Have you seen vending machines? They look like tall glass buildings with piles of cars in them and are placed for customers who want to get their new cars in a unique and fun way. Currently, there are 34 vehicles installed in various cities across the United States
One is located in Denver, Colorado, and I drive by it every day. It has been empty since its creation and is marked “coming soon”. There is graffiti sprayed on the outside of the building, and it looks like it was abandoned rather than waiting for the grand opening. Is this a sign of things to come for the used car retailer? Is Carvana on its way to bankruptcy?
Worked very well. According to, “Revenues increased by 42% and 129% in 2020 and 2021, respectively.” That’s some astronomical growth in a very short period of time. However, just like simple cases of physics, what goes up must eventually come down.
Unfortunately, it seems as though Carvana never thought its wave of success would eventually crash, so it quickly expanded its workforce and infrastructure to handle further growth. However, used auto retail store revenue fell 3% year-over-year as auto prices and interest rates rose, and consumer demand waned.
Motley Fool reported that Carvana’s net loss rose from $68 million to $508 million. To add insult to injury, the company’s long run is now $6.6 billion, and it only has about $316 million in cash and cash equivalents. It doesn’t take a mathematician to know that this could mean a bleak outlook for Karvana’s future.
Carvana may see debt restructuring in the near future rather than bankruptcy
Although bankruptcy is likely to be in place, the company may go through a restructuring process to avoid it. Its creditors want their capital back at some point, but Carvana’s growing operational problems are of great concern.
According to Bloomberg, some of Carvana’s largest creditors have agreed to work together in negotiating the company’s roughly $4 billion in debt. By working together, Carvana and its creditors can “maximize their bargaining power in the event of a potential restructuring,” according to a Bloomberg report.
Possible debt restructuring does not mean bankruptcy. However, Carvana’s creditors may be a little skeptical about the company’s ability to repay the loans.
Is it a good idea to buy a Carvana now?
Mostly not. Carvana has had issues with various states and many customers have filed complaints regarding registration issues. Moreover, the used car market is still at a high level, so we don’t recommend buying a used car now anyway.
If anything, we recommend waiting and seeing how everything turns out with Carvana. Until then, I’ll keep driving by this empty vending machine and see if it’s filled with cars or if it ends up becoming a beacon for times to come.