Everyone hates used-car salesmen.
Everyone except maybe shareholders of Carvana Co., the online upstart that sells cars out of vending machines.
Despite years of losses -- and forecasts of even more red ink ahead -- shares of the Tempe, Arizona-based company have headed upward this year. After falling as much as 57 percent in late 2018, the stock has doubled.
The rebound has drawn scrutiny from Carvana’s skeptics. On paper, though, it’s restored the fortunes of the company’s father-and-son team, the Garcias.
Ernest Garcia II and Ernest Garcia III are now worth a combined $6.7 billion, according to the Bloomberg Billionaires Index. That’s more than Dallas Cowboys owner Jerry Jones, movie mogul Steven Spielberg or hedge fund manager John Paulson.
Vending Machines
According to its website, Carvana lets customers choose from more than 15,000 cars and complete purchases in as little as 10 minutes. Buyers have the option of picking up their car at more than a dozen vending machines located around the country.
It’s been a marketing boon. Revenue has doubled in each of the last four years.
“I find it difficult to see why anybody in 10 years would buy a car in a different way,” said Clifford Sosin, founder of CAS Investment Partners, which owns about 2 percent of Carvana. “If Carvana works out as well as it could, they might be among the richest people on the planet.”
Two years ago this month, the Garcias climbed the dais above the floor of the New York Stock Exchange to ring the opening bell as Carvana went public on the Big Board.
Subprime Loans
It was a remarkable moment for the elder Garcia, who’d been convicted of fraud in 1990 for a small role in the Charles Keating savings-and-loan scandal. He avoided prison by testifying against Keating, received three years of probation and has since had his civil rights restored, according to regulatory filings. He went on to make a fortune selling used cars and providing auto loans to subprime customers via his company, DriveTime Automotive Group Inc.