Online used-car seller Carvana arrives in Minnesota

Carvana Co., an online seller of used cars, started service in Minnesota this week and may test the limits of the state's dealership rules.

The Tempe, Ariz.-based company, which has been operating since 2012, will now deliver cars to buyers within a 100-mile radius of the Twin Cities.

"Expanding our offering into Minnesota allows us to reach a large population of car buyers," Ernie Garcia, Carvana's founder and chief executive, said in a statement. The firm also buys used cars.

Since its start, Carvana has rolled out to 149 markets across the country and grown to more than $2 billion in annual sales.

Carvana has a portfolio of 15,000 used cars. Shoppers can browse the company's website or app to select a car. Delivery happens within a day or two and customers have a week to decide whether to keep a vehicle.

While it's relatively easy to get into the used-car business in Minnesota, state regulations don't permit online-only businesses. Instead, a physical location must be established.

Carvana's Minneapolis location will be something akin to a fulfillment center, but it is not a customer-facing location, Amy O'Hara, a Carvana spokeswoman, said Thursday.

"We are always growing and we are always trying to bring a new way to buy a car to as many people as possible," O'Hara said. "All of the transactions happen online and all of our vehicle tours are online, but all of our vehicles have a seven-day return policy."

Scott Lambert, president of the Minnesota Automobile Dealers Association, which represents new car and truck dealers, said its members don't mind competition — as long as it's fair.

"You can't sell cars purely online in Minnesota," Lambert said. "If you want to sell cars in Minnesota you have to abide by the licensing requirements. As long as they are complying with state licensing requirements — it's just another used-car operation."

To get into the used-car business in Minnesota, entrepreneurs need some knowledge of warranties and sales contracts. Among the licensing requirements are a physical location with posted hours and an office that can do some records management, Lambert said.

Lambert notes there are several thousand used-car dealers in Minnesota, including some who do a portion of their business online.

"We survived CarMax coming into town just fine, and I'm sure my dealers will compete just fine with Carvana," Lambert said, referring to a used-car chain that went national with mega-sized dealerships in the 1990s.

Patrick Kennedy • 612-673-7926