A surge in used-car prices padded Carvana Co.’s bottom line early in the pandemic. As the market for pre-owned vehicles turns the other direction, the company is betting on a different kind of benefit.
“We would love for car prices to drop,” Chief Executive Officer Ernie Garcia III told Bloomberg TV on Thursday. “It would be great for us and great for our customers. We look forward to that as it looks like it may be approaching. Over time our best expectation is probably that car prices come down.”
While lower prices mean less revenue on each vehicle sold, it would make a big purchase more affordable for consumers beset by inflation and high interest rates. Prices in the US already are coming down, falling last month the most since the early days of the pandemic.
Carvana could use a boost, as the retailer races to reduce costs and restructure its debt-heavy balance sheet after a slump in the car market pushed the company into trouble late last year.
Carvana on Wednesday unveiled a sweeping set of plans to reduce debt, extend maturities and sell stock, sending its shares soaring.
It’s been a big shift from 2021, when automakers slashed production in the face of a semiconductor shortage, leaving new-car lots empty.
Used-car dealers made up the shortfall, buying cars at auction and from consumers and turning them around for sale at rapidly rising prices. Carvana said at the time that it helped the company to record wholesale prices.