Posted on 02/11/2022 11:52:19 AM PST by Red Badger
Photo: Honda
Both the new and used car market is a hot mess right now, and will be for sometime. Just how hot of a mess are we talking? Well, a writer for The Verge managed to sell his 2014 Honda Fit to Carvana sight-unseen for $20,905—$90.20 more than he paid for it brand new off a dealer lot. That’s a mighty caliente market.
How could such an old car possibly be worth more today than when it had 23 miles and still smelled like plastic? How could a company that buys such cars at such high prices before even seeing it double its profits year after year? That’s what Sean Hollister, senior news editor at the Verge, wanted to know. Carvana told Hollister that, like most things in this world, it’s all in the algorithm:
It turns out that the “buying my car sight-unseen” part is actually pretty easy to explain. Carvana’s founding team realized it could never have perfect information — no buyer ever does — yet that doesn’t stop thousands of cars getting sold on the auction block with no test drives and no mechanical inspections either. Somehow, human bidders with relatively little information are still able to come to an agreement on the true price of a car. So Carvana built an algorithm that performs similarly to the human bidders at those kinds of auctions and now trusts it to offer you a guaranteed sum of money and show up with a pre-printed check instead of haggling on the driveway.
The system combs through public databases that record insurance, registration, mileage, accidents, and more before it issues that initial quote — and it doesn’t pay top dollar for any car that’s been in an accident. (Carvana actually gave me the lowest bid of any online service for my wife’s Honda Accord, the opposite of what I saw with my Fit, because it got in a minor fender bender a while back.)
According to Carvana’s Tom Taira, who led product at competitor TrueCar for over a decade, the actual quote you’re seeing primarily revolves around three factors: what the car would sell for on the wholesale market today, what Carvana projects it will be worth, and which cars Carvana needs to stock in its inventory. “The miles on it, the accidents on it, the condition that you’ve reported — all of those things are adjustments,” says Taira. But they’re not at the algorithm’s core.
And it’s that third factor, Taira guesses — the need to fill in holes in Carvana’s own inventory of cars — that might have caused the algorithm to aggressively bid for my seven-year-old blue stick shift Honda Fit with its silver trim and alloy wheels.
While the price Carvana paid for Hollister’s car was fairly high and there are occasional overpayments for vehicles, Carvana released a statement standing by the price. The car-selling app said the $20,905 paid for the little hatchback was aggressive, but not overly so and that it expects to make at least a slim margin on the vehicle. Even after transportation to another state, taxes, repairs and any maintenance, Carvana is still planning on making money on a $20,905 seven-year-old vehicle. Hollister’s trick to snagging such a high price was constantly checking multiple used car bidding apps and sites for the best offer. When he spotted a remarkably good price, he went for it.
Related Stories Romain Grosjean Is Ready To Win His First IndyCar Race Nissan 300ZX Convertible, Steyr-Puch Pinzgauer, Honda Stepwgn: The Dopest Cars I Found For Sale Online What Automaker's Lineup Would Make The Best Superhero Team? Carvana told Hollister that not all customers should expect such luck, especially after the market rights itself. When that will happen is anyone’s guess. Used car prices are bananas right now. The average price of a used car in December was $27,500 as the ongoing chip shortage is driving people who might normally opt for a new vehicles into the used market. In December 2021 there were 1.8 million fewer vehicles on dealer lots.
The entire report from the Verge is very interesting and I encourage you to read the whole thing.
You’re gonna turn that thing into a monster. I had a 2001 Dodge Ram with their big V8, back in the day. I think it was a 5.9liter. Great truck. Horrendous transmission. I used to watch the gas needle just move to the Left. But, at that time, gas was less than $1 a gallon, so I wasn’t concerned.
Good luck with that beast.
I just want a little extra torque for towing.
* wink *
Your secret is safe with me. That thing is going to be a monster.
I was driving back up I-55 from New Orleans this morning and sadly didn’t have time to jump off at exit #08 ( I believe it was exit # 8) in Mississippi and drive the eight miles to see the Lynyrd Skynyrd monument where their plane crash happened 😔.
Next time!!!
It was tragic.
I’ll try to make this short....my wife’s dad recorded them before they were LS and MCA scooped them up. They first went by the name “one Percent”.
When my wife’s dad died she acquired his estate which included 4 original recordings.
One of which you may have heard of....the very first recording of “Freebird”.
True story...every word.
I tell my wife if I’d have known she was rock-n-roll royalty I would have married her 10 years before I did. Lol!
Cars cost way to darn much!!
A few years ago I wanted to sell my 2007 Hyundai Sonata Limited in great shape. CarMax was selling them, mostly NOT the Limited version, for around $9,000. So I took mine in and they offered me ... $3,500. I told them kiss my buttocks.
“Got to see what my 2000 civic with 220,000 miles gets.”
Carvana paid me $6,700 over MSRP for my 2018 Civic. Of course, it was a Type R and had less than 5,000 miles on it.
I should have my buddy check to see how much they will give him for my old 250,000? mile ‘93. I suspect he will still be
driving it 5-10 years from now.
Not quite the same but I recently bought a Rolex for 10k including tax. Sold it a week later for 19500. The store asked me not to flip it, I lied. Am I a bad person?
“I tell my wife if I’d have known she was rock-n-roll royalty I would have married her 10 years before I did.”
But you did marry her Ten Years After...
Carvana offered $11,716 for my 2016 Honda Accord Sport Sedan 4D
I owe 8,058 which leaves me $3,658
A 2016 Honda Accord is selling for at their site for $23,590
I bought mine for about $18,000 in 2019
So if I sold then bought a same year Accord I would owe more then $12,000 plus tax, fees etc. Makes no sense to sell.
ISWYDT
👍
“I hate buying a vehicle at a dealership like poison......just walking on the lot irritates the crap outta me.”
ditto ... but last few cars i bought, i did online/remotely/telphone until i came in to inspect auto, sign paperwork, and pay and collect keys and title after deal was worked out remotely ... i dealt exclusively with either the dealership fleet manager or dealership manager ... all cases i had excellent results and got great deals on great cars, both new and used ... though i did deal only with honda dealerships that had excellent online feedback ...
““I don’t have time to sit around waiting while you Lundegaard me.””
ROTFLOL!
did the dealer know what you meant? ... oh, and did you buy the undercoating?
“I curse the day they came up with “No Haggle Pricing”.”
just go elsewhere or different model unless the no-haggle price is actually a fair price ...
That is COOL! Yeah you should have married her sooner!!!
You don’t need a crystal ball to see that’s what dealers and the public are thinking.
No, a sensible one. The Store cannot dictate what you do with your own property..............
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