Used car company Carvana Co. (NYSE: CVNA) renegotiated its debt and trimmed it by $1.2 billion. The solutions come via renegotiated debt and share sales. None of this changed the essentials of the business, and Carvana has a grim future in a highly competitive market. (These companies have the worst reputations.)
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Carvana’s shares rose 40% on the news but remain down by 83% in the past two years. This means skepticism is huge.

In the most recent quarter, Carvana lost $105 million. Revenue dropped from $3.8 billion a year ago to $3.0 billion in the quarter. It sold 76,530 cars in the recent quarter, compared with 117,564 last year. The company said lower car sales were part of pursuing profit. It remains an awful drop and almost certainly means significant damage to market share.

Lost in Carvana’s numbers is the huge competition it faces. This starts with traditional dealers, which see customers face to face, can show them cars and negotiate prices.

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Caravan also competes with online car sales from Cars.com, Auto Trader, TrueCar, CarMax, CarGurus, Edmunds and several others. Carvana may have slick sales packages, but only some people shop by looking at one place. The same is true with financing.

Carvana’s sales decline is in the face of an industry in which new car sales are rising, making the used car market smaller. Used cars were often as expensive as new ones. Consumer price index figures show that used car prices are actually falling now. That means, long term, Carvana is up against a smaller market, and one likely to have lower margins.

Carvana has a new ownership structure, but inventors should not care.

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