Can Carvana Car Vending Machines Disrupt Dealerships?

Carvana takes novel approach to distributing used cars - car vending machines

Back in the day, all you could expect out of a vending machine was a bag of chips or a lame cup of coffee. But like other technologies, vending machines have advanced. Today, they dispense anything from headphones to iPods, makeup and even cars.

Yes, car vending machines.

Carvana, an online-only used car dealer, developed a real-world solution for delivering vehicles purchased online to customers. Coin-operated car vending machines. The eye-catching glass towers hold upwards of 20 cars and stores sold vehicles ready for pick-up at select Carvana locations – no dealership required.

So far, Carvana erected coin-operated car vending machines in Atlanta, Nashville, Austin and Houston. Consumers who live 100-miles outside those metro areas can pick up their car from the vending machines, instead of having it delivered to their home. Carvana even subsidizes up to $200 of the travel costs for buyers who pick up their new car in-person.

Since the actual purchase takes place online, customers only need to enter their name at the kiosk and insert a special Carvana-branded coin, much like an arcade token. Hydraulic lifts spring to life and lower down the vehicle.

“People responded so positively to our [first car vending machine] that we knew we had to bring the experience to additional markets.” said Ernie Garcia, founder and CEO of Carvana. “We’re incredibly excited to show just how fun and stress-free buying a car can be with Carvana.”

A 4,000-Pound Gimmick?

According to a press release, Carvana closed a $160 million round of funding last summer to expand its operations and bring car vending machines to “new markets across the country.” announced in January that a location is in the works in Philadelphia.

Although the car vending machines are largely automated, Carvana reps staff locations to meet and greet buyers and hand them the token. This means the car vending machines only operate during regular business hours.

So while car vending machines may just be a gimmick, this new entrant into the car retail market seems like the real thing. Reuters recently reported that Carvana hired Wells Fargo & Co. and Bank of America Corp. to lead its IPO. The company’s estimated valuation: over $2 billion. That’s a lot of chips.

Of course, buying a used car remains a complex transaction. Beppi, a peer-to-peer online marketplace for used cars, launched in 2014 only to shut down in February 2017.

But Carvana’s high valuation stands as testament to the fact that people don’t like car dealerships – new or used.

A study from Ford found that 83 percent of Americans would prefer to “spend as little time as possible” at a dealership when buying a new car or truck. The consumer perception of used car dealerships is several magnitudes worse. Witness how they’re portrayed in film: The pushy salesman clad in a cheap polyester suit trying to take the customer for a ride.

Carvana disrupts that model. Prices are fixed. There’s no salespeople. And buyers can test-own cars for 7 days. Taking a page from Amazon, Carvana uses fulfillment centers situated near large metro areas. This way it can store its used-auto inventory cheaply, but deliver it quickly to consumers.

“Carvana is revolutionizing the car-buying process for today’s consumer by eliminating the pressure, hassles and hidden fees that come with buying from a dealership,” the company said in a release.

So while an oversized car vending machine may not be the consumer experience that car buyers were hoping for, it definitely does make the process of shelling out for a new set of wheels a hell of a lot more fun.

   Article written by MG Rhodes.  Submitted 4/5/17

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