Carvana tests online-only new-car sales at Dallas Stellantis store
The used-car retailer is using franchised stores for test drives, service and displays while routing new-car purchases through its website.
By Sofia Marchetti · World Affairs Correspondent
4 min read
Carvana is testing a new-car sales model that keeps the transaction online while turning a franchised dealership into a place for test drives, service and product displays. CNBC reported that the experiment could pressure the traditional U.S. dealership model if Carvana expands it beyond its current Stellantis stores.
The company, best known for selling used vehicles on the internet, is using a Dallas Stellantis franchise as the showcase for the strategy, CNBC reported. Carvana president of special projects Tom Taira told CNBC that every vehicle the company sells, new or used, is bought online, even when a customer visits a store.
Carvana now has seven Stellantis franchised dealerships, according to CNBC. The stores are in Arizona; Sacramento and San Diego, California; Dallas; Atlanta; Cleveland; and Boston.
CNBC reported that Carvana has spent about $171 million buying new-vehicle Stellantis franchises, not including its latest Ohio acquisition, based on public filings. The company declined to tell CNBC how much more it has invested in changing the stores for its sales model.
A showroom built for browsing
At the Dallas location, CNBC reported, the inside of the dealership has seating areas instead of the usual sales desks and offices. The store does not have finance-and-insurance departments, and Carvana uses hourly associates rather than commission-based sales staff, according to the report.
Customers are encouraged to use smartphones and QR codes on large screens, vehicles and outdoor displays, CNBC reported. The codes let shoppers review features, configure vehicles and arrange test drives before deciding whether to buy through Carvana’s online platform.
The outdoor display area holds about 50 vehicles grouped by Stellantis brand, according to CNBC. Jeep has an off-road-style setup, Dodge has track-themed displays, Chrysler minivans are paired with a soccer net, and Ram has a truck-focused section.
Taira told CNBC that Carvana is not committed to copying the exact Dallas layout at every franchise. He said the company expects the broader setup — online buying, test drives and service — to be consistent across locations, while Dallas helps test the case for any future stores.
Inventory remains a challenge
CNBC reported that Carvana’s new-vehicle inventory is much smaller than its used-car inventory. As of Wednesday morning, the company’s website showed about 3,000 new vehicles for sale nationwide and more than 60,000 used vehicles, according to CNBC.
That gap can affect test drives, CNBC reported. In one example at the Texas store, the closest available test-drive match for an $87,000 Ram 1500 RHO was a roughly $61,000 Ram 1500 Big Horn with the same interior and four-door layout but without matching performance features.
Taira told CNBC that Carvana is still learning which new vehicles to keep in stock and how to make clear to customers when they are shopping for a new vehicle rather than a used one. He said the company generally favors local sales to control costs, though it can use its national logistics network and more than 100 U.S. locations when needed.
Service and financing
Carvana also plans to service the new vehicles it sells, Taira told CNBC. He said the service departments will operate much like traditional franchised dealership service shops, while following Carvana’s stated approach of transparent pricing and a customer process designed to avoid haggling.
For now, CNBC reported, Carvana is taking cash or offering its own financing for new vehicles, as it does with used cars. The company originates consumer auto loans and sells them to institutional investors and partner banks, including Ally Financial, according to CNBC.
Taira did not rule out future leasing or use of Stellantis financial services, CNBC reported. He said any added products would need to fit into Carvana’s online buying system.
Stellantis told CNBC that Carvana is treated as a corporate owner of its brands, similar to other large publicly traded dealership groups such as Lithia and AutoNation. The automaker said it applies the same standards to all dealer partners and certifies providers that meet program requirements.
The stakes are large if the model spreads. CNBC cited National Automobile Dealers Association data showing 16,990 U.S. franchised retailers with more than $1.3 trillion in sales last year, while Carvana’s used-car business has helped make it the most valuable U.S. auto retailer, with a market value above $70 billion.
This story draws on original reporting from CNBC.