Carvana’s Problems That Led to Their Struggle to Stay Intact

Carvana took the online car buying experience by storm, particularly during the pandemic. However, as major legal troubles and other company issues arise, Carvana’s problems take a front seat as their struggles are showcased. Here’s a look at the issues that led Carvana to the situation they find themselves stuck in.

Things were looking up during the pandemic

Carvana kiosk that may not be doing well considering Carvana's problems.
Carvana building | Joe Raedle via Getty Images

During the pandemic, Carvana was huge. The idea that they would deliver a vehicle to you and then take your old one away with minimal contact was almost too good to be true. Between quarantines and working from home for many, it was the best option for those who needed a car immediately.

Commercials for Carvana flooded everyone’s television screen, and even a few dealerships opened up once lockdowns began to ease up.

Other factors which helped the company grow so rapidly were when Carvana began offering loans with low-interest rates and the occurrence of the chip shortage. In fact, things were so great in 2021 that the Wall Street Journal reported that the stocks for Carvana jumped over 1,000%. 

However, all that has begun to change. Now there are rumors that Carvana may be about to go out of business. So how did it all go so wrong?

Carvana is plagued with lawsuits and complaints

Things took a turn for the worse in the latter months of 2021. Stock prices took a dive of 95%. There were many reasons for this. 

Rather than focusing on making a profit, Carvana took the funds it earned and reinvested it into hiring more employees and updating cars that would be sold soon. It sounds good on paper, but this was alarming to investors as there was very little to no profit to be made.

Secondly, prices for used cars began to grow. As a result, customers began to speak out. Carvana was then banned in Illinois due to issues with titles and registration. There was even one very embarrassing situation when Carvana sold a Denver resident a stolen car

Things aren’t looking so great in North Carolina, either. A report from WSOC-TV states that attorney general Josh Stein has over 60 complaints about Carvana. Many issues revolve around Carvana simply not turning in paperwork to the DMV. They are also falling behind when it comes to passing on paperwork to lenders. 

Another NC resident reported that Carvana insists he owes nearly $6,000, which he has already paid. As a result, many Carvana dealerships are either on probation or aren’t allowed to sell cars for at least six months. The ban will be lifted when Carvana proves it’s addressing some of the many issues plaguing it.

To make matters even worse, Jalopnik reports that Carvana has been banned in Michigan and is now suing for the right to sell there. This was due to state officials reporting that Carvana employees got rid of documents, delayed titles, and didn’t keep up with odometer records. 

The CEO speaks out about Carvana’s problems and moving forward

In 2021, Ernie Garcia, the CEO of Carvana, spoke to CNBC about where he thought the company was going moving forward. He pointed out that much of the growth was due to COVID-19 but was optimistic that things would only improve. 

As it turns out, the business boost Carvana received due to the pandemic couldn’t last. Things may have continued to grow, but thanks to the perfect storm of events that hit so rapidly, Carvana is left struggling.

According to the Wallstreet Journal, in a quarter-two call to shareholders, Garcia stated, “We’re reducing the speed at which we’re growing today given the shift in focus. But our hope and belief is that by getting more efficient, it makes it easier to grow faster in the future because you have kind of less work to do per sale. And so, you know, we’ll hope to get back over time at some point.”

Things could still turn around, of course, but things aren’t looking that good for the moment. Carvana will likely have to start by restoring consumer and investor confidence before it can once again see the growth it had during the pandemic.

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