Even thought Carvana is entirely online, focuses on smaller inventories, and only sells used vehicles the company still has parallels to more traditional dealerships. Despite the differences both businesses suffer from the same economic factors that limit overall vehicle sales.
And, like dealers, Carvana is keen on sourcing more cars from customers.
Vehicle trade-ins coming from consumers are more profitable, company executives have said recently, and they are seen as an integral way for Carvana to increase its gross profit per unit as it strives toward so-far-elusive profitability.
In Carvana's most recent quarterly earnings call, CEO Ernie Garcia said the company more than tripled the number of units it bought from customers through the year. "Some of those flowed through wholesale, some of those flowed through to retail sales, and in either case, there's a profit opportunity there," he said.
Behind the leader
Still, just 17 percent of the cars Carvana was retailing in the fourth quarter were bought from customers. It was at 16 percent in the third quarter, up from 11 percent in the second quarter and 6 percent in the first, CFO Mark Jenkins said in outlining Carvana's profit strategies at an investor presentation near the end of last year. "That still leaves us significantly behind the used-car industry leader in terms of customer sourcing," Jenkins said.
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