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Carvana’s website offers a very simple, cool platform that allows shoppers to search for and buy used cars. Even cooler, the cars are stored in vehicle “vending machines,” a novel storage solution that the company promotes widely in its advertising and marketing materials, seeking to establish and emphasize the innovativeness it brings to all its practices.

But after the cars roll out of the vending machines and into purchasers’ lives, being cool and innovative might not be enough to keep them satisfied. For that, they need the company to be sort of boring, such that it lives up to their basic service expectations. Instead, Carvana keeps getting people excited, but not in a good way. It stands accused of habitually failing to provide titles to the cars it sells, and otherwise not fulfilling its legal obligations to purchasers, which seems like a bare minimum for keeping customers happy—and keeping regulators from taking action.

Instead, the Michigan Department of State already suspended a Carvana dealership’s license after investigators discovered hundreds of title delays and probation violations. It also identified problematic evidence that dealership employees had destroyed documents and failed to maintain accurate odometer records. The investigation was prompted by complaints from customers about not receiving their car titles.

This Carvana dealership had previously been placed on probation—twice—but, according to ClickOnDetroit, customer complaints kept rolling in. ClickOnDetroit also reports that the Michigan Department of State is moving toward revoking the dealer’s license completely. Now, honk if you think this is the only instance of a Carvana dealership running into some legal trouble.

The Illinois Secretary of State’s office suspended Carvana’s license twice in 2022 over consumer complaints about missing titles and registrations. (A state court reinstated the license pending the resolution of a lawsuit.) Carvana avoided having its license suspended in Florida, after (and this might sound familiar) failing to transfer car titles to purchasers. The Florida Department of Highway Safety and Motor Vehicles let Carvana keep operating after it had made some “significant progress” in filing title applications within the required 30-day time period.

Sometimes innovative offerings produce service gaps because customers lack the skills or ability to use the offering correctly, or because their expectations don’t take into account what the service actually promises to do. But sometimes, service gaps open up because an innovative car vending machine operator just does not like to do paperwork. Vroom vroom.

Discussion Questions:

  1. Are Carvana’s problems inherent to the platform, or can they be fixed?
  2. What are some other examples of service gaps?
  3. How should Carvana assure nervous customers, who are wary of sing the platform because of these legal problems?

Source: Chris Teague, “Michigan Suspends Carvana’s Dealer’s License for Repeat Violations [UPDATE],” Yahoo, October 10, 2022; Derick Hutchinson, “Novi Car Dealership Suspended for 112 Title Delays, 127 Probation Violations, Destroying Documents,” clickondetroit.com, October 10, 2022; Jacob Oliva, “Carvana in Hot Water Again, This Time for Alleged Violations in Michigan,” motor1.com, October 13, 2022; Lisa Parker and Tom Jones, “Judge Gives Carvana Green Light to Sell Cars in Illinois Ahead of Late-August Hearing,” NBC Chicago, August 8, 2022; C.J. Moore, “Carvana Averts Suspension of Its Dealer License in Florida,” Automotive News, February 2, 2022; Brad Anderson, “Carvana Set to Keep Dealer License in Florida Despite Not Transferring Titles,” Carscoops, February 3, 2022