Used Car Prices Have Finally Fallen – Along with Carvana’s Stock and Employee Count

The idea that prices for used cars have dropped should relieve consumers, but instead, it just causes more worry – while the cost of vehicles has decreased, so has the number of places able to sell them.

Car dealerships and used vehicle retailers worldwide are having to cut costs dramatically and risk shutting down entirely now that the automotive market is settling back into some semblance of normalcy. Where does this leave retailers like Carvana – a dealer known for the unique way it provides used vehicles to drivers?

Recent Issues with Used Cars

Supply chain issues and factory shutdowns in early 2020 resulted in fewer new cars – manufacturers are still struggling to catch up with previous demand and meet current needs simultaneously today.

The lack of new cars resulted in increased demand for used cars, but as the supply of used vehicles stayed the same – or even decreased – during this time, the increased demand caused prices to skyrocket.

Now used car prices are finally starting to fall back down due to decreased demand and lack of affordability. This allows other issues brought about by rapid automotive market changes to take center stage in people’s minds and the economy.

One such issue is that Carvana, which uses car vending machines for low-contact sales, has been rapidly losing profit, stock, and employees.

Carvana Cuts Costs by Laying Off Employees

Roughly a week before Thanksgiving 2022, Carvana announced they were cutting 1,500 jobs – equaling about 8% of its total workforce. This comes after laying off 2,500 employees – 12% of its workforce at the time – earlier in the year as a cost-cutting measure.

While it could be considered no surprise that decreased demand and cost for used cars resulted in a used car dealer like Carvana cutting part of their workforce, the real story goes deeper for the company.

It all goes back to how little Carvana has made in profits recently and how far its stock value has dropped.

Carvana’s Low Earnings and Lower Stock Value

According to Carvana’s profit records, the company hasn’t been able to meet its expected quarterly adjusted earnings for over a year now. This could be attributed to increased expenses and the past year’s rapidly-changing demand for used cars.

Along with earnings, Carvana’s previously-high stock prices have decreased dramatically. Stocks for the company were at their highest in August 2021 at just over $360. This week, Carvana’s stock was trading at $7.50 to $8.

With an inability to meet earning expectations and rock-bottom stock prices, it’s no wonder that Carvana had to lay off as much as 20% of its workforce this year.

Tried and true used car dealers will survive the change the automotive market faces, but it looks like retailers like Carvana may not. Check back here for news about used cars before making your next purchase!