10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2018 

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to ______

Commission File Number: 001-38073

CARVANA CO.

(Exact name of registrant as specified in its charter)

Delaware	81-4549921
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1930 W. Rio Salado Parkway, Tempe, Arizona	85281
(Address of principal executive offices)	(Zip Code)

(480) 719-8809

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes  ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ý Yes  ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ¨	Accelerated filer  ¨
Non-accelerated filer  ý (Do not check if a smaller reporting company)	Smaller reporting company   ¨
Emerging growth company ý
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes  ý No

As of August 3, 2018, the registrant had 34,256,765 shares of Class A common stock outstanding and 105,816,629 shares of Class B common stock outstanding.

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017	3
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017	4
	Unaudited Condensed Consolidated Statements of Stockholders' Equity / Members' Deficit for the Six Months Ended June 30, 2018 and 2017	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

	June 30, 2018		December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	199,192	$	172,680
Restricted cash	18,356		14,443
Accounts receivable, net	23,573		14,105
Finance receivables held for sale, net	77,128		45,564
Vehicle inventory	302,989		227,446
Other current assets	22,255		15,480
Total current assets	643,493		489,718
Property and equipment, net	217,414		148,681
Intangible assets, net	9,616		—
Goodwill	6,868		—
Other assets	4,372		2,738
Total assets	$	881,763	$	641,137
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	81,880	$	50,306
Accounts payable due to related party	3,193		1,802
Floor plan facility	347,087		248,792
Current portion of long-term debt	6,664		5,131
Total current liabilities	438,824		306,031
Long-term debt, excluding current portion	76,873		48,469
Other liabilities	6,957		7,093
Total liabilities	522,654		361,593
Commitments and contingencies (Note 14)
Stockholders' equity:
Class A Convertible Preferred Stock, $0.01 par value, $1,000 liquidation value per share - 100 shares authorized, issued and outstanding as of June 30, 2018 and December 31, 2017	98,507		97,127
Preferred stock, $0.01 par value - 50,000 shares authorized; none issued and outstanding as of June 30, 2018 and December 31, 2017	—		—
Class A common stock, $0.001 par value - 500,000 shares authorized; 34,242 and 18,096 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	34		18
Class B common stock, $0.001 par value - 125,000 shares authorized; 105,817 and 114,664 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	106		115
Additional paid in capital	95,008		41,375
Accumulated deficit	(29,907)		(12,899)
Total stockholders' equity attributable to Carvana Co.	163,748		125,736
Non-controlling interests	195,361		153,808
Total stockholders' equity	359,109		279,544
Total liabilities & stockholders' equity	$	881,763	$	641,137

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Sales and operating revenues:
Used vehicle sales, net	$	437,922	$	193,947	$	771,978	$	342,329
Wholesale vehicle sales	16,622		7,818		26,755		13,544
Other sales and revenues, including $5,544, $1,898, $9,655 and $3,656, respectively, from related parties	20,742		7,600		36,975		12,565
Net sales and operating revenues	475,286		209,365		835,708		368,438
Cost of sales	426,251		193,326		752,439		342,653
Gross profit	49,035		16,039		83,269		25,785
Selling, general and administrative expenses	95,652		52,011		178,838		97,919
Interest expense, including $0, $1,241, $0 and $1,382, respectively, to related parties	4,165		2,507		7,706		4,566
Other expense, net	468		391		647		609
Net loss before income taxes	(51,250)		(38,870)		(103,922)		(77,309)
Income tax provision	—		—		—		—
Net loss	(51,250)		(38,870)		(103,922)		(77,309)
Net loss attributable to non-controlling interests	(41,285)		(24,328)		(86,914)		(24,328)
Net loss attributable to Carvana Co.	$	(9,965)	$	(14,542)	$	(17,008)	$	(52,981)
Dividends on Class A convertible preferred stock	(1,375)		—		(2,720)		—
Accretion of beneficial conversion feature on Class A convertible preferred stock	—		—		(1,380)		—
Net loss attributable to Class A common stockholders	$	(11,340)	$	(14,542)	$	(21,108)	$	(52,981)
Net loss per share of Class A common stock, basic and diluted (1)	$	(0.41)	$	(0.28)	$	(0.92)	$	(0.56)
Weighted-average shares of Class A common stock, basic and diluted (1)(2)	27,780		15,026		23,063		15,013

(1) Amounts for periods prior to the initial public offering have been retrospectively adjusted to give effect to 15.0 million shares of Class A common stock issued in the initial public offering and the Organizational Transactions described in Note 1.

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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY / MEMBERS' DEFICIT

(Unaudited)

(In thousands)

			Class A Convertible Preferred Stock			Class A Common Stock			Class B Common Stock
	Members' Deficit		Shares	Amount		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Non-controlling Interests		Total Stockholders' Equity
Balance, December 31, 2016	$	(115,961)	—	$	—	—	$	—	—	$	—	$	—	$	—	$	—	$	—
Equity-based compensation expense prior to Organizational Transactions	158		—	—		—	—		—	—		—		—		—		—
Accrued return on Class C Redeemable Preferred Units	(9,439)		—	—		—	—		—	—		—		—		—		—
Net loss prior to Organizational Transactions	(49,942)		—	—		—	—		—	—		—		—		—		—
Conversion of Class C Redeemable Preferred Units for Class A Units	260,411		—	—		—	—		—	—		—		—		—		—
Effect of Organizational Transactions	(85,227)		—	—		—	—		117,236	117		(174,255)		—		259,365		85,227
Issuance of Class A common stock sold in initial public offering, net of underwriters' discounts and commissions and offering expenses	—		—	—		15,000	15		—	—		205,910		—		—		205,925
Net loss subsequent to Organizational Transactions	—		—	—		—	—		—	—		—		(3,039)		(24,328)		(27,367)
Adjustments to the non-controlling interests	—		—	—		—	—		—	—		846		—		(846)		—
Issuance of restricted stock awards, net of forfeitures	—		—	—		544	1		—	—		(1)		—		—		—
Restricted stock surrendered in lieu of withholding taxes	—		—	—		(21)	—		—	—		(299)		—		—		(299)
Equity-based compensation expense subsequent to Organizational Transactions	—		—	—		—	—		—	—		1,944		—		—		1,944
Balance, June 30, 2017	$	—	—	$	—	15,523	$	16	117,236	$	117	$	34,145	$	(3,039)	$	234,191	$	265,430

5

CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY / MEMBERS' DEFICIT - (Continued)

(Unaudited)

(In thousands)

			Class A Convertible Preferred Stock			Class A Common Stock			Class B Common Stock
	Members' Deficit		Shares	Amount		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Non-controlling Interests		Total Stockholders' Equity
Balance, December 31, 2017	$	—	100,000	$	97,127	18,096	$	18	114,664	$	115	$	41,375	$	(12,899)	$	153,808	$	279,544
Net loss	—		—	—		—	—		—	—		—		(17,008)		(86,914)		(103,922)
Issuance of Class A common stock sold in follow-on offering, net of underwriters' discounts and commissions and offering expenses	—		—	—		6,600	7		—	—		172,280		—		—		172,287
Adjustment to non-controlling interests related to follow-on offering	—		—	—		—	—		—	—		(132,375)		—		132,375		—
Issuance of LLC Units related to business acquisitions	—		—	—		—	—		—	—		—		—		9,981		9,981
Adjustment to non-controlling interests related to business acquisitions	—		—	—		—	—		—	—		1,297		—		(1,297)		—
Accretion of beneficial conversion feature on Class A Convertible Preferred Stock	—		—	1,380		—	—		—	—		(1,380)		—		—		—
Dividends on Class A Convertible Preferred Stock	—		—	—		—	—		—	—		(2,720)		—		—		(2,720)
Exchanges of LLC Units	—		—	—		9,569	9		(8,847)	(9)		12,592		—		(12,592)		—
Establishment of deferred tax assets related to increases in tax basis in Carvana Group	—		—	—		—	—		—	—		71,232		—		—		71,232
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group	—		—	—		—	—		—	—		(71,232)		—		—		(71,232)
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes	—		—	—		(36)	—		—	—		(323)		—		—		(323)
Options exercised	—		—	—		13	—		—	—		169						169
Equity-based compensation expense	—		—	—		—	—		—	—		4,093		—		—		4,093
Balance, June 30, 2018	$	—	100,000	$	98,507	34,242	$	34	105,817	$	106	$	95,008	$	(29,907)	$	195,361	$	359,109

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended June 30,
	2018		2017
Cash Flows from Operating Activities:
Net loss	$	(103,922)	$	(77,309)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	9,862		4,645
Loss on disposal of property and equipment	267		565
Provision for bad debt and finance receivable allowance	1,131		494
Gain on loan sales	(22,313)		(8,390)
Equity-based compensation expense	4,093		2,102
Amortization and write-off of debt issuance costs	649		1,250
Originations of finance receivables	(525,885)		(223,843)
Proceeds from sale of finance receivables	513,820		231,942
Changes in assets and liabilities:
Accounts receivable	(9,500)		(8,293)
Vehicle inventory	(74,817)		11,668
Other current assets	(7,397)		(1,538)
Other assets	270		(1,148)
Accounts payable and accrued liabilities	33,002		942
Accounts payable to related party	1,391		285
Other liabilities	(136)		5,337
Net cash used in operating activities	(179,485)		(61,291)
Cash Flows from Investing Activities:
Purchases of property and equipment	(73,425)		(42,576)
Business acquisitions, net of cash acquired	(6,670)		—
Net cash used in investing activities	(80,095)		(42,576)
Cash Flows from Financing Activities:
Proceeds from floor plan facility	837,673		397,082
Payments on floor plan facility	(739,378)		(395,555)
Proceeds from Verde Credit Facility	—		35,000
Payments on Verde Credit Facility	—		(35,000)
Proceeds from long-term debt	25,670		2,980
Payments on long-term debt	(2,852)		(641)
Payments of debt issuance costs, including $0 and $1,000 to related parties, respectively	(325)		(1,000)
Net proceeds from issuance of Class A common stock	172,287		206,323
Proceeds from exercise of stock options	169		—
Tax withholdings related to restricted stock awards	(323)		—
Dividends paid on Class A Convertible Preferred Stock	(2,904)		—
Payments of costs related to issuance of Class A Convertible Preferred Stock	(12)		—
Net cash provided by financing activities	290,005		209,189
Net increase in cash, cash equivalents and restricted cash	30,425		105,322
Cash, cash equivalents and restricted cash at beginning of period	187,123		49,450
Cash, cash equivalents and restricted cash at end of period	$	217,548	$	154,772

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — BUSINESS ORGANIZATION 

Description of Business

Carvana Co. and its wholly-owned subsidiary Carvana Co. Sub (collectively, "Carvana Co.") together with its consolidated subsidiaries (the “Company”) is a leading e-commerce platform for buying used cars. The Company is transforming the used car buying 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 purchase transaction including financing their purchase, trading in their current vehicle and purchasing complementary products such as vehicle service contracts and GAP waiver coverage. 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.

Organization and Initial Public Offering

Carvana Co. is a holding company that was formed as a Delaware corporation on November 29, 2016 for the purpose of completing an initial public offering ("IPO") and related transactions in order to operate the business of Carvana Group, LLC and its subsidiaries (collectively, "Carvana Group"). Substantially all of the Company’s assets and liabilities represent the assets and liabilities of Carvana Group. 

Carvana Group was formed as a limited liability company by DriveTime Automotive Group, Inc. (together with its subsidiaries and affiliates “DriveTime”) and commenced operations in 2012. Prior to November 1, 2014, Carvana Group was a wholly-owned subsidiary of DriveTime. On November 1, 2014 (the “Distribution Date”), DriveTime distributed its member units in Carvana Group to the unit holders of DriveTime on a pro rata basis (the “Distribution”). Carvana Group accounted for the Distribution as a spinoff transaction in accordance with ASC 505-60, Equity — Spinoffs and Reverse Spinoffs and reflected assets and liabilities before and after the Distribution Date at their historical basis.

On May 3, 2017, Carvana Co. completed its IPO of 15.0 million shares of Class A common stock at a public offering price of $15.00 per share. Carvana Co. received approximately $205.8 million in proceeds, net of underwriting discounts and commissions and offering expenses, which it used to purchase approximately 18.8 million newly-issued membership interests of Carvana Group at a price per unit equal to 0.8 times the initial public offering price less underwriting discounts and commissions and offering expenses.

Also in connection with the IPO, the Company completed the following organizational transactions (the “Organizational Transactions”):

• Carvana Group amended and restated its limited liability company operating agreement (the "LLC Agreement") to, among other things, (i) eliminate a class of preferred membership interests, (ii) provide for two classes of common ownership interests in Carvana Group held by the then-existing holders of LLC units (the "Original LLC Unitholders" and together with any holders of LLC units issued subsequent to the IPO, the "LLC Unitholders") consisting of Class B common units (the “Class B Units”) and Class A common units (the “Class A Units”), and (iii) appoint Carvana Co. as the sole manager of Carvana Group;

• Carvana Co. amended and restated its certificate of incorporation to authorize (i) 50.0 million shares of Preferred Stock, par value $0.01 per share, (ii) 500.0 million shares of Class A common stock, par value $0.001 per share, and (iii) 125.0 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 Ernest Garcia, II, Ernie Garcia, III and entities controlled by one or both of them (collectively, the "Garcia Parties") generally entitles its holder to ten votes on all matters to be voted on by stockholders. 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;

• Carvana Group converted its outstanding Class C Redeemable Preferred Units into approximately 43.1 million Class A Units;

8

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

• Carvana Co. issued approximately 117.2 million shares of Class B common stock to holders of Class A Units, on a four-to-five basis with the number of Class A Units they owned, for nominal consideration; and,

• Carvana Co. transferred approximately 0.2 million Class A Units to Ernest Garcia, II in exchange for his 0.1% ownership interest in Carvana, LLC, a majority-owned subsidiary of Carvana Group.

In accordance with the LLC Agreement, Carvana Co. has all management powers over the business and affairs of Carvana Group and conducts, directs and exercises full control over the activities of Carvana Group. Class A Units and Class B Units (the "LLC Units") do not hold voting rights, which results in Carvana Group being considered a variable interest entity ("VIE"). Due to Carvana Co.'s power to control and its significant economic interest in Carvana Group, it is considered the primary beneficiary of the VIE and the Company consolidates the financial results of Carvana Group. As of June 30, 2018, Carvana Co. owned approximately 23.4% of Carvana Group and the LLC Unitholders owned the remaining 76.6%.

The Organizational Transactions described above are considered transactions between entities under common control. As a result, the financial statements for periods prior to the IPO and Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes.

Follow-On Public Offering

On April 30, 2018, the Company completed a follow-on offering of 6.6 million shares of its Class A common stock at a public offering price of $27.50 per share and received net proceeds from the offering of approximately $172.3 million after underwriting discounts and commissions and offering expenses. The Company used the net proceeds to purchase approximately 8.3 million newly-issued LLC Units in Carvana Group, which used the net proceeds primarily for general corporate purposes.

A holder of Class A common stock (the "Selling Stockholder") and certain LLC Unitholders (the "Selling LLC Unitholders") sold a total of approximately 6.1 million shares of Class A common stock as part of the offering. The Selling LLC Unitholders exchanged approximately 6.9 million LLC Units for approximately 5.6 million shares of Class A common stock to be sold in the offering, and to the extent such Selling LLC Unitholder held Class B common stock, the corresponding shares of Class B common stock were immediately retired by the Company. The Company did not receive any proceeds from the sale of the approximately 6.1 million shares of Class A common stock by the Selling Stockholder and the Selling LLC Unitholders.

Convertible Preferred Stock

On December 5, 2017, Carvana Co. amended and restated its certificate of incorporation to authorize 100,000 shares of Class A Convertible Preferred Stock, with an initial stated value of  $1,000 per share and a par value of $0.01 per share (the "Convertible Preferred Stock") and, effective December 5, 2017, Carvana Group amended its LLC Agreement to, among other things, create a class of convertible preferred units. On December 5, 2017, Carvana Co. sold 100,000 shares of Convertible Preferred Stock for net proceeds of approximately $98.5 million, which it used to purchase 100,000 newly-issued convertible preferred units of Carvana Group (the "Convertible Preferred Units") at a price per unit equal to the initial stated value of the Convertible Preferred Stock less issuance costs.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within our most recent Annual Report on Form 10-K.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of June 30, 2018, results of operations for the three and six months ended June 30, 2018 and 2017, and cash flows and changes in stockholders' equity for

9

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

the six months ended June 30, 2018 and 2017. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.

As discussed in Note 1 — Business Organization, Carvana Group is considered a VIE and Carvana Co. consolidates its financial results due to the determination that it is the primary beneficiary. The Company reviews subsidiaries and affiliates, as well as other entities, to determine if it should be considered variable interest entities, and whether it should change the consolidation determinations based on changes in its characteristics. The Company considers an entity a VIE if its equity investors own an interest therein that lacks the characteristics of a controlling financial interest or if such investors do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or if the entity is structured with non-substantive voting interests. To determine whether or not the entity is consolidated with the Company’s results, the Company also evaluates which interests are variable interests in the VIE and which party is the primary beneficiary of the VIE. 

Liquidity

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company has incurred losses from inception through June 30, 2018, and expects to incur additional losses in the future. As the Company continues to fund growth into new markets, fund construction of vending machines and inspection and reconditioning centers and enhance technology and software development efforts, it needs access to substantial capital. From inception, the Company has funded operations through the sale of Class A Units, the sale of Class C Redeemable Preferred Units, capital contributions from DriveTime, its IPO completed on May 3, 2017 for net proceeds of approximately $205.8 million, its follow-on offering completed on April 30, 2018 for net proceeds of approximately $172.3 million, its issuance of Class A Convertible Preferred Stock on December 5, 2017 for net proceeds of approximately $98.5 million, and short-term funding from the Company’s majority owner. The Company has historically funded vehicle inventory purchases through its Floor Plan Facility, described in further detail in Note 8 — Debt Instruments, and had approximately $2.9 million available under the Floor Plan Facility to fund future vehicle inventory purchases as of June 30, 2018. The Company plans to increase the amount and extend the maturity date of financing available to purchase vehicle inventory by amending its existing Floor Plan Facility or by entering into a new agreement prior to the maturity date of the Floor Plan Facility. The Company has also funded certain of its capital expenditures through long-term financing with third parties as described in further detail in Note 8 — Debt Instruments. The Company has historically entered into various agreements under which it sells the finance receivables it originates to third parties. As of June 30, 2018, the Company sells finance receivables under multiple agreements, all of which expire in November 2018. The Company plans to extend or enter into new agreements to sell its finance receivables to third parties prior to the expiration of the agreements. Management believes that its current working capital and expected continued inventory and capital expenditure financing are sufficient to fund operations for at least one year from the financial statement issuance date.

Use of Estimates

The preparation of these accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations. 

Segments

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 reportable segment. The chief operating decision maker focuses on consolidated results in assessing operating performance and allocating resources. Furthermore, the Company offers similar products and services and uses similar

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processes to sell those products and services to similar classes of customers throughout the United States (“U.S.”). Substantially all revenue is generated and all assets are held in the U.S. for all periods presented.

Comprehensive Loss

During the three and six months ended June 30, 2018 and 2017, the Company had no other components of comprehensive loss and, therefore, the net loss and comprehensive loss were the same for all periods presented.

Restricted Cash

The restricted cash includes the deposit required under the Company's Floor Plan Facility, which is 5% of the outstanding floor plan facility principal balance, as explained in Note 8 — Debt Instruments and amounts held as restricted cash as required under letter of credit agreements, as explained in Note 14 — Commitments and Contingencies. 

Revenue Recognition

The Company adopted ASC 606, Revenue from Contracts with Customers ("ASC 606") on January 1, 2018 using the modified retrospective method. ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied. Based on the manner in which the Company historically recognized revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of its revenue recognition and the Company recognized no cumulative effect adjustment upon adoption.

Used Vehicle Sales

The Company sells used vehicles directly to its customers through its website. The prices of used vehicles are set forth in the customer contracts at stand-alone selling prices which are agreed to prior to delivery. The Company satisfies its performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. The Company recognizes revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for used vehicle sales includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the used vehicle. Revenue excludes any sales taxes that are collected from customers.

Wholesale Vehicle Sales

The Company sells vehicles to wholesalers. These vehicles sold to wholesalers are primarily acquired from customers

who trade-in their existing vehicles that do not meet the Company’s quality standards to list and sell through its website. The Company satisfies its performance obligation for wholesale vehicle sales when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. The Company recognizes revenue at the amount it expects to receive for the used vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle.

Other Sales and Revenues

Other sales and revenues include gains on the sales of finance receivables, commissions on vehicle service contracts (“VSCs”), GAP waiver coverage, and interest income received on finance receivables prior to selling them to investors. The Company accounts for the sale of finance receivables in accordance with ASC 860, Transfers and Servicing of Financial Assets as described in the footnotes to the Company's annual financial statements included in its Annual Report filed on Form 10-K with the SEC on March 6, 2018.

Customers purchasing used vehicles from the Company may enter into contracts for VSCs. The Company sells and receives a commission on VSCs under a master dealer agreement with DriveTime, pursuant to which the Company sells VSCs that DriveTime administers and is the obligor. The Company recognizes commission revenue at the time of sale, net of a reserve

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for estimated contract cancellations. The reserve for cancellations is estimated based upon historical experience and recent trends and is reflected as a reduction of other sales and revenues. Changes in these estimates are reflected as an adjustment to revenue in the period identified.

Customers that finance their used vehicle purchases with the Company may enter into contracts to purchase GAP waiver coverage, which provides customers with the promise that whoever then holds the underlying finance receivable will not attempt collection of a loan balance that is in excess of the value of the financed vehicle in the event of a total loss. The price of GAP waiver coverage is set forth in each contract. GAP waiver coverage is recognized as the performance obligation is satisfied over the period of coverage, generally on a straight-line basis over the term of the related finance receivable, less a reserve for cancellations. The reserve for cancellations is estimated based upon historical experience and recent trends and is reflected as a reduction of other sales and revenues. Changes in these estimates are reflected as an adjustment to other sales and revenues in the period identified. Upon selling the finance receivable, the Company recognizes any remaining deferred revenue. DriveTime administers the GAP waiver coverage.

Adoption of New Accounting Standards

As discussed above, the Company adopted ASC 606 on January 1, 2018 using the modified retrospective method. ASC 606 requires the reserve for vehicle inventory returns to be presented separately from vehicle inventory, where the Company previously presented it. As of December 31, 2017, the reserve for estimated returns included within vehicle inventory was approximately $2.6 million. As of June 30, 2018, the reserve for estimated returns included within other current assets was approximately $4.6 million. Furthermore, based on the manner in which the Company recognizes revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of its revenue recognition and the Company recognized no cumulative effect adjustment upon adoption.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Receipts and Payments (“ASU 2016-15”), which provides additional clarity on the classification of specific events on the statement of cash flows including debt prepayment and extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from settlement of insurance claims, distributions received from equity method investees and beneficial interests in securitization transactions. The Company adopted this ASU on January 1, 2018. The adoption of ASU 2016-15 did not have a material effect on its consolidated statements of cash flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows — Restricted Cash (“ASU 2016-18”), which requires the statement of cash flows to include restricted cash with its cash and cash equivalents balance and a reconciliation between all cash items on the balance sheet and the balance presented in the statement of cash flows. In addition, changes in restricted cash related to transfers between cash and cash equivalents and restricted cash will not be presented as cash flow activities in the statement of cash flows. The Company adopted ASU 2016-18 on January 1, 2018 on a retrospective basis. As a result, changes in restricted cash are no longer presented as investing cash flow activities and the restricted cash balance is included with cash and cash equivalents in the beginning and end of period balances on the Company's consolidated statements of cash flows for all periods presented. For the six months ended June 30, 2017, changes in restricted cash included within cash used in investing activities, as originally presented, was approximately $0.1 million.

Accounting Standards Issued But Not Yet Adopted

Since February 2016, the FASB has issued several accounting standards updates related to the new leasing model in ASC 842, Leases (“ASC 842”). ASC 842 introduces a lessee model that requires a right-of-use asset and lease obligation to be presented on the balance sheet for certain leases, whether operating or financing. ASC 842 eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease classification. Expense recognition on the income statement remains similar to current lease accounting guidance. ASC 842 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018 and should be applied using a modified retrospective approach, with the option to elect various practical expedients. The Company plans to adopt ASC 842 for its fiscal year beginning January 1, 2019. The adoption of ASC 842 will require the recognition of a right-of-use asset and a lease obligation for the Company’s leases (see Note 14 — Commitments and Contingencies). While the Company is still evaluating the full effect this guidance will have on its consolidated financial statements and related disclosures, the Company anticipates recognizing right-of-use assets and operating lease liabilities, which will have a material impact upon adoption primarily on its consolidated balance sheets and related disclosures, and will increase total assets and liabilities.

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In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and earlier adoption is permitted beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact on its consolidated financial statements, and plans to adopt ASU 2016-13 for its fiscal year beginning January 1, 2020. Finance receivables originated in connection with the Company’s vehicle sales are held for sale and are sold to third parties. As a result, the Company does not presently hold any finance receivables until maturity. Therefore, the Company does not expect adoption of ASU 2016-13 to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which is intended to simplify the goodwill impairment test by eliminating the second step of the goodwill impairment test, which requires performing a hypothetical purchase price allocation. Under ASU 2017-04, goodwill impairment should be recognized based on the amount by which a reporting unit's carrying amount exceeds its fair value, but should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, may be early adopted after January 1, 2017, and should be applied on a prospective basis. The Company does not expect adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation — Stock Compensation (Topic 718) ("ASU 2018-07") related to the accounting for share-based payment transactions for acquiring goods and services from nonemployees. Under ASU 2018-07, the intent is to simplify and align most requirements for share-based payments to nonemployees with the requirements for share-based payments granted to employees under ASC 718, including measuring the equity instruments at the grant-date fair value. ASU 2018-07 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, and will be applied on a modified retrospective basis through a cumulative-effect adjustment to accumulated deficit. The Company plans to adopt ASU 2018-07 for its fiscal year beginning January 1, 2019 and is currently assessing the impact, if any, the guidance will have on the Company's consolidated financial statements.

NOTE 3 — PROPERTY AND EQUIPMENT, NET 

The following table summarizes property and equipment, net as of June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Land and site improvements	$	40,705	$	11,656
Buildings and improvements	91,775		60,804
Transportation fleet	46,846		39,153
Software	28,006		21,009
Furniture, fixtures and equipment	15,451		12,239
Total property and equipment excluding construction in progress	222,783		144,861
Less: accumulated depreciation and amortization on property and equipment	(30,539)		(20,453)
Property and equipment excluding construction in progress, net	192,244		124,408
Construction in progress	25,170		24,273
Property and equipment, net	$	217,414	$	148,681

Depreciation and amortization expense on property and equipment was approximately $4.9 million and $2.6 million for the three months ended June 30, 2018 and 2017, respectively, and approximately $9.5 million and $4.6 million for the six months ended June 30, 2018 and 2017, respectively. These amounts primarily relate to selling, general and administrative activities and are included as a component of selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

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(Unaudited)

NOTE 4 — GOODWILL AND INTANGIBLE ASSETS, NET

On April 12, 2018, the Company acquired Car360, Inc. ("Car360"), a provider of app-based photo capture technology, for approximately $16.7 million, net of cash acquired of approximately $0.4 million. The purchase price was comprised of approximately $6.7 million cash, net of cash acquired, and approximately 0.5 million Class A Units of Carvana Group, with a fair value of approximately $10.0 million. 

 The purchase price was allocated to net tangible assets of approximately $0.2 million and intangible assets of approximately $9.9 million based on their fair values on the acquisition date.  The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed was $6.9 million, which has been recorded as goodwill.

The historical results of operations for Car360 were not significant to the Company's consolidated results of operations for the periods presented. Certain estimated values for the acquisition, including goodwill and intangible assets, are not yet finalized and are subject to revision as additional information becomes available and more detailed analyses are completed.

The following table summarizes intangible assets and goodwill related to the Car360 acquisition as of June 30, 2018 (in thousands):

	Useful Life	June 30, 2018
Intangible assets:
Developed technology	7 years	$	8,642
Customer relationships	5 years	523
Non-compete agreements	5 years	774
Intangible assets, acquired cost		9,939
Less: accumulated amortization on intangible assets		(323)
Intangible assets, net		$	9,616
Goodwill	N/A	$	6,868

Amortization expense during the three and six months ended June 30, 2018 was $0.3 million. As of June 30, 2018, the remaining weighted-average amortization period for definite-lived intangible assets was approximately 6.5 years. The anticipated annual amortization expense to be recognized in future years as of June 30, 2018 is as follows (in thousands):

	Expected Future Amortization
Remainder of 2018	$	747
2019	1,494
2020	1,494
2021	1,494
2022	1,494
Thereafter	2,893
Total	$	9,616

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(Unaudited)

NOTE 5 — ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES 

The following table summarizes accounts payable and other accrued liabilities as of June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Accounts payable	$	23,996	$	10,546
Sales taxes and vehicle licenses and fees	18,539		9,034
Accrued compensation and benefits	9,141		5,054
Accrued property and equipment	6,374		8,325
Accrued advertising costs	3,752		4,265
Other accrued liabilities	20,078		13,082
Total accounts payable and other accrued liabilities	$	81,880	$	50,306

NOTE 6 — RELATED PARTY TRANSACTIONS 

Lease Agreements

In November 2014, the Company and DriveTime entered into a lease agreement that governs the Company’s access to and utilization of temporary storage, reconditioning, offices and parking space at various DriveTime inspection and reconditioning centers ("IRCs") and retail facilities (the "DriveTime Lease Agreement"). The DriveTime Lease Agreement was most recently amended in March 2018. Lease duration varies by location, with initial terms expiring between 2018 and 2024. Most of the retail facilities have two-year terms and the Company is entitled to exercise up to two consecutive one-year renewal options at up to ten of these locations.

Under the DriveTime Lease Agreement, the Company pays a monthly rental fee related to 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. The Company is additionally responsible for paying for any tenant improvements it requires to conduct its operations and its share of estimated costs incurred by DriveTime related to preparing these sites for use. As it relates to locations where the Company reconditions vehicles, the Company’s share of facility and shared reconditioning supplies expenses are calculated based on the actual costs for operating the inspection centers and the Company’s pro rata share of total reconditioned vehicles and parking spaces at such inspection centers in a given month. Management has determined that the costs allocated to the Company are based on a reasonable methodology.

Separate from the DriveTime Lease Agreement, in December 2016, the Company entered into a lease agreement related to a vehicle inspection and reconditioning center in Tolleson, Arizona, with Verde Investments, Inc., an affiliate of DriveTime ("Verde"), with an initial term of approximately 15 years. The lease agreement requires monthly rental payments and can be extended for four additional five-year periods. In February 2017, the Company also entered into a lease with DriveTime for sole occupancy of a fully-operational inspection and reconditioning center in Winder, Georgia, where the Company previously maintained partial occupancy. The lease has an initial term of eight years, subject to the Company's ability to exercise three renewal options of five years each.

Expenses related to these lease agreements are allocated based on usage to inventory and selling, general and administrative expenses in the accompanying unaudited condensed consolidated balance sheets and statements of operations. Costs allocated to inventory are recognized as cost of sales when the inventory is sold. During the three months ended June 30, 2018, total costs related to these lease agreements were approximately $2.3 million with approximately $1.1 million and $1.2 million allocated to inventory and selling, general and administrative expenses, respectively. During the six months ended June 30, 2018, total costs related to these lease agreements were approximately $4.5 million with approximately $2.1 million and $2.4 million allocated to inventory and selling, general and administrative expenses, respectively. During the three months ended June 30, 2017, total costs related to these lease agreements were approximately $1.8 million with approximately $0.6 million and $1.2 million allocated to inventory and selling, general and administrative expenses, respectively. During the six months ended June 30, 2017, total costs related to these lease agreements were approximately $3.4 million with approximately $1.2 million and $2.2 million allocated to inventory and selling, general and administrative expenses, respectively.

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(Unaudited)

Corporate Office Leases

During the first quarter of 2017, the Company subleased additional office space at DriveTime’s corporate headquarters in Tempe, Arizona. Pursuant to this arrangement, the Company incurred rent expense of approximately $0.1 million during the three months ended March 31, 2017, after which this arrangement was terminated.

In September 2016, the Company entered into a lease with a third party for the second floor of its corporate headquarters in Tempe, Arizona. DriveTime guarantees up to $0.5 million of the Company's rent payments under that lease through September 2019. In connection with that lease, the Company entered into a sublease with DriveTime for the use of the first floor of 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, which is co-terminus with DriveTime's master lease, the Company will pay DriveTime rent equal to the amounts due under DriveTime's master lease. During the three and six months ended June 30, 2018, the rent expense incurred related to this first floor sublease was approximately $0.2 million and $0.4 million, respectively. During the three and six months ended June 30, 2017, the rent expense incurred related to this first floor sublease was approximately $0.2 million and $0.3 million, respectively.

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 vehicle service contracts ("VSCs") and GAP waiver coverage 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. The Company recognized approximately $5.5 million and $9.7 million during the three and six months ended June 30, 2018, respectively, and approximately $1.9 million and $3.7 million during the three and six months ended June 30, 2017, respectively, of commissions earned on VSCs sold to its customers and administered by DriveTime. The commission earned on the sale of these VSCs is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

DriveTime also administers the Company's GAP waiver coverage under the Master Dealer Agreement. The Company pays a per-contract fee to DriveTime to administer the GAP waiver coverage it sells to its customers. The Company incurred approximately $0.0 million and  $0.1 million during the three and six months ended June 30, 2018, respectively, and $0.0 million during the both the three and six months ended June 30, 2017 related to the administration of GAP waiver coverage.

Aircraft Time Sharing Agreement

The Company entered into an agreement to share usage of two aircraft operated by DriveTime on October 22, 2015, and the agreement was subsequently amended on May 15, 2017. Pursuant to the agreement, the Company agreed to reimburse DriveTime for actual expenses for each of the flights in which the Company uses the aircrafts. The original agreement was for  12 months, with perpetual 12-month automatic renewals. Either the Company or DriveTime can terminate the agreement with 30 days’ prior written notice. The Company reimbursed DriveTime approximately $0.2 million and $0.3 million, respectively, under this agreement during the three months ended June 30, 2018 and 2017, respectively, and approximately $0.2 million and $0.4 million under this agreement during the six months ended June 30, 2018 and 2017, respectively.

Credit Facility with Verde

On February 27, 2017, the Company entered into a credit facility with Verde for an amount up to $50.0 million (the "Verde Credit Facility"). Amounts outstanding accrued interest at a rate of 12.0% per annum. Upon execution of the agreement, the Company paid Verde a commitment fee of $1.0 million. In connection with the IPO, the Company repaid the outstanding principal balance of $35.0 million and accrued interest of approximately $0.4 million in full and the Verde Credit Facility agreement terminated.

IP License Agreement

In February 2017, the Company entered into a license agreement that governs the rights of certain intellectual property owned by the Company and the rights of certain intellectual property owned by DriveTime. The license agreement generally provides that each party grants to the other certain limited exclusive (other than with respect to the licensor party and its

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affiliates) and non-exclusive licenses to use certain of its intellectual property and each party agrees to certain covenants not to sue the other party, its affiliates and certain of its service providers in connection with various patent claims. The exclusive license to DriveTime is limited to the business that is primarily of subprime used car sales to retail customers. However, upon a change of control of either party, both parties’ license rights as to certain future improvements to licensed intellectual property and all limited exclusivity rights are terminated. The agreement does not provide a license to any of the Company's patents, trademarks, logos, customers’ personally identifiable information or any intellectual property related to the Company's vending machines, automated vehicle photography or certain other elements of the Company's brand.

Accounts Payable Due to Related Party

Amounts payable to DriveTime and Verde under the agreements explained above, as well as invoices DriveTime initially paid on behalf of the Company for vehicle reconditioning costs and general and administrative expenses, are included in accounts payable to related party in the accompanying unaudited condensed consolidated balance sheets. As of June 30, 2018 and December 31, 2017, approximately $3.2 million and $1.8 million, respectively, was due to related parties primarily related to lease agreements, shared service fees, net VSC fees collected from customers and repayments to DriveTime for invoices paid on behalf of the Company.

NOTE 7 — FINANCE RECEIVABLE SALE AGREEMENTS 

In December 2016, the Company entered into a master purchase and sale agreement (the "Purchase and Sale Agreement") and a master transfer agreement (the "2016 Master Transfer Agreement") pursuant to which it sells finance receivables meeting certain underwriting criteria to certain third party purchasers, including Ally Bank and Ally Financial (the "Ally Parties"). Through November 2017 under the Purchase and Sale Agreement and the 2016 Master Transfer Agreement, the Company could sell up to an aggregate of $375.0 million, and $292.2 million, respectively, in principal balances of finance receivables subject to adjustment as described in the respective agreements. On November 3, 2017, the Company amended its Purchase and Sale Agreement to increase the aggregate amount of principal balances of finance receivables it can sell from $375.0 million to $1.5 billion. Also on November 3, 2017, the Company terminated the remaining capacity under the 2016 Master Transfer Agreement and replaced this facility by entering into a new master transfer agreement (the "2017 Master Transfer Agreement") with a third party under which the third party has committed to purchase up to an aggregate of approximately $357.1 million in principal balances of finance receivables.

During the six months ended June 30, 2018, the Company sold approximately $308.8 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $184.4 million in principal balances of finance receivables under the 2017 Master Transfer Agreement. As of June 30, 2018, there was approximately $847.6 million and $140.5 million of unused capacity under the Purchase and Sale Agreement and the 2017 Master Transfer Agreement, respectively. During the six months ended June 30, 2017, the Company sold approximately $157.7 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $66.6 million in principal balances of finance receivables under the 2016 Master Transfer Agreement. 

The total gain on loan sales related to finance receivables sold under these agreements was approximately $12.4 million and $22.3 million during the three and six months ended June 30, 2018, respectively, and approximately $5.4 million and $8.4 million during the three and six months ended June 30, 2017, respectively, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

NOTE 8 — DEBT INSTRUMENTS 

Floor Plan Facility

The Company has a floor plan facility with a third party to finance its used vehicle inventory, which is secured by substantially all of its assets, other than the Company's interests in real property (the "Floor Plan Facility"). The Company most recently amended the Floor Plan Facility in August 2017 to, among other things, extend the maturity date to December 31, 2018, and increase the available credit to $275.0 million through December 31, 2017 and to $350.0 million from January 1, 2018 through December 31, 2018. The Company is required to make monthly interest payments at a rate per annum equal to one-month LIBOR plus 3.65%, effective August 1, 2017. The Floor Plan Facility requires that at least 5% of the total principal amount owed to the lender is held as restricted cash.

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(Unaudited)

Repayment in an amount equal to the amount of the advance or loan must be made within five business days of selling or otherwise disposing of the underlying vehicle inventory, unless customers financed the purchase by originating an automotive finance receivable. For used vehicle sales involving financing originated by the Company and sold under either the Purchase and Sale Agreement or the 2017 Master Transfer Agreement as mentioned in Note 7 — Finance Receivable Sale Agreements, the lender has extended repayment to the earlier of fifteen business days after the sale of the used vehicle or one day following the sale of the related finance receivable. In November 2017, the Company also entered into a letter agreement to extend repayment of amounts due under the Floor Plan Facility for used vehicle sales involving financing that are not sold under either the Purchase and Sale Agreement or the 2017 Master Transfer Agreement. With respect to such vehicles, the lender agreed to extend repayment of the advance or the loan for such vehicles to the earlier of fifteen business days after the sale of the vehicle or two business days following the funding of the related finance receivable. Outstanding balances related to vehicles held in inventory for more than 180 days require monthly principal payments equal to 10% of the original principal amount of that vehicle until the remaining outstanding balance is the lesser of (i) 50% of the original principal amount or (ii) 50% of the wholesale value. Prepayments may be made without incurring a premium or penalty. Additionally, the Company is permitted to make prepayments to the lender to be held as principal payments under the Floor Plan Facility and subsequently re-borrow such amounts.

As of June 30, 2018, the interest rate on the Floor Plan Facility was approximately 5.74%, the Company had an outstanding balance under this facility of approximately $347.1 million, borrowing capacity available of approximately $2.9 million and held approximately $17.4 million in restricted cash related to this facility. As of December 31, 2017, the Company held approximately $12.4 million in restricted cash related to this facility.

Long-Term Debt

Notes Payable

The Company has 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 serve 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. Each note has a fixed annual interest rate, a two to five-year term and requires monthly payments. As of June 30, 2018, the outstanding principal of these notes had a weighted-average interest rate of 5.6% and totaled approximately $31.3 million, of which approximately $6.7 million is due within the next twelve months and is included as current portion of long-term debt in the accompanying unaudited condensed consolidated balance sheets.

Finance Leases

Beginning in 2017, the Company has financed certain purchases and construction of its property and equipment through various sale and leaseback transactions. As of June 30, 2018, none of these transactions have qualified for sale accounting due to 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. These arrangements require monthly payments and have initial terms that expire in fifteen to twenty years. Some of the agreements are subject to renewal options of up to twenty years and base rent increases throughout the term. As of June 30, 2018, the outstanding liability associated with these sale and leaseback arrangements, net of debt issuance costs, is approximately $52.3 million and is included in long-term debt in the accompanying unaudited condensed consolidated balance sheet.

In November 2017, the Company entered into a master sale-leaseback agreement (the "MSLA") pursuant to which it may sell and lease back certain of its owned or leased properties and construction improvements. A portion of the Company's finance leases described above is through the MSLA. A portion of the fixed rental payments set forth in the respective lease agreements is payable annually beginning in November 2019. Under the MSLA, at any time the Company may elect to, and beginning in November 2019 or until a property owner of a leased site consents to the sale-leaseback, the purchaser has the right to, demand that the Company repurchase one or more of the properties sold and leased back pursuant to the MSLA for an amount equal to the repurchase price. Repurchase prices are defined in each of the applicable leases and are generally the original purchase prices plus any accrued and unpaid rent. As of June 30, 2018, the repurchase prices for all properties under the MSLA excluding unpaid rent totaled approximately $28.8 million. Under the MSLA, the total sales price of properties the Company has sold and is leasing back at any point in time is limited to $75.0 million. As of June 30, 2018, the Company may sell and lease back an additional approximately $46.2 million of its property and equipment under the MSLA.

18

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

NOTE 9 — STOCKHOLDERS' EQUITY 

Organizational Transactions

Immediately prior to the IPO, Carvana Co. amended and restated its certificate of incorporation to, among other things authorize (i) 50.0 million shares of Preferred Stock, par value $0.01 per share, (ii) 500.0 million shares of Class A common stock, par value $0.001 per share, and (iii) 125.0 million shares of Class B common stock, par value $0.001 per share. On December 5, 2017, Carvana Co. amended and restated its certificate of incorporation to authorize 100,000 shares of Convertible Preferred Stock, with an initial stated value of $1,000 per share and a par value of $0.01 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. 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. Holders of Class B common stock are not entitled to receive dividends and would not be entitled to receive any distributions upon the liquidation, dissolution or winding down of the Company. Holders of Class A and Class B common stock vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by applicable law.

As described in Note 1 — Business Organization, Carvana Group amended and restated its LLC Agreement to, among other things, provide for two classes of common ownership interests in Carvana Group. Carvana Group’s two classes of common ownership interests are Class A Units and Class B Units. Carvana Co. is required to, at all times, maintain (i) a 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. (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities and subject to adjustment as set forth in the exchange agreement (the "Exchange Agreement") further discussed below, and taking into account Carvana Sub’s 0.1% ownership interest in Carvana, LLC) and (ii) a four-to-five ratio between the number of shares of Class B common stock owned by the Original LLC Unitholders and the number of Class A Units owned by the Original LLC Unitholders. The Company may issue shares of Class B common stock only to the extent necessary to maintain these ratios. Shares of Class B common stock are transferable only together with a corresponding number of LLC Units if Carvana Co., at the election of an Existing LLC Unitholder, exchanges LLC Units for shares of Class A common stock.

As of June 30, 2018, there were approximately 175.6 million and 6.0 million Class A Units and Class B Units (as adjusted for the participation thresholds), respectively, issued and outstanding. As discussed in Note 11 — 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.

Initial Public Offering

As described in Note 1 — Business Organization, on May 3, 2017, Carvana Co. completed its IPO of 15.0 million shares of Class A common stock at a public offering price of $15.00 per share. Carvana Co. received approximately $205.8 million in proceeds, net of underwriting discounts and commissions and offering expenses. Carvana Co. used the proceeds to purchase approximately 18.8 million newly-issued LLC Units of Carvana Group at a price per unit equal to 0.8 times the initial public offering price less underwriting discounts and commissions. In connection with the IPO, Carvana Co. transferred approximately 0.2 million Class A Units to Ernest Garcia, II in exchange for his 0.1% ownership interest in Carvana, LLC, a majority-owned subsidiary of Carvana Group.

Follow-On Public Offering

On April 30, 2018, the Company completed a follow-on offering of 6.6 million shares of its Class A common stock at a public offering price of $27.50 per share and received net proceeds from the offering of approximately $172.3 million after underwriting discounts and commissions and offering expenses. The Company used the net proceeds to purchase approximately 8.3 million newly-issued LLC Units in Carvana Group, which used the net proceeds primarily for general corporate purposes.

The Selling Stockholder and the Selling LLC Unitholders sold a total of approximately 6.1 million shares of Class A common stock as part of the offering. The Selling LLC Unitholders exchanged approximately 6.9 million LLC Units for approximately 5.6 million shares of Class A common stock to be sold in the offering, and to the extent such Selling LLC

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Unitholder held Class B common stock, the corresponding shares of Class B common stock were immediately retired by the Company. The Company did not receive any proceeds from the sale of the approximately 6.1 million shares of Class A common stock by the Selling Stockholder and the Selling LLC Unitholders.

Exchange Agreement

Carvana Co. and the LLC Unitholders entered into an 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 for certain Class A Units and subject to vesting and the respective participation threshold for Class B Units. To the extent such owners also hold Class B common stock, they will be 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 being exchanged for. Any shares of Class B common stock so delivered will be 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 the six months ended June 30, 2018, certain LLC Unitholders exchanged approximately 12.0 million LLC Units and approximately 8.8 million shares of Class B common stock for approximately 9.6 million newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, Carvana Co. received approximately 12.0 million LLC Units, increasing its total ownership interest in Carvana Group, and canceled the exchanged shares of Class B common stock.

Convertible Preferred Stock

On December 5, 2017, Carvana Co. sold 100,000 shares of Convertible Preferred Stock for a purchase price of $100.0 million and net proceeds of approximately $98.5 million, which it used to purchase 100,000 Convertible Preferred Units of Carvana Group at a price per unit equal to the initial stated value of the Convertible Preferred Stock less issuance costs. The Convertible Preferred Stock has a par value of $0.01 per share and a liquidation value of $1,000 per share.

At the holder's request beginning on January 29, 2018, any or all shares of the Convertible Preferred Stock are convertible into shares of Class A common stock at an initial conversion rate of 50.78 shares of Class A common stock per share of Convertible Preferred Stock. On or after December 5, 2018, the Company will have the option to cause all shares of Convertible Preferred Stock to be converted into shares of Class A common stock or cash, at the Company's election, if the 10-day volume-weighted average price equals or exceeds 150% of the conversion price as set forth in the agreement. In the event Carvana Co. issues any shares of Class A common stock upon conversion of any shares of Convertible Preferred Stock or in connection with any change of control repurchase of shares of Convertible Preferred Stock, a corresponding number of Convertible Preferred Units shall be canceled and cease to be outstanding, and Carvana Group will issue Class A Units to Carvana Co. on a four-to-five ratio between the number of shares of Class A common stock issued by Carvana Co. to the holders of the Convertible Preferred Stock and the number of Class A Units issued. As of June 30, 2018, the holder has not converted any shares of Convertible Preferred Stock.

The initial conversion price was $19.6945, which was calculated based on a 20.0% premium to the volume weighted average price for Class A common stock during the 5 trading days immediately preceding December 4, 2017. Following announcement of the transaction, the share price of Class A common stock increased and exceeded the conversion price on the commitment date and resulted in a beneficial conversion feature ("BCF") of approximately $2.6 million. The BCF was originally recorded as a reduction of the Convertible Preferred Stock with an offset to additional paid-in capital. The BCF accreted as a deemed dividend through January 29, 2018, the first available conversion date, increasing the carrying value of the Convertible Preferred Stock with an offsetting charge to additional paid-in capital. During the six months ended June 30, 2018, the Company recorded the remaining approximately $1.4 million in accretion related to the BCF. The carrying value of the Convertible Preferred Stock was approximately $98.5 million and $97.1 million as of June 30, 2018 and December 31, 2017, respectively.

Upon a change of control, as defined in the agreement, any holder of Convertible Preferred Stock has the option to require the Company (or its successor) to purchase, any or all of its Convertible Preferred Stock at a purchase price per share, payable at the Company’s option in any combination of cash or shares of Class A common stock, of 101% of the liquidation preference, plus all accumulated dividends.

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Holders of the Convertible Preferred Stock have no voting rights. The Convertible Preferred Stock ranks senior, as to payment of dividends and distributions of assets upon the liquidation, dissolution or winding up of Company, to the Company’s common stock and any shares of capital stock of the Company not expressly ranking senior to or pari passu with the Convertible Preferred Stock, and junior to all shares of capital stock of the Company issued in the future, if the terms of which expressly provide that such shares will rank senior to the Convertible Preferred Stock.

The Convertible Preferred Stock accrues dividends at 5.5% of the liquidation preference of $1,000 per share. The dividends are payable in cash quarterly commencing March 15, 2018 so long as the Company has funds legally available and the Board declares a cash dividend payable. The Company may not declare dividends on shares of its common stock or purchase or redeem shares of its common stock, unless all accumulated and unpaid dividends on the Convertible Preferred Stock have been paid in full or a sum for such amounts has been set aside for payment. As the Company declares and pays dividends on the Convertible Preferred Stock, Carvana Group will make distributions to Carvana Co. with respect to the Convertible Preferred Units in an amount equal to the related Convertible Preferred Stock dividend amount and any corresponding tax payments. During the six months ended June 30, 2018, the Company paid approximately $2.9 million of dividends to the holders of the Convertible Preferred Stock and Carvana Group distributed approximately $2.9 million to Carvana Co. with respect to the Convertible Preferred Units. As of June 30, 2018, dividends accrued related to the Convertible Preferred Stock were approximately $0.2 million, or $2.29 per share of Convertible Preferred Stock outstanding.

Class C Redeemable Preferred Units

Prior to 2017, the Company authorized the issuance of and sold approximately 43.1 million Class C Redeemable Preferred Units to various third parties and related parties for net proceeds of approximately $226.9 million. The Company recorded the issuance and sale of Class C Redeemable Preferred Units at fair value, net of issuance costs. In accordance with the Company’s Operating Agreement, the Class C Redeemable Preferred Units accrued a return (the “Class C Return”) at a coupon rate of 12.5% compounding annually on the aggregate amount of capital contributions made with respect to the Class C Redeemable Preferred Units. On May 3, 2017, the Company closed its IPO at a price such that the Company was no longer liable for the accrued Class C Return, and the outstanding Class C Redeemable Preferred Units converted to Class A Units on a one-to-one basis and the related balance became a component of permanent equity.

NOTE 10 — NON-CONTROLLING INTERESTS 

As discussed in Note 1 — Business Organization, Carvana Co. consolidates the financial results of Carvana Group and reports a non-controlling interest related to the portion of Carvana Group owned by the LLC Unitholders. Changes in the ownership interest in Carvana Group while Carvana Co. retains its controlling interest will be accounted for as equity transactions. Exchanges of LLC Units result in a change in ownership and reduce the amount recorded as non-controlling interests and increase additional paid-in capital.

Upon the issuance of shares of Class A common stock by Carvana Co. related to the Company’s equity compensation plans such as the exercise of options, issuance of restricted or non-restricted stock, payment of bonuses in stock or settlement of stock appreciation rights in stock, Carvana Group is required to issue to Carvana Co. a number of Class A Units equal to 1.25 times the number of shares of Class A common stock being issued in connection with the exercise of such options or issuance of other types of equity compensation, subject to adjustment for stock splits, stock dividends, reclassifications and similar transactions. Activity related to the Company's equity compensation plans may result in a change in ownership which will impact the amount recorded as non-controlling interest and additional paid-in capital.

The non-controlling interest related to the Class B Units is determined based on the respective participation thresholds and the share price of Class A common stock on an as-converted basis. 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 six months ended June 30, 2018, the total adjustments related to exchanges of LLC Units was a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of approximately $12.6 million, which has been included in exchanges of LLC Units in the accompanying unaudited condensed consolidated statement of stockholders' equity. During the six months ended June 30, 2018, Carvana Co. utilized its net proceeds from its follow-on offering to purchase LLC Units, which together with the follow-on offering resulted in an adjustment to increase non-controlling interests and to decrease additional paid-in capital by approximately $132.4 million, which has been included in adjustment to non-controlling interests related to follow-on offering in the accompanying unaudited condensed consolidated statement of stockholders' equity. During

21

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

the six months ended June 30, 2018, Carvana Group issued approximately 0.5 million Class A Units with a fair value of approximately $10.0 million as part of the purchase price consideration for Car360, which is reflected as an increase in non-controlling interests in the accompanying unaudited condensed consolidated statement of stockholders' equity. The adjustment related to the issuance of Class A Units to acquire Car360 was a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of approximately $1.3 million, which has been included in adjustment to non-controlling interests related to business acquisitions in the accompanying unaudited condensed consolidated statement of stockholders' equity.

As of June 30, 2018, Carvana Co. owned approximately 23.4% of Carvana Group with the LLC Unitholders owning the remaining 76.6%. The non-controlling interests on the accompanying unaudited condensed consolidated statements of operations represents the portion of the 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.

The following table summarizes the effects of changes in ownership in Carvana Group on the Company's additional paid-in capital during the six months ended June 30, 2018 (in thousands):

	Six Months Ended
	6/30/2018		6/30/2017
Transfers (to) from non-controlling interests:
Decrease as a result of issuances of Class A common stock	$	(132,375)	$	(174,255)
Increase as a result of Carvana Group's issuance of Class A Units in connection with business acquisitions	1,297		—
Increase as a result of exchanges of LLC Units	12,592		—
Increase as a result of adjustments to non-controlling interests	—		846
Total transfers to non-controlling interests	$	(118,486)	$	(173,409)

NOTE 11 — EQUITY-BASED COMPENSATION 

Equity-based compensation expense is recognized based on amortizing the grant-date fair value on a straight-line basis over the requisite service period, which is generally the vesting period of the award, less actual forfeitures. A summary of equity-based compensation expense recognized during the three and six months ended June 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Class B Units	$	605	$	482	$	1,040	$	640
Restricted Stock Units and Awards	978		1,150		1,645		1,150
Options	425		368		833		368
Class A Units	575		—		575		—
Total equity-based compensation expense	$	2,583	$	2,000	$	4,093	$	2,158

As of June 30, 2018, the total unrecognized compensation expense related to outstanding equity awards was approximately $27.8 million, which the Company expects to recognize over a weighted-average period of approximately 3.0 years. Total unrecognized equity-based compensation expense will be adjusted for actual forfeitures.

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

2017 Omnibus Incentive Plan

In connection with the IPO, the Company adopted the 2017 Omnibus Incentive Plan (the "2017 Incentive Plan"). Under the 2017 Incentive Plan, 14.0 million shares of Class A common stock are available for issuance, which the Company may grant as stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, directors, officers and consultants. As of June 30, 2018, approximately 12.5 million shares remain available for future equity award grants under this plan.

Class A Units

During the three and six months ended June 30, 2018, the Company granted certain employees approximately 0.4 million 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 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.

Class B Units

In March 2015, Carvana Group adopted the LLC Equity Incentive Plan. Under the LLC Equity Incentive Plan, Carvana Group could grant Class B Units to eligible employees, non-employee officers, consultants and directors with service vesting conditions. Following completion of the IPO, there are no B Units authorized for the Company to grant under the LLC Equity Incentive Plan. There were no Class B Units issued during the three and six months ended June 30, 2018. During the three and six months ended June 30, 2017, the Company issued an aggregate of approximately 0.8 million Class B Units to executive officers and certain other employees. 

NOTE 12 — LOSS PER SHARE 

Basic and diluted net loss per share is computed by dividing the net loss attributable to Class A common stockholders by the weighted-average shares of Class A common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive shares. For all periods presented, potentially dilutive shares are excluded from diluted net loss per share because they have an anti-dilutive impact. Therefore, basic and diluted net loss per share attributable to Class A common stockholders are the same for all periods presented.

As discussed in Note 1 — Business Organization, the Organizational Transactions are considered transactions between entities under common control and the financial statements for periods prior to the IPO and Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes. For purposes of calculating both the numerator and denominator of net loss per share for periods prior to the IPO, the Company has retroactively reflected the 15.0 million shares issued in the IPO and the LLC Units outstanding as of the Organizational Transactions as if they had been issued and outstanding as of the beginning of each period presented. These calculations for periods prior to the IPO do not consider the options or shares of Class A common stock issued on the IPO date under the 2017 Incentive Plan.

23

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Numerator:
Net loss	$	(51,250)	$	(38,870)	$	(103,922)	$	(77,309)
Net loss attributable to non-controlling interests	41,285		34,594		86,914		68,843
Dividends on Class A convertible preferred stock	(1,375)		—		(2,720)		—
Accretion of beneficial conversion feature on Class A convertible preferred stock	—		—		(1,380)		—
Net loss attributable to Carvana Co. Class A common stockholders, basic and diluted	$	(11,340)	$	(4,276)	$	(21,108)	$	(8,466)
Denominator:
Weighted-average shares of Class A common stock outstanding	28,124		15,242		23,425		15,121
Nonvested weighted-average restricted stock awards	(344)		(216)		(362)		(108)
Weighted-average shares of Class A common stock to compute basic and diluted net loss per Class A common share	27,780		15,026		23,063		15,013
Net loss per share of Class A common stock, basic and diluted	$	(0.41)	$	(0.28)	$	(0.92)	$	(0.56)

Shares of Class B common stock do not share in the losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted net loss per share of Class B common stock under the two-class method has not been presented. LLC Units (adjusted for the Exchange Ratio and participation thresholds) are considered potentially dilutive shares of Class A common stock because they are exchangeable into shares of Class A common stock.

Weighted-average as-converted shares of Convertible Preferred Stock of approximately 5.1 million for each of the three and six months ended June 30, 2018 were evaluated under the if-converted method for potentially dilutive effects and were determined to be anti-dilutive. Weighted-average as-converted Class A Units together with the related Class B common stock of approximately 110.2 million and 117.2 million during the three months ended June 30, 2018 and June 30, 2017, respectively, and of approximately 112.1 million and 117.2 million during the six months ended June 30, 2018 and June 30, 2017, respectively, were evaluated under the if-converted method for potentially dilutive effects and were determined to be anti-dilutive. Outstanding Class B Units of approximately 6.6 million and 7.5 million at June 30, 2018 and June 30, 2017, respectively, were evaluated for potentially dilutive effects and were determined to be anti-dilutive. Potentially dilutive restricted stock awards and units of approximately 0.4 million and for each of the three and six months ended June 30, 2018 and of approximately 0.2 million and 0.1 million for the three and six months ended June 30, 2017, respectively, were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive. As of June 30, 2018, 0.8 million options were outstanding and evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive. During the three and six months ended June 30, 2017, the exercise price of all outstanding options exceeded the average share price of Class A common stock, thus, options were not contemplated in diluted net loss per share computations.

24

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

NOTE 13 — INCOME TAXES 

As described in Note 1 — Business Organization, as a result of the IPO and Organizational Transactions, Carvana Co. began consolidating the financial results of Carvana Group. Carvana Group is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Carvana Group is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members, including Carvana Co., based on its economic interest held in Carvana Group. Carvana Co. was formed on November 29, 2016 and did not engage in any operations prior to the IPO. Carvana Co. is taxed as a corporation and is subject to U.S. federal, state and local income taxes with respect to the allocable share of any taxable income or loss of Carvana Group, as well as any stand-alone income or loss generated by Carvana Co.

As described in Note 9 — Stockholders' Equity, the Company acquired approximately 12.0 million LLC Units during the six months ended June 30, 2018 in connection with exchanges with Existing LLC Unitholders. During the six months ended June 30, 2018, the Company recorded a gross deferred tax asset of approximately $68.7 million associated with the basis difference in its investment in Carvana Group related to the acquisition of these LLC Units which is reflected as an increase to additional paid-in capital in the accompanying unaudited condensed consolidated statement of stockholders' equity.

As described in Note 1 — Business Organization and Note 9 — Stockholders' Equity, Carvana Co. purchased approximately 8.3 million newly-issued LLC Units of Carvana Group in connection with the follow-on offering. The Company recognized a gross deferred tax asset of approximately $2.5 million associated with a portion of the basis difference resulting from this purchase of LLC Units which is reflected as an increase to additional paid-in capital in the accompanying unaudited condensed consolidated statements of stockholders' equity.

The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be realized. During the six months ended June 30, 2018, management performed an assessment of the recoverability of deferred tax assets. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. Management determined, based on the accounting standards applicable to such assessment, that there was sufficient negative 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 against 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.

The Company recognizes uncertain income tax positions when it is more-likely-than-not the position will be sustained upon examination. As of June 30, 2018 and December 31, 2017, the Company has not identified any uncertain tax positions and has not recognized any related reserves.

Tax Receivable Agreement

Carvana Co. expects to obtain an increase in its share of the tax basis in the net assets of Carvana Group when LLC Units are exchanged by the Original LLC Unitholders and other qualifying transactions. As described in Note 9 — Stockholders' Equity, each change in outstanding shares of Class A common stock results in a corresponding increase or decrease in Carvana Co.'s ownership of LLC Units. The Company intends to treat any exchanges of LLC Units as direct purchases of LLC interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that Carvana Co. would otherwise pay in the future to various taxing authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

In connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA”). Under the TRA, the Company generally will be required to pay to the Original LLC Unitholders 85% of the amount of cash savings, if any, in U.S. federal, state or local tax that the Company actually realizes directly or indirectly (or are deemed to realize in certain circumstances) as a result of (i) certain tax attributes created as a result of any sales or exchanges (as determined for U.S. federal income tax purposes) to or with the Company of their interests in Carvana Group for shares of Carvana Co.'s Class A common stock or cash, including any basis adjustment relating to the assets of Carvana Group and (ii) tax benefits attributable to payments made under the TRA (including imputed interest). The Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. 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.

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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 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. Nevertheless, if the claimed tax benefits from the tax basis adjustments are disallowed, the Company’s payments under the TRA could exceed its actual tax savings, and the Company may not be able to recoup payments under the TRA that were calculated on the assumption that the disallowed tax savings were available.

The TRA provides that if (i) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur, (ii) there is a material breach of any material obligations under the TRA; 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 June 30, 2018, 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; therefore, the Company has not recorded a liability related to the tax savings it may realize from utilization of such deferred tax assets. As of June 30, 2018, the total unrecorded TRA liability is approximately $67.9 million. If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, the Company will record a liability related to the TRA which will be recognized as expense within its consolidated statements of operations.

NOTE 14 — COMMITMENTS AND CONTINGENCIES 

Lease Commitments

As of June 30, 2018, the Company is a tenant under various operating leases with third parties related to certain of its market hubs, vending machines and offices. The initial terms expire at various dates between 2018 and 2027. Many of the leases include one or more renewal options ranging from two to twenty years. Rent is recognized on a straight-line basis over the lease term and includes scheduled rent increases as well as amortization of tenant improvement allowances. Rent expense for these operating leases was approximately $1.3 million and $2.6 million for the three and six months ended June 30, 2018 and $1.2 million and $1.8 million for the three and six months ended June 30, 2017, respectively.

Beginning in December 2017, the Company has operating leases with third parties for certain of its transportation fleet. The initial lease terms are for two years from the delivery date of each individual vehicle to the Company, at which time each lease will extend on a month-to-month basis for a potential total lease term of six years unless both parties agree to earlier termination or replacement. Rent expense for these operating leases was approximately $0.4 million and $0.7 million for the three and six months ended June 30, 2018, respectively.

Accrued Limited Warranty

As part of its retail strategy, the Company provides a 100-day or 4,189-mile limited warranty to customers to repair certain broken or defective components of each used vehicle sold. As such, the Company accrues for such repairs based on actual claims incurred to-date and repair reserves based on historical trends. The liability was approximately $1.0 million and $0.8 million as of June 30, 2018 and December 31, 2017, respectively, and is included in accounts payable and other accrued liabilities in the accompanying unaudited condensed consolidated balance sheets.

Letters of Credit

In October 2016, the Company obtained an unconditional, irrevocable, stand-by letter of credit for $1.9 million to satisfy a condition of a new lease agreement. The Company was required to maintain a cash deposit of $1.9 million with the financial institution that issued the stand-by letter of credit until February 2018, at which point the cash deposit requirement was reduced by approximately $1.0 million until November 30, 2018, at which time the letter of credit shall expire. The Company has earned interest on this letter of credit, and as of June 30, 2018 and December 31, 2017, the balance with the financial institution

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

was approximately $1.0 million and $2.0 million, respectively. This balance is classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets.

Legal Matters

In the ordinary course of business, the Company may become subject to litigation or claims. The Company is not aware of any pending legal proceedings of which the outcome is reasonably possible to have a material effect on its results of operations, financial condition or cash flows.

NOTE 15 — FAIR VALUE OF FINANCIAL INSTRUMENTS 

Items Measured at Fair Value on a Recurring Basis

As of June 30, 2018 and December 31, 2017, the Company held certain assets that were required to be measured at fair value on a recurring basis. The following is a summary of fair value measurements at June 30, 2018 and December 31, 2017 (in thousands):

As of June 30, 2018:

	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	187,083	$	187,083	$	—	$	—

As of December 31, 2017:

	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	171,859	$	171,859	$	—	$	—

_________________________

(1) Consists of highly liquid investments with original maturities of three months or less and classified in cash and cash equivalents in the accompanying unaudited condensed consolidated balance sheets.

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 because their respective maturities are less than three months. The carrying value of the Floor Plan Facility was determined to approximate fair value due to its short-term duration and variable interest rate that approximates prevailing interest rates as of each reporting period. The carrying value of notes payable was determined to approximate fair value as each of the notes has prevailing interest rates, which have not materially changed as of June 30, 2018. The carrying value of finance leases was determined to approximate fair value as each of the transactions was entered into at prevailing interest rates during each respective period and they have not significantly fluctuated since inception. The fair value of finance receivables, which are not carried at fair value on the accompanying unaudited condensed consolidated balance sheets, was determined utilizing the estimated sales price based on the historical experience of the Company. 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 June 30, 2018 and December 31, 2017 were as follows (in thousands):

	June 30, 2018		December 31, 2017
Carrying value	$	77,128	$	45,564
Fair value	80,235		47,514

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

NOTE 16 — SUPPLEMENTAL CASH FLOW INFORMATION

The following table summarizes supplemental cash flow information for the six months ended June 30, 2018 and 2017 (in thousands):

	Six Months Ended June 30,
	2018		2017
Supplemental cash flow information:
Cash payments for interest to third parties	$	7,481	$	3,839
Cash payments for interest to related parties	$	—	$	382
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	$	6,970	$	7,601
Capital expenditures financed through long-term debt	$	7,489	$	4,522
Issuance of LLC Units related to business acquisitions	$	9,981	$	—
Dividend accrued on Class A Convertible Preferred Stock included in accrued liabilities	$	229	$	—
Tax withholdings related to equity awards included in accounts payable and accrued liabilities	$	—	$	299
Accrual of return on Class C redeemable preferred units	$	—	$	9,439
Conversion of Class C redeemable preferred units to Class A units	$	—	$	260,411

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the accompanying unaudited condensed consolidated statements of cash flows for all periods presented (in thousands):

	June 30, 2018		December 31, 2017		June 30, 2017		December 31, 2016
Cash and cash equivalents	$	199,192	$	172,680	$	144,433	$	39,184
Restricted cash (1)	18,356		14,443		10,339		10,266
Total cash, cash equivalents and restricted cash	$	217,548	$	187,123	$	154,772	$	49,450

(1) Amounts included in restricted cash represent the deposit required under the Company's Floor Plan Facility, which is 5% of the outstanding Floor Plan Facility principal balance, as explained in Note 8 — Debt Instruments and amounts held as restricted cash as required under letter of credit agreements, as explained in Note 14 — Commitments and Contingencies. Both amounts are classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets.

NOTE 17 — SUBSEQUENT EVENTS 

On August 7, 2018, the Company purchased finance receivables that it previously sold to an unrelated party under the 2017 Master Transfer Agreement for a price of approximately $253.0 million and immediately resold such finance receivables to an unrelated party for the same price under a new transfer agreement. The Company received a fee of approximately $4.0 million for arranging and participating in the transaction.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Unless the context requires otherwise, references in this report to "Carvana," the “Company,” “we,” “us” and “our” refer to Carvana Co. and its consolidated subsidiaries. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our most recent Annual Report filed on Form 10-K, as well as our consolidated financial statements and the accompanying notes included in Item 1 of this Form 10-Q.

Overview

Carvana is a leading e-commerce platform for buying used cars. We are transforming the used car buying experience by giving consumers what they want — a wide selection, great value and quality, transparent pricing and a simple, no pressure transaction. Each element of our business, from inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose.

Our business combines a comprehensive online sales experience with a vertically-integrated supply chain that allows us to sell high quality vehicles to our customers transparently and efficiently at a low price. Using our website, customers can complete all phases of a used vehicle purchase transaction. Specifically, our online sales experience allows customers to:

• Purchase a used vehicle.    As of June 30, 2018, we listed approximately 11,400 vehicles for sale on our website, where customers can select and purchase a vehicle, including arranging financing and signing contracts, directly from their desktop or mobile device. Selling used vehicles to retail customers is the primary driver of our business. Selling used vehicles generates revenue equal to the selling price of the vehicle, less an allowance for returns, and also enables multiple additional revenue streams, including vehicle service contracts (“VSCs”), GAP waiver coverage, and trade-ins.

• Finance their purchase.    Customers can pay for their Carvana vehicle using cash, our proprietary loan origination platform or financing from third parties such as banks or credit unions. Customers who choose to apply for our in-house financing fill out a short application form, select from a range of financing terms we provide, and, if approved, apply the financing to their purchase in our online checkout process. We generally seek to sell the automotive finance receivables we originate to third party financing partners and earn a premium on each sale.

• Protect their purchase.    Customers have the option to protect their vehicle with a CarvanaCare-branded VSC as part of our online checkout process. VSCs provide customers with insurance against certain mechanical repairs after the expiration of their vehicle’s original manufacturer warranty. We earn a fee for selling VSCs on behalf of an affiliate of DriveTime and, prior to December 2016, third parties, who are the obligors under these VSCs. We generally have no contractual liability to customers for claims under these agreements. We also offer GAP waiver coverage to customers in most states. This product contractually obligates us to cancel the remaining principal outstanding after insurance proceeds in a total loss event.

• Sell us their car.    We allow our customers to trade-in a vehicle and apply the trade-in value to their purchase, or to sell us a vehicle independent of a purchase. Using our digital appraisal tool, customers can complete a short appraisal form and receive an offer for their vehicle nearly instantaneously. We generate vehicle offers using a proprietary valuation algorithm supported by extensive used vehicle market and customer behavior data. When customers accept our offer, we take their vehicles into inventory and sell them either at auction as a wholesale sale or through our website as a retail sale. Vehicles sold at auction typically do not meet the quality or condition standards required to be included in retail inventory displayed for sale on our website.

To enable a seamless customer experience, we have built a vertically-integrated used vehicle supply chain, supported by proprietary software systems and data.

• Vehicle sourcing and acquisition.    We acquire the majority of our used vehicle inventory from wholesale auctions. We also, to a lesser extent, acquire vehicles from consumers and directly from used vehicle suppliers, including franchise and independent dealers, leasing companies, and car rental companies. Using proprietary machine learning algorithms and data from a variety of internal and external sources, we evaluate tens of thousands of vehicles daily to determine their fit with consumer demand, internal profitability targets, and our existing inventory mix.

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• Inspection and reconditioning.    After acquiring a vehicle, we transport it to one of our IRCs, where it undergoes a 150-point inspection and is reconditioned to meet “Carvana Certified” standards. This process is supported by a custom used vehicle inventory management system, which tracks vehicles through each stage of the process and is seamlessly integrated with auto parts suppliers to facilitate the procurement of required parts.

• Photography and merchandising.    We photograph vehicles using our proprietary photo booths located at each of our IRCs. This allows us to display interactive, 360-degree images of each vehicle on our website. We also annotate each vehicle image with a list of features and imperfections to assist our customers in their evaluation of each vehicle for purchase. Our 360-degree photo and annotation processes are enabled by proprietary imaging technology and integrations with various vehicle data providers for vehicle feature and option information. In April 2018, we acquired Car360, Inc. ("Car360"), a provider of app-based photo capture technology, to enhance our industry-leading technology by improving our 3D computer vision and augmented reality capabilities.

• Logistics and fulfillment.    We transport vehicles purchased by our customers to their local market for home delivery or pick-up. In markets where we have launched operations, delivery to the customer is completed by a Carvana employee in a branded delivery truck. In a subset of these markets, customers have the option of picking up their car at one of our vending machines. These vending machines are multi-story glass towers where our customers deposit a token into a coin slot and an automated platform delivers the purchased vehicle to a garage bay where the customer is waiting. Our vending machines provide an attractive and unique customer pick-up experience, developing brand awareness while lowering our variable vehicle delivery expense. Our logistics and fulfillment operations are supported by our proprietary vehicle transportation management system, which optimizes the scheduling of transport routes and delivery slots.

On April 30, 2018, we completed a follow-on public offering of 6.6 million shares of Class A common stock at a public offering price of $27.50 per share and received approximately $172.3 million in proceeds after underwriting discounts and commissions and offering expenses. We used the net proceeds from this transaction to purchase Class A Units of Carvana Group, which used the net proceeds from the sale of the Class A Units primarily for general corporate purposes. These general corporate purposes include funding working capital, operating expenses and the selective pursuit of business development opportunities, including to expand our current business through acquisitions of, or investments in, other businesses, products or technologies.

Unit Sales

Since launching to customers in Atlanta, Georgia in January 2013, we have experienced rapid growth in sales through our website. During the six months ended June 30, 2018, the number of vehicles we sold to retail customers grew by 115.8% to 41,034 compared to 19,016 in the six months ended June 30, 2017.

We view the number of vehicles we sell to retail customers as the most important measure of our growth, and we expect to continue to focus on building a scalable platform to increase our retail units sold. This focus on retail units sold is motivated by several factors:

• Retail units sold enable multiple revenue streams, including the sale of the vehicle itself, the sale of automotive finance receivables originated to finance the vehicle, the sale of VSCs, the sale of GAP waiver coverage and the sale of vehicles acquired from customers as trade-ins.

• Retail units sold are the primary driver of customer referrals and repeat sales. Each time we sell a vehicle to a new customer, that customer becomes a candidate to refer future customers and can become a repeat buyer in the future.

• Retail units sold is an important driver of the average number of days between vehicle acquisition by us and the sale to a customer. Reducing average days to sale impacts gross profit on our vehicles because used cars depreciate over time.

• Retail unit sales allow us to benefit from economies of scale due to our centralized online sales model. We believe our model provides meaningful operating leverage in acquisition, reconditioning, transport, customer service and delivery.

We plan to invest in technology and infrastructure to support growth in retail unit sales. This includes continued investment in our acquisition, reconditioning and logistics network, as well as continued investment in product development and engineering to deliver customers a best-in-class experience.

Markets

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Our growth in retail units sold is driven by increased penetration in our existing markets and expansion into new markets. We define a market as a metropolitan area in which we have commenced local advertising and offer free home delivery to customers with a Carvana employee and branded delivery truck. Opening a new market involves hiring a team of customer advocates, connecting the market to our existing logistics network and initiating local advertising. Each new market has typically required approximately $0.5 million in capital expenditures, primarily related to the acquisition of one to two branded delivery trucks, a multi-car hauler to connect the market to our logistics network and furniture, fixtures and equipment in a local office space. As a market scales, we may elect to build a vending machine in the market to further increase customer awareness and improve fulfillment. Each new vending machine has required on average approximately $5.5 million of capital expenditures, depending on the number of stories in the vending machine tower and local market conditions. We have funded certain of these vending machines through sale leaseback transactions with third parties.

Our capital- and headcount-light expansion model has enabled us to increase our rate of market openings in each of the past five years. After opening Atlanta, Georgia in 2013, we opened two markets in 2014, six in 2015, 12 in 2016, 23 in 2017 and 21 in the first six months of 2018, bringing our total number of markets to 65 as of June 30, 2018. Over this period, we have continually improved our market expansion playbook, which we believe improves our ability to execute our growth plan.

When we open a market, we commence local advertising using a blend of brand and direct advertising channels. Our local advertising spend in each market is approximately proportionate to each market’s population, subject to adjustments based on specific characteristics of the market, market age, used vehicle market seasonality and special events such as vending machine openings. This historically has led to increased market penetration over time following the market opening. Beginning in the second quarter of 2017, we increased national television advertising spend. With our growth into new markets, national television advertising has become more economically efficient compared to purchasing several local television advertising campaigns.

Revenue and Gross Profit

Our increased penetration in existing markets and expansion into new markets has led to growth in retail unit sales. We generate revenue on retail units sold from four primary sources: the sale of the vehicles, gains on the sales of loans originated to finance the vehicles, wholesale sales of vehicles we acquire from customers and sales of ancillary products such as VSCs and GAP waiver coverage.

Our largest source of revenue, used vehicle sales, totaled $437.9 million and $772.0 million during the three and six months ended June 30, 2018, respectively, and $193.9 million and $342.3 million during the three and six months ended June 30, 2017, respectively. As we continue to increase penetration in existing markets and expand to new ones, we expect used vehicle sales to increase as we increase retail units sold. We generate gross profit on used vehicle sales from the difference between the retail selling price of the vehicle and our cost of sales associated with acquiring the vehicle and preparing it for sale.

Wholesale sales includes sales of trade-ins and other vehicles acquired from customers as well as sales of certain retail units listed on our website and totaled $16.6 million and $26.8 million during the three and six months ended June 30, 2018, respectively, and $7.8 million and $13.5 million during the three and six months ended June 30, 2017, respectively. We expect wholesale sales to increase with retail units sold and as we expand our suite of product offerings to customers who may wish to trade-in or to sell us a car independent of a retail sale. We generate gross profit on wholesale vehicle sales from the difference between the wholesale selling price of the vehicle and our cost of sales associated with acquiring the vehicle and preparing it for sale.

Other sales and revenues, which primarily includes gains on the sales of loans we originate, sales of GAP waiver coverage and sales commissions on VSCs totaled $20.7 million and $37.0 million during the three and six months ended June 30, 2018, and $7.6 million and $12.6 million during the three and six months ended June 30, 2017, respectively. We expect other sales and revenues to increase with retail units sold. We also expect other sales and revenues to increase as we improve our ability to monetize loans we originate and sell and offer attractive financing solutions and ancillary products to our customers. Other sales and revenues are 100% gross margin products for which gross profit equals revenue.

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During our growth phase, our highest priority will continue to be providing exceptional customer experiences, increasing our brand awareness and building an infrastructure to support growth in retail units sold. Secondarily, we plan to pursue several strategies designed to increase our total gross profit per unit. These strategies include the following:

• Reduce average days to sale.   Our goal is to increase both our number of markets and our sales growth at a faster rate than we increase our inventory size, which we believe would decrease average days to sale due to a relative increase in demand versus supply. Reductions in average days to sale lead to fewer vehicle price reductions, and therefore higher average selling prices, other factors being equal. Higher average selling prices in turn lead to higher gross profit per unit sold, all other factors being equal.

• Leverage existing IRC infrastructure.  As we scale, we intend to more fully utilize the capacity in our four existing IRCs, which collectively have capacity to inspect and recondition approximately 200,000 vehicles per year.

• Increase utilization on logistics network. As we scale, we intend to more fully utilize our in-house logistics network to transport cars to our IRCs after acquisition from wholesale auctions or customers.

• Increase conversion on existing products.    We plan to continue to improve our website to highlight the benefits of our complementary product offerings, including financing, VSCs, GAP waiver coverage and trade-ins.

• Add new products and services.    We plan to utilize our online sales platform to offer additional complementary products and services to our customers.

• Optimize purchasing and pricing. We are constantly improving the ways in which we predict customer demand, value vehicles sight unseen and optimize what we pay to acquire those vehicles. We also regularly test different pricing of our products, including vehicle sticker prices, trade-in and independent vehicle offers and ancillary product prices and believe we can improve by further optimizing prices over time.

Seasonality

Used vehicle sales exhibit seasonality with sales peaking late in the first calendar quarter and diminishing through the rest of the year, with the lowest relative level of vehicle sales expected to occur in the fourth calendar quarter. However, as the timing of income tax refunds is delayed, we believe that the second quarter is likely to show stronger seasonality than in the past. Due to our rapid growth, our overall sales patterns to date have not reflected the general seasonality of the used vehicle industry, but we expect this to change once our business and markets mature. Used vehicle prices also exhibit seasonality, with used vehicles depreciating at a faster rate in the last two quarters of each year and a slower rate in the first two quarters of each year. We may experience seasonal and other fluctuations in our quarterly operating results, which may not fully reflect the underlying performance of our business.

Investment in Growth

We have aggressively invested in the growth of our business and we expect this investment to continue. We anticipate that our operating expenses will increase substantially as we continue to open new markets, expand our logistics network and increase our advertising spending, including increases in television advertising expenditures. There is no guarantee that we will be able to realize the return on our investments.

Relationship with Related Parties

For discussion about our relationship with related parties, refer to Note 6 — Related Party Transactions of our unaudited condensed consolidated financial statements included in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q.

Key Operating Metrics

We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our progress and make strategic decisions. Our key operating metrics reflect the key drivers of our growth, including increasing brand awareness, opening new markets, and enhancing the selection of vehicles we make available to our customers. Our key

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operating metrics also demonstrate our ability to translate these drivers into retail sales and to monetize these retail sales through a variety of product offerings.

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Retail units sold	22,570		10,682		41,034		19,016
Number of markets	65		30		65		30
Average monthly unique visitors (1)	2,286,400		945,034		2,036,276		821,924
Inventory units available on website	11,386		7,503		11,386		7,503
Average days to sale	66		105		67		100
Total gross profit per unit	$	2,173	$	1,501	$	2,029	$	1,356

(1) We recently purchased access to improved Google Analytics data regarding individuals who visit our website. All periods shown above reflect Average Monthly Unique Visitors for such period calculated in accordance with the improved Google Analytics data.

Retail Units Sold

We define retail units sold as the number of vehicles sold to customers in a given period, net of returns under our seven-day return policy. We view retail units sold as a key measure of our growth for several reasons. First, retail units sold is the primary driver of our revenues and, indirectly, gross profit, since retail unit sales enable multiple complementary revenue streams, including financing, VSCs, GAP waiver coverage and trade-ins. Second, growth in retail units sold increases the base of available customers for referrals and repeat sales. Third, growth in retail units sold is an indicator of our ability to successfully scale our logistics, fulfillment and customer service operations.

Number of Markets

We define a market as a metropolitan area in which we have commenced local advertising and offer free home delivery to customers with a Carvana employee and branded delivery truck. We view the number of markets we serve as a key driver of our growth. As we increase our number of markets, the population of consumers who have access to our fully-integrated customer experience increases, which in turn helps to increase the number of vehicles we sell.

Average Monthly Unique Visitors

We define a monthly unique visitor as an individual who has visited our website within a calendar month, based on data provided by Google Analytics. We calculate average monthly unique visitors as the sum of monthly unique visitors in a given period, divided by the number of months in that period. We view average monthly unique visitors as a key indicator of the strength of our brand, the effectiveness of our advertising and merchandising campaigns and consumer awareness.

Inventory Units Available

We define inventory units available as the number of vehicles listed for sale on our website on the last day of a given reporting period. We view inventory units available as a key measure of our growth. Growth in inventory units available increases the selection of vehicles available to consumers in all of our markets simultaneously, which we believe will allow us to increase the number of vehicles we sell. Moreover, growth in inventory units available is an indicator of our ability to scale our vehicle purchasing, inspection and reconditioning operations. As part of our inventory strategy, over time we may choose not to expand inventory units available while continuing to grow sales, thereby improving other key operating metrics of the business.

Average Days to Sale

We define average days to sale as the average number of days between vehicle acquisition by us and delivery to a customer for all retail units sold in a period. However, this metric does not include any retail units that remain unsold at period end. We view average days to sale as a useful metric due to its impact on used vehicle average selling price.

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Total Gross Profit per Unit

We define total gross profit per unit as the aggregate gross profit in a given period divided by retail units sold in that period. Total gross profit per unit is driven by sales of used vehicles, each of which generates additional revenue sources including: wholesale sales of vehicles we acquire from customers as trade-ins, gains on the sales of loans originated to finance the vehicle, revenue from GAP waiver coverage and commissions on sales of VSCs. We believe total gross profit per unit is a key measure of our growth and long-term profitability.

Components of Results of Operations

Used Vehicle Sales

Used vehicle sales represent the aggregate sales of used vehicles to customers through our website. Revenue from used vehicles sales is recognized upon delivery or pick-up of the vehicle by the customer and reported net of a reserve for expected returns. Factors affecting used vehicle sales revenue include the number of retail units sold and the average selling price of these vehicles. Changes in retail units sold are a much larger driver of changes in revenue than are changes in average selling price.

The number of used vehicles we sell depends on our volume of website traffic in the markets we serve, the number of these markets, our inventory selection, the effectiveness of our branding and marketing efforts, the quality of our customer sales experience, our volume of referrals and repeat customers, the competitiveness of our pricing, competition from other used car dealerships and general economic conditions. On a quarterly basis, the number of used vehicles we sell is also affected by seasonality, with demand for used vehicles reaching a seasonal high point in the first half of each year, commensurate with the timing of tax refunds, and diminishing through the rest of the year, with the lowest relative level of used vehicle sales expected to occur in the fourth calendar quarter.

Our retail average selling price depends on the mix of vehicles we acquire and hold in inventory, retail market prices in our markets, our average days to sale and our pricing strategy. We may choose to shift our inventory mix to on average higher or lower cost vehicles, or to raise or lower our prices relative to market to take advantage of supply or demand imbalances, which could temporarily lead to average selling prices increasing or decreasing. We anticipate that our average days to sale will decline over time as we continue to launch new markets, which we believe will increase our retail average selling price, other factors being equal.

Wholesale Vehicle Sales

Wholesale vehicle sales is equal to the aggregate proceeds we receive on vehicles sold to wholesalers. The vehicles we sell to wholesalers are primarily acquired from our customers who trade-in their existing vehicles when making a purchase from us, and to a lesser extent, vehicles we acquire from customers who do not purchase another vehicle from us. In addition, we occasionally sell certain used vehicles previously listed for sale to customers through our website to wholesalers. Factors affecting wholesale vehicle sales include the number of wholesale units sold and the average wholesale selling price of these vehicles. The average selling price of our wholesale units is primarily driven by the mix of vehicles we sell to wholesalers, as well as general supply and demand conditions in the applicable wholesale vehicle market.

Other Sales and Revenues

We generate other sales and revenues primarily through the sales of automotive finance receivables we originate and sell, commissions we receive on VSCs and sales of GAP waiver coverage on vehicles customers buy and finance with us. Prior to December 9, 2016, the VSCs were sold and administered by third parties. On December 9, 2016, we entered into a master dealer agreement with DriveTime, pursuant to which we sell VSCs that DriveTime administers. The commission revenues we recognize on VSCs depends on the number of retail units we sell, the conversion rate of VSCs on these sales, commission rates we receive, VSC early cancellation frequency and product features. The GAP waiver coverage revenue we recognize depends on the number of retail units we sell, the number of customers that choose to finance their purchases with us and the conversion rate of GAP waiver coverage on those sales.

We generally seek to sell the automotive finance receivables we generate under committed forward flow arrangements with third parties who acquire these receivables at premium prices without recourse to us for their post-sale performance. Factors affecting revenue from these sales include the number of automotive finance receivables we originate, the average principal balance of these receivables, the credit quality of the portfolio and the price at which we are able to sell them to third parties.

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The number of receivables we originate is driven by the number of used vehicles sold and the percentage of our sales for which we provide financing, which is influenced by the financing terms we offer our customers relative to alternatives available to the customer. The average principal balance is driven primarily by the mix of vehicles we sell, since higher average selling prices typically mean higher average receivable balances. The price at which we resell these automotive finance receivables is driven by the terms of our forward flow arrangements, applicable interest rates and whether or not the finance receivable includes GAP waiver coverage.

Cost of Sales

Cost of sales includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles we acquire, the source of those vehicles and supply and demand dynamics in the wholesale vehicle market. Reconditioning costs consist of direct costs, including parts, labor and third party repair expenses directly attributable to specific vehicles, as well as indirect costs, such as IRC overhead. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition to the IRC. Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.

Used Vehicle Gross Profit

Used vehicle gross profit equals the vehicle sales price minus our costs of sales associated with vehicles that we list and sell on our website. Used vehicle gross profit per unit equals our aggregate used vehicle gross profit in any measurement period divided by the number of retail units sold in such period.

Wholesale Vehicle Gross Profit

Wholesale vehicle gross profit equals the vehicle sales price minus our cost of sales associated with vehicles we sell to wholesalers. Factors affecting wholesale gross profit include the number of wholesale units sold, the average wholesale selling price of these vehicles, the acquisition price we offer to the customer and, in the case of vehicles formerly listed on our website, the total costs described above associated with that vehicle.

Other Gross Profit

Other sales and revenues consist of 100% gross margin products for which gross profit equals revenue. Therefore, changes in gross profit and the associated drivers are identical to changes in revenues from these products and the associated drivers.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses include expenses associated with advertising to customers, operating our fulfillment centers and vending machines, operating our logistics and fulfillment network and other corporate overhead expenses, including expenses associated with information technology, product development, engineering, legal, accounting, finance and business development. We anticipate that these expenses will increase as we grow. SG&A expenses exclude the costs of transporting vehicles from the point of acquisition to the IRC, and inspecting and reconditioning vehicles, which are included in cost of sales.

Interest Expense

Interest expense includes interest incurred on our Floor Plan Facility (as defined in "Liquidity and Capital Resources"), notes payable and other long-term debt, which are used to fund inventory, our transportation fleet and certain of our property and equipment. During 2017, interest expense also includes interest incurred and the commitment fee related to the Verde Credit Facility (as defined in "Liquidity and Capital Resources"), which was used as needed to fund working capital prior to its termination in connection with our IPO. Interest expense excludes the interest incurred during various construction projects to build, upgrade or remodel certain facilities, which is capitalized to property and equipment and depreciated over the estimated useful lives of the related assets.

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Results of Operations

	Three Months Ended June 30,						Six Months Ended June 30,
	2018		2017		Change		2018		2017		Change
	(dollars in thousands, except per unit amounts)
Net sales and operating revenues:
Used vehicle sales, net	$	437,922	$	193,947	125.8	%	$	771,978	$	342,329	125.5	%
Wholesale vehicle sales	16,622		7,818		112.6	%	26,755		13,544		97.5	%
Other sales and revenues (1)	20,742		7,600		172.9	%	36,975		12,565		194.3	%
Total net sales and operating revenues	$	475,286	$	209,365	127.0	%	$	835,708	$	368,438	126.8	%
Gross profit:
Used vehicle gross profit	$	26,641	$	8,172	226.0	%	$	43,287	$	12,798	238.2	%
Wholesale vehicle gross profit	1,652		267		518.7	%	3,007		422		612.6	%
Other gross profit (1)	20,742		7,600		172.9	%	36,975		12,565		194.3	%
Total gross profit	$	49,035	$	16,039	205.7	%	$	83,269	$	25,785	222.9	%
Market information:
Markets, beginning of period	56		23		143.5	%	44		21		109.5	%
Market launches	9		7		28.6	%	21		9		133.3	%
Markets, end of period	65		30		116.7	%	65		30		116.7	%
Unit sales information:
Used vehicle unit sales	22,570		10,682		111.3	%	41,034		19,016		115.8	%
Wholesale vehicle unit sales	3,658		1,580		131.5	%	6,000		2,868		109.2	%
Per unit selling prices:
Used vehicles	$	19,403	$	18,156	6.9	%	$	18,813	$	18,002	4.5	%
Wholesale vehicles	$	4,544	$	4,948	(8.2)	%	$	4,459	$	4,722	(5.6)	%
Per unit gross profit: (2)
Used vehicle gross profit	$	1,180	$	765	54.2	%	$	1,055	$	673	56.8	%
Wholesale vehicle gross profit	$	452	$	169	167.5	%	$	501	$	147	240.8	%
Other gross profit	$	919	$	711	29.3	%	$	901	$	661	36.3	%
Total gross profit	$	2,173	$	1,501	44.8	%	$	2,029	$	1,356	49.6	%

(1) Includes $5,544 and $1,898 for the three months ended June 30, 2018 and 2017, respectively, and $9,655 and $3,656 for the six months ended June 30, 2018 and 2017, respectively, of other sales and revenues from related parties.

(2) All gross profit per unit amounts are per used vehicle sold, except wholesale vehicle gross profit, which is per wholesale vehicle sold.

Used Vehicle Sales

Three months ended June 30, 2018 Versus 2017. Used vehicle sales increased by $244.0 million to $437.9 million during the three months ended June 30, 2018 compared to $193.9 million during the three months ended June 30, 2017. The increase in revenue was primarily due to an increase in the number of used vehicles sold to 22,570 from 10,682 during the three months ended June 30, 2018 and 2017, respectively. The increase in units sold was driven in part by growth in existing markets due to expanded inventory selection, enhanced marketing efforts, increased brand awareness and customer referrals. The increase in unit sales was also driven by growth to 65 markets as of June 30, 2018 from 30 markets as of June 30, 2017. We anticipate that unit sales will continue to grow as we increase penetration in existing markets and launch new markets. In addition, the average selling price of our retail units sold increased to $19,403 during the three months ended June 30, 2018 from $18,156 during the three months ended June 30, 2017. We believe average selling prices increased primarily as result of a decrease in average days to sale to 66 days in the second quarter of 2018 from 105 days in the comparable prior year period. 

Six months ended June 30, 2018 Versus 2017. Used vehicle sales increased by $429.6 million to $772.0 million during the six months ended June 30, 2018 compared to $342.3 million during the six months ended June 30, 2017. The increase in

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revenue was primarily due to an increase in the number of used vehicles sold to 41,034 from 19,016 during the six months ended June 30, 2018 and 2017, respectively. The increase in units sold was driven in part by growth in existing markets due to expanded inventory selection, enhanced marketing efforts, increased brand awareness and customer referrals. The increase in unit sales was also driven by growth to 65 markets as of June 30, 2018 from 30 markets as of June 30, 2017. We anticipate that unit sales will continue to grow as we increase penetration in existing markets and launch new markets. In addition, the average selling price of our retail units sold increased to $18,813 during the six months ended June 30, 2018 from $18,002 during the six months ended June 30, 2017. We believe average selling prices increased primarily as a result of a decrease in average days to sale to 67 days in the six months ended June 30, 2018 from 100 days in the comparable prior year period.

Wholesale Vehicle Sales

Three months ended June 30, 2018 Versus 2017. Wholesale vehicle sales increased by $8.8 million to $16.6 million during the three months ended June 30, 2018, compared to $7.8 million during the three months ended June 30, 2017. We primarily obtain our wholesale inventory from customer trade-ins. As our retail unit sales have increased, so have the trade-ins we receive. Therefore, we have had more units available for sale to wholesalers over time and our revenues attributed to wholesale vehicle sales have increased, despite the 8.2% decrease in the selling price per wholesale unit.

Six months ended June 30, 2018 Versus 2017. Wholesale vehicle sales increased by $13.2 million to $26.8 million during the six months ended June 30, 2018, compared to $13.5 million during the six months ended June 30, 2017. We primarily obtain our wholesale inventory from customer trade-ins. As our retail unit sales have increased, so have the trade-ins we receive. Therefore, we have had more units available for sale to wholesalers over time and our revenues attributed to wholesale vehicle sales have increased, despite the 5.6% decrease in the selling price per wholesale unit.

Other Sales and Revenues

Three months ended June 30, 2018 Versus 2017. Other sales and revenues primarily consist of gains on the sales of loans we originate, commissions we receive on sales of VSCs and sales of GAP waiver coverage. Other sales and revenues increased by $13.1 million to $20.7 million during the three months ended June 30, 2018, compared to $7.6 million during the three months ended June 30, 2017. This increase was primarily driven by the increase in retail units sold which led to an increase in loans originated and sold, as well as an increase in VSC sales and GAP waiver coverage sales.

Six months ended June 30, 2018 Versus 2017. Other sales and revenues primarily consist of gains on the sales of loans we originate, commissions we receive on sales of VSCs and sales of GAP waiver coverage. Other sales and revenues increased by $24.4 million to $37.0 million during the six months ended June 30, 2018, compared to $12.6 million during the six months ended June 30, 2017. This increase was primarily driven by the increase in retail units sold which led to an increase in loans originated and sold, as well as an increase in VSC sales and GAP waiver coverage sales.

Used Vehicle Gross Profit

Three months ended June 30, 2018 Versus 2017. Used vehicle gross profit increased by $18.5 million to $26.6 million during the three months ended June 30, 2018, compared to $8.2 million during the three months ended June 30, 2017. This increase was driven primarily by an increase in retail units sold, as well as an increase in used vehicle gross profit per unit to $1,180 for the three months ended June 30, 2018 compared to $765 for the three months ended June 30, 2017. The per unit increase was primarily driven by a decrease in average days to sale to 66 days in the three months ended June 30, 2018 from 105 days in the three months ended June 30, 2017.

Six months ended June 30, 2018 Versus 2017. Used vehicle gross profit increased by $30.5 million to $43.3 million during the six months ended June 30, 2018, compared to $12.8 million during the six months ended June 30, 2017. This increase was driven primarily by an increase in retail units sold, as well as an increase in used vehicle gross profit per unit to $1,055 for the six months ended June 30, 2018 compared to $673 for the six months ended June 30, 2017. The per unit increase was primarily driven by a decrease in average days to sale to 67 days in the six months ended June 30, 2018 from 100 days in the six months ended June 30, 2017.

Wholesale Vehicle Gross Profit

Three months ended June 30, 2018 Versus 2017. Wholesale vehicle gross profit increased by $1.4 million to $1.7 million during the three months ended June 30, 2018, compared to $0.3 million during the three months ended June 30, 2017. This

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increase was driven primarily by an increase in wholesale units sold to 3,658 from 1,580 and an increase in wholesale vehicle gross profit per wholesale unit to $452 from $169.

Six months ended June 30, 2018 Versus 2017. Wholesale vehicle gross profit increased by $2.6 million to $3.0 million during the six months ended June 30, 2018, compared to $0.4 million during the six months ended June 30, 2017. This increase was driven primarily by an increase in wholesale units sold to 6,000 from 2,868 and an increase in wholesale vehicle gross profit per wholesale unit to $501 from $147.

Other Gross Profit

Other sales and revenues consist of 100% gross margin products for which gross profit equals revenue. Therefore, changes in other gross profit and the associated drivers are identical to changes in other sales and revenues and the associated drivers.

Components of SG&A

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)				(in thousands)
Compensation and benefits (1)	$	29,251	$	18,789	$	54,238	$	35,092
Advertising expense	26,782		12,385		51,791		23,824
Market occupancy costs (2)	2,618		1,424		5,128		2,407
Logistics (3)	7,826		3,116		14,144		5,924
Other costs (4)	29,175		16,297		53,537		30,672
Total	$	95,652	$	52,011	$	178,838	$	97,919

(1) Compensation and benefits includes all payroll and related costs, including benefits, payroll taxes and equity-based compensation, except those related to preparing vehicles for sale, which are included in cost of sales.

(2) Market occupancy costs includes rent, utilities, security, repairs and maintenance and depreciation of buildings and improvements, including vending machines and fulfillment centers, excluding the portion related to reconditioning vehicles, which is included in cost of sales, and excluding the portion related to corporate occupancy.

(3) Logistics includes fuel, maintenance and depreciation related to operating our own transportation fleet and third party transportation fees, except the portion related to inbound transportation, which is included in cost of sales.

(4) 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.

Selling, general and administrative expenses increased by $43.6 million and $80.9 million to $95.7 million and $178.8 million during the three and six months ended June 30, 2018, respectively, compared to $52.0 million and $97.9 million during the three and six months ended June 30, 2017, respectively. The increase was partially due to an increase in advertising expense of $14.4 million and $28.0 million during the three and six months ended June 30, 2018, respectively, compared to the three and six months ended June 30, 2017 primarily due to an increase in national television advertising and number of markets. Compensation and benefits increased by $10.5 million and $19.1 million during the three and six months ended June 30, 2018, respectively, compared to the three and six months ended June 30, 2017, which was driven by expansion into new markets and the increase in headcount required to support this growth. Market occupancy, logistics and other overhead expenses also increased during the three and six months ended June 30, 2018 compared to the prior period primarily due to an increase in number of markets. These expenses will increase in absolute terms as we expand to additional markets. 

Interest Expense

Interest expense increased by $1.7 million and $3.1 million to $4.2 million and $7.7 million during the three and six months ended June 30, 2018, respectively, compared to $2.5 million and $4.6 million during the three and six months ended June 30, 2017, respectively.  In order to expand the inventory we make available to customers, we increased our borrowings under our Floor Plan Facility period over period, resulting in increased interest expense related to the facility. The remaining increase is due to interest expense incurred during the three and six months ended June 30, 2018 related to the finance leases and notes payable entered into throughout 2017 and 2018 as discussed in "Liquidity and Capital Resources." The increase in interest expense related to the Floor Plan Facility, finance leases and notes payable is partially offset by the $1.2 million and $1.3 million interest incurred related to the Verde Credit Facility during the three and six months ended June 30, 2017,

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respectively. Total borrowings of $35.0 million under the Verde Credit Facility were repaid in full with the proceeds of our IPO and the facility was terminated in May 2017.

Non-GAAP Financial Measures

To supplement the unaudited condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we also present the following non-GAAP measures: EBITDA, EBITDA margin, adjusted net loss and adjusted net loss per share. We believe the presentation of both GAAP and non-GAAP financial measures provides investors with increased transparency into financial measures used by our management team, and it also improves investors’ understanding of our underlying operating performance and their ability to analyze our ongoing operating trends. All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures.

EBITDA and EBITDA Margin

EBITDA and EBITDA Margin are non-GAAP supplemental measures of operating performance that do not represent and should not be considered an alternative to net loss or cash flow from operations, as determined by GAAP. EBITDA is defined as net loss before interest expense, income tax expense and depreciation and amortization expense. EBITDA Margin is EBITDA as a percentage of total revenues. We use EBITDA to measure the operating performance of our business and EBITDA Margin to measure our operating performance relative to our total revenues. We believe that EBITDA and EBITDA Margin are useful measures to us and to our investors because they exclude certain financial and capital structure items that we do not believe directly reflect our core operations and may not be indicative of our recurring operations, in part because they may vary widely across time and within our industry independent of the performance of our core operations. We believe that excluding these items enables us to more effectively evaluate our performance period-over-period and relative to our competitors. EBITDA and EBITDA Margin may not be comparable to similarly titled measures provided by other companies due to potential differences in methods of calculations. A reconciliation of EBITDA to net loss, the most directly comparable GAAP measure, and calculation of EBITDA Margin is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net loss	$	(51,250)		$	(38,870)		$	(103,922)		$	(77,309)
Depreciation and amortization expense	5,257			2,584			9,862			4,645
Interest expense	4,165			2,507			7,706			4,566
EBITDA	$	(41,828)		$	(33,779)		$	(86,354)		$	(68,098)
Total revenues	$	475,286		$	209,365		$	835,708		$	368,438
EBITDA Margin	(8.8)		%	(16.1)		%	(10.3)		%	(18.5)		%

Adjusted Net Loss and Adjusted Net Loss per Share

Adjusted net loss represents net loss attributable to Carvana Co. assuming the full exchange of all outstanding LLC Units for shares of Class A common stock. Adjusted net loss per share is calculated by dividing adjusted net loss by the weighted-average shares of Class A common stock outstanding assuming (i) the full exchange of all outstanding LLC Units, (ii) shares issued in the IPO were outstanding for the entire period presented and (iii) outstanding LLC Units immediately following the Organizational Transactions related to our IPO, including conversion of the Class C Redeemable Preferred Units, were outstanding for all periods prior to the IPO.

Adjusted net loss and adjusted net loss per share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net loss and net loss per share, as determined under GAAP. We believe that by assuming the full exchange of all outstanding LLC Units, adjusted net loss and adjusted net loss per share supplement GAAP measures and enable us and our investors to more effectively evaluate our performance period-over-period and relative to our competitors that have different organizational and tax structures because the assumption eliminates the effect of any changes in net income attributable to Carvana Co. driven by increases in our ownership of Carvana Group, LLC, which are unrelated to our operating performance.

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A reconciliation of adjusted net loss to net loss attributable to Carvana Co., the most directly comparable GAAP measure, and the computation of adjusted net loss per share are as follows (in thousands, except per share amounts):

		Three Months Ended June 30,				Six Months Ended June 30,
		2018		2017		2018		2017
Numerator:
	Net loss attributable to Carvana Co.	$	(9,965)	$	(14,542)	$	(17,008)	$	(52,981)
	Net loss attributable to non-controlling interests	(41,285)		(24,328)		(86,914)		(24,328)
	Dividends on Class A convertible preferred stock	(1,375)		—		(2,720)		—
	Accretion of beneficial conversion feature on Class A convertible preferred stock	—		—		(1,380)		—
	Adjusted net loss attributable to Carvana Co. Class A common stock	$	(52,625)	$	(38,870)	$	(108,022)	$	(77,309)
Denominator:
	Weighted-average shares of Class A common stock outstanding(1)(3)	27,780		15,026		23,063		15,013
	Adjustments:
	Weighted-average assumed exchange of LLC Units for shares of Class A common stock (2)	114,897		121,666		116,878		121,713
	Adjusted shares of Class A common stock outstanding	142,677		136,692		139,941		136,726
Adjusted net loss per share		$	(0.37)	$	(0.28)	$	(0.77)	$	(0.57)

(1) Amounts for periods prior to the initial public offering have been retrospectively adjusted to give effect to 15.0 million shares of Class A common stock issued in the initial public offering.

(2) Amounts for periods prior to the initial public offering have been retrospectively adjusted to include all LLC units outstanding at the initial public offering, including conversion of the Class C Redeemable Preferred Units into Class A Units on a one-for-one basis. Also assumes exchange of all outstanding LLC Units for shares of Class A common stock during each period presented.

(3) Excludes approximately 0.5 million nonvested restricted stock awards and units and 0.8 million vested and nonvested stock options outstanding at June 30, 2018, because they were determined to be anti-dilutive. Excludes approximately 0.5 million restricted stock awards and 0.5 million stock options outstanding at June 30, 2017, because they were determined to be anti-dilutive.

Liquidity and Capital Resources

General

Our principal sources of liquidity are cash generated from our operations and from financing activities. Cash generated from operating activities primarily includes cash derived from the sale of used retail vehicles, the sale of wholesale vehicles and proceeds from the sale of automotive finance receivables originated in connection with the sale of used vehicles. Cash generated from our financing activities primarily includes proceeds from the sale of Class A common stock in our IPO in 2017 and follow-on offering in 2018, proceeds from the sale of Class A Convertible Preferred Stock in 2017, net proceeds from our Floor Plan Facility (defined below), proceeds from issuance of other long-term debt, and sales of Class C Preferred Units throughout 2015 and 2016.  

We have incurred losses each year from inception through June 30, 2018, and expect to incur additional losses in the future. Our ability to service our debt and fund working capital, capital expenditures and business development efforts will depend on our ability to generate cash from operating and financing activities, which is subject to our future operating performance, as well as to general economic, financial, competitive, legislative, regulatory and other conditions, some of which may be beyond our control. On January 1, 2018, the Floor Plan Facility capacity increased to $350.0 million to allow for more vehicle inventory purchases. We plan to increase the amount and extend the maturity date of financing available to purchase vehicle inventory within the next 12 months by amending our existing Floor Plan Facility or by entering into a new agreement. As of June 30, 2018, we sell finance receivables under multiple agreements, all of which feature commitments that expire in November 2018. We plan to extend or enter into new agreements to sell finance receivables to third parties prior to the

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expiration of the agreements. We believe that our existing sources of liquidity including future debt and equity financing will be sufficient to fund our operations, including lease obligations, debt service requirements, capital expenditures and working capital obligations for at least the next 12 months. However, our future capital requirements will depend on many factors, including our rate of revenue growth, our expansion into new markets, construction of vending machines and inspection and reconditioning centers and the timing and extent of our spending to support our technology and software development efforts. To the extent that existing cash and cash from operations are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all.

Floor Plan Facility

We have a floor plan facility with a third party to finance our used vehicle inventory, which is secured by substantially all of our assets, other than our interests in real property (the "Floor Plan Facility"). We most recently amended the Floor Plan Facility in August 2017 to, among other things, extend the maturity date to December 31, 2018, and increase the available credit to $350.0 million from January 1, 2018 through December 31, 2018. We are required to make monthly interest payments on borrowings under the Floor Plan Facility at a rate per annum equal to one-month LIBOR plus a fixed base. The Floor Plan Facility requires that at least 5% of the total principal amount owed to the lender is held as restricted cash.

Repayment in an amount equal to the amount of the advance or loan must be made within five business days of selling or otherwise disposing of the underlying vehicle inventory, unless customers financed the purchase by originating an automotive finance receivable. For used vehicle sales involving financing originated by us and sold under a certain master purchase and sale agreement or master transfer agreement, the lender has extended repayment to the earlier of fifteen business days after the sale of the used vehicle or one business day following the sale of the related finance receivable. In November 2017, we also entered into a letter agreement to extend repayment of amounts due under the Floor Plan Facility for used vehicle sales involving financing that are not sold under a certain master purchase and sale agreement or master transfer agreement. With respect to such vehicles, the lender agreed to extend repayment of the advance or the loan for such vehicles to the earlier of fifteen business days after the sale of the used vehicle or two business days following the sale or funding of the related finance receivable. Outstanding balances related to vehicles held in inventory for more than 180 days require monthly principal payments equal to 10% of the original principal amount of that vehicle until the remaining outstanding balance is the lesser of (i) 50% of the original principal amount or (ii) 50% of the wholesale value. Prepayments may be made without incurring a premium or penalty. Additionally, we are permitted to make prepayments to the lender to be held as principal payments under the Floor Plan Facility and subsequently reborrow such amounts. These prepayments and amounts reborrowed are presented on a gross basis within the consolidated statements of cash flows.

As of June 30, 2018, the interest rate on the Floor Plan Facility was approximately 5.7%, we had an outstanding balance under this facility of approximately $347.1 million, borrowing capacity available of approximately $2.9 million and held approximately $17.4 million in restricted cash related to this facility.

Verde Credit Facility

On February 27, 2017, we entered into a credit facility with Verde for an amount up to $50.0 million (the "Verde Credit Facility"). Amounts outstanding accrued interest at a rate of 12.0% per annum and were scheduled to mature in August 2018. Upon execution of the agreement, we paid Verde a $1.0 million commitment fee. In connection with the IPO completed on May 3, 2017, we repaid the outstanding principal balance of $35.0 million and accrued interest of approximately $0.4 million in full and the Verde Credit Facility terminated.

Other Long-Term Debt

We enter into promissory note and disbursement agreements to finance certain equipment for our transportation fleet and building improvements. The assets financed with the proceeds from these notes serve 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. Each note has a fixed annual interest rate, a two to five-year term and requires monthly payments. As of June 30, 2018, the outstanding principal of these notes had a weighted-average interest rate of 5.6% and totaled approximately $31.3 million, of which approximately $6.7 million is due within the next twelve months.

Beginning in 2017, we have financed certain purchases and construction of our property and equipment through various sale and leaseback transactions. As of June 30, 2018, none of these transactions have qualified for sale accounting due to 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. These arrangements require monthly payments

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and have initial terms that expire in fifteen to twenty years. Some of the agreements are subject to renewal options of up to twenty years and base rent increases throughout the term. As of June 30, 2018, the outstanding liability associated with these sale and leaseback arrangements, net of debt issuance costs, is approximately $52.3 million.

In November 2017, we entered into a master sale-leaseback agreement (the "MSLA") pursuant to which we may sell and lease back certain of our owned or leased properties and construction improvements. A portion of our finance leases described above is through the MSLA. A portion of the fixed rental payments set forth in the respective lease agreements is payable annually beginning in November 2019. Under the MSLA, at any time we may elect to, and beginning in November 2019 or until a property owner of a leased site consents to the sale-leaseback, the purchaser has the right to, demand that we repurchase one or more of the properties sold and leased back pursuant to the MSLA for an amount equal to the repurchase price. Repurchase prices are defined in each of the applicable leases and are generally the original purchase prices plus any accrued and unpaid rent. As of June 30, 2018, the repurchase prices for all properties under the MSLA excluding unpaid rent totaled approximately $28.8 million. Under the MSLA, the total sales price of properties we have sold and are leasing back at any point in time is limited to $75.0 million. As of June 30, 2018, we may sell and lease back an additional approximately $46.2 million of our property and equipment under the MSLA.

Finance Receivables

Our customers can obtain vehicle financing directly on our website. Historically, we have entered into various arrangements to sell the finance receivables we originate. Sales of receivables are a source of cash from operations and remove these loans from our balance sheet without recourse for their post-sale performance. In December 2016, we entered into a master purchase and sale agreement (the "Purchase and Sale Agreement") and a master transfer agreement (the "2016 Master Transfer Agreement") pursuant to which we sell finance receivables meeting certain underwriting criteria to certain third party purchasers, including Ally Bank and Ally Financial (the "Ally Parties"). Through November 2017 under the Purchase and Sale Agreement and the 2016 Master Transfer Agreement, we could sell up to an aggregate of $375.0 million, and $292.2 million, respectively, in principal balances of finance receivables subject to adjustment as described in the respective agreements. On November 3, 2017, we amended our Purchase and Sale Agreement to increase the aggregate amount of principal balances of finance receivables we can sell from $375.0 million to $1.5 billion. Also on November 3, 2017, we terminated the remaining capacity under the 2016 Master Transfer Agreement and replaced this facility by entering into a new master transfer agreement (the "2017 Master Transfer Agreement") with a third party under which the third party has committed to purchase up to an aggregate of approximately $357.1 million in principal balances of finance receivables.

During the six months ended June 30, 2018, we sold approximately $308.8 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $184.4 million in principal balances of finance receivables under the 2017 Master Transfer Agreement. As of June 30, 2018, there was approximately $847.6 million and $140.5 million of unused capacity under the Purchase and Sale Agreement and the 2017 Master Transfer Agreement, respectively.

Liquidity Upon Equity Offerings

On May 3, 2017, we completed an initial public offering and received $205.8 million in proceeds, net of underwriting discounts and commissions and offering costs. We used the net proceeds to purchase Class A Units of Carvana Group. Carvana Group used a portion of the proceeds to repay $35.0 million of outstanding borrowings plus accrued interest under the Verde Credit Facility. Carvana Group used the remaining net proceeds for working capital and general corporate purposes. On April 30, 2018, we completed a follow-on public offering of 6.6 million shares of our Class A common stock and received proceeds from the offering of approximately $172.3 million, net of underwriting discounts and commissions and offering expenses. We used the net proceeds to purchase Class A Units of Carvana Group, and Carvana Group used the net proceeds for working capital and general corporate purposes.

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Cash Flows

The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the six months ended June 30, 2018 and 2017 (in thousands):

	Six Months Ended June 30,
	2018		2017
Net cash used in operating activities	$	(179,485)	$	(61,291)
Net cash used in investing activities	(80,095)		(42,576)
Net cash provided by financing activities	290,005		209,189
Net decrease in cash, cash equivalents and restricted cash	30,425		105,322
Cash, cash equivalents and restricted cash at beginning of period	187,123		49,450
Cash, cash equivalents and restricted cash at end of period	$	217,548	$	154,772

Operating Activities

For the six months ended June 30, 2018, net cash used in operating activities was $179.5 million, an increase of $118.2 million compared to net cash used in operating activities of $61.3 million for the six months ended June 30, 2017. Significant changes impacting net cash used in operating activities comparing the six months ended June 30, 2018 and 2017 are as follows:

• Our net loss was $103.9 million during the six months ended June 30, 2018, an increase of $26.6 million from a net loss of $77.3 million during the six months ended June 30, 2017 primarily due to an increase in selling, general and administrative expenses associated with expansion to additional markets and expanding our corporate infrastructure.

• Net increase in vehicle inventory was $74.8 million during the six months ended June 30, 2018 compared to a net decrease in vehicle inventory of $11.7 million during the six months ended June 30, 2017, resulting in a $86.5 million increase in use of cash related to our efforts to increase and optimize our inventory levels.

• Net cash used related to originations and proceeds of finance receivables was $12.1 million during the six months ended June 30, 2018, compared to net proceeds of $8.1 million during the six months ended June 30, 2017 resulting in an increased use of cash of $20.2 million year over year. This is primarily due to the timing of originations and subsequent sales of finance receivables.

These increases in uses of cash are partially offset by net cash inflows associated with the change in accounts payable and accrued liabilities of $33.0 million during the six months ended June 30, 2018 as compared to a net cash inflow of $0.9 million during the six months ended June 30, 2017, resulting in an increase to cash of $32.1 million year over year.

Investing Activities

Cash used in investing activities was $80.1 million and $42.6 million during the six months ended June 30, 2018 and 2017, respectively, an increase of $37.5 million. The increase primarily relates to the increase in purchases of property and equipment of $30.8 million, reflecting the expansion of our business operations into new markets and construction of new vending machines.

Financing Activities

Cash provided by financing activities was $290.0 million and $209.2 million during the six months ended June 30, 2018 and 2017, respectively, an increase of $80.8 million. The net increase primarily relates to proceeds from and payments on the Floor Plan Facility increasing by $440.6 million and $343.8 million, respectively, resulting in a net increase to sources of cash of $96.8 million. The increase in activity under our Floor Plan Facility is attributable to the increase in the amount of retail units sold to customers during the six months ended June 30, 2018 compared to the six months ended June 30, 2017 and the increase in our inventory balance year over year. The increase in activity is also partially due to our ability to make prepayments to the lender, which are held as principal payments, and subsequently re-borrow such amounts. Additionally, the increase in cash provided by financing activities relates to an increase of $22.7 million in proceeds from long-term debt, primarily associated with our sale lease-back transactions. These increases are offset by a decrease of $34.0 million in net proceeds to $172.3 from the follow-on offering in April 2018 compared to net proceeds of $206.3 million from the IPO in April 2017.

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Contractual Obligations and Commitments

We have not entered into any material contractual obligations outside of the ordinary course of business since the most recently ended fiscal year as disclosed in the header "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent Annual Report on Form 10-K.

Fair Value Measurements

We report money market securities at fair value. See Note 15 — Fair Value of Financial Instruments, included in Part I, Item 1, Unaudited Condensed and Consolidated Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2018.

JOBS Act

We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

The JOBS Act also permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period is irrevocable.

Critical Accounting Policies

Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q for accounting pronouncements adopted since December 31, 2017. There have been no other material changes to our critical accounting policies and use of estimates from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our most recent Annual Report on Form 10-K.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “ongoing,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, statements we make regarding:

• future financial position;

• business strategy;

• budgets, projected costs and plans;

• future industry growth;

• financing sources;

• the impact of litigation, government inquiries and investigations; and

• all other statements regarding our intent, plans, beliefs or expectations or those of our directors or officers.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include, among others, the following:

• our history of losses and ability to maintain profitability in the future;

• our ability to effectively manage our rapid growth;

• our ability to maintain customer service quality and reputational integrity and enhance our brand;

• our limited operating history;

• the seasonal and other fluctuations in our quarterly operating results;

• our relationship with DriveTime;

• our management’s accounting judgments and estimates, as well as changes to accounting policies;

• our ability to compete in the highly competitive industry in which we participate;

• the changes in prices of new and used vehicles;

• our ability to acquire desirable inventory;

• our ability to sell our inventory expeditiously;

• our ability to sell and generate gains on the sale of automotive finance receivables;

• our dependence on the sale of automotive finance receivables for a substantial portion of our gross profits;

• our reliance on credit data for the automotive finance receivables we sell;

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• our ability to successfully market and brand our business;

• our reliance on Internet searches to drive traffic to our website;

• our ability to comply with the laws and regulations to which we are subject;

• the changes in the laws and regulations to which we are subject;

• our ability to comply with the Telephone Consumer Protection Act of 1991;

• the evolution of regulation of the Internet and e-commerce;

• our ability to grow complementary product and service offerings;

• our ability to address the shift to mobile device technology by our customers;

• risks related to the larger automotive ecosystem;

• the geographic concentration where we provide services and recondition and store vehicle inventory;

• our ability to raise additional capital;

• our ability to maintain adequate relationships with the third parties that finance our vehicle inventory purchases;

• the representations we make in our finance receivables we sell;

• our reliance on our proprietary credit scoring model in the forecasting of loss rates;

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

• the risks associated with the construction and operation of our inspection and reconditioning centers, fulfillment centers and vending machines, including our dependence on one supplier for construction and maintenance for our vending machines;

• our ability to finance vending machines and inspection and reconditioning centers;

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

• disruptions in availability and functionality of our website;

• our ability to protect our intellectual property, technology and confidential information;

• our ability to defend against claims that our employees, consultants or advisors have wrongfully used or disclosed trade secrets or intellectual property;

• our ability to defend against intellectual property disputes;

• our ability to comply with the terms of open source licenses;

• conditions affecting automotive manufacturers, including manufacturer recalls;

• our reliance on third party technology to complete critical business functions;

• our dependence on key personnel to operate our business;

• the diversion of management’s attention and other disruptions associated with potential future acquisitions;

• risks relating to the ability of our Class A Convertible Preferred Stock holder to influence our business;

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• the legal proceedings to which we may be subject in the ordinary course of business;

• potential errors in our retail installment contracts with our customers that could render them unenforceable;

• risks relating to our corporate structure and tax receivable agreements; and

• other factors disclosed in the section titled “Risk Factors” in our most recent Annual Report on Form 10-K and other filings we make with the Securities and Exchange Commission.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Report. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our quantitative and qualitative disclosures about market risk from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our most recent Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the six months ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity and capital resources.

Future litigation may be necessary to defend ourselves and our partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our 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 us because of defense and settlement costs, diversion of management resources and other factors.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our most recent Annual Report on Form 10-K, except as disclosed under the heading "Risk Factors" in our Quarterly Report on Form 10-Q filed on May 9, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

There were no unregistered sales of equity during the six months ended June 30, 2018, except as otherwise previously reported.

During the six months ended June 30, 2018, pursuant to the terms of the Exchange Agreement entered into in connection with our IPO, certain LLC Unitholders exchanged approximately 4.2 million LLC Units and approximately 3.2 million shares of Class B common stock for approximately 3.3 million newly-issued shares of Class A common stock. These shares were issued in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933.  

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On August 7, 2018, we purchased finance receivables that we previously sold to an unrelated party under the 2017 Master Transfer Agreement for a price of approximately $253.0 million and immediately resold such finance receivables to an unrelated party for the same price under a new transfer agreement. We received a fee of approximately $4.0 million for arranging and participating in the transaction. The new transfer agreement is filed herewith as Exhibit 10.1.

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ITEM 6. EXHIBITS

Exhibit No.	Description
10.1	Transfer Agreement, filed herewith.
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), filed herewith.
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a), filed herewith.
32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, filed herewith.
32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, filed herewith.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:	August 8, 2018		Carvana Co.
			(Registrant)
		By:	/s/ Mark Jenkins
			Mark Jenkins
			Chief Financial Officer
			(On behalf of the Registrant and as Principal Financial Officer)

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EX-10.1

EXECUTION VERSION

CARVANA AUTO RECEIVABLES DEPOSITOR LLC

as Seller

and

SONORAN AUTO RECEIVABLES TRUST 2017-1 TERM

as Purchaser

TRANSFER AGREEMENT

August 7, 2018

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS			2
	Section 1.1	Definitions; Rules of Construction	2
ARTICLE II CONVEYANCE OF CONTRACTS			2
	Section 2.1	Conveyance of Contracts	2
	Section 2.2	Intent of the Parties	4
ARTICLE III REPRESENTATIONS AND WARRANTIES			5
	Section 3.1	Representations and Warranties of the Seller	5
	Section 3.2	Representations and Warranties of the Purchaser	9
	Section 3.3	Affirmative Covenants of the Seller	10
	Section 3.4	Negative Covenants of the Seller	10
ARTICLE IV MISCELLANEOUS PROVISIONS			11
	Section 4.1	Amendment	11
	Section 4.2	Protection of Right, Title and Interest in and to Receivables	11
	Section 4.3	Governing Law; Consent to Jurisdiction; Waiver of Objection to Venue	12
	Section 4.4	Waiver of Jury Trial	12
	Section 4.5	Notices	12
	Section 4.6	Severability of Provisions	12
	Section 4.7	Assignment; Conveyance of Transferred Contracts and Second Step Transferred Property to the Trust	12
	Section 4.8	No Waiver; Cumulative Remedies	13
	Section 4.9	Counterparts	13
	Section 4.10	Third-Party Beneficiaries	13
	Section 4.11	Merger and Integrations	13
	Section 4.12	Headings	13
	Section 4.13	Indemnification	13
	Section 4.14	Limitation of Liability of Owner Trustee	14
	Section 4.15	Survival	14
	Section 4.16	Termination	14
EXHIBIT A Form of Second Step Contracts Assignment

i

TRANSFER AGREEMENT

This TRANSFER AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), dated as of August 7, 2018, is by and between Carvana Auto Receivables Depositor LLC, a Delaware limited liability company (“Carvana Auto”), as the seller (the “Seller”), and Sonoran Auto Receivables Trust 2017-1 Term, a Delaware statutory trust (the “Trust”), as the purchaser (the “Purchaser”).

AGREEMENTS

WHEREAS, Carvana, LLC, an Arizona limited liability company (“Carvana”), intends to sell or otherwise transfer, on the date hereof, various assets including automobile retail installment sale contracts, direct purchase money loans, conditional sale contracts and related rights, to Carvana Auto, pursuant to the Purchase Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”), between Carvana and Carvana Auto;

WHEREAS, the Seller is willing to sell, on the date hereof, such contracts and related rights to the Purchaser pursuant to this Agreement;

WHEREAS, the Purchaser desires to purchase, on the date hereof, such contracts and related rights, or interests therein owned by the Seller pursuant to this Agreement;

WHEREAS, the Trust intends to fund its acquisition of such contracts and related rights through indebtedness incurred by it pursuant to the Loan and Security Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Loan and Security Agreement”), among the Trust, as borrower, Wells Fargo Bank, National Association, as collateral custodian, account bank and administrative agent, Carvana, LLC, as trust administrator, and the lenders from time to time party thereto; and

WHEREAS, Bridgecrest Credit Company, LLC, an Arizona limited liability company (“Bridgecrest”), is willing to service such contracts in accordance with the terms of the Servicing Agreement, dated as of the date hereof, between the Trust and Bridgecrest.

NOW, THEREFORE, in consideration of the mutual agreements and subject to the terms and conditions herein contained, each party agrees as follows for the benefit of the other party:

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ARTICLE I

DEFINITIONS

Section 1.1Definitions; Rules of Construction. Certain capitalized terms used throughout this Agreement are defined above or in this Section 1.1. In addition, capitalized terms used in this Agreement but not defined herein are defined in and shall have the respective meanings assigned to them in Section 1.1 of the Loan and Security Agreement. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Loan and Security Agreement, the terms and provisions contained herein shall govern with respect to this Agreement. All references herein to “the Agreement” or “this Agreement” are to this Transfer Agreement as it may be amended, supplemented or modified from time to time, and all references herein to Articles and Sections are to Articles or Sections of this Agreement unless otherwise specified. The rules of construction set forth in Sections 1.2, 1.3 and 1.4 of the Loan and Security Agreement shall be applicable to this Agreement (and for such purposes only, references in those sections to the Loan and Security Agreement (including references to “this Agreement”, “hereof”, “hereunder” and words of like effect) shall be deemed to refer this Agreement).

“Eligible Contract” means, as of the Closing Date, any Transferred Contract that satisfies each of the eligibility requirements set forth on Schedule A to the Purchase Agreement.

“Financing Party” means the Trust and each other party identified or described in this Agreement, the Purchase Agreement or the Loan and Security Agreement as having an interest in any rights hereunder, as owner, trustee or secured party.

“Losses” shall have the meaning set forth in Section 4.13.

“Permitted Assign” means a Financing Party to whom the Purchaser or another Financing Party has pledged or assigned any of its rights hereunder in accordance with the Transaction Documents.

“Schedule of Receivables” means the schedule of Receivables included as Schedule A to the Second Step Contracts Assignment.

“Second Step Contracts Assignment” shall have the meaning set forth in Section 2.1(b).

“Second Step Transferred Property” shall have the meaning set forth in Section 2.1(a).

“Transferred Contract” shall have the meaning set forth in Section 2.1(a).

ARTICLE II

CONVEYANCE OF CONTRACTS

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Section 2.1Conveyance of Contracts.

(a)On the date hereof, the Seller shall sell, transfer, assign and set over and otherwise convey to the Purchaser and the Purchaser shall purchase from the Seller, without recourse, all right, title and interest of the Seller in, to and under the following property, whether now existing or hereafter created or acquired (all of the property described in this Section 2.1(a) being collectively referred to herein as the “Second Step Transferred Property”):

(i)the Receivables and the related Contracts identified on the Schedule of Receivables delivered by the Seller to the Purchaser on or before the Closing Date (each, a “Transferred Contract”), and any accounts or obligations evidenced thereby, any guarantee thereof, all Collections and all monies due (including any payments made under any guarantee or similar credit enhancement with respect to any such Receivables) or to become due or received by any Person in payment of any of the foregoing on or after the Cut-off Date;

(ii)the Financed Vehicles (including Financed Vehicles that have been repossessed) or in any document or writing evidencing any security interest in any Financed Vehicle and each security interest in each Financed Vehicle securing each such Receivable, including all proceeds from any sale or other disposition of such Financed Vehicles;

(iii)all Receivable Files, all Authoritative Copies, all Servicer Files and the Schedule of Receivables, and all documents, agreements and instruments included in the Receivable Files and Servicer Files;

(iv)all Records, documents and writings evidencing or related to the Receivables or the Contracts;

(v)all rights to payment under all Insurance Policies with respect to a Financed Vehicle, including any monies collected from whatever source in connection with any default of an Obligor with respect to a Financed Vehicle and any proceeds from claims or refunds of premiums on any Insurance Policy;

(vi)all guaranties, indemnities, warranties, insurance (and proceeds and premium refunds thereof) and other agreements or arrangements of whatever character from time to time supporting or securing payment of the Receivables, whether pursuant to the related Contracts or otherwise;

(vii)all rights to payment under all service contracts and other contracts and agreements associated with the Receivables;

(viii)all security interests, Liens, guaranties and other encumbrances in favor of or assigned or transferred to the Seller in and to the Receivables and Financed Vehicles;

(ix)all Liquidation Proceeds;

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(x)all right, title and interest of the Seller in, to and under (A) the Purchase Agreement and (B) the First Step Contracts Assignment, including the right of the Seller to cause Carvana to repurchase Receivables under the circumstances specified in the Purchase Agreement; and

(xi)all income and proceeds of any of the foregoing.

(b)In connection with the purchase and sale of Second Step Transferred Property hereunder, the Seller agrees, at its own expense, (i) to annotate and indicate on its books and records (including any computer files) that the Transferred Contracts were sold and transferred to the Purchaser pursuant to this Agreement, (ii) to deliver to the Purchaser (or its designee) all Collections on the Transferred Contracts, if any, received after the Cut-off Date, (iii) to deliver to the Purchaser on or prior to the Closing Date an assignment in the form attached hereto as Exhibit A (the “Second Step Contracts Assignment”); and (iv) deliver to the Purchaser such other information, as may be reasonably requested by the Purchaser.

(c)In consideration of the sale of the Transferred Contracts from the Seller to the Purchaser as provided herein, the Purchaser shall pay to the Seller an amount equal to the Receivables Purchase Price. A portion of such consideration will be paid in immediately available funds and the remaining amount by the issuance of the Certificates by the Purchaser to the Seller.

(d)The Purchaser hereby (i) acknowledges that the Seller has granted a perpetual, non-exclusive, assignable, royalty-free license to use the performance data relating to the Transferred Contracts, including the information included in each Monthly Report, to Carvana, LLC and (ii) agrees that it and its assigns shall be bound by the terms of such license to provide such performance data and information to Carvana, LLC.

Section 2.2Intent of the Parties. It is the intention of the parties that the conveyance hereunder of the Transferred Contracts and the other Second Step Transferred Property from the Seller to the Purchaser as provided in Section 2.1 be, and be construed as, an absolute sale, without recourse, of the Transferred Contracts and other Second Step Transferred Property by the Seller to the Purchaser, that the beneficial interest in and title to the Second Step Transferred Property shall not be part of the Seller’s estate in the event of a filing of a bankruptcy petition by or against the Seller under any bankruptcy law and that the Seller does not guarantee collection of any Transferred Contract. Furthermore, such conveyance is not intended to be a pledge of the Transferred Contracts by the Seller to the Purchaser to secure a debt or other obligation of the Seller. Although the parties intend that the sale, transfer, assignment and other conveyance contemplated by this Agreement and the Second Step Contracts Assignment to be an absolute sale, in the event such transfer and assignment is deemed to be other than a sale, the parties intend and agree: (i) that all filings described in this Agreement shall give the Purchaser a first priority perfected security interest in, to and under the Second Step Transferred Property and all proceeds thereof with respect to such transfer and assignment; (ii) this Agreement, together with the Second Step Contracts Assignment, shall be deemed to be the grant of, and the Seller hereby grants to the Purchaser, a “security interest” within the meaning of Article 9 of the UCC from the Seller to the Purchaser and the Trust and Administrative Agent as assignees in all of the

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Seller’s right, title and interest in and to the Second Step Transferred Property in order to secure its obligations hereunder with respect to such transfer and assignment; (iii) this Agreement, together with the Second Step Contracts Assignment, shall be a “security agreement” within the meaning of Article 9 of the UCC for the purposes of such transfer and assignment; and (iv) the Purchaser shall have all of the rights, powers and privileges of a secured party under the UCC with respect to such transfer and assignment and the Second Step Transferred Property related thereto.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1Representations and Warranties of the Seller.

(a)General Representations and Warranties. The Seller makes the following representations and warranties to the Purchaser as of the date of this Agreement, and on which representations and warranties the Purchaser shall rely in acquiring the Transferred Contracts.

(i)Organization and Good Standing. The Seller has been duly organized, and is validly existing as a limited liability company, in good standing under the laws of the state of its formation, with all requisite limited liability company power and authority to own or lease its properties and conduct its business as such business is presently conducted, and the Seller had at all relevant times, and now has all necessary power, authority and legal right to acquire, own and sell the Transferred Contracts and other Second Step Transferred Property, except for non-compliance which could not reasonably be expected to result in a Material Adverse Effect with respect to the Seller.

(ii)Due Qualification. The Seller is duly qualified to do business and is in good standing under the laws of each jurisdiction, and has obtained all necessary licenses and approvals in all jurisdictions, in which the ownership or lease of its property or the conduct of its business requires such qualifications, licenses or approvals (including, as applicable, the origination, purchase, sale, pledge and servicing of the Transferred Contracts), except where the failure to so qualify or obtain such license or approval could not reasonably be expected to result in a Material Adverse Effect.

(iii)Power and Authority; Due Authorization. The Seller (i) has all necessary power, authority and legal right to (A) execute and deliver this Agreement, (B) carry out the terms of this Agreement and (C) sell the Second Step Transferred Property on the terms and conditions herein provided and (ii) has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the sale of the Second Step Transferred Property on the terms and conditions herein and therein provided.

(iv)Valid Sale, Binding Obligation. This Agreement and the Second Step Contracts Assignment, when duly executed and delivered, shall constitute a valid sale, transfer and assignment of the Transferred Contracts and other Second Step Transferred Property to the Purchaser, enforceable against creditors of and purchasers from the Seller; and this Agreement constitutes, and the Second Step Contracts Assignment, when duly executed and

5

delivered, shall constitute, a legal, valid and binding obligation of the Seller enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, receivership, conservatorship, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights in general and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(v)No Violation. The consummation of the transactions contemplated by this Agreement to which it is a party and the fulfillment of the terms hereof will not (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the Seller’s Formation Documents, (ii) result in the creation or imposition of any Lien upon any of the Seller’s properties, other than Permitted Liens, or (iii) violate any Applicable Law; except, solely in the case of clause (iii), where such failure to comply could not reasonably be expected to have a Material Adverse Effect with respect to the Seller.

(vi)No Proceedings. There is no litigation, proceeding or investigation pending or, to the best knowledge of the Seller, threatened against the Seller, before any Governmental Authority (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that would reasonably be expected to have a Material Adverse Effect with respect to the Seller.

(vii)No Consents. All approvals, authorizations, consents, orders, licenses or other actions of any Person or of any Governmental Authority required for the due execution, delivery and performance by the Seller of this Agreement have been obtained except for non-compliance which could not reasonably be expected to result in a Material Adverse Effect with respect to the Seller.

(viii)Bulk Sales. The execution, delivery and performance of this Agreement do not require compliance with any “bulk sales” act or similar law by the Seller.

(ix)Solvency. The transactions under this Agreement do not and will not render the Seller not Solvent.

(x)Taxes. The Seller has filed, caused to be filed, or received an extension of time for filing that has not yet expired all federal and material state, local or foreign tax returns that are required to be filed by it. The Seller has paid or made adequate provisions for the payment of all federal or material amounts of state, local or foreign Taxes and all material assessments made against it or any of its property (other than any amount of Tax the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books of the Seller), and no tax lien has been filed and, to the Seller’s knowledge, no claim is being asserted, with respect to any such Tax, fee or other charge.

(xi)Reports Accurate. All information, exhibits, financial statements, documents, books, records or reports (including the data file indicating

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characteristics of the initial pool of Transferred Contracts) furnished or to be furnished by (or on behalf of) the Seller to the Purchaser, any Financing Party or other designee under or in connection with this Agreement are true, correct and complete in all material respects as of the date specified therein or the date so furnished (as applicable).

(xii)Value Given. The Purchaser shall have given reasonably equivalent value to the Seller in consideration for the transfer by the Seller to the Purchaser of each of the Transferred Contracts and the related Second Step Transferred Property under this Agreement.

(xiii)Accounting. The Seller accounts for the transfers to the Purchaser of Transferred Contracts and related Second Step Transferred Property under this Agreement as sales of such Transferred Contracts and related Second Step Transferred Property in its books, records and financial statements, in each case consistent with GAAP and with the requirements set forth herein, other than for income tax and consolidated accounting purposes.

(xiv)Investment Company Act. The Seller is not an “investment company” registered or required to be registered under the Investment Company Act.

(xv)ERISA. (i) No prohibited transactions or Reportable Events have occurred with respect to any Pension Plan (if any), (ii) no notice of intent to terminate a Pension Plan under Section 4041(c) of ERISA has been filed, nor has any Pension Plan been terminated under Section 4041(c) of ERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to terminate, or appointed a trustee to administer a Pension Plan and no event has occurred or condition exists that might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, and (iii) no liability under Title IV (other than accrued premiums to the Pension Benefit Guaranty Corporation) has been incurred (whether or not assessed), which individually or in the aggregate with respect to (i), (ii) and (iii) above would reasonably be expected to have a Material Adverse Effect with respect to the Seller.

(xvi)Anti-Corruption Laws and Sanctions. The Seller is in compliance with Anti-Corruption Laws and applicable Sanctions. None of the Seller or, to the knowledge of the Seller, any agent of the Seller that will act in any capacity in connection with or benefit from the transactions contemplated by the Transaction Documents, is a Sanctioned Person. None of the Receivables Purchase Price, the use of proceeds of the Receivables Purchase Price or the transactions contemplated by this Agreement will violate Anti-Corruption Laws or applicable Sanctions.

(xvii)Good Title.

(A)Immediately prior to the conveyance of each Transferred Contract and the related Second Step Transferred Property to the Purchaser pursuant to this Agreement and the Second Step Contracts Assignment, the Seller had good and marketable title thereto, free and clear of all Liens except for Permitted Liens or those Liens that will be released simultaneously with the conveyance hereunder.

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(B)Upon the conveyance of such Transferred Contract and the other related Second Step Transferred Property to the Purchaser pursuant to this Agreement and the Second Step Contracts Assignment, the Purchaser will be the sole owner of, and have good, indefeasible and marketable title to such Transferred Contract and other related Second Step Transferred Property, free and clear of any Lien (other than Liens created hereunder, Permitted Liens or those Liens that will be released simultaneously with the conveyance hereunder).

(xviii)Consents Obtained. As of the Closing Date, all consents, licenses, approvals or authorizations of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by the Seller, in connection with the origination, or purchase and sale pursuant to this Agreement and the Second Step Contracts Assignment of such Transferred Contract and the other related Second Step Transferred Property, either (x) have been duly obtained, effected or given and are in full force and effect, or (y) as of the date hereof, the Seller has properly completed and submitted all applications, documents and other materials necessary to cause such consent, license, approval, authorization, registration or declaration to be issued or obtained and has paid all applicable fees and costs in connection therewith.

(b)Representations and Warranties Regarding the Transferred Contracts; Value Given. Pursuant to Section 2.1(a)(x), the Seller assigns to the Purchaser all of its right, title and interest in, to and under the Purchase Agreement. Such assigned right, title and interest includes the benefit of the representations and warranties of Carvana made to the Seller pursuant to Section 3.1(b) of the Purchase Agreement. As of the Closing Date, the Seller hereby represents and warrants to the Purchaser that the Seller has neither taken, nor caused, instructed or authorized to be taken, any action which would cause such representations and warranties of Carvana to be false or incorrect in any material respect as of the Closing Date. The Seller further acknowledges that the Purchaser and the Permitted Assigns rely on the representations and warranties of the Seller under this Agreement and of Carvana under the Purchase Agreement in, as applicable, accepting the Transferred Contracts and executing and delivering the Loan and Security Agreement and the Certificates or consummating the other transactions contemplated by the Transaction Documents.

(c)Repurchase of Transferred Contracts.

(i)In the event of a breach of any representation or warranty set forth in Section 3.1(b) of the Purchase Agreement or Section 3.1(b) hereof, unless the breach shall have been cured within thirty (30) days following discovery of the breach or receipt of notice of such breach as the case may be, the Seller shall no later than the second Payment Date after such discovery or receipt of notice (1) repurchase from the Purchaser each Transferred Contract related to such breach, by remitting to the Collection Account an amount equal to the Release Price of each such Transferred Contract, or (2) in the event of a breach of any representation or warranty set forth in Section 3.1(b) of the Purchase Agreement, use reasonable efforts to enforce, at the direction of the Purchaser (or, if so directed, cooperate with and assist the Purchaser in enforcing), the obligations of Carvana under Section 3.1(c) of the Purchase

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Agreement to repurchase each Transferred Contract related to such breach by remitting to the Collection Account an amount equal to the Release Price of each such Transferred Contract. The Seller shall not interfere with or act to hinder the Purchaser’s exercise of rights and remedies under this Section 3.1(c) or under Section 3.1(c) or 4.10 of the Purchase Agreement.

(ii)The sole and exclusive remedy of the Purchaser with respect to a breach of the Seller’s representations and warranties pursuant to Section 3.1(b) (other than any indemnities available pursuant to Section 4.13) shall be to require the Seller to repurchase each Transferred Contract related to such breach pursuant to this Section 3.1(c).

(iii)Upon the Purchaser’s receipt in the Collection Account of any Release Price, the applicable Transferred Contract and any and all related Second Step Transferred Property shall be automatically and immediately assigned and re-conveyed by the Purchaser to the Seller.

(d)Upon discovery by the Seller or by the Purchaser of a breach of any of the foregoing representations and warranties set forth in Section 3.1(a) or Section 3.1(b) hereof or Section 3.1(a) or Section 3.1(b) of the Purchase Agreement, the party discovering such breach shall give prompt written notice to the other parties.

Section 3.2Representations and Warranties of the Purchaser.

(a)The Purchaser makes the following representations and warranties to the Seller as of the date of this Agreement, and on which representations and warranties the Seller shall rely in selling the Receivables.

(i)Organization and Good Standing. The Purchaser has been duly organized, and is validly existing as a statutory trust and in good standing under the laws of the state of its formation, with all requisite power and authority to own or lease its properties and to conduct its business as such business is presently conducted and to enter into and perform its obligations pursuant to this Agreement.

(ii)Power and Authority; Due Authorization. The Purchaser (i) has all necessary power, authority and legal right to (A) execute and deliver this Agreement party and (B) carry out the terms of this Agreement and (ii) has duly authorized by all necessary action on its part the execution, delivery and performance of this Agreement.

(iii)Binding Obligation. This Agreement constitutes a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms.

(iv)No Violation. The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof will not (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the Purchaser’s Formation Documents, (ii) result in the creation or imposition of any Lien upon any of the Purchaser’s properties, other than Permitted

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Liens, or (iii) violate any Applicable Law, in each case, except where such failure to comply could not reasonably be expected to have a Material Adverse Effect with respect to the Purchaser.

(v)No Proceedings. There is no litigation, proceeding or investigation pending or, to the best knowledge of the Purchaser, threatened against the Purchaser, before any Governmental Authority (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, (iii) challenging the enforceability of a material portion of the Transferred Contracts or (iv) seeking any determination or ruling that would reasonably be expected to have a Material Adverse Effect with respect to the Purchaser.

(vi)No Consents. All approvals, authorizations, consents, orders or other actions of any Person or of any Governmental Authority (if any) required for the due execution, delivery and performance by the Purchaser of this Agreement have been obtained.

(b)Upon discovery by the Seller or by the Purchaser of a breach of any of the representations and warranties set forth in Section 3.2(a), the party discovering such breach shall give prompt written notice to the other parties.

Section 3.3Affirmative Covenants of the Seller. The Seller hereby covenants as to the Transferred Contracts the Seller has sold to the Purchaser hereby that:

(a)Delivery of Payments. The Seller shall promptly, but in no event later than two (2) Business Days after receipt thereof, transfer all Collections received by it after the Cut-off Date with respect to any Transferred Contract or the related Second Step Transferred Property to, or at the direction of, the Purchaser.

(b)Compliance. The Seller will comply, in all material respects, with all Applicable Laws, acts, rules, regulations, orders, decrees and directions of any Governmental Authority applicable to the Seller or the Transferred Contracts or other Second Step Transferred Property or any part thereof; provided, however, that the Seller may contest any Applicable Law, act, regulation, order, decree or direction in any reasonable manner which shall not materially and adversely affect the rights of the Purchaser in any of the Transferred Contracts or other Second Step Transferred Property.

(c)Keeping of Records and Books of Account. The Seller shall maintain and implement administrative and operating procedures, and keep and maintain all documents, books, records and other information, reasonably necessary or advisable for the collection of all Transferred Contracts and other Second Step Transferred Property.

Section 3.4Negative Covenants of the Seller. The Seller hereby covenants as to the Transferred Contracts the Seller has sold to the Purchaser hereby that:

(a)Contracts Not to be Evidenced by Instruments. The Seller shall take no action to cause any Transferred Contract that is not, as of the Closing Date, evidenced by an Instrument, to be so evidenced except in connection with the enforcement or collection of such Transferred Contract.

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(b)Security Interests. The Seller shall not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien (other than Permitted Liens) on any portion of the Transferred Contracts or other Second Step Transferred Property, whether now existing or hereafter transferred hereunder, or any interest therein, and the Seller shall not sell, pledge, assign or suffer to exist any Lien on its interest, if any, hereunder. The Seller shall promptly notify the Purchaser of the existence of any Lien (other than Permitted Liens) on any portion of the Transferred Contracts or other Second Step Transferred Property and the Seller shall defend the right, title and interest of the Purchaser (and the Permitted Assigns) in, to and under such Transferred Contracts and other Second Step Transferred Property, against all claims of third parties; provided, however, that nothing in this subsection shall prevent or be deemed to prohibit the Seller from suffering to exist Permitted Liens upon any portion of the Second Step Transferred Property.

(c)Sale Treatment. The Seller shall not account for or treat (whether in the Seller’s financial statements or otherwise) the transactions contemplated by this Agreement in any manner other than as the sale, or absolute assignment, of the Transferred Contracts and other Second Step Transferred Property by the Seller to the Purchaser other than for income tax and consolidated accounting purposes.

ARTICLE IV

MISCELLANEOUS PROVISIONS

Section 4.1Amendment. This Agreement may be amended, waived, supplemented or modified only with 10 Business Days’ prior written notice to KBRA and by a written amendment duly executed and delivered by the Seller and the Purchaser (subject to any expressly applicable amendment provision of the Transaction Documents) and, in each case, with the prior written consent of the Administrative Agent (acting at the direction of the Required Lenders).

Section 4.2Protection of Right, Title and Interest in and to Receivables.

(a)The Seller, at its expense, shall cause all financing statements and continuation statements, amendments, assignments and any other necessary documents and notices, covering or evidencing the Purchaser’s right, title and interest in and to the Transferred Contracts and other Second Step Transferred Property to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, and take such other action, all in such manner and in such places as may be required by law, or as the Purchaser may reasonably request, fully to preserve and protect the right, title and interest of the Purchaser (and the Permitted Assigns) hereunder in and to all of the Transferred Contracts and such other Second Step Transferred Property. The Seller shall deliver to the Purchaser file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing. The Purchaser shall cooperate fully with the Seller in connection with the obligations set forth above and will execute any and all documents reasonably required or requested to fulfill the intent of this subsection.

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(b)The Seller shall not change its State of formation or its name, identity or entity structure, unless it shall give the Purchaser written notice thereof at no later than (10) days prior to such change.

(c)The Seller shall give the Purchaser notice no later than ten (10) days after any relocation of its principal place of business or chief executive office.

(d)The Seller shall maintain its respective computer systems relating to loan record keeping so that, from and after the time of sale under this Agreement of any Transferred Contract, the Seller’s master computer records (including any backup archives) that refer to a Transferred Contract shall indicate clearly the interest of the Purchaser (or its Permitted Assign).

Section 4.3Governing Law; Consent to Jurisdiction; Waiver of Objection to Venue. THIS AGREEMENT AND THE SECOND STEP CONTRACTS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN §§5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW)). EACH OF THE PARTIES HERETO HEREBY AGREES TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, LOCATED IN THE BOROUGH OF MANHATTAN AND THE FEDERAL COURTS LOCATED WITHIN THE STATE OF NEW YORK IN THE BOROUGH OF MANHATTAN. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER OR UNDER THE SECOND STEP CONTRACTS ASSIGNMENT IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

Section 4.4Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

Section 4.5Notices. All demands, notices and communications upon or to the Seller or Purchaser under this Agreement shall be delivered as specified in Section 14.2 in the Loan and Security Agreement.

Section 4.6Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions and terms of this Agreement and shall in no way affect the validity or unenforceability of the other provisions of this Agreement.

Section 4.7Assignment; Conveyance of Transferred Contracts and Second Step Transferred Property to the Trust. This Agreement may not be assigned by the Purchaser or the Seller except as contemplated by this Section 4.7. The Seller acknowledges that the

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Purchaser (or any Permitted Assign) may, pursuant to certain agreements, convey the Transferred Contracts and the other Second Step Transferred Property, together with certain rights under this Agreement, to Financing Parties pursuant to the Loan and Security Agreement. The Seller acknowledges and consents to such conveyance and waives any further notice thereof.

Section 4.8No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Purchaser or the Seller, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law.

Section 4.9Counterparts. This Agreement may be executed in two (2) or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by email or facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 4.10Third-Party Beneficiaries. This Agreement will inure to the benefit of and be binding upon the parties hereto and shall inure to the benefit of the Permitted Assigns, and each such Permitted Assign shall be considered to be a third party beneficiary hereof. In furtherance of the foregoing, Permitted Assigns may enforce the duties and obligations of the Seller under this Agreement against the Seller (whether in the name and place of the Purchaser or in their own name) for the benefit of the applicable Permitted Assigns. The Administrative Agent shall be a third party beneficiary hereto. Except as otherwise provided in this Agreement, no other Person will have any right or obligation hereunder.

Section 4.11Merger and Integration. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided herein.

Section 4.12Headings. The headings herein are for purposes of references only and shall not otherwise affect the meaning or interpretation of any provision hereof.

Section 4.13Indemnification. The Seller shall indemnify the Purchaser, each Lender and the Administrative Agent, and their respective directors, officers, employees, and agents (the “Indemnified Parties”) against any and all losses, claims, damages (including punitive damages), liabilities or expenses (including reasonable legal and accounting fees and expenses) (collectively, “Losses”), as incurred (payable promptly upon written request), for or on account of or arising from or in connection with or as a result of this Agreement or any other Transaction Document, including (w) the sale by the Seller of the Transferred Contracts or the other Second Step Transferred Property, (x) any breach of any representation, warranty or covenant of the Seller in this Agreement, the other Transaction Documents or in any certificate or other written material delivered pursuant hereto or thereto, (y) the failure by the Seller to comply with Applicable Law or (z) any litigation, claim, proceeding or investigation before any Governmental Authority (1) relating to arising from this Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby or (2) relating to the Seller in which any Indemnified Party becomes involved as a result of the transactions contemplated by

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the Transaction Documents, as applicable, including any judgment, award, settlement, reasonable and documented out of pocket external attorneys’ fees and other out of pocket costs or expenses incurred in connection with any such litigation, claim, proceeding or investigation. Notwithstanding the foregoing, such indemnity shall not be available to an Indemnified Party to the extent that such Losses (A) have resulted from the gross negligence, bad faith, fraud or willful misconduct of the Indemnified Party or (B) arise primarily due to the deterioration in the credit quality or market value of the Transferred Contracts, Financed Vehicles or other Second Step Transferred Property (or the underlying Obligors thereunder) or otherwise constituting credit recourse for the failure of an Obligor to pay any amount owing with respect to any Second Step Transferred Property.

Section 4.14Limitation of Liability of Owner Trustee. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust, National Association (“WTNA”), not individually or personally but solely as Owner Trustee of the Purchaser, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Purchaser is made and intended not as personal representations, undertakings and agreements by WTNA but is made and intended for the purpose of binding only the Purchaser, (c) nothing herein contained shall be construed as creating any liability on WTNA, individually or personally, to perform any covenant either expressed or implied contained herein of the Purchaser, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WTNA has made no investigation as to the accuracy or completeness of any representations and warranties made by the Purchaser in this letter and (e) under no circumstances shall WTNA be personally liable for the payment of any indebtedness or expenses of the Purchaser or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this letter or any other transaction documents.

Section 4.15Survival. All representations, warranties, covenants, indemnities and other provisions made by the Seller herein or in connection herewith shall be considered to have been relied upon by the Purchaser, and shall survive the execution and delivery of this Agreement. The terms of Section 4.13 shall survive the termination or assignment of this Agreement.

Section 4.16Termination. The Purchaser may not terminate this Agreement until on or after the later of the Termination Date under the Loan and Security Agreement and the date as of which all Obligations have been indefeasibly paid in full.

[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

	CARVANA AUTO RECEIVABLES DEPOSITOR LLC,
	as Seller
By:	/s/ Paul Breaux
	Name: Paul Breaux
	Title: Vice President, General Counsel, and Secretary
	SONORAN AUTO RECEIVABLES TRUST 2017-1 TERM,
	as Purchaser
By:	WILMINGTON TRUST,NATIONAL ASSOCIATION,not in its individual capacity but solely as Owner Trustee
By:	/s/ Nancy E. Hagner
	Name: Nancy E. Hagner
	Title: Assistant Vice President

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EXHIBIT A

FORM OF

SECOND STEP CONTRACTS ASSIGNMENT

PURSUANT TO TRANSFER AGREEMENT

On __________, 201___, for value received, in accordance with the Transfer Agreement, dated as of August 7, 2018 (as amended, modified or supplemented from time to time, the “Transfer Agreement”), between Carvana Auto Receivables Depositor LLC, a Delaware limited liability company (the “Seller”), and Sonoran Auto Receivables Trust 2017-1 Term, a Delaware statutory trust (the “Purchaser”), the Seller does hereby sell, assign, transfer and otherwise convey unto the Purchaser, without recourse,

(i)the Receivables and the related Contracts identified on the Schedule of Receivables delivered by the Seller to the Purchaser on or before the Closing Date (each, a “Transferred Contract”), and any accounts or obligations evidenced thereby, any guarantee thereof, all Collections and all monies due (including any payments made under any guarantee or similar credit enhancement with respect to any such Receivables) or to become due or received by any Person in payment of any of the foregoing on or after the Cut-off Date;

(ii)the Financed Vehicles (including Financed Vehicles that have been repossessed) or in any document or writing evidencing any security interest in any Financed Vehicle and each security interest in each Financed Vehicle securing each such Receivable, including all proceeds from any sale or other disposition of such Financed Vehicles;

(iii)all Receivable Files, all Authoritative Copies, all Servicer Files and the Schedule of Receivables, and all documents, agreements and instruments included in the Receivable Files and Servicer Files;

(iv)all Records, documents and writings evidencing or related to the Receivables or the Contracts;

(v)all rights to payment under all Insurance Policies with respect to a Financed Vehicle, including any monies collected from whatever source in connection with any default of an Obligor with respect to a Financed Vehicle and any proceeds from claims or refunds of premiums on any Insurance Policy;

(vi)all guaranties, indemnities, warranties, insurance (and proceeds and premium refunds thereof) and other agreements or arrangements of whatever character from time to time supporting or securing payment of the Receivables, whether pursuant to the related Contracts or otherwise;

A-1

(vii)all rights to payment under all service contracts and other contracts and agreements associated with the Receivables;

(viii)all security interests, Liens, guaranties and other encumbrances in favor of or assigned or transferred to the Seller in and to the Receivables and Financed Vehicles;

(ix)all Liquidation Proceeds;

(x)all right, title and interest of the Seller in, to and under (A) the Purchase Agreement and (B) the First Step Contracts Assignment, including the right of the Seller to cause Carvana to repurchase Receivables under the circumstances specified in the Purchase Agreement; and

(xi)the proceeds of any of the foregoing.

It is the intention of the Seller and the Purchaser that the transfer and assignment of Transferred Contracts contemplated by the Transfer Agreement and this Second Step Contracts Assignment shall constitute an absolute and irrevocable sale of the Transferred Contracts from the Seller to the Purchaser so that the beneficial interest in and title to the Transferred Contracts and the other related Second Step Transferred Property shall not be part of the Seller’s estate in the event of the filing of a petition for insolvency, receivership or conservatorship by or against the Seller or placement into receivership or conservatorship of the Seller under any relevant bankruptcy, insolvency, receivership or conservatorship law.

The foregoing transfer and assignment of Transferred Contracts contemplated by the Transfer Agreement and this Second Step Contracts Assignment does not constitute and is not intended to result in any assumption by the Purchaser of any obligation of the Seller, the Servicer or any other Person to the Obligors, insurers or any other Person in connection with the Transferred Contracts or the other related Second Step Transferred Property, including any insurance policies or any agreement or instrument relating to any of them.

THIS SECOND STEP CONTRACTS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN §§5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW)).

This Second Step Contracts Assignment is made pursuant to and upon the representations, warranties and agreements on the part of the undersigned contained in the Transfer Agreement and is to be governed by the Transfer Agreement.

Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to them in the Transfer Agreement.

* * * * *

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IN WITNESS WHEREOF, the undersigned has caused this Second Step Contracts Assignment to be duly executed as of the day and year first written above.

	CARVANA AUTO RECEIVABLES LLC
By:	/s/
	Name:
	Title:

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SCHEDULE A TO THE SECOND STEP CONTRACTS ASSIGNMENT

SECOND STEP SCHEDULE OF RECEIVABLES

The Second Step Schedule of Receivables is on file at the offices of:

1.The Administrative Agent

2.The Servicer

3.The Seller

4.The Purchaser

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EX-31.1

Exhibit 31.1

Certification of the Chief Executive Officer

Pursuant to Rule 13a-14(a)

I, Ernie Garcia, III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Carvana Co.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

1. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 8, 2018	/s/ Ernest C. Garcia, III
		Ernest C. Garcia, III
		Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of the Chief Financial Officer

Pursuant to Rule 13a-14(a)

I, Mark Jenkins, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Carvana Co.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

1. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 8, 2018	/s/ Mark Jenkins
		Mark Jenkins
		Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to Rule 18 U.S.C. Section 1350

In connection with the Quarterly Report on Form 10-Q of Carvana Co. (the “Company”) for the quarter ended June 30, 2018, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Ernie Garcia, III, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 8, 2018	/s/ Ernest C. Garcia, III
		Ernest C. Garcia, III
		Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of the Chief Financial Officer

Pursuant to Rule18 U.S.C. Section 1350

In connection with the Quarterly Report on Form 10-Q of Carvana Co. (the “Company”) for the quarter ended June 30, 2018, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Mark Jenkins, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 8, 2018	/s/ Mark Jenkins
		Mark Jenkins
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 03, 2018
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Entity Registrant Name	CARVANA CO.
Entity Central Index Key	0001690820
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Class A
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		34,256,765
Class B
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		105,816,629

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 199,192	$ 172,680
Restricted cash	18,356	14,443
Accounts receivable, net	23,573	14,105
Finance receivables held for sale, net	77,128	45,564
Vehicle inventory	302,989	227,446
Other current assets	22,255	15,480
Total current assets	643,493	489,718
Property and equipment, net	217,414	148,681
Intangible assets, net	9,616	0
Goodwill	6,868	0
Other assets	4,372	2,738
Total assets	881,763	641,137
Current liabilities:
Accounts payable and accrued liabilities	81,880	50,306
Accounts payable due to related party	3,193	1,802
Floor plan facility	347,087	248,792
Current portion of long-term debt	6,664	5,131
Total current liabilities	438,824	306,031
Long-term debt, excluding current portion	76,873	48,469
Other liabilities	6,957	7,093
Total liabilities	522,654	361,593
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock	0	0
Additional paid in capital	95,008	41,375
Accumulated deficit	(29,907)	(12,899)
Total stockholders' equity attributable to Carvana Co.	163,748	125,736
Non-controlling interests	195,361	153,808
Total stockholders' equity	359,109	279,544
Total liabilities & stockholders' equity	881,763	641,137
Convertible Preferred Stock
Stockholders' equity:
Preferred stock	98,507	97,127
Class A
Stockholders' equity:
Common stock	34	18
Class B
Stockholders' equity:
Common stock	$ 106	$ 115

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Convertible Preferred Stock
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, liquidation value	$ 1,000,000	$ 1,000,000
Preferred stock, shares authorized (in shares)	100,000	100,000
Preferred stock, shares issued (in shares)	100,000	100,000
Preferred stock, shares outstanding (in shares)	100,000	100,000
Class A
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares issued (in shares)	34,242,000	18,096,000
Common stock, shares outstanding (in shares)	34,242,000	18,096,000
Class B
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	125,000,000	125,000,000
Common stock, shares issued (in shares)	105,817,000	114,664,000
Common stock, shares outstanding (in shares)	105,817,000	114,664,000

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2018		Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Sales and operating revenues:
Used vehicle sales, net	$ 437,922		$ 193,947		$ 771,978	$ 342,329
Wholesale vehicle sales	16,622		7,818		26,755	13,544
Other sales and revenues, including $5,544, $1,898, $9,655 and $3,656, respectively, from related parties	20,742		7,600		36,975	12,565
Net sales and operating revenues	475,286		209,365		835,708	368,438
Cost of sales	426,251		193,326		752,439	342,653
Gross profit	49,035		16,039		83,269	25,785
Selling, general and administrative expenses	95,652		52,011		178,838	97,919
Interest expense, including $0, $1,241, $0 and $1,382, respectively, to related parties	4,165		2,507		7,706	4,566
Other expense, net	468		391		647	609
Net loss before income taxes	(51,250)		(38,870)		(103,922)	(77,309)
Income tax provision	0		0		0	0
Net loss	(51,250)		(38,870)		(103,922)	(77,309)
Net loss attributable to non-controlling interests	(41,285)		(24,328)		(86,914)	(24,328)
Net loss attributable to Carvana Co.	(9,965)		(14,542)		(17,008)	(52,981)
Dividends on Class A convertible preferred stock	(1,375)		0		(2,720)	0
Accretion of beneficial conversion feature on Class A convertible preferred stock	0		0		(1,380)	0
Net loss attributable to Class A common stockholders	$ (11,340)		$ (14,542)		$ (21,108)	$ (52,981)
Class A
Sales and operating revenues:
Net loss per share of Class A common stock, basic and diluted (in dollars per share)	$ (0.41)	[1]	$ (0.28)	[1]	$ (0.92)	$ (0.56)
Weighted-average shares of Class A common stock, basic and diluted (in shares)	27,780	[1],[2]	15,026	[1],[2]	23,063	15,013	[1],[2]

[1] Amounts for periods prior to the initial public offering have been retrospectively adjusted to give effect to 15.0 million shares of Class A common stock issued in the initial public offering and the Organizational Transactions described in Note 1.

[2] Weighted-average shares of Class A common stock outstanding have been adjusted for unvested restricted stock awards.

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Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Other sales and revenues, from related parties	$ 5,544	$ 1,898	$ 9,655	$ 3,656
Interest expense, from related parties	$ 0	$ 1,241	$ 0	$ 1,382

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Condensed Consolidated Statements of Stockholders' Equity / Members' Deficit (Unaudited) - USD ($) $ in Thousands	Total	Car360	Follow-On Public Offering	Carvana Group	Convertible Preferred Stock	Member Units	Preferred Stock Convertible Preferred Stock	Common Stock Class A	Common Stock Class A Follow-On Public Offering	Common Stock Class B	Additional Paid-in Capital	Additional Paid-in Capital Car360	Additional Paid-in Capital Follow-On Public Offering	Additional Paid-in Capital Carvana Group	Additional Paid-in Capital Convertible Preferred Stock	Accumulated Deficit	Non-controlling Interests	Non-controlling Interests Car360	Non-controlling Interests Follow-On Public Offering	Non-controlling Interests Member Units Car360
Members' Deficit, beginning of the period at Dec. 31, 2016						$ (115,961)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	$ (77,309)
Accretion of beneficial conversion feature on Class A convertible preferred stock	0
Stockholders' Equity, end of the period (in shares) at Jun. 30, 2017								15,523,000		117,236,000
Stockholders' Equity, end of the period at Jun. 30, 2017	265,430							$ 16		$ 117	$ 34,145					$ (3,039)	$ 234,191
Members' Deficit, beginning of the period at Dec. 31, 2017						$ 0
Stockholders' Equity, beginning of the period (in shares) at Dec. 31, 2017							100,000,000	18,096,000		114,664,000
Stockholders' Equity, beginning of the period at Dec. 31, 2017	279,544						$ 97,127	$ 18		$ 115	41,375					(12,899)	153,808
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(103,922)															(17,008)	(86,914)
Issuance, net of underwriters' discounts and commissions and offering expenses, value		$ 9,981	$ 172,287						$ 7				$ 172,280							$ 9,981
Issuance, net of underwriters' discounts and commissions and offering expenses (in shares)									6,600,000
Adjustments to non-controlling interests								$ 9		$ (9)	12,592	$ 1,297	(132,375)				(12,592)	$ (1,297)	$ 132,375
Restricted stock surrendered in lieu of withholding taxes	(323)										(323)
Restricted stock surrendered in lieu of withholding taxes (in shares)								(36,000)
Equity-based compensation expense	4,093										4,093
Accretion of beneficial conversion feature on Class A convertible preferred stock	(1,380)				$ 1,380										$ (1,380)
Preferred dividends	(2,720)										(2,720)
Exchanges of LLC Units (in shares)								9,569,000		(8,847,000)
Exchanges of LLC Units								$ 9		$ (9)	12,592	$ 1,297	$ (132,375)				(12,592)	$ (1,297)	$ 132,375
Establishment of deferred tax assets related to increases in tax basis in Carvana Group				$ 71,232										$ 71,232
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group				$ (71,232)										$ (71,232)
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes (in shares)								(36,000)
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes	(323)										(323)
Options exercised (in shares)								13,000
Options exercised	169										169
Stockholders' Equity, end of the period (in shares) at Jun. 30, 2018							100,000,000	34,242,000		105,817,000
Stockholders' Equity, end of the period at Jun. 30, 2018	$ 359,109						$ 98,507	$ 34		$ 106	$ 95,008					$ (29,907)	$ 195,361

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash Flows from Operating Activities:
Net loss	$ (103,922)	$ (77,309)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	9,862	4,645
Loss on disposal of property and equipment	267	565
Provision for bad debt and finance receivable allowance	1,131	494
Gain on loan sales	(22,313)	(8,390)
Equity-based compensation expense	4,093	2,102
Amortization and write-off of debt issuance costs	649	1,250
Originations of finance receivables	(525,885)	(223,843)
Proceeds from sale of finance receivables	513,820	231,942
Changes in assets and liabilities:
Accounts receivable	(9,500)	(8,293)
Vehicle inventory	(74,817)	11,668
Other current assets	(7,397)	(1,538)
Other assets	270	(1,148)
Accounts payable and accrued liabilities	33,002	942
Accounts payable to related party	1,391	285
Other liabilities	(136)	5,337
Net cash used in operating activities	(179,485)	(61,291)
Cash Flows from Investing Activities:
Purchases of property and equipment	(73,425)	(42,576)
Payments to Acquire Businesses, Gross	(6,670)	0
Net cash used in investing activities	(80,095)	(42,576)
Cash Flows from Financing Activities:
Proceeds from floor plan facility	837,673	397,082
Payments on floor plan facility	(739,378)	(395,555)
Proceeds from Verde Credit Facility	0	35,000
Payments on Verde Credit Facility	0	(35,000)
Proceeds from long-term debt	25,670	2,980
Payments on long-term debt	(2,852)	(641)
Payments of debt issuance costs, including $0 and $1,000 to related parties, respectively	(325)	(1,000)
Proceeds from exercise of stock options	169	0
Tax withholdings related to restricted stock awards	(323)	0
Net cash provided by financing activities	290,005	209,189
Net increase in cash, cash equivalents and restricted cash	30,425	105,322
Cash, cash equivalents and restricted cash at beginning of period	187,123	49,450
Cash, cash equivalents and restricted cash at end of period	217,548	154,772
Common Stock
Cash Flows from Financing Activities:
Net proceeds from issuance of Class A common stock	172,287	206,323
Convertible Preferred Stock
Cash Flows from Financing Activities:
Dividends paid on Class A Convertible Preferred Stock	(2,904)	0
Payments of costs related to issuance of Class A Convertible Preferred Stock	$ (12)	$ 0

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Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Statement of Cash Flows [Abstract]
Payments of debt issuance costs to related parties	$ 0	$ 1,000

XML

Business Organization

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Organization

NOTE 1 — BUSINESS ORGANIZATION 

Description of Business

Carvana Co. and its wholly-owned subsidiary Carvana Co. Sub (collectively, "Carvana Co.") together with its consolidated subsidiaries (the “Company”) is a leading e-commerce platform for buying used cars. The Company is transforming the used car buying 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 purchase transaction including financing their purchase, trading in their current vehicle and purchasing complementary products such as vehicle service contracts and GAP waiver coverage. 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.

Organization and Initial Public Offering

Carvana Co. is a holding company that was formed as a Delaware corporation on November 29, 2016 for the purpose of completing an initial public offering ("IPO") and related transactions in order to operate the business of Carvana Group, LLC and its subsidiaries (collectively, "Carvana Group"). Substantially all of the Company’s assets and liabilities represent the assets and liabilities of Carvana Group. 

Carvana Group was formed as a limited liability company by DriveTime Automotive Group, Inc. (together with its subsidiaries and affiliates “DriveTime”) and commenced operations in 2012. Prior to November 1, 2014, Carvana Group was a wholly-owned subsidiary of DriveTime. On November 1, 2014 (the “Distribution Date”), DriveTime distributed its member units in Carvana Group to the unit holders of DriveTime on a pro rata basis (the “Distribution”). Carvana Group accounted for the Distribution as a spinoff transaction in accordance with ASC 505-60, Equity — Spinoffs and Reverse Spinoffs and reflected assets and liabilities before and after the Distribution Date at their historical basis.

On May 3, 2017, Carvana Co. completed its IPO of 15.0 million shares of Class A common stock at a public offering price of $15.00 per share. Carvana Co. received approximately $205.8 million in proceeds, net of underwriting discounts and commissions and offering expenses, which it used to purchase approximately 18.8 million newly-issued membership interests of Carvana Group at a price per unit equal to 0.8 times the initial public offering price less underwriting discounts and commissions and offering expenses.

Also in connection with the IPO, the Company completed the following organizational transactions (the “Organizational Transactions”):

• Carvana Group amended and restated its limited liability company operating agreement (the "LLC Agreement") to, among other things, (i) eliminate a class of preferred membership interests, (ii) provide for two classes of common ownership interests in Carvana Group held by the then-existing holders of LLC units (the "Original LLC Unitholders" and together with any holders of LLC units issued subsequent to the IPO, the "LLC Unitholders") consisting of Class B common units (the “Class B Units”) and Class A common units (the “Class A Units”), and (iii) appoint Carvana Co. as the sole manager of Carvana Group;

• Carvana Co. amended and restated its certificate of incorporation to authorize (i) 50.0 million shares of Preferred Stock, par value $0.01 per share, (ii) 500.0 million shares of Class A common stock, par value $0.001 per share, and (iii) 125.0 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 Ernest Garcia, II, Ernie Garcia, III and entities controlled by one or both of them (collectively, the "Garcia Parties") generally entitles its holder to ten votes on all matters to be voted on by stockholders. 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;

• Carvana Group converted its outstanding Class C Redeemable Preferred Units into approximately 43.1 million Class A Units;

• Carvana Co. issued approximately 117.2 million shares of Class B common stock to holders of Class A Units, on a four-to-five basis with the number of Class A Units they owned, for nominal consideration; and,

• Carvana Co. transferred approximately 0.2 million Class A Units to Ernest Garcia, II in exchange for his 0.1% ownership interest in Carvana, LLC, a majority-owned subsidiary of Carvana Group.

In accordance with the LLC Agreement, Carvana Co. has all management powers over the business and affairs of Carvana Group and conducts, directs and exercises full control over the activities of Carvana Group. Class A Units and Class B Units (the "LLC Units") do not hold voting rights, which results in Carvana Group being considered a variable interest entity ("VIE"). Due to Carvana Co.'s power to control and its significant economic interest in Carvana Group, it is considered the primary beneficiary of the VIE and the Company consolidates the financial results of Carvana Group. As of June 30, 2018, Carvana Co. owned approximately 23.4% of Carvana Group and the LLC Unitholders owned the remaining 76.6%.

The Organizational Transactions described above are considered transactions between entities under common control. As a result, the financial statements for periods prior to the IPO and Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes.

Follow-On Public Offering

On April 30, 2018, the Company completed a follow-on offering of 6.6 million shares of its Class A common stock at a public offering price of $27.50 per share and received net proceeds from the offering of approximately $172.3 million after underwriting discounts and commissions and offering expenses. The Company used the net proceeds to purchase approximately 8.3 million newly-issued LLC Units in Carvana Group, which used the net proceeds primarily for general corporate purposes.

A holder of Class A common stock (the "Selling Stockholder") and certain LLC Unitholders (the "Selling LLC Unitholders") sold a total of approximately 6.1 million shares of Class A common stock as part of the offering. The Selling LLC Unitholders exchanged approximately 6.9 million LLC Units for approximately 5.6 million shares of Class A common stock to be sold in the offering, and to the extent such Selling LLC Unitholder held Class B common stock, the corresponding shares of Class B common stock were immediately retired by the Company. The Company did not receive any proceeds from the sale of the approximately 6.1 million shares of Class A common stock by the Selling Stockholder and the Selling LLC Unitholders.

Convertible Preferred Stock

On December 5, 2017, Carvana Co. amended and restated its certificate of incorporation to authorize 100,000 shares of Class A Convertible Preferred Stock, with an initial stated value of  $1,000 per share and a par value of $0.01 per share (the "Convertible Preferred Stock") and, effective December 5, 2017, Carvana Group amended its LLC Agreement to, among other things, create a class of convertible preferred units. On December 5, 2017, Carvana Co. sold 100,000 shares of Convertible Preferred Stock for net proceeds of approximately $98.5 million, which it used to purchase 100,000 newly-issued convertible preferred units of Carvana Group (the "Convertible Preferred Units") at a price per unit equal to the initial stated value of the Convertible Preferred Stock less issuance costs.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within our most recent Annual Report on Form 10-K.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of June 30, 2018, results of operations for the three and six months ended June 30, 2018 and 2017, and cash flows and changes in stockholders' equity for

the six months ended June 30, 2018 and 2017. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.

As discussed in Note 1 — Business Organization, Carvana Group is considered a VIE and Carvana Co. consolidates its financial results due to the determination that it is the primary beneficiary. The Company reviews subsidiaries and affiliates, as well as other entities, to determine if it should be considered variable interest entities, and whether it should change the consolidation determinations based on changes in its characteristics. The Company considers an entity a VIE if its equity investors own an interest therein that lacks the characteristics of a controlling financial interest or if such investors do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or if the entity is structured with non-substantive voting interests. To determine whether or not the entity is consolidated with the Company’s results, the Company also evaluates which interests are variable interests in the VIE and which party is the primary beneficiary of the VIE. 

Liquidity

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company has incurred losses from inception through June 30, 2018, and expects to incur additional losses in the future. As the Company continues to fund growth into new markets, fund construction of vending machines and inspection and reconditioning centers and enhance technology and software development efforts, it needs access to substantial capital. From inception, the Company has funded operations through the sale of Class A Units, the sale of Class C Redeemable Preferred Units, capital contributions from DriveTime, its IPO completed on May 3, 2017 for net proceeds of approximately $205.8 million, its follow-on offering completed on April 30, 2018 for net proceeds of approximately $172.3 million, its issuance of Class A Convertible Preferred Stock on December 5, 2017 for net proceeds of approximately $98.5 million, and short-term funding from the Company’s majority owner. The Company has historically funded vehicle inventory purchases through its Floor Plan Facility, described in further detail in Note 8 — Debt Instruments, and had approximately $2.9 million available under the Floor Plan Facility to fund future vehicle inventory purchases as of June 30, 2018. The Company plans to increase the amount and extend the maturity date of financing available to purchase vehicle inventory by amending its existing Floor Plan Facility or by entering into a new agreement prior to the maturity date of the Floor Plan Facility. The Company has also funded certain of its capital expenditures through long-term financing with third parties as described in further detail in Note 8 — Debt Instruments. The Company has historically entered into various agreements under which it sells the finance receivables it originates to third parties. As of June 30, 2018, the Company sells finance receivables under multiple agreements, all of which expire in November 2018. The Company plans to extend or enter into new agreements to sell its finance receivables to third parties prior to the expiration of the agreements. Management believes that its current working capital and expected continued inventory and capital expenditure financing are sufficient to fund operations for at least one year from the financial statement issuance date.

Use of Estimates

The preparation of these accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations. 

Segments

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 reportable segment. The chief operating decision maker focuses on consolidated results 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.”). Substantially all revenue is generated and all assets are held in the U.S. for all periods presented.

Comprehensive Loss

During the three and six months ended June 30, 2018 and 2017, the Company had no other components of comprehensive loss and, therefore, the net loss and comprehensive loss were the same for all periods presented.

Restricted Cash

The restricted cash includes the deposit required under the Company's Floor Plan Facility, which is 5% of the outstanding floor plan facility principal balance, as explained in Note 8 — Debt Instruments and amounts held as restricted cash as required under letter of credit agreements, as explained in Note 14 — Commitments and Contingencies. 

Revenue Recognition

The Company adopted ASC 606, Revenue from Contracts with Customers ("ASC 606") on January 1, 2018 using the modified retrospective method. ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied. Based on the manner in which the Company historically recognized revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of its revenue recognition and the Company recognized no cumulative effect adjustment upon adoption.

Used Vehicle Sales

The Company sells used vehicles directly to its customers through its website. The prices of used vehicles are set forth in the customer contracts at stand-alone selling prices which are agreed to prior to delivery. The Company satisfies its performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. The Company recognizes revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for used vehicle sales includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the used vehicle. Revenue excludes any sales taxes that are collected from customers.

Wholesale Vehicle Sales

The Company sells vehicles to wholesalers. These vehicles sold to wholesalers are primarily acquired from customers

who trade-in their existing vehicles that do not meet the Company’s quality standards to list and sell through its website. The Company satisfies its performance obligation for wholesale vehicle sales when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. The Company recognizes revenue at the amount it expects to receive for the used vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle.

Other Sales and Revenues

Other sales and revenues include gains on the sales of finance receivables, commissions on vehicle service contracts (“VSCs”), GAP waiver coverage, and interest income received on finance receivables prior to selling them to investors. The Company accounts for the sale of finance receivables in accordance with ASC 860, Transfers and Servicing of Financial Assets as described in the footnotes to the Company's annual financial statements included in its Annual Report filed on Form 10-K with the SEC on March 6, 2018.

Customers purchasing used vehicles from the Company may enter into contracts for VSCs. The Company sells and receives a commission on VSCs under a master dealer agreement with DriveTime, pursuant to which the Company sells VSCs that DriveTime administers and is the obligor. The Company recognizes commission revenue at the time of sale, net of a reserve

for estimated contract cancellations. The reserve for cancellations is estimated based upon historical experience and recent trends and is reflected as a reduction of other sales and revenues. Changes in these estimates are reflected as an adjustment to revenue in the period identified.

Customers that finance their used vehicle purchases with the Company may enter into contracts to purchase GAP waiver coverage, which provides customers with the promise that whoever then holds the underlying finance receivable will not attempt collection of a loan balance that is in excess of the value of the financed vehicle in the event of a total loss. The price of GAP waiver coverage is set forth in each contract. GAP waiver coverage is recognized as the performance obligation is satisfied over the period of coverage, generally on a straight-line basis over the term of the related finance receivable, less a reserve for cancellations. The reserve for cancellations is estimated based upon historical experience and recent trends and is reflected as a reduction of other sales and revenues. Changes in these estimates are reflected as an adjustment to other sales and revenues in the period identified. Upon selling the finance receivable, the Company recognizes any remaining deferred revenue. DriveTime administers the GAP waiver coverage.

Adoption of New Accounting Standards

As discussed above, the Company adopted ASC 606 on January 1, 2018 using the modified retrospective method. ASC 606 requires the reserve for vehicle inventory returns to be presented separately from vehicle inventory, where the Company previously presented it. As of December 31, 2017, the reserve for estimated returns included within vehicle inventory was approximately $2.6 million. As of June 30, 2018, the reserve for estimated returns included within other current assets was approximately $4.6 million. Furthermore, based on the manner in which the Company recognizes revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of its revenue recognition and the Company recognized no cumulative effect adjustment upon adoption.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Receipts and Payments (“ASU 2016-15”), which provides additional clarity on the classification of specific events on the statement of cash flows including debt prepayment and extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from settlement of insurance claims, distributions received from equity method investees and beneficial interests in securitization transactions. The Company adopted this ASU on January 1, 2018. The adoption of ASU 2016-15 did not have a material effect on its consolidated statements of cash flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows — Restricted Cash (“ASU 2016-18”), which requires the statement of cash flows to include restricted cash with its cash and cash equivalents balance and a reconciliation between all cash items on the balance sheet and the balance presented in the statement of cash flows. In addition, changes in restricted cash related to transfers between cash and cash equivalents and restricted cash will not be presented as cash flow activities in the statement of cash flows. The Company adopted ASU 2016-18 on January 1, 2018 on a retrospective basis. As a result, changes in restricted cash are no longer presented as investing cash flow activities and the restricted cash balance is included with cash and cash equivalents in the beginning and end of period balances on the Company's consolidated statements of cash flows for all periods presented. For the six months ended June 30, 2017, changes in restricted cash included within cash used in investing activities, as originally presented, was approximately $0.1 million.

Accounting Standards Issued But Not Yet Adopted

Since February 2016, the FASB has issued several accounting standards updates related to the new leasing model in ASC 842, Leases (“ASC 842”). ASC 842 introduces a lessee model that requires a right-of-use asset and lease obligation to be presented on the balance sheet for certain leases, whether operating or financing. ASC 842 eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease classification. Expense recognition on the income statement remains similar to current lease accounting guidance. ASC 842 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018 and should be applied using a modified retrospective approach, with the option to elect various practical expedients. The Company plans to adopt ASC 842 for its fiscal year beginning January 1, 2019. The adoption of ASC 842 will require the recognition of a right-of-use asset and a lease obligation for the Company’s leases (see Note 14 — Commitments and Contingencies). While the Company is still evaluating the full effect this guidance will have on its consolidated financial statements and related disclosures, the Company anticipates recognizing right-of-use assets and operating lease liabilities, which will have a material impact upon adoption primarily on its consolidated balance sheets and related disclosures, and will increase total assets and liabilities.

In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and earlier adoption is permitted beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact on its consolidated financial statements, and plans to adopt ASU 2016-13 for its fiscal year beginning January 1, 2020. Finance receivables originated in connection with the Company’s vehicle sales are held for sale and are sold to third parties. As a result, the Company does not presently hold any finance receivables until maturity. Therefore, the Company does not expect adoption of ASU 2016-13 to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which is intended to simplify the goodwill impairment test by eliminating the second step of the goodwill impairment test, which requires performing a hypothetical purchase price allocation. Under ASU 2017-04, goodwill impairment should be recognized based on the amount by which a reporting unit's carrying amount exceeds its fair value, but should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, may be early adopted after January 1, 2017, and should be applied on a prospective basis. The Company does not expect adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation — Stock Compensation (Topic 718) ("ASU 2018-07") related to the accounting for share-based payment transactions for acquiring goods and services from nonemployees. Under ASU 2018-07, the intent is to simplify and align most requirements for share-based payments to nonemployees with the requirements for share-based payments granted to employees under ASC 718, including measuring the equity instruments at the grant-date fair value. ASU 2018-07 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, and will be applied on a modified retrospective basis through a cumulative-effect adjustment to accumulated deficit. The Company plans to adopt ASU 2018-07 for its fiscal year beginning January 1, 2019 and is currently assessing the impact, if any, the guidance will have on the Company's consolidated financial statements.

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Property and Equipment, Net

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

NOTE 3 — PROPERTY AND EQUIPMENT, NET 

The following table summarizes property and equipment, net as of June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Land and site improvements	$	40,705	$	11,656
Buildings and improvements	91,775		60,804
Transportation fleet	46,846		39,153
Software	28,006		21,009
Furniture, fixtures and equipment	15,451		12,239
Total property and equipment excluding construction in progress	222,783		144,861
Less: accumulated depreciation and amortization on property and equipment	(30,539)		(20,453)
Property and equipment excluding construction in progress, net	192,244		124,408
Construction in progress	25,170		24,273
Property and equipment, net	$	217,414	$	148,681

Depreciation and amortization expense on property and equipment was approximately $4.9 million and $2.6 million for the three months ended June 30, 2018 and 2017, respectively, and approximately $9.5 million and $4.6 million for the six months ended June 30, 2018 and 2017, respectively. These amounts primarily relate to selling, general and administrative activities and are included as a component of selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

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Goodwill and Intangible Assets, Net

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

NOTE 4 — GOODWILL AND INTANGIBLE ASSETS, NET

On April 12, 2018, the Company acquired Car360, Inc. ("Car360"), a provider of app-based photo capture technology, for approximately $16.7 million, net of cash acquired of approximately $0.4 million. The purchase price was comprised of approximately $6.7 million cash, net of cash acquired, and approximately 0.5 million Class A Units of Carvana Group, with a fair value of approximately $10.0 million. 

 The purchase price was allocated to net tangible assets of approximately $0.2 million and intangible assets of approximately $9.9 million based on their fair values on the acquisition date.  The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed was $6.9 million, which has been recorded as goodwill.

The historical results of operations for Car360 were not significant to the Company's consolidated results of operations for the periods presented. Certain estimated values for the acquisition, including goodwill and intangible assets, are not yet finalized and are subject to revision as additional information becomes available and more detailed analyses are completed.

The following table summarizes intangible assets and goodwill related to the Car360 acquisition as of June 30, 2018 (in thousands):

	Useful Life	June 30, 2018
Intangible assets:
Developed technology	7 years	$	8,642
Customer relationships	5 years	523
Non-compete agreements	5 years	774
Intangible assets, acquired cost		9,939
Less: accumulated amortization on intangible assets		(323)
Intangible assets, net		$	9,616
Goodwill	N/A	$	6,868

Amortization expense during the three and six months ended June 30, 2018 was $0.3 million. As of June 30, 2018, the remaining weighted-average amortization period for definite-lived intangible assets was approximately 6.5 years. The anticipated annual amortization expense to be recognized in future years as of June 30, 2018 is as follows (in thousands):

	Expected Future Amortization
Remainder of 2018	$	747
2019	1,494
2020	1,494
2021	1,494
2022	1,494
Thereafter	2,893
Total	$	9,616

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Accounts Payable and Other Accrued Liabilities

6 Months Ended

Jun. 30, 2018

Payables and Accruals [Abstract]

Accounts Payable and Other Accrued Liabilities

NOTE 5 — ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES 

The following table summarizes accounts payable and other accrued liabilities as of June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Accounts payable	$	23,996	$	10,546
Sales taxes and vehicle licenses and fees	18,539		9,034
Accrued compensation and benefits	9,141		5,054
Accrued property and equipment	6,374		8,325
Accrued advertising costs	3,752		4,265
Other accrued liabilities	20,078		13,082
Total accounts payable and other accrued liabilities	$	81,880	$	50,306

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 6 — RELATED PARTY TRANSACTIONS 

Lease Agreements

In November 2014, the Company and DriveTime entered into a lease agreement that governs the Company’s access to and utilization of temporary storage, reconditioning, offices and parking space at various DriveTime inspection and reconditioning centers ("IRCs") and retail facilities (the "DriveTime Lease Agreement"). The DriveTime Lease Agreement was most recently amended in March 2018. Lease duration varies by location, with initial terms expiring between 2018 and 2024. Most of the retail facilities have two-year terms and the Company is entitled to exercise up to two consecutive one-year renewal options at up to ten of these locations.

Under the DriveTime Lease Agreement, the Company pays a monthly rental fee related to 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. The Company is additionally responsible for paying for any tenant improvements it requires to conduct its operations and its share of estimated costs incurred by DriveTime related to preparing these sites for use. As it relates to locations where the Company reconditions vehicles, the Company’s share of facility and shared reconditioning supplies expenses are calculated based on the actual costs for operating the inspection centers and the Company’s pro rata share of total reconditioned vehicles and parking spaces at such inspection centers in a given month. Management has determined that the costs allocated to the Company are based on a reasonable methodology.

Separate from the DriveTime Lease Agreement, in December 2016, the Company entered into a lease agreement related to a vehicle inspection and reconditioning center in Tolleson, Arizona, with Verde Investments, Inc., an affiliate of DriveTime ("Verde"), with an initial term of approximately 15 years. The lease agreement requires monthly rental payments and can be extended for four additional five-year periods. In February 2017, the Company also entered into a lease with DriveTime for sole occupancy of a fully-operational inspection and reconditioning center in Winder, Georgia, where the Company previously maintained partial occupancy. The lease has an initial term of eight years, subject to the Company's ability to exercise three renewal options of five years each.

Expenses related to these lease agreements are allocated based on usage to inventory and selling, general and administrative expenses in the accompanying unaudited condensed consolidated balance sheets and statements of operations. Costs allocated to inventory are recognized as cost of sales when the inventory is sold. During the three months ended June 30, 2018, total costs related to these lease agreements were approximately $2.3 million with approximately $1.1 million and $1.2 million allocated to inventory and selling, general and administrative expenses, respectively. During the six months ended June 30, 2018, total costs related to these lease agreements were approximately $4.5 million with approximately $2.1 million and $2.4 million allocated to inventory and selling, general and administrative expenses, respectively. During the three months ended June 30, 2017, total costs related to these lease agreements were approximately $1.8 million with approximately $0.6 million and $1.2 million allocated to inventory and selling, general and administrative expenses, respectively. During the six months ended June 30, 2017, total costs related to these lease agreements were approximately $3.4 million with approximately $1.2 million and $2.2 million allocated to inventory and selling, general and administrative expenses, respectively.

Corporate Office Leases

During the first quarter of 2017, the Company subleased additional office space at DriveTime’s corporate headquarters in Tempe, Arizona. Pursuant to this arrangement, the Company incurred rent expense of approximately $0.1 million during the three months ended March 31, 2017, after which this arrangement was terminated.

In September 2016, the Company entered into a lease with a third party for the second floor of its corporate headquarters in Tempe, Arizona. DriveTime guarantees up to $0.5 million of the Company's rent payments under that lease through September 2019. In connection with that lease, the Company entered into a sublease with DriveTime for the use of the first floor of 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, which is co-terminus with DriveTime's master lease, the Company will pay DriveTime rent equal to the amounts due under DriveTime's master lease. During the three and six months ended June 30, 2018, the rent expense incurred related to this first floor sublease was approximately $0.2 million and $0.4 million, respectively. During the three and six months ended June 30, 2017, the rent expense incurred related to this first floor sublease was approximately $0.2 million and $0.3 million, respectively.

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 vehicle service contracts ("VSCs") and GAP waiver coverage 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. The Company recognized approximately $5.5 million and $9.7 million during the three and six months ended June 30, 2018, respectively, and approximately $1.9 million and $3.7 million during the three and six months ended June 30, 2017, respectively, of commissions earned on VSCs sold to its customers and administered by DriveTime. The commission earned on the sale of these VSCs is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

DriveTime also administers the Company's GAP waiver coverage under the Master Dealer Agreement. The Company pays a per-contract fee to DriveTime to administer the GAP waiver coverage it sells to its customers. The Company incurred approximately $0.0 million and  $0.1 million during the three and six months ended June 30, 2018, respectively, and $0.0 million during the both the three and six months ended June 30, 2017 related to the administration of GAP waiver coverage.

Aircraft Time Sharing Agreement

The Company entered into an agreement to share usage of two aircraft operated by DriveTime on October 22, 2015, and the agreement was subsequently amended on May 15, 2017. Pursuant to the agreement, the Company agreed to reimburse DriveTime for actual expenses for each of the flights in which the Company uses the aircrafts. The original agreement was for  12 months, with perpetual 12-month automatic renewals. Either the Company or DriveTime can terminate the agreement with 30 days’ prior written notice. The Company reimbursed DriveTime approximately $0.2 million and $0.3 million, respectively, under this agreement during the three months ended June 30, 2018 and 2017, respectively, and approximately $0.2 million and $0.4 million under this agreement during the six months ended June 30, 2018 and 2017, respectively.

Credit Facility with Verde

On February 27, 2017, the Company entered into a credit facility with Verde for an amount up to $50.0 million (the "Verde Credit Facility"). Amounts outstanding accrued interest at a rate of 12.0% per annum. Upon execution of the agreement, the Company paid Verde a commitment fee of $1.0 million. In connection with the IPO, the Company repaid the outstanding principal balance of $35.0 million and accrued interest of approximately $0.4 million in full and the Verde Credit Facility agreement terminated.

IP License Agreement

In February 2017, the Company entered into a license agreement that governs the rights of certain intellectual property owned by the Company and the rights of certain intellectual property owned by DriveTime. The license agreement generally provides that each party grants to the other certain limited exclusive (other than with respect to the licensor party and its

affiliates) and non-exclusive licenses to use certain of its intellectual property and each party agrees to certain covenants not to sue the other party, its affiliates and certain of its service providers in connection with various patent claims. The exclusive license to DriveTime is limited to the business that is primarily of subprime used car sales to retail customers. However, upon a change of control of either party, both parties’ license rights as to certain future improvements to licensed intellectual property and all limited exclusivity rights are terminated. The agreement does not provide a license to any of the Company's patents, trademarks, logos, customers’ personally identifiable information or any intellectual property related to the Company's vending machines, automated vehicle photography or certain other elements of the Company's brand.

Accounts Payable Due to Related Party

Amounts payable to DriveTime and Verde under the agreements explained above, as well as invoices DriveTime initially paid on behalf of the Company for vehicle reconditioning costs and general and administrative expenses, are included in accounts payable to related party in the accompanying unaudited condensed consolidated balance sheets. As of June 30, 2018 and December 31, 2017, approximately $3.2 million and $1.8 million, respectively, was due to related parties primarily related to lease agreements, shared service fees, net VSC fees collected from customers and repayments to DriveTime for invoices paid on behalf of the Company.

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Finance Receivable Sale Agreements

6 Months Ended

Jun. 30, 2018

Transfers and Servicing [Abstract]

Finance Receivable Sale Agreements

NOTE 7 — FINANCE RECEIVABLE SALE AGREEMENTS 

In December 2016, the Company entered into a master purchase and sale agreement (the "Purchase and Sale Agreement") and a master transfer agreement (the "2016 Master Transfer Agreement") pursuant to which it sells finance receivables meeting certain underwriting criteria to certain third party purchasers, including Ally Bank and Ally Financial (the "Ally Parties"). Through November 2017 under the Purchase and Sale Agreement and the 2016 Master Transfer Agreement, the Company could sell up to an aggregate of $375.0 million, and $292.2 million, respectively, in principal balances of finance receivables subject to adjustment as described in the respective agreements. On November 3, 2017, the Company amended its Purchase and Sale Agreement to increase the aggregate amount of principal balances of finance receivables it can sell from $375.0 million to $1.5 billion. Also on November 3, 2017, the Company terminated the remaining capacity under the 2016 Master Transfer Agreement and replaced this facility by entering into a new master transfer agreement (the "2017 Master Transfer Agreement") with a third party under which the third party has committed to purchase up to an aggregate of approximately $357.1 million in principal balances of finance receivables.

During the six months ended June 30, 2018, the Company sold approximately $308.8 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $184.4 million in principal balances of finance receivables under the 2017 Master Transfer Agreement. As of June 30, 2018, there was approximately $847.6 million and $140.5 million of unused capacity under the Purchase and Sale Agreement and the 2017 Master Transfer Agreement, respectively. During the six months ended June 30, 2017, the Company sold approximately $157.7 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $66.6 million in principal balances of finance receivables under the 2016 Master Transfer Agreement. 

The total gain on loan sales related to finance receivables sold under these agreements was approximately $12.4 million and $22.3 million during the three and six months ended June 30, 2018, respectively, and approximately $5.4 million and $8.4 million during the three and six months ended June 30, 2017, respectively, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

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Debt Instruments

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Debt Instruments

NOTE 8 — DEBT INSTRUMENTS 

Floor Plan Facility

The Company has a floor plan facility with a third party to finance its used vehicle inventory, which is secured by substantially all of its assets, other than the Company's interests in real property (the "Floor Plan Facility"). The Company most recently amended the Floor Plan Facility in August 2017 to, among other things, extend the maturity date to December 31, 2018, and increase the available credit to $275.0 million through December 31, 2017 and to $350.0 million from January 1, 2018 through December 31, 2018. The Company is required to make monthly interest payments at a rate per annum equal to one-month LIBOR plus 3.65%, effective August 1, 2017. The Floor Plan Facility requires that at least 5% of the total principal amount owed to the lender is held as restricted cash.

Repayment in an amount equal to the amount of the advance or loan must be made within five business days of selling or otherwise disposing of the underlying vehicle inventory, unless customers financed the purchase by originating an automotive finance receivable. For used vehicle sales involving financing originated by the Company and sold under either the Purchase and Sale Agreement or the 2017 Master Transfer Agreement as mentioned in Note 7 — Finance Receivable Sale Agreements, the lender has extended repayment to the earlier of fifteen business days after the sale of the used vehicle or one day following the sale of the related finance receivable. In November 2017, the Company also entered into a letter agreement to extend repayment of amounts due under the Floor Plan Facility for used vehicle sales involving financing that are not sold under either the Purchase and Sale Agreement or the 2017 Master Transfer Agreement. With respect to such vehicles, the lender agreed to extend repayment of the advance or the loan for such vehicles to the earlier of fifteen business days after the sale of the vehicle or two business days following the funding of the related finance receivable. Outstanding balances related to vehicles held in inventory for more than 180 days require monthly principal payments equal to 10% of the original principal amount of that vehicle until the remaining outstanding balance is the lesser of (i) 50% of the original principal amount or (ii) 50% of the wholesale value. Prepayments may be made without incurring a premium or penalty. Additionally, the Company is permitted to make prepayments to the lender to be held as principal payments under the Floor Plan Facility and subsequently re-borrow such amounts.

As of June 30, 2018, the interest rate on the Floor Plan Facility was approximately 5.74%, the Company had an outstanding balance under this facility of approximately $347.1 million, borrowing capacity available of approximately $2.9 million and held approximately $17.4 million in restricted cash related to this facility. As of December 31, 2017, the Company held approximately $12.4 million in restricted cash related to this facility.

Long-Term Debt

Notes Payable

The Company has 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 serve 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. Each note has a fixed annual interest rate, a two to five-year term and requires monthly payments. As of June 30, 2018, the outstanding principal of these notes had a weighted-average interest rate of 5.6% and totaled approximately $31.3 million, of which approximately $6.7 million is due within the next twelve months and is included as current portion of long-term debt in the accompanying unaudited condensed consolidated balance sheets.

Finance Leases

Beginning in 2017, the Company has financed certain purchases and construction of its property and equipment through various sale and leaseback transactions. As of June 30, 2018, none of these transactions have qualified for sale accounting due to 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. These arrangements require monthly payments and have initial terms that expire in fifteen to twenty years. Some of the agreements are subject to renewal options of up to twenty years and base rent increases throughout the term. As of June 30, 2018, the outstanding liability associated with these sale and leaseback arrangements, net of debt issuance costs, is approximately $52.3 million and is included in long-term debt in the accompanying unaudited condensed consolidated balance sheet.

In November 2017, the Company entered into a master sale-leaseback agreement (the "MSLA") pursuant to which it may sell and lease back certain of its owned or leased properties and construction improvements. A portion of the Company's finance leases described above is through the MSLA. A portion of the fixed rental payments set forth in the respective lease agreements is payable annually beginning in November 2019. Under the MSLA, at any time the Company may elect to, and beginning in November 2019 or until a property owner of a leased site consents to the sale-leaseback, the purchaser has the right to, demand that the Company repurchase one or more of the properties sold and leased back pursuant to the MSLA for an amount equal to the repurchase price. Repurchase prices are defined in each of the applicable leases and are generally the original purchase prices plus any accrued and unpaid rent. As of June 30, 2018, the repurchase prices for all properties under the MSLA excluding unpaid rent totaled approximately $28.8 million. Under the MSLA, the total sales price of properties the Company has sold and is leasing back at any point in time is limited to $75.0 million. As of June 30, 2018, the Company may sell and lease back an additional approximately $46.2 million of its property and equipment under the MSLA.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Stockholders' Equity

NOTE 9 — STOCKHOLDERS' EQUITY 

Organizational Transactions

Immediately prior to the IPO, Carvana Co. amended and restated its certificate of incorporation to, among other things authorize (i) 50.0 million shares of Preferred Stock, par value $0.01 per share, (ii) 500.0 million shares of Class A common stock, par value $0.001 per share, and (iii) 125.0 million shares of Class B common stock, par value $0.001 per share. On December 5, 2017, Carvana Co. amended and restated its certificate of incorporation to authorize 100,000 shares of Convertible Preferred Stock, with an initial stated value of $1,000 per share and a par value of $0.01 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. 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. Holders of Class B common stock are not entitled to receive dividends and would not be entitled to receive any distributions upon the liquidation, dissolution or winding down of the Company. Holders of Class A and Class B common stock vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by applicable law.

As described in Note 1 — Business Organization, Carvana Group amended and restated its LLC Agreement to, among other things, provide for two classes of common ownership interests in Carvana Group. Carvana Group’s two classes of common ownership interests are Class A Units and Class B Units. Carvana Co. is required to, at all times, maintain (i) a 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. (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities and subject to adjustment as set forth in the exchange agreement (the "Exchange Agreement") further discussed below, and taking into account Carvana Sub’s 0.1% ownership interest in Carvana, LLC) and (ii) a four-to-five ratio between the number of shares of Class B common stock owned by the Original LLC Unitholders and the number of Class A Units owned by the Original LLC Unitholders. The Company may issue shares of Class B common stock only to the extent necessary to maintain these ratios. Shares of Class B common stock are transferable only together with a corresponding number of LLC Units if Carvana Co., at the election of an Existing LLC Unitholder, exchanges LLC Units for shares of Class A common stock.

As of June 30, 2018, there were approximately 175.6 million and 6.0 million Class A Units and Class B Units (as adjusted for the participation thresholds), respectively, issued and outstanding. As discussed in Note 11 — 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.

Initial Public Offering

As described in Note 1 — Business Organization, on May 3, 2017, Carvana Co. completed its IPO of 15.0 million shares of Class A common stock at a public offering price of $15.00 per share. Carvana Co. received approximately $205.8 million in proceeds, net of underwriting discounts and commissions and offering expenses. Carvana Co. used the proceeds to purchase approximately 18.8 million newly-issued LLC Units of Carvana Group at a price per unit equal to 0.8 times the initial public offering price less underwriting discounts and commissions. In connection with the IPO, Carvana Co. transferred approximately 0.2 million Class A Units to Ernest Garcia, II in exchange for his 0.1% ownership interest in Carvana, LLC, a majority-owned subsidiary of Carvana Group.

Follow-On Public Offering

On April 30, 2018, the Company completed a follow-on offering of 6.6 million shares of its Class A common stock at a public offering price of $27.50 per share and received net proceeds from the offering of approximately $172.3 million after underwriting discounts and commissions and offering expenses. The Company used the net proceeds to purchase approximately 8.3 million newly-issued LLC Units in Carvana Group, which used the net proceeds primarily for general corporate purposes.

The Selling Stockholder and the Selling LLC Unitholders sold a total of approximately 6.1 million shares of Class A common stock as part of the offering. The Selling LLC Unitholders exchanged approximately 6.9 million LLC Units for approximately 5.6 million shares of Class A common stock to be sold in the offering, and to the extent such Selling LLC

Unitholder held Class B common stock, the corresponding shares of Class B common stock were immediately retired by the Company. The Company did not receive any proceeds from the sale of the approximately 6.1 million shares of Class A common stock by the Selling Stockholder and the Selling LLC Unitholders.

Exchange Agreement

Carvana Co. and the LLC Unitholders entered into an 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 for certain Class A Units and subject to vesting and the respective participation threshold for Class B Units. To the extent such owners also hold Class B common stock, they will be 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 being exchanged for. Any shares of Class B common stock so delivered will be 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 the six months ended June 30, 2018, certain LLC Unitholders exchanged approximately 12.0 million LLC Units and approximately 8.8 million shares of Class B common stock for approximately 9.6 million newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, Carvana Co. received approximately 12.0 million LLC Units, increasing its total ownership interest in Carvana Group, and canceled the exchanged shares of Class B common stock.

Convertible Preferred Stock

On December 5, 2017, Carvana Co. sold 100,000 shares of Convertible Preferred Stock for a purchase price of $100.0 million and net proceeds of approximately $98.5 million, which it used to purchase 100,000 Convertible Preferred Units of Carvana Group at a price per unit equal to the initial stated value of the Convertible Preferred Stock less issuance costs. The Convertible Preferred Stock has a par value of $0.01 per share and a liquidation value of $1,000 per share.

At the holder's request beginning on January 29, 2018, any or all shares of the Convertible Preferred Stock are convertible into shares of Class A common stock at an initial conversion rate of 50.78 shares of Class A common stock per share of Convertible Preferred Stock. On or after December 5, 2018, the Company will have the option to cause all shares of Convertible Preferred Stock to be converted into shares of Class A common stock or cash, at the Company's election, if the 10-day volume-weighted average price equals or exceeds 150% of the conversion price as set forth in the agreement. In the event Carvana Co. issues any shares of Class A common stock upon conversion of any shares of Convertible Preferred Stock or in connection with any change of control repurchase of shares of Convertible Preferred Stock, a corresponding number of Convertible Preferred Units shall be canceled and cease to be outstanding, and Carvana Group will issue Class A Units to Carvana Co. on a four-to-five ratio between the number of shares of Class A common stock issued by Carvana Co. to the holders of the Convertible Preferred Stock and the number of Class A Units issued. As of June 30, 2018, the holder has not converted any shares of Convertible Preferred Stock.

The initial conversion price was $19.6945, which was calculated based on a 20.0% premium to the volume weighted average price for Class A common stock during the 5 trading days immediately preceding December 4, 2017. Following announcement of the transaction, the share price of Class A common stock increased and exceeded the conversion price on the commitment date and resulted in a beneficial conversion feature ("BCF") of approximately $2.6 million. The BCF was originally recorded as a reduction of the Convertible Preferred Stock with an offset to additional paid-in capital. The BCF accreted as a deemed dividend through January 29, 2018, the first available conversion date, increasing the carrying value of the Convertible Preferred Stock with an offsetting charge to additional paid-in capital. During the six months ended June 30, 2018, the Company recorded the remaining approximately $1.4 million in accretion related to the BCF. The carrying value of the Convertible Preferred Stock was approximately $98.5 million and $97.1 million as of June 30, 2018 and December 31, 2017, respectively.

Upon a change of control, as defined in the agreement, any holder of Convertible Preferred Stock has the option to require the Company (or its successor) to purchase, any or all of its Convertible Preferred Stock at a purchase price per share, payable at the Company’s option in any combination of cash or shares of Class A common stock, of 101% of the liquidation preference, plus all accumulated dividends.

Holders of the Convertible Preferred Stock have no voting rights. The Convertible Preferred Stock ranks senior, as to payment of dividends and distributions of assets upon the liquidation, dissolution or winding up of Company, to the Company’s common stock and any shares of capital stock of the Company not expressly ranking senior to or pari passu with the Convertible Preferred Stock, and junior to all shares of capital stock of the Company issued in the future, if the terms of which expressly provide that such shares will rank senior to the Convertible Preferred Stock.

The Convertible Preferred Stock accrues dividends at 5.5% of the liquidation preference of $1,000 per share. The dividends are payable in cash quarterly commencing March 15, 2018 so long as the Company has funds legally available and the Board declares a cash dividend payable. The Company may not declare dividends on shares of its common stock or purchase or redeem shares of its common stock, unless all accumulated and unpaid dividends on the Convertible Preferred Stock have been paid in full or a sum for such amounts has been set aside for payment. As the Company declares and pays dividends on the Convertible Preferred Stock, Carvana Group will make distributions to Carvana Co. with respect to the Convertible Preferred Units in an amount equal to the related Convertible Preferred Stock dividend amount and any corresponding tax payments. During the six months ended June 30, 2018, the Company paid approximately $2.9 million of dividends to the holders of the Convertible Preferred Stock and Carvana Group distributed approximately $2.9 million to Carvana Co. with respect to the Convertible Preferred Units. As of June 30, 2018, dividends accrued related to the Convertible Preferred Stock were approximately $0.2 million, or $2.29 per share of Convertible Preferred Stock outstanding.

Class C Redeemable Preferred Units

Prior to 2017, the Company authorized the issuance of and sold approximately 43.1 million Class C Redeemable Preferred Units to various third parties and related parties for net proceeds of approximately $226.9 million. The Company recorded the issuance and sale of Class C Redeemable Preferred Units at fair value, net of issuance costs. In accordance with the Company’s Operating Agreement, the Class C Redeemable Preferred Units accrued a return (the “Class C Return”) at a coupon rate of 12.5% compounding annually on the aggregate amount of capital contributions made with respect to the Class C Redeemable Preferred Units. On May 3, 2017, the Company closed its IPO at a price such that the Company was no longer liable for the accrued Class C Return, and the outstanding Class C Redeemable Preferred Units converted to Class A Units on a one-to-one basis and the related balance became a component of permanent equity.

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Non-controlling Interests

6 Months Ended

Jun. 30, 2018

Noncontrolling Interest [Abstract]

Non-controlling Interests

NOTE 10 — NON-CONTROLLING INTERESTS 

As discussed in Note 1 — Business Organization, Carvana Co. consolidates the financial results of Carvana Group and reports a non-controlling interest related to the portion of Carvana Group owned by the LLC Unitholders. Changes in the ownership interest in Carvana Group while Carvana Co. retains its controlling interest will be accounted for as equity transactions. Exchanges of LLC Units result in a change in ownership and reduce the amount recorded as non-controlling interests and increase additional paid-in capital.

Upon the issuance of shares of Class A common stock by Carvana Co. related to the Company’s equity compensation plans such as the exercise of options, issuance of restricted or non-restricted stock, payment of bonuses in stock or settlement of stock appreciation rights in stock, Carvana Group is required to issue to Carvana Co. a number of Class A Units equal to 1.25 times the number of shares of Class A common stock being issued in connection with the exercise of such options or issuance of other types of equity compensation, subject to adjustment for stock splits, stock dividends, reclassifications and similar transactions. Activity related to the Company's equity compensation plans may result in a change in ownership which will impact the amount recorded as non-controlling interest and additional paid-in capital.

The non-controlling interest related to the Class B Units is determined based on the respective participation thresholds and the share price of Class A common stock on an as-converted basis. 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 six months ended June 30, 2018, the total adjustments related to exchanges of LLC Units was a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of approximately $12.6 million, which has been included in exchanges of LLC Units in the accompanying unaudited condensed consolidated statement of stockholders' equity. During the six months ended June 30, 2018, Carvana Co. utilized its net proceeds from its follow-on offering to purchase LLC Units, which together with the follow-on offering resulted in an adjustment to increase non-controlling interests and to decrease additional paid-in capital by approximately $132.4 million, which has been included in adjustment to non-controlling interests related to follow-on offering in the accompanying unaudited condensed consolidated statement of stockholders' equity. During

the six months ended June 30, 2018, Carvana Group issued approximately 0.5 million Class A Units with a fair value of approximately $10.0 million as part of the purchase price consideration for Car360, which is reflected as an increase in non-controlling interests in the accompanying unaudited condensed consolidated statement of stockholders' equity. The adjustment related to the issuance of Class A Units to acquire Car360 was a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of approximately $1.3 million, which has been included in adjustment to non-controlling interests related to business acquisitions in the accompanying unaudited condensed consolidated statement of stockholders' equity.

As of June 30, 2018, Carvana Co. owned approximately 23.4% of Carvana Group with the LLC Unitholders owning the remaining 76.6%. The non-controlling interests on the accompanying unaudited condensed consolidated statements of operations represents the portion of the 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.

The following table summarizes the effects of changes in ownership in Carvana Group on the Company's additional paid-in capital during the six months ended June 30, 2018 (in thousands):

	Six Months Ended
	6/30/2018		6/30/2017
Transfers (to) from non-controlling interests:
Decrease as a result of issuances of Class A common stock	$	(132,375)	$	(174,255)
Increase as a result of Carvana Group's issuance of Class A Units in connection with business acquisitions	1,297		—
Increase as a result of exchanges of LLC Units	12,592		—
Increase as a result of adjustments to non-controlling interests	—		846
Total transfers to non-controlling interests	$	(118,486)	$	(173,409)

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Equity-Based Compensation

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity-Based Compensation

NOTE 11 — EQUITY-BASED COMPENSATION 

Equity-based compensation expense is recognized based on amortizing the grant-date fair value on a straight-line basis over the requisite service period, which is generally the vesting period of the award, less actual forfeitures. A summary of equity-based compensation expense recognized during the three and six months ended June 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Class B Units	$	605	$	482	$	1,040	$	640
Restricted Stock Units and Awards	978		1,150		1,645		1,150
Options	425		368		833		368
Class A Units	575		—		575		—
Total equity-based compensation expense	$	2,583	$	2,000	$	4,093	$	2,158

As of June 30, 2018, the total unrecognized compensation expense related to outstanding equity awards was approximately $27.8 million, which the Company expects to recognize over a weighted-average period of approximately 3.0 years. Total unrecognized equity-based compensation expense will be adjusted for actual forfeitures.

2017 Omnibus Incentive Plan

In connection with the IPO, the Company adopted the 2017 Omnibus Incentive Plan (the "2017 Incentive Plan"). Under the 2017 Incentive Plan, 14.0 million shares of Class A common stock are available for issuance, which the Company may grant as stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, directors, officers and consultants. As of June 30, 2018, approximately 12.5 million shares remain available for future equity award grants under this plan.

Class A Units

During the three and six months ended June 30, 2018, the Company granted certain employees approximately 0.4 million 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 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.

Class B Units

In March 2015, Carvana Group adopted the LLC Equity Incentive Plan. Under the LLC Equity Incentive Plan, Carvana Group could grant Class B Units to eligible employees, non-employee officers, consultants and directors with service vesting conditions. Following completion of the IPO, there are no B Units authorized for the Company to grant under the LLC Equity Incentive Plan. There were no Class B Units issued during the three and six months ended June 30, 2018. During the three and six months ended June 30, 2017, the Company issued an aggregate of approximately 0.8 million Class B Units to executive officers and certain other employees.

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Loss Per Share

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Loss Per Share

NOTE 12 — LOSS PER SHARE 

Basic and diluted net loss per share is computed by dividing the net loss attributable to Class A common stockholders by the weighted-average shares of Class A common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive shares. For all periods presented, potentially dilutive shares are excluded from diluted net loss per share because they have an anti-dilutive impact. Therefore, basic and diluted net loss per share attributable to Class A common stockholders are the same for all periods presented.

As discussed in Note 1 — Business Organization, the Organizational Transactions are considered transactions between entities under common control and the financial statements for periods prior to the IPO and Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes. For purposes of calculating both the numerator and denominator of net loss per share for periods prior to the IPO, the Company has retroactively reflected the 15.0 million shares issued in the IPO and the LLC Units outstanding as of the Organizational Transactions as if they had been issued and outstanding as of the beginning of each period presented. These calculations for periods prior to the IPO do not consider the options or shares of Class A common stock issued on the IPO date under the 2017 Incentive Plan.

The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Numerator:
Net loss	$	(51,250)	$	(38,870)	$	(103,922)	$	(77,309)
Net loss attributable to non-controlling interests	41,285		34,594		86,914		68,843
Dividends on Class A convertible preferred stock	(1,375)		—		(2,720)		—
Accretion of beneficial conversion feature on Class A convertible preferred stock	—		—		(1,380)		—
Net loss attributable to Carvana Co. Class A common stockholders, basic and diluted	$	(11,340)	$	(4,276)	$	(21,108)	$	(8,466)
Denominator:
Weighted-average shares of Class A common stock outstanding	28,124		15,242		23,425		15,121
Nonvested weighted-average restricted stock awards	(344)		(216)		(362)		(108)
Weighted-average shares of Class A common stock to compute basic and diluted net loss per Class A common share	27,780		15,026		23,063		15,013
Net loss per share of Class A common stock, basic and diluted	$	(0.41)	$	(0.28)	$	(0.92)	$	(0.56)

Shares of Class B common stock do not share in the losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted net loss per share of Class B common stock under the two-class method has not been presented. LLC Units (adjusted for the Exchange Ratio and participation thresholds) are considered potentially dilutive shares of Class A common stock because they are exchangeable into shares of Class A common stock.

Weighted-average as-converted shares of Convertible Preferred Stock of approximately 5.1 million for each of the three and six months ended June 30, 2018 were evaluated under the if-converted method for potentially dilutive effects and were determined to be anti-dilutive. Weighted-average as-converted Class A Units together with the related Class B common stock of approximately 110.2 million and 117.2 million during the three months ended June 30, 2018 and June 30, 2017, respectively, and of approximately 112.1 million and 117.2 million during the six months ended June 30, 2018 and June 30, 2017, respectively, were evaluated under the if-converted method for potentially dilutive effects and were determined to be anti-dilutive. Outstanding Class B Units of approximately 6.6 million and 7.5 million at June 30, 2018 and June 30, 2017, respectively, were evaluated for potentially dilutive effects and were determined to be anti-dilutive. Potentially dilutive restricted stock awards and units of approximately 0.4 million and for each of the three and six months ended June 30, 2018 and of approximately 0.2 million and 0.1 million for the three and six months ended June 30, 2017, respectively, were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive. As of June 30, 2018, 0.8 million options were outstanding and evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive. During the three and six months ended June 30, 2017, the exercise price of all outstanding options exceeded the average share price of Class A common stock, thus, options were not contemplated in diluted net loss per share computations.

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Income Taxes

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 13 — INCOME TAXES 

As described in Note 1 — Business Organization, as a result of the IPO and Organizational Transactions, Carvana Co. began consolidating the financial results of Carvana Group. Carvana Group is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Carvana Group is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members, including Carvana Co., based on its economic interest held in Carvana Group. Carvana Co. was formed on November 29, 2016 and did not engage in any operations prior to the IPO. Carvana Co. is taxed as a corporation and is subject to U.S. federal, state and local income taxes with respect to the allocable share of any taxable income or loss of Carvana Group, as well as any stand-alone income or loss generated by Carvana Co.

As described in Note 9 — Stockholders' Equity, the Company acquired approximately 12.0 million LLC Units during the six months ended June 30, 2018 in connection with exchanges with Existing LLC Unitholders. During the six months ended June 30, 2018, the Company recorded a gross deferred tax asset of approximately $68.7 million associated with the basis difference in its investment in Carvana Group related to the acquisition of these LLC Units which is reflected as an increase to additional paid-in capital in the accompanying unaudited condensed consolidated statement of stockholders' equity.

As described in Note 1 — Business Organization and Note 9 — Stockholders' Equity, Carvana Co. purchased approximately 8.3 million newly-issued LLC Units of Carvana Group in connection with the follow-on offering. The Company recognized a gross deferred tax asset of approximately $2.5 million associated with a portion of the basis difference resulting from this purchase of LLC Units which is reflected as an increase to additional paid-in capital in the accompanying unaudited condensed consolidated statements of stockholders' equity.

The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be realized. During the six months ended June 30, 2018, management performed an assessment of the recoverability of deferred tax assets. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. Management determined, based on the accounting standards applicable to such assessment, that there was sufficient negative 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 against 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.

The Company recognizes uncertain income tax positions when it is more-likely-than-not the position will be sustained upon examination. As of June 30, 2018 and December 31, 2017, the Company has not identified any uncertain tax positions and has not recognized any related reserves.

Tax Receivable Agreement

Carvana Co. expects to obtain an increase in its share of the tax basis in the net assets of Carvana Group when LLC Units are exchanged by the Original LLC Unitholders and other qualifying transactions. As described in Note 9 — Stockholders' Equity, each change in outstanding shares of Class A common stock results in a corresponding increase or decrease in Carvana Co.'s ownership of LLC Units. The Company intends to treat any exchanges of LLC Units as direct purchases of LLC interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that Carvana Co. would otherwise pay in the future to various taxing authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

In connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA”). Under the TRA, the Company generally will be required to pay to the Original LLC Unitholders 85% of the amount of cash savings, if any, in U.S. federal, state or local tax that the Company actually realizes directly or indirectly (or are deemed to realize in certain circumstances) as a result of (i) certain tax attributes created as a result of any sales or exchanges (as determined for U.S. federal income tax purposes) to or with the Company of their interests in Carvana Group for shares of Carvana Co.'s Class A common stock or cash, including any basis adjustment relating to the assets of Carvana Group and (ii) tax benefits attributable to payments made under the TRA (including imputed interest). The Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. 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 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. Nevertheless, if the claimed tax benefits from the tax basis adjustments are disallowed, the Company’s payments under the TRA could exceed its actual tax savings, and the Company may not be able to recoup payments under the TRA that were calculated on the assumption that the disallowed tax savings were available.

The TRA provides that if (i) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur, (ii) there is a material breach of any material obligations under the TRA; 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 June 30, 2018, 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; therefore, the Company has not recorded a liability related to the tax savings it may realize from utilization of such deferred tax assets. As of June 30, 2018, the total unrecorded TRA liability is approximately $67.9 million. If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, the Company will record a liability related to the TRA which will be recognized as expense within its consolidated statements of operations.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 14 — COMMITMENTS AND CONTINGENCIES 

Lease Commitments

As of June 30, 2018, the Company is a tenant under various operating leases with third parties related to certain of its market hubs, vending machines and offices. The initial terms expire at various dates between 2018 and 2027. Many of the leases include one or more renewal options ranging from two to twenty years. Rent is recognized on a straight-line basis over the lease term and includes scheduled rent increases as well as amortization of tenant improvement allowances. Rent expense for these operating leases was approximately $1.3 million and $2.6 million for the three and six months ended June 30, 2018 and $1.2 million and $1.8 million for the three and six months ended June 30, 2017, respectively.

Beginning in December 2017, the Company has operating leases with third parties for certain of its transportation fleet. The initial lease terms are for two years from the delivery date of each individual vehicle to the Company, at which time each lease will extend on a month-to-month basis for a potential total lease term of six years unless both parties agree to earlier termination or replacement. Rent expense for these operating leases was approximately $0.4 million and $0.7 million for the three and six months ended June 30, 2018, respectively.

Accrued Limited Warranty

As part of its retail strategy, the Company provides a 100-day or 4,189-mile limited warranty to customers to repair certain broken or defective components of each used vehicle sold. As such, the Company accrues for such repairs based on actual claims incurred to-date and repair reserves based on historical trends. The liability was approximately $1.0 million and $0.8 million as of June 30, 2018 and December 31, 2017, respectively, and is included in accounts payable and other accrued liabilities in the accompanying unaudited condensed consolidated balance sheets.

Letters of Credit

In October 2016, the Company obtained an unconditional, irrevocable, stand-by letter of credit for $1.9 million to satisfy a condition of a new lease agreement. The Company was required to maintain a cash deposit of $1.9 million with the financial institution that issued the stand-by letter of credit until February 2018, at which point the cash deposit requirement was reduced by approximately $1.0 million until November 30, 2018, at which time the letter of credit shall expire. The Company has earned interest on this letter of credit, and as of June 30, 2018 and December 31, 2017, the balance with the financial institution

was approximately $1.0 million and $2.0 million, respectively. This balance is classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets.

Legal Matters

In the ordinary course of business, the Company may become subject to litigation or claims. The Company is not aware of any pending legal proceedings of which the outcome is reasonably possible to have a material effect on its results of operations, financial condition or cash flows.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

NOTE 15 — FAIR VALUE OF FINANCIAL INSTRUMENTS 

Items Measured at Fair Value on a Recurring Basis

As of June 30, 2018 and December 31, 2017, the Company held certain assets that were required to be measured at fair value on a recurring basis. The following is a summary of fair value measurements at June 30, 2018 and December 31, 2017 (in thousands):

As of June 30, 2018:

	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	187,083	$	187,083	$	—	$	—

As of December 31, 2017:

	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	171,859	$	171,859	$	—	$	—

_________________________

(1) Consists of highly liquid investments with original maturities of three months or less and classified in cash and cash equivalents in the accompanying unaudited condensed consolidated balance sheets.

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 because their respective maturities are less than three months. The carrying value of the Floor Plan Facility was determined to approximate fair value due to its short-term duration and variable interest rate that approximates prevailing interest rates as of each reporting period. The carrying value of notes payable was determined to approximate fair value as each of the notes has prevailing interest rates, which have not materially changed as of June 30, 2018. The carrying value of finance leases was determined to approximate fair value as each of the transactions was entered into at prevailing interest rates during each respective period and they have not significantly fluctuated since inception. The fair value of finance receivables, which are not carried at fair value on the accompanying unaudited condensed consolidated balance sheets, was determined utilizing the estimated sales price based on the historical experience of the Company. 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 June 30, 2018 and December 31, 2017 were as follows (in thousands):

	June 30, 2018		December 31, 2017
Carrying value	$	77,128	$	45,564
Fair value	80,235		47,514

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Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2018

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

NOTE 16 — SUPPLEMENTAL CASH FLOW INFORMATION

The following table summarizes supplemental cash flow information for the six months ended June 30, 2018 and 2017 (in thousands):

	Six Months Ended June 30,
	2018		2017
Supplemental cash flow information:
Cash payments for interest to third parties	$	7,481	$	3,839
Cash payments for interest to related parties	$	—	$	382
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	$	6,970	$	7,601
Capital expenditures financed through long-term debt	$	7,489	$	4,522
Issuance of LLC Units related to business acquisitions	$	9,981	$	—
Dividend accrued on Class A Convertible Preferred Stock included in accrued liabilities	$	229	$	—
Tax withholdings related to equity awards included in accounts payable and accrued liabilities	$	—	$	299
Accrual of return on Class C redeemable preferred units	$	—	$	9,439
Conversion of Class C redeemable preferred units to Class A units	$	—	$	260,411

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the accompanying unaudited condensed consolidated statements of cash flows for all periods presented (in thousands):

	June 30, 2018		December 31, 2017		June 30, 2017		December 31, 2016
Cash and cash equivalents	$	199,192	$	172,680	$	144,433	$	39,184
Restricted cash (1)	18,356		14,443		10,339		10,266
Total cash, cash equivalents and restricted cash	$	217,548	$	187,123	$	154,772	$	49,450

(1) Amounts included in restricted cash represent the deposit required under the Company's Floor Plan Facility, which is 5% of the outstanding Floor Plan Facility principal balance, as explained in Note 8 — Debt Instruments and amounts held as restricted cash as required under letter of credit agreements, as explained in Note 14 — Commitments and Contingencies. Both amounts are classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets.

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Subsequent Events

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

NOTE 17 — SUBSEQUENT EVENTS 

On August 7, 2018, the Company purchased finance receivables that it previously sold to an unrelated party under the 2017 Master Transfer Agreement for a price of approximately $253.0 million and immediately resold such finance receivables to an unrelated party for the same price under a new transfer agreement. The Company received a fee of approximately $4.0 million for arranging and participating in the transaction.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within our most recent Annual Report on Form 10-K.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of June 30, 2018, results of operations for the three and six months ended June 30, 2018 and 2017, and cash flows and changes in stockholders' equity for

the six months ended June 30, 2018 and 2017. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.As discussed in Note 1 — Business Organization, Carvana Group is considered a VIE and Carvana Co. consolidates its financial results due to the determination that it is the primary beneficiary. The Company reviews subsidiaries and affiliates, as well as other entities, to determine if it should be considered variable interest entities, and whether it should change the consolidation determinations based on changes in its characteristics. The Company considers an entity a VIE if its equity investors own an interest therein that lacks the characteristics of a controlling financial interest or if such investors do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or if the entity is structured with non-substantive voting interests. To determine whether or not the entity is consolidated with the Company’s results, the Company also evaluates which interests are variable interests in the VIE and which party is the primary beneficiary of the VIE.

Liquidity

LiquidityThe accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company has incurred losses from inception through June 30, 2018, and expects to incur additional losses in the future. As the Company continues to fund growth into new markets, fund construction of vending machines and inspection and reconditioning centers and enhance technology and software development efforts, it needs access to substantial capital. From inception, the Company has funded operations through the sale of Class A Units, the sale of Class C Redeemable Preferred Units, capital contributions from DriveTime, its IPO completed on May 3, 2017 for net proceeds of approximately $205.8 million, its follow-on offering completed on April 30, 2018 for net proceeds of approximately $172.3 million, its issuance of Class A Convertible Preferred Stock on December 5, 2017 for net proceeds of approximately $98.5 million, and short-term funding from the Company’s majority owner. The Company has historically funded vehicle inventory purchases through its Floor Plan Facility, described in further detail in Note 8 — Debt Instruments, and had approximately $2.9 million available under the Floor Plan Facility to fund future vehicle inventory purchases as of June 30, 2018. The Company plans to increase the amount and extend the maturity date of financing available to purchase vehicle inventory by amending its existing Floor Plan Facility or by entering into a new agreement prior to the maturity date of the Floor Plan Facility. The Company has also funded certain of its capital expenditures through long-term financing with third parties as described in further detail in Note 8 — Debt Instruments. The Company has historically entered into various agreements under which it sells the finance receivables it originates to third parties. As of June 30, 2018, the Company sells finance receivables under multiple agreements, all of which expire in November 2018. The Company plans to extend or enter into new agreements to sell its finance receivables to third parties prior to the expiration of the agreements. Management believes that its current working capital and expected continued inventory and capital expenditure financing are sufficient to fund operations for at least one year from the financial statement issuance date.

Use of Estimates

Use of EstimatesThe preparation of these accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations.

Segments

Segments

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 reportable segment. The chief operating decision maker focuses on consolidated results 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.”). Substantially all revenue is generated and all assets are held in the U.S. for all periods presented.

Comprehensive Loss

Comprehensive Loss

During the three and six months ended June 30, 2018 and 2017, the Company had no other components of comprehensive loss and, therefore, the net loss and comprehensive loss were the same for all periods presented.

Restricted Cash

Restricted CashThe restricted cash includes the deposit required under the Company's Floor Plan Facility, which is 5% of the outstanding floor plan facility principal balance, as explained in Note 8 — Debt Instruments and amounts held as restricted cash as required under letter of credit agreements, as explained in Note 14 — Commitments and Contingencies.

Revenue Recognition

Revenue Recognition

The Company adopted ASC 606, Revenue from Contracts with Customers ("ASC 606") on January 1, 2018 using the modified retrospective method. ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied. Based on the manner in which the Company historically recognized revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of its revenue recognition and the Company recognized no cumulative effect adjustment upon adoption.

Used Vehicle Sales

The Company sells used vehicles directly to its customers through its website. The prices of used vehicles are set forth in the customer contracts at stand-alone selling prices which are agreed to prior to delivery. The Company satisfies its performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. The Company recognizes revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for used vehicle sales includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the used vehicle. Revenue excludes any sales taxes that are collected from customers.

Wholesale Vehicle Sales

The Company sells vehicles to wholesalers. These vehicles sold to wholesalers are primarily acquired from customers

who trade-in their existing vehicles that do not meet the Company’s quality standards to list and sell through its website. The Company satisfies its performance obligation for wholesale vehicle sales when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. The Company recognizes revenue at the amount it expects to receive for the used vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle.

Other Sales and Revenues

Other sales and revenues include gains on the sales of finance receivables, commissions on vehicle service contracts (“VSCs”), GAP waiver coverage, and interest income received on finance receivables prior to selling them to investors. The Company accounts for the sale of finance receivables in accordance with ASC 860, Transfers and Servicing of Financial Assets as described in the footnotes to the Company's annual financial statements included in its Annual Report filed on Form 10-K with the SEC on March 6, 2018.

Customers purchasing used vehicles from the Company may enter into contracts for VSCs. The Company sells and receives a commission on VSCs under a master dealer agreement with DriveTime, pursuant to which the Company sells VSCs that DriveTime administers and is the obligor. The Company recognizes commission revenue at the time of sale, net of a reserve

for estimated contract cancellations. The reserve for cancellations is estimated based upon historical experience and recent trends and is reflected as a reduction of other sales and revenues. Changes in these estimates are reflected as an adjustment to revenue in the period identified.

Customers that finance their used vehicle purchases with the Company may enter into contracts to purchase GAP waiver coverage, which provides customers with the promise that whoever then holds the underlying finance receivable will not attempt collection of a loan balance that is in excess of the value of the financed vehicle in the event of a total loss. The price of GAP waiver coverage is set forth in each contract. GAP waiver coverage is recognized as the performance obligation is satisfied over the period of coverage, generally on a straight-line basis over the term of the related finance receivable, less a reserve for cancellations. The reserve for cancellations is estimated based upon historical experience and recent trends and is reflected as a reduction of other sales and revenues. Changes in these estimates are reflected as an adjustment to other sales and revenues in the period identified. Upon selling the finance receivable, the Company recognizes any remaining deferred revenue. DriveTime administers the GAP waiver coverage.

Adoption of New Accounting Standards and Accounting Standards Issued But Not Yet Adopted

Adoption of New Accounting Standards

As discussed above, the Company adopted ASC 606 on January 1, 2018 using the modified retrospective method. ASC 606 requires the reserve for vehicle inventory returns to be presented separately from vehicle inventory, where the Company previously presented it. As of December 31, 2017, the reserve for estimated returns included within vehicle inventory was approximately $2.6 million. As of June 30, 2018, the reserve for estimated returns included within other current assets was approximately $4.6 million. Furthermore, based on the manner in which the Company recognizes revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of its revenue recognition and the Company recognized no cumulative effect adjustment upon adoption.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Receipts and Payments (“ASU 2016-15”), which provides additional clarity on the classification of specific events on the statement of cash flows including debt prepayment and extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from settlement of insurance claims, distributions received from equity method investees and beneficial interests in securitization transactions. The Company adopted this ASU on January 1, 2018. The adoption of ASU 2016-15 did not have a material effect on its consolidated statements of cash flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows — Restricted Cash (“ASU 2016-18”), which requires the statement of cash flows to include restricted cash with its cash and cash equivalents balance and a reconciliation between all cash items on the balance sheet and the balance presented in the statement of cash flows. In addition, changes in restricted cash related to transfers between cash and cash equivalents and restricted cash will not be presented as cash flow activities in the statement of cash flows. The Company adopted ASU 2016-18 on January 1, 2018 on a retrospective basis. As a result, changes in restricted cash are no longer presented as investing cash flow activities and the restricted cash balance is included with cash and cash equivalents in the beginning and end of period balances on the Company's consolidated statements of cash flows for all periods presented. For the six months ended June 30, 2017, changes in restricted cash included within cash used in investing activities, as originally presented, was approximately $0.1 million.

Accounting Standards Issued But Not Yet Adopted

Since February 2016, the FASB has issued several accounting standards updates related to the new leasing model in ASC 842, Leases (“ASC 842”). ASC 842 introduces a lessee model that requires a right-of-use asset and lease obligation to be presented on the balance sheet for certain leases, whether operating or financing. ASC 842 eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease classification. Expense recognition on the income statement remains similar to current lease accounting guidance. ASC 842 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018 and should be applied using a modified retrospective approach, with the option to elect various practical expedients. The Company plans to adopt ASC 842 for its fiscal year beginning January 1, 2019. The adoption of ASC 842 will require the recognition of a right-of-use asset and a lease obligation for the Company’s leases (see Note 14 — Commitments and Contingencies). While the Company is still evaluating the full effect this guidance will have on its consolidated financial statements and related disclosures, the Company anticipates recognizing right-of-use assets and operating lease liabilities, which will have a material impact upon adoption primarily on its consolidated balance sheets and related disclosures, and will increase total assets and liabilities.

In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and earlier adoption is permitted beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact on its consolidated financial statements, and plans to adopt ASU 2016-13 for its fiscal year beginning January 1, 2020. Finance receivables originated in connection with the Company’s vehicle sales are held for sale and are sold to third parties. As a result, the Company does not presently hold any finance receivables until maturity. Therefore, the Company does not expect adoption of ASU 2016-13 to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which is intended to simplify the goodwill impairment test by eliminating the second step of the goodwill impairment test, which requires performing a hypothetical purchase price allocation. Under ASU 2017-04, goodwill impairment should be recognized based on the amount by which a reporting unit's carrying amount exceeds its fair value, but should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, may be early adopted after January 1, 2017, and should be applied on a prospective basis. The Company does not expect adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation — Stock Compensation (Topic 718) ("ASU 2018-07") related to the accounting for share-based payment transactions for acquiring goods and services from nonemployees. Under ASU 2018-07, the intent is to simplify and align most requirements for share-based payments to nonemployees with the requirements for share-based payments granted to employees under ASC 718, including measuring the equity instruments at the grant-date fair value. ASU 2018-07 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, and will be applied on a modified retrospective basis through a cumulative-effect adjustment to accumulated deficit. The Company plans to adopt ASU 2018-07 for its fiscal year beginning January 1, 2019 and is currently assessing the impact, if any, the guidance will have on the Company's consolidated financial statements.

Loss Per Share

Basic and diluted net loss per share is computed by dividing the net loss attributable to Class A common stockholders by the weighted-average shares of Class A common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive shares. For all periods presented, potentially dilutive shares are excluded from diluted net loss per share because they have an anti-dilutive impact. Therefore, basic and diluted net loss per share attributable to Class A common stockholders are the same for all periods presented.

As discussed in Note 1 — Business Organization, the Organizational Transactions are considered transactions between entities under common control and the financial statements for periods prior to the IPO and Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes. For purposes of calculating both the numerator and denominator of net loss per share for periods prior to the IPO, the Company has retroactively reflected the 15.0 million shares issued in the IPO and the LLC Units outstanding as of the Organizational Transactions as if they had been issued and outstanding as of the beginning of each period presented. These calculations for periods prior to the IPO do not consider the options or shares of Class A common stock issued on the IPO date under the 2017 Incentive Plan.

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Property and Equipment, Net (Tables)

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment

The following table summarizes property and equipment, net as of June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Land and site improvements	$	40,705	$	11,656
Buildings and improvements	91,775		60,804
Transportation fleet	46,846		39,153
Software	28,006		21,009
Furniture, fixtures and equipment	15,451		12,239
Total property and equipment excluding construction in progress	222,783		144,861
Less: accumulated depreciation and amortization on property and equipment	(30,539)		(20,453)
Property and equipment excluding construction in progress, net	192,244		124,408
Construction in progress	25,170		24,273
Property and equipment, net	$	217,414	$	148,681

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Goodwill and Intangible Assets, Net (Tables)

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill

The following table summarizes intangible assets and goodwill related to the Car360 acquisition as of June 30, 2018 (in thousands):

	Useful Life	June 30, 2018
Intangible assets:
Developed technology	7 years	$	8,642
Customer relationships	5 years	523
Non-compete agreements	5 years	774
Intangible assets, acquired cost		9,939
Less: accumulated amortization on intangible assets		(323)
Intangible assets, net		$	9,616
Goodwill	N/A	$	6,868

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The anticipated annual amortization expense to be recognized in future years as of June 30, 2018 is as follows (in thousands):

	Expected Future Amortization
Remainder of 2018	$	747
2019	1,494
2020	1,494
2021	1,494
2022	1,494
Thereafter	2,893
Total	$	9,616

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Accounts Payable and Other Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2018

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities

The following table summarizes accounts payable and other accrued liabilities as of June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Accounts payable	$	23,996	$	10,546
Sales taxes and vehicle licenses and fees	18,539		9,034
Accrued compensation and benefits	9,141		5,054
Accrued property and equipment	6,374		8,325
Accrued advertising costs	3,752		4,265
Other accrued liabilities	20,078		13,082
Total accounts payable and other accrued liabilities	$	81,880	$	50,306

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Non-controlling Interests (Tables)

6 Months Ended

Jun. 30, 2018

Noncontrolling Interest [Abstract]

Changes In Ownership On Additional Paid-In Capital

The following table summarizes the effects of changes in ownership in Carvana Group on the Company's additional paid-in capital during the six months ended June 30, 2018 (in thousands):

	Six Months Ended
	6/30/2018		6/30/2017
Transfers (to) from non-controlling interests:
Decrease as a result of issuances of Class A common stock	$	(132,375)	$	(174,255)
Increase as a result of Carvana Group's issuance of Class A Units in connection with business acquisitions	1,297		—
Increase as a result of exchanges of LLC Units	12,592		—
Increase as a result of adjustments to non-controlling interests	—		846
Total transfers to non-controlling interests	$	(118,486)	$	(173,409)

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Equity-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Equity-Based Compensation Expense

A summary of equity-based compensation expense recognized during the three and six months ended June 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Class B Units	$	605	$	482	$	1,040	$	640
Restricted Stock Units and Awards	978		1,150		1,645		1,150
Options	425		368		833		368
Class A Units	575		—		575		—
Total equity-based compensation expense	$	2,583	$	2,000	$	4,093	$	2,158

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Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Summary of the Calculation of Basic and Diluted Net Loss Per Share

The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Numerator:
Net loss	$	(51,250)	$	(38,870)	$	(103,922)	$	(77,309)
Net loss attributable to non-controlling interests	41,285		34,594		86,914		68,843
Dividends on Class A convertible preferred stock	(1,375)		—		(2,720)		—
Accretion of beneficial conversion feature on Class A convertible preferred stock	—		—		(1,380)		—
Net loss attributable to Carvana Co. Class A common stockholders, basic and diluted	$	(11,340)	$	(4,276)	$	(21,108)	$	(8,466)
Denominator:
Weighted-average shares of Class A common stock outstanding	28,124		15,242		23,425		15,121
Nonvested weighted-average restricted stock awards	(344)		(216)		(362)		(108)
Weighted-average shares of Class A common stock to compute basic and diluted net loss per Class A common share	27,780		15,026		23,063		15,013
Net loss per share of Class A common stock, basic and diluted	$	(0.41)	$	(0.28)	$	(0.92)	$	(0.56)

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Carrying Value and Fair Value of Finance Receivables

The carrying value and fair value of the finance receivables as of June 30, 2018 and December 31, 2017 were as follows (in thousands):

	June 30, 2018		December 31, 2017
Carrying value	$	77,128	$	45,564
Fair value	80,235		47,514

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Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2018

Supplemental Cash Flow Elements [Abstract]

Schedule of Supplemental Cash Flow Information

The following table summarizes supplemental cash flow information for the six months ended June 30, 2018 and 2017 (in thousands):

	Six Months Ended June 30,
	2018		2017
Supplemental cash flow information:
Cash payments for interest to third parties	$	7,481	$	3,839
Cash payments for interest to related parties	$	—	$	382
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	$	6,970	$	7,601
Capital expenditures financed through long-term debt	$	7,489	$	4,522
Issuance of LLC Units related to business acquisitions	$	9,981	$	—
Dividend accrued on Class A Convertible Preferred Stock included in accrued liabilities	$	229	$	—
Tax withholdings related to equity awards included in accounts payable and accrued liabilities	$	—	$	299
Accrual of return on Class C redeemable preferred units	$	—	$	9,439
Conversion of Class C redeemable preferred units to Class A units	$	—	$	260,411

Schedule of Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the accompanying unaudited condensed consolidated statements of cash flows for all periods presented (in thousands):

	June 30, 2018		December 31, 2017		June 30, 2017		December 31, 2016
Cash and cash equivalents	$	199,192	$	172,680	$	144,433	$	39,184
Restricted cash (1)	18,356		14,443		10,339		10,266
Total cash, cash equivalents and restricted cash	$	217,548	$	187,123	$	154,772	$	49,450

(1) Amounts included in restricted cash represent the deposit required under the Company's Floor Plan Facility, which is 5% of the outstanding Floor Plan Facility principal balance, as explained in Note 8 — Debt Instruments and amounts held as restricted cash as required under letter of credit agreements, as explained in Note 14 — Commitments and Contingencies. Both amounts are classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets.

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Business Organization - Narrative (Details)				2 Months Ended	3 Months Ended	6 Months Ended
	Apr. 30, 2018 USD ($) $ / shares shares	Dec. 05, 2017 USD ($) $ / shares shares	May 03, 2017 USD ($) vote $ / shares shares	Jun. 30, 2017 USD ($)	Jun. 30, 2018 $ / shares shares	Jun. 30, 2018 USD ($) $ / shares shares	Dec. 31, 2017 $ / shares shares
Subsidiary, Sale of Stock [Line Items]
Preferred stock, shares authorized (in shares)			50,000,000.0		50,000,000	50,000,000	50,000,000
Preferred stock, par value (in dollars per share) | $ / shares			$ 0.01		$ 0.01	$ 0.01	$ 0.01
Conversion ratio						1.25
Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion of stock, converted (in shares)	6,900,000					12,000,000.0
Carvana Group
Subsidiary, Sale of Stock [Line Items]
Ownership percentage by Carvana Co.					23.40%	23.40%
Ownership percentage by existing unitholders					76.60%	76.60%
Class A Common Units
Subsidiary, Sale of Stock [Line Items]
Conversion ratio					0.80	0.80
Class A Common Units | Carvana Group
Subsidiary, Sale of Stock [Line Items]
Convertible preferred stock, shares issued upon conversion (in shares)			43,100,000
Class A Common Units | Ernest Garcia, II
Subsidiary, Sale of Stock [Line Items]
Investment owned, balance (in shares)			200,000
Interest acquired			0.10%
Class A Common Units | Carvana Group
Subsidiary, Sale of Stock [Line Items]
Investment owned, balance (in shares)	8,300,000		18,800,000
LLC price per unit, multiple on initial public offering price less underwriting discounts and commissions			0.8
Follow-On Public Offering
Subsidiary, Sale of Stock [Line Items]
Stock sold during period, net proceeds | $						$ 172,287,000
Class A
Subsidiary, Sale of Stock [Line Items]
Common stock, shares authorized (in shares)			500,000,000.0		500,000,000	500,000,000	500,000,000
Common stock, par value (in dollars per share) | $ / shares			$ 0.001		$ 0.001	$ 0.001	$ 0.001
Number of votes | vote			1
Class A | Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion ratio			0.8
Conversion of stock, issued (in shares)	5,600,000					9,600,000
Class A | IPO
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (in shares)			15,000,000.0
Sale of stock, price per share (in dollars per share) | $ / shares			$ 15.00
Stock sold during period, net proceeds | $			$ 205,800,000	$ 205,925,000
Sale of stock, net proceeds received | $			205,800,000
Issuance of Class A common stock sold in initial public offering, net of underwriters' discounts and commissions and offering expenses | $			$ 205,800,000
Class A | Follow-On Public Offering
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (in shares)	6,600,000
Sale of stock, price per share (in dollars per share) | $ / shares	$ 27.50
Sale of stock, net proceeds received | $	$ 172,300,000
Issuance of Class A common stock sold in initial public offering, net of underwriters' discounts and commissions and offering expenses | $	$ 172,300,000
Class A | Follow-On Public Offering - Shares from Selling Stockholder And Selling LLC Unitholders
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (in shares)	6,100,000
Sale of stock, net proceeds received | $	$ 0
Issuance of Class A common stock sold in initial public offering, net of underwriters' discounts and commissions and offering expenses | $	$ 0
Class B
Subsidiary, Sale of Stock [Line Items]
Common stock, shares authorized (in shares)			125,000,000.0		125,000,000	125,000,000	125,000,000
Common stock, par value (in dollars per share) | $ / shares			$ 0.001		$ 0.001	$ 0.001	$ 0.001
Number of votes | vote			1
Common stock, shares issued (in shares)			117,200,000
Conversion ratio			0.8
Class B | Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion of stock, converted (in shares)						8,800,000
Class B | Garcia Parties
Subsidiary, Sale of Stock [Line Items]
Number of votes | vote			10
Convertible Preferred Stock
Subsidiary, Sale of Stock [Line Items]
Stock sold during period, net proceeds | $		$ 98,500,000
Preferred stock, shares authorized (in shares)		100,000			100,000	100,000	100,000
Preferred stock, par value (in dollars per share) | $ / shares		$ 0.01			$ 0.01	$ 0.01	$ 0.01
Preferred stock initial value per share (in dollars per share) | $ / shares		$ 1,000
Issuance of stock (in shares)		100,000
Convertible Preferred Stock | Carvana Group
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (in shares)		100,000

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Summary of Significant Accounting Policies - Liquidity (Details) - USD ($) $ in Thousands				2 Months Ended	6 Months Ended
	Apr. 30, 2018	Dec. 05, 2017	May 03, 2017	Jun. 30, 2017	Jun. 30, 2018
Line of Credit | Floor Plan Facility
Debt Instrument [Line Items]
Line of credit facility, remaining borrowing capacity					$ 2,900
Follow-On Public Offering
Debt Instrument [Line Items]
Stock sold during period, net proceeds					$ 172,287
Class A | IPO
Debt Instrument [Line Items]
Sale of stock, net proceeds received			$ 205,800
Stock sold during period, net proceeds			$ 205,800	$ 205,925
Class A | Follow-On Public Offering
Debt Instrument [Line Items]
Sale of stock, net proceeds received	$ 172,300
Convertible Preferred Stock
Debt Instrument [Line Items]
Stock sold during period, net proceeds		$ 98,500

XML

Summary of Significant Accounting Policies - Segments (Details)	6 Months Ended
	Jun. 30, 2018 segment
Accounting Policies [Abstract]
Number of reportable segments	1

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Summary of Significant Accounting Policies - Comprehensive Loss (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Accounting Policies [Abstract]
Other comprehensive income	$ 0	$ 0	$ 0	$ 0

XML

Summary of Significant Accounting Policies - Restricted Cash (Details)	Jun. 30, 2018
Floor Plan Facility | Line of Credit
Debt Instrument [Line Items]
Deposit required under floor plan facility, percentage of principal balance	5.00%

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Summary of Significant Accounting Policies - Adoption of New Accounting Standards (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reserve for estimated returns included within vehicle inventory		$ 4.6	$ 2.6
Accounting Standards Update 2016-18
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Change in restricted cash	$ 0.1

XML

Property and Equipment, Net - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation and amortization on property and equipment	$ (30,539)	$ (20,453)
Property and equipment, net	217,414	148,681
Land and site improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	40,705	11,656
Buildings and improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	91,775	60,804
Transportation fleet
Property, Plant and Equipment [Line Items]
Property and equipment, gross	46,846	39,153
Software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	28,006	21,009
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	15,451	12,239
Property and equipment excluding construction in progress, net
Property, Plant and Equipment [Line Items]
Property and equipment, gross	222,783	144,861
Property and equipment, net	192,244	124,408
Construction in progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 25,170	$ 24,273

XML

Property and Equipment, Net - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense			$ 9,862	$ 4,645
Property, Plant and Equipment
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense	$ 4,900	$ 2,600	$ 9,500	$ 4,600

XML

Goodwill and Intangible Assets, Net - Narrative (Details) - USD ($) $ in Thousands, shares in Millions		3 Months Ended	6 Months Ended
	Apr. 12, 2018	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Business Acquisition [Line Items]
Goodwill		$ 6,868	$ 6,868	$ 0
Class A Common Units
Business Acquisition [Line Items]
Number of shares issued to former stockholders (in shares)	0.5
Car360
Business Acquisition [Line Items]
Payments to acquire business, net of cash acquired	$ 16,700
Cash acquired	400
Payments to acquire business, net	6,700
Fair value, equity interested issued	10,000		10,000
Fair value, tangible assets	200
Fair value, intangible assets	9,900
Goodwill	$ 6,900	6,868	6,868
Amortization expense		$ 300	$ 300
Weighted average amortization period, definite-lived intangible assets			6 years 6 months
Car360 | Class A Common Units
Business Acquisition [Line Items]
Number of shares issued to former stockholders (in shares)			0.5

XML

Goodwill and Intangible Assets, Net - Summary of Fair Value of Acquired Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Apr. 12, 2018	Dec. 31, 2017
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	$ 9,616		$ 0
Goodwill	6,868		$ 0
Car360
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets	9,939
Less: accumulated amortization	(323)
Intangible assets, net	9,616
Goodwill	6,868	$ 6,900
Car360 | Developed technology
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets	$ 8,642
Useful Life	7 years
Car360 | Customer relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets	$ 523
Useful Life	5 years
Car360 | Non-compete agreements
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets	$ 774
Useful Life	5 years

XML

Goodwill and Intangible Assets, Net - Schedule of Future Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2018	$ 747
2019	1,494
2020	1,494
2021	1,494
2022	1,494
Thereafter	2,893
Intangible assets, net	$ 9,616	$ 0

XML

Accounts Payable and Other Accrued Liabilities - Summary of Accounts Payable and Other Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Payables and Accruals [Abstract]
Accounts payable	$ 23,996	$ 10,546
Sales taxes and vehicle licenses and fees	18,539	9,034
Accrued compensation and benefits	9,141	5,054
Accrued property and equipment	6,374	8,325
Accrued advertising costs	3,752	4,265
Other accrued liabilities	20,078	13,082
Total accounts payable and other accrued liabilities	$ 81,880	$ 50,306

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Related Party Transactions - Lease Agreements (Details) - Affiliated Entity $ in Millions	1 Months Ended			3 Months Ended		6 Months Ended
	Feb. 28, 2017 renewal_option	Dec. 31, 2016 renewal_option	Nov. 30, 2014 renewal_option location	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
DriveTime Automotive Group, Inc. | Related Party Lease Agreements | Building
Related Party Transaction [Line Items]
Operating lease term			2 years
Operating lease, number of renewal options | renewal_option			2
Operating leases, renewal term			1 year
Operating lease, renewal options, number of locations (up to) | location			10
DriveTime Automotive Group, Inc. | Lease Agreement for Fully-Operational Inspection and Reconditioning Center | Building | Winder, Georgia
Related Party Transaction [Line Items]
Operating lease term	8 years
Operating lease, number of renewal options | renewal_option	3
Operating leases, renewal term	5 years
Verde Investments, Inc. | Lease Agreement Related to Vehicle Inspection and Reconditioning Center | Building | Tolleson, Arizona
Related Party Transaction [Line Items]
Operating lease term		15 years
Operating lease, number of renewal options | renewal_option		4
Operating leases, renewal term		5 years
Verde Investments, Inc. and DriveTime Automotive Group Inc. | Related Party Lease Agreements
Related Party Transaction [Line Items]
Expenses from transactions with related party | $				$ 2.3	$ 1.8	$ 4.5	$ 3.4
Verde Investments, Inc. and DriveTime Automotive Group Inc. | Related Party Lease Agreements | Cost of Sales
Related Party Transaction [Line Items]
Expenses from transactions with related party | $				1.1	0.6	2.1	1.2
Verde Investments, Inc. and DriveTime Automotive Group Inc. | Related Party Lease Agreements | Selling, general and administrative
Related Party Transaction [Line Items]
Expenses from transactions with related party | $				$ 1.2	$ 1.2	$ 2.4	$ 2.2

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Related Party Transactions - Corporate Office Leases (Details) - Affiliated Entity - DriveTime Automotive Group, Inc.	1 Months Ended	3 Months Ended			6 Months Ended
	Sep. 30, 2016 USD ($) renewal_option	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
Subleased Office Space, Corporate Headquarters
Related Party Transaction [Line Items]
Expenses from transactions with related party				$ 100,000
Corporate Headquarters, Office Lease
Related Party Transaction [Line Items]
Guarantor obligations, maximum exposure (up to)	$ 500,000
Operating lease term	83 months
Operating lease, number of renewal options | renewal_option	3
Operating leases, renewal term	5 years
Subleased Office Space, First Floor
Related Party Transaction [Line Items]
Expenses from transactions with related party		$ 200,000	$ 200,000		$ 400,000	$ 300,000
Operating lease term	83 months
Operating lease, number of renewal options | renewal_option	3
Operating leases, renewal term	5 years

XML

Related Party Transactions - Master Dealer Agreement (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Related Party Transaction [Line Items]
Revenue from related parties	$ 5,544	$ 1,898	$ 9,655	$ 3,656
DriveTime Automotive Group, Inc. | Affiliated Entity | Master Dealer Agreement
Related Party Transaction [Line Items]
Revenue from related parties	5,500	1,900	9,700	3,700
Expenses related to administration of GAP waiver coverage	$ 0	$ 0	$ 100	$ 0

XML

Related Party Transactions - Aircraft Time Sharing Agreement (Details) - Affiliated Entity - DriveTime Automotive Group, Inc. - Aircraft Time Sharing Agreement - Air Transportation Equipment $ in Millions		3 Months Ended		6 Months Ended
	Oct. 22, 2015 aircraft	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
Related Party Transaction [Line Items]
Number of aircrafts | aircraft	2
Contractual agreement term	12 months
Contractual agreement, perpetual automatic renewal term	12 months
Number of allowable days prior to contract termination with written notice	30 days
Expenses from transactions with related party | $		$ 0.2	$ 0.3	$ 0.2	$ 0.4

XML

Related Party Transactions - Credit Facility with Verde (Details) - USD ($)		6 Months Ended
	May 03, 2017	Jun. 30, 2018	Jun. 30, 2017	Feb. 27, 2017
Related Party Transaction [Line Items]
Repayment outstanding principal balance		$ 0	$ 35,000,000
Line of Credit | Affiliated Entity | Verde Investments, Inc.
Related Party Transaction [Line Items]
Debt instrument, fee amount				$ 1,000,000.0
Verde Credit Facility | Line of Credit | Affiliated Entity | Verde Investments, Inc.
Related Party Transaction [Line Items]
Line of credit facility, maximum borrowing capacity (up to)				$ 50,000,000.0
Interest rate				12.00%
Repayment outstanding principal balance	$ 35,000,000.0
Accrued interest paid	$ 400,000

XML

Related Party Transactions - Accounts Payable Due to Related Party (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Related Party Transaction [Line Items]
Accounts payable due to related party	$ 3,193	$ 1,802
Affiliated Entity
Related Party Transaction [Line Items]
Accounts payable due to related party	$ 3,200	$ 1,800

XML

Finance Receivable Sale Agreements - Narrative (Details) - Consumer Loan - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Nov. 03, 2017	Nov. 02, 2017	Dec. 31, 2016
Purchase and Sale Agreement
Securitization or Asset-backed Financing Arrangement, Financial Asset for which Transfer is Accounted as Sale [Line Items]
Transfer of financial assets, accounted for as sales, maximum amount eligible to be sold					$ 1,500,000,000	$ 375,000,000.0	$ 375,000,000.0
Transfer of financial assets accounted for as sales, amount derecognized	$ 308,800,000	$ 157,700,000	$ 308,800,000	$ 157,700,000
Receivable purchase agreement, remaining unused capacity	847,600,000		847,600,000
Master Transfer Agreement
Securitization or Asset-backed Financing Arrangement, Financial Asset for which Transfer is Accounted as Sale [Line Items]
Transfer of financial assets, accounted for as sales, maximum amount eligible to be sold					$ 357,100,000		$ 292,200,000
Transfer of financial assets accounted for as sales, amount derecognized	184,400,000	66,600,000	184,400,000	66,600,000
Receivable purchase agreement, remaining unused capacity	140,500,000		140,500,000
Master Purchase and Sale Agreement and Master Transfer Agreement
Securitization or Asset-backed Financing Arrangement, Financial Asset for which Transfer is Accounted as Sale [Line Items]
Gain on loan sales	$ 12,400,000	$ 5,400,000	$ 22,300,000	$ 8,400,000

XML

Debt Instruments - Floor Plan Facility (Details) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Line of Credit Facility [Line Items]
Line of credit, outstanding	$ 347,087,000		$ 248,792,000
Restricted cash	$ 18,356,000		14,443,000	$ 10,339,000	$ 10,266,000
Floor Plan Facility | Line of Credit
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity		$ 350,000,000.0	275,000,000.0
Deposit required under floor plan facility, percentage of principal balance	5.00%
Term of principal payments	5 days
Principal repayment, term threshold after sale of used vehicle	15 days
Principal repayment, term threshold after sale of related finance receivable	1 day
Outstanding balance, days held in inventory threshold	180 days
Outstanding balance, held in inventory, percentage of original principal amount due	10.00%
Outstanding balance, held in inventory, original principal amount, threshold	50.00%
Outstanding balance, held in inventory, wholesale value, threshold	50.00%
Interest rate	5.74%
Line of credit, outstanding	$ 347,100,000
Line of credit facility, remaining borrowing capacity	2,900,000
Restricted cash	$ 17,400,000		$ 12,400,000
Floor Plan Facility | Line of Credit | London Interbank Offered Rate (LIBOR)
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate	3.65%

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Debt Instruments - Long-Term Debt (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Current portion of long-term debt	$ 6,664	$ 5,131
Notes Payable, Other Payables | Promissory Note
Debt Instrument [Line Items]
Weighted average interest rate	5.60%
Notes payable	$ 31,300
Current portion of long-term debt	$ 6,700
Notes Payable, Other Payables | Promissory Note | Minimum
Debt Instrument [Line Items]
Debt instrument, term	2 years
Notes Payable, Other Payables | Promissory Note | Maximum
Debt Instrument [Line Items]
Debt instrument, term	5 years

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Debt Instruments - Finance Leases (Details) $ in Millions	1 Months Ended	12 Months Ended
	Nov. 30, 2017 USD ($) property	Dec. 31, 2017	Jun. 30, 2018 USD ($)
Sale Leaseback Transaction [Line Items]
Sale leaseback transaction, amount due under financing arrangement			$ 52.3
Master Sale-Leaseback Agreement
Sale Leaseback Transaction [Line Items]
Sale leaseback transaction, number of properties sold and leased back at amount equal to the repurchase price (or more) | property	1
Sale leaseback transaction, total repurchase price			28.8
Sale leaseback transaction, maximum sales price of properties sold and leasing back	$ 75.0
Sale leaseback transaction, additional amount company may sell and lease back			$ 46.2
Minimum
Sale Leaseback Transaction [Line Items]
Sale leaseback transaction, expiration period		15 years
Maximum
Sale Leaseback Transaction [Line Items]
Sale leaseback transaction, expiration period		20 years
Sale leaseback transaction, renewal period (up to)		20 years

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Stockholders' Equity - Organizational Transactions (Details)			3 Months Ended	6 Months Ended
	May 03, 2017 vote $ / shares shares	May 02, 2017	Jun. 30, 2018 $ / shares shares	Jun. 30, 2018 $ / shares shares	Dec. 31, 2017 $ / shares shares	Dec. 05, 2017 $ / shares shares
Limited Partners' Capital Account [Line Items]
Preferred stock, shares authorized (in shares)	50,000,000.0		50,000,000	50,000,000	50,000,000
Preferred stock, par value (in dollars per share) | $ / shares	$ 0.01		$ 0.01	$ 0.01	$ 0.01
Conversion ratio				1.25
Class A Common Units
Limited Partners' Capital Account [Line Items]
Conversion ratio			0.80	0.80
Class A Common Units | Carvana Group
Limited Partners' Capital Account [Line Items]
Common unit, outstanding (in shares)			175,600,000	175,600,000
Class B Common Units | Carvana Group
Limited Partners' Capital Account [Line Items]
Common unit, outstanding (in shares)			6,000,000.0	6,000,000.0
Garcia Parties
Limited Partners' Capital Account [Line Items]
Ownership percentage of outstanding shares, minimum requirement		25.00%
Carvana Sub
Limited Partners' Capital Account [Line Items]
Percentage of voting power		0.10%
Class A
Limited Partners' Capital Account [Line Items]
Common stock, shares authorized (in shares)	500,000,000.0		500,000,000	500,000,000	500,000,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.001		$ 0.001	$ 0.001	$ 0.001
Number of votes | vote	1
Required ratio between shares issued and shares owned of subsidiary	0.8
Required ratio between shares outstanding and shares owned of subsidiary	0.8
Class B
Limited Partners' Capital Account [Line Items]
Common stock, shares authorized (in shares)	125,000,000.0		125,000,000	125,000,000	125,000,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.001		$ 0.001	$ 0.001	$ 0.001
Number of votes | vote	1
Conversion ratio	0.8
Class B | Garcia Parties
Limited Partners' Capital Account [Line Items]
Number of votes | vote	10
Convertible Preferred Stock
Limited Partners' Capital Account [Line Items]
Preferred stock, shares authorized (in shares)			100,000	100,000	100,000	100,000
Preferred stock, par value (in dollars per share) | $ / shares			$ 0.01	$ 0.01	$ 0.01	$ 0.01
Preferred stock initial value per share (in dollars per share) | $ / shares						$ 1,000

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Stockholders' Equity - Initial Public Offering (Details) $ / shares in Units, $ in Thousands		2 Months Ended
	May 03, 2017 USD ($) $ / shares shares	Jun. 30, 2017 USD ($)	Apr. 30, 2018 shares
Class A Common Units | Ernest Garcia, II
Limited Partners' Capital Account [Line Items]
Investment owned, balance (in shares)	200,000
Interest acquired	0.10%
Carvana Group | Class A Common Units
Limited Partners' Capital Account [Line Items]
Investment owned, balance (in shares)	18,800,000		8,300,000
LLC price per unit, multiple on initial public offering price less underwriting discounts and commissions	0.8
Class A | IPO
Limited Partners' Capital Account [Line Items]
Sale of stock, number of shares issued in transaction (in shares)	15,000,000.0
Sale of stock, price per share (in dollars per share) | $ / shares	$ 15.00
Stock sold during period, net proceeds | $	$ 205,800	$ 205,925

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Stockholders' Equity - Follow-On Public Offering (Details) - USD ($)		6 Months Ended
	Apr. 30, 2018	Jun. 30, 2018	May 03, 2017
Class A | Follow-On Offering
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (in shares)	6,600,000
Sale of stock, price per share (in dollars per share)	$ 27.50
Sale of stock, net proceeds received	$ 172,300,000
Class A | Follow-On Public Offering - Shares from Selling Stockholder And Selling LLC Unitholders
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (in shares)	6,100,000
Sale of stock, net proceeds received	$ 0
Carvana Group | Class A Common Units
Subsidiary, Sale of Stock [Line Items]
Investment owned, balance (in shares)	8,300,000		18,800,000
Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion of stock, converted (in shares)	6,900,000	12,000,000.0
Exchange Agreement | Class A
Subsidiary, Sale of Stock [Line Items]
Conversion of stock, issued (in shares)	5,600,000	9,600,000

XML

Stockholders' Equity - Exchange Agreement (Details)			6 Months Ended
	Apr. 30, 2018 shares	May 03, 2017	Jun. 30, 2018 shares
Limited Partners' Capital Account [Line Items]
Conversion ratio			1.25
Exchange Agreement
Limited Partners' Capital Account [Line Items]
Conversion of stock, converted (in shares)	6,900,000		12,000,000.0
LLC units received (in shares)			12,000,000.0
Class B
Limited Partners' Capital Account [Line Items]
Conversion ratio		0.8
Class B | Exchange Agreement
Limited Partners' Capital Account [Line Items]
Conversion of stock, converted (in shares)			8,800,000
Class A | Exchange Agreement
Limited Partners' Capital Account [Line Items]
Conversion ratio		0.8
Conversion of stock, issued (in shares)	5,600,000		9,600,000

XML

Stockholders' Equity - Convertible Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended		6 Months Ended		11 Months Ended
	Dec. 11, 2017	Dec. 05, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Jan. 29, 2018	Dec. 31, 2017	May 03, 2017
Limited Partners' Capital Account [Line Items]
Preferred stock, par value (in dollars per share)			$ 0.01		$ 0.01				$ 0.01	$ 0.01
Accretion of beneficial conversion feature on Class A convertible preferred stock			$ 0	$ 0	$ (1,380)	$ 0
Preferred stock			$ 0		$ 0				$ 0
Convertible Preferred Stock
Limited Partners' Capital Account [Line Items]
Issuance of stock (in shares)		100,000
Gross issuance of stock		$ 100,000
Stock sold during period, net proceeds		$ 98,500
Preferred stock, par value (in dollars per share)		$ 0.01	$ 0.01		$ 0.01				$ 0.01
Preferred stock initial value per share (in dollars per share)		1,000
Conversion rate (in dollars per share)		$ 19.6945						$ 50.78
Percent of stock price for company option to convert preferred stock to common		150.00%
Redemption price, calculation premium to volume weighted average stock price		20.00%
Beneficial conversion feature of Class A convertible preferred stock							$ 2,600
Redemption price, trading days used In calculation	5 days
Accretion of beneficial conversion feature on Class A convertible preferred stock					$ 1,380
Preferred stock			$ 98,507		$ 98,507				$ 97,127
Liquidation preference during change in control			101.00%		101.00%
Preferred stock dividend rate		5.50%
Dividends paid					$ 2,904	0
Accrued dividends			$ 229	$ 0	$ 229	$ 0
Accrued dividends (in dollars per share)			$ 2.29		$ 2.29
Convertible Preferred Stock | Carvana Group
Limited Partners' Capital Account [Line Items]
Sale of stock, number of shares issued in transaction (in shares)		100,000
Convertible Preferred Units | Carvana Group
Limited Partners' Capital Account [Line Items]
Dividends paid					$ 2,900

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Stockholders' Equity - Class C Redeemable Preferred Units (Details) - Class C Redeemable Preferred Units - USD ($) $ in Millions	May 03, 2017	Dec. 31, 2016	Dec. 09, 2016
Limited Partners' Capital Account [Line Items]
Temporary equity, coupon rate		12.50%
Class A | IPO
Limited Partners' Capital Account [Line Items]
Temporary equity, conversion ratio if offering price as a percentage of original issuance price threshold exceeded (in shares)	1
Various Third Parties and Related Parties
Limited Partners' Capital Account [Line Items]
Temporary equity, stock issued during period (in shares)		43,100,000
Temporary equity, value stock issued during period			$ 226.9

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Non-controlling Interests - Narrative (Details) $ in Thousands, shares in Millions		2 Months Ended	3 Months Ended	6 Months Ended
	Apr. 12, 2018 USD ($) shares	Jun. 30, 2017 USD ($)	Jun. 30, 2018	Jun. 30, 2018 USD ($) shares
Noncontrolling Interest [Line Items]
Conversion ratio				1.25
Carvana Group
Noncontrolling Interest [Line Items]
Ownership percentage by Carvana Co.			23.40%	23.40%
Ownership percentage by existing unitholders			76.60%	76.60%
Additional Paid-in Capital
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests		$ 846		$ 12,592
Non-controlling Interests
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests		$ (846)		(12,592)
Follow-On Public Offering | Additional Paid-in Capital
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests				(132,375)
Follow-On Public Offering | Non-controlling Interests
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests				$ 132,375
Class A Common Units
Noncontrolling Interest [Line Items]
Conversion ratio			0.80	0.80
Number of shares issued to former stockholders (in shares) | shares	0.5
Car360
Noncontrolling Interest [Line Items]
Fair value, equity interested issued	$ 10,000			$ 10,000
Car360 | Additional Paid-in Capital
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests				1,297
Car360 | Non-controlling Interests
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests				$ (1,297)
Car360 | Class A Common Units
Noncontrolling Interest [Line Items]
Number of shares issued to former stockholders (in shares) | shares				0.5

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Non-controlling Interests - Changes in Ownership (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Transfers (to) from non-controlling interests:
Increase as a result of exchanges of LLC Units	$ 12,592	$ 0
Increase as a result of adjustments to non-controlling interests	0	846
Total transfers to non-controlling interests	(118,486)	(173,409)
Car360
Transfers (to) from non-controlling interests:
Increase as a result of Carvana Group's issuance of Class A Units in connection with business acquisitions	1,297	0
Class A
Transfers (to) from non-controlling interests:
Decrease as a result of issuances of Class A common stock	$ (132,375)	$ (174,255)

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Equity-Based Compensation - Equity-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	$ 2,583	$ 2,000	$ 4,093	$ 2,158
Unrecognized compensation expense	27,800		$ 27,800
Unrecognized compensation expense, period for recognition			3 years
Class B Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	605	482	$ 1,040	640
Restricted Stock Units and Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	978	1,150	1,645	1,150
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	425	368	833	368
Class A Common Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	$ 575	$ 0	$ 575	$ 0

XML

Equity-Based Compensation - 2017 Omnibus Incentive Plan (Details) - 2017 Omnibus Incentive Plan	Jun. 30, 2018 shares
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Maximum number of awards authorized for grant (in shares)	14,000,000.0
Class A | Class A
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Number of shares available for grant (in shares)	12,500,000

XML

Equity-Based Compensation - Class A Units (Details) shares in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018 $ / shares shares	Jun. 30, 2018 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Conversion ratio		1.25
Class A Common Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of units granted in the period (in shares) | shares	0.4	0.4
Number of units granted in the period (in dollars per share) | $ / shares	$ 18.58	$ 18.58
Conversion ratio	0.80	0.80
Class A Common Units | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service-based vesting period	2 years	2 years
Class A Common Units | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service-based vesting period	4 years	4 years

XML

Equity-Based Compensation - Class B Units (Details) - Class B Units - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	May 03, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of units authorized (in shares)					0
Number of units issued in the period (in shares)	0	800,000	0	800,000

XML

Loss Per Share - Narrative (Details) - shares		3 Months Ended		6 Months Ended
	May 03, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Preferred Class A
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)		5,100,000		5,100,000
Class B
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)		110,200,000	117,200,000	112,100,000	117,200,000
Class B Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)				6,600,000	7,500,000
Restricted Awards And Restricted Stock Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)		400,000	200,000	400,000	100,000
Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)				800,000
IPO | Class A
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Sale of stock, number of shares issued in transaction (in shares)	15,000,000.0

XML

Loss Per Share - Calculation of Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	2 Months Ended	3 Months Ended				6 Months Ended
	Jun. 30, 2017	Jun. 30, 2018		Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Numerator:
Net loss	$ (27,367)	$ (51,250)		$ (38,870)		$ (103,922)	$ (77,309)
Net loss attributable to non-controlling interests		41,285		34,594		86,914	68,843
Dividends on Class A convertible preferred stock		(1,375)		0		(2,720)	0
Accretion of beneficial conversion feature on Class A convertible preferred stock		0		0		(1,380)	0
Net loss attributable to Carvana Co. Class A common stockholders, basic and diluted		$ (11,340)		$ (4,276)		$ (21,108)	$ (8,466)
Class A
Denominator:
Weighted-average shares of Class A common stock to compute basic and diluted net loss per Class A common share (in shares)		27,780	[1],[2]	15,026	[1],[2]	23,063	15,013	[1],[2]
Net loss per share of Class A common stock, basic and diluted (in dollars per share)		$ (0.41)	[1]	$ (0.28)	[1]	$ (0.92)	$ (0.56)
Restricted Awards
Denominator:
Nonvested weighted-average restricted stock awards (in shares)		(344)		(216)		(362)	(108)
Class A Common Units
Denominator:
Weighted-average shares of Class A common stock outstanding (in shares)		28,124		15,242		23,425	15,121

[1] Amounts for periods prior to the initial public offering have been retrospectively adjusted to give effect to 15.0 million shares of Class A common stock issued in the initial public offering and the Organizational Transactions described in Note 1.

[2] Weighted-average shares of Class A common stock outstanding have been adjusted for unvested restricted stock awards.

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Income Taxes - Narrative (Details) - USD ($)		6 Months Ended
	Apr. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	May 03, 2017
Income Tax Contingency [Line Items]
Uncertain tax positions		$ 0	$ 0
Related reserves		0	$ 0
Carvana Group
Income Tax Contingency [Line Items]
Gross deferred tax asset		68,700,000
Carvana Group | Class A Common Units
Income Tax Contingency [Line Items]
Gross deferred tax asset		$ 2,500,000
Investment owned, balance (in shares)	8,300,000			18,800,000
Exchange Agreement
Income Tax Contingency [Line Items]
Conversion of stock, converted (in shares)	6,900,000	12,000,000.0

XML

Income Taxes - Tax Receivable Agreement (Details) $ in Millions	Jun. 30, 2018 USD ($)
Income Tax Disclosure [Abstract]
Deferred tax liability, unrecorded, Tax Receivable Agreement	$ 67.9

XML

Commitments and Contingencies - Lease Commitments (Details) $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) renewal_option	Jun. 30, 2017 USD ($)
Operating Leased Assets [Line Items]
Operating leases, rent expense		$ 1.3	$ 1.2	$ 2.6	$ 1.8
Transportation Equipment
Operating Leased Assets [Line Items]
Operating leases, renewal term	6 years
Operating leases, rent expense		$ 0.4		$ 0.7
Operating lease term	2 years
Minimum
Operating Leased Assets [Line Items]
Operating lease, number of renewal options | renewal_option				1
Operating leases, renewal term				2 years
Maximum
Operating Leased Assets [Line Items]
Operating leases, renewal term				20 years

XML

Commitments and Contingencies - Accrued Limited Warranty (Details) $ in Millions	6 Months Ended
	Jun. 30, 2018 USD ($) mi	Dec. 31, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Limited warranty, period	100 days
Limited warranty, miles | mi	4,189
Accrued limited warranty | $	$ 1.0	$ 0.8

XML

Commitments and Contingencies - Letters of Credit (Details) - USD ($) $ in Millions	1 Months Ended
	Feb. 28, 2018	Jun. 30, 2018	Dec. 31, 2017	Oct. 31, 2016
Interest-bearing Deposits
Loss Contingencies [Line Items]
Restricted cash		$ 1.0	$ 2.0
Financial Standby Letter of Credit
Loss Contingencies [Line Items]
Letters of credit outstanding				$ 1.9
Required cash deposit with financial institution				$ 1.9
Required cash deposit with financial institution after February 2018	$ 1.0

XML

Fair Value of Financial Instruments - Fair Value Assets Measured on a Recurring Basis (Details) - Fair Value, Measurements, Recurring - Money market funds - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets:
Money market funds	$ 187,083	$ 171,859
Level 1
Assets:
Money market funds	187,083	171,859
Level 2
Assets:
Money market funds	0	0
Level 3
Assets:
Money market funds	$ 0	$ 0

XML

Fair Value of Financial Instruments - Carrying Value and Fair Value, Finance Receivables (Details) - Level 2 - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Carrying value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of finance receivables, net	$ 77,128	$ 45,564
Fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of finance receivables, net	$ 80,235	$ 47,514

XML

Supplemental Cash Flow Information - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Supplemental cash flow information:
Cash payments for interest	$ 7,481	$ 3,839
Cash payments for interest to related parties	0	382
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	6,970	7,601
Capital expenditures financed through long-term debt	7,489	4,522
Tax withholdings related to equity awards included in accounts payable and accrued liabilities	0	299
Accrual of return on Class C redeemable preferred units	0	9,439
Conversion of Class C redeemable preferred units to Class A units	0	260,411
Convertible Preferred Stock
Non-cash investing and financing activities:
Dividend accrued on Class A Convertible Preferred Stock included in accrued liabilities	229	0
Car360 | Member Units
Non-cash investing and financing activities:
Issuance of LLC Units related to business acquisitions	$ 9,981	$ 0

XML

Supplemental Cash Flow Information - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Supplemental Cash Flow Elements [Abstract]
Cash and cash equivalents	$ 199,192	$ 172,680	$ 144,433	$ 39,184
Restricted cash	18,356	14,443	10,339	10,266
Total cash, cash equivalents and restricted cash	$ 217,548	$ 187,123	$ 154,772	$ 49,450

XML

Supplemental Cash Flow Information - Narrative (Details)	Jun. 30, 2018
Floor Plan Facility | Line of Credit
Line of Credit Facility [Line Items]
Deposit required under floor plan facility, percentage of principal balance	5.00%

XML

Subsequent Events - Narrative (Details) - Consumer Loan - Purchase and Sale Agreement - USD ($) $ in Millions	Aug. 07, 2018	Jun. 30, 2018	Jun. 30, 2017
Subsequent Event [Line Items]
Transfer of financial assets accounted for as sales, amount derecognized		$ 308.8	$ 157.7
Subsequent Event
Subsequent Event [Line Items]
Transfer of financial assets accounted for as sales, amount derecognized	$ 253.0
Transfer of financial assets accounted for as sales, amount derecognized, transaction fee received	$ 4.0

XML

Label	Element	Value
Adjustments Related to Tax Withholding for Share-based Compensation	us-gaap_AdjustmentsRelatedToTaxWithholdingForShareBasedCompensation	$ 299,000
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	85,227,000
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue	1,944,000
Retained Earnings [Member]
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	(3,039,000)
Noncontrolling Interest [Member]
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	259,365,000
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	(24,328,000)
Member Units [Member]
Members' Equity	us-gaap_MembersEquity	0
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	(85,227,000)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	(49,942,000)
Stock Issued During Period, Value, Conversion of Convertible Securities	us-gaap_StockIssuedDuringPeriodValueConversionOfConvertibleSecurities	260,411,000
Limited Liability Company (LLC) Members' Equity, Unit-based Compensation	us-gaap_LimitedLiabilityCompanyLLCMembersEquityUnitBasedCompensation	158,000
Adjustments to Additional Paid in Capital, Increase in Carrying Amount of Redeemable Preferred Stock	us-gaap_AdjustmentsToAdditionalPaidInCapitalIncreaseInCarryingAmountOfRedeemablePreferredStock	9,439,000
Additional Paid-in Capital [Member]
Adjustments Related to Tax Withholding for Share-based Compensation	us-gaap_AdjustmentsRelatedToTaxWithholdingForShareBasedCompensation	299,000
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	(174,255,000)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue	1,944,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	us-gaap_StockIssuedDuringPeriodValueRestrictedStockAwardNetOfForfeitures	(1,000)
Common Class A [Member] | Additional Paid-in Capital [Member] | IPO [Member]
Stock Issued During Period, Value, New Issues	us-gaap_StockIssuedDuringPeriodValueNewIssues	$ 205,910,000
Common Class A [Member] | Common Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures	us-gaap_StockIssuedDuringPeriodSharesRestrictedStockAwardNetOfForfeitures	544,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	us-gaap_StockIssuedDuringPeriodValueRestrictedStockAwardNetOfForfeitures	$ 1,000
Shares Paid for Tax Withholding for Share Based Compensation	us-gaap_SharesPaidForTaxWithholdingForShareBasedCompensation	21,000
Common Class A [Member] | Common Stock [Member] | IPO [Member]
Stock Issued During Period, Value, New Issues	us-gaap_StockIssuedDuringPeriodValueNewIssues	$ 15,000
Stock Issued During Period, Shares, New Issues	us-gaap_StockIssuedDuringPeriodSharesNewIssues	15,000,000
Common Class B [Member] | Common Stock [Member]
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	$ 117,000
Stock Issued During Period, Shares, Conversion of Units	us-gaap_StockIssuedDuringPeriodSharesConversionOfUnits	117,236,000