Carvana continued to grow even in 2020, making its online retail platform a bigger threat to traditional resellers.

Credit unions and other lenders have also watched Carvana as it becomes an increasingly important issuer of auto loans.

The Navy Federal Credit Union of Vienna, Virginia ($ 135.7 billion in assets, 9.9 million members as of Dec.31) – the largest credit union and the largest auto lender among credit unions – this month will launch a partnership with Carvana’s competitor, TrueCar. The Santa Monica, Calif., Company last year launched an online channel called TrueCar Military that offers special discounts to serving and retired military personnel and their family members.

“The importance of this announcement cannot be overstated,” TrueCar President and CEO Mike Darrow told investors in a February 24 earnings call.

“The Federal Navy has more than 10 million members across the country,” he said. “Their participation is a big step forward in our goals of reaching and serving the more than 40 million members of the military community and builds on our existing partnerships with Military AutoSource, GovX, veteran service organizations. fighters like DAV and Team RWB, and OEMs like FCA, Audi and BMW.

Screenshot of the TrueCar military car buying campaign. Screenshot of the TrueCar military car buying campaign.

“To be sure, it will take time for this partnership to develop. Yet we believe the potential here is undeniable, ”he said.

Phoenix-based Carvana buys, repackages and sells its own inventory of used cars (purchasing an increasing number directly from owners through its online platform). Its model includes 27 multistage car “vending machines”, fleets of blue and white trucks that deliver cars to homes, and 11 inspection and reconditioning centers.

TrueCar has no inventory and is lightweight. It provides an online service that connects car buyers with a network of dealerships. TrueCar users purchased 766,413 vehicles through its network of more than 3,700 dealers last year, up from 998,495 in 2019.

Carvana’s annual report released on February 25 showed that it sold 244,111 used cars through its online retail portal in 2020, up 37.5% from 2019.

Its share is still tiny: 0.6% of the 38.4 million used cars sold last year, according to a US market estimate from TrueCar. Right now, no one has more than a 3% share of the highly fragmented market, according to TrueCar.

But Carvana is thinking bigger: sell two million cars per year (a 5% share of 2020 volumes).

Carvana’s revenue from retail car sales grew 38.6% to $ 4.7 billion in 2020, accounting for 85% of its total revenue of $ 5.6 billion. A portion of the other income she earns comes from the sale of the auto loans from which she is derived.

And just as the used car market is highly fragmented, so too is auto credit.

Carvana typically accounts for 75-80% of loans for the cars it sells. With average fourth-quarter loan amounts ranging from 87% to 92% of average prices, Carvana made about $ 970 million to $ 1.1 billion in auto loans in the 12 months ending Dec.31, up by 57% compared to the previous year.

As a lender, Carvana’s production was roughly between the Teachers Federal Credit Union’s 2021 auto-start target of Smithtown, NY ($ 8.4 billion in assets, 355 731 members) and the $ 1.4 billion generated last year by the State Employees’ Credit Union of Raleigh, North Carolina ($ 47.4 billion in assets, 2.5 million members).

Carvana had planned to sell more cars last year, but the pandemic has struck. Although he launched an advertising campaign that showcased online shopping and home delivery as a “safer way” to buy a car, he still had to deal with pandemic-related bottlenecks that slowed down deliveries.

Chairman and CEO Ernie Garcia said Carvana was not hampered by the request. There were plenty of them. And it wasn’t his ability to acquire cars.

The biggest supply constraint has been that it needs more capacity to recondition cars. It takes time to change, but the company is on it.

Carvana opened four inspection and reconditioning centers in 2020, enabling the company to process 600,000 cars per year. He said he plans to open 10 more centers by the end of 2022, bringing the capacity to 1.25 million cars per year. From there it will expand to be able to sell two million cars per year.

“We’re clearly building for a very big future, and we’re trying to make sure we’re ahead of ourselves when we look at our supply chain,” Garcia said.

“The longest turnaround time for components in this supply chain is building the physical facilities to do the repackaging. The second longest timeframe is training and hiring all the people to turn that ability into an active ability. But we are working very hard to win.


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