Financial Analysis

"NOTE 16 COMMITMENTS AND CONTINGENCIES Accrued Limited Warranty As part of its retail strategy, the Company provides a 100-day or 4,189-mile limited warranty to customers to repair certain broken or defective components of each used vehicle sold. As such, the Company accrues for such repairs based on actual claims incurred to-date and repair reserves based on historical trends. The liability was $29 million and $25 million as of June 30, 2026 and December 31, 2025, respectively, and is included in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets. The expense was $54 million and $36 million for the three months ended June 30, 2026 and 2025, respectively, and $103 million and $71 million for the six months ended June 30, 2026 and 2025, respectively, and is included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. Purchase Obligations The Company has purchase obligations for certain customary services related to operating a wholesale auction business of $71 million in aggregate over the next three years, as of June 30, 2026. These purchase obligations are recorded as liabilities when the services are rendered. Legal Matters From time to time, the Company is involved in various claims, legal actions, and governmental inquiries. For example, the Company is currently a party to legal and regulatory disputes, including putative class action lawsui …

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"NOTE 9 DEBT INSTRUMENTS Debt instruments, excluding finance leases, which are discussed in Note 15 Leases, as of June 30, 2026 and December 31, 2025 consisted of the following: June 30, 2026 December 31, 2025 (in millions) Asset-based financing: Floor plan facility $ 126 $ 58 Financing of beneficial interests in securitizations 396 374 Real estate financing 485 485 Transportation fleet financing 90 23 Total asset-based financing 1,097 940 Senior Secured Notes 3,929 3,929 Senior Unsecured Notes 107 107 Total debt 5,133 4,976 Less: current portion (319) (211) Less: unamortized debt issuance costs (1) (32) (36) Plus: unamortized premium (2) 17 18 Total included in long-term debt, net $ 4,799 $ 4,747 (1) The unamortized debt issuance costs related to long-term debt are presented as a reduction of the carrying amount of the corresponding liabilities on the accompanying unaudited condensed consolidated balance sheets. Unamortized debt issuance costs related to revolving debt arrangements are presented within other assets on the accompanying unaudited condensed consolidated balance sheets and not included here. (2) The unamortized premium relates to a portion of the notes exchange offers completed in September 2023 which were accounted for as a debt modification. Short-Term Revolving Facilities Floor Plan Facility The Company previously entered into a floor plan facility with Ally to finance its vehicle inventory, which was secured by Carvana, LLC's vehicle inventory, general intan …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"NOTE 12 EQUITY-BASED COMPENSATION Equity-based compensation is recognized based on amortizing the grant-date fair value on a straight-line basis over the requisite service period, which is generally the vesting period of the award, less actual forfeitures. A summary of equity-based compensation recognized during the three and six months ended June 30, 2026 and 2025 is as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (in millions) Restricted Stock Units $ 25 $ 26 $ 51 $ 47 Options 3 4 8 9 Total equity-based compensation 28 30 59 56 Equity-based compensation capitalized to property and equipment (2) (2) (5) (4) Equity-based compensation capitalized to inventory (1) (1) (2) (2) Equity-based compensation, net of capitalized amounts $ 25 $ 27 $ 52 $ 50 During the three months ended June 30, 2026 and 2025, the Company capitalized $2 million during each period of equity-based compensation to property and equipment related to software development and $1 million each period to inventory related to reconditioning and inbound transportation of vehicles. During the six months ended June 30, 2026 and 2025, the Company capitalized $5 million and $4 million, respectively, of equity-based compensation to property and equipment related to software development and $2 million each period to inventory related to reconditioning and inbound transportation of vehicles. Equity-based compensation expense in cost of sales was $1 million and less than $1 million du …

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"NOTE 17 FAIR VALUE OF FINANCIAL INSTRUMENTS The Company holds certain assets that are required to be measured at fair value on a recurring basis, and beneficial interests in securitizations for which it elected the fair value option. A description of the fair value hierarchy and the Company's methodologies are included in Note 2 Summary of Significant Accounting Policies in its most recent Annual Report on Form 10-K. The following tables are a summary of fair value measurements and hierarchy level at June 30, 2026 and December 31, 2025: June 30, 2026 Carrying Value Level 1 Level 2 Level 3 (in millions) Assets: Money market funds $ 7 $ 7 $ $ Beneficial interests in securitizations $ 502 $ $ $ 502 Warrants $ 14 $ $ $ 14 December 31, 2025 Carrying Value Level 1 Level 2 Level 3 (in millions) Assets: Money market funds $ 1,297 $ 1,297 $ $ Beneficial interests in securitizations $ 486 $ $ $ 486 Warrants $ 58 $ $ $ 58 Money Market Funds Money market funds consist of highly liquid investments with original maturities of three months or less and are classified in cash and cash equivalents and restricted cash in the accompanying unaudited condensed consolidated balance sheets. Beneficial Interests in Securitizations Beneficial interests in securitizations include rated notes and certificates of the securitization trusts, the same securities as issued to other investors as described in Note 8 Securitizations and Variable Interest Entities. Beneficial interests in securitizations are in …

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NOTE 14 INCOME TAXES As described in Note 1 Business Organization and Note 10 Stockholders' Equity, as a result of the IPO, Carvana Co. began consolidating the financial results of Carvana Group. Carvana Group is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Carvana Group is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members (LLC Unitholders), including Carvana Co., based on its allocable share held in Carvana Group. Nonetheless, many states require that partnerships make mandatory tax payments on behalf of members who are non-residents of the respective states. Accordingly, if Carvana Group generates taxable income and is required to remit income tax on behalf of its members, it will make payments to the states through composite tax returns and non-resident withholding. These payments are treated as distributions to the affected members because the amounts remitted are a payment of income tax on behalf of the affected members. Payments on behalf of non-controlling members of $2 million for each of the three months ended June 30, 2026 and 2025, and $4 million for each of the six months ended June 30, 2026 and 2025 are included as reductions to the non-controlling interests in the accompanying unaudited condensed consolidated statements of stockholders' equi …

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NOTE 15 LEASES The Company is party to various lease agreements for real estate and transportation equipment. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company also assesses whether each lease is an operating or finance lease at the lease commencement date. Rent expense of operating leases is recognized on a straight-line basis over the lease term and includes scheduled rent increases as well as amortization of tenant improvement allowances. Operating Leases As of June 30, 2026, the Company is a tenant under various operating leases related to certain of its hubs, vending machines, inspection and reconditioning centers, auction locations, storage, parking, dealerships, and corporate offices. The initial terms expire at various dates between 2026 and 2039. Many of the leases include one or more renewal options ranging from one to twenty years and some contain purchase options. The Company leases and subleases certain of its real estate to third parties. Lease and sublease income for each of the three months ended June 30, 2026 and 2025 was $2 million and for each of the six months ended June 30, 2026 and 2025 was $4 million and is included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. The Company's operating leas …

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Accounting Standards Issued But Not Yet Adopted The Company is currently evaluating the impact of ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , and ASU 2025-06, Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software on the presentation of its consolidated financial statements and accompanying notes.

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"NOTE 6 RELATED PARTY TRANSACTIONS Lease Agreements In November 2014, the Company and DriveTime Automotive Group, Inc. (together with its subsidiaries and affiliates other than the Company, collectively, ""DriveTime""), a related party of the Company due to Ernest Garcia II, Ernest Garcia III, and entities controlled by one or both of them (collectively the ""Garcia Parties"") controlling and owning substantially all of the interests in DriveTime, entered into a lease agreement that previously governed the occupation of two inspection and reconditioning centers in Blue Mound, Texas and Delanco, New Jersey. Pursuant to that lease agreement, the Company made monthly lease payments based on DriveTime's actual rent expense, and the Company was responsible for the actual insurance costs, tenant improvements required to conduct operations, and real estate taxes. In March 2025, the Company assumed DriveTime's lease at the Blue Mound, Texas location, which lease expires in 2029, with two five-year renewal options. The Company continues to lease the Delanco, New Jersey location from DriveTime, which lease expires in 2032 with no further renewal options. In February 2017, the Company entered into a lease agreement with DriveTime for sole occupancy of a fully operational inspection and reconditioning center in Winder, Georgia. In May 2024, the lease expiration for the Winder, Georgia location was extended to 2030, subject to two remaining renewal options of five years each. Expenses rel …

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"NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (""GAAP"") for interim financial information. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within the Company's most recent Annual Report on Form 10-K filed on February 18, 2026. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Companys financial position as of June 30, 2026, results of operations, changes in stockholders' equity, and cash flows for the three and six months ended June 30, 2026 and 2025. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations. As discussed in Note 1 Business Organization, Carvana Group is considered a VIE and Carvana Co. consolidates its financial results due to the determination that it is the primary b …

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NOTE 19 SUBSEQUENT EVENTS Ally Master Purchase and Sale Agreement On July 27, 2026, the Company and Ally amended the Ally MPSA to, among other things, increase the commitment by Ally to purchase up to $8.0 billion of principal balances of finance receivables between July 27, 2026 and July 26, 2027 on substantially similar terms as the preceding Ally MPSA. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing