Fitch Ratings has assigned a 'BB+' rating with a Recovery Rating of 'RR2' to Carvana Co.'s proposed senior secured term loan, which is expected to total approximately $1 billion.
Proceeds will be used for general corporate purposes, including repaying a portion of Carvana's $1.66 billion senior notes due June 2030. This is a leverage-neutral transaction.
Carvana's 'BB-?'/Stable Long-Term Issuer Default Rating (IDR) reflects its good position as an online used auto disruptor with long-term market share opportunities, particularly within a highly fragmented industry. Recent profitability improvements led to 2025 EBITDA of $2.1 billion, or about 10.5% of revenue, and Fitch expects EBITDAR leverage to trend around the low-2x range, assuming EBITDA about $2.5 billion in 2026. The rating also reflects Carvana's controlled-company status, related-party transactions, and reliance on customer loan sales, which account for 56% of EBITDA, to fund its business.
Key Rating Drivers
Online Disruptor: Carvana has disrupted the traditionally bricks-and-mortar used-vehicle retail market through its online platform. The company grew revenue to $20.3 billion in 2025 from $130 million in 2015 by expanding brand awareness, inventory sourcing, and reconditioning capabilities. Fitch believes the company's digital model and physical infrastructure are becoming structural advantages in a highly fragmented industry, particularly relative to independent dealers that lack the means to invest in capabilities such as a digital platform.
Fitch expects Carvana to increase its market share from its still modest 2.5% position in the approximately $800 billion industry by leveraging these competitive advantages and continuing to expand brand awareness. The industry remains highly fragmented, with the 10 largest U.S. automotive retailers collectively accounting for only about 10% of the market. Fitch expects Carvana's revenue to grow by about 30% in 2026, with growth moderating thereafter to the mid-single digits annually, compared with expected industry growth of about 2%-3%. Fitch also expects EBITDA to increase from $2.1 billion in 2025 to about $2.6 billion over the next three years.
EBITDA Concentration Risk: Carvana's loan origination and monetization business generated about $1.2 billion in profits in 2025, representing 56% of total EBITDA. About 80% of customers use Carvana's in-house financing. The company originates and monetizes loans through Ally Financial, ABS issuances, and fixed-pool sales, differentiating it from peers that either earn commissions from third-party lenders or retain loans to generate net interest margin. Sustained ABS market access and continued loan buyer demand are therefore critical to Carvana's business model and liquidity.
A disruption in securitization markets or weaker buyer demand could force Carvana to retain loans on its balance sheet or sell them at lower margins. Given roughly $13 billion of originations in 2025, this could create significant liquidity pressure and materially weaken profitability given the high EBITDA reliance on loan sales. Loan sale premiums are also sensitive to interest rate movements and strategic pricing decisions, as reflected in margin compression in 1H26 when Carvana lowered customer interest rates to support growth. Weaker expected loss performance, as seen in the 2022-2023 ABS vintages, could also reduce buyer valuations and compress premiums.
Profitability Focus: Carvana has a history of aggressive growth, with persistently negative EBITDA before 2023 and a distressed debt exchange in 2023. EBITDA margins improved from 2% in 2023 to about 10.5% in 2025, supported by cost efficiencies and revenue growth of 27% in 2024 and about 50% in 2025 and 1H26. Fitch expects margins to normalize to the mid-9% range in 2026, reflecting expansion of the lower-margin digital retail marketplace, higher reconditioning and shipping costs, and continued brand investment. The rating also recognizes Carvana's longer-term market share ambitions, which could require reinvestment and pressure margins beyond Fitch's forecast.
Good Liquidity: Carvana's liquidity was $4.7 billion as of June 30, 2026, including $2.6 billion of balance sheet cash and availability on its $1.5 billion floor plan facility maturing April 2027 and various revolving facilities backed by unsold finance receivables ($921 million as of June 30, 2026). Fitch expects Carvana to generate about $700 million in annual FCF beginning in 2026, aided by about $30 million in lower annual interest expense. FCF could be used for growth initiatives, including M&A. Carvana's solid liquidity somewhat mitigates the operational risk of potential disruptions to its receivables monetization activities.
Reasonable Leverage: Carvana's leverage profile has improved in recent years on EBITDA growth and some debt paydown. EBITDAR leverage was 4.3x and 2.4x in 2024 and 2025, respectively, and Fitch expects EBITDAR leverage to modestly decline to the low 2x range beginning in 2026, assuming EBITDA in the $2.5 billion range and steady debt in the $5 billion range. EBITDAR fixed charge coverage could trend in the mid-4x range in the medium term. The company has publicly stated that it intends to delever through EBITDA growth and achieve investment-grade status over time.
Governance Issues: The governance assessment of 'deficient' results in an adjustment of -1 notch of the Standalone Credit Profile (SCP). CEO Ernest Garcia III and his father Ernest Garcia II control around 83% of voting rights and can pursue competing interests. Related-party transactions with DriveTime Automotive Group, controlled by Ernest Garcia II, include high-margin warranty commissions as well as payments for services and subleases. Past governance and business practice issues led to temporary suspensions in some states over title and registration issues. Future occurrences could impact consumers' view of the Carvana brand.
Peer Analysis
Carvana's peers include leading U.S. new and used auto retailers AutoNation, Inc. (BBB-/Stable), Asbury Automotive Group, Inc. (BB/Positive) and Sonic Automotive, Inc. (BB/Stable). Relative to Carvana, these traditional auto dealers are more diversified with new vehicles, parts, services and finance offerings, resulting in a more balanced gross profit mix that helps limit financial sensitivity to the cyclical new and used vehicle market.
AutoNation and Asbury, through its Clicklane brand, have omnichannel platforms similar to Carvana's. AutoNation's rating reflects Fitch's expectations for EBITDAR leverage at or below 3.3x. Asbury's Positive Outlook reflects management's track record of sustaining EBITDAR leverage sustaining below 3.8x, with Fitch expecting leverage of about 3.7x in 2026. Fitch expects Sonic's EBITDAR leverage to range between 3.8x and 4.3x.
Fitch's Key Rating-Case Assumptions
Revenue could trend in the high single digits in 2H26, with total revenue growth projected at around $26 billion in 2026, and grow in the mid-single digits in subsequent years assuming modest market share expansion, yielding revenue near $30 billion by 2029;
EBITDA growth could track with revenue, assuming margins in the low- to mid-9% range starting in 2026;
FCF could be around $700 million annually, assuming about $400 million of cash interest expense and $150 million of capex;
EBITDAR leverage is projected in the low 2x range, below the 2.4x recorded in 2025 and 4.3x in 2024, on EBITDA expansion and assuming flat debt levels. EBITDAR fixed charge coverage could be around mid-4x beginning 2026, similar to the 2025 level.
Corporate Rating Tool Inputs and Scores
Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the SCP:
Business and financial profile factors (assessment, relative importance): management ('b+', Higher), sector characteristics ('bbb-?'?, Moderate), market and competitive positioning ('bbb+', Higher), diversification and asset quality ('bb', Moderate), company operational characteristics ('bbb+', Moderate), profitability ('bb-?'?, Moderate), financial structure ('a', Lower), and financial flexibility ('bbb-?'?, Moderate).
The quantitative financial subfactors are based on standard CRT financial period parameters: 20% weight for the latest historical year 2025, 40% for the forecast year 2026 and 40% for the forecast year 2027.
The governance assessment of 'some deficiencies' results in an adjustment of -1 notch.
The operating environment assessment of 'aa-?' has no impact.
The SCP is 'bb-?'?.
To derive the Long-Term IDR:
Fitch made no adjustments to the SCP, resulting in an IDR of 'BB-?'?.
Recovery Analysis
Fitch assigned Recovery Ratings (RRs) to the various debt tranches in accordance with its criteria, which allows for the assignment of RRs for issuers with IDRs in the 'BB' category. RRs in the 'BB' category are not computed by bespoke analysis due to the distance to default. Instead, they serve as a label to reflect an estimate of the risk of these instruments relative to other instruments in the entity's capital structure.
Fitch assigned Carvana's first lien secured notes a 'BB+'/'RR2', reflecting superior recovery prospects in the event of default. Fitch views these notes as practically junior to Carvana's asset-backed facilities, including its floor plan facilities. Carvana's unsecured debt has average recovery prospects and is rated 'BB-?'/'RR4'.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
A downgrade could result from growth investments, including acquisitions, which materially pressure profitability and cash flow relative to Fitch's forecast;
EBITDAR leverage sustained near 4x or EBITDAR fixed charge coverage sustained around 2.5x;
Material change in the company's receivables monetization processes which pressure income or cash flow;
Increased governance concerns could also yield a downgrade.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade would require a track record of sustained ABS market access and consistent loan monetization across varying market and credit conditions, and/or evidence that gains on loan sales are a consistent and predictable contributor to EBITDA, increasing confidence in the resilience of Carvana's originate-to-monetize model;
A demonstrated track record of market share gains with stable profitability and cash flow generation while sustaining EBITDAR leverage below 2.5x and EBITDAR fixed charge coverage comfortably above 4x.
Liquidity and Debt Structure
Carvana's liquidity sources include cash, a $1.5 billion floor plan facility due April 2027 and finance receivable facilities totaling $4.1 billion as of June 30, 2026. Liquidity totaled $4.7 billion, with $2.6 billion in cash and $2 billion available under its facilities.
Fitch expects around $700 million in annual FCF in 2026. Carvana regularly sells consumer receivables, originating $12.8 billion and generating $13.3 billion in cash from receivables sales in 2025. These sales are a significant source of ongoing liquidity, and an inability to monetize receivables would be a material credit concern. Fitch notes however that the company would earn interest if the receivables portfolio were held on the balance sheet and that the sale of receivable reduces ongoing loan performance risk.
Pro forma for the transaction, Carvana's debt consists of a new $1 billion senior secured term loan B, $2.9 billion in senior secured notes, $107 million in senior unsecured notes, and $1.1 billion in debt secured by inventory, receivables and certain real estate. The proceeds from new term loan will repay part of the $1.66 billion 2030 senior notes. Carvana's next significant maturity is the rest of the 2030 notes, about $660 million due June 2030.
Issuer Profile
Carvana is a leading U.S. online used car retailer, with 2025 revenue and EBITDA of $20.3 billion and $2.1 billion, respectively.
Summary of Financial Adjustments
Financial statement adjustments that depart materially from those contained in the published financial statements of the relevant rated entity or obligor are disclosed below:
EBITDA adjusted to exclude stock-based compensation;
Balance sheet lease liabilities are used as lease-equivalent debt starting in fiscal 2023, and lease-related interest and depreciation and amortization are reclassified as operating costs in the income statement and as operating cash outflows in the cash flow statement, in accordance with Fitch's Corporate Rating Criteria.
Date of Relevant Committee
24-Jul-2026
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
Climate Vulnerability Signals
The results of our Climate.VS screener did not indicate an elevated risk for Carvana Co.
ESG Considerations
Carvana Co. has an ESG Relevance Score of '5' for Group Structure due to related party transactions with DriveTime Automotive Group which is controlled by Ernest Garcia II, which has a negative impact on the credit profile and is highly relevant to the rating, resulting in an implicitly lower rating.
Carvana Co. has an ESG Relevance Score of '5' for Governance Structure due to concentrated voting control, with CEO Ernest Garcia III and his father Ernest Garcia II collectively controlling about 83% of voting rights, enabling pursuit of competing interests. This has a negative impact on the credit profile and is highly relevant to the rating, resulting in an implicitly lower rating.
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
RATING ACTIONS
Entity / Debt
Rating Type
Rating
Rating Action
Recovery
Carvana Co.
senior secured
LT
BB+
New Rating
RR2
Page
of 1
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
APPLICABLE CRITERIA
Corporates Recovery Ratings and Instrument Ratings Criteria (pub. 03 Aug 2024) (including rating assumption sensitivity)
Corporate Rating Criteria (pub. 10 Jan 2026) (including rating assumption sensitivity)
Sector Navigators - Addendum to the Corporate Rating Criteria (pub. 10 Jan 2026)
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
Corporate Monitoring & Forecasting Model (COMFORT Model), v8.2.0 (1)
ADDITIONAL DISCLOSURES
Solicitation Status
Endorsement Policy
ENDORSEMENT STATUS
Carvana Co. EU Endorsed, UK Endorsed
DISCLAIMER & DISCLOSURES
All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and disclaimers. Please read these limitations and disclaimers by following this link: https://www.fitchratings.com/understandingcreditratings. In addition, the following https://www.fitchratings.com/rating-definitions-document details Fitch's rating definitions for each rating s
Read More
Solicitation Status
The ratings above were solicited and assigned or maintained by Fitch at the request of the rated entity/issuer or a related third party. Any exceptions follow below.
Fitch's solicitation status policy can be found at www.fitchratings.com/ethics.
Endorsement Policy
Fitch's international credit ratings produced outside the EU or the UK, as the case may be, are endorsed for use by regulated entities within the EU or the UK, respectively, for regulatory purposes, pursuant to the terms of the EU Regulation or the UK Regulation, as the case may be. Fitch's approach to endorsement in the EU and the UK can be found on Fitch's Regulatory Affairs page on Fitch's website. The endorsement status of international credit ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for structured finance transactions on the Fitch website. These disclosures are updated on a daily basis.
(C) 2026 Electronic News Publishing, source ENP Newswire