What changed in this filing

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Item 1A. Risk Factors

2026-02-18 compared with 2025-02-19 · 127 added, 96 removed, 454 unchanged (33% of the section changed)

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• our reliance on internal and external logistics to transport our vehicle inventory;

• our use of artificial intelligence technology;

• our ability to protect the personal information and other data that we collect, process and store;

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• our dependence on key personnel to operate our business;

• the risk of receiving less than the full amount of benefit we expect to receive from our minority equity investment in Root, Inc.;

• the risk of receiving less than the full amount of benefit we expect to receive from our minority equity investments;

• risks associated with acquisitions and strategic initiatives;

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Our business is affected by industry and economic conditions.

Purchases of new and used vehicles are typically discretionary for consumers and have been, and may continue to be, affected by negative trends in the economy.

Purchases of new and used vehicles are typically discretionary for consumers and have been, and may continue to be, sensitive to adverse economic trends.

Consumer purchases of new and used vehicles generally decline during recessionary periods and other periods in which disposable income is adversely affected.

Inflationary impacts on labor, materials, fuel, and other vehicle costs and services, as well as scarcity of certain products, have caused increased vehicle prices, which have adversely affected, and may continue to adversely affect, the market for used vehicles.

In 2022 and 2023, as a result of changes in the economy, the market, and the industry, we shifted our focus to driving profitability through fundamental operating efficiency.

Even though we were able to shift our focus towards long-term growth in 2024, if economic conditions worsen or a recession occurs, we have been and may again be required to take stricter measures to protect our business.

Further, inflationary impacts on labor, materials, fuel, and other vehicle costs and services, as well as scarcity of certain products, have caused and may again cause increased vehicle prices, which may adversely affect demand and pricing in the used vehicle market.

Although the Company is currently focused on long-term growth, if economic conditions worsen or a recession occurs, we may once again be required to take stricter operating efficiency measures to protect our business.

Those measures, including restructurings and cost savings, could materially adversely affect our business, operations, and financial results.

Further, elevated and volatile interest rates have pressured and may again pressure consumer affordability and monthly payments, which may reduce demand for used vehicles.

Adverse conditions affecting one or more automotive manufacturers could also impact the supply of vehicles and our inventory, change consumer car purchasing behaviors, and have a material adverse effect on our sales and results of operations.

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Further adverse conditions, including labor disruptions at manufacturer facilities, may affect the market for new vehicles, thereby affecting the supply and market for used vehicles.

Increased environmental regulation has also made, and may in the future make, used vehicles more expensive and less desirable for consumers.

Our business may also be negatively affected by challenges to the larger automotive ecosystem, including global health crises, such as the past COVID-19 pandemic, which may impact workforces, operations, and consumer behavior;

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global supply chain challenges;

military conflicts, such as the conflict in Ukraine and the Middle East, or changes in relations between countries, such as between the United States, China, and Taiwan;

and other macroeconomic issues.

New technologies such as autonomous driving software and the increasing popularity of electric vehicles also have the potential to change the dynamics of vehicle ownership in the future.

military conflicts, such as the conflicts in Ukraine and the Middle East, or changes in relations between countries, such as between the United States, China, and Taiwan and conditions in Latin America following the recent U.S.

military action in Venezuela;

and other macroeconomic and geopolitical issues.

New technologies such as autonomous driving software and the increasing popularity of electric vehicles also have the potential to change the dynamics of vehicle ownership in the future and make certain used vehicles more expensive or less desirable.

In addition, technology related to generative AI is advancing rapidly, and its future impact on the automotive ecosystem is unknown.

Finally, any new or increased tariffs or other trade restrictions implemented by the U.S.

federal government or other countries may change vehicle supply or the supply of important vehicle parts and components, as well as customer vehicle purchasing behavior.

Finally, the imposition or suspension of tariffs or other trade restrictions implemented by the U.S.

federal government or other countries, including changes to the import tariffs implemented by the U.S.

on vehicles and parts, and uncertainty regarding the same, may change vehicle supply or the supply or cost of important vehicle parts and components, as well as customer vehicle purchasing behavior.

Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

The extent and duration of these impacts are inherently uncertain and could vary materially across geographies and over time.

We may require additional capital to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances.

If such capital is not available to us, our business, operating results, and financial condition may be harmed.

We may require additional capital to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances, including to increase our marketing expenditures to improve our brand awareness, build and maintain our inventory of quality used vehicles, develop new products or services, further improve existing products and services, enhance our operating infrastructure, fund our growth or expansion into new markets, implement strategic initiatives,

or acquire complementary businesses and technologies.

services, enhance our operating infrastructure, fund our growth or expansion into new markets, implement strategic initiatives, or acquire complementary businesses and technologies.

Accordingly, we may need to engage in equity or debt financings to secure additional capital.

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Volatility in the credit markets may also have an adverse effect on our ability to obtain debt financing.

Increased benchmark interest rates, widening credit spreads, reduced lender appetite for automotive or consumer-credit exposures, or rating downgrades could increase our borrowing costs or limit our access to capital.

If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, operating results, financial condition and prospects could be adversely affected.

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For our revenues and profits to grow, we need a healthy industry and macroeconomic environment, and to successfully increase our penetration in existing markets, enter new markets, acquire more new and repeat customers, further improve the quality of our product offering, features, and complementary products and services, introduce high quality new products, services, and features, expand our brand awareness, and carry sufficient inventory with high enough quality and low enough cost to meet the demand for our vehicles.

We have no control over the industry and macroeconomic environment we face, as occurred in 2022 and 2023, and our business strategy has and may be adversely affected as a result.

We have no control over the industry and macroeconomic environment we face, as demonstrated by the challenges we experienced in 2022 and 2023, and our business strategy has and may be adversely affected as a result.

Further, even if we succeed and our revenue and profits increase, we may not achieve historical rates of growth.

Our historical and current rapid growth has placed and may continue to place significant demands on our management and our operational and financial resources.

Our rapid growth has placed and may continue to place significant demands on our management and our operational and financial resources.

We have in the past expended, and may again expend, substantial financial and other resources on marketing and advertising, inventory expansion, production capacity expansion, and general administration expenses related to being a growing public company.

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Thus, we rely heavily on marketing and advertising to increase brand visibility.

If we fail to maintain the high standards on which our reputation is built, or if an actual, or alleged failure of these standards occurs that damages this reputation, it could adversely affect consumer trust, customer demand, and our marketing and branding efforts, and have a material adverse effect on our business, sales, and results of operations.

Even the perception of a decrease in the quality of our customer service or brand could impact our results.

If we fail to maintain our reputation, or if an actual, perceived, or alleged failure of these standards occurs that damages this reputation, we could experience reduced consumer trust, lower customer demand, diminished effectiveness of our marketing and brand-building efforts, and a material adverse effect on our business, sales, and results of operations.

The operationally intensive aspect of our offering and the nature of automotive retail that necessitates the use of third-party vendors and systems to complete certain ancillary parts of the customer transaction (e.g., vehicle inspections, submitting title and registration paperwork to vendors or state entities) makes maintaining the quality of our customer experience a particularly difficult challenge.

For example, we have been the subject of various complaints relating to the timely delivery of certificates of title and registration, and vehicle quality.

While we do not believe these claims are material, irrespective of their validity, any claims, complaints, or negative publicity could diminish customer confidence in our platform and adversely affect our brand.

While we do not believe these claims are material, irrespective of their validity, any claims, complaints, investigations, government inquiries, or negative publicity could diminish customer confidence in our platform and adversely affect our brand.

The use of social media increases the speed with which information, misinformation, and opinions can be shared and thus the speed with which our reputation can be affected.

Negative or inaccurate postings, articles, or comments on social media, the internet, or the press about us have, from time to time, generated negative publicity that damages the reputation of our brand.

If we fail to correct or mitigate misinformation or negative information about us, the vehicles we offer to sell or purchase, our customer experience, or any aspect of our brand, including information spread through social media or traditional media channels, it could have a material adverse effect on our business, sales, and results of operations.

Negative or inaccurate postings, articles, reports, or comments on social media, the internet, or the press about us have, from time to time, generated negative publicity that damages the reputation of our brand.

If we fail to correct or mitigate misinformation or negative information about us, the vehicles we offer to sell or purchase, our customer experience, or any

aspect of our brand, including information spread through social media or traditional media channels, it could have a material adverse effect on our business, sales, and results of operations.

We experience seasonal and other fluctuations in our quarterly and annual operating results, which may not fully reflect the underlying performance of our business.

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Used vehicle sales generally exhibit seasonality with sales typically peaking late in the first calendar quarter (coinciding with the time when the federal government issues tax refunds) and diminishing through the rest of the year, with the lowest relative level of sales expected to occur in the fourth calendar quarter.

Due to our historical and current rapid growth, our overall sales patterns in the past have not always reflected the general seasonality of the used vehicle industry.

Due to our rapid growth, our overall sales patterns in the past have not always reflected the general seasonality of the used vehicle industry.

However, as our business and markets continue to mature, we expect our results to become more reflective of typical market seasonality.

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• the pace and level of changes in benchmark interest rates;

• litigation or other claims against us.

• litigation, investigations, regulatory inquiries, or other claims against us.

In addition, a significant portion of our expenses are fixed and do not vary proportionately with fluctuations in revenues.

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We maintain a business relationship with DriveTime, a related party due to the Garcia Parties’ control and ownership of substantially all of the interests in DriveTime.

We benefit from our relationship and a series of arrangements with DriveTime and its affiliates that cannot be assumed to have been negotiated at arm’s length.

We continue to periodically engage DriveTime, its affiliates, and other entities controlled by our controlling stockholder to provide us with certain services, including lease agreements and the administration of VSCs.

We are party to a number of arrangements with DriveTime and its affiliates that cannot be assumed to have been negotiated at arm’s length.

We continue to periodically engage DriveTime, its affiliates, and other entities controlled by our controlling stockholder to provide us with certain services, including but not limited to, lease agreements, the administration of VSCs, and the servicing of automotive finance receivables originated by us.

DriveTime has also in the past and may in the future purchase or sell certain vehicles or automotive finance receivables from or to us.

Finally, before and after we sell automotive finance receivables originated by us, DriveTime performs ongoing servicing and collections.

There can be no assurance that DriveTime and the other affiliates will continue these arrangements on similar terms, or at all, and as a result our financial condition and results of operations may be adversely affected and historical costs may not always accurately reflect future costs and expenses.

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Our competitors may also develop and market new technologies that render our existing or future business model, products, and services less competitive, unmarketable, or obsolete.

For example, rapid changes in technology, including rideshare services and the development of autonomous vehicles (including Waymo, which is offering autonomous ride-hailing services in certain markets), could lead to a decrease in demand for our products.

For example, rapid changes in technology, including rideshare services and the development of autonomous vehicles, including those developed by Waymo and Tesla, could lead to a decrease in demand for our products.

Competitors may also impede our ability to reach consumers or commence operations in certain jurisdictions.

For example, we depend in part on internet search engines, lead generators, automotive finance partners, social networking sites, and vehicle listing sites to drive traffic to our website and mobile application and our competitors may increase their search engine optimization efforts and outbid us for search terms on various search engines, use their political influence and increase lobbying efforts, or align with Internet search engine providers to receive a higher search result page ranking than ours.

Any reduction in the number of users directed to our website and mobile application through internet search engines, lead generators, automotive finance providers, social networking sites, or vehicle listing sites, could harm our business and operating results.

For example, we depend in part on internet search engines, lead generators, automotive finance partners, social networking sites, AI tools, and vehicle listing sites to drive traffic to our website and mobile application and our competitors may increase their search engine optimization efforts and outbid us for search terms on various search engines, use their political influence and increase lobbying efforts, or align with Internet search engine providers to receive a higher search result page ranking than ours.

Any reduction in the number of users directed to our website and mobile application through internet search engines, lead generators, automotive finance providers, social networking sites, AI tools, or vehicle listing sites, could harm our business and operating results.

In addition, technology related to generative AI is advancing rapidly, and its future impact on the automotive ecosystem is unknown.

For example, AI-driven automation and virtual assistants may streamline dealership operations, improve customer engagement, and increase efficiency in sourcing and managing used vehicles, which could significantly alter competitive dynamics and operational requirements in the automotive market.

Private plaintiffs and federal, state, and local regulatory and law enforcement authorities continue to scrutinize advertising, sales, financing, and insurance activities in the purchase, sale, and leasing of used vehicles.

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Any significant changes in prices for new or used vehicles could have a material adverse effect on our revenues and results of operations.

An overall increase in prices or monthly payments for used vehicles, including as a result of increased interest rates customers face when financing a vehicle, makes it difficult for certain customers to afford to purchase a vehicle.

Similarly, if prices for used vehicles rise relative to prices for new vehicles, it could make buying a new vehicle more attractive to our customers than buying a used vehicle.

Manufacturer incentives could also contribute to narrowing this price gap.

In addition, while lower used vehicle prices reduce our cost of acquiring new inventory, lower prices could also lead to reductions in the prices at which we can sell such inventory, which could have a negative impact on gross profit.

An overall increase in used vehicle prices or monthly payments, including as a result of increased interest rates, longer loan terms, or tighter credit standards, makes it difficult for certain customers to afford to purchase a vehicle.

Similarly, if prices for used vehicles rise relative to prices for new vehicles, consumers may prefer new vehicles, particularly where manufacturer financing incentives narrow the total cost of ownership gap.

Additional manufacturer incentives could also contribute to narrowing this price gap.

In addition, while lower used vehicle prices reduce our cost of acquiring inventory, lower prices could also lead to reductions in the prices at which we can sell such inventory, which could create markdown risk and have a negative impact on gross profit.

Furthermore, any significant changes in wholesale prices for used vehicles could have a material adverse effect on our results of operations by reducing wholesale margins.

Price volatility can also complicate pricing algorithms, appraisal accuracy, and residual value assumptions, potentially leading to increased return rates, inventory write-downs, or reduced financing proceeds.

Our business is dependent upon our ability to acquire desirable vehicles and parts used to recondition vehicles, and to expeditiously sell such vehicle inventory.

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There can be no assurance that the supply or price of desirable used vehicles will be sufficient to meet our needs.

If we fail to

adjust appraisal offers to stay in line with broader market trade-in offer trends, to recognize those trends, or to properly assess vehicles before we purchase them, it could adversely affect our ability to acquire desirable inventory.

If we fail to adjust appraisal offers to stay in line with broader market trade-in offer trends, to recognize those trends, or to properly assess vehicles before we purchase them, it could adversely affect our ability to acquire desirable inventory.

Further, we rely on agreements with third-parties to finance our vehicle inventory purchases, and may require additional financing arrangements in the future.

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A reduction in the availability of or access to sources of desirable inventory, including parts necessary to recondition such inventory, whether due to supply chain constraints, pricing, or otherwise, could have a material adverse effect on our business, sales, and results of operations.

It is also common that commercial suppliers of used vehicles regularly review their relationships with used vehicle disposition channels, such as our wholesale marketplace platform or retail marketplace offering, through written requests for proposals.

Such suppliers may from time to time require us to change the way we do business as part of the request for proposal process or provide services on less favorable terms.

Such suppliers may from time to time require us to change the way we do business or provide services on less favorable terms.

There can be no assurance that our existing agreements will not be canceled or that we will be able to enter into future agreements with these or other suppliers on similar terms, or at all.

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We are subject to a wide range of evolving federal, state, and local laws and regulations, many of which may have limited to no interpretation precedent as it relates to our business model.

Our compliance obligations may vary by jurisdiction and change without advance notice.

Our sale and purchase of used vehicles and related activities, including financing our customers’ acquisition of those vehicles, shipping and delivery of vehicles and the sale of complementary products and services, are subject to state and local licensing requirements, state laws, regulations, and systems and process requirements related to title and registration, state laws regulating the sale of motor vehicles and related products and services, federal and state laws regulating advertising of motor vehicles and related products and services, federal and state consumer protection laws prohibiting unfair, deceptive or misleading practices toward consumers, customer insurance related regulations, regulations governing the internet, e-commerce or mobile commerce, anti-money laundering regulations, and labor laws.

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We utilize telephone calls and text messaging as a means of communicating with and marketing to consumers, some of which activities are regulated by the TCPA.

Consumers have in the past and may in the future allege violations of the TCPA, and if we fail to adhere to or successfully implement appropriate processes and procedures in response to existing or future marketing regulations, it could result in legal and monetary liability, fines, penalties, or damage to our reputation.

Consumers have in the past and may in the future allege violations of the TCPA, and if we fail to adhere to or successfully implement appropriate

processes and procedures in response to existing or future marketing regulations, it could result in legal and monetary liability, fines, penalties, or damage to our reputation.

Further restrictions may also adversely affect our ability to attract customers.

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Our logistics operations, which we depend on to transport vehicles to and from wholesale auctions, our IRCs, our vending machines, our hubs, and our customers, are subject to regulation by the DOT and by the states through which our vehicles travel.

New or additional

restrictive limitations on the transport of vehicles, such as the California Zero Emission Vehicle program, could increase our operating expenses.

New or additional restrictive limitations on the transport of vehicles, such as the California Zero Emission Vehicle program, could increase our operating expenses.

Finance Related Laws and Regulations.

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Any of these risks, if realized, could adversely affect our business and results of operations.

Consumer protection, insurance, and licensing requirements for ancillary products may also evolve in the future, increasing costs and limiting product design and attach rates.

We rely on internal and external logistics to transport our inventory throughout the United States, which subjects us to business risks and costs associated with the transportation industry.

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Our failure to successfully manage our logistics and fulfillment process could cause a disruption in our inventory supply chain and distribution, which may adversely affect our operating results and financial condition.

We collect, process, store, share, transmit, disclose, and use information, including personally identifiable information, and implement artificial intelligence technology in certain offerings.

Capacity constraints, labor shortages, and regulatory changes affecting hours-of-service and emissions may increase cost-to-deliver and extend cycle times.

Our use of artificial intelligence may not perform as expected and could expose us to technological, operational, legal, and reputational risks that could adversely affect our business, financial condition, and results of operations

We increasingly develop and deploy AI technology through third party generative AI platforms and internal software, in connection with our proprietary systems and customer experiences, including automated, self-service workflows, AI-enabled customer support tools, internal work efficiencies, and enhancement of our recruiting and hiring processes.

These initiatives are complex, rapidly evolving, and inherently uncertain.

There is no assurance that our AI capabilities will function as intended, deliver anticipated benefits, or scale cost-effectively.

The performance, quality, and impact of AI models depend on numerous factors, including the availability and integrity of training data, model design, computational resources, integration with our operations and technology stack, and ongoing monitoring and governance.

If our AI systems or those third party platforms we utilize underperform, produce inaccurate, incomplete, or biased outputs, hallucinate or fail under edge cases, degrade customer experiences, inadvertently disclose or misuse intellectual property, or otherwise fail to meet expectations, we could experience decreased conversion, operational disruptions, increased costs, reduced margins, customer dissatisfaction, negative publicity, or harm to our brand and competitive position.

Increased use of AI may additionally result in cybersecurity, data privacy, and labor and employment risks.

The laws, rules, standards, and guidance relating to AI are developing rapidly and vary across jurisdictions.

We may be subject to evolving requirements regarding transparency, fairness, explainability, safety, data usage and provenance, content integrity, consumer protection, and algorithmic accountability.

If we use AI in ways that regulators view as unfair, deceptive, discriminatory, or otherwise noncompliant, we could face heightened scrutiny, investigations, enforcement actions, private litigation, or requirements to modify, suspend, or cease certain AI-enabled practices.

To the extent AI touches areas implicating privacy, information security, intellectual property, credit and financing, or other regulated activities, we may incur additional compliance obligations and associated costs.

The development and deployment of AI requires ongoing investments in talent, infrastructure, data quality, tooling, and governance frameworks.

These investments may be significant and may not result in improvements to growth, margins, or customer experience.

We may need to devote additional resources to testing, monitoring, documentation, and controls to address emerging standards and mitigate model risks, including bias, fairness, and safety.

If we are unable to develop, procure, integrate, or govern AI technologies effectively;

if third-party AI providers or inputs are unavailable, unreliable, or more costly;

if regulatory requirements materially constrain AI use;

or if our AI initiatives otherwise fail to meet expectations, our business, financial condition, and results of operations could be adversely affected.

We collect, process, store, share, transmit, disclose, and use information, including personally identifiable information.

Our actual or perceived failure to protect such information and data, comply with privacy and security-related requirements, mitigate data loss, and/or prevent a cybersecurity or other incident could damage our reputation and harm our business and operating results.

We collect, process, store, share, transmit, disclose, and use sensitive information and other data provided by consumers, employees, and business partners, including personally identifiable information (“PII”), to support our business operations.

This information may include social security numbers, credit scores, credit card information, and financial information.

have taken measures designed to safeguard such information and have received assurances from our third-party providers, our facilities and systems, and those of third-party providers, could be vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors, or other similar events.

Additionally, our increased use of artificial intelligence ("AI") technology through third party generative AI platforms and internal software to, for example, power our chatbots that streamline customer interactions and assist customers in navigating the purchasing process, improve internal work efficiencies, and enhance our recruitment and hiring processes, may result in cybersecurity, data privacy, and labor and employment risks.

Uncertainty around new and emerging AI technologies, including increased regulatory oversight, may require additional investment in the development and maintenance of proprietary datasets and machine learning models and development of appropriate protections and safeguards for handling the use of customer and employee data with AI technologies, which may be costly.

Furthermore, any sensitive information (including regulated, proprietary, and confidential information, including PII) that we input into a third-party generative AI platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI model.

Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of PII, confidential information, and intellectual property.

This information may include social security numbers, credit scores, and financial information.

Although we have taken measures designed to safeguard such information, our facilities and systems could be vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors, or other similar events.

Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of PII, SPI, confidential information, and intellectual property.

We also rely on third‑party service providers and vendors that process information on our behalf.

We have limited ability to control their security and privacy practices, and contractual protections and due diligence may not prevent all incidents.

A security incident at a third party could have similar adverse effects on us as an incident on our own systems.

The use of AI tools and programs by new or existing vendors may also introduce unique vulnerabilities whose existence or exploitation could have a material adverse effect on our business or operations.

We are subject to numerous and rapidly evolving federal, state, and local laws regarding privacy, cybersecurity and the collection, use, and disclosure of PII and other data.

Many states, including California, have implemented laws that give consumers expanded rights to manage their personal information, adding to the evolving patchwork of U.S.

privacy and cybersecurity law.

Many states, including California, have implemented laws that give consumers expanded rights to manage their personal information.

In addition, cybersecurity has become a high priority for regulators, and some jurisdictions have enacted laws setting forth cybersecurity compliance standards and/or requiring companies to notify certain parties of data security breaches involving certain types of personal data.

The SEC has adopted rules for public companies, requiring the mandatory disclosure of material cybersecurity incidents and the Federal Trade Commission and the New York Department of Financial Services have both also increased incident reporting and expanded cybersecurity program requirements.

Any failure or perceived failure to maintain the security of and/or adhere to privacy-related obligations related to personal and other data that is provided to us by consumers, employees, and vendors, or any failure or perceived failure to appropriately report and respond to cyber incidents under expanded requirements, could harm our reputation and expose us to a risk of loss or litigation, regulatory scrutiny or enforcement actions, and possible liability, any of which could adversely affect our business and operating results.

The SEC has adopted

rules for public companies, requiring the mandatory disclosure of material cybersecurity incidents and the Federal Trade Commission and the New York Department of Financial Services have both also increased incident reporting and expanded cybersecurity program requirements.

Any failure or perceived failure to maintain the security of and/or adhere to privacy-related obligations related to personal and other data that is provided to us by consumers, employees, and vendors, or any failure or perceived failure to appropriately report and respond to cyber incidents in accordance with applicable law and contractual obligations, could harm our reputation and expose us to a risk of loss or litigation, regulatory scrutiny or enforcement actions, and possible liability, any of which could adversely affect our business and operating results.

If our cybersecurity measures are breached or there is a disruption in our technology systems, our business, brand, operating results, and financial condition could be harmed.

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Although we consider cybersecurity protection and system stability to be an important piece of our business, strategy, and management, we have in the past and may in the future experience potentially significant interruptions to our systems.

Interruptions in these systems, whether due to system failures, programming or configuration errors, computer viruses, or physical or electronic break-ins, including from ransomware or distributed denial of service attacks, could prevent us from selling cars, providing customary financing options to our customers, limit the availability of the inventory on our website and mobile application, prevent or inhibit consumers from accessing our website or mobile application, delay our communication, or cause a breach of data (including PII).

If an actual or perceived breach of our security occurs or there is a disruption in our technology systems, we could lose competitively sensitive business information, intellectual property or lose control of our information processes or internal controls.

Interruptions in these systems, whether due to system failures, programming or configuration errors, computer viruses, or physical or electronic break-ins, including from ransomware or distributed denial of service attacks, could prevent us from selling cars, providing customary financing options to our customers, limit the availability of the inventory on our website and mobile application, impair consumer access to our platforms, delay communications, or cause a breach of data (including PII, SPI, and other confidential information).

If an actual or perceived breach of our security occurs or there is a disruption in our technology systems, we could lose competitively sensitive business information, intellectual property or experience compromise of our information processes or internal controls.

In addition, the public perception of the effectiveness of our security measures or services could be harmed, and we could lose employees, customers, and business partners.

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A significant portion of our technology footprint, including the technology and infrastructure that supports our website and mobile applications, is hosted in third-party data center facilities that we do not own or control.

Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war,

electronic and physical break-ins, computer viruses, earthquakes, and similar events.

Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, computer viruses, earthquakes, and similar events.

The occurrence of any of these events could damage our systems and hardware or could cause them to fail which could result in interruptions in the delivery of our services or impair our operations, negatively impacting sales and operating results.

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Changes in the law or adverse court rulings may also limit the scope of our rights and inhibit us from preventing others from using our technology.

Finally, the introduction of AI tools, such as our chatbot, into our business has also increased the risk of inadvertent disclosure of proprietary information and trade secrets.

Steps taken to mitigate this risk, including agreements with vendors and policies relating to the safe use of AI tools may not effectively protect proprietary information and any incidents of inadvertent disclosure could undermine our intellectual property rights.

In addition, our use of AI tools, such as our chatbot, into our business has also increased the risk of inadvertent disclosure of proprietary information and trade secrets.

Steps taken to mitigate this risk, including agreements with vendors and policies relating to the

safe use of AI tools may not effectively protect proprietary information and any incidents of inadvertent disclosure could undermine our intellectual property rights.

We may, and occasionally in the ordinary course of business do, receive communications alleging infringement or misappropriation of intellectual property or claims relating to licenses with respect thereto.

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As a result of such claims, we may have to pay monetary damages and lose valuable intellectual property rights or personnel.

Further, even if we are successful in defending against such claims, litigation could result in substantial costs, harm our reputation, and be a distraction to management.

Lastly, we use open source software in our platform and expect to use open source software in the future.

There is a risk that such licenses could be construed by courts in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform.

Further, even if we are successful in defending against such claims, litigation could result in substantial costs, harm our reputation, and divert management attention.

Lastly, we use open source software in our platform and expect to continue doing so.

Certain open source licenses could be interpreted to impose unanticipated conditions or restrictions on our ability to market our platform.

By the terms of certain open source licenses, we could be required to make our proprietary software available to be used by the public, re-engineer portions of code, or otherwise be limited to use such code or technology if we combine our proprietary software with open source software in a certain manner.

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Our executive officers and other employees are at-will employees, which means they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace.

We may not receive the full, expected benefit from our minority equity investment in Root, Inc.

We hold shares of Series A convertible preferred stock and warrants to acquire Class A common stock in Root.

As a minority equity investor, our influence over Root is limited, and we may be unable to influence Root’s business plan, assure quality control, or set the timing and pace of development, cause Root to effect significant transactions such as large expenditures or contractual commitments, develop insurance products, or borrow money.

Our inability to control the operations or management of Root may result in us receiving or retaining less than the amount of benefit we might otherwise expect to receive from appreciation of the equity investment or from the commercial relationship associated therewith.

We may be limited in our ability to monetize or exit our investment in Root given contractual restrictions on selling our investment and uncertainty in the trading market for Root's equity securities.

We may not receive the full, expected benefit from our minority equity investments, including Root, Inc.

We have certain minority equity investments in other companies, including shares of Series A convertible preferred stock and warrants to acquire Class A common stock in Root (the "Root Warrants").

As a minority equity investor, our influence over these companies is limited, and we may be unable to influence their business plans, assure quality control, set the timing and pace of development, or cause them to effect significant transactions such as large expenditures or contractual commitments, develop insurance or other products, or borrow money.

Our inability to control the operations or management of the these companies may result in us receiving or retaining less than the amount of benefit we might otherwise expect to receive from appreciation of the equity investment or from the commercial relationship associated therewith.

We may be limited in our ability to monetize or exit our investment in these companies, given contractual restrictions on selling our investment and uncertainty in the trading market for their equity securities.

In addition, we have in the past recognized, and may again recognize, decreases in fair value in relation to our Root Warrants, and we may also experience a decrease in fair value in relation to our Series A convertible preferred stock.

Any other downward adjustment to or impairment of our equity investment could adversely impact our results of operations and financial condition.

Any other downward adjustment to or impairment of our equity investments could adversely impact our results of operations and financial condition.

We have acquired, and may continue to acquire, other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

In the past, we have occasionally acquired complementary businesses and technologies, including the acquisition of our wholesale marketplace, and we may do so again in the future.

In the past, we have occasionally acquired complementary businesses and technologies, including the acquisition of our wholesale marketplace and acquisition of five franchise dealerships, and we may do so again in the future.

The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to successfully complete identified acquisitions.

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• retention of employees from the acquired company;

• entry into certain new lines of business may subject us to new laws and regulations or additional operational costs;

• cultural challenges associated with integrating employees from the acquired company into our organization;

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Acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, and amortization expenses, any one of which could harm our financial condition.

Additionally, acquisitions have resulted, and may again result, in impairments of intangible assets such as goodwill,

and tangible assets.

Additionally, acquisitions have resulted, and may again result, in impairments of intangible assets such as goodwill, and tangible assets.

Any of these risks, if realized, could materially and adversely affect our business, financial condition, and results of operations.

We are, and may in the future be, subject to legal proceedings, claims, and investigations, which could have a material adverse effect on our business, results of operations, and financial condition.

We are subject to various legal proceedings, claims, and investigations, from time to time, which could have a material adverse effect on our business, results of operations, and financial condition.

We are subject to various legal proceedings, claims, inquiries, and investigations, from time to time, which could have a material adverse effect on our business, results of operations, and financial condition.

Legal claims have been and could be asserted against us by individuals, either individually or through class actions, by governmental entities in civil or criminal investigations and proceedings, or by other entities.

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These actions have in the past and could in the future expose us to adverse publicity and to substantial monetary damages and legal defense costs, injunctive relief, and criminal and civil fines and penalties, including but not limited to suspension or revocation of licenses to conduct business.

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

In June 2025, we received a subpoena from the SEC requesting information that we believe primarily relates to allegations raised by a report published by a now-defunct short-selling firm.

We currently cannot predict the outcome of this matter.

For more information, see Item 3.

Legal Proceedings.

When such inquiries arise, we work with government agencies to respond to these requests and cooperate with any such inquiries, which if not amicably resolved, could result in state Attorney General offices filing claims against us.

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If these variables or other factors were to change, we might be required to reduce our sale prices on automotive finance receivables, sell fewer of them, or both, which would reduce our gains on sales of automotive finance receivables.

In addition, our ability to sell automotive finance receivables on acceptable terms depends on investor demand and liquidity in the asset-backed securities and whole-loan markets.

A reduction in investor demand, widening credit spreads, or changes in underwriting expectations could adversely affect execution, including required discounts, advance rates, and time to sale.

The terms of the financing we offer are dependent in part on our assessment of such customers’ credit-worthiness, which is based on data gathered from customers and other parties and assessed by our proprietary technology tools.

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Furthermore, if our financing partners cease to purchase these receivables, we could be subject to the risk that some of these receivables are not paid when due and we are forced to incur unexpected asset write-offs and bad debt expense.

In addition, changes in the condition of the securitization market could lead us to incur higher costs to access funds in the market or lose access to the market, requiring us to seek alternative means to finance those originations that could be more expensive, or retain credit risk in excess of those required under the Risk Retention Rules (as defined below), which may prevent us from derecognizing the loans and recognizing a gain on sale.

expensive, or retain credit risk in excess of those required under the Risk Retention Rules (as defined below), which may prevent us from derecognizing the loans and recognizing a gain on sale.

As a result, the value of any securities that we may retain in our securitizations might be reduced or, in some cases, eliminated as a result of an adverse change in economic conditions or the financial markets.

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For example, if economic conditions were to deteriorate unexpectedly, additional loan losses not incorporated in the existing allowance or valuation may occur.

Further, if the receivables we sell experience higher loss

rates than forecasted, we may obtain less favorable pricing on the receivables we sell to financing partners or in securitizations in the future and suffer reputational harm in the marketplace for the receivables we sell.

Further, if the receivables we sell experience higher loss rates than forecasted, we may obtain less favorable pricing on the receivables we sell to financing partners or in securitizations in the future and suffer reputational harm in the marketplace for the receivables we sell.

As a result, losses or prepayments in excess of expectations could have a material adverse effect on our business, results of operations, and financial condition.

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As such, we have no independent means of generating revenue or cash flow, and our ability to pay our taxes, debt obligations, and operating expenses depends on the financial results and cash flows of Carvana Group and its subsidiaries and distributions we receive from Carvana Group.

Under the terms of the LLC Agreement (as defined in Note 1 — Business Organization), Carvana Group is obligated to make distributions to LLC Unitholders, including Carvana Co.

Under the terms of the limited liability agreement of Carvana Group (the "LLC Agreement"), Carvana Group is obligated to make distributions to LLC Unitholders, including Carvana Co.

Sub LLC ("Carvana Co.

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The LLC Agreement also obligates Carvana Group to make distributions to us to allow us to pay for our debt obligations, which are represented by our Senior Secured Notes and Senior Unsecured Notes (described in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and Note 9 — Debt Instruments), and to pay for our obligations under the Tax Receivable Agreement (as defined in Note 14 — Income Taxes).

While we intend to cause Carvana Group to make distributions to us in an amount sufficient to fund these taxes, obligations, and expenses, Carvana Group’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which Carvana Group is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering Carvana Group insolvent.

While we intend to cause Carvana Group to make distributions to us in an amount sufficient to fund these taxes, obligations, and expenses, Carvana Group’s ability to make such distributions may be subject to various limitations and restrictions, including, without limitation, (i) prohibitions or restrictions contained in current and future debt agreements and other contracts;

(ii) applicable law (including limited liability company law, creditor protection laws governing payments and asset transfers, and solvency tests);

(iii) applicable regulatory or licensing requirements;

and (iv) actual or projected liquidity needs and other business requirements of Carvana Group.

If we do not have sufficient funds to pay taxes, obligations or expenses, we may have to borrow funds, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders.

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These tax distributions will likely exceed (as a percentage of Carvana Group’s income) the overall effective tax rate applicable to a similarly situated corporate taxpayer.

As a result of the potential differences in the

amount of net taxable income allocable to us and the LLC Unitholders, particularly in light of the reduction in corporate tax rates passed in 2017, it is possible that we will receive distributions significantly in excess of our tax liabilities and obligations to make payments under the Tax Receivable Agreement.

As a result of differences in taxable income allocations between us and the LLC unitholders and applicable tax rates, we may receive distributions significantly in excess of our tax liabilities and obligations to make payments under the Tax Receivable Agreement.

To the extent we do not distribute such cash balances as dividends on our Class A common stock and instead, for example, hold such cash balances or lend them to Carvana Group, the LLC Unitholders would benefit from any value attributable to such accumulated cash balances as a result of their ownership of Class A common stock following an exchange of its LLC Units (including any exchange upon an acquisition of us).

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We are party to a Tax Receivable Agreement with the LLC Unitholders, pursuant to which we will be required to make cash payments to such LLC Unitholders equal to 85% of the tax benefits, if any, that we actually realize, or, in some circumstances, are deemed to realize, as a result of (1) the increase in our wholly owned subsidiary’s proportionate share of the existing tax basis of the assets of Carvana Group and an adjustment in the tax basis of the assets of Carvana Group reflected in that proportionate share as a result of any exchanges of LLC Units held by the LLC Unitholders for shares of our Class A common stock or cash, and (2) certain other tax benefits related to payments we make under the Tax Receivable Agreement.

Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we will realize as a result of LLC Unit exchanges, and the resulting amounts we are likely to pay to LLC Unitholders pursuant to the Tax Receivable Agreement;

Due to the uncertainty of various factors, we cannot reliably estimate the likely tax benefits we will realize as a result of future

LLC Unit exchanges, and the resulting amounts we are likely to pay to LLC Unitholders pursuant to the Tax Receivable Agreement;

however, we estimate that such payments may be substantial.

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We may not be able to realize all or a portion of the tax benefits that are currently expected to result from future exchanges of LLC Units for our Class A common stock and from payments made under the Tax Receivable Agreement.

Our ability to realize the tax benefits that we currently expect to be available as a result of the increases in tax basis created by any future exchanges of LLC Units for our Class A common stock, the payments made pursuant to the Tax Receivable Agreement, and the interest deductions imputed under the Tax Receivable Agreement all depend on a number of assumptions, including that we earn sufficient taxable income each year during the period over which such deductions are available and that there are no changes in applicable law or regulations.

For example, the reduction in corporate tax rates pursuant to the 2017 changes in U.S.

federal income tax law had the effect of reducing the expected value of the tax benefits we realize as a result of the increase in our proportionate share of the existing tax basis of the assets of Carvana Group arising from future exchanges of LLC Units held by an LLC Unitholder for shares of our Class A common stock or cash.

The reduction in the value of such tax benefits is expected to have two primary consequences—it reduces the cash payments we expect to be required to make pursuant to the Tax Receivable Agreement and it reduces the expected value to us of the 15% of the amount of such tax benefits that we will retain pursuant to the Tax Receivable Agreement.

Our ability to realize the tax benefits that we currently expect to be available as a result of (i) tax basis increases arising from exchanges of LLC Units for our Class A common stock or cash, (ii) payments made pursuant to the Tax Receivable Agreement, and (iii) the interest deductions imputed under the Tax Receivable Agreement all depend on a number of assumptions, including that we earn sufficient taxable income each year during the period over which such deductions are available and that there are no changes in applicable law or regulations.

For example, changes in corporate tax rates or in the treatment of basis adjustments have reduced and may again reduce the value of such tax benefits.

Any reduction in the value of such tax benefits is expected to have two primary consequences—it reduces the cash payments we expect to be required to make pursuant to the Tax Receivable Agreement and it reduces the expected value to us of the 15% of the amount of such tax benefits that we will retain pursuant to the Tax Receivable Agreement.

Additionally, if our actual taxable income were insufficient or there were additional adverse changes in applicable laws or regulations, we may be further unable to realize all or a portion of the expected tax benefits and our cash flows and stockholders’ equity (deficit) could be negatively affected.

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Our substantial indebtedness, including any additional indebtedness incurred in the future, could adversely affect our financial flexibility, ability to incur additional debt, and our competitive position and prevent us from fulfilling our obligations under our financing agreements.

As of December 31, 2024, we had outstanding, on a consolidated basis (1) $205 million aggregate principal amount of our Senior Unsecured Notes, (2) $4.4 billion aggregate principal amount of our Senior Secured Notes, which includes $105 million of accrued payment-in-kind interest, (3) $67 million aggregate principal amount of borrowings under our Floor Plan Facility and the Finance Receivable Facilities (as defined below), (4) $183 million aggregate principal amount of indebtedness represented by our finance lease agreements between us and providers of equipment financing, (5) an outstanding balance of $354 million under our secured borrowing facility through which we finance certain retained beneficial interests in our

securitizations, and (6) $485 million of other long-term debt related to our sale leaseback transactions.

As of December 31, 2025, we had outstanding, on a consolidated basis, (1) $107 million aggregate principal amount of our Senior Unsecured Notes, (2) $3.9 billion aggregate principal amount of our Senior Secured Notes, (3) $58 million aggregate principal amount of borrowings under our Floor Plan Facility and the Finance Receivable Facilities (as defined below), (4) $157 million aggregate principal amount of indebtedness represented by our finance lease agreements between us and providers of equipment financing, (5) an outstanding balance of $374 million under our secured borrowing facility through which we finance certain retained beneficial interests in our securitizations, (6) $485 million of other long-term debt related to our sale leaseback transactions, and (7) an outstanding balance of $23 million under a loan and security agreement to finance certain equipment for our transportation fleet.

Our substantial indebtedness has had and could have further significant effects on our business.

For example, it has or could:

• make it more difficult for us to satisfy our obligations with respect to our current and future indebtedness, including o ur Senior Secured Notes and Senior Unsecured Notes (collectively the "Senior Notes," each as defined in Note 10 — Debt Instruments) and the Floor Plan Facility;

• make it more difficult for us to satisfy our obligations with respect to our current and future indebtedness, including o ur Senior Secured Notes and Senior Unsecured Notes (collectively the "Senior Notes," each as defined in Note 9 — Debt Instruments), the Floor Plan Facility, and Finance Receivable Facilities;

• increase our vulnerability to adverse changes in prevailing economic, industry, and competitive conditions;

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The market price of our Class A common stock has fluctuated, and may continue to fluctuate widely due to many factors, some of which may be beyond our control.

The closing price of our Class A

common stock between January 1, 2024 and January 1, 2025 has ranged from a low of $41.00 to a high of $260.80.

The closing price of our Class A common stock between January 1, 2025 and January 1, 2026 has ranged from a low of $162.57 to a high of $472.73.

Many factors may cause the market price of our Class A common stock to fluctuate significantly, including those described elsewhere in this "Risk Factors" section and this Annual Report on Form 10-K, as well as the following:

• adverse impacts to the larger automotive ecosystem, including consumer demand, global supply chain challenges (including the imposition of new or increased tariffs), and other macroeconomic issues;

• previous and future strategic actions and manipulations of the market for our securities by short sellers and "short squeezes;"

• adverse impacts to the larger automotive ecosystem, including consumer demand, global supply chain challenges (including the impact of increased tariffs), and other macroeconomic issues;

• previous and future strategic actions and manipulations of the market for our securities by short sellers and "short squeezes" (including the impact of the report published in the first quarter of 2025 by a now-defunct short-selling firm);

• our operating and financial performance and prospects;

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• changes in general market, economic, and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war, and responses to such events.

Volatility in the market price of our Class A common stock may prevent investors from being able to sell their Class A common stock at or above their purchase price or at all.

These broad market and industry factors may materially reduce the market price of our Class A common stock, regardless of our operating performance.

In addition, price volatility may be greater if the public float and trading volume of our Class A common stock is low.

In addition, broad market and industry factors may materially reduce the market price of our Class A common stock, regardless of our operating performance.

Because we do not intend to pay dividends on our Class A common stock for the foreseeable future, any return on investment in our Class A common stock is solely dependent upon the appreciation of the price of our Class A common stock on the open market, which may not occur.

Sustained or significant declines in our stock price could also increase the likelihood of stockholder litigation, which could result in substantial costs and divert management attention.

The Garcia Parties control us and their interests may conflict with our or our stockholders’ interests in the future.

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(iii) under our equity incentive plans available to our directors, employees and consultants;

and (iv) under our “at-the-market offering” program (the “ATM Program”) that provides for the sale of 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.

and (iv) under our “at-the-market offering” program (the “ATM Program”) that provides for the sale of the greater of (i) a number of shares of Class A common stock representing an aggregate offering price of $461 million or (ii) an aggregate of 21 million shares of its Class A common stock, from time to time.

Any stock that we issue or exchange dilutes the percentage ownership held by the investors who hold Class A common stock.

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• we require advance notice and duration of ownership requirements for stockholder proposals.

Our amended and restated certificate of incorporation also contains a provision that provides us with protections similar to Section 203 of the DGCL, and prevents us from engaging in a business combination with a person (excluding the Garcia Parties and their transferees) who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval is obtained prior to the acquisition.

Our amended and restated certificate of incorporation also contains a provision that provides us with protections similar to Section 203 of the Delaware General Corporation Law ("DGCL"), and prevents us from engaging in a business combination with a person (excluding the Garcia Parties and their transferees) who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval is obtained prior to the acquisition.

These provisions could discourage, delay, or prevent a transaction involving a change in control of our company.

These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors of their choosing and cause us to take other corporate actions our stockholders desire, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our Class A common stock.

stockholders may deem advantageous, or negatively affect the trading price of our Class A common stock.

In addition, because our Board is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team.

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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 1A. Risk Factors