It's the age of online shopping and a few years ago the race to establish the Amazon of used cars began. However, things haven't turned out that way, and companies like Carvana have been rocked by the used car market not going their way. Now its main competitor Vroom has officially closed its online used car sales business and will be liquidating its inventory.
The news was announced both on Vroom's website and in a press release from Automotive News. Vroom said the company is suspending all online auto transactions, both buying and selling, and will sell its existing inventory through wholesale stores. Vroom reiterates the need to conserve cash (in other words, avert bankruptcy) and will also begin layoffs. However, the internal financial unit United Auto Credit Corporation will continue to operate.
A mini hatchback in the back of a Vroom pickup truck. Vroom
Vroom's financial situation has deteriorated rapidly in recent years, and losses are spiraling out of control. Automotive News reports that Vroom counted just 4,561 online sales in the third quarter of 2023, a decline of 29 percent compared to the previous year. Profit per vehicle also fell 25 percent to $3,144, contributing to a loss of $82.9 million. That's after a loss of $51.1 million in the same quarter of 2022.
But it's also worth questioning the feasibility of selling used cars online at all. Selling new cars digitally, as pioneered by Tesla, makes sense because customers (theoretically) know the condition and quality of what they are buying. However, if you handle the used buying process online, customers may not know what they are getting, and while freedom from haggling means they are more convenient, they also reduce the chances of getting a deal.
There's just too much care involved when buying a used car, and perhaps the premium charged for convenience just isn't worth it for used car buyers. Maybe this idea won't stick – but we need to think about what we do with these car vending machines.
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