Carvana falls as rising rates, inflation cut used car sales

Nov 7, 2022, 3:56 PM | Updated: 4:42 pm

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

Writers: Russian attacks seek ‘erasure’ of Ukrainian culture

KYIV, Ukraine (AP) — Russian troops in Ukraine are deliberately attacking the country’s museums, libraries and other cultural institutions, according to a report issued Friday by the U.S. and Ukrainian chapters of the international writers’ organization PEN. “Culture is not collateral damage in the war against Ukraine; it’s a target, a central pillar of Russian […]
10 hours ago
FILE - Two feral hogs are caught in a trap on a farm in rural Washington County, Mo., Jan. 27, 2019...
Associated Press

Feral hog control: 8 years, some progress, $2.5B damage/year

NEW ORLEANS (AP) — Eight years into a U.S. program to control damage from feral pigs, the invasive animals with big appetites and snouts that uproot anything that smells good are still a multibillion-dollar plague on farmers, wildlife and the environment. These prolific hogs gone wild have been wiped out in 11 of the 41 […]
10 hours ago
Associated Press

Talks with breakaway region fail to ease Moldova energy woes

CHISINAU, Moldova (AP) — An electricity plant in a Moscow-backed breakaway region of Moldova will not resume supplying energy to the rest of the country after a meeting between Moldovan officials and representatives of the Transnistria region failed to produce an agreement Friday, authorities said. The meetings held in Moldova’s capital, Chisinau, focused on a […]
10 hours ago
FILE - An election worker verifies a ballot on a screen inside the Maricopa County Recorders Office...
Associated Press

NOT REAL NEWS: A look at what didn’t happen this week

A roundup of some of the most popular but completely untrue stories and visuals of the week. None of these are legit, even though they were shared widely on social media. The Associated Press checked them out. Here are the facts: ___ Arizona election equipment was certified ahead of midterms CLAIM: Election equipment in Arizona […]
10 hours ago
FILE - Former President Donald Trump announces a third run for president as he speaks at Mar-a-Lago...
Associated Press

Prosecution resumes closing argument at Trump Org. trial

NEW YORK (AP) — Prosecutors resumed their closing argument Friday in the Trump Organization’s criminal tax fraud trial, promising to share previously unrevealed details about Donald Trump’s knowledge of a tax dodge scheme hatched by one of his top executives. “Donald Trump knew exactly what was going on with his top executives,” Assistant Manhattan District […]
10 hours ago
FILE - The FTX logo appears on home plate umpire Jansen Visconti's jacket at a baseball game with t...
Associated Press

The pandemic, Karens, crypto craziness: We’re over you, 2022

NEW YORK (AP) — The rudeness pandemic, the actual pandemic and all things gray. There’s a lot to leave behind when 2022 comes to a close as uncertainty rules around the world. The health crisis brought on the dawn of slow living, but it crushed many families forced to hustle for their lives. Karens went […]
10 hours ago

Sponsored Articles

...
SCHWARTZ LASER EYE CENTER

Key dates for Arizona sports fans to look forward to this fall

Fall brings new beginnings in different ways for Arizona’s professional sports teams like the Cardinals and Coyotes.
...
Day & Night Air Conditioning, Heating and Plumbing

Here are 4 signs the HVAC unit needs to be replaced

Pool renovations and kitchen upgrades may seem enticing, but at the forefront of these investments arguably should be what residents use the most. In a state where summertime is sweltering, access to a functioning HVAC unit can be critical.
...
Day & Night Air Conditioning, Heating and Plumbing

Ways to prevent clogged drains and what to do if you’re too late

While there are a variety of ways to prevent clogged drains, it's equally as important to know what to do when you're already too late.
Carvana falls as rising rates, inflation cut used car sales