Carvana’s 7-Day Return Policy Boosts Retention Rate

Carvana’s seven-day return policy has resulted in a single-digit return rate, Christina Keiser, vice president of strategy, said at the Auto Finance Sales & Marketing Summit last month.

“Carvana return rates are in the mid- to high-single digits, and about half of those are swaps — meaning, a customer exchanges the original vehicle for a different Carvana vehicle,” Keiser said.

“[Our policy] comes back to a couple things, one of which is the cost of changing customer behavior and reducing the perceived risk of trying something new,” she said. “If the worst that can happen when [customers] buy cars online is that [they] return them, people will try it.”

Carvana looks at this business model through an economic lens, Keiser said. “In the early days, we found that a seven-day money-back guarantee is just about as good of a get-out-of-jail-free card for a customer [as someone can get].”

In addition, Carvana offers a 100-day warranty. “That test-to-own feels like a good example of something that challenges the [traditional car-buying] paradigm,” she said.