The Expert Podcast

• Discussing the ongoing issues surrounding Carvana, including stock price drops, financial disclosures, and title problems being investigated by multiple states, government agencies, and law enforcement.
• Speculating on the potential reasons behind these title problems, with a focus on the financial aspect of the company.
• Disclaimer: We're not accusing Carvana of any wrongdoing; this is a hypothetical analysis of how dealerships could get into trouble with titles.

• Title problems often arise due to fraud or floor plan out of trust situations, where a dealership may double finance vehicles.
• Hypothetical Scenario: A dealership gets cars from auto auctions (like Odessa and Mannheim) with credit lines, sells them, but doesn't pay the auction for the vehicles, creating a double financing situation.

• Carvana is an online car dealership that sources used cars from auctions and consumers.
• Dealers like Carvana often rely on credit lines from auto auctions and floor plan financing to fund inventory.
• The potential risk: If the dealer fails to pay off the credit line, the vehicle title may not be obtained, leading to title delays or problems for the buyer.

• Example: A dealership can sell a car but fail to pay off the auction's credit line. The car gets sold again, and the same vehicle could be funded multiple times, creating financial instability.
• This technique, known as being "out of trust," is illegal and can result in significant financial problems for the dealership.

• A dealership in Florida (Excel Auto Group) faced accusations of "out of trust fraud" by mismanaging millions of dollars in inventory and not paying off their floor plan, leading to customers being unable to receive titles for their vehicles.

• Carvana has faced multiple states with title issues, raising questions about the reasons behind these delays.
• Multiple government investigations into Carvana’s title problems suggest that there may be deeper financial issues affecting the company's operations.

• Carvana recently completed a leveraged buyout of Odessa Auto Auction for $2.8 billion.
• This move raises questions about Carvana's ability to control title financing more closely, possibly contributing to its title troubles.

• Carvana also provides direct financing to its customers, bypassing traditional banks.
• This creates overlap in the financing process, which could result in extra working capital or financial issues if not managed properly.

• Large public companies like Carvana should not have widespread title issues. These problems often stem from not properly handling financing, which is crucial for title transfers.
• The use of temporary tags across multiple states may be used to delay title transfers, further complicating the situation.

• Government agencies, including attorneys general, are investigating Carvana’s operations, particularly around title issues.
• If these investigations reveal deeper financial troubles or fraud, it could have serious consequences for Carvana.

• Title problems are a significant issue for Carvana, with many buyers unable to obtain titles for months, sometimes over a year.
• The involvement of law enforcement and multiple states suggests that the issue is not a simple paperwork error but potentially more serious.

• If you've experienced title issues with Carvana, share your story in the comments.
• If you're an employee with insight into the situation, we’d love to hear from you.

• We’ll continue to follow this story as it unfolds, and we encourage you to keep an eye on developments to see if these hypotheticals turn out to be true.