Father and son used-car sellers get $7.5 billion richer in a day

The online retailer Cavana sells cars out of massive vending machines.

CARVANA

The online retailer Cavana sells cars out of massive vending machines.

Carvana has yet to post a quarterly profit since going public in 2017, but it’s made Ernest Garcia II and his son Ernest Garcia III two of the richest people in the US.

The elder Garcia is the largest shareholder of Carvana, the online retailer that sells cars out of massive vending machines. His son, Ernest Garcia III, is the company’s chief executive officer. Together they’re worth $US21.6 billion (NZ$33 billion), according to the Bloomberg Billionaires Index.

Shares of the company surged 31 per cent after it projected record revenue and profit margins, sending the Garcias’ collective wealth jumping by around $US5 billion ($7.5 billion). The stock has rallied almost 150 per cent this year as Americans have turned to buying household essentials, entertainment and, increasingly, used cars online.

“Covid-19 is prompting consumers to seek out used cars, and CVNA is a key beneficiary of this trend,” said Alexander Potter, an analyst at Piper Sandler.

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Carvana lets customers choose from more than 19,000 cars and complete purchases in as little as 10 minutes, according to its website. Buyers have the option of picking up their car at more than a dozen vending machines located around the country, using a coin.

Ernest Garcia II's company sells cars via massive vending machines.

Ernest Garcia II/Supplied

Ernest Garcia II’s company sells cars via massive vending machines.

Its revenue doubled to $US3.9 billion last year as it sold about 200,000 cars. It now sees a path to 2 million sales a year.

Garcia II is worth $US15.2 billion and his son $US6.4 billion, according to Bloomberg’s Index, which tracks the daily fortunes of the world’s richest 500 people.

Carvana has been the target of sceptics and short sellers in the past, and its shares have been volatile since it went public. It has rallied more than 680 per cent since a March low and has a $US36.6 billion market valuation.

The company said it will sell $US1 billion of new debt, seizing on the boom in demand for its vehicles and low yields in the corporate bond market.

Around $US600 million of the proceeds will be used to refinance existing debt, with the rest held as cash on the balance sheet.

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