DENVER — Carvana's promise is easy car buying, but one customerafterthe nexthas told Contact Denver7that Carvana has reneged on that pact.
Contact Denver7has been investigating the popular online car dealership, which is now facing scrutiny with multiple states issuing fines or suspending the dealership's license. However, in Colorado, there is little the state can do as the point of sale for local customers most often occurs in another state.
"I think it's a really important issue to expose," said Mark Ferrandino, head of Colorado's Department of Revenue, which oversees car dealerships in the state. "In some of these online companies, they're moving cars so quickly that they haven't done their due diligence behind the scenes to make sure they have a clear title before they sell the car. But we're seeing a much more systematic issue with Carvana. That is happening more frequently in more counties, with more cars."
His agency has received complaints from more than half of the 64 counties in the state about Carvana's paperwork problems at DMVs.
Contact Denver7 has learned that state regulators met with Carvana at the end of February, and the company promised changes, including hiring a new contractor to handle paperwork issues. The company also promised to no longer sell cars without titles in hand.
While Carvana representatives have denied interview requests from Contact Denver7, a spokesperson released a statement to Contact Denver7, characterizing the complaints as rare and blaming the pandemic. But the statement indicated the company is working to improve in Colorado.
"The ongoing impact of the pandemic has created business process challenges for many companies, with delays and staffing challenges across every industry and every logistics chain," the statement read in part. "To address the receding impact of the pandemic on operations, Carvana has made several improvements to our Colorado processes, and shared these changes with our state and local partners. We look forward to continuing to partner with the state and counties to continuously improve our consumer experience and ensure that the car buying process is as simple and efficient as possible."
Ferrandino said he is "hopeful" Carvana will make changes in Colorado.
"Because I think stories like this, that you're doing, complaints we're hearing from the counties [show] it's an issue," Ferrandino said. "If they want to be able to sell cars, they're going to have to improve their processes."
Carvana has had issues in several other states, including Florida, Texas, Michigan, California and North Carolina. The business was fined more than $10,000 in Texas for paperwork issues and was prohibited from selling cars in Raleigh, North Carolina for six months. In California, Carvana paid out $850,000 in a civil lawsuit in four counties stemming from the company making transactions without the proper licenses.
However, when it comes to enforcement in Colorado, Ferrandino said the state's hands are tied. Even though Carvana has a license in the state and is building a car vending machine in Denver, the point of sale at the moment is out of state, usually in Arizona where the company is headquartered.
Ferrandino said that every complaint against Carvana has been closed because the state did not have the authority to investigate.
If a consumer bought a car from Carvana, and the point of sale is in Arizona, consumers would have to file a complaint in Arizona..
"We hold our dealerships accountable for following the laws in Colorado, but we can only do that in Colorado," Ferrandino said, indicating that laws at the federal level have not kept pace with technology. "I think that's a conversation that we as a department, but we also we as a state and other states, need to have that conversation as we see more and more sales across the country."
That conversation is happening too late for Carvana customers now reaching out to Contact Denver7, which is why Ferrandino is now openly warning — buyer beware.
"This is the biggest purchase after a house in many people's lives," he said. "And so it is important to make sure consumers know what the risk is, especially when you're going online to purchase a car."
The state of Colorado has these tips for car buyers to protect themselves when buying a car online:
- Research the location from which you are buying the vehicle, including details on where the vehicle is located and dealership are located.
- Check the VIN on the vehicle:
- Check Motor Vehicle Verification System to confirm the vehicle has not been reported stolen.
- Check National Motor Vehicle Title Information System to Research Vehicle History. (There is a fee for this service)
- Check National Insurance Crime Bureau to confirm the vehicle has not been declared a total loss.
- Most used vehicles are sold “as is” without any guarantee or warranty. It is important that you or a qualified mechanic thoroughly inspect the vehicle before buying. Look at reviews online, ask for a report on the vehicle's history (CARFAX) and have a mechanic inspect the vehicle before buying. Consider this: When we purchase homes, we have an inspector review the property for problems before buying the house. The same theory can be applied to a used car purchase. Have a third party — a mechanic you trust — inspect the vehicle before purchasing, and be aware of any mechanical issues before buying the car.
- Know that you have the right to walk away.
- To avoid misunderstandings, get all promises in writing on the contract that you sign. If repairs or accessories are promised, specify a date of completion and have it written in the contract.
- The state's Auto Industry Division has a section of its website dedicated to public and consumer information and awareness to aid consumers in purchasing a vehicle. Learn what your rights are as consumers and what Colorado law says pertaining to motor vehicle sales.
- If you cannot work out an issue with a dealership, you may report complaints to the Auto Industry Division by completing its complaint form.
Editor's note: Denver7 seeks out audience tips and feedback to help people in need, resolve problems and hold the powerful accountable. If you know of a community need our call center could address, or have a story idea for our investigative team to pursue, please email us at contact7@thedenverchannel.com or call (720) 462-7777. Find more Contact Denver7 stories here.
Producer Joe Vaccarelli contributed to this report.
