How Carvana Makes Money

Carvana’s glass “vending machines,” same-day delivery rollouts, and slick checkout screens make the buying experience feel like e-commerce—because it is. Under the hood, though, the economics look more like a vertically integrated auto retailer married to a capital-markets shop. Understanding how Carvana makes money means tracking not just cars sold, but also loans originated, auctions run, and add-on products wrapped around each sale. And because the company lived through a pandemic boom, a brutal 2022–23 reset, and a sharp rebound, the story of its business model is also a story about execution, financing, and scale.

What Carvana Actually Sells

Carvana generates revenue in three primary buckets:

1. Retail Vehicle Sales: The biggest driver is selling used cars to consumers through its online storefront. In 2024, Carvana sold 416,348 retail units, producing $9.68 billion in retail vehicle revenue.

2. Wholesale Vehicle Sales (Including ADESA U.S.): Vehicles that don’t fit retail standards and trade-ins flow into wholesale channels. This includes Carvana’s ADESA U.S. wholesale auction network (acquired in 2022), which operates dozens of physical auction sites and digital lanes. In 2024, wholesale vehicle revenue totaled $2.84 billion, with 199,780 wholesale vehicles sold and 955,802 wholesale marketplace units transacted.

3. Other Sales & Revenues (Financing & Ancillary Products): Carvana originates auto loans at checkout and then sells those receivables to investors via whole-loan sales (e.g., to Ally) and securitizations; it also earns commissions on vehicle service contracts (VSCs), GAP waiver coverage, and integrated auto insurance (via Root). This “Other” line contributed $1.15 billion in 2024 revenue; VSC commissions alone were $193 million. Because these items are accounting gains and commissions rather than inventory sold at cost, Carvana describes Other as carrying near-100% gross margins.

The mix matters: retail vehicles bring top-line heft; finance & ancillary products add high-margin economics; wholesale clears inventory, feeds auctions, and deepens network effects.

The Retail Engine: Digital Storefront + In-House Operations

Carvana’s retail flywheel starts online: a nationally pooled selection, 360° photography, transparent pricing, one-click financing, and delivery or pickup (including those photogenic towers). As of Dec. 31, 2024, the company said 75% of the U.S. population lived within 100 miles of an inspection & reconditioning center (IRC) or auction site, a density that shortens delivery times and enables offerings like same-day delivery—now expanding city by city. The vending machines aren’t just a gimmick; Carvana maintains three dozen-plus of them, using them for brand awareness and lower variable fulfillment costs in pickup markets.

Behind the scenes, the hub-and-spoke logistics network moves cars from acquisition through IRCs to customers. Carvana’s pitch is that software-directed routing, in-house hauling, and standardized reconditioning unlock speed and cost advantages that scale with volume. And by integrating IRC capabilities into ADESA auction “megasites,” the company can pool inventory regionally and cut time-to-customer—hence the drumbeat of press releases adding IRC capacity and same-day delivery in markets such as Richmond, Las Vegas, and Seattle.

Financing: The Capital-Markets Profit Engine

When shoppers choose Carvana financing, the company originates the loan using its own underwriting models. It then monetizes those receivables by selling them—either in securitizations or through whole-loan sales under arrangements such as a Master Purchase and Sale Agreement with Ally Bank. Economically, Carvana books a gain on sale (the present value of expected cash flows net of funding and expected losses), which drops into that high-margin “Other sales & revenues” line. This pipeline is core to Carvana’s model and a major reason per-unit profits can exceed gross profit on the car itself.

The same checkout flow also offers VSCs, GAP coverage, and integrated insurance via Root, layering incremental, capital-light margin on top of each retail unit.

Wholesale & Auctions: ADESA U.S. As a Second Platform

Carvana’s 2022 purchase of ADESA U.S. brought 56 auction locations and a large wholesale marketplace under its umbrella. Strategically, that did three things: (1) added real estate and throughput for reconditioning; (2) created a wholesale outlet and fee engine; and (3) embedded Carvana deeper in the upstream and downstream flows of used vehicles. In Reuters’ shorthand at the time, the deal “boost[ed] physical presence” just as the pandemic boom was fading; Carvana has since been building out IRC capability within ADESA sites to shorten delivery times and deepen selection in key metros.

What The Numbers Say (Most Recent)

Full-Year 2024 (Carvana):
• Retail units: 416,348
• Retail revenue: $9.68 B
• Wholesale revenue: $2.84 B
• Other sales & revenues: $1.15 B
• VSC commissions: $193 M
• Wholesale marketplace units: 955,802
These results capture “normalized” conditions after the company’s 2022–23 reset.

Second Quarter 2025 (Carvana):
Carvana reported record quarterly results: 143,280 retail units sold (+41% YoY), $4.84 B in revenue (+42%), $308 M net income (6.4% margin), and $601 M Adjusted EBITDA (12.4% margin). Management also raised full-year 2025 Adjusted EBITDA guidance to $2.0–$2.2 B.

The Market Backdrop (2024):
Total U.S. used-vehicle sales were 37.4 million, with 19.9 million of those as retail transactions through dealers. That’s the denominator for understanding share.

Competitor—CarMax:
CarMax, the largest U.S. used-car retailer, sold ~789,000 retail units in its fiscal year ended Feb. 28, 2025 (FY2025) and pegged its 2024 age 0-10 retail market share at ~3.7%. Its captive, CarMax Auto Finance (CAF), financed ~42.7% of retail units in FY2025.

Competitor—Vroom:
The once-close online rival exited e-commerce used-car retail in Jan. 2024, winding down to focus on its finance (UACC) and analytics (CarStory) units.

Market Share: Where Carvana Sits Today

Using Cox Automotive’s 19.9 million retail used transactions for 2024 and Carvana’s 416,348 retail units, Carvana’s retail share is roughly 2.1%. On the same math, CarMax’s ~789,000 units imply ~4.0% share (CarMax’s own metric for the narrower 0–10-year segment is 3.7%). The rest of the market is highly fragmented across thousands of franchised and independent dealers; even the top 10 used-car retailers combined account for <10% share, underscoring how much room scale players have to grow.

Unit Economics: Why “Other” Matters So Much

When Carvana hits its stride, per-unit profitability reflects more than just the spread between a car’s acquisition + reconditioning cost and its retail price. The gain-on-sale from selling the customer’s auto loan, plus commissions on VSCs/GAP/insurance, represent largely capital-light margin stacking on the same transaction. That’s why the company emphasizes “Other sales & revenues” as a near-100% gross-margin line, and why sustained financing execution is crucial for profitability.

In 2024 and 2025, the effect became visible: Carvana delivered successive quarters of double-digit Adjusted EBITDA margins (e.g., 12.4% in Q2 2025), a level historically rare for auto retailers.

Strengths: What The Model Does Well

1) Digital Convenience & Brand Theater: A true end-to-end checkout, 360° imagery, seven-day return policy, and home delivery are table stakes; the vending machines add a distinctive brand moment and, in pickup markets, can lower variable costs.

2) Vertically Integrated Logistics & Reconditioning: The hub-and-spoke network, in-house hauling, and standardized IRCs compress cycle times and reduce per-unit costs as volume scales. Integrating IRC capabilities into ADESA auction sites speeds deliveries and broadens local selection.

3) Capital-Markets Monetization: A mature playbook for loan sales and securitizations lets Carvana capture value from its financing funnel in cash today, improving per-unit economics and feeding growth.

4) Wholesale Platform Effects: The ADESA marketplace gives Carvana a fee-generating outlet for non-retailable cars and a source of fresh inventory, while reinforcing relationships with dealers and fleets.

Weaknesses & Risks: What Can Go Wrong

1) Debt Load & Refinancing Risk: Carvana’s aggressive 2020–22 build-out (including the ADESA acquisition) left a heavy debt stack. In July 2023, the company struck a series of debt-exchange deals with >90% of bondholders that cut total debt by ~$1.2 B, extended maturities, and reduced interest expense by >$430 M per year for two years—buying time to improve operations. But the capital structure still matters if used-car margins compress or funding markets turn.

2) Regulatory Scrutiny: Title/registration missteps led to high-profile license suspensions in states like Illinois (2022), while regulators in Michigan took action over alleged violations, and North Carolina curbed operations around a Raleigh site in 2021. These incidents put pressure on back-office processes that must be flawless at scale.

3) Cyclical & Funding Sensitivity: Used-vehicle demand, loan performance, and securitization appetite can swing with interest rates and consumer credit. The pandemic snapped prices sharply higher, but normalization in 2022–23 exposed inventory and pricing risk for all digital dealers.

4) Execution Burden: Same-day delivery, national inventory pooling, and integrated financing are strengths—but they also create a large operational surface area. Mistakes in underwriting, reconditioning, or logistics ripple through economics quickly. (Carvana’s rebound shows what tight execution can fix; the 2022 slump showed what it can’t.)

The Arc: Boom, Bust, And A Reset

Pandemic Boom (2020–2021). With new-car supply constrained and consumers flush with stimulus, used-car prices surged and digital auto retail adoption jumped, turbocharging Carvana’s growth.

Post-Pandemic Correction (2022). As affordability worsened and rates rose, demand cooled, pricing normalized, and Carvana’s fixed-cost base (and ADESA debt) bit hard; the firm cut jobs and slowed expansion to stabilize.

Debt Work & Operational Turnaround (2023–2024): Carvana executed out-of-court exchanges that reduced debt and interest burden, then focused on per-unit profitability and cost control—ultimately delivering its first-ever annual profit in 2023 (helped by debt-extinguishment gains) and a run of profitable quarters.

Reacceleration (2025 YTD): With more IRC-enabled ADESA sites and same-day delivery markets live, Carvana posted record Q2 2025 revenue, units, and margins and lifted its full-year guidance. The rebound has been dramatic; the next challenge is sustaining profitable growth through cycles.

How Carvana Stacks Up To CarMax And “Traditional” Dealers

CarMax remains the scale leader with ~790k retail used units in FY2025 and a mature captive finance arm (CAF) that financed ~43% of retail sales—evidence that financing capture is a bedrock margin driver for big used-car retailers. Carvana’s share (~2% of 2024 retail) is smaller, but it has a larger digital mix and a national logistics footprint that supports same-day in select metros—capabilities CarMax is also building with its own omni-channel push. Meanwhile, traditional dealers (franchised + independents) still control most of the market; the top 10 used-car retailers together held <10% share in 2023.

And the digital peer set? Vroom exited the arena in 2024, underscoring how hard it is to crack the category without funding and operational scale.

The Economics, In Plain English

• Car sales pay the bills; financing fattens the margin: Retail vehicles generate revenue and customer flow. The high-margin dollars come from selling the loan and packaging protection products at checkout.

• Auctions are both a safety valve and a growth lever: ADESA lets Carvana wholesale what it can’t retail and earn fees doing it—while providing real estate to bolt on reconditioning that shortens delivery times and deepens local inventory.

• Scale compounds advantages: More cars → better selection → higher conversion → more loans and VSCs → better per-unit economics → more cash to reinvest in speed and coverage. That’s the loop Carvana is trying to run faster.

What To Watch Next

1. Funding Conditions & Credit: Gain-on-sale economics depend on securitization spreads and loan performance. Watch quarterly commentary for whole-loan sales vs. ABS mix and any changes with partners like Ally.

2. IRC Buildout + Same-Day Coverage: Each ADESA-to-IRC conversion can shave days off delivery and expand same-day inventory—Seattle and other recent adds are leading indicators.

3. Regulatory Hygiene: Ongoing investments in title/DMV automation and compliance will be table stakes to prevent repeat suspensions.

4. Share Gains vs. CarMax: With the retail used market at ~19.9 M units, modest share gains translate into significant volumes—especially if Carvana sustains double-digit EBITDA margins.

Bottom Line

Carvana makes money by selling used cars, then monetizing the customer relationship through financing and ancillary products, with wholesale auctions as both a profit center and an operational backbone. The model works when the company executes across logistics, underwriting, and compliance—turning each retail sale into a stack of high-margin line items—and when funding markets stay receptive. After a painful 2022 reset, Carvana reduced debt, tightened operations, and is now posting record margins and units. In a fragmented market where even leaders hold only single-digit share, the prize for sustained, compliant, capital-disciplined execution is large. The flip side is that the same leverage works in reverse if execution slips or funding tightens—which is why the most important numbers to watch are units, Adjusted EBITDA margin, and the health of the financing pipeline.