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Industrials

Used car dealer Carvana expands as coronavirus fuels U.S. demand for online sales

(Reuters) - Online used car buying platform Carvana Co CVNA.N on Thursday said it was nearly tripling its U.S. footprint and will expand to 100 additional markets as the coronavirus crisis prompts more consumers to embrace contactless vehicle purchases.

Carvana, which launched in 2012 and offers online purchases, financing and delivery of used vehicles, said its expansion comes at a time when many consumers shy away from entering traditional dealerships and vehicle showrooms.

The coronavirus outbreak, which at one point saw 90% of the U.S. population under some form of lockdown, has battered the auto industry, reducing sales in some areas with high infection rates by as much as 80%.

But Carvana Chief Executive Ernie Garcia told Reuters that sales on his platform held up much more broadly than those in the rest of the industry.

“Something that’s happened with this pandemic is that it’s gotten many consumers who previously wouldn’t have bought a car online to now buy it online,” Garcia said.

Carvana on Wednesday reported a 43% increase in first-quarter vehicle sales. While sales dropped up to 30% on a yearly basis in April, they rebounded in May, the company said.

In its latest expansion, Carvana is mainly entering cities in proximity to already existing markets along the East Coast, the Midwest, the South and Texas. Consumers in a total of some 260 U.S. markets, including in California, can now order their car through the website.

Traditional auto retailers have been slow to embrace e-commerce, but the COVID-19 pandemic is slowly changing the industry, with more dealers moving some or all of their sales processes online.

Automakers, who have been burning through money while their plants are shuttered, are also trying to entice consumers with unprecedented discounts, including no-interest loans and deferred payments.

But the used vehicle market, where some 40 million cars and trucks change hands each year, remains a wild card. As nearly new lease vehicles return to the market and add to oversupply, used vehicle prices are being pushed down.

Carvana’s Garcia said used car prices have dropped an average of 15% since the onset of the pandemic. But economic hardship and U.S. unemployment levels not seen since the Great Depression could also be a boon to the used vehicle market.

“I think there’s generally a migration from new to used vehicles in tougher economic times,” Garcia said.

Reporting by Tina Bellon in New York; editing by Jonathan Oatis

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