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Originally Posted by lemming
This might be an easy answer, but do you think Carvana is lowering its standards on cars that it will re-sell because supply is so tight?
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No. I think they have black and white criteria for what they'll buy intending to resell and what they'll buy to wholesale. The wholesale intended vehicles get offers way below what they (their algorithm) think it might wholesale for in a worst case scenario to prevent against getting burned. The resale intended vehicles get offers based on what they (their algorithm) think they will be able to sell it for within X days. The algorithm almost certainly takes into account indicated condition against their data on what repairing those flaws will cost, their current stock of similar vehicles, probably inventories of similar models at competing dealers, etc, etc.
When I've compared in the past, it always looked like the difference between their offer-to-buy and offered-for-sale prices on $25-$50k cars has been about $7k. That didn't change from when things were normal pre-COVID through fall of 2020 when the car market seemed to be headed towards something like normalcy...before the chip shortage fucked everything up again. I haven't looked lately, but I'd expect it to be in the same ballpark.
I have heard some things from wholesale car buyers that Carvana has/has had buyers out there with instructions to buy everything at times to keep them in inventory and that has pushed prices upwards. I don't think that their standards have lowered, though, but they've been more willing to spend more money on cars they with less regard to condition.
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I’m curious about this in general because dealer lots are so sparse right now.
When I was at the dealer earlier today for an oil change (free) —they were parking the vehicles in diagonal to “fill” the lot which is normally a rectangular grid of vehicles so it would not look empty.
I have never in my life seen something like that on a dealer lot.
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I've passed a lot of dealerships in the eastern half of the country this summer and it's been frightening how empty so many of them have been.