This Startup’s Answer to Avoiding Dealers: A Car Vending Machine

November 12, 2015, 6:00 PM UTC
Courtesy of Carvana

Vending machines aren’t just for buying soda, salty snacks, and scary-looking egg salad sandwiches. In Nashville, you can now roll up to a five-story vending machine and buy a car.

Carvana, a Phoenix-based online-car-buying startup that describes itself as the “Amazon of cars,” opened the vending machine Thursday in Nashville. The five-story glass building, which is equipped with three customer delivery bays, can store up to 20 cars. The vending machine is open Monday through Saturday and vehicle pickup is free for all Carvana customers. The company says it will subsidize $200 in airfare and arrange transportation from the Nashville airport for customers who live outside Tennessee, but who want to pick up their car at the vending machine.

CEO and founder Ernie Garcia says the vending machine concept is a brick-and-mortar extension of its online business model that was built for customers who still want to pick up their vehicle in person. The vending machine “serves as a metaphor for Carvana’s business principles: easy and efficient with the customer in complete control,” Garcia told Fortune.

Once a customer has shopped and purchased the car online, they head over to the vending machine. The customer selects their name from a kiosk inside the building and inserts a Carvana-branded coin to start up the vending machine. The car is automatically retrieved from the tower and ushered into a delivery bay, where the customer can take possession, and begin their seven-day test ownership period. The vehicles undergo a 150-point inspection and come with a 100-day or 4,189-mile bumper-to-bumper warranty, and a seven-day test drive. Carvana also touts a “no questions asked” return policy.

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In the past, Carvana has advertised that customers save an average of $1,681 on their purchase. Garcia says that won’t change. “The machine itself costs almost nothing to run once it’s operational,” Garcia says.

Carvana, which allows buyers to shop for, finance, buy, and trade in a car online, plans to expand its vending machine concept into other cities, Garcia says. The company launched in 2013 in Atlanta, Charlotte, N.C., and Nashville, and has since expanded into several new markets, including Birmingham, Ala., and Dallas in early 2015. In the past month, the company has expanded into Austin, Houston, San Antonio, and Raleigh, N.C. Carvana has warehouse facilities in Atlanta and Dallas, which store about 600 cars.

Carvana, which has raised $300 million in funding, does have competition in online car sales market. Beepi Inc., Carlypso, Shift Technologies, and Vroom are raising capital and expanding staff. And each startup offers its own spin on white-glove or concierge-style service. In July, New York startup Vroom raised $54 million and previously raised $19 million in equity from between 15 and 20 wealthy investors, including former pro football player John Elway and former Autonation and Blockbuster CEO Steve Berrard. In September, Shift Technologies, an online marketplace for used cars in San Francisco and Los Angeles, raised $50 million in new funding.

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