Carvana Bought a 2015 Honda Fit for $20,905, More Than It Was Worth New
Carvana has been in the news lately, primarily for negative things over positive stories. This time, Carvana’s algorithm messed up and paid an insane amount of money for a Honda Fit. The price of an old Honda is through the roof, but many used cars are worth more than new cars right now too. So what’s the deal with this situation, and did someone at the company make a mistake?
The 2015 Honda Fit was worth $20,814 seven years ago
Sean Hollister, a writer for The Verge, decided it was time to part with his beloved Honda Fit vehicle. Hollister purchased the Honda Fit off the lot in December 2014 and loved it until this year. He paid $20,814.80, a reasonable amount for a Honda with 23 miles on it at the time. But now, with used car prices going absolutely bonkers, why not try and get some money for a car that people generally don’t want?
Carvana touts itself as the “pioneers of online car buying” and says that people will never have to set foot in a dealership again. Carvana brings the car to buyers and picks the vehicles up from the seller’s driveways. No dealership necessary and no haggling. If you want to purchase a vehicle, you can search the online system.
If you are interested in selling, the company offers you an amount within two minutes. You can enter your license plate of VIN and get an offer online. Depending on what kind of specs your car has, the offers can be all over the place, which is what happened with this Honda Fit.
Carvana had the highest offer on the Honda Fit, more than CarMax, TrueCar, and Vroom
Carvana isn’t the only company offering such services. CarMax was one of the originals; TrueCar is pretty similar. There is also Vroom. When Hollister priced his Fit at these, Carvana was a lot higher. In fact, it was $7,500 higher than CarMax and $6,000 higher than Vroom.
This isn’t the first time someone has gotten a crazy offer on a used car lately. With the semiconductor chip shortage ravaging the industry, prices for new and used vehicles are all over the place. For whatever reason, Carvana’s algorithm thought this 2015 Honda Fit was worth as much used as it was new. So, the company wrote Hollister $20,905 for the Honda Fit, a profit of $90.20.
Part of the fun is that Carvana doesn’t even see the car before making the offer. The company showed up with a printed check and didn’t even inspect it before handing it over. The person delivering the check did look at the mileage and took a few photos before loading it up and taking it off in a Carvana-branded tow truck.
The Carvana algorithm is meant to work like a human at an auction block. It uses public databases that comb through insurance information, registration, mileage, accidents, and more before coming up with an offer amount. Sometimes it is pretty low for one reason or another, with people reporting Carvana offered the lowest amount from the competing companies.
While this seems like an error, this Honda was deemed “unique” by the Carvana algorithm
Tom Taira, who works for Carvana now and worked for TrueCar for more than 10 years, says the offer comes from three factors. These factors are the price the vehicle would sell for on the wholesale market, what Caravana projects it will be worth, and which cars the company needs in its inventory. When sellers enter in the condition, mileage, and accidents, these are only minor adjustments for the algorithm.
“The systems are naturally buying or being more aggressive on particular vehicles, so we can fill ‘slots’ that we want to have in our inventory,” Taira said. Perhaps there was a need for some Honda Fit vehicles in Carvana’s system, and Hollister was in the right place at the right time.
When asked about this particular situation, Carvana spokesperson Veronica Cardenas said that it was just the stars aligning for a good offer. This particular 2015 Honda Fit was deemed “unique” by the algorithm based on its low miles and manual transmission, which made an unusually high offer. However, someone will probably pay good money for this vehicle.
If you want to gamble with your vehicle’s value, you can get a new quote using a different email every day. All you need is your license plate or VIN to get an offer, so try until you get something good. Anything is better than walking into a dealership and waiting around for someone to decide what your vehicle is worth. Carvana is doing just that, and sometimes people get lucky.
