Kempner’s Unofficial Business
This is a new column by me, Matt Kempner. I’ve been a reporter or editor since gas was about a dollar a gallon and “Hands Across America” was a thing. I’ve spent lots of time covering government, the environment and, for most of my career, business. But I don’t daydream about fiscal policy and corporate earnings. What I love about business is the strategy and the people and the journeys that those people take. I like irony and surprise and nuance. I’ve interviewed soldiers, oystermen, football stars, chicken plant workers, Fortune 500 CEOs, suburban activists and entrepreneurs dreaming big dreams. How cool is that? I’ve teared up in interviews, laughed inappropriately, been yelled at and snookered. I do like an adventure. Let’s see where this one goes.
Is there anything you wouldn’t buy online?
The latest test of that question is hitting the car industry, which is already being roiled by lots of tradition-smashing change.
A 2-year-old company called Carvana has a simple idea: that you and I are willing to pay thousands of dollars for our next used car without ever having actually driven it.
Or even taken a seat in it. Or stuck our noses in to make sure some frightening, inextinguishable smell isn’t lurking inside.
And we’re talking about cars that average about $20,000 under Carvana’s no-haggle banner. The vehicles range from late-model Corollas to Mercedes.
Co-founder Ben Huston tells me the company expects to sell 400 this month. It’s part of a growing movement to beef up car-buying options online, with moves by traditional dealers and big chains like AutoNation as well as startups such as Beepi, a West Coast outfit that certifies cars individuals are selling and connects the vehicles to online buyers.
Beepi and Carvana may be the most edgy because customers agree to buy without ever seeing the vehicles in person. That really does sound wacky when you say it out loud, doesn’t it?
Carvana looks an unlikely player to upend the traditional dealer model. For starters, its majority owner is the primary owner of a big used car dealer, Phoenix-based DriveTime.
DriveTime focuses on customers with weak or bad credit. In the last three years, it has been hit with nearly 800 complaints to the Better Business Bureau, and those are just the ones that have already been closed. (In that same period, DriveTime sold about 300,000 vehicles.) The BBB still gives the company an A-, a grade that apparently includes a ding after the federal Consumer Financial Protection Bureau last year accused DriveTime of unfair debt collection practices. The company didn’t admit wrongdoing but agreed to pay an $8 million civil penalty.
One of Carvana’s founders, Ernie Garcia, is the son of DriveTime’s founder and chairman.
Another twist in Carvana’s story is that while it is headquartered in Phoenix, its most crucial operations center is across from a cattle farm near Winder, Ga., a town well beyond metro Atlanta’s back fence.
That’s where Carvana has 2,000 vehicles at any one time being processed for resale.
Huston, the co-founder who graciously gave me a tour, predicts big growth ahead. So far the company has opened centers in Charlotte, Nashville and Birmingham, as well as in Atlanta, where the company launched its sales effort.
Online car shopping has been underway for a long time now.
Plenty of us will start our searches online and even negotiate price before showing up at a dealer.
Still, the consummation of our transaction usually means visiting a big showroom, where anything can happen and time won’t move fast enough.
Expect to spend perhaps two hours there, Autotrader advises. And that’s if you’ve already picked out your car, negotiated the price, set up your financing and face no snafus. Seems like a problem, since an Autotrader survey found consumer satisfaction fell sharply after an hour and a half in a dealership.
Yet 84 percent of consumers say they prefer to buy a vehicle in person, according to a study earlier this year. Go figure. (Autotrader is owned by Cox Enterprises, the same company that operates The Atlanta Journal-Constitution.)
I remember a salesman at a dealership once locked the door on a room he asked me to wait in while he brought my offer to his sales manager. Another time, one added a steep. last-minute fee, though he had repeatedly assured me there would be no such buffoonery.
In fairness, I also have done deals with pleasant people at dealerships who treated me well. But never have I bought a car quickly and efficiently.
So imagine my amazement the other day when I witnessed a 19-year-old college student punch a code into Carvana’s “Vending Machine” in Atlanta to get the car she had signed up for online.
(Vehicles are either delivered directly to consumers on a little hauler or customers can pick them up at the “vending machines.” These sites aren’t showrooms, but they do have staffers who help buyers complete their purchases.)
A bay door slid up, revealing a shiny little Kia Forte. Kaci Cole stepped inside. After maybe 10 minutes of swiping an iPad and signing five pieces of real paper and getting help setting up the vehicle’s Bluetooth, she was out the door, $13,000 lighter and steering the first car she ever bought.
Time elapsed: not much more than signing out a rental car for the weekend.
She had actually taken the 3-year-old Kia — with its 41,138 miles of chances for problems — for a 5-minute test drive. But I wondered if she was just going through the motions of evolutionary memory. And the test drive came after she had signed up to buy the car, not before, when she was still weighing her options.
“This is the future,” Lyncoln Doggett informed me. He was a friend who had tagged along with Cole. “Everything in the world is happening where you don’t have to go through these hard processes.”
He prefers online transactions: “You can just get in your car and go. I don’t want to talk to people.”
That last disturbing line is a topic for another day.
Carvana executives know people can get wiggy about buying such a big thing online. So they post extensive images of every vehicle’s interior and exterior. They point out defects. And they promise a seven-day, no-questions-asked, money-back guarantee.
I found lots of glowing customer reviews and comments online. But I also spotted several complaints, including on Carvana’s own site.
They usually centered around messed up title work or vehicle defects that customers caught only after they drove away with their new purchases. I didn’t see any suggestion that Carvana reneged on its return policy.
I like Carvana’s concept, but I’m still wary.
I’m a smidgen out of control in researching before I buy a car. It takes us a long time to earn enough money for a decent vehicle. So I figure it’s worth trying hard to make a wise decision.
Carvana’s seven-day return policy is soothing. But I wonder: Once we’ve gone through the trouble of getting a car, wouldn’t we be predisposed to live with all but the most serious problems, rather than starting all over?
“Who wants to waste the time doing that?” said Mike Barnette.
He has a dog in this fight. He and his brother co-own a small car lot started by their father in 1959 in Winder, not far from Carvana’s processing center.
A sign on Barnette’s lot beckons passing drivers: “Quality Vehicles At Best Prices. C Us Today.”
He told me he never buys a used vehicle for his lot if he can’t first sit in it, crank the motor and determine whether it’s decent. Any shortcut around that, he said, “is not common sense.”
(I didn’t find any Better Business Bureau complaints online about Barnette’s business.)
Huston, the Carvana co-founder, knows he doesn’t have to win over everybody to be wildly successful.
He’s a guy open to change and making life easy. He’s bought shoes online (yawn) and business suits online (but fitted at the old brick and mortar) and personal care items online.
So I asked: Is there anything you wouldn’t buy online?
“A house,” he said. “If I was going to buy a house, I would want to see it first. That may be the limit.”
There you have it, real estate agents. Break our next boundary.
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