27 Oct At Carvana you buy a car – not play a game
“Carvana is a customer service business using technology to buy cars. Everything we are doing has the customer in mind.” —Ryan Keeton, Chief Brand Officer, Carvana.
Used car salesmen typically have a horrible reputation. When many of us decide to buy a used car, we’ll go into a dealership worried about being scammed. To offset that, we’ll prepare for the experience in various ways:
- Compulsively study Consumer Reports-types of websites to learn the benefits and challenges of various car brands and models
- Memorize Kelley Blue Book prices to know what’s a good deal and what isn’t
- Do eye exercises or get new glasses to prepare for reading a lot of contractual fine print
- Practice rhetorical gymnastics for extreme negotiations
Basically, we strategize how to win the game of used car buying.
I did the same before I bought my used car. I worried about being scammed the whole time I was at the dealership. I was texting friends during my four hours there, making sure I was doing the right thing and not saying or signing anything stupid. I didn’t want to lose.
Today, there is a better way—Carvana.
I was curious how it worked. I searched for Mini Coopers and saw that they were discounted from the Kelley Blue Book price. Impressive! The whole time I was browsing, I felt like I was buying clothes—the experience was that simple and straightforward. They included a picture of the car that indicated where the dings and dents were (at a dealership, that would be my problem, it’s all buyer beware and I wouldn’t notice them). Financing was approved in seconds and the site updated the prices so I could see my monthly rates. The site boasts that you can order a car on a Friday night and get it the next morning. I wasn’t ready to buy, so I didn’t try that. But I was curious to learn more.
It sounded too good to be true. But it isn’t.
Ryan Keeton, Carvana’s Chief Brand Officer, is one of the three founders who started Carvana in Arizona in March, 2013. They all have experience in finance, operations and marketing, which becomes obvious as you use the site and their service. One of the co-founders, Ernie, had the vision—he was in the car dealership businesses and knew car sales could work better.
The used car industry overall doesn’t have the best customer experience (lots of fear and distrust) and there hasn’t been much innovation or technology infused into dealerships for a long time. A lot of the business includes 3rd party partnerships and costs for showrooms, car lots, inventory, and staff—about $1,500-$2,000 of overhead per sale per customer.
Carvana re-engineered all aspects of this business, leveraging technology as much as possible and keeping the customer at the center of the experience. They wanted to build a company known for a better way to buy a car.
They created their own end-to-end system that allows them to sell cars for $1,681 lower than Kelley Blue Book on average. They are a real-deal, legal dealership sans car lot. Instead of a lot, they store cars in an Amazon.com-like distribution center, making it easier to deliver the car anywhere in the metro area they cover, and it’s where they also recondition the cars for resale.
They add touches that help change customer perceptions about used car shopping. For example, A few days after I got financing approved, I got a call from Carvana. I was a little annoyed to hear from a telemarketer (aren’t we all!), but the experience was surprisingly positive. They didn’t try to convince me to buy—never mind buy today. They called to see if I had any questions.
I was so excited that happened! That’s how customer experiences are supposed to work – care about my needs!
And this focus on the customer’s experience is making them successful. They have been consistently adding markets since 2013 (they recently entered the Texas market including a 30 acre operations center based in Dallas), they already have a number of repeat customers, and an average customer satisfaction rating of 4.9 out of 5.
(As an aside, I read all six of the 1 and 2 star review. Yes, the process has some bumps, however, they own their mistakes and do their best to make things right. You don’t see that often.)
I didn’t really understand was how they acquired their cars and if they did the trade-in process typically associated with dealerships.
Ryan explained that they put about $1,000 toward reconditioning a car for resale. They don’t accept cars that were in an accident or have frame damage, but they do buy rental cars and do accept trade-ins.
They found a way to determine trade-in value online. You need your VIN, which may take a couple of minutes to find, but once you have that and your license plate number, you need to answer only eight questions and they present you the value of your car. They even subtract your car payment to determine what can be allocated to the new car. It’s quick, easy, straightforward, and automated.
If you do decide to buy a car and trade-in your existing car, they deliver your new car and take away your existing car. It’s almost like what happens when you buy a mattress and get it delivered to your house. Brilliant!
I’m looking forward to buying my next car from Carvana. I’m not one to research a car for months and be ready for a negotiation war. I’m glad Carvana found a way to eliminate the used car buying game and make it fun—why shouldn’t it be?
But they did create a new question: as they grow, what will those used car salesmen will do?