Online used-car retailer Carvana posted a record second quarter as more Americans turned to affordable used vehicles instead of buying new.
The numbers
Carvana sold nearly 200,000 vehicles during the quarter, a roughly 40% increase from a year earlier. Revenue climbed 52% to about $7.4 billion, while profit jumped to $310 million from $183 million.
“The experience we deliver to our customers is simple, fun, and fair, building our brand and driving word of mouth,” said Chairman and CEO Ernie Garcia III.
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The average new vehicle now costs roughly $50,000, while full-size pickups average more than $66,000, according to Kelley Blue Book. Those prices are pushing many shoppers toward used vehicles.
CarEdge reported new-car prices have climbed 3.4% over the past year.
Analysts said Carvana’s online shopping model, allowing customers to buy through its website or app without traditional dealership negotiations, continues to resonate with buyers seeking convenience and lower prices.
The Wall Street Journal reported roughly one million consumers have exited the new-car market because prices remain so high.
Others are simply holding onto their current vehicles longer as higher fuel costs and broader inflation continue squeezing household budgets.
Gas prices and inflation
The average price of a gallon of gas was $4.09 nationally Thursday morning, up from $3.14 a gallon a year ago, according to AAA.
Consumers are also dealing with strong economic headwinds in the form of inflation. The Bureau of Economic Analysis reported Thursday that the Personal Consumption Expenditure price index rose by 3.7% in June.
Carvana is seeing specific growth in the Midwest and Northeast, as well as people with higher incomes.
The company also reported strong growth among higher-income buyers. Garcia said purchases from households earning more than $100,000 annually increased by more than 60% year over year.
Despite the strong quarter, investors were less enthusiastic. Shares fell about 8% after the company projected full-year earnings of $2.7 billion to $3 billion, below some Wall Street expectations.
Looking ahead
While used cars remain its core business, Carvana is also making a push into new vehicles.
The company recently acquired several Stellantis dealerships, allowing customers to shop for new Jeep, Ram and Chrysler vehicles through Carvana.
It has also launched a new smartphone-based retail experience designed to simplify the new-car buying process.
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