Vending machines are more commonly associated with sodas or candy bars, but one company wants to sell you a car from one.
Phoenix-based Carvana is only two and half years old, but it has made a reputation for itself across the Southeast for its car delivery service, where customers purchase their used vehicle online and the company delivers it to their doorsteps for a seven day, no questions asked test drive. Now the company is changing its game by opening the first ever vending machine for cars in Nashville, Tennessee.
"We wanted to create something that would be inexpensive long-term so we could keep our prices historically low and then do something on brand metaphorically where customers are in complete control of the experience and making car buying fun," CEO Ernie Garcia said in a phone conversation. "Often the experience of buying a car ruins the experience of buying a car, and we don't want to do that, so we came up with this idea of a vending machine."
The company is backed by DriveTime, a nationwide network of used car dealerships and service facilities. Carvana just raised $50 million in its initial funding round.
Carvana makes its money the same way any used car dealer does, by purchasing used cars at a low cost then reselling them for a slight mark up, but what makes Carvana special, according to Garcia, is that not having a permanent dealership helps cut costs for both the company and its customers. Garcia said customers save on average $1,500 in dealership fees when they purchase a car through Carvana.
With the Nashville vending machine, customers will have the same purchasing experience they have always had. Carvana offers a variety of brands, such as Ford and Tesla, and a huge range in prices, anywhere from $7,000 to $90,000. The only difference in the customer's experience is the delivery method.
The vending machine features a glass tower that hold five tiers of vehicles and up to 20 cars, and the way it works is fairly simple.
Customers order their Carvana used car online, they then go to the Welcome Center where they are given a commemorative coin to insert into the slot, a robotic arm then pulls the car out onto a pallet that takes the car to its delivery bay and once their car has reached its delivery bay, customers can inspect the car and take it home.
Garcia said creating the vending machine works as a solution to customer concerns about having their car delivered straight to their home.
"There are still customers who have been bruised and wounded by their historical car purchasing experiences, so they're not super comfortable with an automotive retailer coming to their door so they would rather go somewhere to get the car," he said. "They feel like it's easier to walk away probably, so I think we didn't really anticipate that because we knew we wouldn't be giving customers that experience, but that is real."
Despite being based in Atlanta, Carvana chose Nashville to launch its vending machine, something Garcia said was the right strategic move. He said Nashville has consistently been a very successful market, and the company felt confident the vending machine-style of delivery would be well received.
Garcia said the company has no plans to open a new vending machine currently, but if customer response is what he predicts it will be customers might see a lot more car vending machines around town.
"Offering these vending machines is actually less expensive for us than delivering cars to customers as long as we're getting a certain volume of customers, so it's easier to invest in these vending machines in larger markets where we'll have more sells," he said. "I would say you're more likely to see these popping up in our larger markets than in our smaller markets, but it is our model going forward."Carvana delivers cars in cities throughout the Southeast, including Atlanta, Nashville, Charlotte, Birmingham, Dallas, Houston, Austin, with recent launches in San Antonio and Raleigh. Carvana is currently the second largest seller of used cars in Georgia, trailing only Carmax ( KMX - Get Report) .