In 2012, Carvana changed how the auto industry sold cars, offering an innovative way for consumers to buy used cars online. The hub makes it easy for buyers to find pre-owned vehicles without going to traditional dealerships. The entire transaction takes place online, with the car delivered to a buyer’s home or office. Carvana even has unique vending machines where buyers can pick up their newly purchased vehicles.
Changing the face of car sales in America brought Carvana enormous success. The company reported 2021 annual revenue of $12.8 billion, up more than 125% from 2020. But the online auto retailer has also experienced controversy, appearing in the news for problems in various states, including Florida, Illinois, Michigan, and North Carolina.
How Carvana’s problems began
Carvana prides itself on offering certified pre-owned cars with no hidden fees and prompt door-to-door delivery. The auto giant has four vending machines in Florida — in Jacksonville, Tampa, Orlando, and Miami — and last year alone had 23,500 title applications in the state.
But earlier in 2022, the online car retailer was accused of not filing the appropriate title paperwork for new car purchases in Florida. Multiple customers complained they didn’t receive the title on time, preventing them from licensing their vehicles within 30 days, as required by state law. According to the local news station WFLA, some consumers had to wait more than 100 days to receive their car’s title.
Carvana also faced trouble in Raleigh, North Carolina, and was banned from selling vehicles. In Charlotte, the online retailer had been on probation until this month. The same problems the company experienced in Florida persisted in North Carolina, with delays in paperwork filing and title issues.
Carvana failed to dig itself out of trouble in Michigan
Most recently, Carvana unsuccessfully tried to get itself out of trouble in Michigan.
In October, Carvana’s dealership license in Novi, Michigan, was suspended for “imminent harm to the public” for several violations of the Michigan Vehicle Code. According to the Detroit Free Press, “the alleged violations were discovered during an investigation by the state regulatory staff of multiple complaints from consumers about title problems with their vehicles.”
Carvana fought back, filing an injunction to try to reverse the state suspension, claiming it was an “illegal and irresponsible attempt to shut down a growing Michigan business” over “technical paperwork violations involving title and transfer issues.” However, a Michigan judge denied the request, claiming that because Carvana is “the second-largest used-car retailer in the United States and has sold over 1 million vehicles,” an inability to conduct business at one location in Novi would not cause “irreparable harm” to the company’s overall online sales.
Michigan Department of State spokeswoman Aneta Kiersnowski Crisp said her office has received more than 100 complaints regarding title issues with Carvana and that “department staff met with Carvana on multiple occasions to explain Michigan law and suggest pathways to compliance.” She explained, “Carvana continued selling vehicles without titles to scores of Michigan families, putting the residents at risk of legal violations, fines, and other penalties.”
An administrative hearing is scheduled in Michigan for November 22.
The company avoids further trouble in Florida
Carvana faced having its dealer license suspended in Florida for not immediately complying with state requirements. Automotive News reported that the company averted a crisis and significantly reduced the number of outstanding title applications from 400 to 29 within 30 days. Of those, “11 customers received buyout offers that ‘include compensation for all of their payments made, plus 15% over the purchase price of the vehicle.'” The remaining 18 customers didn’t respond.
The Florida Department of Highway Safety and Motor Vehicles didn’t revoke Carvana’s license, stating, “the department believes Carvana’s change in customer service delivery and business practices, including no longer selling vehicles until the vehicle’s title is in your possession, will reduce similar issues moving forward.”
Meanwhile, the company faced a steep decline in sales, experiencing first-quarter losses of $506 million.