Here's How Carvana Will Reward Shareholders in a Tough Auto Market

Everybody loves a new vehicle, but few enjoy the buying process. It's that dislike for how much of the industry does business -- in Carvana Co.'s (NYSE: CVNA) case, the used-vehicle market -- which opens the door for disruption, innovation, and financial rewards for investors. In fact, according to Carvana citing a DealerSocket 2016 report, 81% of consumers don't enjoy the car buying process, which is great news for the company's streamlined online buying model and unique vending machine concept.

With a wave of off-lease vehicles coming that could pressure companies like Carvana, yet an industry ripe for a better way to do business, this is one way Carvana can excel and reward shareholders.

A simple way for Carvana to boost its bottom line, even if a glut of off-lease vehicles weighs on top-line pricing in the future, is to improve its operations and expand its gross profit per unit (GPU). Gross profit per unit is simply the gross profit driven by sales of used vehicles, including the wholesale of vehicles traded in during the purchase, gains on sales of loans to finance the vehicle, and commissions on sales of vehicle service contracts -- it's a key measure of the company's core profitability.

Source: Fool.com