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Ernie Garcia, right, explains Carvana’s disruptive role to James Wester during Money20/20. Photo courtesy of Money20/20.

Carvana, an e-commerce platform for buying used cars, is best known for its massive used car “vending machines.” Customers place a large coin into a coin slot to activate the release of a vehicle from a highly secure, multistory garage that can be seen from miles away.

But behind the visual and technological spectacle of the massive structure lies an attempt to make the entire car buying experience — which many consumers dread — frictionless. Carvana founder and president Ernie Garcia described the rationale behind his plan to disrupt the retail automobile industry during a presentation at the Money20/20 show this week in Las Vegas.

Carvana’s multistory vending garage allows customers to pick up their cars after buying them online. Picture courtesy of Carvana.

The need to change the car-buying experience was support by a text poll among the attendees at Garcia’s presentation, 67 percent of whom said they do not like car buying the process. Seven percent said they like the car buying experience and 26 percent said “it depends.”

A seamless process

Carvana buyers search for and purchase their car from a stock of 12,000 vehicles listed on the Carvana website. They can take the car for a virtual spin and inspect all of the features using patented 360-degree photo technology. They can also access a free vehicle history report.

Once the purchase is complete, customers can have their car delivered, or pick it up at one of Carvana’s massive car vending machines. If they choose the latter option, they simply go to the vending garage, enter a code on the keypad, get their car and drive it home.

Garcia, interviewed by James Wester, research director for IDC Financial Insight, said that the buying process with Carvana can be completed entirely online within a matter of minutes, and can saves a customer $15,000 compared with a traditional used car dealer.

The main advantage Carvana offers is that it removes friction — much of it having to do with financing — from the process of buying a car, Garcia said. Eighty-five percent of car buyers finance their purchase, he said, and most car purchases involve trade-ins.

“When you buy a car, it’s surrounded by many other decisions,” Garcia said. He added that the industry is poised for disruption because car dealers have made it difficult for consumers to have a positive experience buying a car.

A financial service

Garcia said that consumers see the car-buying process largely as a financial decision.

Prequalifying for a Carvana loan requires the customer to fill out a short form — a two minute process, according to the company’s website. Applicants receive rate offers valid for four days, or they can secure their own financing if they prefer. Carvana conducts its own credit scoring, extends the car’s original warranty and offers coverage in the event of a car being destroyed or stolen.

Carvana is also unique in that it controls its car supply chain, Garcia said.

The company will continue to improve its service, he said, noting that any ambitious company continuously looks to improve.

“There’s lots of room for us to get smarter and utilize data,” he said, emphasizing that the company is committed to finding new ways to help customers make better decisions.

Will traditional dealers survive?

While Carvana is one of the country’s fastest growing auto retailers, according to Garcia, he does not believe that the traditional used car dealer is headed for extinction any time soon. He said that the test drive that dealers offer remains an important part of the buying experience. And for this reason, he doesn’t think that Carvana will disrupt auto retailing as fast as fintechs are disrupting the financial services industry.

However, a big question for the future is how important the test drive experience will remain when technology, such as Carvana’s 360-degree photo technology capabilities with 3D computer vision and augmented reality, will offer new ways for the car buyer to get the information they need to make a buying decision.

This year, Carvana acquired Car360, enhancing its 360-degree photo capabilities with 3D computer vision and augmented reality, the company reported.

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