Is car vending machine the future of pre-owned car reseller? - The Coverage Automotive

Is car vending machine the future of pre-owned car reseller?

Online pre-owned car retailer Carvana has recently launched its first “car vending machine” last week in Houston, Texas where a glass encased eight-storey structure sits right off a busy highway.

The “vending machine” will hold 30 cars at any one time and will dispense pre-owned cars in four delivery bays, only to customers who have special coin to make it work which is sent to them after completing their online purchase.

Carvana believes this is a valuable part of its strategy to win customer over by re-inventing the process of buying a pre-owned car which is presumed difficult as its plague by the fear of being taken advantage of by sales people.

“Our view of what we are trying to do is make the experience a high quality one that customers love,” said Carvana co-founder and CEO Ernie Garcia. The goal, he said, is “to make car buying fun.”

He said the founders did not start out planning to be an online site, but aimed to rethink the car buying transaction from start to finish and find ways to “differentiate economically, through the entire pipeline.”

Carvana, which launched in 2013 and is now in 21 markets after adding 12 this year, stores its cars far outside cities in areas where rent is cheap and the company says it saved customers at least USD 1,400 on average on purchase prices compared to the Kelley Blue Book suggested price which is the industry standard.

Carvana offers online comparison shopping, refurbished vehicles, financing options and trade-ins all on its web portal, and Garcia says the fastest purchase was completed in seven minutes and the company also provides free delivery as soon as the next day, or pickup at one of the vending machines.

Delivery costs US$150, so Garcia says the vending machine is another way for Carvana to trim costs and to promote the new service, Carvana is offering USD200 for buyers who prefers to fly to Houston to pick up the car from the vending machine.

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Carvana also offers a seven-day test drive period, in which if you are not satisfied with your purchase, a full refund will be made or customers can choose another car.

“There is a lot of evidence that an easy-to-use return policy is a way to improve the car-buying experience,” said Garcia, who compared the policy to online shoe retailer Zappos, which overcame scepticism about buying shoes without trying them on with its painless return policy.

He said about half of the customers who return cars switch to another vehicle.

“It’s very clear from the customer response that what we’re doing works,” Garcia said.

Carvana’s revenues more than doubled this year to US$350 million from US$150 million in 2015 and the firm raised another USD160 million earlier this summer, bringing its funding total to USD460 million.

Garcia added that “the response we have seen has been overwhelming.” and the company is looking to add more vending machines around America.

“We’re trying to expand as quickly as we responsibly can,” he said. “We’re looking to build out more.”

News reports say the company was trying to acquire land near Richmond for another machine, but withdrew the application after locals raised concern about the amount of light from the building.

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