Online car vendor Carvana crushes earnings as Americans shift to used cars
Stocked up on quarters… for Carvana vending machines. Yesterday shares of the online used-car seller surged 19% after it sped through Wall Street's Q3 estimates. Carvana lets buyers shop, sell, and trade cars online. Customers can get their cars delivered at home or pick them up at an eight-story car-vending machine. Carvana’s quarterly sales nearly doubled to $3.6B as its costs fell. Rival CarMax also beat estimates last month after price cuts boosted sales for its used-car catalog.
U-turn: Carvana’s made a comeback since 2022, when shrinking sales and mounting debt drove it to the brink of bankruptcy.
Still driving dad’s pickup… Car prices have soared as pandemic disruptions led automakers to build about 8M fewer cars, which kept supply tight and prices high. Today, the average price gap between new and used vehicles is at a record $20K, with fewer affordable whips left on dealer lots. Cars priced under $25K are fairly rare, with sales in that range down 78% over the past five years. So Americans are holding onto their cars longer than ever: the average vehicle on the road is nearly 13 years old.
Consumers are shifting gears… Folks are gravitating more toward used vehicles, whose prices are down 5% from a year ago (versus 1% for new cars). While retailers of pre-owned cars have had a rough ride, easing interest rates and lower demand for new models are jump-starting biz. Carvana boosted its annual earnings forecast, saying it expects stronger car sales in Q4.