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Item 8. Financial Statements and Supplementary Data

2025-02-19 compared with 2024-02-22 · 505 added, 517 removed, 1232 unchanged (45% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Board of Directors and Stockholders

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Carvana Co.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules included under Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule included under Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 19, 2025 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Derecognition of Transferred Finance Receivables

As described further in Notes 2, 8, and 9 to the financial statements, the Company is party to various transfer agreements pursuant to which it sells finance receivables meeting specified underwriting criteria to financing partners, and also transfers its finance receivables to securitization trusts as asset backed securitization transactions.

The Company's transfers of finance receivables to financing partners and asset backed securitizations are considered sales of financial assets in accordance with Accounting Standards Codification (ASC) 860, Transfers and Servicing (“ASC 860”).

ASC 860 outlines certain criteria in order for the Company to derecognize the finance receivables upon the completion of the transfer, as presented within the statements of cash flows.

We identified the determination that the transfers of finance receivables meet the derecognition criteria of ASC 860 as a critical audit matter.

The principal consideration for our determination that transfers of finance receivables meet the derecognition criteria of ASC 860 is a critical audit matter is because the transfers of finance receivables from the Company to both its financing partners and securitization trusts requires complex auditor judgments to determine that these transactions meet the derecognition criteria of ASC 860, specifically evaluating the legal isolation criteria of the transferred finance receivables from the Company.

Our audit procedures related to the determination that transfers of finance receivables meet the derecognition criteria of ASC 860 included the following, among others:

• We tested the design and operating effectiveness of management's review control over the accounting determination that the transfers of finance receivables meet the derecognition criteria set forth in ASC 860.

• We read the various transfer and sale agreements between the Company and its financing partners and securitization trusts, assessed the true sale and non-consolidation legal opinions provided by management's experts, and evaluated the information with respect to management's analysis of the criteria set forth in ASC 860 to permit the derecognition of the finance receivables.

Critical audit matters are matters arising from the current period audit of the financial statements that are communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Board of Directors and Stockholders

Opinion on internal control over financial reporting

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Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Controls over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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Intangible assets, net 34 52

Other assets, including $ 0 and $ 1 , respectively, due from related parties

Total assets $ 8,484 $ 7,071

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Current portion of long-term debt 309 189

Other current liabilities, including $ 3 and $ 4 , respectively, from leases with related parties

Other current liabilities, including $ 16 and $ 3 , respectively, due to related parties

Total current liabilities 1,338 1,536

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Commitments and contingencies (Note 17)

Stockholders' deficit:

Stockholders' equity (deficit):

Preferred stock, $ 0.01 par value - 50,000 shares authorized;

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Accumulated deficit ( 1,416 ) ( 1,626 )

Total stockholders' equity (deficit) attributable to Carvana Co.

Total stockholders' equity attributable to Carvana Co.

Non-controlling interests 115 ( 627 )

Total stockholders' deficit ( 384 ) ( 1,053 )

Total liabilities & stockholders' deficit $ 7,071 $ 8,698

Total stockholders' equity (deficit) 1,375 ( 384 )

Total liabilities & stockholders' equity (deficit) $ 8,484 $ 7,071

See accompanying notes to consolidated financial statements.

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Goodwill impairment — — 847

Other operating expense, net 12 8 14

Operating income (loss) 990 ( 80 ) ( 2,351 )

Interest expense

Gain on debt extinguishment ( 878 ) — —

Loss (Gain) on debt extinguishment 12 ( 878 ) —

Other (income) expense, net ( 73 ) ( 9 ) 56

Net income (loss) before income taxes 400 175 ( 2,893 )

Income tax provision 25 1 1

Income tax (benefit) provision ( 4 ) 25 1

Net income (loss) 404 150 ( 2,894 )

Net loss attributable to non-controlling interests ( 300 ) ( 1,307 ) ( 152 )

Net income (loss) attributable to non-controlling interests 194 ( 300 ) ( 1,307 )

Net income (loss) attributable to Carvana Co.

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Weighted-average shares of Class A common stock outstanding - diluted 132,206 200,578 100,828

(1) Weighted-average shares of Class A common stock outstanding - basic have been adjusted for unvested restricted stock awards.

See accompanying notes to consolidated financial statements.

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Net loss — — — — — ( 1,587 ) ( 1,307 ) ( 2,894 )

Exchanges of LLC Units 13,145 — ( 12,692 ) — 43 — ( 43 ) —

Establishment of deferred tax assets related to increases in tax basis in Carvana Group — — — — 908 — — 908

Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group — — — — ( 908 ) — — ( 908 )

Issuance of Class A common stock to settle vested restricted stock units 218 — — — — — — —

Issuance of Class A common stock under ESPP 2 — — — 1 — — 1

Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes ( 22 ) — — — ( 39 ) — — ( 39 )

Options exercised 75 — — — 1 — — 1

Equity-based compensation — — — — 47 — — 47

Balance, December 31, 2021 89,930 $ — 82,900 $ — $ 795 $ ( 489 ) $ 219 $ 525

Net loss — — — — — ( 1,587 ) ( 1,307 ) ( 2,894 )

Issuance of Class A common stock, net of underwriters' discounts and commissions and offering expenses 15,625 — — — 1,227 — — 1,227

Adjustments to the non-controlling interests related to equity offering — — — — ( 554 ) — 554 —

Exchanges of LLC Units 46 — — — 1 — ( 1 ) —

Exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises 46 — — — 1 — ( 1 ) —

Establishment of deferred tax assets related to increases in tax basis in Carvana Group — — — — 22 — — 22

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Balance, December 31, 2022 106,037 $ — 82,900 $ — $ 1,558 $ ( 2,076 ) $ ( 535 ) $ ( 1,053 )

Class A Common Stock Class B Common Stock

Shares Amount Shares Amount Additional Paid-in Capital Accumulated Deficit Non-controlling Interests Total Stockholders' Equity (Deficit)

Net income (loss)

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— — 2,721 — — — 126 126

Adjustment to non-controlling interests related to equity offerings — — — — ( 83 ) — 83 —

Exchanges of LLC Units 31 — ( 2 ) — 1 — ( 1 ) —

Adjustments to the non-controlling interests related to equity offerings — — — — ( 83 ) — 83 —

Exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises 31 — ( 2 ) — 1 — ( 1 ) —

Contribution of Class A common stock from related party

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( 30 ) — — — ( 15 ) — — ( 15 )

Class A Common Stock Class B Common Stock

Shares Amount Shares Amount Additional Paid-in Capital Accumulated Deficit Non-controlling Interests Total Stockholders' Equity (Deficit)

Options exercised

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Balance, December 31, 2023 114,239 $ — 85,619 $ — $ 1,869 $ ( 1,626 ) $ ( 627 ) $ ( 384 )

Net income — $ — — $ — $ — $ 210 $ 194 $ 404

Issuance of Class A common stock, net of underwriters' discounts and commissions and offering expenses 6,826 $ — — $ — $ 1,264 $ — $ — $ 1,264

Adjustments to the non-controlling interests related to equity offerings — $ — — $ — $ ( 515 ) $ — $ 515 $ —

Exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises 6,923 $ — ( 6,500 ) $ — $ ( 33 ) $ — $ 33 $ —

Establishment of deferred tax assets related to increases in tax basis in Carvana Group — $ — — $ — $ 289 $ — $ — $ 289

Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group — $ — — $ — $ ( 289 ) $ — $ — $ ( 289 )

Contribution of Class A common stock from related party ( 1 ) $ — — $ — $ — $ — $ — $ —

Issuance of Class A common stock to settle vested restricted stock units 4,834 $ — — $ — $ — $ — $ — $ —

Issuance of Class A common stock under ESPP 10 $ — — $ — $ 1 $ — $ — $ 1

Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes — $ — — $ — $ ( 19 ) $ — $ — $ ( 19 )

Options exercised 440 $ — — $ — $ 7 $ — $ — $ 7

Equity-based compensation — $ — — $ — $ 102 $ — $ — $ 102

Balance, December 31, 2024 133,271 $ — 79,119 $ — $ 2,676 $ ( 1,416 ) $ 115 $ 1,375

See accompanying notes to consolidated financial statements.

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(In millions)

For the Years Ended December 31,

Years Ended December 31,

2024 2023 2022

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Loss on disposal of property and equipment 12 8 14

Gain on debt extinguishment ( 878 ) — —

Loss (Gain) on debt extinguishment 12 ( 878 ) —

Payment-in-kind interest expense 458 184 —

Provision for bad debt and valuation allowance 27 38 23

Amortization and write-off of debt issuance costs 24 27 11

Amortization of debt issuance costs 15 24 27

Unrealized (gain) loss on warrants to acquire Root Class A common stock ( 115 ) ( 3 ) 80

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Payments for acquisitions, net of cash acquired — ( 7 ) ( 2,196 )

Purchases of investments — — ( 126 )

Principal payments received on and proceeds from sale of beneficial interests 67 53 81

Net cash provided by (used in) investing activities 31 ( 2,583 ) ( 627 )

Net cash (used in) provided by investing activities ( 13 ) 31 ( 2,583 )

Cash Flows from Financing Activities:

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Tax withholdings related to restricted stock units and awards ( 19 ) ( 15 ) ( 8 )

Net cash (used in) provided by financing activities ( 868 ) 3,899 3,528

Net (decrease) increase in cash, cash equivalents and restricted cash ( 34 ) ( 8 ) 307

Net cash provided by (used in) financing activities 261 ( 868 ) 3,899

Net increase (decrease) in cash, cash equivalents and restricted cash 1,166 ( 34 ) ( 8 )

Cash, cash equivalents, and restricted cash at beginning of period 594 628 636

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The Company is transforming the used car sales experience by giving consumers what they want - a wide selection, great value and quality, transparent pricing, and a simple, no pressure transaction.

Using the website, customers can complete all phases of a used vehicle transaction, including financing their purchase, trading in their current vehicle, and purchasing complementary products such as vehicle service contracts ("VSC"), auto insurance, and GAP waiver coverage.

Using the website or mobile application, customers can complete all phases of a used vehicle transaction, including financing their purchase, trading in their current vehicle, and purchasing complementary products such as vehicle service contracts ("VSC"), GAP waiver coverage, and auto insurance.

Each element of the Company's business, from inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose.

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Substantially all of the Company’s assets and liabilities represent the assets and liabilities of Carvana Group, except the Company's Senior Secured Notes and Senior Unsecured Notes (each as defined in Note 10 — Debt Instruments) which were issued by Carvana Co.

and guaranteed by its and Carvana Group's existing domestic restricted subsidiaries, excluding, in the case of the Senior Unsecured Notes, ADESA US Auction, LLC ("ADESA"), and its subsidiaries.

and are guaranteed by its and Carvana Group's existing domestic restricted subsidiaries, excluding, in the case of the Senior Unsecured Notes, ADESA US Auction, LLC ("ADESA"), and its subsidiaries.

In accordance with Carvana Group, LLC's amended and restated limited liability company agreement (the "LLC Agreement"), Carvana Co.

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All intercompany balances and transactions have been eliminated.

The Company has incurred losses in prior periods and expects to incur additional losses in the future as it continues to shift priorities to focus on driving profitability through operating efficiency and reducing expenses.

Certain prior period amounts have been reclassified to conform to current period presentation to account for the additions of other operating expense, net and operating income (loss) in our accompanying consolidated statements of operations.

The Company has incurred losses in prior periods and may incur additional losses in the future as it continues to focus on driving profitable growth through operating efficiency.

Historically, the Company's capital and liquidity needs were primarily satisfied through its debt and equity financings, operating cash flows, and short-term revolving facilities.

During the year ended December 31, 2023, the Company (i) received net cash proceeds of $ 327 million from its "at-the-market offering" program and $ 126 million from its private placement of Class A Units and Class B common stock to the Garcia Parties;

(ii) launched and closed an offer to exchange its Senior Unsecured Notes for new Senior Secured Notes that significantly reduced near-term cash interest expense and total debt outstanding;

(iii) amended certain revolving credit facilities primarily to extend maturities;

and (iv) on November 1, 2023, the Company resized the Floor Plan Facility to $ 1.5 billion and extended its maturity date to April 30, 2025.

Management believes that current working capital, cash flows

During the year ended December 31, 2024, the Company (i) repurchased and cancelled $ 370 million of principal amount of 2028 Senior Secured Notes (as defined below);

(ii) redeemed $ 100 million of principal amount of 2028 Senior Secured Notes;

(iii) received net cash

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

from operations, and expected continued or new financing arrangements will be sufficient to fund operations for at least one year from the financial statement issuance date.

proceeds of $ 1.3 billion from its "at-the-market offering" program (the "ATM Program");

and (iv) amended certain revolving credit facilities primarily to extend maturities.

In January 2025, the Company (i) amended its Master Purchase and Sale Agreement (as defined below) for the purchaser to purchase up to a maximum of $ 4.0 billion of principal balances of finance receivables from the amendment date through January 2026;

and (ii) extended another of its short-term revolving credit facilities through April 2026.

Management believes that current working capital, cash flows from operations, and expected continued or new financing arrangements will be sufficient to fund operations for at least one year from the financial statement issuance date.

Use of Estimates

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Restricted Cash

Amounts included in restricted cash primarily represent the deposits required under the Company's short-term revolving facilities and any undistributed amounts collected on the finance receivables pledged under the Company's finance receivable facilities as explained in Note 10 — Debt Instruments.

As of December 31, 2023 and 2022, restricted cash also includes certain cash held for corporate insurance purposes.

Accounts Receivable, Net

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The allowance for doubtful accounts is estimated based upon historical experience, current economic conditions, and other factors and is evaluated periodically.

The allowance for doubtful accounts was $ 9 million and $ 12 million as of December 31, 2023 and 2022, respectively.

The allowance for doubtful accounts was $ 9 million as of both December 31, 2024 and 2023.

Finance Receivables Held for Sale, Net

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For purposes of determining the valuation allowance, finance receivables are evaluated collectively to determine the allowance as they represent a large group of smaller-balance homogeneous loans.

The allowance was $ 59 million and $ 36 million as of December 31, 2023 and 2022, respectively.

Principal balances of finance receivables are charged-off when the Company is unable to sell the finance receivable and the related vehicle has been repossessed and liquidated or the receivable has otherwise been deemed uncollectible.

Interest income on finance receivables held for sale is recognized when earned based

The allowance was $ 38 million and $ 59

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

on contractual loan terms and is included in other sales and revenues.

million as of December 31, 2024 and 2023, respectively.

Interest income on finance receivables held for sale is recognized when earned based on contractual loan terms and is included in other sales and revenues.

Loan origination costs are capitalized and recognized as a reduction to the gain on loan sale when the loans are sold.

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Definite-lived intangible assets consist of developed technology, customer relationships, and non-compete agreements and are generally amortized on a straight-line basis over their estimated useful lives.

The Company determined the useful lives of its definite-lived intangible assets based on multiple factors including technological obsolescence, the make-up of the acquired customer base and expected attrition, and the period over which expected cash flows are used to measure the fair value of the intangible asset at acquisition.

The Company periodically reassesses the useful lives of its definite-lived intangible assets when events or circumstances indicate

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

that useful lives have significantly changed from the previous estimate.

the period over which expected cash flows are used to measure the fair value of the intangible asset at acquisition.

The Company periodically reassesses the useful lives of its definite-lived intangible assets when events or circumstances indicate that useful lives have significantly changed from the previous estimate.

No impairment charges related to intangible assets were recognized during the years ended December 31, 2024, 2023, or 2022.

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These transactions often result in the creation of securitization trusts, which are VIEs.

To comply with Regulation RR of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Risk Retention Rules") the Company retains at least a 5% interest in the credit risk of the underlying finance receivables, which it accomplishes by retaining at least a 5% interest in each security issued by the securitization trusts.

Typically, this includes notes and certificates, which are presented as beneficial interests in securitizations on the accompanying consolidated balance sheets.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other current assets consist of various items, including, among other items, software licenses and subscriptions, prepaid expenses, the estimated reserve for vehicle inventory returns, the current portion of the purchase price adjustment receivables based on the performance of the Company's finance receivables, the current portion of the receivable related to the excess cash reserves over realized claims of vehicle service contracts ("VSCs"), and deposits.

Other assets consist of various items, including, among other items, investment in equity instruments (as further discussed in Note 18 — Fair Value of Financial Instruments), the purchase price adjustment receivables based on the performance of the Company's finance receivables, the receivable related to the excess cash reserves over realized claims of VSCs, collateral for insurance, and debt issuance costs on revolving debt instruments.

securitization trusts.

Typically, this includes notes and certificates, which are presented as beneficial interests in securitizations on the accompanying consolidated balance sheets.

Other current assets consist of various items, including, among other items, software licenses and subscriptions, prepaid expenses, the estimated reserve for vehicle inventory returns, sales tax receivables, the current portion of the purchase price adjustment receivables based on the performance of the Company's finance receivables, and deposits.

Other assets consist of various items, including, among other items, investment in equity instruments and derivative assets related to Root Warrants (each as further discussed in Note 18 — Fair Value of Financial Instruments), the purchase price adjustment receivables based on the performance of the Company's finance receivables, collateral for insurance, deferred tax assets, and debt issuance costs on revolving debt instruments.

Accrued Liabilities

Accrued liabilities consist of various items payable within one year, including, among other items, accruals for sales tax, compensation and benefits, vehicle licenses and fees, interest expense on the Senior Unsecured Notes, reserves for returns and cancellations, and advertising expenses.

Accrued liabilities consist of various items payable within one year, including, among other items, accruals for sales tax, compensation and benefits, vehicle licenses and fees, interest expense on the Senior Notes, reserves for returns and cancellations, and advertising expenses.

Other Liabilities

As of December 31, 2023 and 2022, other current liabilities primarily consist of the current portion of operating lease liabilities.

Other liabilities consist of various items to be recognized beyond one year, including the deferred revenue associated with Root Warrants (as further discussed in Note 18 — Fair Value of Financial Instruments) and tax receivable agreement ("TRA") liability (as further discussed in Note 15 — Income Taxes).

As of December 31, 2024 and 2023, other current liabilities primarily consist of the current portion of operating lease liabilities, deferred revenue associated with Root Warrants (as further discussed in Note 18 — Fair Value of Financial Instruments), and tax receivable agreement ("TRA") liability (as further discussed in Note 15 — Income Taxes).

Other liabilities consist of various items to be recognized beyond one year, including the deferred revenue associated with Root Warrants, and tax receivable agreement ("TRA") liability.

Revenue Recognition

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Changes in these estimates are reflected as an adjustment to revenue in the period identified.

Retail vehicle sales also include service revenue from retail marketplace transactions, which are retail marketplace partner vehicles sold to customers through Carvana, where the Company recognizes revenue on the sale of the vehicle on a net basis.

The amount of consideration received for retail vehicle sales includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract.

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The Company satisfies its performance obligation for wholesale sales and revenues when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery or pick up at an auction when the transfer of title, risks and rewards of ownership, and control pass to the wholesale purchaser.

The Company recognizes revenue at the amount it expects to receive for the used wholesale vehicle, which is the fixed price determined at the auction, or for wholesale marketplace transactions, at the amount it expects to receive for auction fees charged in facilitating the transaction.

The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle and auction fees are typically due within two days of a completed sale.

The Company recognizes revenue at the amount it expects to receive for the used wholesale vehicle,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

which is the fixed price determined at the auction, or for wholesale marketplace transactions, at the amount it expects to receive for auction and service fees charged in facilitating the transaction.

The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle and auction fees are typically due within two days of a completed sale.

Other Sales and Revenues

Other sales and revenues include gains on the sales of finance receivables, commissions on VSCs, GAP waiver coverage, and customer insurance and interest income received on finance receivables prior to selling them to investors.

Other sales and revenues include gains on the sales of finance receivables, commissions on VSCs, GAP waiver coverage, and other complementary products and interest income received on finance receivables prior to selling them to investors.

Customers purchasing retail vehicles from the Company may enter into contracts for VSCs and, if they finance with the Company, GAP waiver coverage.

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Profit-sharing payments will begin when the underlying VSCs reach a specified level of claims history.

As of December 31, 2023 and 2022, the Company had ending receivables of less than $ 1 million and $ 8 million, respectively, related to cumulative profit-sharing payments recognized as revenue to which it expects to be entitled.

As of both December 31, 2024 and 2023, the Company had ending receivables of less than $ 1 million related to cumulative profit-sharing payments recognized as revenue to which it expects to be entitled.

The receivables are included in other current assets and other assets on the accompanying consolidated balance sheets.

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Vehicle reconditioning costs include parts, labor, inbound transportation costs, and other incremental overhead costs, which are allocated to inventory via specific identification and standard costing.

Occupancy and labor costs not related to vehicle acquisition or reconditioning, including those incurred in connection with expanding production capacity, are expensed as incurred as a component of selling, general and administrative expense.

Occupancy and labor costs not related to vehicle acquisition or reconditioning are expensed as incurred as a component of selling, general and administrative expense.

Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.

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On January 1, 2022, the plan was amended whereby prospective participants' employer matching contributions vest evenly over the employee's initial four-year service period.

Employer contributions to the plan, net of forfeitures, were $ 8 million, $ 8 million,

Employer contributions to the plan, net of forfeitures, were $ 8 million for each the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and $ 5 million for the years ended December 31, 2023, 2022, and 2021, respectively.

years ended December 31, 2024, 2023, and 2022.

Employer contributions are included in selling, general, and administrative expenses in the accompanying consolidated statements of operations.

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See Note 18 — Fair Value of Financial Instruments for additional information.

Business segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance.

Based on the way the Company manages its business, the Company has determined that it currently operates with one operating segment and therefore one reportable segment.

The chief operating decision maker ("CODM") focuses on consolidated results in assessing operating performance and allocating resources.

Furthermore, the Company offers similar

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

products and services and uses similar processes to sell those products and services to similar classes of customers throughout the United States ("U.S.").

Business segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing operating performance.

The Company operates and manages an integrated business with the overall objective of increasing the number of retail units sold and total gross profit per retail unit.

Because of this, the Company has determined that it currently operates with one operating segment and therefore one reportable segment.

The CODM is the chief executive officer and focuses on consolidated results, specifically consolidated net income (loss), in assessing operating performance and allocating resources.

Furthermore, the Company offers similar products and services and uses similar processes to sell those products and services to similar classes of customers throughout the United States ("U.S.").

The amounts presented in each revenue line item in the accompanying consolidated statements of operations represent categories of revenue disaggregated by product and customer type.

The measure of segment assets is reported on the accompanying consolidated balance sheets as total assets.

Substantially all revenue is generated and all assets are held in the U.S.

for all periods presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segment information for the years ended December 31, 2024 and 2023 are as follows:

Years ended December 31,

2024 2023 2022

(in millions)

Net sales and operating revenues $ 13,673 $ 10,771 $ 13,604

Cost of sales

10,797 9,047 12,358

Gross profit 2,876 1,724 1,246

Compensation and benefits

Market occupancy

Goodwill impairment

Other operating expense, net

Operating income (loss) 990 ( 80 ) ( 2,351 )

Interest expense

Loss (Gain) on debt extinguishment

Other (income) expense, net

( 73 ) ( 9 ) 56

Net income (loss) before income taxes

400 175 ( 2,893 )

Income tax (benefit) provision

Net income (loss)

$ 404 $ 150 $ ( 2,894 )

(1) Other costs include all other selling, general and administrative expenses such as IT expenses, corporate occupancy, professional services and insurance, limited warranty, and title and registration.

The Company accounts for income taxes pursuant to the asset and liability method, which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse.

Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment.

The Company reduces the carrying amounts of deferred tax assets by a valuation allowance if, based on the evidence available, it is more likely than not that such assets will not be realized.

In making the assessment under the more likely than not standard, appropriate consideration must be given to all positive and negative evidence related to the realization of the deferred tax assets.

The Company reduces the carrying amounts of deferred tax assets by a valuation allowance if, based on the evidence available, both positive and negative, as well as the objectivity and verifiability of that evidence, it is more likely than not that some portion or all of the Company's deferred tax assets will not be realized.

The assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods by jurisdiction, the Company's experience with loss carryforwards not expiring unutilized, and all tax planning alternatives that may be available.

A valuation allowance is recognized if under applicable accounting standards the Company determines it is more likely than not that its deferred tax assets would not be realized.

See Note 15 — Income Taxes for additional information.

Accounting Standards Issued But Not Yet Adopted

Tax Receivable Agreement

The Company's TRA liability is determined and recorded in accordance with ASC 450, Contingencies , which requires the determination of whether the liability is both probable and reasonably estimable.

The primary consideration is the Company's usage of deferred tax assets, which currently have a full valuation allowance applied against them.

As such, the Company recorded a TRA liability of $ 82 million and $ 14 million as of December 31, 2024 and 2023, respectively, which represents the portion of the liability that is probable and reasonably estimable.

For the remaining $ 2.0 billion TRA liability as of December 31, 2024, the Company determined that it was more likely than not that its deferred tax assets subject to the TRA would not be realized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Adoption of New Accounting Standards

In November 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update “ASU” 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which modifies the disclosure and presentation requirements of reportable segments.

The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit and loss.

The amendments also require disclosure of all other segment items by reportable segment and a description of its composition.

Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires the disclosure of significant segment expenses that are regularly provided to the CODM.

The amendments also require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

These amendments apply regardless of the Company having one operating segment.

The Company adopted ASU 2023-07 in its fourth quarter of 2024 using a retrospective transition method.

Accounting Standards Issued But Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , which requires entities to disclose certain additional information including, among other items, purchases of inventory, employee compensation, depreciation, and intangible asset amortization included within each consolidated statements of operations expense caption.

The update will be effective for annual reporting periods beginning after December 15, 2026.

The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.

The Company assessed all other Accounting Standards Updates issued but not yet adopted and determined they are not relevant to the Company or are not expected to have a material impact upon adoption.

NOTE 3 — BUSINESS COMBINATIONS

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with 6.5 million square feet of buildings on more than 4,000 acres of land, significantly expanding the Company's infrastructure and enhancing its customer offering by facilitating a broader selection of vehicles and faster delivery times.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the allocation of the purchase price consideration to identifiable assets acquired and liabilities assumed as of December 31, 2022:

Purchase Price Allocation

(in millions)

Assets Acquired

Current assets $ 208

Property and equipment 1,281

Operating lease right-of-use assets 188

Intangible assets 79

Other assets 1

Total Assets Acquired 1,757

Liabilities Assumed

Current liabilities 233

Operating lease liabilities 167

Total Liabilities Assumed 400

Net Assets Acquired 1,357

Purchase price consideration 2,195

Goodwill $ 838

Identifiable intangible assets acquired consist of the following (in millions):

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Personal property was valued using the replacement cost method of the cost approach, for which the key assumptions are the costs of similar personal property in new condition and economic obsolescence rates.

The acquisition resulted in the recognition of $ 838 million of goodwill, which is deductible for tax purposes and represents the future economic benefits expected to arise from anticipated synergies and intangible assets that do not qualify for separate recognition, including an assembled workforce, non-contractual relationships and other agreements.

For the years ended December 31, 2023 and 2022, the Company recognized $ 856 million and $ 490 million, respectively, of wholesale sales and revenues, $ 770 million and $ 472 million, respectively, of cost of sales, and a net loss of $ 83 million and $ 101 million, respectively, from ADESA operations, which includes $ 122 million and $ 83 million, respectively, of depreciation and amortization, including acquired intangible assets amortization expense of $ 15 million for each year.

The following unaudited pro forma combined results of operations information for the years ended December 31, 2022 and 2021 have been prepared as if the ADESA Acquisition occurred on January 1, 2021:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma combined results of operations information for the year ended December 31, 2022 has been prepared as if the ADESA Acquisition occurred on January 1, 2022:

Year ended December 31, 2022

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Net loss attributable to Carvana Co.

$ ( 1,681 ) $ ( 295 )

Net loss per share of Class A common stock - basic and diluted $ ( 15.89 )

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The unaudited pro forma combined results of operations information is provided for informational purposes only and is not necessarily intended to represent the results that would have been achieved had the ADESA Acquisition been consummated on January 1, 2022 or indicative of the results that may be achieved in the future.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 — PROPERTY AND EQUIPMENT, NET

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Property and equipment, net $ 2,773 $ 2,982

Depreciation and amortization expense on property and equipment was $ 386 million, $ 346 million, and $ 153 million for the years ended December 31, 2023, 2022, and 2021, respectively, of which $ 166 million, $ 183 million, and $ 103 million was recorded to selling, general, and administrative expense, respectively, $ 51 million, $ 49 million, and $ 26 million was capitalized

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to vehicle inventory, respectively, and $ 169 million, $ 114 million, and $ 24 million were recorded to cost of sales, respectively, including $ 66 million, $ 52 million, and $ 24 million previously capitalized to vehicle inventory, respectively.

The Company capitalized internal use software costs totaling $ 56 million, $ 85 million, and $ 59 million during the years ended December 31, 2023, 2022, and 2021, respectively, which is included in software and construction in progress in the table above.

The Company capitalized $ 42 million, $ 68 million, and $ 45 million during the years ended December 31, 2023, 2022, and 2021, respectively, of payroll and payroll-related costs, excluding equity-based compensation capitalized to property and equipment, for employees who are directly associated with and who devote time to the development of software products for internal use.

The Company capitalizes interest in connection with various construction projects to build, upgrade, or remodel certain of its facilities.

During the years ended December 31, 2023, 2022, and 2021, the Company incurred total interest costs, net of interest income, of $ 637 million, $ 503 million, and $ 185 million, respectively, of which $ 5 million, $ 17 million, and $ 9 million, respectively, were capitalized.

Depreciation and amortization expense on property and equipment in cost of sales was $ 140 million, $ 169 million, and $ 114 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Depreciation and amortization expense on property and equipment in selling, general and administrative expense was $ 147 million, $ 166 million, and $ 183 million during the years ended December 31, 2024, 2023, and 2022, respectively.

NOTE 5 — INTANGIBLE ASSETS

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Developed technology 41 41

Non-compete agreements — 1

Intangible assets, acquired cost 91 91

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NOTE 6 — ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

The following table summarizes accounts payable and other accrued liabilities as of December 31, 2023 and 2022:

The following table summarizes accounts payable and accrued liabilities as of December 31, 2024 and 2023:

(in millions)

Accounts payable, including $ 17 and $ 7 , respectively, due to related parties

Accrued interest expense

Accrued compensation and benefits 92 41

Sales taxes and vehicle licenses and fees 87 77

Reserve for returns and cancellations 75 57

Accrued compensation and benefits 41 65

Customer deposits 63 30

Accrued interest expense (1)

Accrued advertising costs 18 4

Income tax liability

Accrued property and equipment 1 10

Other accrued liabilities 189 146

Total accounts payable and other accrued liabilities $ 596 $ 777

(1) As discussed in Note 10 — Debt Instruments, accrued payment-in-kind ("PIK") interest is included in long-term debt within the accompanying consolidated balance sheets.

Total accounts payable and accrued liabilities

NOTE 7 — RELATED PARTY TRANSACTIONS

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In November 2014, the Company and DriveTime Automotive Group, Inc.

(together with its consolidated affiliates, 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 (the "DriveTime Lease Agreement") that governs the Company’s access to and utilization of temporary storage, reconditioning, offices and parking space at various DriveTime facilities, including hubs and inspection and reconditioning centers.

The DriveTime Lease Agreement was most recently amended in December 2018.

The last hub facility lease remaining under the DriveTime Lease Agreement expired in April 2023, and the leases for the inspection and reconditioning centers expire between 2024 and 2026, subject to renewal options.

In March 2017, the Company and DriveTime entered into a lease agreement that governs the Company's access to and utilization of office and parking space at various DriveTime facilities (the "DriveTime Hub Lease Agreement").

The DriveTime Hub Lease Agreement was most recently amended in July 2021.

The last facility remaining under the DriveTime Hub Lease Agreement expired in April 2023 and was not renewed.

Prior to expiration, the hub locations under the DriveTime Lease Agreement and the DriveTime Hub Lease Agreement both had cancellable lease terms of less than twelve months with rights to terminate at the Company's election with 60 days' prior written notice and certain one-year renewal options provided.

At non-reconditioning locations, because it was not reasonably certain that the Company would exercise its options to extend the leases or abstain from exercising its termination rights within these lease agreements to create a lease term greater than one year, the Company accounted for them as short-term leases.

For these locations, the Company made variable monthly lease payments based on its pro rata utilization of space at each facility plus a pro rata share of each facility’s actual insurance costs and real estate taxes.

Management had determined that the costs allocated to the Company were based on a reasonable methodology.

The DriveTime Lease Agreement also includes the Blue Mound and Delanco inspection and reconditioning centers.

At both of these locations, the Company expects the lease to continue beyond twelve months, therefore those locations are not considered short-term leases.

The Company occupies all of the space at these inspection and reconditioning centers and makes monthly lease payments based on DriveTime's actual rent expense.

In addition, the Company is responsible for the actual insurance costs, tenant improvements required to conduct operations, and real estate taxes at these inspection and reconditioning center locations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(together with its consolidated affiliates, 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, which currently governs the occupation of two inspection and reconditioning centers in Blue Mound, Texas and Delanco, New Jersey.

The lease for the Blue Mound, Texas location expires in 2029, with two five-year renewal options, and the lease for the Delanco, New Jersey location expires in 2026, with no current renewal options.

The Company makes monthly lease payments based on DriveTime's actual rent expense.

In addition, the Company is responsible for the actual insurance costs, tenant improvements required to conduct operations, and real estate taxes.

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.

The lease has an initial term of eight years , subject to the Company's ability to exercise three renewal options of five years each.

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 related to these operating lease agreements are allocated based on usage to inventory and selling, general and administrative expenses in the accompanying consolidated balance sheets and statements of operations.

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In connection with that lease, the Company entered into a sublease with DriveTime for the use of another floor in the same building.

The lease and sublease each have a term of 83 months, subject to the right to exercise three five-year extension options.

Pursuant to the sublease, the Company pays the rent equal to the amounts due under DriveTime's master lease directly to DriveTime's landlord.

The rent expense incurred related to this first floor sublease was $ 1 million during each of the years ended December 31, 2023, 2022, and 2021.

The lease and sublease expire in February 2024.

In December 2019, Verde Investments, Inc., an affiliate of DriveTime ("Verde"), purchased an office building in Tempe, Arizona that the Company leased from an unrelated landlord prior to Verde's purchase.

The lease and sublease each had a term of 83 months, subject to the right to exercise three five-year extension options.

Pursuant to the sublease, the Company paid the rent equal to the amounts due under DriveTime's master lease directly to DriveTime's landlord.

The lease and sublease expired in February 2024.

The rent expense incurred related to the first floor sublease was less than $ 1 million during each of the years ended December 31, 2024, 2023, and 2022.

In December 2019, Verde Opportunity Heath LLC, an affiliate of DriveTime ("Verde"), purchased an office building in Tempe, Arizona that the Company leased from an unrelated landlord prior to Verde's purchase.

In connection with the purchase, Verde assumed that lease.

The lease has an initial term of ten years , subject to the right to exercise two five-year extension options.

The lease has an initial term of ten years expiring in 2029, subject to the right to exercise

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two five-year extension options.

The rent expense incurred under the lease with Verde was $ 1 million during each of the years ended December 31, 2024, 2023, and 2022.

Wholesale Sales and Revenues

DriveTime purchases wholesale vehicles from, and sells wholesale vehicles to, both the Company and unrelated third parties through both competitive online auctions that are managed by unrelated third parties and the Company's wholesale marketplace platform.

Additionally, beginning in September 2023, the Company provided DriveTime with reconditioning services through its wholesale marketplace platform.

The Company recognized $ 19 million, $ 32 million, and $ 54 million of wholesale sales and revenues from DriveTime during the years ended December 31, 2023, 2022, and 2021, respectively.

Wholesale Vehicle Sales

DriveTime purchases wholesale vehicles from the Company through competitive auctions that are open to other dealers.

As a result, the Company recognized $ 12 million, $ 10 million, and $ 30 million of wholesale sales and revenues from DriveTime during the years ended December 31, 2024, 2023, and 2022, respectively.

Wholesale Marketplace Revenues

DriveTime sells vehicles to, and purchases vehicles from, third parties through the Company's wholesale marketplace platform.

These transactions occur through competitive auctions in which all registered buyers and sellers are able to bid on and purchase, or list and sell, wholesale vehicles.

In addition, beginning in September 2023, certain auction locations provide DriveTime with reconditioning services.

As a result, the Company recognized $ 16 million, $ 9 million, and $ 2 million of wholesale sales and revenues from DriveTime during the years ended December 31, 2024, 2023, and 2022, respectively, and $ 2 million and less than $ 1 million of cost of sales to DriveTime related to reconditioning services during the years ended December 31, 2024 and 2023, respectively.

Retail Vehicle Acquisitions and Reconditioning

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The purchase price of each vehicle was equal to the wholesale price of the vehicle plus a fee for transportation and reconditioning services.

In addition, DriveTime performs reconditioning services for the Company at DriveTime reconditioning centers.

As of December 31, 2023, and 2022, less than $ 1 million and $ 1 million, respectively, related to vehicles and reconditioning services were included in vehicle inventory in the accompanying consolidated balance sheets.

The Company also recognized $ 4 million, $ 22 million, and $ 62 million of cost of goods sold during the years ended December 31, 2023, 2022, and 2021 respectively.

As of December 31, 2024 and 2023, zero and less than $ 1 million, respectively, related to these vehicles and reconditioning services were included in vehicle inventory in the accompanying consolidated balance sheets.

The Company also recognized less than $ 1 million, $ 4 million, and $ 22 million of cost of goods sold during the years ended December 31, 2024, 2023, and 2022, respectively, related to these vehicles.

Master Dealer Agreement

In December 2016, the Company entered into a master dealer agreement with DriveTime (the "Master Dealer Agreement"), pursuant to which the Company may sell VSCs to customers purchasing a vehicle from the Company.

In December 2016, the Company entered into a master dealer agreement with DriveTime (the "Master Dealer Agreement"), most recently amended in April 2021, pursuant to which the Company may sell VSCs to customers purchasing a vehicle from the Company.

The Company earns a commission on each VSC sold to its customers and DriveTime is obligated by and subsequently administers the VSCs.

The Company collects the retail purchase price of the VSCs from its customers and remits the purchase price net of commission to DriveTime.

In November 2018, the Company amended the Master Dealer Agreement to allow the Company to receive payments for excess reserves based on the performance of the VSCs versus the reserves held by the VSC administrator, once a required claims period for such VSCs has passed.

In August 2020 and April 2021, the Company and DriveTime further amended the Master Dealer Agreement to adjust excess reserve payment calculations and timing and the scope of DriveTime's after-sale administration services, respectively.

During the years ended December 31, 2023, 2022, and 2021, the Company recognized $ 138 million, $ 176 million, and $ 186 million, respectively, of commissions earned on VSCs sold to its customers and administered by DriveTime, net of a reserve for estimated contract cancellations, and payments for excess reserves to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

which it expects to be entitled.

The commission earned on the sale of VSCs and expected payments for excess reserves is included in other sales and revenues in the accompanying consolidated statements of operations.

Beginning in 2017, DriveTime also administers the Company's limited warranty provided to all customers and administered a portion of the Company's GAP waiver coverage under the Master Dealer Agreement.

Since the first quarter of 2020, the Company's GAP waiver coverage sales have been administered by an unrelated third party.

The Company pays a per-vehicle fee to DriveTime to administer the limited warranty included with every purchase and prior to the first quarter of 2020 paid a per-contract fee to DriveTime to administer a portion of the GAP waiver coverage it sells to its customers.

The Master Dealer Agreement further allows the Company to receive payments for excess reserves based on the performance of the VSCs versus the reserves held by the VSC administrator, once a required claims period for such VSCs has passed.

During the years ended December 31, 2024, 2023, and 2022, the Company recognized $ 193 million, $ 138 million, and $ 176 million, respectively, of commissions earned on VSCs sold to its customers and administered by DriveTime, net of a reserve for estimated contract cancellations, and payments for excess reserves to which it expects to be entitled, which are included in other sales and revenues in the accompanying consolidated statements of operations.

Beginning in 2017, DriveTime also administers the Company's limited warranty provided to all customers.

The Company pays a per-vehicle fee to DriveTime to administer the limited warranty included with every purchase.

The Company incurred $ 19 million, $ 17 million, and $ 18 million during the years ended December 31, 2024, 2023, and 2022, respectively, related to the administration of limited warranty.

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Finally, in December 2022, the Company entered into a profit sharing agreement with DriveTime with regard to the Transferred Contracts (the "Profit Sharing Agreement").

The Company recognized $ 7 million and $ 3 million in revenue during the years ended December 31, 2023 and 2022, respectively, under the Profit Sharing Agreement.

The Company recognized $ 7 million in revenue during each of the years ended December 31, 2024 and 2023, and $ 3 million during the year ended 2022 under the Profit Sharing Agreement.

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Servicing and Administrative Fees

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The Company reimbursed DriveTime less than $ 1 million under this agreement during each of the years ended December 31, 2024, 2023, and 2022.

Shared Services Agreement with DriveTime

In November 2014, the Company and DriveTime entered into a shared services agreement whereby DriveTime provided certain accounting and tax, legal and compliance, information technology, telecommunications, benefits, insurance, real estate, equipment, corporate communications, software and production, and other services primarily to facilitate the transition of these services to the Company on a standalone basis (the "Shared Services Agreement").

The Shared Services Agreement was most recently amended and restated in February 2021 and operates on a year-to-year basis, with the Company having the right to terminate any or all services with 30 days' prior written notice and DriveTime having the right to terminate any or all services with 90 days' prior written notice.

Charges allocated to the Company are based on the Company’s actual use of the specific services detailed in the Shared Services Agreement.

The Company incurred less than $ 1 million in expenses related to the Shared Services Agreement during each of the years ended December 31, 2023, 2022, and 2021.

Accounts Payable Due to Related Party

As of December 31, 2024 and 2023, $ 17 million and $ 7 million, respectively, was due to related parties primarily related to the agreements mentioned above, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

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Tax Receivable Agreement Liability

As further discussed in Note 15 — Income Taxes, as of December 31, 2024 and 2023, the Company recorded a tax receivable agreement ("TRA") liability of $ 82 million and $ 14 million, respectively, of which $ 61 million and $ 11 million, respectively, is due to related parties.

Refer to Note 15 — Income Taxes for further discussion of the TRA.

Contributions of Class A Common Stock From Ernest Garcia III

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Garcia"), committed to giving then-current employees 23 shares of Class A common stock each from his personal shareholdings once employees reach their two-year employment anniversary ("CEO Milestone Gift" or "Gift").

As a result and during the three months ended March 31, 2022, the Company granted 23 restricted stock units ("RSUs") to each current employee, which vest after they complete their second year of employment, for a total of 435,035 RSUs granted during the period.

For every gift that vests, and pursuant to a contribution agreement (the "Contribution Agreement") entered into by and between the Company and Mr.

As a result and during the three months ended March 31, 2022, the Company granted 23 restricted stock units ("RSUs") to each current employee, which vested after completion of their second year of employment, for a total of 435,035 RSUs granted during the period.

For every Gift that vested, and pursuant to a contribution agreement (the "Contribution Agreement") entered into by and between the Company and Mr.

Garcia on February 22, 2022, Mr.

Garcia contributes to the Company, at the end of each fiscal quarter, the number of shares of Class A common stock, granted pursuant to the CEO Milestone Gift, that have vested during such quarter.

Garcia contributed to the Company, at the end of each fiscal quarter, the number of shares of Class A common stock, granted pursuant to the CEO Milestone Gift, that had vested during such quarter.

The shares contributed shall be shares of Class A common stock that Mr.

Garcia individually owns, at no charge.

The contribution is intended to fund RSU awards to certain employees of the Company upon their satisfying the applicable employment tenure requirements.

Garcia individually owned, at no charge.

During the years ended December 31, 2024 and 2023, 1,104 and 62,606 RSUs, respectively, vested and an equal number of shares of Class A common stock were contributed by Mr.

As of January 2024, all RSUs granted pursuant to the CEO Milestone Gift had vested or been forfeited.

Although the Company does not expect Mr.

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In satisfaction of that commitment, on August 18, 2023, the Company entered into a Securities Purchase Agreement with the Garcia Parties providing for the purchase of an aggregate of 3.4 million Class A Units, together with 2.7 million shares of Class B common stock, at a price equivalent to $ 46.31 per share of Class A common stock, or $ 37.048 per Class A Unit on an as-exchanged basis.

The Company used the proceeds therefrom to partially fund the cash tender offer to purchase a portion of the 2025 Senior Unsecured Notes (as defined below).

The Company used the proceeds therefrom to partially fund the cash tender offer to purchase a portion of the 2025 Senior Unsecured Notes (as defined in Note 10 — Debt Instruments).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 — FINANCE RECEIVABLE SALE AGREEMENTS

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Pursuant to the MPSA, the Company sells finance receivables meeting certain underwriting criteria under a committed forward flow arrangement without recourse to the Company for their post-sale performance.

The Company and the Ally Parties amended the MPSA at various times throughout 2021, 2022, and 2023 to extend the scheduled commitment termination date to January 12, 2024, establish a commitment by the Ally Parties to purchase up to a maximum of $ 4.0 billion of principal balances of finance receivables between January 13, 2023 and the scheduled commitment termination date, and broaden the scope of finance receivables eligible for sale to the Ally Parties.

On January 11, 2024, the Company and the Ally Parties amended the MPSA to reestablish the commitment by the Ally Parties to purchase up to $ 4.0 billion of principal balances of finance receivables between January 11, 2024 and January 10, 2025.

During the years ended December 31, 2024, 2023, and 2022, the Company sold $ 3.0 billion, $ 3.6 billion, and $ 3.8 billion, respectively, in principal balances of finance receivables under the MPSA and had $ 1.0 billion of unused capacity as of December 31, 2024.

On January 3, 2025, the Company and the Ally Parties amended the MPSA to, among other things, reestablish the commitment by the Ally Parties to purchase up to $ 4.0 billion of principal balances of finance receivables between January 3, 2025 and January 2, 2026.

Securitization Transactions

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Upon sale of the finance receivables to the securitization trusts, the Company recognizes a gain or loss on sales of finance receivables.

The net proceeds from the sales are the fair value of the assets obtained as part of the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

transactions and typically include cash and at least 5% of the beneficial interests issued by the securitization trusts to comply with the Risk Retention Rules, as defined and further discussed in Note 9 — Securitizations and Variable Interest Entities.

The net proceeds from the sales are the fair value of the assets obtained as part of the transactions and typically include cash and at least 5% of the beneficial interests issued by the securitization trusts to comply with the Risk Retention Rules, as defined and further discussed in Note 9 — Securitizations and Variable Interest Entities.

During the years ended December 31, 2024, 2023 and 2022, the Company sold $ 3.8 billion, $ 2.8 billion and $ 2.4 billion, respectively, in principal balances of finance receivables through securitization transactions.

Fixed Pool Loan Sales

During the year ended December 31, 2024, the Company completed fixed pool loan sales of $ 1.5 billion in principal balances of finance receivables to an unrelated third party on terms substantially similar to the Company’s securitization transactions and sales under the MPSA.

There were no fixed pool loan sales other than securitization transactions during the years ended December 31, 2023 or 2022.

Gain on Loan Sales

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The beneficial interests retained by the Company include, but are not limited to, rated notes and certificates of the securitization trusts.

The holders of the certificates issued by the securitization trusts have rights to cash flows only after the holders of the notes issued by the securitization trusts have received their contractual cash flows.

The holders of the certificates issued by the

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securitization trusts have rights to cash flows only after the holders of the notes issued by the securitization trusts have received their contractual cash flows.

The securitization trusts have no direct recourse to the Company’s assets, and holders of the securities issued by the securitization trusts can look only to the assets of the securitization trusts that issued their securities for payment.

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The Company’s continuing involvement with the VIEs consists of retaining a portion of the securities issued by the VIEs, providing industry standard representations and warranties regarding the underlying finance receivables, and performing ministerial duties as the trust administrator.

As of December 31, 2023, the Company is not the primary beneficiary of these securitization trusts because its retained interests in the VIEs do not have exposures to losses or benefits that could potentially be significant to the VIEs.

As of December 31, 2024, the Company was not the primary beneficiary of these securitization trusts because its retained interests in the VIEs do not have exposures to losses or benefits that could potentially be significant to the VIEs.

As such, the Company does not consolidate the securitization trusts.

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Total unconsolidated VIEs $ 464 $ 464 $ 366 $ 366

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The beneficial interests in securitizations are considered securities available for sale subject to restrictions on transfer pursuant to the Company’s obligations as a sponsor under the Risk Retention Rules.

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Total securities available for sale $ 460 $ 464 $ 365 $ 366

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NOTE 10 — DEBT INSTRUMENTS

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Finance receivable facilities — 555

Financing of beneficial interest in securitizations 293 268

Notes payable — 3

Financing of beneficial interests in securitizations

Real estate financing 485 485

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Total included in long-term debt, net $ 5,148 $ 5,229

(1) Includes $ 185 million of accrued PIK interest through December 31, 2023, which will increase the principal amount of Senior Secured Notes on February 15, 2024, the next semi-annual interest payment date.

(1) Includes $ 105 million and $ 185 million of accrued paid-in-kind ("PIK") interest as of December 31, 2024 and 2023, respectively.

Accrued PIK interest increases the principal amount of Senior Secured Notes on each semi-annual interest payment date.

(2) 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 consolidated balance sheets.

Unamortized debt issuance costs related to revolving debt arrangements are presented within other assets on the accompanying consolidated balance sheets and not included here.

(3) The unamortized premium relates to a portion of the Offers (as defined below) which were accounted for as a debt modification.

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(3) 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 a lender to finance its vehicle inventory, which was secured by Carvana LLC's vehicle inventory, general intangibles, accounts receivable, and finance receivables (as amended, the "Floor Plan Facility").

On September 1, 2023, the Company amended the Floor Plan Facility in connection with the issuance of the Senior Secured Notes discussed below to provide for an additional exclusive grant of collateral over certain deposit accounts and the cash on deposit in those accounts in favor of the lender and to amend certain other affirmative and negative covenants.

The Company previously entered into a floor plan facility with the Ally Parties to finance its vehicle inventory, which was secured by Carvana LLC's vehicle inventory, general intangibles, accounts receivable, and finance receivables (as amended, the "Floor Plan Facility").

On September 1, 2023, the Company amended the Floor Plan Facility in connection with the issuance of the Senior Secured Notes (as defined below) to provide for an additional exclusive grant of collateral over certain deposit accounts and the cash on deposit in those accounts in favor of the lender and to amend certain other affirmative and negative covenants.

The Company amended and restated the Floor Plan Facility on November 1, 2023, to resize the line of credit to $ 1.5 billion through April 30, 2025 and to lower the interest rate to (i) a prime rate plus 0.10 % when amounts drawn under the facility are under 50 % of the then current inventory balance and (ii) a prime rate plus 0.50 % when amounts drawn are over 50 %.

3 unchanged sentences

Additionally, the Company is permitted to make prepayments to the lender to be held as principal payments under the Floor Plan Facility and subsequently reborrow such amounts.

The Floor Plan Facility also requires monthly interest payments and required that at least 12.5 % of the total principal amount owed to the lender be held as restricted cash.

On November 1, 2023, the restricted cash requirements were amended to introduce a sliding scale whereby at least 12.5 % of the total principal amount owed to the lender is required to be held as restricted cash if amounts drawn are under 50 % of the then current inventory balance, which requirement increases to (i) 17.5 % required to be held as restricted cash if amounts drawn are between 50 % and 59.99 %, (ii) 22.5 % required to be held as restricted cash if amounts drawn are between 60 % and 69.99 %, and (iii) 25 % required to be held as restricted cash if amounts drawn are equal to or over 70 %.

The Floor Plan Facility also requires monthly interest payments and restricted cash requirements on a sliding scale whereby at least 12.5 % of the total principal amount owed to the lender is required to be held as restricted cash if amounts

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

drawn are under 50 % of the then current inventory balance, which requirement increases to (i) 17.5 % required to be held as restricted cash if amounts drawn are between 50 % and 59.99 %, (ii) 22.5 % required to be held as restricted cash if amounts drawn are between 60 % and 69.99 %, and (iii) 25 % required to be held as restricted cash if amounts drawn are equal to or over 70 %.

The Company is also required to pay the lender an availability fee based on the average unused capacity during the prior calendar quarter under the Floor Plan Facility.

As of December 31, 2023, the Company had $ 113 million outstanding under the Floor Plan Facility, unused capacity of $ 1.4 billion, and held $ 14 million in restricted cash related to this facility.

As of December 31, 2024, the Company had $ 67 million outstanding under the facility, unused capacity of $ 1.4 billion, and held $ 8 million in restricted cash related to this facility.

During the year ended December 31, 2024, the Company's effective interest rate on the Floor Plan Facility was 6.85 %.

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In January 2020, the Company entered into an agreement pursuant to which a lender agreed to provide a revolving credit facility to fund certain finance receivables originated by the Company.

In 2023, the Company amended its agreement to, among other things, adjust the line of credit to $ 500 million and extend the maturity date to January 24, 2024, and in January 2024, the maturity was further extended to January 19, 2025.

In 2023, the Company amended its agreement to, among other things, adjust the line of credit to $ 500 million.

In January 2024, the maturity date was extended to January 19, 2025, which date was further extended on January 15, 2025, for a maturity date of April 15, 2026.

In February 2020, the Company entered into an agreement pursuant to which a second lender agreed to provide a $ 500 million revolving credit facility to fund certain finance receivables originated by the Company.

In December 2021, the Company amended its agreement to, among other things, increase the line of credit to $ 600 million and extend the maturity date to December 8, 2023.

In December 2023, the Company amended its agreement to, among other things, extend the maturity date to December 8, 2025.

In December 2021, the Company amended its agreement to, among other things, increase the line of credit to $ 600 million and in December 2023, the maturity date was extended to December 8, 2025.

In April 2021, the Company entered into an agreement pursuant to which a third lender agreed to provide a $ 500 million revolving credit facility to fund certain finance receivables originated by the Company.

In December 2021 and September 2022,

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Company amended its agreement to, among other things, increase this line of credit to $ 600 million and extend the maturity date to March 30, 2024.

In October 2021, the Company entered into an agreement pursuant to which a fourth lender agreed to provide a $ 350 million revolving credit facility to fund certain finance receivables originated by the Company.

On May 8, 2023, the Company settled all outstanding amounts owed and terminated the agreement with the lender.

In March 2022, the Company entered into an agreement pursuant to which a fifth lender agreed to provide a $ 500 million revolving credit facility to fund certain finance receivables originated by the Company.

In September 2023, the Company amended its agreement to extend the maturity date to September 18, 2024.

In May 2023, the Company entered into an agreement pursuant to which a sixth lender agreed to provide a $ 500 million revolving credit facility to fund certain finance receivables originated by the Company.

The Company can draw upon this facility until May 31, 2024.

In December 2021, the Company amended its agreement to, among other things, increase this line of credit to $ 600 million, and in April 2024 the maturity date was extended to October 10, 2025.

In March 2022, the Company entered into an agreement pursuant to which a fourth lender agreed to provide a $ 500 million revolving credit facility to fund certain finance receivables originated by the Company.

In August 2024, the Company amended its agreement to extend the maturity date to August 7, 2025.

In May 2023, the Company entered into an agreement pursuant to which a fifth lender agreed to provide a $ 500 million revolving credit facility to fund certain finance receivables originated by the Company until May 31, 2024.

In May 2024, the Company amended its agreement to extend the maturity date to August 15, 2025.

The Finance Receivable Facilities require that any undistributed amounts collected on the pledged finance receivables be held as restricted cash.

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The subsidiaries that entered into these Finance Receivable Facilities are each wholly-owned, special purpose entities whose assets are not available to the general creditors of the Company.

As of December 31, 2023 and 2022, the Company had $ 555 million and $ 965 million, respectively, outstanding under these Finance Receivable Facilities, unused capacity of $ 2.1 billion and $ 1.6 billion, respectively, and held $ 8 million and $ 36 million, respectively, in restricted cash related to these Finance Receivable Facilities.

For the years ended December 31, 2023 and 2022, the Company's effective interest rate on these Finance Receivable Facilities was 6.60 % and 2.93 %.

As of December 31, 2024 and 2023, the Company had zero and $ 555 million, respectively, outstanding under these Finance Receivable Facilities, unused capacity of $ 2.7 billion and $ 2.1 billion, respectively, and held $ 2 million and $ 8 million, respectively, in restricted cash related to these Finance Receivable Facilities.

During the years ended December 31, 2024 and 2023, the Company's effective interest rate on these Finance Receivable Facilities was 7.39 % and 6.60 %.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt

Senior Secured Notes

The Company has issued various tranches of Senior Secured Notes (collectively, the "Senior Secured Notes") as further described below:

Senior Secured Notes

2024 December 31,

2023 Year 1 PIK Interest Rate

Year 2 Cash/PIK Toggle Interest Rate

Thereafter Cash Interest Rate

(in millions, except percentages)

Notes due December 1, 2028 (the "2028 Senior Secured Notes")

$ 611 $ 981 12 % 9 %/ 12 %

Notes due June 1, 2030 (the "2030 Senior Secured Notes")

1,660 1,471 13 % 11 %/ 13 %

Notes due June 1, 2031 (the "2031 Senior Secured Notes")

1,982 1,741 14 % - - / 14 %

Accrued PIK interest

Total principal amount $ 4,358 $ 4,378

unamortized debt issuance costs

( 40 ) ( 53 )

unamortized premium

Total Senior Secured debt

$ 4,345 $ 4,362

Interest on each of the Senior Secured Notes is payable semi-annually on February 15 and August 15, and commenced on February 15, 2024.

On February 15, 2024 and as required by the indentures governing the Senior Secured Notes, the Company increased the principal amount of the 2028, 2030, and 2031 Senior Secured Notes in connection with the payment of interest in kind of $ 53 million, $ 88 million, and $ 111 million, respectively.

Further, on August 15, 2024 and as required by the indentures governing the Senior Secured Notes, the Company increased the principal amount of the 2028, 2030, and 2031 Senior Secured Notes in connection with the payment of interest in kind of $ 47 million, $ 101 million, and $ 130 million, respectively.

On February 15, 2025, the Company paid interest for the 2028 and 2030 Senior Secured Notes in cash, and intends to continue to pay cash interest for the 2028 and 2030 Senior Secured Notes at the next semi-annual payment date on August 15, 2025.

As a result, beginning on August 15, 2024, the Company is accruing PIK interest only on the 2031 Senior Secured Notes.

Cash interest expense on the 2028 and 2030 Senior Secured Notes is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

The Company may redeem some or all of each series of Senior Secured Notes at any time prior to certain specified redemption dates (the "Secured Early Redemption Dates") and at 100 % of the principal amount outstanding plus applicable make-whole premiums set forth in each respective indenture, plus any accrued and unpaid interest to the redemption date.

Prior to the Secured Early Redemption Dates, the Company may also redeem up to 35 % of the original aggregate principal amount of the 2028 and 2030 Senior Secured Notes at a redemption price equal to 109 % of the principal amount outstanding, together with accrued and unpaid interest to, but not including, the date of redemption, using the net cash proceeds of certain equity offerings.

Finally, on or after the Secured Early Redemption Dates, the Company may redeem its Senior Secured Notes in whole or in part at redemption prices set forth in each respective indenture, plus accrued and unpaid interest up to but excluding the redemption date.

If the Company experiences certain change of control events, it must make an offer to purchase all of the Senior Secured Notes at 101 % of the principal amount thereof, plus any accrued and unpaid interest, to the repurchase date.

During the year ended December 31, 2024, the Company repurchased $ 370 million of principal amount of the 2028 Senior Secured Notes in the open market for $ 384 million which included $ 8 million of accrued interest.

Additionally, during the year ended December 31, 2024, the Company redeemed $ 100 million of principal amount of the 2028 Senior Secured Notes for $ 108 million which included $ 3 million of accrued interest.

The repurchased notes were cancelled upon receipt.

The repurchases and redemption are treated as an extinguishment of debt, with any realized discount (premium) recognized as a gain (loss) on debt extinguishment in the accompanying consolidated statements of operations, net of transaction fees and write-offs of related unamortized debt issuance costs and unamortized premium.

As a result of the repurchases and redemption, during the year ended December 31, 2024, the Company recognized a net loss on debt extinguishment of $ 12 million which included $ 2 million of transaction fees and write-offs of related unamortized debt issuance costs and unamortized premium.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Senior Secured Notes mature as specified in the table above unless earlier repurchased or redeemed and are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by all of the domestic restricted subsidiaries of the Company (other than, subject to certain exceptions, any subsidiary that constitutes an "immaterial subsidiary," "captive insurance subsidiary," "securitization subsidiary" or "permitted joint venture").

The Senior Secured Notes and the guarantees are secured by (i) second-priority liens on certain assets and property of the Company, pledged in favor of the Ally Parties under the Floor Plan Facility and (ii) first-priority liens on certain assets and property of the Company and the guarantors, as identified in the indentures to the Senior Secured Notes.

The indentures to the Senior Secured Notes contain restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things and subject to certain exceptions, incur additional debt or issue preferred stock, create new liens, create restrictions on intercompany payments, pay dividends and make other distributions in respect of the Company's capital stock, redeem or repurchase the Company’s capital stock or prepay subordinated indebtedness, make certain investments or certain other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates, and effect mergers or consolidations.

On September 1, 2023, the Company completed a series of transactions whereby it exchanged validly tendered senior unsecured notes for newly issued senior secured notes (the "Exchange Offers").

2 unchanged sentences

Additionally, the Company wrote off $ 66 million of debt issuance costs in connection with the Offers.

The Company assessed the Offers to determine whether the transactions represent debt modifications or debt extinguishments under Accounting Standards Codification 470.

The Company assessed the Offers to determine whether the transactions represent debt modifications or debt extinguishments under ASC 470.

As a result of certain lenders that participated in the Offers, the Company determined that a majority of the Offers were a debt extinguishment and the remainder of the Offers were a debt modification, which resulted in a gain on debt extinguishment of $ 878 million.

As a result, the Company initially recognized a $ 40 million premium which is reflected as an addition to the principal balance of the Senior Secured Notes and will be amortized against interest expense over the respective lives of the Senior Secured Notes.

As a result, during the year ended December 31, 2023, the Company initially recognized a $ 40 million premium which is reflected as an addition to the principal balance of the Senior Secured Notes and will be amortized against interest expense over the respective lives of the Senior Secured Notes.

The aggregate principal amounts of the Senior Unsecured Notes that were validly tendered and accepted by the Company in the Offers are set forth in the table below.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Principal Amount Validly Tendered and Accepted

20 unchanged sentences

$ 5,725 $ 5,520 96.4 % $ 341 $ 981 $ 1,471 $ 1,741 $ 4,193

The following table summarizes the components and interest rate terms of the Company's Senior Secured Notes:

Senior Secured Notes

2023 December 31,

2022 Year 1 PIK Interest Rate

Year 2 Cash/PIK Toggle Interest Rate

Thereafter Cash Interest Rate

(in millions, except percentages)

Notes due December 1, 2028 (the "2028 Senior Secured Notes")

$ 981 $ — 12 % 9 %/ 12 %

Notes due June 1, 2030 (the "2030 Senior Secured Notes")

1,471 — 13 % 11 %/ 13 %

Notes due June 1, 2031 (the "2031 Senior Secured Notes")

1,741 — 14 % - - / 14 %

Accrued PIK interest

Total principal amount $ 4,378 $ —

unamortized debt issuance costs

unamortized premium

Total Senior Secured debt

Interest on each of the Senior Secured Notes is payable semi-annually on February 15 and August 15, commencing on February 15, 2024.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the redemption date.

The Senior Secured Notes mature as specified in the table above unless earlier repurchased or redeemed and are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by all of the domestic restricted subsidiaries of the Company (other than the subsidiaries formed for inventory, finance receivables, securitization facilities, immaterial subsidiaries, or unrestricted subsidiaries).

Senior Unsecured Notes

The Company has issued various tranches of Senior Unsecured Notes (the "Senior Unsecured Notes") each under a separate indenture, as further described below:

The following table summarizes components of the Company's Senior Unsecured Notes:

Senior Unsecured Notes

2024 December 31,

1 unchanged sentence

(in millions, except percentages)

Senior Unsecured Notes due October 1, 2025 ("2025 Senior Unsecured Notes")

Notes due October 1, 2025 ("2025 Senior Unsecured Notes")

$ 98 $ 98 5.625 %

Senior Unsecured Notes due April 15, 2027 ("2027 Senior Unsecured Notes")

Notes due April 15, 2027 ("2027 Senior Unsecured Notes")

32 32 5.500 %

Senior Unsecured Notes due October 1, 2028 ("2028 Senior Unsecured Notes")

Notes due October 1, 2028 ("2028 Senior Unsecured Notes")

22 22 5.875 %

Senior Unsecured Notes due September 1, 2029 ("2029 Senior Unsecured Notes")

Notes due September 1, 2029 ("2029 Senior Unsecured Notes")

26 26 4.875 %

Senior Unsecured Notes due May 1, 2030 ("2030 Senior Unsecured Notes")

Notes due May 1, 2030 ("2030 Senior Unsecured Notes")

27 27 10.250 %

Total principal amount 205 205

unamortized debt issuance cost ( 1 ) ( 76 )

Total Senior Unsecured debt

$ 204 $ 5,649

current portion ( 98 ) —

unamortized debt issuance costs

Total included in long-term debt, net $ 106 $ 204

Each of the 2025, 2027, 2028 and 2029 Senior Unsecured Notes were issued pursuant to an indenture entered into by and among the Company, each of the guarantors party thereto and U.S.

3 unchanged sentences

Interest on each of the Senior Unsecured Notes is payable semi-annually.

The Senior Unsecured Notes mature as specified in the table above unless earlier repurchased or redeemed and are guaranteed by the Company's existing domestic restricted subsidiaries (other than the subsidiaries formed for inventory, finance receivables, securitization facilities, immaterial subsidiaries, or unrestricted subsidiaries).

The Senior Unsecured Notes mature as specified in the table above unless earlier repurchased or redeemed and are guaranteed by certain of the Company's subsidiaries.

In March 2023, the Company designated ADESA and its subsidiaries as unrestricted subsidiaries under the indentures governing the Senior Unsecured Notes.

The Company may redeem some or all of each series of Senior Unsecured Notes at any time prior to certain specified redemption dates (the "Unsecured Early Redemption Dates") at the redemption prices and applicable make-whole premiums set forth in each respective indenture, plus any accrued and unpaid interest to the redemption date.

Prior to the Unsecured Early

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Redemption Dates, the Company may also redeem up to 35 % of the aggregate principal amount at a redemption price equal to 100 % plus the respective interest rate specified in the table above, together with accrued and unpaid interest to, but not including, the date of redemption, with the net cash proceeds of certain equity offerings.

Prior to the Unsecured Early Redemption Dates, the Company may also redeem up to 35 % of the aggregate principal amount at a redemption price equal to 100 % plus the respective interest rate specified in the table above, together with accrued and unpaid interest to, but not including, the date of redemption, with the net cash proceeds of certain equity offerings.

With respect to the 2030 Senior Unsecured Notes, the Company may, at its option, redeem in the aggregate up to 10 % of the original aggregate principal amount of the 2030 Senior Unsecured Notes during the period from, and including, May 1, 2025 to, but excluding May 1, 2027, at a redemption price equal to 105.125 % of the 2030 Senior Unsecured Notes to be redeemed, plus accrued and unpaid interest thereon to the relevant redemption rate.

2 unchanged sentences

In connection with the Exchange Offers, the Company obtained consents from holders of each series of Senior Unsecured Notes to amend the indentures governing the notes to eliminate substantially all of the restrictive covenants as well as certain events of default and related provisions therein, and on August 30, 2023, the Company and the trustee entered into supplemental indentures to effect such amendments.

Notes Payable

The Company entered into promissory note and disbursement agreements to finance certain equipment for its transportation fleet and building improvements.

The assets financed with the proceeds from these notes served as the collateral for each note and certain security agreements related to these assets have cross collateralization and cross default provisions with respect to one another.

The notes had a fixed annual interest rate, a two - to three-year term and required monthly payments.

During December 2023, the Company settled its promissory note and as a result, as of December 31, 2023 there were no outstanding amounts.

As of December 31, 2022, the outstanding principal of these notes had a weighted-average interest rate of 7.5 % and totaled $ 3 million net of unamortized debt issuance costs, of which $ 1 million was due within the next twelve months and is included in current portion of long-term debt in the accompanying consolidated balance sheets.

Real Estate Financing

1 unchanged sentence

As of December 31, 2024, none of these transactions have qualified for sale accounting due to meeting the criteria for finance leases, or forms of continuing involvement, such as repurchase options or renewal periods that extend the lease for substantially all of the asset's remaining useful life, and are therefore accounted for as financing transactions.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

These arrangements require monthly payments and have initial terms of 20 to 25 years.

Some of the agreements are subject to renewal options of up to 25 years and some are subject to base rent increases throughout the term.

As of December 31, 2023 and 2022, the outstanding liability associated with these sale and leaseback arrangements, net of unamortized debt issuance costs, was $ 482 million and $ 483 million, respectively, and was included in long-term debt in the accompanying consolidated balance sheets.

As of both December 31, 2024 and 2023, the outstanding liability associated with these sale and leaseback arrangements, net of unamortized debt issuance costs, was $ 482 million and was included in long-term debt in the accompanying consolidated balance sheets.

Financing of Beneficial Interests in Securitizations

1 unchanged sentence

Beginning in June 2019, the Company entered into secured borrowing facilities through which it finances certain retained beneficial interests in securitizations whereby the Company sells such interests and agrees to repurchase them for their fair value at a stated time of repurchase.

As of December 31, 2023 and 2022, the Company has pledged $ 293 million and $ 268 million, respectively, of its beneficial interests in securitizations as collateral under the repurchase agreements with expected repurchases ranging from March 2024 to December 2030.

As of December 31, 2024 and 2023, the Company had pledged $ 354 million and $ 293 million, respectively, of its beneficial interests in securitizations as collateral under the repurchase agreements with expected repurchases ranging from October 2025 to December 2032.

The securitization trusts distribute payments related to the Company's pledged beneficial interests in securitizations directly to the lenders, which reduces the beneficial interests in securitizations and the related debt balance.

1 unchanged sentence

In the event of a decline in the fair value of the pledged collateral, the repurchase price of the pledged collateral will be increased by the amount of the decline.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The outstanding balance of these facilities, net of unamortized debt issuance costs, was $ 351 million and $ 290 million, as of December 31, 2024 and 2023, respectively, of which $ 136 million and $ 108 million, respectively was included in current portion of long-term debt in the accompanying consolidated balance sheets.

Principal Maturities

The following table summarizes the aggregate principal maturities due in each period for Senior Secured Notes (excluding any accrued PIK interest), Senior Unsecured Notes, real estate financing, and financing of beneficial interests in securitizations as of December 31, 2024.

6 unchanged sentences

NOTE 11 — STOCKHOLDERS' EQUITY (DEFICIT)

Organizational Transactions

Classes of Common Stock and LLC Units

Carvana Co.'s amended and restated certificate of incorporation, among other things, authorizes (i) 50 million shares of Preferred Stock, par value $ 0.01 per share, (ii) 500 million shares of Class A common stock, par value $ 0.001 per share, and (iii) 125 million shares of Class B common stock, par value $ 0.001 per share.

Each share of Class A common stock generally entitles its holder to one vote on all matters to be voted on by stockholders.

Each share of Class B common stock held by the Garcia Parties generally entitles its holder to ten votes on all matters to be voted on by stockholders, for so long as the Garcia Parties maintain direct or indirect beneficial ownership of at least 25 % of the outstanding shares of Carvana Co.'s Class A common stock determined on an as-exchanged basis assuming that all of the Class A Units and Class B Units were exchanged for Class A common stock.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

common stock.

All other shares of Class B common stock generally entitle their holders to one vote per share on all matters to be voted on by stockholders.

10 unchanged sentences

Such consideration from the Company can be, at the Company's election, either shares of Class A common stock or cash.

As of December 31, 2023 and 2022, there were 250 million and 236 million Class A Units, respectively, and 2 million and 1 million Class B Units, respectively (as adjusted for the participation thresholds and closing price of Class A common stock on

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023 and 2022), issued and outstanding.

As of December 31, 2024 and 2023, there were 265 million and 250 million Class A Units, respectively, and 2 million at each period of Class B Units (as adjusted for the participation thresholds and closing price of Class A common stock on December 31, 2024 and 2023), issued and outstanding.

As discussed in Note 13 — Equity-Based Compensation, Class B Units were issued under the Company’s LLC Equity Incentive Plan (the "LLC Equity Incentive Plan") and are subject to a participation threshold, and are earned over the requisite service period.

Equity Offerings

On April 26, 2022, the Company completed a public offering of 15.625 million shares of its Class A common stock at an offering price of $ 80 for total net proceeds of $ 1.2 billion, after deducting underwriting discounts and offering expenses.

The Garcia Parties purchased an aggregate of 5.4 million shares of the Class A common stock offered at the public offering price.

The Company used the net proceeds to purchase 19.5 million newly-issued LLC Units in Carvana Group.

At-the-Market Offering

On July 19, 2023, the Company entered into a distribution agreement with Citigroup Global Markets Inc.

and Moelis & Company LLC, whereby the Company may sell up to the greater of (i) shares of Class A common stock representing an aggregate offering price of $ 1.0 billion, or (ii) an aggregate of 35 million shares of Class A common stock, from time to time, through an "at-the-market offering" program (the "ATM Program").

The following table summarizes the activity pursuant to the ATM Program for the period presented:

Year Ended December 31, 2023

and Moelis & Company LLC to establish an ATM Program, and on July 31, 2024, the Company refreshed the ATM Program by entering into an Amended and Restated Distribution Agreement with Barclays Capital Inc., Citigroup Global Markets Inc., Moelis & Company LLC, and Virtu Americas LLC.

Under the ATM Program as of December 31, 2024, the Company could sell up to the greater of (i) shares of Class A common stock representing an aggregate offering price of $ 1.0 billion or (ii) an aggregate of 35 million shares of Class A common stock, from time to time.

The Company uses the net proceeds from the ATM Program to purchase Class A Units.

The following table summarizes the activity under the ATM Program for the years ended December 31, 2024 and 2023.

December 31, 2024 December 31, 2023

(in millions, except share and per share amounts)

2 unchanged sentences

Gross proceeds (1)

(1) Net proceeds were $ 327 million after deducting $ 9 million of commissions and other offering expenses incurred.

$ 1,274 $ 336

(1) Net proceeds were $ 1.264 billion and $ 327 million, respectively, after deducting $ 10 million and $ 9 million, respectively, of commissions and other offering expenses incurred.

Private Placement

2 unchanged sentences

The price equivalent of $ 46.31 per share of Class A common stock was equal to the weighted average sale price per share of Class A common stock sold under the ATM Program through August 18, 2023.

As further described below, Class B common stock is exchangeable for an equivalent number of shares of Class A common stock, which exchange must be accompanied by 1.25 times as many Class A Units.

As further described below, Class B common stock is exchangeable for an equivalent

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

number of shares of Class A common stock, which exchange must be accompanied by 1.25 times as many Class A Units.

As exchanged, the price per Class A Unit was $ 37.048 .

4 unchanged sentences

To the extent such owners also hold Class B common stock, they are required to deliver to Carvana Co.

a number of shares of Class B common stock equal to the number of shares of Class A common stock

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

being exchanged for.

a number of shares of Class B common stock equal to the number of shares of Class A common stock being exchanged for.

Any shares of Class B common stock so delivered are canceled.

The number of exchangeable Class B Units is determined based on the value of Carvana Co.'s Class A common stock and the applicable participation threshold.

During each of the years ended December 31, 2023 and 2022, certain LLC Unitholders exchanged less than 0.1 million LLC Units and no shares of Class B common stock for less than 0.1 million newly-issued shares of Class A common stock.

Simultaneously, and in connection with these exchanges, Carvana Co.

received less than 0.1 million LLC Units during each of the years ended December 31, 2023 and 2022, increasing its total ownership interest in Carvana Group.

Class A Non-Convertible Preferred Units

On October 2, 2018, Carvana Group, LLC amended its LLC Agreement to create a class of non-convertible preferred units (the "Class A Non-Convertible Preferred Units"), effective September 21, 2018.

The Class A Non-Convertible Preferred Units were created in connection with Carvana Co.'s issuance of its Senior Unsecured Notes, as discussed further and defined in Note 10 — Debt Instruments.

On October 2, 2020, Carvana Group, LLC amended and restated its LLC Agreement to, among other things, authorize the issuance of 1.1 million Class A Non-Convertible Preferred Units to be sold to Carvana Co.

in connection with the issuance of its 2025 and 2028 Senior Unsecured Notes and authorize the issuance of additional Class A Non-Convertible Preferred Units, in each case in consideration for the capital contribution made or deemed to have been made by Carvana Co.

of the net proceeds of notes issuances.

used the net proceeds from the issuance of its Senior Unsecured Notes to purchase the Class A Non-Convertible Preferred Units, and, in the case of the Senior Secured Notes, received Class A Non-Convertible Preferred Units upon the cancellation of units previously issued in connection with the issuance of the Senior Unsecured Notes, as specified below:

Senior Notes Issuance

Class A Non-Convertible Preferred Units

Cancelled in Connection with Offers

Net Total Class A Non-Convertible Preferred Units

Finally, in connection with each exchange, in order to preserve the required four-to-five ratio between the number of shares of Class A common stock issued and outstanding by Carvana Co.

and the number of Class A Units owned by Carvana Co., an equivalent number of LLC units to the LLC units exchanged are issued to Carvana Co.

The exchanges affected pursuant to the Exchange Agreement during the years ended December 31, 2024 and 2023 were as follows:

December 31, 2024 December 31, 2023

(in thousands)

October 2020 2025 Senior Unsecured Notes

500 ( 402 ) 98

March 2021 2027 Senior Unsecured Notes

600 ( 568 ) 32

October 2020 2028 Senior Unsecured Notes

600 ( 578 ) 22

August 2021 2029 Senior Unsecured Notes

750 ( 724 ) 26

May 2022 2030 Senior Unsecured Notes

3,275 ( 3,248 ) 27

September 2023 2028 Senior Secured Notes

September 2023 2030 Senior Secured Notes

1,471 — 1,471

September 2023 2031 Senior Secured Notes

1,741 — 1,741

9,918 ( 5,520 ) 4,398

LLC Units exchanged by certain LLC Unitholders

Shares of Class B common stock retired

Newly issued Class A common stock

LLC Units received by Carvana Co.

Class A Non-Convertible Preferred Units

In accordance with the Carvana Group, LLC amended and restated LLC Agreement, and in connection with the issuance of Senior Secured Notes or Senior Unsecured Notes by Carvana Co., Carvana Group, LLC is authorized to issue Class A Non-Convertible Preferred Units to Carvana Co.

In each case, the consideration for the capital contribution made or deemed to have been made by Carvana Co.

is equal to the net proceeds of notes issuances.

As of December 31, 2024 and 2023, Carvana Co.

held 4.5 million and 4.4 million Class A Non-Convertible Preferred Units, respectively.

When Carvana Co.

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repays or otherwise retires, one Class A Non-Convertible Preferred Unit is canceled and retired.

As discussed in Note 10 — Debt Instruments, the Company exchanged a majority of its Senior Unsecured Notes for new Senior Secured Notes, at which time 5.5 million Class A Non-Convertible Preferred Units were canceled and retired.

During the year ended December 31, 2024, the Company cancelled and retired 0.47 million of Class A Non-Convertible Preferred Units in conjunction with the repurchases and redemption of 2028 Senior Secured Notes as discussed in Note 10 — Debt Instruments and issued 0.53 million of Class A Non-Convertible Preferred Units in conjunction with the PIK interest payments the Company was required to make on each of February 15 and August 15, 2024.

During the year ended December 31, 2023, the Company cancelled and retired 5.5 million of Class A Non-Convertible Preferred Units in conjunction with the exchange of a portion of its Senior Unsecured Notes for new Senior Secured Notes.

Tax Asset Preservation Plan

On January 16, 2023, the Company entered into a Section 382 Rights Agreement (the “Tax Asset Preservation Plan”) designed to preserve shareholder value and the value of certain tax assets primarily associated with federal net operating loss carryforwards and built-in losses under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

The Tax Asset Preservation Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of the Company's outstanding Class A common stock (any such person an “Acquiring Person”), without the approval of the Company’s board of directors (the "Board").

In connection therewith, the Board declared a dividend of one preferred share purchase right (a “Right”) for each share of Class A common stock, par value $ 0.001 per share, of the Company.

Each Right entitles the registered holder to purchase from

On January 16, 2023, the Company entered into a Section 382 Rights Agreement, which was later amended and restated (the “Tax Asset Preservation Plan”).

On June 3, 2024, the Company determined that the Tax Asset Preservation Plan was no longer necessary for the preservation of material valuable Tax Attributes (as defined therein) and set a final expiration date of June 4, 2024, upon which date the preferred share purchase rights expired and the Tax Asset Preservation Plan terminated.

In connection therewith, the associated Series B Preferred Stock underlying the preferred share purchase rights was eliminated by

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Company one one-thousandth of a share of Series B Preferred Stock, par value $ 0.01 per share, of the Company (the “Preferred Shares”) at a price of $ 50.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.

The Rights will separate and begin trading separately from the Class A common stock, and right certificates will be caused to evidence the Rights, on the earlier to occur of (i) the Close of Business (as such term is defined in the Tax Asset Preservation Plan) on the tenth day following a public announcement, or the public disclosure of facts indicating, that a Person (as such term is defined in the Tax Asset Preservation Plan) or group of affiliated or associated Persons has acquired Beneficial Ownership (as such term is defined in the Tax Asset Preservation Plan) of 4.9% or more of the outstanding Class A common stock (or, in the event that the Board determines to effect an exchange in accordance with Section 24 of the Tax Asset Preservation Plan and the Board determines that a later date is advisable, then such later date) and (ii) the close of business on the tenth business day (or such later date as may be determined by action of the Board prior to such time as any Person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation of which would result in the Beneficial Ownership by a Person or group of 4.9% or more of the outstanding Class A common stock.

If issued, each Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void) will become exercisable for Class A common stock having a value equal to two times the exercise price of the Right.

However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company, including without limitation any dividend, voting or liquidation rights.

On July 18, 2023, the Company amended and restated its Tax Asset Preservation Plan in order to adjust the definition of Beneficial Ownership to exclude derivatives that may only be settled in cash, do not confer voting rights, and lack other features consistent with beneficial ownership of shares of Class A common stock.

filing of a Certificate of Elimination with the State of Delaware on June 5, 2024, returning such Preferred Stock to authorized but undesignated shares.

NOTE 12 — NON-CONTROLLING INTERESTS

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To the extent that the number of as-converted Class B Units change or Class B Units are forfeited, the resulting difference in ownership will be accounted for as equity transactions adjusting the non-controlling interest and additional paid-in capital.

During the years ended December 31, 2023, 2022, and 2021, the total adjustments related to exchanges of LLC Units were a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of $ 1 million, $ 1 million, and $ 43 million, respectively, which have been included in exchanges of LLC Units in the accompanying consolidated statements of stockholders' equity (deficit).

During the years ended December 31, 2024, 2023, and 2022, the total adjustments related to exchanges of LLC Units and non-controlling interest related to restricted stock unit ("RSU") vesting and stock option ("NQSO") exercises were an increase in non-controlling interests and a corresponding decrease in additional paid-in capital of $ 33 million, and a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of $ 1 million, and $ 1 million, respectively, which have been included in exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises in the accompanying consolidated statements of stockholders' equity (deficit).

During the years ended December 31, 2024, 2023, and 2022, Carvana Co.

utilized its net proceeds from its equity offerings to purchase LLC Units, which resulted in adjustments to increase non-controlling interests and to decrease additional paid-in capital by $ 83 million, and $ 554 million, respectively, which have been included in adjustment to non-controlling interests related to equity offerings in the accompanying consolidated statements of stockholders' equity (deficit).

No LLC Units were purchased during 2021.

utilized the net proceeds from its equity offerings and ATM Program to purchase Class A Units, which resulted in adjustments to increase non-controlling interests and to decrease additional paid-in capital by $ 515 million, $ 83 million, and $ 554 million, respectively, which have been included in adjustments to the non-controlling interests related to equity offerings in the accompanying consolidated statements of stockholders' equity (deficit).

As of December 31, 2024, Carvana Co.

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The net income (loss) attributable to the non-controlling interests on the accompanying consolidated statements of operations represents the portion of the net income (loss) attributable to the economic interest in Carvana Group held by the non-controlling LLC Unitholders calculated based on the weighted average non-controlling interests' ownership during the periods presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31,

Years Ended December 31,

2024 2023 2022

(in millions)

Transfers from (to) non-controlling interests:

Transfers (to) from non-controlling interests:

Decrease as a result of issuances of Class A and B common stock $ ( 515 ) $ ( 83 ) $ ( 554 )

Increase as a result of exchanges of LLC Units 1 1 43

Total transfers from (to) non-controlling interests $ ( 82 ) $ ( 553 ) $ 43

(Decrease) Increase as a result of exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises ( 33 ) 1 1

Total transfers to non-controlling interests $ ( 548 ) $ ( 82 ) $ ( 553 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 — EQUITY-BASED COMPENSATION

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A summary of equity-based compensation recognized during the years ended December 31, 2024, 2023, and 2022 is as follows:

For the Years Ended December 31,

Years Ended December 31,

2024 2023 2022

(in millions)

Restricted Stock Units and Awards excluding those granted in relation to the CEO Milestone Gift $ 66 $ 41 $ 35

Restricted Stock Units granted in relation to the CEO Milestone Gift ( 1 ) 39 —

Restricted Stock Units and Awards $ 81 $ 65 $ 80

Options 21 16 13

Class A Units — — 1

Total equity-based compensation 102 81 93

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Equity-based compensation, net of capitalized amounts $ 91 $ 73 $ 69

During the years ended December 31, 2023, 2022, and 2021, the Company capitalized $ 7 million, $ 8 million, and $ 7 million, respectively, of equity-based compensation to property and equipment related to software development and real estate projects and $ 1 million, $ 16 million, and $ 1 million, respectively, to inventory related to reconditioning and inbound transportation of vehicles.

All other equity-based compensation is included in selling, general, and administrative expenses in the accompanying consolidated statements of operations.

During the years ended December 31, 2024, 2023, and 2022, the Company capitalized $ 9 million, $ 7 million, and $ 8 million, respectively, of equity-based compensation to property and equipment related to software development and $ 2 million, $ 1 million, and $ 16 million, respectively, to inventory related to reconditioning and inbound transportation of vehicles.

All other equity-related compensation is included in selling, general, and administrative expenses in the accompanying consolidated statements of operations.

As of December 31, 2024, unrecognized equity-based compensation related to outstanding awards and the related weighted-average period over which it is expected to be recognized subsequent to December 31, 2024 is presented in the table below.

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Total unrecognized equity-based compensation $ 187

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2017 Omnibus Incentive Plan

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The number of shares authorized for issuance under the 2017 Incentive Plan is subject to an automatic annual increase (the "Automatic Increase") of the lesser of two percent of the Company's outstanding Class A common stock or an amount determined by the Compensation and Nominating Committee of the Board.

On each of January 1, 2023, and January 1, 2024, the number of shares authorized for issuance under the 2017 Incentive Plan increased by two percent of the outstanding Class A common stock under the Automatic Increase.

On each of January 1, 2025 and 2024, the number of shares authorized for issuance under the 2017 Incentive Plan increased by two percent of the then outstanding Class A common stock under the Automatic Increase.

In addition, on May 1, 2023, the Company's stockholders approved an amendment to the 2017 Incentive Plan to further increase the number of shares available under the 2017 Incentive Plan by 20 million shares (the "Amendment Increase").

After taking into account the January 1, 2023 Automatic Increase and the Amendment Increase, as of December 31, 2023, 36 million shares of Class A common stock are available for issuance under the 2017 Incentive Plan, which the Company may grant as stock options, stock appreciation rights, restricted stock, restricted stock units and other equity-based awards to employees, directors, officers, and consultants.

After taking into account the January 1, 2024 Automatic Increase and the Amendment Increase, as of December 31, 2024, 17 million shares of Class A common stock are available for issuance under the 2017 Incentive Plan, which the Company may grant as stock options, stock appreciation rights, restricted stock awards, restricted stock units and other equity-based awards to employees, directors, officers, and consultants.

The majority of equity granted by the Company vests over four-year periods based on continued employment with the Company.

As of December 31, 2023, 17 million shares remain available for future equity-based award grants under this plan.

The Company also maintains a clawback policy (the "Clawback Policy"), which requires the Company's officers, as defined by Rule 16a-1 of the Securities Exchange Act of 1934, to repay the Company certain Incentive Compensation (as defined in the Clawback Policy) if (i) the Company is required to prepare an accounting restatement of its financial statements due to its material noncompliance with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (each a "Restatement"), and (ii) no more than three years have elapsed since the original filing date of the financial statements.

In the event of a Restatement, the Company must recover the amount of Incentive Compensation received that exceeds the amount of Incentive Compensation that otherwise would have been received, had it been determined based on the restated amounts, computed without regard to any taxes paid.

To date, there has been no repayment of compensation from executive officers pursuant to the Clawback Policy.

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Restricted Stock Awards and Restricted Stock Units

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RSUs are settled in shares of Class A common stock on a one -to-one basis within thirty days of vesting.

As discussed in Note 7 — Related Party Transactions, the RSUs granted during the year ended December 31, 2022 include 0.5 million RSUs granted in connection with the CEO Milestone Gift for which the Company recognized a benefit of $ 1 million as a result of more forfeitures than employees continuing to vest and an expense of $ 39 million for the years ended December 31, 2023 and 2022, respectively, a portion of which related to the production of the Company's used vehicle inventory and was therefore capitalized to inventory.

RSA and RSU activity during the years ended December 31, 2024, 2023, and 2022 was as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Number of RSAs/RSUs (in thousands) Weighted-Average Grant-Date Fair Value

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Outstanding and nonvested at December 31, 2022

2,652 $ 52.62

Granted 10,392 $ 13.13

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Employee Stock Purchase Plan

In May 2021, the Company adopted an employee stock purchase plan (the "ESPP").

On July 1, 2021, the ESPP went into effect.

In May 2021, the Company adopted an employee stock purchase plan (the "ESPP"), which went into effect on July 1, 2021.

The ESPP allows substantially all employees, excluding members of senior management, to acquire shares of the Company's Class A common stock through payroll deductions over six-month offering periods, commencing on January 1 and July 1 of each year.

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The Company is authorized to grant up to 0.5 million shares of Class A common stock under the ESPP.

During the years ended December 31, 2023, 2022 and 2021, the Company issued 32,790 , 86,352 and 2,494 shares of Class A common stock, respectively, and as of December 31, 2023, 378,364 shares of Class A common stock remained available for future issuance.

During all three years ended December 31, 2023, 2022 and 2021, the Company recognized less than $ 1 million of equity-based compensation expense related to the ESPP.

During the years ended December 31, 2024, 2023 and 2022, the Company issued 10,396 , 32,790 and 86,352 shares of Class A common stock, respectively, and as of December 31, 2024, 367,968 shares of Class A common stock remained

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

available for future issuance.

During each of the three years ended December 31, 2024, 2023 and 2022, the Company recognized less than $ 1 million of equity-based compensation expense related to the ESPP.

Non-Qualified Stock Options

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The options typically vest 25 % on the anniversary of the grant date and in equal monthly installments thereafter for a total vesting period of four years and expire ten years after the grant date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock option activity during the years ended December 31, 2024, 2023, and 2022 was as follows:

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2,497 $ 25.84 8.4 $ 444

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The Company determined the grant-date fair value of the options granted during the years ended December 31, 2024, 2023, and 2022 using the Black-Scholes valuation model with the following weighted-average assumptions:

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During 2018, the Company granted certain employees Class A Units with service-based vesting over two - to four-year periods and a grant-date fair value of $ 18.58 per Class A Unit.

The grantees entered into the Exchange Agreement under which each LLC Unitholder (and certain permitted transferees thereof) may receive shares of the Company's Class A common stock in

The grantees entered into the Exchange Agreement under which each LLC Unitholder (and certain permitted transferees thereof) may receive shares of the Company's Class A common stock in exchange for their LLC Units on a four-to-five conversion ratio, or cash at the option of the Company, subject to conversion ratio adjustments for stock splits, stock dividends, reclassifications, and similar transactions and subject to vesting.

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exchange for their LLC Units on a four-to-five conversion ratio, or cash at the option of the Company, subject to conversion ratio adjustments for stock splits, stock dividends, reclassifications, and similar transactions and subject to vesting.

A summary of the Class A Unit activity for the years ended December 31, 2024, 2023, and 2022 is as follows:

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Granted — n/a

Exchanged ( 36 ) $ 18.58

Forfeited — n/a

Exchanged — n/a

Forfeited ( 6 ) $ 18.58

Outstanding at December 31, 2022

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Exchanged — n/a

Forfeited ( 6 ) $ 18.58

Forfeited — n/a

Outstanding at December 31, 2023

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Exchanged ( 61 ) $ 5.75

Forfeited ( 1 ) $ 12.00

Forfeited — n/a

Outstanding at December 31, 2022

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Diluted net earnings (loss) per share is computed by giving effect to all potentially dilutive shares.

For the years ended December 31, 2022 and 2021, potentially dilutive shares are excluded from diluted net earnings (loss) per share because they would have an anti-dilutive impact.

Potentially dilutive shares have been excluded from the computation of diluted net earnings (loss) per share when their effect is anti-dilutive.

Net earnings (loss) for all periods presented is attributable only to Class A common stockholders, due to no activity related to convertible preferred stock during those periods.

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(in millions, except number of shares, which are reflected in thousands, and per share amounts)

Net income (loss) $ 404 $ 150 $ ( 2,894 )

Net income (loss) attributable to non-controlling interests 194 ( 300 ) ( 1,307 )

Net income (loss) attributable to Carvana Co.

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Dilutive effect of Class A common shares:

Stock Options (1)

Restricted Stock Units and Awards (1)

6,689 4,815 —

Class A Units (2)

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(1) Calculated using the treasury stock method, if dilutive

(2) Calculated using the if-converted method, if dilutive

Shares of Class B common stock do not share in the losses of the Company and are therefore not participating securities.

(2) Calculated using the if-converted stock method, if dilutive

Shares of Class B common stock do not share in the losses or income of the Company and are therefore not participating securities.

As such, separate presentation of basic and diluted net earnings (loss) per share of Class B common stock under the two-class method has not been presented.

The following table presents potentially dilutive securities, as of the end of the period, excluded from the computations of diluted net earnings (loss) per share of Class A common stock for the years ended December 31, 2023, 2022, and 2021:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31,

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1,763 — 1,559

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

_________________________

(1) Represents number of instruments outstanding at the end of the period that were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive.

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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, including Carvana Co., based on its economic interest held in Carvana Group.

Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members, including Carvana Co., based on its allocable share held in Carvana Group.

was formed on November 29, 2016 and did not engage in any operations prior to the IPO.

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federal, state and local income taxes with respect to its allocable share of any taxable income or loss of Carvana Group, as well as any stand-alone income or loss generated by Carvana Co.

Net income (loss) before income taxes was $ 175 million, $( 2.9 ) billion, and $( 286 ) million for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company had an income tax expense of $ 25 million for the year ended December 31, 2023, and $ 1 million for both years ended December 31, 2022 and 2021.

The components of income tax expense are as follows:

Net income (loss) before income taxes was $ 400 million, $ 175 million, and $( 2.9 ) billion for the years ended December 31, 2024, 2023, and 2022, respectively.

The Company had an income tax (benefit) provision of $( 4 ) million, $ 25 million, and $ 1 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The components of income tax (benefit) provision are as follows:

Years Ended December 31,

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State - Total

Income tax provision

Income tax (benefit) provision

$ ( 4 ) $ 25 $ 1

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federal income taxes at statutory rate $ 84 21.0 % $ 37 21.0 % $ ( 607 ) 21.0 %

Loss attributable to non-controlling interests 61 34.9 % 274 ( 9.5 ) % 32 ( 11.2 ) %

(Income) Loss attributable to non-controlling interests ( 42 ) ( 10.6 ) % 61 34.9 % 274 ( 9.5 ) %

State taxes 1 0.3 % 19 10.9 % ( 64 ) 2.2 %

Stock based compensation — — % — — % ( 16 ) 5.6 %

Excess tax benefits related to stock-based compensation ( 50 ) ( 12.5 ) % — — % — — %

Valuation allowance ( 10 ) ( 2.5 ) % ( 96 ) ( 54.9 ) % 398 ( 13.7 ) %

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Other — — % 1 0.6 % — — %

Income tax provision $ 25 14.3 % $ 1 — % $ 1 ( 0.3 ) %

Income tax (benefit) provision $ ( 4 ) ( 1.0 ) % $ 25 14.3 % $ 1 — %

Deferred income taxes reflect the net tax effects of temporary differences between the tax basis in an asset or liability and its reported amount under GAAP.

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Deferred tax liabilities $ — $ —

Intangibles $ — $ ( 1 )

Total deferred tax assets and liabilities $ 3 $ 5

As of December 31, 2023 and 2022, the Company had federal and state net operating loss carry forwards of $ 1.2 billion and $ 1.9 billion, respectively.

Federal losses that arose prior to 2018 are anticipated to be fully utilized.

Federal losses generated after 2017 will be carried forward indefinitely.

As described in Note 11 — Stockholders' Equity (Deficit), during the year ended December 31, 2023, the Company acquired less than 0.1 million LLC Units in connection with exchanges with LLC Unitholders.

The Company also issued 7.2 million shares of Class A common stock and received gross proceeds of $ 336 million under the ATM program.

The Company utilized the proceeds from the issuance of Class A common stock to purchase 8.9 million newly issued Class A units in Carvana Group.

As a result, the Company recognized a gross deferred tax asset of less than $ 1 million associated with the

As of both December 31, 2024 and 2023, the Company had federal and state net operating loss carry forwards of $ 1.2 billion.

All federal net operating losses can be carried forward indefinitely, certain state net operating losses can be carried forward indefinitely, and others can be carried forward between 10 and 20 years.

As described in Note 11 — Stockholders' Equity (Deficit), the Company acquires LLC Units in connection with exchanges with LLC Unitholders.

During the years ended December 31, 2024 and 2023, the Company recognized a gross deferred tax asset of $ 280 million and less than $ 1 million, respectively, associated with the difference in basis in its investment in Carvana Group related to these acquisitions of LLC Units.

Additionally, as described in Note 11 — Stockholders' Equity (Deficit), the Company issues shares under the ATM Program and utilizes the proceeds from the issuance of Class A common stock to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

basis difference in its investment in Carvana Group which is reflected as an increase to additional paid-in capital in the accompanying statements of stockholders' equity (deficit).

During the year ended December 31, 2022, the Company acquired less than 0.1 million LLC Units in connection with exchanges with LLC Unitholders.

On April 26, 2022, the Company issued 15.625 million shares of its Class A common stock and received net proceeds from the offering of $ 1.2 billion.

The Company utilized the proceeds from the issuance of Class A common stock to purchase 19.5 million newly issued Class A units in Carvana Group.

As a result, the Company recognized a gross deferred tax asset of $ 22 million associated with the basis difference in its investment in Carvana Group which is reflected as an increase to additional paid-in capital in the accompanying consolidated statements of stockholders' equity (deficit).

As described in Note 10 — Debt Instruments, the Company completed the Exchange Offers, whereby it exchanged validly tendered Senior Unsecured Notes for newly issued Senior Secured Notes.

tax purposes the Company is required to recognize cancellation of debt income (“CODI”) on the difference between the adjusted issue price of the debt exchanged and the fair market value of the new debt issued.

The Company has determined that it should recognize $ 1.4 billion of CODI for tax purposes.

purchase Class A Units in Carvana Group.

During the years ended December 31, 2024 and 2023, the Company recognized a gross deferred tax asset of $ 9 million and $ 21 million, respectively, associated with the difference in basis in its investment in Carvana Group related to these acquisitions of LLC Units.

As described in Note 10 — Debt Instruments, during the year ended December 31, 2023, the Company completed the Exchange Offers, whereby it exchanged validly tendered Senior Unsecured Notes for newly issued Senior Secured Notes.

tax purposes the Company recognized cancellation of debt income (“CODI”) on the difference between the adjusted issue price of the debt exchanged and the fair market value of the new debt issued.

As a result, during the year ended December 31, 2023, the Company recognized $ 1.4 billion of CODI for tax purposes.

As described in Note 3 — Business Combinations, the Company acquired ADESA on May 9, 2022.

The Company made an election under Section 336(e) of the United States Internal Revenue Code of 1986, as amended (the “Code”) to treat the acquisition as a deemed asset acquisition for income tax purposes and as such will receive a step up in asset basis and will be able to amortize the acquired Goodwill under Section 197 of the Code over a 15-year period.

The total Goodwill amortization expense for the years ended December 31, 2023 and 2022 was $ 56 million and $ 37 million, respectively.

The Company made an election under Section 336(e) of the United States Internal Revenue Code of 1986, as amended (the “Code”) to treat the acquisition as a deemed asset acquisition for income tax purposes and as such received a step up in asset basis and is able to amortize the acquired Goodwill under Section 197 of the Code over a 15-year period.

The total Goodwill amortization expense was $ 56 million for each of the years ended December 31, 2024 and 2023, and $ 37 million for the year ended December 31, 2022.

During the year ended December 31, 2024, management performed an assessment of the recoverability of deferred tax assets.

Management determined, based on the accounting standards applicable to such assessment, that there was sufficient evidence as a result of the Company’s cumulative losses to conclude it was more likely than not that its deferred tax assets would not be realized and has recorded a full valuation allowance of $ 2.0 billion against its deferred tax assets.

The Company has $ 5 million in deferred tax assets and less than $ 1 million in deferred tax liabilities from separate filing entities that are not available to offset its deferred tax assets.

In the event that management was to determine that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be made which would reduce the provision for income taxes.

This assessment considered both objective and subjective factors.

These factors included, but were not limited to, a history of taxable losses in prior years, excess tax benefits related to equity-based compensation, and future reversal of existing temporary differences.

After evaluating all available evidence, management determined, based on the accounting standards applicable to such assessment, that there was sufficient evidence as a result of the Company’s cumulative losses to conclude it was more likely than not that its deferred tax assets would not be realized and has maintained a full valuation allowance against its deferred tax assets.

Given the improvement in the Company's operating results and depending on the amount of equity-based compensation tax deductions available in the future, among other factors, a release of the deferred tax asset valuation allowance may be possible in the next few years.

Release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax provision for the period the release is recorded.

The Company recognizes uncertain income tax positions when it is more-likely-than-not the position will be sustained upon examination.

As of the year ended December 31, 2024 and 2023, the Company has no t identified any uncertain tax positions and has no t recognized any related reserves.

The Company's effective tax rate for the years ended December 31, 2023 and 2022 was an expense of 14.3 % and 0.0 %, respectively.

The effective tax rate for the year ended December 31, 2023 differs from the statutory tax rate primarily due to the current year income tax expense related to the impact of CODI, partially offset by a change to the valuation allowance on the Company's deferred tax assets.

The Company's effective tax rate for the years ended December 31, 2024 and 2023 was a benefit of 1.0 % and an expense of 14.3 %, respectively.

Tax Receivable Agreement

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To the extent that the Company is unable to timely make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid.

If the Internal Revenue Service or a state or local taxing authority challenges the tax basis adjustments that give rise to payments under the TRA and the tax basis adjustments are subsequently disallowed, the recipients of payments under the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

agreement will not reimburse the Company for any payments the Company previously made to them.

Any such disallowance would be taken into account in determining future payments under the TRA and would, therefore, reduce the amount of any such future payments.

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or (iii) the Company elects an early termination of the TRA, then the TRA will terminate and the Company's obligations, or the Company's successor’s obligations, under the TRA will accelerate and become due and payable, based on certain assumptions, including an assumption that the Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA and that any LLC Units that have not been exchanged are deemed exchanged for the fair market value of the Company's Class A common stock at the time of termination.

As of December 31, 2023, the Company has recorded a $ 14 million TRA liability related to the estimated cash savings in U.S.

federal, state or local tax related to the tax benefits utilized to offset recognized CODI, which is included in other liabilities in the accompanying consolidated balance sheets, and of which $ 11 million will be paid to related parties.

As of December 31, 2024 and 2023, the Company recorded a TRA liability of $ 82 million and $ 14 million, respectively, of which $ 61 million and $ 11 million, respectively, will be paid to related parties.

As of December 31, 2024 and 2023, $ 17 million and zero , respectively, is included in other current liabilities and $ 65 million and $ 14 million, respectively, is included in other liabilities on the accompanying consolidated balance sheets.

For the remaining $ 2.0 billion TRA liability as of December 31, 2024, the Company has concluded, based on applicable accounting standards, that it was more likely than not that its deferred tax assets subject to the TRA would not be realized;

20 unchanged sentences

The Company leases and subleases certain of its real estate to third parties.

Lease and sublease income for the years ended December 31, 2023, 2022, and 2021 was $ 5 million, $ 3 million, and zero ,

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Lease and sublease income for the years ended December 31, 2024, 2023, and 2022 was $ 7 million, $ 5 million, and $ 3 million, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

The Company's operating leases are included in operating lease right-of-use assets, other current liabilities, and operating lease liabilities on the accompanying consolidated balance sheets.

Refer to Note 7 — Related Party Transactions for further discussion of operating leases with related parties.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Finance Leases

1 unchanged sentence

The leases have initial terms of two to five years , some of which include extension options for up to four additional years, and require monthly payments.

The Company's finance leases are included in long-term debt on the accompanying consolidated balance sheets.

The Company's finance leases are included in current portion of long-term debt and long-term debt on the accompanying consolidated balance sheets.

Lease Costs and Activity

19 unchanged sentences

(1) The year ended December 31, 2022 includes $ 28 million of lease termination fees, net of amounts written off for the corresponding operating lease right-of-use assets and operating lease liabilities which were terminated.

Maturity Analysis of Lease Liabilities

The following table summarizes maturities of lease liabilities as of December 31, 2023:

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Maturity Analysis of Lease Liabilities

The following table summarizes maturities of lease liabilities as of December 31, 2024:

Operating Leases (1)

12 unchanged sentences

(1) Leases that are on a month-to-month basis, short-term leases, and lease extensions that the Company does not expect to exercise are not included.

(2) Related party lease payments exclude rent payments due under the DriveTime Lease Agreement and the DriveTime Hub Lease Agreement for locations where the Company shares space with DriveTime, as those are variable lease payments contingent upon the Company's utilization of the leased assets.

(2) Related party lease payments exclude rent payments due under the DriveTime lease Agreements for locations where the Company shares space with DriveTime, as those are variable lease payments contingent upon the Company's utilization of the leased assets.

As of December 31, 2024 and 2023, none of the Company's lease agreements contain material residual value guarantees or material restrictive covenants.

17 unchanged sentences

Purchase Obligations

The Company has purchase obligations for certain customary services related to operating a wholesale auction business of $ 139 million in aggregate over the next five years , as of December 31, 2023.

The Company has purchase obligations for certain customary services related to operating a wholesale auction business of $ 109 million in aggregate over the next four years , as of December 31, 2024.

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 and legal actions that arise in the ordinary course of business for a publicly traded auto retail and e-commerce company.

For example, the Company is currently a party to legal and regulatory disputes, including putative class action and shareholder derivative lawsuits, alleging, among other things, the violation of federal securities and antitrust laws and state laws regarding consumer protection, stockholders' rights and the titling and registration of vehicles sold to its customers.

These disputes include, but are not limited to, In re Carvana Co.

Securities Litigation, United States District Court for the District of Arizona (Case No.

CV-22-2126-PHX-MTL);

In re Carvana Co.

Stockholders Litigation, Delaware Chancery Court (Case No.

2020-0415-KSJM);

Taiae Bradley v.

Carvana, LLC, United States District Court for the Eastern District of Pennsylvania (Case No.

2:22-cv-02525-MMB);

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 intellectual property disputes, putative class action lawsuits, and shareholder derivative lawsuits, alleging, among other things, patent infringement, the violation of federal securities and antitrust laws and state laws regarding consumer protection, stockholders' rights, and the titling and registration of vehicles sold to its customers.

These disputes include, but are not limited to, Carvana, LLC v.

, United States District Court for the Southern District of New York (Case No.

7:23-cv-08616-KMK-VR);

Dana Jennings, et al.

1 unchanged sentence

5:21-cv-05400-EGS);

Syretta Harvin et al.

Carvana, LLC et al., United States District Court for the Eastern District of Pennsylvania (Case No.

and Syretta Harvin et al.

Carvana, LLC et al.

, United States District Court for the Eastern District of Pennsylvania (Case No.

2:23-cv-02068-MRP).

and In re Carvana Co.

In 2024, In re Carvana Co.

Stockholders Litigation , Delaware Chancery Court (Case No.

2023-0600-KSJM).

In 2023, Neal Vestal v.

Carvana Co., et al ., Delaware Chancery Court (Case No.

2022-0609-KSJM), Mountaineer Motors of Lenoir, LLC v.

Carvana, LLC, et al ., United States District Court for the Western District of North Carolina (Case No.

5:22-cv-00171), and City of Warwick Retirement System v.

Carvana Co., et al ., Maricopa County, Arizona Superior Court (Case No.

CV2022-013054) were all dismissed with prejudice, and Brittany Fischer v.

Carvana, LLC , Lee County, Florida Circuit Court (Case No.

2022-007133-CA-01) was settled for an immaterial amount.

The Company believes the claims in these matters are not material or are without merit and intends to defend the matters vigorously.

The Company also continues to work closely with government agencies to respond to their requests.

It is not possible to determine the probability of loss or estimate damages, if any, for any of the above matters, and therefore, the Company has not established reserves for any of these proceedings.

If the Company determines that a loss is both probable and reasonably estimable, the Company will record a liability, and, if the liability is material, disclose the amount of the liability reserved.

2020-0415-KSJM) was dismissed, all charges against Company officers and directors brought in In re Carvana Co.

Stockholders Litigation , Delaware Chancery Court (Case No.

2023-0600-KSJM) were dismissed, and Michael Cribier v.

Carvana, LLC , United States District Court for the Southern District of California (Case No.

3:24-cv-00094-DMS-JLB) was settled for an immaterial amount.

Additionally, the Attorney General offices of various states, from time to time, conduct inquiries regarding the Company's inspection, reconditioning, advertising, sale, delivery, titling, registration, and post-sale service of retail vehicles.

The Company works closely with government agencies to respond to these requests and fully cooperates with any such inquiries, which if not amicably resolved, have resulted and may again result in state Attorney General offices filing claims against the Company.

The Company believes the claims or counterclaims against the Company in the legal matters above are not material or are without merit, as may be applicable, and intends to defend the matters vigorously.

As of December 31, 2024 and 2023, the Company has an accrual for unresolved legal matters, including, if applicable, those discussed above, of $ 10 million and $ 3 million, respectively.

The accrual is classified in accounts payable and accrued expenses in the accompanying consolidated balance sheets and selling, general and administrative expenses in the accompanying statements of operations.

If an unfavorable ruling or development were to occur, there exists the possibility of a material adverse impact on the Company's business, results of operations, financial condition, or cash flows.

Future litigation may be necessary to defend the Company and its partners by determining the scope, enforceability and validity of third-party proprietary rights or to establish its proprietary rights.

The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

Securities Class Action

On August 3, 2022, a putative class action complaint titled John Brent v.

Carvana Co., et al.

was filed in the United States District Court for the District of New Jersey against the Company and certain of the Company's executive officers.

The complaint was filed on behalf of a purported class of stockholders and asserts violations of Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5.

The complaint sought unspecified damages and an award of fees, costs, and expenses.

On September 29, 2022, a second putative class action complaint titled Rodeo Collection Ltd.

Carvana Co., et al.

was filed in the United States District Court for the District of New Jersey, alleging similar claims against the same defendants, and seeking the same form of relief.

The two cases were then consolidated and subsequently transferred to the United States District Court for the District of Arizona (the "Arizona District Court") as In re Carvana Co.

Securities Litigation , United States District Court for the District of Arizona (Case No.

CV-22-2126-PHX-MTL).

On February 14, 2023, a consolidated complaint was filed in the Arizona District Court, alleging new claims for violation of Section 20A of the Exchange Act and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended (the "Securities Act"), and naming as new defendants certain Carvana directors, officers, and underwriters.

The Arizona District Court granted the Company's motion to dismiss the consolidated complaint on February 29, 2024 and gave the plaintiff leave to file an amended complaint, which was filed on March 29, 2024.

On December 16, 2024, the Company's motion to dismiss the consolidated complaint, as amended, was granted with respect to alleged violations of Section 20A of the Exchange Act and Section 12(a)(2) of the Securities Act, granted in part and denied in part with respect to alleged violations of Section 10(b) and Rule 10b-5 of the Exchange Act and Section 11 of the Securities Act, and denied with respect to alleged violations of Section 20(a) of the Exchange Act and Section 15 of the Securities Act.

The Company intends to vigorously defend the remaining claims under this action in all respects.

At this time, the Company is not

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in a position to assess the likelihood of any potential loss or adverse effect on its financial condition or to estimate the amount or range of potential losses, if any, from this action.

The results of any current or future litigation or government inquiries cannot be predicted with certainty, and regardless of the outcome, litigation and government inquiries can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

NOTE 18 — FAIR VALUE OF FINANCIAL INSTRUMENTS

9 unchanged sentences

$ 464 $ — $ — $ 464

Purchase price adjustment receivables

$ 2 $ — $ — $ 2

Root Warrants

$ 120 $ — $ — $ 120

December 31, 2023

4 unchanged sentences

Beneficial interests in securitizations $ 366 $ — $ — $ 366

Purchase price adjustment receivables

$ 7 $ — $ — $ 7

Root Warrants

$ 5 $ — $ — $ 5

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 consolidated balance sheets.

As of December 31, 2023 and 2022, the Company has purchase price adjustment receivables of $ 7 million and $ 37 million, respectively, which are carried at fair value and classified as other assets in the accompanying consolidated balance sheets.

Under the MPSA, the purchaser will make future cash payments to the Company based on the performance of the finance receivables sold.

The fair value of the purchase price adjustment receivables are determined based on the extent to which the Company’s estimated performance of the underlying finance receivables exceeds a mutually agreed upon performance threshold of the underlying finance receivables as of measurement dates specified in the MPSA.

The Company develops its estimate of future cumulative losses based on the historical performance of finance receivables it originated with similar characteristics as well as general macro-economic trends.

The Company then utilizes a discounted cash flow model to calculate the present value of the expected future payment amounts.

Due to the lack of observable market data these receivables are classified as Level 3.

The adjustments to the fair value of the purchase price adjustment receivables were a gain of $ 1 million and $ 14 million during the years ended December 31, 2023 and 2022, respectively, and are reflected in other (income) expense, net in the accompanying consolidated statements of operations.

Beneficial Interests in Securitizations

3 unchanged sentences

The Company's beneficial interests in securitizations include rated notes and certificates and other assets, all of which are classified as Level 3 due to the lack of observable market data.

The Company determines the fair value of its rated notes based on non-binding broker quotes.

The non-binding broker quotes are based on models that consider the prevailing interest rates, recent market transactions, and current business conditions.

The Company determines the fair value of its certificates and other assets using a combination of non-binding market quotes and internally developed discounted cash flow models.

The Company determines the fair value of its rated notes based

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

discounted cash flow models use discount rates based on prevailing interest rates and the characteristics of the specific instruments.

As of December 31, 2023 and 2022, the range of discount rates were 6.2 % to 12.0 % and 7.1 % to 11.3 %, respectively.

on non-binding broker quotes.

The non-binding broker quotes are based on models that consider the prevailing interest rates, recent market transactions, and current business conditions.

The Company determines the fair value of its certificates and other assets using a combination of non-binding market quotes and internally developed discounted cash flow models.

The discounted cash flow models use discount rates based on prevailing interest rates and the characteristics of the specific instruments.

As of December 31, 2024 and 2023, the range of discount rates were 6.0 % to 10.0 % and 6.2 % to 12.0 %, respectively, and the weighted average of discount rates were 9.7 % and 8.9 %, respectively.

Significant increases or decreases in the inputs to the models could result in a significantly higher or lower fair value measurement.

3 unchanged sentences

There were no transfers out of Level 3 during the years ended December 31, 2024 and 2023.

In December 2021, the Company began selling certain of its beneficial interests in securitizations that are not required to be retained by the Risk Retention Rules.

The Company sells certain of its beneficial interests in securitizations that are not required to be retained by the Risk Retention Rules.

For the years ended December 31, 2024 and 2023, the Company sold beneficial interests in securitizations for a purchase price totaling $ 9 million and $ 13 million, respectively.

9 unchanged sentences

Ending Balance $ 464 $ 366

Fair Value of Financial Instruments

The carrying amounts of restricted cash, accounts receivable, accounts payable and accrued liabilities, and accounts payable to related party approximate fair value due to their respective short-term maturities.

The carrying value of the short-term revolving facilities were determined to approximate fair value due to their short-term duration and variable interest rates that approximate prevailing interest rates as of each reporting period.

The carrying value of notes payable and sale leasebacks were determined to approximate fair value as each of the transactions were entered into at prevailing interest rates during each respective period and they have not materially changed as of or during the years ended December 31, 2023 and 2022.

The carrying value of the financing of beneficial interests in securitizations was determined to approximate fair value because in the event of a decline in the fair value of the pledged collateral of the financing, the repurchase price of the pledged collateral will be increased by the amount of the decline.

The fair value of the Senior Notes, which are not carried at fair value on the accompanying consolidated balance sheets, was determined using Level 2 inputs based on quoted market prices for the identical liability.

The fair value of the Senior Notes as of December 31, 2023 and 2022 was as follows:

(in millions)

Carrying value, net of unamortized debt issuance costs, unamortized premium, and accrued PIK interest

$ 4,566 $ 5,649

Fair value $ 3,866 $ 2,533

The fair value of finance receivables, which are not carried at fair value on the accompanying consolidated balance sheets, was determined utilizing the estimated sales price based on the historical experience of the Company.

Such fair value

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

measurement of the finance receivables, net is considered Level 2 under the fair value hierarchy.

The carrying value and fair value of the finance receivables as of December 31, 2023 and 2022 were as follows:

(in millions)

Carrying value $ 807 $ 1,334

Fair value $ 854 $ 1,437

Investment in Equity Securities

Purchase Price Adjustment Receivables

The Company's purchase price adjustment receivables are carried at fair value and classified as other assets and other current assets in the accompanying consolidated balance sheets.

Under the MPSA, the purchaser will make future cash payments to the Company based on the performance of the finance receivables sold.

The Company then utilizes a discounted cash flow model to calculate the present value of the expected future payment amounts.

Due to the lack of observable market data these receivables are classified as Level 3.

The adjustments to the fair value of the purchase price adjustment receivables were a loss of of less than $ 1 million and gain of $ 1 million during the years ended December 31, 2024 and 2023, respectively, and are reflected in other (income) expense, net in the accompanying consolidated statements of operations.

Root Warrants

In October 2021, the Company purchased Series A convertible preferred shares in Root, Inc.

2 unchanged sentences

The Company considered all relevant transactions since the date of its investment and has not recorded any impairments or upward or downward adjustments to the carrying amount of its investment in Root, as there have not been changes in the observable price of its equity interest through December 31, 2024.

On August 12, 2022, Root effected a reverse stock split of its Class A common stock and Class B common stock at a ratio of 18:1, whereby each 18 shares of Root's Class A common stock and Class B common stock were automatically combined into one share of Class A common stock or Class B common stock, respectively (the "Reverse Stock Split").

The shares of Root's Class A common stock issuable to the Company on the conversion of the Series A convertible preferred shares were adjusted proportionally.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Also in October 2021, the Company entered into a commercial agreement with Root, under which the Root auto insurance products were to be embedded into the Company's e-commerce platform.

In accordance with the provisions of the commercial agreement, the Company received eight tranches of warrants to purchase shares of Root's Class A common stock (the "Root Warrants").

On September 1, 2022, the integrated auto insurance solution, which embedded into the Company's e-commerce platform (the "Integrated Platform"), was completed.

The first tranche of Root Warrants, consisting of 2.4 million shares of Root's Class A common stock, as adjusted pursuant to the Reverse Stock Split, became exercisable upon completion of the Integrated Platform, and is considered a derivative instrument.

The second tranche of Root Warrants, consisting of 3.2 million shares of Root's Class A common stock, became exercisable on November 14, 2023, upon the achievement of certain insurance sales metrics through the Integrated Platform, and is considered a derivative instrument.

The other tranches vest based on further insurance product sales through the Integrated Platform and are considered derivative instruments.

On September 1, 2022, the integrated auto insurance solution, which embedded into the Company's e-commerce platform was completed.

The first tranche of Root Warrants, consisting of 2.4 million shares of Root's Class A common stock, became exercisable upon completion of the integrated solution, and is considered a derivative instrument.

The second tranche of Root Warrants, consisting of 3.2 million shares of Root's Class A common stock, became exercisable on November 14, 2023, and the third tranche, consisting of 1.6 million shares of Root's Class A common stock, became exercisable on May 3, 2024.

Both the second and third tranche of the Root Warrants became exercisable upon the achievement of certain insurance sales metrics through the integrated solution, and are considered derivative investments.

The other tranches vest based on a combination of the arrival of certain dates and further insurance product sales through the integrated solution and are considered derivative instruments.

The Company used a Monte Carlo simulation to estimate the fair value of these Root Warrants, which are classified as Level 3.

Under this Monte Carlo simulation, the primary unobservable input utilized in determining the fair value of the Root Warrants was the expected volatility of Root's class A common stock, which was implied from the historical volatility of their stock.

As of December 31, 2024 and 2023, the expected volatility utilized in the Monte Carlo simulation was 100 % and 85 %, respectively.

At contract inception, the Company recognized an asset of $ 30 million for the Root Warrants and deferred revenue, classified in other assets and other liabilities, respectively in the accompanying consolidated balance sheets.

During the year ended December 31, 2022, the Company determined it was probable that the volume of insurance products required to earn the Root Warrants would be achieved and recorded an additional $ 75 million of Root Warrants and deferred revenue based on the contract inception date fair value as determined by the Monte Carlo simulation.

In 2022, the Company determined it was probable that the volume of insurance products required to earn the Root Warrants would be achieved and recorded an additional $ 75 million of Root Warrants and deferred revenue based on the contract inception date fair value as determined by the Monte Carlo simulation.

As of December 31, 2024 and 2023, the deferred revenue balance was $ 57 million and $ 78 million, respectively, and the Company recognized $ 21 million in Root Warrant revenue during each of the years ended December 31, 2024 and 2023, and $ 7 million during the year ended December 31, 2022.

The Root Warrants and deferred revenue are classified in other assets and other liabilities, respectively, in the accompanying consolidated balance sheets.

The deferred revenue is recognized over the

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

expected contract performance period within other sales and revenues in the accompanying consolidated statements of operations.

The deferred revenue is recognized over the expected contract performance period within other sales and revenues in the accompanying consolidated statements of operations.

The following table presents changes in the Company's Level 3 Root Warrants measured at fair value:

2 unchanged sentences

Opening balance

Warrants to acquire Root's Class A common stock — 75

Total unrealized gain (loss)

Unrealized gain

Ending balance

The Company recognized the increase (decrease) in fair value in relation to the Root Warrants through other (income) expense, net in the accompanying consolidated statements of operations.

The Company recognized an increase in fair value of $ 3 million and a decrease in fair value of $ 79 million during the years ended December 31, 2023 and 2022, respectively.

Derivative Instruments

In relation to the Root Warrants, the Company recognized an increase in fair value of $ 115 million and $ 3 million during the years ended December 31, 2024 and 2023, respectively, which are included in other (income) expense, net in the accompanying consolidated statements of operations.

Interest Rate Caps

The Company utilizes non-designated cash flow hedges including interest rate cap agreements to minimize its exposure to interest rate fluctuations on variable rate debt borrowings.

1 unchanged sentence

During the year ended December 31, 2023, the Company entered into two interest rate cap agreements to limit exposure to interest rate risk on variable rate debt associated with finance receivables.

The two interest rate caps each had cap rates of 5.0 %, notional amounts of $ 364 million and $ 236 million, and expiry date of July 2027 and April 2027, respectively.

The two interest rate caps each had cap rates of 5.0 %, notional amounts of $ 364 million and $ 236 million, and expiry dates of July 2027 and April 2027, respectively.

The fair value of the Company's interest rate caps is impacted by the credit risk of both the Company and its counterparty.

The Company has an agreement with its derivative financial instrument counterparty that contains provisions providing that if the Company defaults on the indebtedness associated with its derivative financial instrument, then the Company could also be declared in default on its derivative financial instrument obligation.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

declared in default on its derivative financial instrument obligation.

In addition, the Company minimizes nonperformance risk on its derivative instrument by evaluating the creditworthiness of its counterparty, which is limited to major banks and financial institutions.

2 unchanged sentences

For the year ended December 31, 2023, the Company recognized mark-to-market adjustments of $ 2 million of expense within other (income) expense, net in the accompanying consolidated statements of operations.

As of December 31, 2023, the interest rate caps were terminated and the value was zero in the accompanying consolidated balance sheets.

The interest rate caps were terminated during the year ended December 31, 2023.

Fair Value of Financial Instruments

The carrying value of sale leasebacks were determined to approximate fair value as each of the transactions were entered into at prevailing interest rates during each respective period and they have not materially changed as of or during the years ended December 31, 2024 and 2023.

The fair value of the Senior Notes as of December 31, 2024 and 2023 was as follows:

(in millions)

Carrying value, net of unamortized debt issuance costs, unamortized premium, and accrued PIK interest

$ 4,549 $ 4,566

Fair value $ 5,050 $ 3,866

Such fair value measurement of the finance receivables, net is considered Level 2 under the fair value hierarchy.

The carrying value and fair value of the finance receivables as of December 31, 2024 and 2023 were as follows:

(in millions)

Carrying value $ 612 $ 807

Fair value $ 670 $ 854

AND SUBSIDIARIES

2 unchanged sentences

The following table summarizes supplemental cash flow information for the years ended December 31, 2024, 2023, and 2022:

For the Years Ended December 31,

Years Ended December 31,

2024 2023 2022

22 unchanged sentences

Finance Receivable Facilities

On January 19, 2024, the Company amended one of its agreements governing one of its short-term revolving credit facilities to, among other things, extend the maturity date to January 19, 2025.

On January 15, 2025, the Company amended one of its agreements governing one of its short-term revolving credit facilities to, among other things, extend the maturity date to April 15, 2026.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On February 19, 2025, the Company entered into a Second Amended and Restated Distribution Agreement (the "Second A&R Distribution Agreement") with Barclays Capital Inc., Citigroup Global Markets Inc., and Virtu Americas LLC to further refresh its ATM Program, whereby the Company may sell up to the greater of (i) a number of shares of Class A common stock representing an aggregate offering price of $ 1.0 billion or (ii) an aggregate of 21,016,898 shares of its Class A common stock, from time to time.

In connection therewith, the Company intends to file a Registration Statement on Form S-3 on February 19, 2025 in connection with the offer and sale of shares contemplated by the Second A&R Distribution Agreement.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data