Is Carvana a Ripoff?
A Brief History of Carvana
Carvana was founded in 2012 by a father and son, Ernest Garcia II and III, who wanted to create a marketplace where buyers and sellers could connect directly. They realized there were no sites out there that allowed them to sell cars online, so they created Carvana.com.
With a growing number of shoppers looking to purchase used cars online, Carvana was able to capitalize on this trend and grow its user base rapidly. As a result, it quickly grew into one of the largest used car dealerships in America. Today, Carvana boasts millions of monthly users who shop for hundreds of thousands of used cars every month.
Plus, Carvana operates over 1,000 locations across North America and Canada, and has sold over $1 billion worth of vehicles since its inception.
In this article, I will address the concerns that customers are facing as well as share my own experience with Carvana.
Carvana's Past Legal Issues
Every business faces issues as they scale. I believe this is what happened with Carvana. As their inventory grew and more and more cars were processed by them, they ran into delayed title issues, registration issues and had sold lemons based on dozens of complaints on reddit posts.
While clerical delays can occur, it appears that something must be happening with the titling process for vehicles in particular states. If a car is financed, then in order to get the title, you will need a payoff letter clearing the title to be given to the new owner. There may be delays from the financing entity releasing the title or perhaps, the payment for the pay-off was delayed in being sent.
Another possibility is that the title was lost somehow. For example, if Carvana purchased the car at auction, which probably is the case, then the auction house sends the title to Carvana. The title gets lost in the shuffle, Carvana will need to reapply for a new replacement title which may take weeks and months. Some states understand this to provide a period of 2 months in order to get the title to the buyer.
Unfortunately, delays do happen, especially if it's financed. If you paid the full amount, the title should be in the buyer's possession in 2 weeks.
I was issued a temporary plate and did receive the title and official plates within 30 days, which was about 3 days before the temp plate expired.
Legal Issues Facing Carvana: Car buyers on the hook without a title
A consumer advocacy group says Carvana sold cars without titles. A spokesperson for the Consumer Financial Protection Bureau told CBS News that consumers often don't realize they are buying a vehicle without a title because Carvana doesn't include one with the paperwork. This is an ongoing issue with Carvana but I am sure it will be resolved soon.
Carvana: How It Works
Cars purchased through Carvana require very little paperwork before delivery, and customers are able to pay online without having to go into a dealership.
My personal experience with Carvana was a positive one and I was able to find the exact car that I was looking for. I will get into the pricing comparison a bit later.
This makes it easy for people who want to buy cars quickly, but aren't ready to commit to a purchase just yet.
Customers can choose from a wide range of used cars, including popular models like the Honda Civic, Toyota Corolla, Ford Focus, Nissan Altima, Chevrolet Cruze, Kia Forte, Hyundai Elantra, Mazda 3, VW Golf, Jeep Wrangler, Chrysler 200, Dodge Challenger, Mitsubishi Mirage, Subaru Forester, and many others.
In fact, you can purchase EV cars too like Tesla and Nissan Leaf. I can definitely see myself using Carvana again, if the price is right.
Why is Carvana More Expensive?
Carvana is still a used car dealership. While they advertise that they are cheaper and more affordable, buyers are really paying for convenience. In the age of Doordash, Uber and everything delivered, plus the pandemic helped fuel the growth and popularity of Carvana.
I myself was interested in comparing their inventory as well as finding a GOOD deal on a new car.
Carvana's no-haggle pricing is true. There is no price negotiation.
There are no pushy salesmen or backdoor negotiations with the sales manager to drive down the price. It is what it is.
While you might be able to find a lower price with a private party, depending on how much you are spending, it might make sense exploring Carvana pricing.
Pricewise, Carvana prices, I have found, are about the retail pricing of KBB. (as of 10/2022) within $1,000-$2,000 under VERY GOOD condition. (Because we all know that most used cars are in VERY GOOD condition and not mint.)
My particular car was a special AMG edition so I was willing to spring for a car with the exact specifications. I did contact a few local dealerships and they ALWAYS had a dealer prep fee. This BS fee in my opinion, ranged from $700 - $3,000 depending on the dealership.
So when you see a price online that is too good to be true, it typically is. I found a similar car priced $1,000 less than Carvana but once you add the "Dealer Prep" fee of $1,200 plus other "Doc Fees" the price exceeded Carvana's price.
Another GREAT thing about Carvana are the car photos and the free Vehicle History Report. Having this information gave me confidence that what I was buying was literally the same car.
Is Carvana Worth It?
It depends. You need to do your homework on car pricing and availability in your area. The good thing about the service is that Carvana allows you to shop out of state with the peace of mind that you have a 7-day return policy to protect you in case of buyer's remorse.
Plus, the 150-point inspection is at least standardized. My particular car needed tires as noted in the 150-point inspection and the car came with four brand new tires.
Car dealerships need to stay competitive in order to compete with Carvana. Carvana ONLY sells used cars. So you can compare new vs used pricing in order to determine what is the best for your budget and needs.
If you are looking for useful tips on pricing, you can download my free guide on buying a used car in order to determine the RIGHT fair price for your car.
Overall the entire process with Carvana from the buying process to getting the license plate delivered was a simple process when compared to traditional dealerships.
I did experience a delivery delay of 1 week but that was expected since the car was out of state. The delivery time was accurate as the Carvana advocate texted me about 30 minutes from arrival time.
The total car buying experience was new to me since I mainly purchased my cars on marketplaces like the local paper, Facebook and craigslist. Carvana has really opened my eyes on what's possible and how you can avoid sleazy dealerships and their tactics.
I would also rate their customer service as good.
Remember, Carvana is a good place to start but keep your eyes open on deals all around you. The used car market ALWAYS has inventory and opportunities all the time.
Carvana makes it simple to find financing. While I always suggest seeking out your own financing like credit unions, if you have decent credit scores or excellent credit, Carvana will run a soft credit check that will NOT impact your score.
This is considered pre-approval for their financing. During the application process, the rates were pretty good and there wasn't any awkwardness to the process. I believe their transparency helps and their financing is automated based on your credit score.
They did not require any income verification but fund verification was required. During the buying process, PLAID was used to help verify the funds available for the payment so it is important to have funds available.
If you have bad credit, I would suggest that you work on improving your score so that you will be able to take advantage of better rates.
When Does Carvana Take Down Payment?
In my case, payment for the car was taken at the time of delivery but it didn't hit my account until 24-48 hours later. I think this is a good policy so that you are not caught off guard when a big amount is taken directly from your bank account.
On delivery day, the Carvana advocate explained that the payment will be taken in the next day or so.
I did not take the trade in value since it was less than what I could get as a private party seller. You will need to calculate your trade-in value on KBB and compare it with Carvana. From my research, many customers have opted for the Carvana trade in since their offer was higher than dealerships.
Trade-in is easy. As long as it drives, they don't really look too closely at the car since it will be going through Carvana's 150-Point Inspection process.
Is it Worth Getting Extended Warranties from Carvana?
I typically decline extended warranties. But in this case, they convinced me to reconsider.
During the 100 Day Warranty, I had a few issues pop up with the car. Specifically an engine light on the dash and some cosmetic stuff on delivery.
SilverRock covered the repair regarding the purge valve and the 10 hours of labor to replace. In addition, they were also willing to address a few cosmetic issues upon delivery.
NOTE: Cosmetic issues are ONLY covered within the first 7 days upon delivery.
As a result, I am paying monthly on their extended warranty which is CHEAPER if you purchase during your car purchase. If you purchase AFTER, like me, then the pricing does increase by 20%. You can always cancel your monthly payment anytime.
Can You Cancel Carvana Order?
Yes. Throughout the entire shopping experience, I always knew that you could cancel the order. You can simply call your Carvana Advocate and request to cancel the order.
You also have the option to return your car using their 7-day money back guarantee operation.
However, if you did have a delivery fee, this shipping charge is NOT REFUNDABLE.
You are in the driver's seat during the 7-days so use it wisely. I strongly recommend a PPI and keeping in touch with your Carvana Advocate to inform them of any concerns or issues that arise.
Final Thoughts on Carvana
Compared to a regular dealership or average car dealership, Carvana IS a new way of car shopping. The online experience was a positive one and I would consider using Carvana again in the future.
The PROs of Carvana:
- 7-day return policy
- 150-point inspection
- fair price (your mileage may vary)
- 100 day/4,189-mile warranty
The CONs of Carvana:
- Pricey warranties
- Only 7-days return policy
- Cheap tire replacement
- Non-negotiable pricing
I hope you found my personal review helpful.
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