Carvana just got a whole lot bigger. The online used car marketplace just bought an entire auction house for $2.2 billion in cash, according to an announcement on the company’s website.
They bought KAR Global’s ADESA U.S. physical wholesale auction subsidiary. It’s meant to give Carvana another revenue stream. On top of that, it gives the company a physical site to help with sales in this insane car market as well as exclusive rights of ADESA.com.
The deal “substantially improves” the reach of Carvana’s logistics network, Automotive News reports. Carvana reported a $182 million net loss in the fourth quarter of 2021.
Right now, Carvana buyers can pick up their vehicles at one of its 30 car vending machines or have the cars delivered right to their doors. From the report:
“We will move from currently having inspection centers within 200 miles of 56 percent of the U.S. population to eventually being within 200 miles of 94 percent of the U.S. population,” Ernie Garcia, Carvana CEO, said. “Demonstrating the quality of these locations, we will move from being within 50 miles of 16 percent of the U.S. population to being within 50 miles of 58 percent of the population.”
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He added a move like this will make the customer experience better by slashing shipping times. Carvana estimates that acquisition will increase their production capacity by about 2 million cars a year.
The company opened its 15th inspection and reconditioning center earlier this year, and according to Automotive News, that brought total production capacity to 880,000 vehicles.
That really puts into perspective how big of a jump ADESA purchase is for Carvana. It more than doubles their current capacity.
They use these facilities to get the cars they buy resale-ready, meaning inspecting and reconditioning them.
Garcia says the company is planning to open six more centers this year alone. Five of them were already scheduled, and now the sixth could change with the ADESA news.
The company says ADESA’s name is going to stick around for its wholesale auction business.
“ADESA earned its place as a respected brand in our industry because of its dedicated team and robust operations. We have long admired ADESA, having come to appreciate their approach as a customer for many years, ,” Garcia said in release. “ We look forward to joining forces and continuing on the path of delivering the best customer offering for both retail and wholesale customers.”
According to TechCrunch, Carvana is funding the purchase of ADESA by using part of a $3.275 billion loan it got from JPMorgan Chase Bank N.A. and Citi. The remaining billion dollars would be used to improve ADESA’s sites across the country.
John Hammer — which is an excellent name for the president of an auction house — is coming over to Carvana when the deal closes in the second quarter of this year.