This is essentially how Carvana has decimated the private used car market in my area. Only instead of low product prices, they offer well-above market value for used cars to private sellers so that Carvana becomes the only source for a car that fits your criteria.
I do not see Carvana lasting long, at least not if their only strategy is to pay above market for used cars and getting in the crosshairs of multiple state regulators.
yyy "cornering the market" is exceptionally difficult to execute. In used cars for example, other companies could make a fortune trucking in used cars from elsewhere and selling them to Carvana...
if their theory holds true that means private sellers were massively under negotiating, or that there is a large arbitrage value between when a seller wants to sell and the days on market.
ie assume seller is willing to pay $50 a day to have car sold today (and not have to field calls etc). That means selling a car a month faster is worth $1500. Carvana can borrow the $25K car value at ~5% to pay $100 interest to hold the asset for a month playing the time arbitrage.
I'm finding one thing that seems to be happening generationally (or just in my experience) is that folks are far more willing to pay for convenience/now. That means they'd rather have the $25k and car sold today than have the $1500 in their pocket a month later (and field calls etc).
I agree completely and totally see why people do it. I am keenly aware of the big spread between trade-in value and what the dealer will turn around and sell it for -- and yet, having sold a vehicle a couple of times, I will probably never do it again. Especially when you consider the risk of getting scammed somehow in the money transferring process, a lot of people will eat the few thousand bucks. I don't know if Carvana will stick around, but definitely see myself going to them or Carmax instead of Craigslist next time I am done with a car.
Right, the CarMax process is pretty painless and the prices they pay aren't much lower than what you could get in a private party sale. I think some HN users might not appreciate how risky selling a car on Craigslist has become; there have been many high profile news stories about sellers being scammed or robbed. Plus with the increasing levels of violence in many cities more people (especially women) are simply afraid to meet random strangers or give out their contact info.
I sold my old car via CarMax and enjoyed the experience. I'll go back to them once my car gets old enough regardless of potential peanuts I might save theoretically.
