Covid and a Crowd of Startups Are Forever Changing How Americans Buy Cars

(Bloomberg) — Even before the pandemic, Laura Ratliff hated car shopping. She was hunting for a well-worn, yet dependable, Toyota SUV, but the options didn’t much impress her. When she got to a certain point with a model or two, they failed inspections with her mechanic. It didn’t help that the dealers she met fit the stereotype—unctuous and inspiring zero trust. She peeked at some listings on Craigslist, too, but those sellers were sketchier still.

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By May, as the Brooklyn, N.Y.-resident found herself in the epicenter of the virus outbreak in the U.S., she gave up the search. As a travel writer, Ratliff is often on the go, but for the time being, staying put seemed the best option. Her two dogs would be happy enough with their daily walks in Fort Greene Park rather than sprawling acres upstate.

Then she noticed a post on Instagram, from a fellow travel writer in Denver, touting new and used cars from Carvana Corp., an online-only car dealer. After about 20 minutes of web comparison-shopping, Ratliff bought a 2011 Volkswagen Tiguan with 85,000 miles on it. Within two weeks, Carvana shipped the wheels from Georgia to Philadelphia. She showed up in an Uber, plunked a palm-sized coin into the company’s massive vending machine, an elaborate marketing toy, and watched the SUV descend the glass-paneled parking garage like a 3,500-pound bag of Doritos.

“This is the first car I bought as an adult, and something about the Carvana experience made me feel more in control and safer, if that makes sense,” Ratliff explained. “Basically, I just looked at the odometer and drove off.”

The pandemic has accelerated consumers’ shift from analog to digital when it comes to car shopping. Auto factories ground to a halt this spring just as commuters closed their ride-hailing apps and abandoned public transportation. Used vehicles quickly became the only fully functioning auto market, yet millions of consumers were leery—even more so than usual—of going to a car dealership.

It was a set of remarkable, end-times conditions that Ernest Garcia III could not have imagined seven years ago when he started Carvana in a bid to digitally disrupt more than a century of four-wheel commerce. His business suddenly became one of the best-positioned car dealers in the country, along with a smattering of traditional dealers who quickly ramped up online sales in the weeks after the first waves of the pandemic. Demand boomed and heading into the summer, inventory across the industry was squeezed.

Thanks to the Covid economy, Carvana as well as rival startups Shift Technologies Inc. and Vroom Inc. are seeing growth rates their IPO bankers could only have dreamed of. The trio are focused almost exclusively on used vehicles, with no-haggle pricing and no-questions-asked return policies, but also compete with new-car salesmen, used-car lots and peer-to-peer platforms such as Craigslist and Facebook Inc.’s Marketplace.

“Things that were going to take five years to happen took place in five months,” said Shift Chief Executive Officer George