New Carvana tower aims to make car buying ‘fun’
A local car lot is about to make buying a used vehicle look as easy as operating a vending machine.
Customers at the new eight-story, glassed-in tower visible from Interstate 10 west of Beltway 8 will have already picked out and ordered their car online from the Arizona-based retailer Carvana and scheduled an appointment to pick it up. At the Carvana lobby that opens next week, they’ll collect an oversize token to insert into a coin slot, activating the gears and lifts that bring the vehicle down to one of four delivery bays.
“We believe car buying should be fun,” said Ryan Keeton, who co-founded Carvana four years ago.
The company operates in 21 markets and has been in Houston for 1½ years. The local car vending machine will be its second but not its last as it expands the concept to other cities.
Carvana officials say the machine cuts down on overhead and real estate expenses, allowing the company to pack up to 30 cars on about two acres of land. They also say the spectacle of seeing the machine in action makes the car-buying experience more enjoyable.
Consumers could respond to that, said Steve McDowell, owner of Sugar Land-based InfoNation, which tracks local auto sales trends.
“Buying an automobile, especially when it’s a used car, is an experience most people don’t look forward to,” he said.
When Carvana started out, it would only deliver cars to online buyers. As volume grew, the company decided to add a place for customers to pick them up, CEO Ernie Garcia said. After developing a prototype of the automated “vending machines” in Atlanta three years ago, Carvana opened its first fully operable one in Nashville, Tenn., in 2015.
Sales and financing are handled online, but Garcia noted customers have seven days to return vehicles that don’t live up to their expectations.
He also said the company can undersell traditional dealerships by about $1,500 per vehicle. He and Keeton said they expect Houston to be a significant market.
Wyatt Wainwright, president of the Houston Auto Dealers Association, said he foresees most consumers sticking with a traditional dealership for used cars.
Still, those who want to go the online route with Carvana can begin placing orders on Wednesday for pickup at the Houston location.
In August, Carvana secured $160 million in capital funding, in part to add more of the machines nationally. In the meantime, the company will subsidize $200 of a plane ticket to Nashville or Houston and provide airport pickup.
Garcia said revenue has increased each year and expects it to be $350 million this year. He declined to say whether Carvana is profitable yet.
Keeton pointed out that the machine often attracts entire families to Nashville to pick their car together.
He said online searches for Carvana have picked up in the Houston area in recent days as more people drive past the tower that faces I-10.
McDowell called the used car business locally “extremely profitable” and he expects inventory to grow over the next few years in the Houston area.