Carvana originations nearly flat as credit tightens

Used-vehicle retailer Carvana ’s loan originations ticked down in the fourth quarter following months of credit tightening as the company eyes credit scoring improvements. Originations dipped 4% sequentially but inched up 0.5% year over year to $1.5 billion in Q4, according to an Auto Finance News analysis of the retailer’s Feb. 22 letter to shareholders. Full-year originations landed at $6 billion, down 16.6% YoY. Carvana, which faced liquidity woes for much of 2023, in July restructured its unsecured debt through a swap with its major creditors to reduce its debt by about $1.2 billion. Tempe, Ariz.-based Carvana also tightened credit standards in the past six months and “more recently,” Chief Executive Ernie Garcia said during the company’s Feb. 22 earnings call, noting that the retailer is looking at ways to increase gross profit per unit (GPU). “Regardless of where we choose to price things like rates or the vehicle, we believe we can be more efficient in ... continued enhancement in credit scoring, credit pricing and credit structuring, and innovations that we've been recently rolling out internally that allow us to more precisely connect our credit pricing structuring and risk assessment to individual loans,” Garcia said. The retailer also kept more loans on its balance sheet compared to the prior quarter, but fewer than a year ago. Finance receivables held for sale were $807 million in Q4 compared with $650 million in Q3 and $1.3 billion in Q4 2022, according to the letter. Carvana issued its first auto asset-backed securities deal of the year on Feb. 21, a $444.5 million transaction backed by subprime auto loans, according to Finsight , which monitors securities. Other GPU declines Meanwhile, other GPU, which includes finance and insurance profits, fell 26.4% quarter over quarter but rose 24.4% YoY to $1,945, with the sequential decrease largely due to Carvana selling about $200 million less in principal than it originated, as well as a lower spread that was partially offset by higher aftermarket product revenue, according to the letter. Carvana sold a higher volume of loans in Q4 compared with a year prior, contributing to the YoY increase in other GPU. “Sequential changes in other GPU were primarily driven by selling a lower volume of loans in Q4 relative to retail units sold in Q3, as well as lower premium on loan sales resulting from higher industrywide loss expectations that we have since passed through to our pricing,” Mark Jenkins , chief financial officer, said during the call. “We expect a sequential increase in other GPU in Q1.” Carvana sold 76,090 retail units in Q4, down 6.1% sequentially and 12.3% YoY, according to the letter. The retailer bought and sold more than 250,000 vehicles directly from customers in 2023, with total vehicle inventory landing at 1.2 billion units as of Dec. 31, 2023, compared with 1.9 billion units at yearend 2022. Total retail sales for the full year 2023 declined 24% YoY to 312,847 units. Carvana had $3.1 billion in total liquidity resources in Q4, including $1 billion available on its short-term revolving facilities, according to the shareholder letter. Shares of Carvana [ NYSE: CVNA ] were trading at $69.23 as of market close in New York today, up 32.1% from market open. The retailer has a market capitalization of $13.8 billion. Early-bird registration is now available for the second annual Auto Finance Summit East 2024 , May 1-3 in Nashville, Tenn., which gathers lenders, dealers and fintech innovators in an event designed to bring the power of technology to a cross section of industry players. Early-bird pricing ends March 15. Visit AutoFinance.Live to learn more.

Carvana originations nearly flat as credit tightens

Retailer’s originations ticked up 0.5% YoY to $1.5B

PNC Financial appoints new president and other staff moves

Li Auto posts first yearly profit but sees challenges ahead

Related Posts

CPS’ originations fall 12.3% in Q3

Vroom subsidiary UACC’s originations up 7%

Open Lending certified loans fall 13%

Li Auto posts first yearly profit but sees challenges ahead

Stay Informed with Our Newsletters

The Roadmap Podcast

SPONSORED

Driving Innovation in Automotive Refunds: How Onbe and Allied Solutions Are Modernizing the Payment Experience

Navigating the Margin Squeeze: EVs, Tariffs & Pricing — A Q&A with Earnix

Enhancing credit approaches to boost conversion and dealer loyalty

Welcome Back!

Retrieve your password