Prediction: Carvana's New-Car Business Will Work. Early Numbers Are Stunning.

It's a shame that Carvana (NYSE: CVNA) doesn't have its headquarters in Las Vegas, because it's been quite a magic show. Years ago, there were legitimate questions about whether the company was heading into bankruptcy. Then, through a series of moves, management turned everything around and began to thrive as consumers adopted the online-sales strategy. If you had invested $10,000 in Carvana three years ago, it would be worth over $140,000 now.

For its next magic trick, the company is going to scoop up a bunch of brick-and-mortar dealerships, expand into new-car sales, and refuse to sell you a vehicle in person. Sounds crazy, right? My prediction to the rest of the industry: It's going to work scarily well.

What's the scoop?

Ask any used-car retailer, and they'll probably tell you Carvana has built a better mousetrap and disrupted its industry. Evidence backs that up: The company's $70 billion market capitalization makes it the most valuable auto retailer in the U.S.

Carvana spent $171 million to buy seven Stellantis dealerships as its way to break into new-car sales for incremental revenue and profits, but it's so much more than that. And, just as importantly, it isn't breaking away from its online-sales mousetrap that has worked so well.

Jeep would become a big brand for Carvana new-car sales. Image source: Stellantis.

If you want to buy a new car in person, spend all day at a dealership, haggle with commission-based salespeople, and work through paperwork for financing, then go across the street. But Carvana is replacing stereotypical salespeople and offices; instead, it will have couches and chairs and a small staff only to help if you need advice browsing its online selection, customizing options online, or test-driving vehicles.

Essentially, the auto dealer is removing much of the overhead for a typical new-car sales process, and this is important. What most investors might not know is that selling new cars isn't the lucrative part of owning a dealership. Since Carvana hasn't opened its books for this new business segment, let's use AutoNation as a benchmark of a huge auto retailer that has opened its books.

During the first quarter of 2026, new and used vehicles combined to generate 76% of AutoNation's total revenue, and yet those two segments combined to generate only 22% of gross profit. The lucrative part of owning a dealership comes from two other segments: parts and service (P&S), and finance and insurance (F&I). Those two segments generated only 24% of AutoNation's first-quarter total revenue, but 78% of total gross profit.

The good news is that Carvana is offering financing online through its own loans backed by Ally Financial, and its dealerships' service bays will continue to operate as normal.

There already is evidence it's working

The first new-car dealership purchased by Carvana is in Casa Grande, Arizona, and it has grown impressively. According to Stellantis data shared with CNBC, that one dealership sold over 700 new vehicles in May. That dwarfs the same store's prior average of between 30 to 50 new vehicle sales before Carvana took over, per The Wall Street Journal.

It gets better, too, because while Carvana's used-car business is already lucrative, the company still needs to get its hands on more valuable inventory, and consumers trading in vehicles checks that box.

Any questions?

There are still many questions to answer. Can Carvana cut enough new-car sales overhead to improve the profitability of this segment beyond that of traditional dealerships? Can management find a way to synergize its huge online used-car business with a handful of brick-and-mortar new-car dealerships? Will it consider expanding its handful of dealerships beyond Stellantis?

My prediction is that Carvana's Arizona store is not a one-hit wonder, and its online-sales strategy will work and disrupt the legacy 16,990 new-car retailers and their $1.3 trillion market. While it's doing that, it's going to synergize new and old parts of its business, generate new revenue streams, build its competitive advantages, expand its shipping points and reach, and evolve into a more lucrative overall business.

Despite refusing to sell you a new vehicle in person, Carvana's new-car mousetrap makes a lot of business sense.

Ally is an advertising partner of Motley Fool Money. Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.