Carvana is Actively Acquiring Used Cars: Change in Strategy Due to Supply and Demand Imbalance in the U.S. Car Market

Taiwan • Business • 05/05 22:31
Carvana is Actively Acquiring Used Cars: Change in Strategy Due to Supply and Demand Imbalance in the U.S. Car Market

In the context of the imbalance between supply and demand and soaring prices in the U.S. used car market, Carvana is actively purchasing vehicles from consumers to cope with tariffs and supply shortages. The company has adopted a profit-oriented strategy and is responding to the demand for high-quality used cars. Although Carvana offers convenient options for selling cars, in a seller's market, holding onto or carefully selling a car might be more advantageous.

Key Updates

05/07 03:06

Trump's tariff talks with Canadian Prime Minister Trudeau ended without results, the U.S. stocks fell across the board on May 6,

On May 6, U.S. President Trump met with Canadian Prime Minister Justin Trudeau at the White House, but they failed to reach an agreement on tariff issues, heightening market fears of a trade war. On that day, all four major U.S. stock indices declined, with the S&P 500 index dropping 0.77%, breaking a nine-day winning streak. In March, the U.S. trade deficit widened to $140.5 billion, an all-time high, highlighting the economic pressure from increased imports and trade policy uncertainty.

05/07 02:00

Apple faces pressure from tariffs in the US-China trade negotiations, and iPhone prices could increase.

In April 2025, former President of the United States, Trump, announced a new round of high tariffs on Chinese goods, putting pressure on Apple Inc. due to rising costs and the need for supply chain restructuring, which could lead to higher iPhone prices. The U.S. and China began their first trade talks in Switzerland, but their positions remained divided. Trump's tariff policy has already had an impact on the U.S. stock market, and the Federal Reserve is struggling between weak economic data and inflationary pressures. The rapid development of artificial intelligence has raised policy and ethical concerns, posing a challenge for global governance.

05/06 18:32

Lofler, Administrator of the U.S. Small Business Administration, states that small businesses support Trump's tariff policy and challenge negative media reports.

At the "Small Business Week" event in Washington, D.C., Kelly Loeffler, the Administrator of the U.S. Small Business Administration, stated that the mainstream media's criticism of Trump's tariff policies is at odds with the support from small businesses. She is advocating for the "American Manufacturing Financing Act" to increase loan limits to bolster the manufacturing sector and help businesses restructure their supply chains to lessen dependence on China. Loeffler highlighted the confidence that small businesses have in Trump's policies and pointed out a surge in loan applications, which indicates that businesses are preparing to expand.

05/06 14:01

The EU plans to impose tariffs worth 100 billion euros on US goods: The risk of trade negotiations breaking down intensifies

On May 6, 2025, the European Union plans to impose retaliation tariffs on approximately 100 billion euros worth of U.S. goods as a precautionary measure to prevent potential breakdowns in trade negotiations. This action will add to the current tariffs on 21 billion euros of U.S. goods and may also extend to restrictions on services and export controls. The EU has expressed concerns about the U.S. expanding tariffs and investigations and has begun internal consultations to prepare for a comprehensive counteraction. Since negotiations began in April, progress has been slow. The EU is seeking substantial concessions but is not ruling out any options.

05/06 13:02

In April, China's port shipments rose by 7% and air transport surged by 30%. Despite the trade war, exports are still expected to grow.

Despite the escalating US-China trade war, with the US imposing tariffs as high as 145% on Chinese goods, China's trade logistics data for April shows resilience. According to data from China's Ministry of Transport, for the week ending April 27, ports across the country handled 6.7 million TEUs, an increase of 7% compared to the previous year; the number of international air cargo flights rose by 30% compared to the previous year. Bloomberg predicts a 2.5% increase in exports for April compared to the previous year, indicating strong performance despite high tariffs. The reduction in cargo ships on US-China routes highlights the pressure on exports to the US, and the Chinese government and businesses are adjusting their export strategies to tackle these challenges.

05/05 22:31

Carvana is Actively Acquiring Used Cars: Change in Strategy Due to Supply and Demand Imbalance in the U.S. Car Market

In the context of the imbalance between supply and demand and soaring prices in the U.S. used car market, Carvana is actively purchasing vehicles from consumers to cope with tariffs and supply shortages. The company has adopted a profit-oriented strategy and is responding to the demand for high-quality used cars. Although Carvana offers convenient options for selling cars, in a seller's market, holding onto or carefully selling a car might be more advantageous.

05/05 21:01

At the Milken Global Conference, U.S. Senior Officials Confront Trade Uncertainty Stemming from Trump's New Tariff Policy.

On May 5, 2025, the 28th annual Milken Institute Global Conference was held in Beverly Hills, California, where senior leaders from the finance, technology, and government sectors discussed the trade uncertainties triggered by the new tariff policies introduced by Trump. U.S. Treasury Secretary Scott Besant stated that tariffs are crucial for reviving investment and manufacturing, but business leaders, such as Citigroup CEO Jane Fraser, noted that while a 10% tariff is manageable, the uncertainty is what hinders investment. The U.S. has imposed tariffs of up to 245% on Chinese goods, impacting the global economy, leading to a contraction in Asian manufacturing and a decline in UK exports.

05/05 17:01

In April 2025, the U.S. services sector continued to expand for ten straight months, with price pressures reaching a two-year high.

In April 2025, U.S. service sector activity continued to expand, with the ISM Services PMI rising to 51.6, marking the tenth consecutive month above the expansion threshold. However, there was an increase in price pressures, with the ISM Price Index reaching 65.1, the highest since January 2023. Supply bottlenecks, policy uncertainty, and import tariffs have driven up business costs, affecting economic activity and inflation metrics.

05/05 17:01

Citigroup CEO Jane Fraser: Companies can handle a 10% tariff, but investment and hiring are still cautious

On May 5th, 2025, Citigroup CEO Jane Fraser said at the Milken Institute Global Conference in Los Angeles that most corporate clients can handle a 10% tariff imposed by the United States on trade partners, but a 25% tariff is challenging. Companies are generally postponing capital expenditures and hiring, waiting for the economic outlook to clear up. She pointed out that tariffs might affect supply chains and prices, and companies are bolstering their balance sheets and tweaking supply chain strategies to deal with the uncertainty.

05/05 15:03

The United States has temporarily suspended a 46% tariff on Vietnam, with the first round of negotiations on May 7 focusing on trade fairness.

The United States originally planned to impose a 46% tariff on Vietnamese goods starting April 9, but after various negotiations, the measure has been delayed by 90 days. Vietnamese Prime Minister Pham Minh Chinh confirmed on May 5 that the two sides will hold the first round of tariff talks on May 7, with a focus on safeguarding Vietnam's interests and advancing fair trade. Vietnam has sent a technical team to the U.S. and developed strategies to mitigate the tariff impact, supporting businesses and workers.

Carvana's Strategic Shift: From Growth at All Costs to Profit-Oriented

Since its founding in 2012, Carvana (NYSE: CVNA) has been dedicated to revolutionizing the traditional car sales model by offering a one-stop service through its online platform, covering everything from vehicle search, inspection, financing, to delivery. In 2024, Carvana became the most profitable publicly traded car retailer in the U.S., with an adjusted EBITDA margin of 10.1% and a net profit margin of 4.5% in the fourth quarter. This marks the company's successful transition from "costly growth" to a "sustainable profitability growth" strategy.

However, behind all this is a precise management of supply chain and market trends. Carvana's success partly stems from its ability to control the supply of used cars. As the new car market is constrained by tariffs and supply shortages, Carvana is accelerating the purchase of vehicles from consumers to replenish its inventory and maintain sales momentum.

Why Does Carvana Want to Buy Your Car?

In the spring of 2025, Carvana sent out a large number of emails to consumers with a straightforward subject: "We want to buy your car!" This is not just a marketing campaign but a direct response to the current market situation. According to USA Today, Carvana is actively expanding its inventory to meet the surge in demand for used cars triggered by tariffs.

The U.S. government recently imposed tariffs of up to 25% on imported cars and parts, leading to higher new car prices, prompting consumers to turn to the relatively cheaper used car market. According to a ZeroSum report, although used car transactions in April 2025 decreased by 100,000 units compared to the previous month, they were still 12% higher than the same period last year. Carvana foresaw this trend and is ensuring sufficient inventory on its platform to meet demand by purchasing vehicles directly from consumers.

Moreover, Carvana's business model relies on acquiring vehicles from individuals at reasonable prices and reselling them at higher prices. This means that if you choose to sell your vehicle to Carvana, the company will determine the offer based on market conditions and potential profit.

Used Car Market: Demand Outstrips Supply, Prices Soar

The current used car market is in an "ideal storm." According to CarEdge's May 2025 report, used car prices have risen by $900 since February, with an average selling price of $26,200. This surge is driven by several factors:

  • Aftermath of Chip Shortage: The pandemic in 2021–2022 led to a significant reduction in new car production, with about 15 million new cars failing to hit the market as scheduled, resulting in a severe shortage of "gently used" used cars.
  • Tariff Effect: New car prices have risen due to tariffs, driving up demand in the used car market.
  • Seasonal Factors: Spring is traditionally a peak car-buying season, and the "spring car-buying spree" in 2025 is particularly evident.
  • Economic Uncertainty: Inflation and interest rate fluctuations make consumers more inclined to purchase lower-priced used cars.

According to Cox Automotive data, new car inventory in April dropped from 3 million to 2.6 million units, with a supply lasting just over 60 days. Brands like Toyota and Subaru have inventories even lower than two weeks. This supply crunch further enhances the appeal of used cars.

Holding onto Your Car: Why It Might Be Wise Now

In such a market environment, while Carvana offers a fast and easy way to sell your car, holding onto your vehicle might be more valuable. According to CarEdge's analysis, vehicles under six years old are currently the most popular in the market and are priced most competitively. If you own a low-mileage, well-maintained vehicle, its value may remain strong in the coming months.

Additionally, if you are considering purchasing a new car, current new car prices have surpassed the $50,000 mark (according to ZeroSum's April report) and may rise further due to tariffs. This means that even if you can sell your old car at a good price, the cost of buying a new car may be higher, resulting in higher overall costs for replacing your car.

Comparing Carvana with Traditional Transaction Methods

For consumers looking to sell their vehicles, the convenience offered by Carvana is unquestionable. According to recommendations from CarEdge and U.S. News, Carvana is suitable for sellers who want to complete transactions quickly and avoid tedious processes. In contrast, private transactions may yield higher offers but require managing advertising, test drives, negotiations, and paperwork on your own.

According to Beaver County Dodge, while trading with dealers may result in slightly lower prices, it can save a lot of time and risk. Ultimately, the choice depends on how you weigh price against convenience.

References

People Also Ask...

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Carvana is actively buying up used cars; is it because of tariffs or supply shortages?

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Carvana is looking to buy cars, how will this affect our community's used car market?

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