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| The car "Vending Machine" |
Abstract
In 2012, Earnest Garcia III co-founded and became the CEO of a future billion
dollar car company, Carvana. Soon after the company became widespread and
known by millions of people, customer complaints and poor reviews started flying
in every month. Carvana is an online used-car buying service that cuts out having
to go to dealerships and even delivers your newly bought car right to your home.
With Carvana, car buying and selling is meant to be simple and carefree without the
pressures of going to a dealership or having to search for places to sell your car.
Customers can even finance their vehicle through Carvana and choose to either have
their new car delivered to them or customers can pick their new car up at a car vending
machine. This paper will analyze various ethical theories including individualism,
utilitarianism, kantianism, and the virtue theory. When it comes to individualism,
Carvana acted ethically when it came to maximizing profits but fell short when it came
to acting within the letter of the law. Under utilitarianism, Carvanan acted unethically
because of the amount of customers who were dissatisfied with their experience with
the company. Then, looking at Kantianism, Carvana was once again acting unethically
due to the company's continued emphasis on self-interest and not the overall duty of the
business. Lastly, relating the virtue theory to Carvana, the company once again does not
prove to act ethically as it does not uphold the values of honesty, courage, justice, and
temperance.
Company Case
Carvana is a used car retailer that works fully online. The company allows potential
buyers to browse and choose a car online and then the car is either delivered to the
buyers door or can be picked up at a Carvana Vending Machine. Car buyers have seven
days to try their chosen car and if they are not satisfied then the buyer can return their
car and get all of their money back. The company was founded in 2012 by Earnet Garcia
III in Tempe, Arizona. The company thrives on ease and convenience to the extent that
“Consumers can use its web site to buy used cars, obtain financing and arrange for
vehicle delivery” (Vardi). Carvana is a multi-billion dollar company that separates itself
from its competitors by offering a wide selection of vehicles from used cars to used
trucks and ensuring that each individual vehicle has undergone a 150 point inspection.
Once someone arrives at the Carvana website, it is quite easy to search all vehicles in the
inventory and each car has a 360-view [that] even allows you to highlight hotspots,
which could be minor dings or imperfections in the exterior” (Kress). Also, a potential
buyer can view the interior and the car’s Vehicle Identification Number. Once a car has
been chosen, the buyer goes through the process of paying for the vehicle on the website
whether it be through cash, financing, or trading in. Carvana also has the option of selling
a car completely online with a pending offer as long as the vehicle passes the in-person
inspection (Kress). Overall, Carvana has become an easy to use car online shopping service
that has no pressure and no hassle. Every vehicle is guaranteed either 4,189 miles or 100
days but there is no way to test drive the car before buying it and prices tend to be slightly
higher than cars told privately. All of the cars sold on Carvana have no reported incidents
and no fire or flood damages guaranteed (Consumer Affairs).
The Case
When Carvana first premiered in 2012 many people were extremely intrigued and
excited to take the hassle and time out of car buying. The overall satisfaction rating for
Carvana is currently two out of five stars with a majority of users giving the company
one star reviews. Eight years later and once the company had enough customers it quickly
became obvious that more buyers were dissatisfied with their experience than there were
pleased customers. Many customer complained about the lack of a thorough 150 point
inspection like the company promises. One customer wrote “Their 150 point inspection
is a joke. They put a cheap set of Walmart tires on it that wouldn't hold air. The truck
arrived with a dead battery with corroded terminals that the driver tried to explain away”
(Consumer Affairs). Along with the 150 point inspection issues, many other customers
were dissatisfied with the delivery process as many vehicles were delivered to buyers
days and even weeks after the estimated delivery time and even when buyers
received their vehicle many did not receive the title or registration to the vehicle for
weeks (Consumer Affairs). On one website alone there were over one-thousand
customer complaints varying from problems with the product or service to guarantee
or warranty issues (Better Business Bureau).
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| Overview showing the poor review percentage |
Stakeholders
The main stakeholders in Carvana include Morgan Stanley, Price T Rowe Associates
Inc., Tiger Global Management, Vanguard Group Inc., Baillie Gifford & Co., and many
other major organizations (Fintel). These stakeholders bear a large burden by Carvana’s
poor customer reviews and services. Although these are not the sole stakeholders in the
company they do have some of the largest ownership percentages of everyone. Due to
the recent poor reviews of the services provided by Carvana including their poor 150
point inspection and delivery services these major corporations are losing money in the
millions of shares that they own. The yearly revenue for Carvana ending September 30th,
2020 $4.864 billion which is a 42.17% increase in revenue compared to 2019. Even
though there was a 42% increase, this is no match to the 101.48% increase in revenue
for Carvana between 2018 and 2019. Such a decrease in profit weighs heavily on the
stakeholders of Carvana and without a better approach to customer satisfaction, profits
will not increase by so much again (Macrotrends).
Individualism
Milton Friedman believed that businesses must be concerned with maximizing their
profits as long as it’s done so within the law. Individualism encompasses a slightly
different ethical theory as “it is sometimes referred to as the economic model because it
is based on an economic view of the limits that ethics has in a business context and is
based on economic theories” (Salazar 18). Looking at Carvana in relation to individualism,
Carvana was extremely in line with the ideals and thoughts of individualism. This is
because Carvana’s main goal as a company is to make a profit and throughout the last
five years, Carvana has continued to make billions of dollars in profits. For example,
from 2016 to 2017 Carvana increased its sales by $0.859 billion which was a 135.21%
increase and then from 2017 to 2018 Carvana’s sales increased by $1.955 billion, a
127.68% increase (Macrotrends). The main issue that arises is whether Carvana was acting
within the law. It is clear after reading hundreds of customer complaints that Carvana
did not act ethically within the law. On the Carvana website, the company states “we put
each vehicle through a 150-point inspection so that you can be 100% confident in the
quality and safety of your vehicle. This inspection includes everything from tread depth
of tires to thickness of brake pads to exterior paint quality to Bluetooth compatibility”
(Peace of mind comes certified). Many of the customer reviews reveal the truth about the
150 point inspection that Carvana lies about and falsely promises its customers. From
mechanical issues to cosmetic damage, many new car buyers were surprised to find issues
with their new cars that were not laid out in the car descriptions. When customers called
the support center, Carvana did little to nothing to help them with their car issues and
often helped in no way (Consumer Affairs). Therefore, it is quit obvious that Carvana
has been trying to make the largest profits that they possibly can but in doing so they
have not been acting ethically within the rule of law.
Utilitarianism
Looking at this case from a utilitarian viewpoint, the case would be deemed unethical
because of the surplus of unsatisfied customers which left a massive negative effect on
the customers purchasing from Carvana. A “utilitarian philosophy would aim for the
betterment of society as a whole. Utilitarianism would say that an action is right if it
results in the happiness of the greatest number of people in a society or a group”
(Investopedia). Based on the amount of negative reviews and reports from unhappy
customers, it is clear that Carvana did not understand that the lack of promise and
guarantee on their part would result in the negative experiences of thousands of customers.
Before promising a 150 point inspection, specific delivery dates, and a stress free car
buying experience, Carvana needed to understand the amount of work and time that each
car buying process would take and need. Carvana is trying to move cars too quickly that
they have time and time again not reached the promising ideologies that the company is
supposed to uphold. A utilitarianist business’ actions “should aim to maximize the
happiness in the long run for all conscious beings that are affected by the business action”
(Salazar 19). Carvana should be focused on exceeding the expectations of their buyers by
maximizing pleasure and reducing pain through a stakeholder approach. With Carvana
being more concerned about making money and getting their vehicles sold in the
shortest amount of time, they lost sight of the importance of the satisfaction of their
valued customers.
Kantianism
Kantianism was created by Immanuel Kant and it provides the belief that people should
“always act in ways that respect and honor individuals and their choices. Don’t lie,
cheat, manipulate or harm others to get your way. Rather, use informed and rational
consent from all parties” (Salazar 20). In shorter terms, the main focus of Kantianism is
on rationality and Good Will. A business should make its choice based on the duty that
the business has and not on its self-interests. Businesses should be honest with their
customers and should also be loyal to their customers. Carvana has been acting in their
own self-interest for years now, putting their own want for profits over the happiness and
satisfaction of their customers. One customer explained that two of their hubcaps on the car
fell off due to not being sacred tight enough after the 150 point inspection and Carvana
told the customer “that since this was an accidental issue I am responsible for the hubcaps
and Carvana won't be willing to help” (Carvana LLC: Complaints: Better Business
Bureau). The Owner of Carvana, Earnet Garcia III should have acted when his customers
first began complaining about improper customer service (Vardi). Negative reviews of
Carvana have been steadily posted on various websites for years now and the issue is that
the same comments from 2018 are still being expressed in reviews from November 2020.
It is clear that the owner of Carvana has no intention of improving his companies services
as nothing has been for years now. Instead, Earnest Garcia III continues to make profits
off of unhappy customers and happily broadcasts the positive reviews from customers
all over the front page of Carvanan’s website, as if there have been little to no issues with
other customers (Carvana LLC: Complaints: Better Business Bureau). Carvana has been
continuing unethical practices according to Kantianism and will continue to do so unless
someone does something about it.
Virtue Theory
“Virtue theory asks about a person’s character and assesses whether a person is virtuous
or not” (Salazar 22). This theory was originally created by the ancient greek philosopher,
Aristotle, and includes four main virtues which are honesty, justice, courage, and
temperance. The main aspect that separates this theory from the three other theories that
have been discussed is that the other theories examine individual actions while the virtue
theory examines the character of a person (Salazar 23). If people want to live a virtuous
life and function well they must be rational. Applying Carvana to the virtue theory,
Carvana has not been completely honest with their customers as to the high degree of
inspections that take place on every vehicle. Instead of upholding their values of checking
every car with their 150 point inspection, they oftentimes fell short of their promises.
One customer explained that “they put a cheap set of Walmart tires on it that wouldn't
hold air. The truck arrived with a dead battery with corroded terminals that the driver
tried to explain away. You had one job, 150 point inspection” (Consumer Affairs). Also,
Carvana's virtue of justice was not met because the company was not just to the unsatisfied
customers who bought their vehicles. In many cases where customers had negative
experiences, they were never refunded or given assistance for their misfortunes. Customers
were left alone to figure out how to handle issues with their new cars instead of getting
assistance from Carvana who guarantees a 150 point inspection (Consumer Affairs).
Justified Ethics Evaluation
In my opinion, the actions done by Carvana have been consistently unethical and
unprofessional from a business standpoint. There have been hundreds upon hundreds of
one and two star reviews about the poor performance of Carvana as an online car buyer
and seller company. Carvana should have been taking these complaints more seriously
from the start of their business because without satisfied customers a company cannot thrive
and prosper. As more people read the negative reviews and comments about customer
experiences it caused less people to buy and sell cars with Carvana and does not comfort
other customers to purchase or sell a car from Carvana in the future. If Carvana had taken
the reviews of customers more seriously and reworked some of the mechanical issues with
their car inspections and delivery period, the company’s profits would have been higher in
the last year like they were from 2018 to 2019. Overall, the inability for Carvana to adapt
to the complaints by customers is very unprofessional and even worse is the fact that
Carvana continues to do little to nothing about the situation and helping customers with
their faulty cars.
Action Plan
Carvana is currently experiencing many issues related to customer service. The company
has had a high number of one star reviews in which customers have experienced delayed
delivery times, high prices, and poorly inspected vehicles. Carvana needs to address their
lack of a quality 150 point inspection that they have promised on their website. In order to
do this the company must first hire a manager that will better overlook the mechanics of
the inspection to ensure that every vehicle is prepared to be sent off to customers. Also,
Carvana must improve the process and checks that are put in place for each area of the
inspection and this can be done by raising the standards of the overall inspection. Looking
at delivery times, Carvana needs to put in place a more accurate system to determine when
cars will arrive to customers so that they are more prepared, not waiting, and have a reliable
form of transportation until their new car comes in. If a customer was told that they have to
wait an extra 2 days, it is believed that customers would be happier with this option then
waiting around for days or weeks not knowing when their car will arrive. It is important
for good customer service that products arrive in a timely fashion and one way to improve
this would be to increase the number of Carvana Vending Machines around the country.
There are currently 24 locations where people can go to receive their cars instead of
having the car delivered to them. If more vending machines were available around the
country then more people would be willing to go get their cars themselves instead of
waiting for delivery. Therefore, Carvana should increase their vending machine locations
to have at least one location in every 50 states in the USA so that people will be more
inclined to drive to pick up their vehicle and customer complaints related to delivery times
will decrease. By allowing more people to go to nearby vending machines there will be
less of a demand for delivery resulting in faster delivery times for those that are too far
to pick up their vehicle.
References
Carvana is rated "Average" with 3.6 / 5 on Trustpilot. (n.d.). Retrieved from
https://www.trustpilot.com/review/carvana.com?languages=en
Carvana LLC: Complaints: Better Business Bureau. (n.d.). Retrieved from
https://www.bbb.org/us/az/tempe/profile/online-car-dealers/carvana-llc-1126-1000037076/complaints
Consumer Affairs. (n.d.). Carvana. Retrieved from https://www.consumeraffairs.com/
automotive/carvana.html
Fintel. (n.d.). CVNA / Carvana Co. - Institutional Ownership and Shareholders. Retrieved from
https://fintel.io/so/us/cvna#:~:text=Largest%20shareholders%20include%20Morgan%20
Stanley,Carvana%20Co.
Kress, J. (2020, June 29). Carvana Review: 5 Things to Know Before You Buy or Sell. Retrieved
from https://clark.com/cars/carvana-review/
Macrotrends. (n.d.). Carvana Revenue 2015-2020: CVNA. Retrieved November 27, 2020, from
https://www.macrotrends.net/stocks/charts/CVNA/carvana/revenue
Mathew. (2020, June 12). Carvana Reviews and Complaints: What You Need to Know Before
Buying Your Car Online. Retrieved from https://thedashcamdigest.com/
carvana-reviews-and-complaints-what-you-need-to-know-before-buying-your-car-online
Peace of mind comes certified. (n.d.). Retrieved November 29, 2020, from
https://www.carvana.com/certified-program
Salazar, Heather. The Business Ethics Case Manual. n.d.
Vardi, N. (2017, December 18). How An Ex-Con Became A Billionaire From Used Cars.
Retrieved from https://www.forbes.com/sites/nathanvardi/2017/12/18
how-an-ex-con-became-a-billionaire-from-used-cars/?sh=3e7277446d3f
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