Hello People, if you’re in the market to buy a car then please wait because there’s been some massive new developments. Carvana is falling, now it’s no secret that Americans hate the car shopping experience so much that it’s become a statistical joke as one in five Americans would rather give up getting frisky once a month than go to a car dealership and that is bold of them to assume. People would rather clean their houses; they’d rather stand in line at the DMV or they’d rather do their taxes.
How Carvana Grew?
One of those companies is a company you might have heard of before called Carvana. Carvana promised to give you the car without the car salesman and during the pandemic when everyone was forced to stay inside. Their stock price exploded to over 360 dollars per share. Carvana became the third fastest company to get inside of the SP 500 Index. Going digital was the new way to sell cars to Consumers and as their business grew, they had to buy more cars at over inflated prices to fill their inventory and thanks to the chip and inventory shortage is why 82 out of 100 cars were sold over MSRP value this year in 2022.
Carvana could be Bankrupt.
The buyers were not only retail consumers it was also institutions, wholesalers and car companies like Carvana and now the bubble has finally popped because on Wednesday this week Carvana’s stock lost 43% of its value in a single day. To give you a perspective on just how bad that number is remember the stock market is supposed to return anywhere from 8-10 % per year, so Carvana just lost five to six years’ worth of growth in a single day. The company could be going bankrupt.
Fall of Carvana and Over Priced Car Industry
The stock went from a peak of over $ 360 all the way down to 3 dollars and 80 cents that represents a value loss of 99% which means if you had put in one thousand dollars into carvana stock at the beginning of this year, today you’d have ten dollars out of your initial one thousand dollar investment . The reason that carvana specifically is so important to this story is because they’re sort of considered to be the Goldman Sachs of the automotive World. Better yet they’re considered to be the Amazon of the car World. They are massive and if they declare bankruptcy that will force the greedy car dealers to finally lower their prices and stop charging customers over MSRP and it will finally break the illusion that cars are still some hot commodity and this of course is massive news for the entire used car industry because that means we are finally going to get some sweet car deals next year.
How Fall of Carvana will affect Car Prices?
Let’s understand how fall of Carvana will have a huge effect on used car prices. So far they’ve laid off roughly 20 percent of their staff this year and 10 of Carvana’s biggest lenders including two of their biggest ones Apollo and Pimco which hold roughly 4 billion dollars’ worth of debt have agreed to a three-month co-operation deal. Now if you’re confused about what that means, that means their biggest lenders sort of come together and said to each other that in case if anything goes wrong let’s not fight with each other over who gets what. In case they need to restructure and we know what restructure means in today’s market it means chapter 11 bankruptcy.
2023 might start with Recession: How to earn money in Recession.
The point is Carvana’s running out of money and the rest of their business strategy relies on losing even more money just to gain market share which is obviously a strategy that is not working and now we’re seeing the collapse of the Carvana. If carvana goes out of business or it continues to be squeezed then they’ll be forced to sell off more of their cars. Now the bad news is people like you and I the retail consumer won’t be able to bid on those cars unless of course you have a wholesale or dealer license. So, it’s going to be other companies and other wholesale buyers buying those cars but if carvana actually fails then there’ll be a huge drop in consumer confidence and the illusion that dealerships have built up that used cars still have pent-up demand will eventually break.
Conclusion
Carvana’s lenders companies are not dealerships, they have zero incentive to wait and to slowly trickle those cars onto the market, they would want to sell and dump everything on the market ASAP to get their money out fast and that would again have a huge impact on car values because inventory would skyrocket and car values would drop. The point is things could get ugly really fast so please be careful and if you’re in the market to buy a used car maybe wait a little because you might get a much better deal really really soon.