Used-car megastore Carvana said Wednesday it is back to "business as usual" in Michigan, but state officials say not quite because the company's Novi location is no longer a licensed dealership. But Michigan car buyers can make a purchase with Carvana online and get a car.

Carvana and the state reached a settlement as part of an ongoing dispute over the state's assertion that Carvana committed violations of the Michigan Vehicle Code, which Carvana admitted to doing.

In early October, state officials suspended the license of the Carvana dealership in Novi for "imminent harm to the public," a claim Carvana has called baseless. The state said that Carvana LLC, owned by Paul Breaux and located off of Novi Road near I-96, committed several violations centering on untimely delivery of titles after vehicle sales. The alleged violations were discovered during an investigation by the state regulatory staff of multiple complaints from consumers about title problems with their vehicles.

On Wednesday, Carvana’s senior associate general counsel, Chris Olson, told the Free Press exclusively that Carvana agreed to voluntarily hand in its in-state Michigan dealer license for a period of three years, after which it can apply for it again. The Michigan Department of State confirmed the settlement with Carvana and provided the signed agreement to the Free Press.

“To save taxpayer dollars that would go to court fees it is standard practice for our department to offer plea deals to dealerships that violate the law and are likely to have their licenses revoked," said Jake Rollow, chief external affairs officer for Secretary of State Jocelyn Benson. "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."

Carvana said settling the matter allows both sides to move forward and for the company to continue to serve Michigan's car buyers, this time with new practices in place to assure compliance with Michigan law.

“I view this as a positive. I recognize that we were late, we weren't perfect and the state was frustrated at us. … We see this as a pretty small bucket of people, but it's important to them. And, we have to get it right. … Our performance today is really, really good so I hope this is closing that chapter."

Doing business out of Arizona

Carvana's sales in Michigan make up about 2% to 3% of the company’s total U.S. sales. Carvana has not released its total sales for last year, but in 2021 it sold about 425,000 car across the nation, Olson said.

Olson said the settlement doesn't change much for Michigan car buyers who could still buy a car from Carvana online and have it delivered to them even during the state's suspension due to Michigan law allowing e-commerce activity.

As part of the settlement, Michigan consumers can still buy a used vehicle from Carvana online and either take delivery of it at Carvana's vending machine in Novi or Carvana will deliver it to their home.  Carvana, based in Tempe, Arizona, told the state regulators it would use an Arizona selling license and process to conduct business in Michigan. That means Michigan customers will get temporary plates and paperwork from Arizona after their purchase. They can then switch over to Michigan with the Secretary of State.

It is a preferred method of operating, Olson said, because it saves time and money with efficient systems that already exist in Arizona.

“We offer Arizona-based program in 18 states so we know how to do that paperwork well, so we’re happy to do this model," Olson said. "It’s our baseline."

Rollow confirmed that Michiganders can continue to do business with Carvana online but will need to retitle the vehicles they buy to Michigan.

"We continue to protect Michiganders by enforcing the law with car dealerships across the state and revoking the licenses of any dealer that fails to comply with the law," Rollow said.

As part of the settlement, Carvana has also agreed to pay a $10,000 fine to cover the cost of the state's investigation, the settlement document said and Olson confirmed.

Avoiding a 'war with regulators'

The settlement will put an end to Carvana's lawsuit against the state, Olson said.

On Oct. 13, Carvana filed injunction motions with the Michigan Court of Claims asking for an immediate stop to the state’s suspension. But on Oct. 20, a Michigan Court of Claims judge denied Carvana's request for a temporary restraining order against the state.

The settlement not only provides both parties with "certainty and clarity," but it avoids future legal hearings.

"This was something both parties could live with and move forward on how to operate in the state,” Olson said.

To assure customers that Carvana will expeditiously process the paperwork on vehicle sales, Olson said the company is putting many safeguards in place such as new training for newly hired employees, assigning people to specifically be responsible for processing all sales paperwork, and it is doing a "a root cause diagnosis as to why the deals were delayed and to be more stringent of what we require of customers in terms of documents. All of that combined makes the performance better and assures that no deals fall through the cracks and have these delays.”

'Business as usual' in Michigan

Olson said most of Carvana's customers in Michigan who had any problems getting their titles or other paperwork have had their situations resolved. He noted that Michigan customers who bought from Carvana last week, for example, all got their permanent tags and title transferred correctly and completed on time. The week before it was 99.2% and for the last quarter of 2022, 98% of Carvana sales were completed in a timely manner, Olson said.

Olson said if a customer still has an issue they can call Carvana at 1-800-333-4554.

“It’s business as usual for us in the state of Michigan," Olson said. "Customers can continue to buy from us and we’re looking forward to serving the state.”

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Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.

This article originally appeared on Detroit Free Press: Carvana hands over Michigan dealer license in deal with state