Carvana enjoys Q4 hike in finance GPU, origination volume

Online car retailer Carvana saw soaring finance gross profit per unit (GPU) and origination volume during the COVID-19 pandemic, fueled by a shift to e-commerce. Carvana’s finance GPU increased 43% year over year to $1,400, according to the company’s fourth-quarter earnings statement. The retailer securitized $405 million in principal balances during the fourth quarter, contributing to a $421 YoY increase in finance GPU, Mark Jenkins, chief financial officer, said on the recent earnings call. At yearend 2020, Carvana’s finance GPU jumped 14% YoY to $1,096. Since 2016, the retailer has logged a 151% increase in finance GPU. Fourth-quarter originations clocked in at $1.1 billion, a 33% increase YoY, bringing the yearend total to $3.6 billion, according to an Auto Finance News analysis. By comparison, Carvana originated $2.6 billion at yearend 2019. Net finance receivables held for sale at yearend 2020 totaled $275 million, with Carvana selling a majority of its originations to Ally Financial , with whom the company has a $3 billion purchase agreement. Meanwhile, inventory shortages in the second half of 2020 led Carvana in the third quarter to buy more vehicles from consumers than it sold to them . In the fourth quarter, Carvana bought 72,200 cars from consumers, a 110% YoY increase. By yearend 2020, Carvana had bought 204,000 vehicles from consumers, an increase of 95% YoY. Amid pent-up demand, the number of cars immediately available for purchase on Carvana’s website dropped by more than 80% to 4,700 in July 2020, from a peak of 25,300 in April that year, according to the earnings supplement. “We saw more demand than we had ever seen before, and we tried to rapidly catch up. And then that was overlaid with three successive waves of COVID, which obviously [had] impacts across our entire supply chain,” Chief Executive Ernie Garcia said on the call. The Tempe, Ariz.-based Carvana sold 72,172 units in the fourth quarter, a 43% YoY increase. At the end of 2020, the company had sold a total of 244,111 retail units, a 37% YoY increase. Carvana opened four new inspection and reconditioning centers in 2020, helping available inventory climb back to 12,800 vehicles in the fourth quarter, according to the earnings supplement. In January 2021, Carvana had 9,500 cars immediately available online, with the retailer looking to increase total capacity to 1.25 million units by 2022 by opening 10 new inspection centers, including two in 2021. “We've got a lot more demand than we're able to satisfy, given our limited inventory, so our focus is on trying to ramp that up,” Garcia noted. Shares of Carvana [NYSE: CVNA] were trading at $311.92 as of market close today, up 10% since market open. Carvana has a market capitalization of $53 billion. Caravan’s stock has rocketed during the pandemic, increasing 197% since last year. For comparison, Carvana’s stock was trading around $100 per share in January 2020. Auto Finance Innovation Summit, the premier event for technology in auto finance, returns March 16-17, 2021, as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2021 event and register, visit www.AutoFinanceInnovation.com .

Carvana enjoys Q4 hike in finance GPU, origination volume

Retailer logs 43% YoY increase in finance GPU, despite inventory woes

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