Carvana Lawsuit: Can You Trust Carvana?

January 24, 2022

Update 9/28/2022:

Is This the Beginning of the End for Carvana? Executive Faces Criminal Charges

Legal troubles are mounting for Carvana. The second-largest used vehicle dealer in the nation has faced a class action lawsuit in Pennsylvania, regulatory woes in Florida, a suspended license in Illinois, and now criminal charges in that state. The latest developments are the most serious to date. 

Charges Filed Against Carvana’s Legal Representative

Paul Breaux, Carvana’s lead lawyer, is facing 57 criminal charges in the state of Illinois. It’s been revealed that in May of this year, the Illinois Secretary of State filed 27 counts of failure to transfer vehicle titles by a dealership and 50 counts of improper use of titling and registration.

Carvana is on the defensive. In a statement issued by the company, Breaux said that the charges lack merit. “The State of Illinois has charged me because Carvana delivered a car to a customer’s home. This is surprising and confusing both because it feels extremely anti-consumer and because I proactively met with several Illinois officials in 2017 to describe this exact practice and they did not then nor have they since raised any concerns, during which time we’ve delivered tens of thousands of cars to Illinois homes and provided exceptional customer experiences.”

We can only speculate that if the Secretary of State of Illinois filed 57 charges against Breaux, there’s more to the story than Carvana is ready to admit.

Why is Carvana in Trouble?

sell to carvana

The charges are extensive, but in summary, Carvana is in trouble for continuing to sell and deliver used vehicles in Illinois after the state had suspended their dealers’ license on May 10. Illinois’ Secretary of State Police Director Elmer Garza told Automotive News that as Carvana’s legal representative, Breaux bears responsibility for wrongdoing related to the company’s licensing in the state. In February, Illinois announced that it had begun investigating consumer complaints about the company’s vehicle titling and registration procedures. 

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Garza told Automotive News that they weren’t just dealing with isolated incidents, but rather extensive complaints. “In this particular case, we had over 100 complaints against [Carvana] for failure to transfer title, which resulted in an inspection, which resulted in the other charges,” Garza said. “Most of that stuff is records violations pertaining to their licensing agreement with the state.” It now looks like their investigation found at least 57 instances of legal wrongdoing.

Illinois charged Breaux with two counts of failure to comply with licensees’ requirement to keep records and make inspections; one count of failure to comply with licensees’ requirement to document evidence of right to possession; one count of failure to comply with licensees’ requirement on records for new and used vehicles; and one count related to maintaining records for special plates.

In a separate filing on May 12, the agency charged Breaux with two counts of Carvana operating as an unlicensed used-vehicle dealer.

Why Did Illinois Suspend Carvana’s License to Sell?

Carvana lawsuit

In early 2022, the Secretary of State’s office found that Carvana had been regularly abusing the use of the state’s temporary tags and had been failing to properly transfer title of vehicles sold in the state. 

Carvana recovered their license to sell in Illinois after a judge blocked state agencies from revoking their dealer license while the investigation continued. It’s unclear how today’s news of dozens of charges filed will impact Carvana’s license to sell in the state.

Carvana Faces Legal Woes in Florida and Elsewhere

A class action lawsuit was filed against Carvana in Pennsylvania in late 2021. The lawsuit alleges that Carvana has unlawfully delayed permanently transferring certain car titles, despite having a contractual obligation to do so in a timely manner. 

In Florida, Carvana narrowly avoided having their dealer license suspended. Carvana was under fire for breaking Florida law by failing to deliver titles to customers within 30 days of purchase. The Florida Department of Highway Safety and Motor Vehicles decided it would not go after Carvana’s license, citing “significant progress” in how Carvana operates in the state. That includes Carvana’s no-brainer decision to stop selling vehicles until the vehicle’s title is in their possession. Yes, you read that right.

In North Carolina, Carvana has been closely watched by the Attorney General. Wake County, home to Raleigh, suspended Carvana’s license to sell for six months due to a flood of consumer complaints. In Charlotte, Carvana is essentially on probation as the state monitors sales carefully. North Carolina attorney general Josh Stein told WSOC-TV that he’s received more than 60 complaints about Carvana that involve all sorts of issues.

The latest developments in Illinois show that this saga is far from over.

Should You Buy From Carvana?

Don’t buy from Carvana unless you have a substantial auto repair fund and a whole lot of patience. Time and time again, Carvana has sold faulty, poorly maintained used vehicles to unsuspecting buyers. Carvana does offer a 7 day return option, but too many Carvana buyers are seeing their vehicles turn into symbols of misery very quickly. In one recent instance, Carvana tried to compensate a buyer with a measly $300 when her Volkswagen Tiguan had a catastrophic failure just days after it was sold. As if that wasn’t enough, Carvana led the consumer down a terrible path of expensive towing fees, poor customer service, and more. You can check out the full story here

And then there’s the title and registration problem. Carvana has faced lawsuits and investigations in three states for failing to transfer the titles of vehicles they sold to the buyer. In arguably worse cases, Carvana even sold cars when they themselves did NOT even have the title yet. Wow. 

As consumer advocates, we wouldn’t wish the Carvana experience on anyone. Sure there are success stories, but it’s just too much of a gamble with your hard-earned money. Selling to Carvana is a different story, we’re about to explain.

Should You Sell to Carvana?

What about selling a car to Carvana? When it comes time to say goodbye to your beloved (or hated) current set of wheels, you have more options than ever before. From Vroom to CarMax and even the guy down the block, everyone wants to buy your used car. But when it comes to selling to Carvana, here’s what you need to know. 

Carvana pays top dollar for used cars. The only way you’re likely to get a better offer is to sell to a private party. Carvana is in growth mode, meaning that they aim to sell more and more cars to grow their business. As a publicly traded company, they have to please their investors, and that means growth. Therefore, they usually outbid other online car buyers. That means more money for you.

If you’re wondering if selling to Carvana is a good deal, the answer is that it usually is. Still, you’ll want to see what Carvana’s competitors can offer you. That’s why we created a way for you to compare multiple quotes, all in one spot. You’ll only enter your car’s info once! Try it out and let us know what you think!

Our own Zach Shefska sold his own car to Carvana and documented the whole experience. See how it went, and what advice he has to share, in this guide to selling to Carvana.

Original Post from January 2022

Buying a car is hard, and in 2022 that’s becoming even more difficult. Car prices are through the roof, and online car dealers like Carvana and Vroom are struggling to satisfy their customer. These companies stormed onto the scene offering a simple and easy car buying process, however, right now Carvana is facing a class action lawsuit from disgruntled customers, and Vroom isn’t faring much better.

Carvana has grown very fast. In 2015 they sold just 6,500 vehicles nationally. In 2021 that number skyrocketed past 300,000. The company recently celebrated an impressive milestone; one million total vehicles retailed since their founding.

Carvana’s rapid growth has led to investor fanfare and a sky-high stock price. But what’s happening under the hood (pun intended) at Carvana? Things aren’t quite as rosy.

Right now there is an active class action lawsuit against Carvana, and it alleges many missteps the company has taken when interacting with their customers. The most egregious being title and registration issues that do not allow customers to legally drive the vehicles they’ve purchased.

Let’s breakdown the Carvana lawsuit, what is alleged, and what you need to know.

👉 Click here if you’re interested in a full review of selling to Carvana. I sold them my Volvo a little over a year ago and vlogged the experience.

What is alleged in the Carvana lawsuit

A class action lawsuit has been filed in Pennsylvania court against Carvana. The suit alleges that Carvana has unlawfully delayed transferring cars’ titles for months. Without a title, a consumer cannot lawfully operate a motor vehicle or secure insurance because they cannot lawfully claim ownership of it. That’s obviously a problem when you’ve just spent tens of thousands of dollars to “buy” a car.

The suit, filed in Pennsylvania, breaks consumer protections as outlined in the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

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Carvana has faced this issue in other states as well. For example multiple news reports from Florida tell the same story. Carvana actually lost their dealers license in North Carolina in 2021 for the same issue as well. At this point it is a well known pattern of behavior that Carvana is not capable or producing the permanent title and registration for all of their vehicles.

According to the lawsuit, one of the plaintiffs purchased a 2017 Kia Sportage from Carvana on December 29, 2020. Carvana then delivered the vehicle to their residence with an Arizona temporary license tag. The customer signed the sales and delivery documents in paper and electronic form.

Over the course of nearly a year, and after countless email exchanges, Carvana never provided the driver with their permanent registration. Instead, they issued six different temporary tags from multiple different states (Arizona, Tennessee, and Pennsylvania).

Without proper registration and a vehicle’s title you cannot legally operate it. You also can’t claim ownership of it. By withholding the permanent title from a customer, Carvana essentially sold someone a car and did not actually transfer ownership. The lawsuit alleges this happened to other customers as well.

Common issues buying a car from Carvana

You don’t have to look too far to see that getting a vehicle’s title and registration from Carvana are common issues. The Better Business Bureau page for Carvana is concerning. Plus, a quick dive on Reddit, TikTok, and other social media exposes even more common problems faced by Carvana customers.

Take for example this experience documented on reddit from car buyer in Massachusetts. Carvana has struggled to maintain their dealer licenses in many states. If your dealer license lapses or is suspended you cannot legally sell vehicles. That’s exactly what happen in Boston, resulting in delays for customers.

Then there was the viral TikTok of former Carvana employees saying that the company does not disclose accidents or recondition cars effectively. While we cannot comment on the validity of these statements, it is important to understand that Carvana does purchase cars from rental car companies, and rental car companies do not report accidents to insurance companies or services like CarFax. They don’t have to, since they can simply take care of the repairs in-house. This means you may not know you’re buying a vehicle that previously had damage, and this is why we always recommend getting a pre-purchase inspection on a used car.

In addition the title and registration issues that led to the current Carvana lawsuit, these other issues are things you should be aware of before you buy a car from Carvana.

Common issues selling a car to Carvana

What about selling a car to Carvana? Are there any common issues or challenges you should expect to face then?

No! Generally speaking, selling to Carvana is easy and simple. Honestly, it’s a bit too simple and easy … They barely inspect the vehicle, they come to you with a tow truck, and they give you the money immediately.

👉 Click here if you’re interested in a full review of selling to Carvana. I sold them my Volvo a little over a year ago and vlogged the experience.

Is Carvana Legit?

Should you do business with Carvana? Is the company “legit”? The owners of Carvana, Ernest Garcia II and his son Ernest Garcia III, have a long history in the automotive industry.

Before Carvana, Ernest Garcia II pleaded guilty to felony bank fraud charges for his role in the collapse of Charles Keating’s Lincoln Savings and Loan Association in the early 1990’s. After that experience, Garcia bought Ugly Duckling, a bankrupt rent-a-car franchise. After many years Garcia renamed the company DriveTime. Nowadays, DriveTime and Carvana do a lot of business together.

While Carvana’s origin story is interesting, it doesn’t inspire much confidence. This is especially true when you realize that Garcia II sold more than $3.6 billion of Carvana stock last year.

Is Carvana legit? Sure, they are a massive business, with billions of dollars in the bank, but do they play by the rules and leave a good taste in your mouth? That’s still to be determined.

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2 Comments

  1. Scott

    I’ve done bodywork for years, what Carvana is doing is a old chop shop tactic, I’m willing to bet the run around on titles and registration is because the vehicle has been wrecked, bought at a insurance auction and came with a salvage title, another red flag is the delay after delay before receiving the vehicle, what they are doing is mostly cosmetic, structurally they’ve done just enough to get it out of their hair, that’s why consumers are having these problems mechanically not long after receiving the vehicle.

    Reply
    • Ace Jorg

      I understand the possible “patch them up and sell ‘um”. Unless they can get a clear tittle from another states I don’t know how they could get around a “Salvage” tittle.
      I bought a car from a dealer and after the 90 day temp license expired I was told that previous owner had lost tittle and dealership had to apply for a lost tittle then apply for new tittle in their name. Car came from another state.

      Reply

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