Posted on 02/11/2022 11:52:19 AM PST by Red Badger
Photo: Honda
Both the new and used car market is a hot mess right now, and will be for sometime. Just how hot of a mess are we talking? Well, a writer for The Verge managed to sell his 2014 Honda Fit to Carvana sight-unseen for $20,905—$90.20 more than he paid for it brand new off a dealer lot. That’s a mighty caliente market.
How could such an old car possibly be worth more today than when it had 23 miles and still smelled like plastic? How could a company that buys such cars at such high prices before even seeing it double its profits year after year? That’s what Sean Hollister, senior news editor at the Verge, wanted to know. Carvana told Hollister that, like most things in this world, it’s all in the algorithm:
It turns out that the “buying my car sight-unseen” part is actually pretty easy to explain. Carvana’s founding team realized it could never have perfect information — no buyer ever does — yet that doesn’t stop thousands of cars getting sold on the auction block with no test drives and no mechanical inspections either. Somehow, human bidders with relatively little information are still able to come to an agreement on the true price of a car. So Carvana built an algorithm that performs similarly to the human bidders at those kinds of auctions and now trusts it to offer you a guaranteed sum of money and show up with a pre-printed check instead of haggling on the driveway.
The system combs through public databases that record insurance, registration, mileage, accidents, and more before it issues that initial quote — and it doesn’t pay top dollar for any car that’s been in an accident. (Carvana actually gave me the lowest bid of any online service for my wife’s Honda Accord, the opposite of what I saw with my Fit, because it got in a minor fender bender a while back.)
According to Carvana’s Tom Taira, who led product at competitor TrueCar for over a decade, the actual quote you’re seeing primarily revolves around three factors: what the car would sell for on the wholesale market today, what Carvana projects it will be worth, and which cars Carvana needs to stock in its inventory. “The miles on it, the accidents on it, the condition that you’ve reported — all of those things are adjustments,” says Taira. But they’re not at the algorithm’s core.
And it’s that third factor, Taira guesses — the need to fill in holes in Carvana’s own inventory of cars — that might have caused the algorithm to aggressively bid for my seven-year-old blue stick shift Honda Fit with its silver trim and alloy wheels.
While the price Carvana paid for Hollister’s car was fairly high and there are occasional overpayments for vehicles, Carvana released a statement standing by the price. The car-selling app said the $20,905 paid for the little hatchback was aggressive, but not overly so and that it expects to make at least a slim margin on the vehicle. Even after transportation to another state, taxes, repairs and any maintenance, Carvana is still planning on making money on a $20,905 seven-year-old vehicle. Hollister’s trick to snagging such a high price was constantly checking multiple used car bidding apps and sites for the best offer. When he spotted a remarkably good price, he went for it.
Related Stories Romain Grosjean Is Ready To Win His First IndyCar Race Nissan 300ZX Convertible, Steyr-Puch Pinzgauer, Honda Stepwgn: The Dopest Cars I Found For Sale Online What Automaker's Lineup Would Make The Best Superhero Team? Carvana told Hollister that not all customers should expect such luck, especially after the market rights itself. When that will happen is anyone’s guess. Used car prices are bananas right now. The average price of a used car in December was $27,500 as the ongoing chip shortage is driving people who might normally opt for a new vehicles into the used market. In December 2021 there were 1.8 million fewer vehicles on dealer lots.
The entire report from the Verge is very interesting and I encourage you to read the whole thing.
We are Cuber.
A friend of a friend ordered a new Ford bronco last year....waited a whole year to take delivery and sold it to another dealership in a matter of days after the purchase for $15k more than he paid for it.
SMH
Crazy
was your friend’s name Hoovie? That sounds familiar.
Carvana offered me $37,250 for my 2016 Silverado LTZ with almost 58k miles on it. I bought it brand new in 2016 for less than that.
What’s the best way? Take a Saturday and visit every auto dealer in town to see who pays the most? Sounds like we have the upper hand.
This is in north Fla if that helps.
You know.....land of lynyrd skynyrd!
OK lol off topic, I just watched LS live version of Freebird on Youtube a few days ago. A Day in the Green?
That red Honda looks like a cheese wedge or doorstop, as a lot of subcompact cars do.
Take a day off work on the last day of the month when they are desperate to fill their quotas..............
I bought a 2003 Dodge Ram 2500 for $8,000 5 years ago.
It’s now worth $13K on Kelly Blue Book.
We took a 2010 Lexus IS 250 with 62,000 miles to 5 local dealers, it’s KBB price to private party was $12,000. All 4 dealers offered us $11,750, $12,000, 12,400 and 12,500 on the spot to sell. We did Carvana online and 4 days later they showed up with a $14,250 check and we handed them the title and the took it away. We were shocked and thought they would try and haggle us down from the original offer but nope, here’s your check, give us the car. Easy Peasy and I’ll call them again.
I also wonder with this push to EVs, if they think soon ICE cars will be at a premium.
Yeah that was just a couple months before the plane crash.
Got to see what my 2000 civic with 220,000 miles gets.
I can understand that. If I’m not mistaken, folks locked in a price upon ordering and Ford was adamant about dealers not jacking the prices up.
It’s a remake of a classic.
I have a ‘77 and folks follow me into parking lots.
That dealer probably had someone lined up to pay at least $20-25k over what your buddy paid
I don’t know, but I do know they will probably be buying my 2014 RAV4 fairly soon and I’ll take their check to Toyota for the down payment on our newer certified one. No way I’ll trade the thing in at my dealer, who we like btw. Every time I’m at the dealer getting service the salespeople always hit me up to get my car, they know it’s a low miles very well taken care of car, but I’m not trading with them after our Carvana experience.
Oh sure the dealerships gonna make money you know that.
I hate buying a vehicle at a dealership like poison......just walking on the lot irritates the crap outta me.
My nephew just got talent to the cleaners. Few bad for him. But you gota learn.
I envision a day real soon where the dealerships are historic sites. Build it online Have it delivered.
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