Carvana falls as rising rates, inflation cut used car sales

Nov 7, 2022, 12:56 AM | Updated: 3:32 pm
FILE - A Carvana car retail "vending machine" and vehicle parking lot are seen from a drone in Sout...

FILE - A Carvana car retail "vending machine" and vehicle parking lot are seen from a drone in South Fayette, Pa., on March 15, 2021. Shares of the upstart used-vehicle chain tumbled another 16% on Monday, Nov. 7, 2022, undercut by the company's struggles with falling prices and waning demand for its products. (AP Photo/Ted Shaffrey, File)

(AP Photo/Ted Shaffrey, File)

DETROIT (AP) — Shares of upstart used-vehicle chain Carvana tumbled another 16% Monday, undercut by the company’s struggles with falling prices and waning demand for its products.

The latest downturn comes after the shares fell almost 40% on Friday following Morgan Stanley analyst Adam Jonas’s move to suspend his rating and price target for the company’s stock.

Carvana had been growing quickly as used car prices soared after the pandemic. But it has been caught in an environment where rising interest rates and high prices have sent many potential used car buyers to the sidelines. It reported a $283 million third-quarter net loss Thursday,

Jonas wrote in a note to investors Friday that Carvana’s earnings revealed falling sales, higher expenses per vehicle sold, and a “material exhaustion” of cash.

“While the company is continuing to pursue cost cutting actions, we believe a deterioration in the used car market combined with a volatile interest rate/funding environment add material risk to the outlook,” he wrote.

Trading of the Phoenix-based company’s stock was briefly halted twice Monday morning as the price fell too quickly. Carvana stock is down almost 97% since the end of last year, closing Monday at $7.39.

Jessica Caldwell, executive director of insights for Edmunds.com, said the used-vehicle market is generally hit harder by rising interest rates and inflation. New-vehicle sales are usually more resilient because automakers subsidize lower-interest loans, she said.

“The slowing of the market is kind of the core issue,” Caldwell said. Some used-car dealers paid top dollar for late-model used vehicles, only to find that prices fell during the past few months, she said.

Plus, new-vehicle supplies, long crimped by a shortage of computer chips that cut production, are improving, drawing buyers away from higher-end used vehicles, she said.

U.S. used vehicle prices are about 30% higher than they were before the coronavirus pandemic began, and were around $31,000 on average in September. But the average price is down was down 1% from its May peak, according to Edmunds.

Carvana’s third-quarter sales fell 8% and revenue was down 4%, the company said.

“Cars are an expensive, discretionary, often-financed purchase that inflated much more than other goods in the economy over the last couple years, and it is clearly having an impact on people’s purchasing decisions,” CEO Ernie Garcia said last week.

The company, he told analysts after the earnings release, is on track with expense and operational efficiency goals, “but industry demand, interest rate and depreciation headwinds are slowing our progress and overall profitability.”

The used-car market is in transition, Edmunds’ Caldwell said. Supplies, she said, will be limited in the future due to fewer cars coming off leases and fewer sales by rental car companies. She predicted that prices will start to level off but remain fairly high.

“They’re going to get softer. They have to. But they’re not necessarily going back to 2019 pricing,” she said.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Associated Press

China prepares to send new 3-person crew to space station

BEIJING (AP) — Final preparations were being made Monday to send a new three-person crew to China’s space station as it nears completion amid intensifying competition with the United States. The China Manned Space Agency said the Shenzhou-15 mission will take off from the Jiuquan Satellite Launch Center on the edge of the Gobi Desert […]
21 hours ago
Australian Security Intelligence Organization director-general Mike Burgess points as he talks in C...
Associated Press

Australia reduces national terrorism threat to ‘possible’

CANBERRA, Australia (AP) — Australia’s terrorism threat level has been downgraded from “probable” to “possible” for the first time since 2014, the head of the main domestic spy agency said Monday. The defeat of the Islamic State group in battle in the Middle East and an ineffective al-Qaida propaganda machine failing to connect with Western […]
21 hours ago
Maurene Bullock, left, and Dr. Angela Coprew-Boyd, pray during a prayer vigil held by the Chesapeak...
Associated Press

Black pastors group holds vigil for Walmart shooting victims

CHESAPEAKE, Va. (AP) — Five days have passed since Lorenzo Gamble was killed in a mass shooting at a Walmart in Chesapeake, Virginia. His mother, Linda Gamble, hasn’t been able to do much of anything, including eat, because she misses him so much. “It’s been really hard because I never, ever in a million years […]
21 hours ago
A small plane rests on live power lines after crashing, Sunday, Nov. 27, 2022, in Montgomery Villag...
Associated Press

Crews work to rescue 2 in plane caught high in power lines

GAITHERSBURG, Md. (AP) — A small plane carrying two people got stuck in live power lines Sunday evening in Maryland, causing widespread power outages in the surrounding county as officials worked to extricate the aircraft and its occupants. The Federal Aviation Administration said in a statement that the single-engine plane, which had departed White Plains, […]
21 hours ago
FILE - Los Angeles Rams wide receiver Odell Beckham Jr. walks on the sideline during a NFL division...
Associated Press

NFL free agent Odell Beckham Jr. taken off plane in Miami

MIAMI (AP) — NFL free agent Odell Beckham Jr. was removed by police from an aircraft before takeoff at Miami International Airport after officials said he failed to respond to requests to buckle his seatbelt and appeared to be unconscious, police and airline officials said Sunday. “Fearing that Mr. Beckham was seriously ill, and that […]
21 hours ago
Associated Press

Landslide kills at least 14 at funeral in Cameroon’s capital

YAOUNDE, Cameroon (AP) — A landslide during a funeral ceremony in Cameroon’s capital on Sunday has left at least 14 people dead, the regional governor said. Dozens of others were missing as rescue crews dug through the rubble with flashlights. Centre Regional Gov. Naseri Paul Bea told the Cameroonian national broadcaster CRTV that the search […]
2 days ago

Sponsored Articles

SHIBA WA...

Medicare open enrollment is here and SHIBA can help!

The SHIBA program – part of the Office of the Insurance Commissioner – is ready to help with your Medicare open enrollment decisions.
Lake Washington Windows...

Choosing Best Windows for Your Home

Lake Washington Windows and Doors is a local window dealer offering the exclusive Leak Armor installation.
Anacortes Christmas Tree...

Come one, come all! Food, Drink, and Coastal Christmas – Anacortes has it all!

Come celebrate Anacortes’ 11th annual Bier on the Pier! Bier on the Pier takes place on October 7th and 8th and features local ciders, food trucks and live music - not to mention the beautiful views of the Guemes Channel and backdrop of downtown Anacortes.
Swedish Cyberknife Treatment...

The revolutionary treatment of Swedish CyberKnife provides better quality of life for majority of patients

There are a wide variety of treatments options available for men with prostate cancer. One of the most technologically advanced treatment options in the Pacific Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform at Swedish Medical Center.
Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
Swedish Cyberknife 900x506...

June is Men’s Health Month: Here’s Why It’s Important To Speak About Your Health

According to the Centers for Disease Control and Prevention, men in the United States, on average, die five years earlier than women.
Carvana falls as rising rates, inflation cut used car sales