Carvana barred from selling vehicles in Raleigh, N.C., area until January - Greater Cincinnati Automobile Dealers Association

Carvana barred from selling vehicles in Raleigh, N.C., area until January

North Carolina has suspended online used-car retailer Carvana Co. CVNA -2.40% from selling cars in the Raleigh area until January, after a state investigation determined that it failed to deliver titles to the motor vehicle department and sold cars without state inspections.

The state motor vehicles department has revoked Carvana’s dealer license for its Wake County location until Jan. 29, the state attorney general’s office said Wednesday. The Tempe, Ariz.-based company also has agreed to pay a civil penalty of $500 and an administrative hearing fee of $200, according to court documents.

The penalty was part of an agreement Carvana reached earlier this month with state officials, following a probe by the North Carolina’s Division of Motor Vehicles.

“We’re pleased that we were able to reach a solution with the North Carolina DMV,” Carvana spokeswoman Amy O’Hara said in a statement. “We’re proud of the tens of thousands of North Carolina residents we’ve served since 2014 and are excited to continue delivering exceptional customer experiences there for many years to come.”

The company’s stock closed at $360.70 a share Wednesday, down 2.5 percent.

Carvana—a startup founded in 2012 with the mission of selling cars exclusively online—had a strong run during the pandemic as car buyers, stuck at home due to virus concerns, have embraced its direct-delivery model. Its stock has popped within the last year, pushing its valuation to $64 billion, higher than Ford Motor Co. , according to FactSet.

The company has promoted itself as a hassle-free way to purchase vehicles, including having them delivered right to customers’ doorstep. Many car shoppers recognize it for its tall, glass vending towers that dispense vehicles purchased through its website.

Carvana also, in its marketing material, said it puts each vehicle through a 150-point inspection to help reassure customers nervous about buying a car without seeing if first.

State officials in North Carolina said the motor vehicles department brought the enforcement action after receiving a consumer complaint and an investigation.

The state said in court filings that Carvana violated dealer licensing laws by not delivering the vehicle title to the DMV in a timely manner and failing to perform a state-required inspection before the vehicle was sold in North Carolina.

State officials also said the company issued out-of-state plates and tags to a vehicle sold to a North Carolina resident, also a violation of dealer licensing laws.

North Carolina said the action is limited to the specific Raleigh-area location, not the three other sites that the company has in the state.

Carvana’s business model has gotten more attention lately as more auto makers and dealers expand online-selling tools and options. It also has been working to scale up quickly, aiming to capture what has been a boom in used-car sales this year.

The company said it brought in $45 million in net income in the second quarter, its first profitable one, and total revenue almost tripled from a year earlier to $3.3 billion, beating Wall Street expectations. Still, pandemic-related restrictions have caused bottlenecks at its vehicle reconditioning centers, facilities used to prepare cars for sale. And Carvana Chief Executive Officer Ernie Garcia said last week that there is more demand than capacity to process used vehicles.