Online car dealership Carvana has no immediate plans to form a captive like its main competitor CarMax, but it does hope to improve its existing third-party finance program, Chief Executive Ernie Garcia said during the company’s first-quarter earnings call last week.
“I think, somewhere we think we can do better is in financing,” Garcia said. “While [CarMax] has a captive finance company, and that enables them to monetize finance receivables in a more complete way on those receivables that they keep, we built a pretty unique finance platform.”
Carvana signaled that it is unwilling to take on the additional risk involved in financing loans, opting instead to provide customers access to credit. “[That allows us] to monetize finance originations across the entire credit spectrum — not just to the top end of the credit spectrum — while passing that credit risk on to third parties,” Garcia said.
Ally Financial Inc. agreed in early January to fund $600 million worth of contracts for the online retailer, and Carvana added Associated Credit Union and LGE Community Credit Union to its 11 credit union partners in December 2016.Like This Post