only one previous owner. There’s a good chance that buyers can, by researching Carvana, find an excellent car.

Understanding Carvana’s Financing Options

A big drawcard encouraging buyers to use Carvana to buy a car is that they offer in-house finance. The other options available to buyers are to use third-party financing or to pay cash for the vehicle.

Financing Through Carvana

Carvana will finance deals for buyers with a poor credit record who may not get finance from other sources. They will do a soft credit check to confirm there are no current defaults, but no minimum credit score is required. The purchaser must be over 18, with a minimum income of $10,000 a year, and no co-signers are allowed except for specific states. The loan period is 72 months, but the buyer can reduce this.

Third-Party Finance

If the buyer has gotten a better rate from another finance provider or needs to buy with a co-applicant, it doesn’t prevent the deal from being finalized. All Carvana needs is details of the loan and the lender before proceeding with the sale.

Cash Purchases

The buyer simply needs to inform Carvana on the online purchase agreement that he will not require finance and will be paying cash for the car.

Examining Carvana’s Warranty

Carvana offers an extended warranty program called CarvanaCare which is one of the best warranties in the industry. It can be for various periods from 24 to 72 months, depending on the vehicle, its age, and odometer reading, coupled with a distance limit of 60,000 or 90,000 miles.

The warranty covers most parts of the car, including engine, transmission, suspension, heating, and cooling systems, as well as electrical and fuel systems. The warranty also covers 24-hour roadside assistance, which includes towing services.

Carvana doesn’t have a specific price list but provides quotes on every warranty. The warranty must be taken up if the quote is accepted before the car is delivered to the new owner.

Pros And Cons Of Buying A Car On Carvana

Pros

1. 1. Easy and Convenient: Carvana is easy to use, provides complete information on any car in their inventory, and will arrange everything from obtaining a clear title, finance to cover the purchase, and delivery of the car if required.
2. Quality Assurance: all Carvana cars are low mileage, accident-free, and less than 10 years old. They are sold with a complete CARFAX report, having undergone a 150-point examination. Cars can be returned within the first seven days if defective in any way, and the buyer can purchase an extended warranty if he chooses.
3. Low Prices: Traditional dealers have high overheads and don’t have the sales volume to allow them to cut prices. Carvana offers excellent value, and buyers know that their prices are non-negotiable.

Cons

1. Limited Inventory: although there is a vast inventory, if the buyer is looking for a specific model and year, it may be better to look at what the specialist dealer has available, remembering that they also have online access to inventory.
2. Limited Financing Options: In certain states, buyers are not allowed to have co-applicants, and although finance is given to those who may not qualify elsewhere, the premiums are often higher than competitors.
3. Limited Warranty: Carvana doesn’t give buyers the option of which components they wish to cover – it’s a “one size fits all” policy.

Summary Of Benefits And Drawbacks

Carvana has provided buyers with an opportunity to select, finance, and take delivery of their dream car without being pressured by a pushy salesman.

A major drawback is that there is no chance to physically test the car before purchasing it. This negative has been answered by Carvana’s 7-day “no-questions-asked” return policy. In recent months, second-hand car prices have dropped quite dramatically, so the prices of Carvana cars may not be as competitive as before.

Final Verdict: Is Buying A Car On Carvana Worth It?

Until 2022, Carvana was flying high, selling cars at excellent prices and in ever-increasing volumes. In January 2023, however, the future of Carvana is in serious doubt, with the value of the inventory dropping, sales volumes falling, and some serious legal hurdles to overcome.

The convenience of being able to buy a quality car with a warranty, with finance that is difficult to get anywhere else, makes Carvana a still-attractive option. There is no risk to the buyer, and Carvana may well trade out of its current difficulties, so if you want to buy online, use it.

Resources

https://en.wikipedia.org/wiki/Carvana

https://investors.carvana.com/news-releases/2022/10-12-2022

https://www.reddit.com/r/carvana/