Russ Wiles

The Republic | azcentral.com

Fast-growing online auto retailer Carvana secures a new round of venture-capital financing

The funding will help the used-car retailer hire more people, expand its physical presence and more

Among its unusual features, Carvana operates a couple automated car "vending machine" systems

Get ready for some more car vending machines.

Carvana, a Phoenix-based online vehicle retailer that has opened two automated vehicle-dispensing systems, has announced another round of venture-capital financing that should help keep it in the fast lane. The privately owned company plans to use the funds to expand its physical operations, hire more employees, invest further in technology and add to its used-vehicle inventory. The latest $160 million infusion of private investment capital brings the company's total funding to $460 million.

Carvana, which claims to be the most heavily funded private online auto dealer, vows to revolutionize the ways used vehicles are sold. It currently offers nearly 5,000 cars and trucks for sale, with a goal of expanding to around 10,000 by year-end. It promises hassle-free purchases that can be completed in a matter of minutes, saving customers time and money. The company also accepts trade-ins.

Roughly a quarter of all buyers complete the process within 20 minutes, said Ernie Garcia, Carvana's CEO and founder. "The speed and ease is unmatched in the industry," he said in an interview.

Founded in 2013, Carvana claims to be the first complete online auto retailer. It is partly owned by Tempe-based DriveTime Automotive, where Garcia served as an executive. DriveTime, a national leader in used-vehicle sales, runs a network of roughly 140dealerships around the nation, geared mainly to subprime customers or those with poor credit histories.

Carvana doesn't have dealerships, with buyers instead browsing autos online at carvana.com. Consumers can use computers or phones to shop, complete all paperwork, apply for and receive financing and trade in vehicles, too. Purchased cars can be picked up at various locations or delivered to a customer's driveway.

Carvana guarantees that the vehicles it sells weren't involved in accidents, and it runs each car or truck through a 150-point inspection prior to sale. It also has a 100-day/4,189 mile bumper-to-bumper warranty, as well as a seven-day, no-questions-asked return policy. The 4,189-mile figure reflects the average amount of driving done by U.S. motorists in 100 days, Garcia said.

Carvana, which is owned by management, employees and institutional investors, has been on the fast track since selling its first vehicles in Atlanta in 2013. That year, the company generated $4 million in revenue, Garcia said, with sales rising to $40 million in 2014, $140 million in 2015 and a projected $360 million this year. The company has around 600 employees, including 240 or so in Arizona, and has been hiring rapidly. Open positions include those for website developers, product-development specialists, accountants and customer "advocates" or representatives who help guide consumers through the process.

The new round of venture-capital funding "gives us a runway as far as we can now see," said Garcia, who indicated the company has no current plans to raise money as a public corporation through an initial public offering but didn't rule it out, either.

Carvana doesn't have traditional dealerships. Instead, it prepares and stores vehicles at various places around the nation. It currently has a physical presence in 15 metro areas, meaning it provides next-day delivery in these places. The markets are Atlanta; Austin; Birmingham, Ala.; Charlotte, N.C.; Dallas; Houston; Jacksonville, Fla.; Miami; Nashville; Orlando; Raleigh, N.C.; Richmond, Va.; San Antonio, Texas; Tampa; and Washington, D.C.

Customers outside those areas also can buy or trade-in vehicles through Carvana, though not as quickly for delivery or pick up. Depending on where a vehicle is stored and other factors, delivery charges can run from a couple hundred dollars or less to $1,000 or so, Garcia said.

The company will continue to expand, though Garcia didn't identify which metro areas will be next to gain a Carvana presence.

Garcia said company executives initially expected tech-savvy young adults would be the primary customers, but the base is much broader, with an average age of 42. Vehicles themselves range from around $10,000 to $70,000 in price and typically are between one and eight years old, with 4,000 to 75,000 miles on them.

About those vending machines

Carvana's automated facility near Nasvhille, which opened in November, really does let you select a vehicle with the drop of a coin — just not any car or any coin. The five-story structure holds up to 20 vehicles. Buyers insert a special, oversized coin, which triggers a robotic arm that grabs the desired vehicle, sending it on its way. Eventually, a robot picks up the car and drives it to a bay. Customers utilizing the vending machine have already purchased their vehicles, with the vending-machine process more a formality, though an unusual one.

Carvana earlier opened a smaller, less-elaborate car vending machine in Atlanta. The company vows to build more such facilities in other markets.

Buyers who live outside the Atlanta or Nashville areas can take advantage of a Carvana "fly and drive" promotion. The company pledges to subsidize $200 of customers' one-way airfare to either of those cities. A buyer can then drop the special coin in the machine, pick up the vehicle and drive it home.

As noted, buyers using the vending machines have already purchased their vehicles. It's a fulfillment service, said Garcia, but one that makes the car-buying process different and fun. "It's a family event, where buyers will bring four or five people, all recording the transaction on their smart phones," he said. The company also makes videos available.

Alternatively, customers such as Phoenix-area residents who live outside Carvana's primary service areas can have vehicles delivered by a third-party carrier. A delivery charge will apply.

Reach the reporter at russ.wiles@arizonarepublic.com or 602-444-8616.