Carvana Lawsuit: Can You Trust Carvana?

January 24, 2022

Buying a car is hard, and in 2022 that’s becoming even more difficult. Car prices are through the roof, and online car dealers like Carvana and Vroom are struggling to satisfy their customer. These companies stormed onto the scene offering a simple and easy car buying process, however, right now Carvana is facing a class action lawsuit from disgruntled customers, and Vroom isn’t faring much better.

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Carvana has grown very fast. In 2015 they sold just 6,500 vehicles nationally. In 2021 that number skyrocketed past 300,000. The company recently celebrated an impressive milestone; one million total vehicles retailed since their founding.

Carvana’s rapid growth has led to investor fanfare and a sky-high stock price. But what’s happening under the hood (pun intended) at Carvana? Things aren’t quite as rosy.

Right now there is an active class action lawsuit against Carvana, and it alleges many missteps the company has taken when interacting with their customers. The most egregious being title and registration issues that do not allow customers to legally drive the vehicles they’ve purchased.

Let’s breakdown the Carvana lawsuit, what is alleged, and what you need to know.

👉 Click here if you’re interested in a full review of selling to Carvana. I sold them my Volvo a little over a year ago and vlogged the experience.

What is alleged in the Carvana lawsuit

A class action lawsuit has been filed in Pennsylvania court against Carvana. The suit alleges that Carvana has unlawfully delayed transferring cars’ titles for months. Without a title, a consumer cannot lawfully operate a motor vehicle or secure insurance because they cannot lawfully claim ownership of it. That’s obviously a problem when you’ve just spent tens of thousands of dollars to “buy” a car.

The suit, filed in Pennsylvania, breaks consumer protections as outlined in the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

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Carvana has faced this issue in other states as well. For example multiple news reports from Florida tell the same story. Carvana actually lost their dealers license in North Carolina in 2021 for the same issue as well. At this point it is a well known pattern of behavior that Carvana is not capable or producing the permanent title and registration for all of their vehicles.

According to the lawsuit, one of the plaintiffs purchased a 2017 Kia Sportage from Carvana on December 29, 2020. Carvana then delivered the vehicle to their residence with an Arizona temporary license tag. The customer signed the sales and delivery documents in paper and electronic form.

Over the course of nearly a year, and after countless email exchanges, Carvana never provided the driver with their permanent registration. Instead, they issued six different temporary tags from multiple different states (Arizona, Tennessee, and Pennsylvania).

Without proper registration and a vehicle’s title you cannot legally operate it. You also can’t claim ownership of it. By withholding the permanent title from a customer, Carvana essentially sold someone a car and did not actually transfer ownership. The lawsuit alleges this happened to other customers as well.

Common issues buying a car from Carvana

You don’t have to look too far to see that getting a vehicle’s title and registration from Carvana are common issues. The Better Business Bureau page for Carvana is concerning. Plus, a quick dive on Reddit, TikTok, and other social media exposes even more common problems faced by Carvana customers.

Take for example this experience documented on reddit from car buyer in Massachusetts. Carvana has struggled to maintain their dealer licenses in many states. If your dealer license lapses or is suspended you cannot legally sell vehicles. That’s exactly what happen in Boston, resulting in delays for customers.

Then there was the viral TikTok of former Carvana employees saying that the company does not disclose accidents or recondition cars effectively. While we cannot comment on the validity of these statements, it is important to understand that Carvana does purchase cars from rental car companies, and rental car companies do not report accidents to insurance companies or services like CarFax. They don’t have to, since they can simply take care of the repairs in-house. This means you may not know you’re buying a vehicle that previously had damage, and this is why we always recommend getting a pre-purchase inspection on a used car.

In addition the title and registration issues that led to the current Carvana lawsuit, these other issues are things you should be aware of before you buy a car from Carvana.

Common issues selling a car to Carvana

What about selling a car to Carvana? Are there any common issues or challenges you should expect to face then?

No! Generally speaking, selling to Carvana is easy and simple. Honestly, it’s a bit too simple and easy … They barely inspect the vehicle, they come to you with a tow truck, and they give you the money immediately.

👉 Click here if you’re interested in a full review of selling to Carvana. I sold them my Volvo a little over a year ago and vlogged the experience.

Is Carvana Legit?

Should you do business with Carvana? Is the company “legit”? The owners of Carvana, Ernest Garcia II and his son Ernest Garcia III, have a long history in the automotive industry.

Before Carvana, Ernest Garcia II pleaded guilty to felony bank fraud charges for his role in the collapse of Charles Keating’s Lincoln Savings and Loan Association in the early 1990’s. After that experience, Garcia bought Ugly Duckling, a bankrupt rent-a-car franchise. After many years Garcia renamed the company DriveTime. Nowadays, DriveTime and Carvana do a lot of business together.

While Carvana’s origin story is interesting, it doesn’t inspire much confidence. This is especially true when you realize that Garcia II sold more than $3.6 billion of Carvana stock last year.

Is Carvana legit? Sure, they are a massive business, with billions of dollars in the bank, but do they play by the rules and leave a good taste in your mouth? That’s still to be determined.

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1 Comment

  1. Scott

    I’ve done bodywork for years, what Carvana is doing is a old chop shop tactic, I’m willing to bet the run around on titles and registration is because the vehicle has been wrecked, bought at a insurance auction and came with a salvage title, another red flag is the delay after delay before receiving the vehicle, what they are doing is mostly cosmetic, structurally they’ve done just enough to get it out of their hair, that’s why consumers are having these problems mechanically not long after receiving the vehicle.

    Reply

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