How A Convicted Felon Stole BILLIONS Selling Used Cars | The Carvana Story

The Rise and Fall Of Carvana

If you’ve watched TV or browsed the internet in the past few years, you’ve probably seen ads for Carvana – the online used car dealership with the giant vending machines. But did you know that behind the shiny exterior lies a story of greed, deception, and subprime lending?

It all started in 2012, when Carvana was founded by car enthusiasts Ernie Garcia III and Ryan Keeton. They wanted to revolutionize the way people buy and sell cars, and their online shopping process quickly became known for its ease and convenience.

But as it turns out, Carvana’s success was built on a foundation of subprime lending – offering loans to people with poor credit at exorbitant interest rates. And the man behind it all was Ernie Garcia II, a convicted felon and the largest shareholder of Carvana.

Garcia II made his fortune through buy-here-pay-here schemes, preying on customers who had the highest chance of defaulting on their loans. His past caught up with him when he got caught using a white-collar scheme called “straw borrowing” to obtain a $30 million line of credit.

But that didn’t stop him from taking his retail car chain Ugly Duckling public and renaming it Drivetime. By 2017, it was bringing in over $2.5 billion annually through subprime lending.

And that’s where his son’s idea for Carvana came in. Carvana was essentially a bank disguised as an auto broker, and its 150-point inspection was often bogus. The company was charging buyers up to 28% in interest, and its promise of “whatever your budget, we’ll drive you happy” was too good to be true.

The pandemic poured rocket fuel on Carvana’s success, and the company started buying up cars at record pace and price. But their 150-point inspection was often bogus, and there were thousands of complaints from unhappy customers.

Despite all this, Carvana’s revenue was up almost 200%. But its highly leveraged balance sheet put the company in a vulnerable position, and it eventually filed for bankruptcy in 2021. While the company is still alive, it’s billions of dollars in debt, and its customer base is at an all-time low.

So, will Carvana pull out of this? Only time will tell. But perhaps buying a used car out of a vending machine isn’t the best idea after all.

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