- Carvana vs Dealership: What’s the Real Difference? - August 14, 2023
If you are trying to figure out if Carvana is a better option for purchasing a used car than going with a dealership, this article is for you.
I’ve now used Carvana twice to purchase a vehicle, once earlier on it it’s history in 2019 (2017 Mazda-3) and more recently in 2023 for a 2021 Mazda CX-5). My experience differed a LOT! It’s not as perfect as it sounds.
That said, I’m also an avowed hater of the dealership experience. Specifically, having to spend the better part of a day doing the dog and pony show. Longer if I want a “good deal”. But, as I learned on my last go-around with Carvana, there’s clear trade-offs and it’s not as simple as Carvana makes it sound.
So what in the heck is Carvana even trying to do?
Table of Contents
Understanding Carvana and Dealerships
Before delving into a comparative analysis, it’s crucial to understand how Carvana and car dealerships operate.
How Does Carvana Work?
Carvana, often nicknamed as a “car vending machine,” provides an innovative solution for online car shopping. It combines the ease of online browsing with physical locations where customers can pick up their newly bought vehicles.
The process begins with a search for a specific make and model, which can be refined using filters and sorted based on categories like price, mileage, and more. Once a vehicle is selected, Carvana provides a detailed 360-degree inspection, highlighting any flaws or blemishes.
Carvana also offers a range of financing options, making the purchase process seamless. This simplicity, combined with the unique experience of picking up a car from a vending machine, sets Carvana apart from many other online car-buying websites.
How Does a Car Dealership Work?
In contrast, purchasing a car from a dealership is a more hands-on experience. It starts with research on the desired vehicles and setting a budget. At the dealership, salespeople assist customers in answering their queries and helping them test-drive vehicles to get a feel of the car.
Once a suitable car is chosen, customers can negotiate the price and terms. After deciding on the terms and conditions, the sales contract and other relevant paperwork are signed with the finance and insurance (F&I) manager.
Main Differences Between Carvana and the Dealership Experience
Here’s how I see the key differences between Carvana and a traditional dealership:
- Online Shopping Experience: Carvana offers a completely online shopping experience, allowing customers to browse, choose, and purchase a car from the comfort of their own homes. There’s no need for a stressful negotiation with a salesperson.
- 7-Day Return Policy: Carvana offers a 7-day return policy, allowing customers to fully test the car in real-life conditions. Traditional dealerships only offer short test drives.
- Transparent Pricing: Carvana has no hidden fees or haggling, the price you see is the price you pay. Traditional dealerships often involve negotiation, which can be stressful and time-consuming.
- Vehicle Delivery: Carvana delivers your purchased vehicle right to your doorstep. Traditional dealerships require you to visit their location to pick up your new car.
- 360-Degree Vehicle Images: On Carvana’s website, you can view high-resolution, 360-degree images of the vehicle, both interior and exterior. This level of detail is not typically provided at traditional dealerships.
- Financing Options: Carvana offers quick and easy online financing options. At a dealership, this process can be more complex and time-consuming.
- Customer Service: Carvana’s customer service is available 24/7. Traditional dealerships have limited hours.
- Trade-In Process: Carvana offers an easy, straightforward trade-in process with instant online offers. Traditional dealerships often require a physical appraisal and can involve negotiation.
- Vehicle Selection: Carvana has a wide selection of vehicles available nationwide, whereas a traditional dealership’s selection is limited to what they have on their lot.
Comparing Vehicle Selection and Quality
In terms of vehicle selection and quality, Carvana had the edge in my book. It offers a wide array of high-quality cars, SUVs, and trucks, all of which undergo a rigorous inspection process. Moreover, it ensures that the available vehicles are accident-free.
Conversely, the used car dealership market – even the “certified pre-owned” gimmick – is fairly limited locally.
While it’s not true for all dealerships, some have raised concerns over the quality of inventory and warranties. Regardless, dealerships hold an advantage in offering test drives, which many car shoppers consider essential. Y0u can literally open the hood and look under the car if you want to.
Examining Pricing and Delivery
When it comes to pricing, both Carvana and dealerships offer competitive rates based on market trends.
However, Carvana has a “no-haggle” policy—meaning the listed price is the final price. On the other hand, dealerships allow price negotiations, which could potentially result in better deals.
As for delivery, Carvana provides delivery services for those living close to their markets, whereas dealerships typically allow customers to drive their new car off the lot once the transaction is finalized.
Warranty and Returns: Carvana vs Dealership
Carvana offers a 100-Day Limited Warranty and a 7-Day Money Back Guarantee, while dealerships usually don’t have return policies as sales are considered final upon signing the contract.
The main reason Carvana does this is that buyers tend to have less time to evaluate and inspect a vehicle compared to dealership experiences. Carvana basically removes the friction of using their network by offering the “free trial” version.
Carvana or Dealership: Which is Better?
The choice between Carvana and a dealership largely depends on individual needs and preferences. Carvana offers a vast selection and user-friendly financing options, but you can’t test drive or see the car in person. On the other hand, dealerships offer a more traditional car buying experience, including the chance to test drive.
My Personal Experiences with Carvana Over 4 Years
Here’s my experience separated by about 4 years.
- 2019 (Mazda-3 Purchase): I was in the market for a small sedan just to get around town, as I already worked from home mostly. The first reason I enjoyed Carvana at the time was it’s seamless way to browse selection. When I found the vehicle I wanted, I easily confirmed the order with some digital paperwork, followed the steps to get my insurance setup, and then waiting for my delivery (about 8 days out). Sure enough, the vehicle was delivered on time and on schedule. They offered to let me drive it around for a “test drive” if I wanted. Then I signed some additional paperwork in person. Carvana even orchestrated new plate delivery, titling and registration, just like with a dealership. Overall I was quite satisfied with this experience!
- 2023 (Mazda CX-5 Purchase): Fast forward a few years and I was ready to make another purchase, trading in the Mazda-3 for a CX-5. Overall I found that their selection and generally expanded, with about 12+ great options in my much and specifications. The app in general was easier to use. With my positive experience in 2019, it was a much easier decision to go with Carvana in 2023. Everything went great until it came time for my vehicle delivery. My initial delivery time was postponed a week. Then, a day before my re-scheduled delivery a somewhat frazzled local delivery rep called to let me know the vehicle wouldn’t start as the key fob wasn’t programmed correctly. Ok… He then asked if I still wanted delivery and they would reimburse me for local repair. No way! I wasn’t comfortable taking receipt of a vehicle with undrivable issues. Fair enough, they said they would take care of it with the dealership. But, another 1 week delay. A few days before my July 2nd delivery, they postponed it again… for July 4th delivery. This whole time I’d been re-arranging my schedule to be available. Not a huge hassle as I was home most of the time, but still more annoying than it should have been. On the evening of July 3rd I received a call for the local Carvana location in Raleigh, NC asking if I wanted to COME IN to trade in and pickup my car as he didn’t know if the delivery crew would be able to make a July 4th delivery. Then why schedule it in the system? I was pretty frustrated at this point, but decided to drive the 35 minutes to make it happen. Once there, it took about 1.5 hours to get the vehicle. Then the fun started. Because their system made me sign up for a new insurance policy at the time of purchase, I now had an extra 30+ days insurance gap. This caused my plate transfer to get delayed (I learned after the fact). I didn’t find this out until 1 day before the temporary plates expired! And only after I called multiple times to them and my local DMV. Finally, 1 day after my plates expired, they figured out the issue and offered to just send me new plates. Thankfully these arrived within 48 hours. Overall, I had a very mixed experience this time.
All in all, I was less impressed with a lot of things about my latest Carvana experience, mainly to do with their inconsistent communication, registration hiccups, and disconnect between their “systems” and their people on the ground.
That said, I’m very happy with the vehicle itself it was a great value and I feel like a got a slightly above market trade in value for my old car.
Even with all of the problems with my latest Carvana experience, I still saved time relative to the dealership experience and probably some money too (I don’t have the patience for haggling).
Carvana vs Dealership Summary
Here’s my high level take on the trade offs to consider:
|Convenience||Carvana provides a fully online car buying experience. You can purchase a car from the comfort of your home, without having to visit a dealership.||Traditional dealerships require you to visit in person, which can be time-consuming and inconvenient.|
|Pricing||Carvana offers no-haggle pricing, meaning the price you see is the price you pay. There are no negotiations, eliminating stress and uncertainty.||Dealerships often involve haggling and negotiations, which can be stressful and result in unexpected costs.|
|Test Drives||Carvana provides a 7-day return policy, essentially serving as an extended test drive to ensure you’re happy with your purchase.||Dealerships offer traditional test drives, but these are usually short and may not fully reveal the car’s fit for your daily life.|
|Financing||Carvana offers in-house financing options and provides terms upfront. This provides transparency and streamlines the buying process.||Dealerships often have financing options, but they often involve third-party lenders, which can complicate the process and potentially introduce less favorable terms.|
|Vehicle Selection||Carvana provides a wide selection of cars nationwide, which can be browsed online.||Dealership inventory is limited to what’s physically available on the lot, which may limit your choices.|
|Delivery||Carvana offers home delivery of your purchased vehicle, adding to the convenience of the buying process.||Most dealerships require you to pick up your vehicle in person. Some may offer delivery, but it’s not a standard practice.|
|Customer Service||Carvana has customer service available 24/7 online or by phone to assist with any queries or concerns.||Dealership hours are typically limited, and you may need to schedule an appointment for assistance.|
Current Carvana Lawsuits
While I still consider Carvana a legit option for purchasing used vehicles, it’s not without controversy. As a public company (unlike most local dealerships), they’ve got a big target on their back and car purchases are notoriously thorny.
Here’s a summary of the current litigation and issues surrounding Carvana:
- Carvana is currently facing several legal challenges across the United States. One notable case is a class-action lawsuit filed in Pennsylvania court, which alleges that Carvana has unlawfully delayed transferring vehicles’ titles, preventing customers from legally driving the cars they purchased. This case is particularly noteworthy as Carvana’s motion to dismiss the case was denied by a federal judge, meaning it will proceed.
- In addition to this, Carvana’s lead lawyer, Paul Breaux, is facing 57 criminal charges in Illinois for failure to transfer vehicle titles and improper use of titling and registration. This has resulted in the Illinois Secretary of State suspending Carvana’s dealer license, and the impact of these charges on Carvana’s ability to sell in Illinois is still uncertain.
- Lastly, Carvana is also accused of fraudulent activity by its investors who seek compensation for their alleged losses. The lawsuit claims that the Tempe, Arizona-based used-car retailer engaged in fraudulent activities. The company is also facing legal issues and complaints to the Attorney’s General in other states including Florida and North Carolina.
Other Carvana Alternatives & Competitors
While Carvana is one of the most iconic recent disruptions to the car dealership market, there’s actually a few great options to also consider:
- Vroom: An online used car retailer that allows customers to browse, buy, sell, and finance used vehicles. Like Carvana, Vroom also delivers vehicles directly to the customer’s home.
- Shift: An online platform where individuals can buy and sell used cars. Shift offers features like on-demand test drives and car delivery.
- AutoTrader: A comprehensive online marketplace for new and used vehicles, allowing users to buy and sell cars. AutoTrader provides extensive search filters and detailed vehicle information.
- Carmax: One of the largest used-car retailers in the U.S, offering a wide selection of used cars. It provides in-person and online buying options.
- TrueCar: An online automotive marketplace that provides pricing transparency by publishing data on what other people paid for cars.
- Cars.com: An online platform providing listings for new and used vehicles from dealers and private sellers, along with research tools and car reviews.
- Edmunds: Known for its expert reviews, this site also offers a platform for buying and selling cars, and provides detailed car listings, vehicle valuation, and pricing tools.
- eBay Motors: As part of the larger eBay marketplace, eBay Motors offers a platform for individuals and dealers to buy and sell used and new cars.
- CarGurus: A global online automotive marketplace connecting buyers and sellers of new and used cars. It uses proprietary technology, search algorithms, and data analytics to bring transparency and simplicity to the car shopping process.
- Autolist: An app and website that aggregates listings from many sources to make it easy for users to find used and new cars for sale.
My Takeway on Carvana vs Dealership
From my experience, it’s clear that both Carvana and dealerships have their unique advantages.
Carvana offers competitive pricing and a hassle-free buying experience, while dealerships provide a comprehensive service and the opportunity to negotiate prices.
Buying a car on Carvana feels like less of a time commitment and more of a casual, dare I say “fun”, experience. Almost like browsing Zillow for houses.
On the flip side, when you really need someone to get ahold of – like when Carvana messed up my registration – it’s painfully arcane to navigate their glorified customer support line. In this case, having a salesman who’s commission is directly tied up with your successful transaction can be helpful with a dealership.
That said, here’s how I’d make a decision:
- Looking to haggle and negotiate? Don’t bother with Carvana. They literally don’t care and there’s no way to negotiate. Even with trade-ins, the price their algorithm spits out is what you get. For better or for worse! Don’t bother sending them the “blue book” value. Pro tip: That said, getting a Carvana offer for a used car or price comp CAN be an effective way to negotiate against a dealership!
- Looking to save time and hassle? Skip the dealership and go with Carvana. While Carvana clearly has some issues on fulfillment, at least you don’t have to be sitting around in the dealership (where some of the same issues are still possible).