Those looking to buy or sell cars have many avenues to choose from nowadays. There seems to be no end to the list of companies that are offering to either buy your car from you or sell you a great-value car with different financing options. Some of them do all of the above, and one of those is Carvana.
Carvana has become very well known since its inception mostly due to some of its signature approaches like use of the “car vending machine” as a collection point for people to get cars that they have purchased online. Carvana offers one of the most comprehensive online services of any competitor out there, perhaps challenged only by the likes of Carmax in terms of scale .
Today we dive into how the process works and what it brings to customers using Carvana’s service. Let’s first gain some background to understand how Carvana operates and what sets it apart.
Carvana has distinguished itself from many of its competitors by offering an exclusively online car buying and selling service that operates without any physical selling locations. This is the main difference between Carvana and biggest competitor CarMax. You might well have seen Carvana locations around the country and be thinking to yourself, “I’ve seen a Carvana lot,” but actually what you saw was likely one of Caravana’s pickup locations with one of its “car vending machines.”
These are spots where people who perhaps can’t get delivery or for whom delivery is not a convenient option whether available or not can go to collect a car that they have purchased. These sites are typically automated with few staff on site. The online-only approach is one of the reasons that Carvana is able to offer vehicles at lower prices than others since their overheads are greatly reduced by not having to operate brick and mortar dealerships anywhere.
Using Carvana, buyers are able to buy a vehicle, sell a vehicle that they have, or trade in their current vehicle as part of a deal to purchase a new car. The Carvana trade in value will offset some of the cost of the new vehicle, much as you would do when buying from an OEM dealership. In the next section, we’ll look more closely at Carvana trade in and how it works.
Carvana Trade In: How Does it Work?
When considering the process, Carvana have evidently put a great deal of thought into how to make an online-based trade-in deal as seamless and easy as possible. In a regular trade-in deal done at a local dealership, no one is under any illusions as to how it works. The buyer describes the car they have, they get an offer from the dealership, they bring the car with them to complete the deal where it is inspected and the details confirmed. But how would that work when it’s all being done online?
Actually it’s very straightforward. First of all, you need to get a trade-in value on your existing vehicle from Carvana. People usually do this on the website by simply entering the license plate or VIN, along with a few key details. Upon receiving this, Carvana will issue an offer for the vehicle online which is valid for 7 days. This makes the process even simpler than many other similar platforms which usually involve having to make phone calls and deal with sales agents in order to get your offer. On Carvana, you don’t need to give any other information than that about your vehicle and home state.
Once you have that trade-in value, you can directly apply it to a purchase you are making on the Carvana online platform. So if you are looking at a car that costs $15,000 on Carvana, and you were offered $7,000 for your existing car, then the net amount you’ll spend on your Carvana vehicle will be $8,000. That all seems easy enough, but how does Carvana get your trade-in vehicle if they are entirely an online entity? How is the transaction completed?
To complete the transaction, customers have a number of options. The first choice is to have their new vehicle delivered to their home, at which time the truck that brings your new car will also be used to take away your old car. The delivery/collection agent who comes with your new car will inspect your vehicle and finalize the deal. Once everything is in order, they will hand you a check for the agreed amount and you can bank that instantly.
If home delivery isn’t for you, then an alternative is to have the new car sent to a Carvana hub where it will be stored. You can then take your trade-in vehicle there directly where it will be checked over and confirmed before you receive your money. Carvana also helps out with all the necessary DMV paperwork. Once the trade-in is done, you can drive away in your new car that is already in place there at the Carvana hub.
So: to recap - here is how Carvana trade in works:
Step 1: Get a trade-in value for your existing car on the Carvana website. The valuation is valid for 7 days.
Step 2: Choose your new vehicle on Carvana keeping in mind that you will be able to deduct the trade-in value of your existing vehicle from the price.
Step 3: Arrange for delivery or collection of your new vehicle, and then follow the appropriate steps regarding your existing car. In the case of delivery, the collection agent will check over the car, pay you for it, and take it away at the same time your new car is being delivered. In the case of pickup, your new car is waiting for you at the hub, and you simply drop off your existing car at the hub, collect payment and then drive off in your new car.
And that’s it. It’s a very neat and elegant process. There are a few more important details for trade-in vehicles that we will cover in the next section.
Carvana Trade-in Value - How is it Calculated?
One big question on the minds of many is how the Carvana trade-in value is calculated in the first place. As you might expect, these types of companies offering convenient and easy processes for selling cars don’t reveal all the details about how they calculate the valuations they come up with for customer vehicles. Among the many players in the marketplace, however, Carvana is certainly among the most open.
On their own blog, Carvana revealed that when valuing a customer’s car, they take into account a number of factors. Their words were “Carvana utilizes a wide range of data to generate an authoritative value for your vehicle.” One source for that data is the Kelley Blue Book trade-in data, which is encouraging since a number of similar operations only use more clandestine Black Book ratings that most consumers are not privy to.
They also look at “trade-in data for similar vehicles in your local market.” This means it’s not a one-size fits all approach, either. If the car in question is a convertible, for instance, and the market is northern New Jersey or upstate New York, then there isn’t as much demand in that market for that kind of car, and that might impact the value that the seller receives.
One more deciding factor, according to Carvana, is vehicle history reports, namely CarFax and Autocheck reports. These are utilized to learn more details about the vehicle's likely condition, its accident and owner history, etc.
Getting the Best Possible Rate
Having a car that fits well with market conditions and that has a clean history is definitely the best place to begin when getting an offer from Carvana. Business Insider did a piece in which they detailed further on certain documents that the seller can provide to Carvana to hopefully maximize the value of that offer. You’ll be asked to provide:
- A photograph showing the current odometer reading
- A photograph showing the current driver’s license of any individuals named on the title
- Photos of the front and back of the Certificate of Title
- If you have any liens on your vehicle, then you also need to provide a photo of the 10-day payoff statement, as well as the current registration
Cars on finance can even be considered if they are in negative equity, but the seller will have to provide a photo of a certified check for the amount of negative equity on the vehicle currently. With all of these things (as needed) in good order, as well as clean CarFax/Autocheck reports, then you can expect to get a very competitive market rate for your car. You shouldn’t expect to get the exact market value, however. There’s a good chance that Carvana plans to sell the vehicle after inspecting and certifying it. That being the case, they’ll need a lower buying price in order to secure profit on the vehicle later. That’s the premium one pays for the sheer convenience of getting these fast quotes, quick pickups or easy drop-offs as part of the service.
Carvana Trade In: Is It a Good Deal?
Debate goes on and on about whether or not services such as Carvana really offer people a good deal, especially when it comes to owners selling their cars to Carvana or using them as trade-in vehicles. Some feel very strongly that owners are being stiffed on price and that the value they get for their car is significantly lower than what they would get for it if they sold the car privately.
Here’s the thing: of course it’s true that you get less for the car when trading-in or selling to Carvana than you would if you sold it yourself. This is the inevitable premium that you pay for the convenience of working with Carvana. Your car, after all, has more than one type of valuation: private sale value, trade-in value, auction value, lot value, etc. Carvana isn’t buying in the same way that a private buyer does, and the price does reflect that reality.
That being said, the price is still fair and is paid instantly in a reliable method without having to worry about the deal falling through or Carvana’s plans changing suddenly as you might experience with a private buyer. As we mentioned before, the main thing you’re paying for with Carvana is the convenience factor. You get your quote nearly instantly online, and can have the car collected as your new one is delivered, or simply take the car to the Carvana hub for drop-off as you collect your new one. That kind of simplicity comes with a price.
Good Deal? It Depends on You
At the end of the day, therefore, the debate is somewhat meaningless because whether the Carvana trade-in value is good for you or not really depends on your situation. If you want a simple process, then the deal is very good indeed. Carvana has a clear, easy-to-follow procedure that gives customers flexible choices in how they want their trade-in vehicle and new vehicle to be managed.
If you need to get a new car and trade in your old one quickly, then this can be a great option because it allows you to complete a new car deal virtually overnight without a hitch. The only thing you wait for is delivery, and everything is handled quickly and remotely by the Carvana team. The company’s whole ethos was built on the notion that buying a car could be something you could do as quickly and simply as making a purchase on Amazon.
When getting the highest-possible price is top of your priority list and you’re not worried about how long it takes, then making the sale privately before moving on to buy a new car is the best path for you and you might want to consider giving Carvana a miss. It works for those who want most to take advantage of the system they have constructed.