Carvana Co. (Carvana) operates as an e-commerce platform for buying and selling used cars.
The company provides refreshingly different and convenient experiences for used car buying and selling that can save customers time and money. On the company's platform, consumers can research and identify a vehicle, inspect it using the company's patented 360-degree vehicle imaging technology, obtain financing and warranty coverage, purchase the vehicle, and schedule delivery or pick-up, all from their d...
Carvana Co. (Carvana) operates as an e-commerce platform for buying and selling used cars.
The company provides refreshingly different and convenient experiences for used car buying and selling that can save customers time and money. On the company's platform, consumers can research and identify a vehicle, inspect it using the company's patented 360-degree vehicle imaging technology, obtain financing and warranty coverage, purchase the vehicle, and schedule delivery or pick-up, all from their desktop or mobile device. Additionally, a customer can obtain a conditional offer online for their vehicle by answering a few questions without needing to provide service records. The company's transaction technologies and online platform transform a traditionally time-consuming process by allowing customers to secure financing, complete a purchase or sale, and schedule delivery or pick-up online in as little as 10 minutes.
The company's technology and infrastructure allow the company to seamlessly and cost-efficiently deliver this experience to the company's customers. The company uses proprietary algorithms to optimize its nationally pooled inventory of over 33,000 total website units, inspect and recondition the company's vehicles based on its inspection process, and operate the company's own logistics network to deliver cars directly to customers in the company's markets as soon as the same day in certain markets. Customers in certain markets also have the option to pick up their vehicle at one of the company's patented vending machines, which provides an exciting pick-up experience for the customer while increasing scalability and building brand awareness.
In addition, through the company's acquisition (the 'ADESA Acquisition') of ADESA U.S. Auction, LLC ('ADESA'), the company has 56 auction sites throughout the U.S., which enhance the company's customer offering by facilitating a broader selection of vehicles and faster delivery times.
As of December 31, 2023, the company established a logistics network and local marketing presence in 316 metropolitan cities and the company's in-house distribution network services 81.1% of the U.S. population, and in the long term the company plans to continue to expand its population coverage. As of December 31, 2023, the company purchased, reconditioned, sold, and delivered 1.7 million retail vehicles to customers through the company's website.
Carvana's Solution
In response to these evolving consumer needs, the company builds Carvana to provide a no-pressure, no-haggle experience with flexible and fast transactions. Consumers can research and identify a vehicle, inspect it using interactive high-definition photography, obtain financing and warranty coverage, value their current vehicle, complete their purchase, and schedule delivery or pick up, all from the company's online platform. The company's uniformed employees deliver cars to customers in its markets in branded haulers as soon as the same day in certain markets, or customers can pick vehicles up at one of the company's 38 vending machines. The company offers a seven-day return policy on all of its cars sold. The sales process the company has built enables its customers to execute their purchases, once a car has been selected, in as little as 10 minutes, and obtain a conditional offer for their current vehicle in as little as two minutes.
The company intends to deliver the best selection, best value, and best experience for used car buyers and sellers.
The Best Selection
As of December 31, 2023, the company offered all customers a nationally pooled inventory of over 33,000 high-quality used vehicles on the company's website. The company and its partners evaluate and recondition all of the vehicles that the company owns and offers for sale, which the company performs at scale across its network of inspection and reconditioning centers ('IRCs') or auction locations with reconditioning capacity. The company's customer research indicates that size and range of selection are primary determinants of where customers will transact. The company uses proprietary algorithms to optimize the company's inventory acquisition based on extensive used vehicle market and customer behavior data. Furthermore, the company's nationally pooled inventory system maximizes the breadth of vehicle selection for the company's customers in any given location.
The Best Value
The company's proprietary technology and vertically integrated business model allow the company to enjoy a significantly lower variable cost structure at scale versus traditional dealerships and to provide substantial value to the company's customers. The company does not require a network of brick-and-mortar dealerships, staffed with sales personnel; instead, the company utilizes both an in-house logistics network and patented vending machines to facilitate vehicle delivery and pick-ups. Furthermore, the company is able to provide personalized and highly transparent financing terms based on basic customer information that results in faster transaction times, clear lending terms, and competitive interest rates.
The Best Experience
The company intends to provide the best car buying and selling experience available for the company's customers through a fully integrated, convenient online experience. The company's patented 360-degree vehicle imaging technology provides transparency by allowing customers to view vehicle features and imperfections. The company also provides automated vehicle valuations for buying vehicles from customers with or without a retail purchase, automated financing, vehicle service contracts ('VSC'), auto insurance, GAP waiver coverage, limited warranty, and other ancillary products. Customers can easily select among thousands of preapproved financing terms and receive approval in seconds.
The company offers a premium fulfillment experience with pick-up and delivery options, including pick-up at the company's vending machines or hubs, and as soon as same day deliveries, depending on the market. The company's in-house customer advocates are available to answer customer questions that arise throughout the process. At every customer touch point, the company strives to provide the level of customer service that makes purchasing a car from the company an enjoyable, memorable experience. Finally, the company offers seven-day return and 100-day limited warranty policies with every car the company sells, subject to a deductible. The company's customers value the ease of use and transparency of its platform.
Growth Strategies
The company's long-term strategy is to continue growing its vehicle unit sales, market penetration, number of markets, and complementary product revenues while enhancing competitive positioning by executing the following key elements of the company's growth strategy: increasing sales through further penetration of the company's existing markets; optimizing its inventory selection; continuing to innovate and extend the company's technology leadership; continuing to enhance its mobile sales platform; developing broad consumer awareness of the company's brand; generating referrals and repeat customers; and developing new products.
Customer Lifecycle
Search and Discovery
The company has developed a mobile-optimized website, where prospective car buyers can immediately begin browsing, researching, filtering and identifying their choice from an inventory of over 33,000 total website units that the company offers for sale. The company has also developed a series of innovative features to enhance the customer experience on the company's website and enable better product discovery, such as highly engaging visual imagery and merchandising, as well as easy-to-use site navigation tools and personalization features. The company also integrates with various vehicle data providers for vehicle feature and option information as a research tool to assist the company's customers with their purchase decisions.
Virtual Tour
Once customers select a vehicle, they have the ability to take an annotated virtual vehicle tour on the company's website, which includes a 360-degree view of the interior and exterior of the actual vehicle. This interactive tour allows customers to review vehicle imperfections through high-definition photography and provides them with an extensive list of vehicle details, accessories and safety features presented in an intuitive and easy to review manner.
Seamless Transaction Technology
Once customers have chosen a vehicle, the company's platform allows them to complete the purchase in as little as 10 minutes, saving them both time and money.
Financing. The company preapproves thousands of down payment and monthly payment combinations that allow customers to choose their preferred financing. The company's website includes unique, highly engaging, and intuitive financing tools that are transparent and demonstrate the relationship between preapproved down payment, monthly payment, and term combinations. The company's financing tool allows borrowers to adjust permutations of their preapproved credit terms, including down payment, monthly payment, and loan term to select a personal payment plan. The company's customers can obtain a preapproval decision in seconds generated by the company's proprietary credit scoring and deal structuring algorithms for every car in the company's inventory. This involves a short process that does not impact customers' credit unless they pursue a purchase and finance transaction.
Complementary Products. The company's customers can further supplement their online vehicle purchase by electing to purchase a fully integrated VSC. In order to help improve the transaction experience, the company evaluates numerous options to ultimately provide each customer with personalized options for VSCs. Customers in most states financing their purchase with the company is also offered GAP waiver coverage, customized by term length, during checkout. The company has also partnered with Root, Inc. ('Root') to offer an integrated auto insurance solution, through which customers in most states may conveniently access and purchase auto insurance directly from the Carvana e-commerce platform.
Sell A Vehicle. For customers interested in trading-in or selling the company their vehicle without the purchase of a retail vehicle, the company's online tool provides customers with an automated offer for their existing vehicle that can be applied to any vehicle purchase or paid directly without an associated vehicle purchase. In either case, a customer can receive a conditional offer for their vehicle from the company's site simply by answering a few questions about the vehicle condition and features. The customer can then schedule a time to have the vehicle picked up at their home and receive payment. This process eliminates the need to visit a dealership or negotiate a private sale.
Documentation and Payment. To further improve the ease of purchasing and financing vehicles, complementary products, and trade-ins, the company has developed a seamless, fully integrated online documentation process. The company has established partnerships with several technology providers that allow for automated down payment, income verification, and payment processing through simple, easy to use tools, such as the ability to take pictures of required documents with a smartphone.
Fulfillment. Customers can choose to have their vehicle delivered or pick up their vehicle at one of the company's patented vehicle vending machines, depending on the market. In certain markets, the company can deliver cars as soon as the same day with a Carvana-uniformed employee in a branded, custom single-car hauler. The company's vending machines provide an attractive and unique customer pick-up experience that many customers choose. At the company's vending machines, the customer deposits a Carvana-branded token into a coin slot and an automated platform selects the customer's car from the multi-story tower and delivers it to a garage bay where the customer is waiting with a Carvana delivery advocate.
Post-sale Customer Support
Once customers have their car, the company's customer advocates manage the post-sale coordination and service call process including helping customers with returns or exchanges pursuant to the company's seven-day return policy.
Vehicle Lifecycle
Vehicle Acquisition. The company primarily acquires its used vehicle inventory directly from customers when they trade in or sell the company their vehicles and through the large and liquid national used-car auction market. Acquiring directly from customers eliminates auction fees and provides more diverse vehicles. The remainder of the company's inventory is acquired from vehicle finance and leasing companies, rental car companies, and other suppliers. The company uses proprietary algorithms to determine which cars to bid on at auction and how much to bid. The company's software sifts through over 100,000 vehicles per day and filters out vehicles with poor condition ratings or other unacceptable attributes, and can evaluate the tens of thousands of potential vehicle purchases that remain per day, creating a competitive advantage versus in-person sourcing methods generally used by traditional dealerships. Once the company's algorithms have identified a suitable vehicle for purchase, bids are verified and executed by a centralized team of inventory-sourcing professionals. For vehicles sold to the company through its website, the company uses proprietary algorithms to determine an appropriate offer. The company assesses vehicles on the basis of quality, inventory fit, consumer desirability, relative value, expected reconditioning costs, and vehicle location to identify the most in-demand and profitable vehicles to acquire for inventory. The company utilizes a broad range of data sources, including proprietary site data, and a variety of external data sources to support the company's assessments.
Inspection and Reconditioning. Once the company acquires a vehicle, the company leverages its in-house logistics or a vendor to transport the vehicle to an inspection and reconditioning center or auction location with reconditioning capacity, at which point the vehicle is entered into the company's inventory management system. The company then begins an inspection process covering controls, features, brakes, tires, and cosmetics. Each IRC includes trained technicians, vehicle lifts, paint-less dent repair, and paint capabilities and receives on-site support from vendors with whom the company has integrated systems to ensure ready access to parts and materials. When an inspection is complete, the company estimates the necessary reconditioning cost for the vehicle to meet its standards and expected timing for that vehicle to be made available for sale on the company's website.
Photography and Merchandising. To provide transparency to the company's customers, its patented, automated photo technology captures a 360-degree exterior and interior virtual tour of each vehicle in the company's website inventory. The company's photo technology photographs the interior and exterior of the vehicle while technicians annotate material defects based on visibility-threshold category. The company also features integrations with various vehicle data providers for vehicle feature and option information. The company has instituted a unified cosmetic standard across all IRCs and certain auction sites to better ensure a consistent customer experience.
Transportation and Fulfillment. Third-party vehicle transportation is often slow, expensive, and unreliable. To address these challenges, the company builds an in-house auto logistics network backed by the company's proprietary TMS to transport its vehicles to customers in the company's markets. The system is based on a 'hub and spoke' model, which connects all IRCs to vending machines and hubs via the company's owned and leased fleet of multi-car and single car haulers. The company's TMS allows the company to efficiently manage locations, routes, route capacities, trucks, and drivers while also dynamically optimizing for speed and cost. The company stores inventory primarily at the IRCs and other sites, and when a vehicle is sold, it is delivered directly to customers in the company's markets or transported to a vending machine or certain hubs for pick-up by the customer. Due to the company's robust and proprietary logistics infrastructure, the company is able to offer its customers and operations team highly accurate predictions of vehicle availability, minimizing unanticipated delays and ensuring a seamless and reliable customer experience.
Marketing
The company's customer base is relatively similar to the overall market for used cars at average price points of the company's vehicles, with a slight shift toward younger customers. The company's sales and marketing efforts utilize a multi-channel approach, built on a seasonality-adjusted, market-based model budget. Subject to the company's profitability initiatives, the company utilizes a combination of brand building, as well as direct response channels to efficiently seed and scale the company's local markets. The company's paid advertising efforts include, but are not limited to, advertisements through national and local television, search engine marketing, inventory site listing, retargeting, organic referral, display, out-of-home, digital video, digital radio, direct mail, and branded pay-per-click channels. In addition to the company's paid channels, the company intends to attract new customers through enhancing the company's earned media and public relations efforts and further investing in the company's patented vending machines.
Intellectual Property
As of December 31, 2023, the company held 32 issued U.S. patents, which cover its vending machine technology, photo technology, website user interface technology, personalization methods for displaying digital media and imaging technology, and one issued international patent covering the company's photo technology.
The company has 21 domestic trademark registrations and six international trademarks in active use, including registrations for 'Carvana,' the Carvana design mark, the Carvana logo, and various slogans.
The company is the registered holder of a variety of domestic and international domain names, including 'carvana.com'.
In addition, the company has a cross-license agreement with DriveTime Automotive Group, Inc. (together with its subsidiaries and affiliates, other than the company, 'DriveTime') pursuant to which DriveTime has obtained limited licenses to some of the company's intellectual property.
Government Regulation
The regulatory bodies that regulate the company and its business include at the federal level: the Consumer Financial Protection Bureau, the Federal Trade Commission, the United States Department of Transportation, the Occupational Health and Safety Administration, the Department of Justice, the U.S. Securities and Exchange Commission (the 'SEC'), and the Federal Communications Commission; at the state level: various state dealer licensing authorities, state consumer protection agencies including state attorney general offices, and state financial regulatory agencies; and at the municipal level: various municipal authorities covering licensing, zoning, occupancy, and tax obligations. The company is subject to compliance audits of its operations by many of these authorities.
History
Carvana Co. was founded in 2012. The company was incorporated as a Delaware corporation in 2016.
