They say a journey of a thousand miles begins with a single step. When it comes to the remarkable journey your Carvana vehicle takes, from the moment it is acquired by us to the moment it is delivered to your door, the points that plot its incredible course are both numerous and meticulously executed. At Carvana, transparency lies at the heart of everything we do, and we believe you deserve an up close and personal view of the important steps that lead to the completion of a Carvana purchase.
Our multi-part series called “The Carvana Odyssey” serves to reveal just how much energy, effort, and passion goes in to providing you with your Carvana purchase by offering an in-depth and behind-the-scenes look at the processes and people that make the new way to buy a car possible. The Carvana Odyssey begins with us acquiring a vehicle. This typically happens in one of three ways: off lease/off rentals, off trades, and/or through wholesale channels. To help bring clarity to this process, we enlisted members of our car buying team in purchasing analyst Danny DePrez, inventory operations analyst Danny Segal, and director of inventory purchasing Brian Boyd, to shine a light on Carvana’s approach when it comes to acquiring the vehicles for its ever-expanding inventory.
PART I: THE WHOLESALE WISEGUYSPictured (From L-R): Carvana car buyers Mick Pagel, AJ Romero, Danny Markman, Sunny Warda, Danny Segal, Justin Deviese, David Liokumovich, Ben DeWees, and Danny DePrez. The metamorphosis of an ordinary vehicle becoming a Carvana vehicle before eventually becoming your vehicle begins with Carvana’s car buying team. Think of these guys as the talent scouts responsible for discovering your favorite athlete or musician; these individuals are charged with stocking Carvana’s inventory with high-quality vehicles so that you have no shortage of options when you go to buy your next car. Using online vehicle sourcing tools, our car buyers have access to a variety of wholesale feeds that not only allows them to see what kinds of vehicles are available, but also provides them appraisal information on the vehicles being wholesaled.
On a given day, car buyers like the Dannys will pull data from these wholesale feeds and send it to Carvana’s data analytics team to be “scrubbed” in order find vehicles that meet our exacting standards. The “scrubbing” process includes eliminating vehicles that fail to comply with our uncompromising policy of never selling a vehicle that has notable frame damage or that has ever been in a reported accident. This data includes information such as which wholesales are running in a given week, and how many cars are at a particular wholesale.
“There may be 4,000 cars available at wholesale, but we may only be eligible to buy a quarter of the available vehicles depending on what gets scrubbed,” says Danny Segal. “The model from our data analytics team removes all of the vehicles from the list that don’t meet our criteria.”
The model, according to Brian Boyd, is “smart enough where it will look for certain words, different versions of the same words, misspellings, etc,” to create a new, “biddable” list and help the buyers drastically reduce the guesswork associated with purchasing a vehicle from wholesale.
“That creates a list of cars that we feel are biddable in some fashion,” says Boyd. “Then the model uses an algorithm that basically takes into account our history with that type of car, takes into account the current market price for the car, as well as where the car is located and therefore how much it will cost to ship.
“Compared to most dealerships, this model is far more sophisticated,” Boyd continued. “National franchises like AutoNation, Lithia, and a few of the other big players use some version of the model we have. With that said, I think we’re quickly advancing beyond our peers. Our model is constantly evolving as we continue building up enough internal data to know who our customers are – our customers look different than those who go to AutoNation, for example. We’re on par with many of our peers now, but the expectation is that over the next 12 months, we’ll outpace many of them as far as the sophistication of the models we have.”
From the finalized list of “biddable” vehicles the model produces, Segal says the car buying team still maintains a critical eye in their evaluations of the vehicles, as the goal above all else is to find vehicles that are of the utmost quality.
“Of the percentage of remaining eligible vehicles, our buyers may bid on anywhere between 40 to 60 percent of those cars depending on their condition. From that original 4,000 number, we may only be actually bidding on 500 vehicles total. We’re very, very selective when buying vehicles, as it’s our primary goal to find cars that we believe will meet our high standards for initial quality.”
To ensure the best possible quality vehicles for customers, that means that vehicles purchased at wholesale must not only have never been in an accident, but are also in quality enough condition to pass Carvana’s rigorous 150-point inspection conducted by an ASE Certified mechanic.
Within Carvana’s buying team, buyers are placed into groups based on specialty. For instance, one group may solely focus on purchasing Pacific/Asian sedans, while another focuses on Domestic or European sedans, and so forth. According to Danny DePrez, this enables the buying team to have in-house experts, so to speak, on the vehicles Carvana purchases.
“It allows us to get pretty familiar with certain makes and models,” says DePrez. “[A buyer] can ‘own’ their particular segment. They’re equipped with a knowledge base so if there’s questions about a certain car, Customer Advocates can come to them for a direct answer. It also allows buyers to know exactly what to look for in a car, as they have a trained eye for the vehicles within the realm of their concentration.”
The process of vetting the vehicles at wholesale starts with an examination of the vehicle condition report (commonly referred to amongst the buyers as a “CR”). The vehicle condition report is a report generated by an unbiased third party that has the best intentions of the seller (the wholesaler) and buyer (Carvana) in mind. The CRs are the car buying team’s “bread and butter,” as they detail exactly what the vehicle’s package includes, as well as the kind of condition the car is in. The CR includes photos and key information about the vehicle, as well as an overall rating on a 1-5 scale. In most cases, buyers target vehicles rated 4.0 or above, but even despite a quality rating, some mystery can remain as to what the buyers are actually purchasing. Fortunately, there are a number of checks in place after the purchase of a vehicle at wholesale that helps ensure the buyers weren’t sold a useless hunk of metal.
“We have a deal with all of the wholesalers which includes a post-sale inspection,” says DePrez. “When Carvana buys a vehicle at wholesale, [the wholesaler] will actually send out inspectors to look at the car and make sure they are as advertised. If there’s something wrong right off the bat, such as the air conditioning not working, the sellers agree to either reimburse us for the cost to fix it, or we can unwind the deal and we don’t have to buy it. However, this rarely happens.”
In the event an issue with the vehicle finds its way past the wholesale inspectors, inspectors and mechanics at the Carvana Inspection Centers serve as a second line of defense to help detect any problems the vehicle may have. If an issue with a particular vehicle is immediately found at the inspection center, Carvana is able to take advantage of a 14-day arbitration window. This means that if Carvana obtains a car that was not as described on the vehicle’s CR, an arbitration inspector will come out and evaluate the car for themselves. If the arbiter rules in favor of Carvana, the wholesaler takes the car back and reimburses Carvana for the full cost of the vehicle.
In most cases, however, these safety nets and contingency options are not needed. Once Carvana wins a vehicle at wholesale, it gets tagged and goes through its post-sale inspection. Once the inspection is complete, a daily report is finalized on all of the vehicles purchased by Carvana at that particular wholesale on that particular day. With that report in hand, Carvana then notifies our third party transport team where the vehicles are located. From there, the third party transport retrieves the vehicles and ships them back to the appropriate Carvana Inspection Center, where the inspection and perfection phase of the Carvana Odyseey will begin in earnest.