> The core problem Carvana is facing is they're a predatory lender who happens to use cars as the fodder for the loans.
This is the business model of every used car dealer ever. It’s a sound plan insofar as it is profitable, ethics aside.
Where Carvana went wrong is with trying to make it scale. Independent used auto lots are a thing for a reason. The amount of red tape involved with selling cars is massive, and multiply it by trying to comply with every state and locality in the country, you quickly have an intractable level of complexity. And government agencies can’t be shuffled off to a support email like a SaaS customer. Every single car sold requires hours of high touch work by a real human. And when your margins are so razor thin from all the overhead with an operation like this, a tiny downturn can be ruinous.
I will add that there isn't a great return on scaling a car dealership like this. There aren't sufficient arbitrage opportunities to outweigh the costs of transporting cars around and complying with a hodgepodge of state laws.
This is the business model of every used car dealer ever. It’s a sound plan insofar as it is profitable, ethics aside.
Where Carvana went wrong is with trying to make it scale. Independent used auto lots are a thing for a reason. The amount of red tape involved with selling cars is massive, and multiply it by trying to comply with every state and locality in the country, you quickly have an intractable level of complexity. And government agencies can’t be shuffled off to a support email like a SaaS customer. Every single car sold requires hours of high touch work by a real human. And when your margins are so razor thin from all the overhead with an operation like this, a tiny downturn can be ruinous.