Michigan Carvana store agrees to surrender dealer license; online sales can continue

A Carvana Co. outlet in Michigan agreed to surrender its dealer license in lieu of further administrative action by state regulators, who in October suspended that license over titling, registration and odometer issues they found to be in violation of the Michigan Vehicle Code.

Carvana agreed Tuesday that the location in question — in Novi, a Detroit suburb — would have its dealer license revoked, according to a closeout agreement document provided Wednesday by the Michigan Department of State. The document was signed by a representative for Jocelyn Benson, Michigan's secretary of state, and by Paul Breaux, Carvana's general counsel.

"In a plea deal signed with our department, the Carvana dealership in Novi agreed it had violated the law and to have its dealer license revoked and be barred from reapplying for a new license for three years," Department of State spokesman Jake Rollow wrote in a statement provided to Automotive News.

Michigan residents may still buy vehicles through Carvana's website, though they will "need to retitle vehicles they purchase to Michigan," Rollow wrote in the statement.

Carvana can keep delivering vehicles purchased through the website to Michigan residents at its Michigan locations, according to the agreement. Cars purchased online by customers can still be picked up at the Novi location. Customers who walk up to that location can talk to Carvana employees about the company’s online sales process, though paperwork can’t be done.

"The settlement agreement cements Carvana’s ability to continue selling and delivering cars to Michiganders as it has done continuously since 2014 by using its innovative and consumer-friendly e-commerce business model," said Alan Hoffman, Carvana's head of external affairs, in a statement to Automotive News.

Under the terms of the agreement, Carvana can’t apply for a dealer license with the department within the next three years. The retailer will also pay a $10,000 penalty to cover the cost of the department's investigation, according to the agreement.

In his statement, Rollow wrote it is "standard practice" for the department to save taxpayer dollars that would go to court fees by offering plea deals to retail outlets that have violated the law and are likely to have their licenses revoked.

An administrative hearing between Carvana and the department scheduled for Wednesday was canceled.

Background

The Michigan Department of State had claimed Carvana violated the Michigan Vehicle Code by failing to apply for title and registration within 15 days of delivery, failing to maintain odometer records, improperly issuing temporary registrations and failing to have records available for inspection.

Following the Oct. 7 suspension, Carvana said the department's actions were "illegal and reckless." On Oct. 13, the retailer filed a complaint against Benson and her office and asked a Michigan court to block the suspension, a request the court denied.

Carvana shares surged 24.4 percent to close at $5.50 on Wednesday.