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 September 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 every Interactive Data File required to be submitted 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 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 November 2, 2018, the registrant had 38,849,394 shares of Class A common stock outstanding and 105,215,869 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 September 30, 2018 and December 31, 2017	2
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017	3
	Unaudited Condensed Consolidated Statements of Stockholders' Equity / Members' Deficit for the Nine Months Ended September 30, 2018 and 2017	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 4.	Controls and Procedures	54
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

	September 30, 2018		December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	439,794	$	172,680
Restricted cash	18,471		14,443
Accounts receivable, net	23,498		14,105
Finance receivables held for sale, net	88,151		45,564
Vehicle inventory	339,005		227,446
Other current assets	26,446		15,480
Total current assets	935,365		489,718
Property and equipment, net	251,942		148,681
Intangible assets, net	9,243		—
Goodwill	9,353		—
Other assets	6,200		2,738
Total assets	$	1,212,103	$	641,137
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	96,861	$	50,306
Accounts payable due to related party	3,512		1,802
Floor plan facility	349,392		248,792
Current portion of other long-term debt	7,838		5,131
Total current liabilities	457,603		306,031
Senior unsecured notes	342,481		—
Other long-term debt, excluding current portion	96,179		48,469
Other liabilities	9,072		7,093
Total liabilities	905,335		361,593
Commitments and contingencies (Note 14)
Stockholders' equity:
Class A Convertible Preferred Stock, $0.01 par value, $1,000 liquidation value per share - 25 and 100 shares authorized, issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	24,627		97,127
Preferred stock, $0.01 par value - 50,000 shares authorized; none issued and outstanding as of September 30, 2018 and December 31, 2017	—		—
Class A common stock, $0.001 par value - 500,000 shares authorized; 38,269 and 18,096 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	38		18
Class B common stock, $0.001 par value - 125,000 shares authorized; 105,813 and 114,664 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	106		115
Additional paid in capital	130,284		41,375
Accumulated deficit	(45,949)		(12,899)
Total stockholders' equity attributable to Carvana Co.	109,106		125,736
Non-controlling interests	197,662		153,808
Total stockholders' equity	306,768		279,544
Total liabilities & stockholders' equity	$	1,212,103	$	641,137

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

2

CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Sales and operating revenues:
Used vehicle sales, net	$	486,269	$	208,113	$	1,258,247	$	550,442
Wholesale vehicle sales	21,440		7,459		48,195		21,003
Other sales and revenues, including $6,696, $2,414, $16,351 and $6,070, respectively, from related parties	27,212		9,807		64,187		22,372
Net sales and operating revenues	534,921		225,379		1,370,629		593,817
Cost of sales	477,615		204,963		1,230,054		547,616
Gross profit	57,306		20,416		140,575		46,201
Selling, general and administrative expenses	115,768		58,676		294,606		156,595
Interest expense, including $0, $0, $0 and $1,382, respectively, to related parties	5,649		838		13,355		5,404
Other expense, net	308		671		955		1,280
Net loss before income taxes	(64,419)		(39,769)		(168,341)		(117,078)
Income tax provision	—		—		—		—
Net loss	(64,419)		(39,769)		(168,341)		(117,078)
Net loss attributable to non-controlling interests	(48,377)		(35,389)		(135,291)		(59,717)
Net loss attributable to Carvana Co.	$	(16,042)	$	(4,380)	$	(33,050)	$	(57,361)
Dividends on Class A convertible preferred stock	(1,230)		—		(3,950)		—
Accretion of beneficial conversion feature on Class A convertible preferred stock	—		—		(1,380)		—
Net loss attributable to Class A common stockholders	$	(17,272)	$	(4,380)	$	(38,380)	$	(57,361)
Net loss per share of Class A common stock, basic and diluted(1)	$	(0.50)	$	(0.29)	$	(1.43)	$	(0.86)
Weighted-average shares of Class A common stock, basic and diluted(1)(2)	34,655		15,045		26,927		15,024

(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.

3

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	—		—	—		—	—		—	—		—		(7,419)		(59,717)		(67,136)
Adjustments to the non-controlling interests	—		—	—		—	—		—	—		333		—		(333)		—
Issuance of restricted stock awards, net of forfeitures	—		—	—		538	1		—	—		(1)		—		—		—
Restricted stock surrendered in lieu of withholding taxes	—		—	—		(27)	—		—	—		(399)		—		—		(399)
Options exercised	—		—	—		2	—		—	—		28		—		—		28
Equity-based compensation expense subsequent to Organizational Transactions	—		—	—		—	—		—	—		3,831		—		—		3,831
Balance, September 30, 2017	$	—	—	$	—	15,513	$	16	117,236	$	117	$	35,447	$	(7,419)	$	199,315	$	227,476

4

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	$	97,127	18,096	$	18	114,664	$	115	$	41,375	$	(12,899)	$	153,808	$	279,544
Net loss	—		—	—		—	—		—	—		—		(33,050)		(135,291)		(168,341)
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)		—
Conversions of Class A Convertible Preferred Stock	—		(75)	(73,880)		3,808	4		—	—		73,876		—		—		—
Adjustment to non-controlling interests related to conversion of Class A Convertible Preferred Stock	—		—	—		—	—		—	—		(51,289)		—		51,289		—
Accretion of beneficial conversion feature on Class A Convertible Preferred Stock	—		—	1,380		—	—		—	—		(1,380)		—		—		—
Dividends on Class A Convertible Preferred Stock	—		—	—		—	—		—	—		(3,950)		—		—		(3,950)
Exchanges of LLC Units	—		—	—		9,783	9		(8,851)	(9)		13,203		—		(13,203)		—
Establishment of deferred tax assets related to increases in tax basis in Carvana Group	—		—	—		—	—		—	—		73,961		—		—		73,961
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group	—		—	—		—	—		—	—		(73,961)		—		—		(73,961)
Contribution of Class A common stock from related party	—		—	—		(165)	—		—	—		—		—		—		—
Issuance of Class A common stock to settle vested restricted stock units	—		—	—		162	—		—	—		—		—		—		—
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes	—		—	—		(64)	—		—	—		(1,376)		—		—		(1,376)
Options exercised	—		—	—		49	—		—	—		642						642
Equity-based compensation expense	—		—	—		—	—		—	—		17,981		—		—		17,981
Balance, September 30, 2018	$	—	25	$	24,627	38,269	$	38	105,813	$	106	$	130,284	$	(45,949)	$	197,662	$	306,768

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

5

CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2018		2017
Cash Flows from Operating Activities:
Net loss	$	(168,341)	$	(117,078)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	16,301		7,746
Loss on disposal of property and equipment	542		882
Provision for bad debt and finance receivable allowance	1,375		805
Gain on loan sales	(35,655)		(14,982)
Equity-based compensation expense	17,981		3,989
Amortization and write-off of debt issuance costs	1,055		1,407
Originations of finance receivables	(872,382)		(361,265)
Proceeds from sale of finance receivables	1,114,304		361,659
Purchase of finance receivables	(253,041)		—
Changes in assets and liabilities:
Accounts receivable	(9,434)		(6,159)
Vehicle inventory	(110,312)		(5,962)
Other current assets	(11,879)		(1,206)
Other assets	(420)		(1,722)
Accounts payable and accrued liabilities	44,827		8,694
Accounts payable to related party	1,710		258
Other liabilities	(506)		6,920
Net cash used in operating activities	(263,875)		(116,014)
Cash Flows from Investing Activities:
Purchases of property and equipment	(107,228)		(59,408)
Business acquisitions, net of cash acquired	(6,670)		—
Net cash used in investing activities	(113,898)		(59,408)
Cash Flows from Financing Activities:
Proceeds from floor plan facility	1,297,419		674,411
Payments on floor plan facility	(1,196,819)		(644,641)
Proceeds from issuance of senior unsecured notes	350,000		—
Proceeds from Verde Credit Facility	—		35,000
Payments on Verde Credit Facility	—		(35,000)
Proceeds from long-term debt	46,179		7,596
Payments on long-term debt	(8,817)		(1,137)
Payments of debt issuance costs, including $0 and $1,000 to related parties, respectively	(6,309)		(1,000)
Net proceeds from issuance of Class A common stock	172,287		206,323
Proceeds from exercise of stock options	642		28
Tax withholdings related to restricted stock awards	(1,376)		(399)
Dividends paid on Class A Convertible Preferred Stock	(4,279)		—
Payments of costs related to issuance of Class A Convertible Preferred Stock	(12)		—
Net cash provided by financing activities	648,915		241,181
Net increase in cash, cash equivalents and restricted cash	271,142		65,759
Cash, cash equivalents and restricted cash at beginning of period	187,123		49,450
Cash, cash equivalents and restricted cash at end of period	$	458,265	$	115,209

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

6

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;

7

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 September 30, 2018, Carvana Co. owned approximately 25.5% of Carvana Group and the LLC Unitholders owned the remaining 74.5%.

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 September 30, 2018, results of operations for the three and nine months ended September 30, 2018 and 2017, and cash flows and changes in stockholders'

8

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

equity for the nine months ended September 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 September 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, the issuance of senior unsecured notes for net proceeds of approximately $342.5 million on September 21, 2018, 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 $0.6 million available under the Floor Plan Facility to fund future vehicle inventory purchases as of September 30, 2018. The Company amended the Floor Plan Facility on November 2, 2018 to increase the amount by $300.0 million and extend the maturity date to October 31, 2020. 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 September 30, 2018, the Company sells finance receivables under multiple agreements. On November 2, 2018, the Company increased the available amount under and extended these facilities. 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 nine months ended September 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 upon 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 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 September 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 nine months ended September 30, 2017, changes in restricted cash included within cash used in investing activities, as originally presented, was approximately $1.5 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 its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13") related to updated requirements over the disclosures of fair value measurements. Under ASU 2018-13, certain disclosure requirements for fair value measurements will be eliminated, modified or added to facilitate better communication around recurring and nonrecurring fair value measurements. ASU 2018-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with some amendments applied prospectively, some applied retrospectively and early adoption permitted. The Company plans to adopt ASU 2018-13 for its fiscal year beginning January 1, 2020 and is currently assessing the impact the guidance will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The intent of this pronouncement is to align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software as defined in ASC 350-40. Under ASU 2018-15, the capitalized implementation costs related to a cloud computing arrangement will be amortized over the term of the arrangement and all capitalized implementation amounts will be required to be presented in the same line items of the financial statements as the related hosting fees. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company plans to adopt ASU 2018-15 for its fiscal year beginning January 1, 2020 and is currently assessing the impact, if any, the guidance will have on its consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). ASU 2018-17 requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety for determining whether a decision-making fee is a variable interest. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the amendments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company is currently assessing the impact, if any, the guidance will have on its consolidated financial statements.

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(Unaudited)

NOTE 3 — PROPERTY AND EQUIPMENT, NET 

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

	September 30, 2018		December 31, 2017
Land and site improvements	$	44,042	$	11,656
Buildings and improvements	108,116		60,804
Transportation fleet	52,742		39,153
Software	32,335		21,009
Furniture, fixtures and equipment	18,005		12,239
Total property and equipment excluding construction in progress	255,240		144,861
Less: accumulated depreciation and amortization on property and equipment	(36,836)		(20,453)
Property and equipment excluding construction in progress, net	218,404		124,408
Construction in progress	33,538		24,273
Property and equipment, net	$	251,942	$	148,681

Depreciation and amortization expense on property and equipment was approximately $6.1 million and $3.1 million for the three months ended September 30, 2018 and 2017, respectively, and approximately $15.6 million and $7.7 million for the nine months ended September 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.

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 and a related deferred tax liability of approximately $2.5 million. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed and the deferred tax liability was approximately $9.4 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.

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(Unaudited)

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

	Useful Life	September 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		(696)
Intangible assets, net		$	9,243
Goodwill	N/A	$	9,353

Amortization expense during the three and nine months ended September 30, 2018 was approximately $0.4 million and $0.7 million, respectively. As of September 30, 2018, the remaining weighted-average amortization period for definite-lived intangible assets was approximately 6.3 years. The anticipated annual amortization expense to be recognized in future years as of September 30, 2018 is as follows (in thousands):

	Expected Future Amortization
Remainder of 2018	$	374
2019	1,494
2020	1,494
2021	1,494
2022	1,494
Thereafter	2,893
Total	$	9,243

NOTE 5 — ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES 

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

	September 30, 2018		December 31, 2017
Accounts payable	$	28,972	$	10,546
Sales taxes and vehicle licenses and fees	22,604		9,034
Reserve for returns and cancellations	9,501		4,545
Accrued compensation and benefits	7,991		5,054
Accrued property and equipment	7,138		8,325
Accrued advertising costs	3,835		4,265
Accrued interest	2,506		774
Other accrued liabilities	14,314		7,763
Total accounts payable and other accrued liabilities	$	96,861	$	50,306

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(Unaudited)

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 and 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 September 30, 2018, total costs related to these lease agreements were approximately $2.2 million with approximately $1.2 million and $1.0 million allocated to inventory and selling, general and administrative expenses, respectively. During the nine months ended September 30, 2018, total costs related to these lease agreements were approximately $6.7 million with approximately $3.3 million and $3.4 million allocated to inventory and selling, general and administrative expenses, respectively. During the three months ended September 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 nine months ended September 30, 2017, total costs related to these lease agreements were approximately $5.2 million with approximately $1.8 million and $3.4 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 nine months ended September 30, 2018, the rent expense incurred related to this first floor sublease was approximately $0.2 million and $0.6 million, respectively. During the three and nine months ended September 30, 2017, the rent expense incurred related to this first floor sublease was approximately $0.2 million and $0.5 million, respectively.

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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 $6.7 million and $16.4 million during the three and nine months ended September 30, 2018, respectively, and approximately $2.4 million and $6.1 million during the three and nine months ended September 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 $0.1 million and $0.2 million during the three and nine months ended September 30, 2018, respectively, and $0.0 million during the both the three and nine months ended September 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 $0.0 million, respectively, under this agreement during the three months ended September 30, 2018 and 2017, respectively, and approximately $0.4 million under this agreement during each of the nine months ended September 30, 2018 and 2017.

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, which was amended and restated in April 2017, 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 September 30,

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(Unaudited)

2018 and December 31, 2017, approximately $3.5 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.

Contribution Agreement

On September 12, 2018, the Company and its chief executive officer, Ernie Garcia III ("Mr. Garcia"), entered into a contribution agreement (the “Contribution Agreement”). Pursuant to the Contribution Agreement, Mr. Garcia agreed to contribute to the Company, at no charge, approximately 0.2 million shares of the Company’s Class A common stock (the “Share Contribution”). The Share Contribution is intended to fund restricted stock unit awards to then-current employees of Carvana, LLC upon their satisfying certain employment tenure requirements. The Company does not expect Mr. Garcia to incur any tax obligations related to the Share Contribution, but it has indemnified Mr. Garcia from any such obligations that may arise.

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 nine months ended September 30, 2018, the Company sold approximately $521.7 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $306.5 million in principal balances of finance receivables under the 2017 Master Transfer Agreement. As of September 30, 2018, there was approximately $634.6 million and $18.4 million of unused capacity under the Purchase and Sale Agreement and the 2017 Master Transfer Agreement, respectively. During the nine months ended September 30, 2017, the Company sold approximately $241.3 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $106.6 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 $13.3 million and $35.7 million during the three and nine months ended September 30, 2018, respectively, and approximately $6.6 million and $15.0 million during the three and nine months ended September 30, 2017, respectively, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

In August 2018, the Company purchased finance receivables that it previously sold to a purchaser's trust under the 2017 Master Transfer Agreement for a price of approximately $253.0 million and immediately resold such finance receivables to another trust owned by the same purchaser for the same price under a new transfer agreement. The Company is not obligated to, nor does it have a right to, purchase or sell finance receivables it has previously sold under the 2017 Master Transfer Agreement. The transaction completed in August 2018 was entered into in connection with a refinancing by the purchaser and was entered into independently from the terms of the 2017 Master Transfer Agreement. The Company received a fee of approximately $4.0 million for arranging and participating in the transaction, 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,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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 September 30, 2018, the interest rate on the Floor Plan Facility was approximately 5.91%, the Company had an outstanding balance under this facility of approximately $349.4 million, borrowing capacity available of approximately $0.6 million and held approximately $17.5 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

Senior Unsecured Notes

On September 21, 2018, the Company issued an aggregate of $350.0 million in senior unsecured notes due 2023 (the "Senior Notes") under an indenture entered into by and among the Company, each of the guarantors party thereto and U.S. Bank National Association, as trustee (the “Indenture”). The Senior Notes accrue interest at a rate of 8.875% per annum, which is payable semi-annually in arrears on April 1 and October 1 of each year beginning April 1, 2019. The Senior Notes mature on October 1, 2023, unless earlier repurchased or redeemed, and are guaranteed by the Company's existing domestic restricted subsidiaries (other than the subsidiaries formed solely for the purpose of facilitating the Company's sales of its finance receivables). The Company may redeem some or all of the Senior Notes on or after October 1, 2020 at redemption prices set forth in the Indenture, plus any accrued and unpaid interest to the redemption date. Prior to October 1, 2020, the Company may redeem up to 35.0% of the aggregate principal amount of the Senior Notes at a redemption price equal to 108.875%, together with accrued and unpaid interest to, but not including, the date of redemption, with the net cash proceeds of certain equity offerings. In addition, the Company may, at its option, redeem some or all of the Senior Notes prior to October 1, 2020, by paying a make-whole premium plus any accrued and unpaid interest, to, but not including, the redemption date. If the Company experiences certain change of control events, it must make an offer to purchase all of the Senior Notes at 101.0% of the principal amount thereof, plus any accrued and unpaid interest, to the repurchase date.

The Indenture governing the Senior Notes contains restrictive covenants that limit the ability of the Company to, among other things, incur additional debt or issue preferred stock, create liens, create restrictions on the Company’s ability to make intercompany payments, pay dividends and make other distributions in respect of the Company's capital stock, redeem or repurchase the Company’s capital stock or prepay subordinated indebtedness, make certain investments or certain other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates, and effect mergers or consolidations. Certain of these covenants will be suspended if the Senior Notes are assigned an investment grade rating from any two of Moody’s Investors Service, Inc., Standard & Poor’s Rating Services, and Fitch Ratings, Inc., and there is no continuing default. As of September 30, 2018, the Company was in compliance with all covenants.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The outstanding principal of the Senior Notes, net of debt issuance costs, was approximately $342.5 million as of September 30, 2018 and is included as long-term debt in the accompanying unaudited condensed consolidated balance sheet. In connection with the issuance of these Senior Notes, Carvana Group amended its LLC agreement to create a class of non-convertible preferred units, which Carvana Co. purchased with its net proceeds from the issuance of these Senior Notes, as further discussed in Note 9 — Stockholders' Equity.

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 September 30, 2018, the outstanding principal of these notes had a weighted-average interest rate of 5.9% and totaled approximately $34.8 million, of which approximately $7.2 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 September 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 September 30, 2018, the outstanding liability associated with these sale and leaseback arrangements, net of debt issuance costs, is approximately $65.9 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 "Master Sale-Leaseback Agreement" or "MSLA"), which was amended in November 2018, 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 2020. Under the MSLA, at any time the Company may elect to, and beginning in November 2020 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 September 30, 2018, the repurchase prices for all properties under the MSLA excluding unpaid rent totaled approximately $24.6 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 September 30, 2018, the Company may sell and lease back an additional approximately $50.4 million of its property and equipment under the MSLA.

Capital Leases

Beginning in August 2018, the Company has a capital lease obligation to finance certain equipment for its transportation fleet. The lease has a 5.2% fixed annual interest rate, a five-year term and requires monthly payments. As of September 30, 2018, the outstanding amount of the lease is approximately $3.4 million, of which approximately $0.6 million is due within the next twelve months and is included as current portion of other long-term debt in the accompanying unaudited condensed consolidated balance sheet.

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

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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 September 30, 2018, there were approximately 180.5 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.

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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 nine months ended September 30, 2018, certain LLC Unitholders exchanged approximately 12.3 million LLC Units and approximately 8.9 million shares of Class B common stock for approximately 9.8 million newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, Carvana Co. received approximately 12.2 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. During the nine months ended September 30, 2018, the holder converted 75,000 shares of Convertible Preferred Stock into approximately 3.8 million shares of Class A common stock, Carvana Co. canceled and retired 75,000 Convertible Preferred Units, and Carvana Group issued approximately 4.8 million Class A Units to Carvana Co.

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 nine months ended September 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 $24.6 million and $97.1 million as of September 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 nine months ended September 30, 2018, the Company paid approximately $4.3 million of dividends to the holders of the Convertible Preferred Stock and Carvana Group distributed approximately $4.3 million to Carvana Co. with respect to the Convertible Preferred Units. As of September 30, 2018, dividends accrued related to the Convertible Preferred Stock were approximately $0.1 million, or $3.36 per share of Convertible Preferred Stock outstanding.

Class A Non-Convertible Preferred Units

On October 2, 2018, Carvana Group amended its LLC Agreement to create a class of non-convertible preferred units (the "Class A Non-Convertible Preferred Units"), effective September 21, 2018. The Class A Non-Convertible Preferred Units were created in connection with Carvana Co.'s issuance of the Senior Notes, as discussed further in Note 8 — Debt Instruments. Carvana Co. used its net proceeds from the Senior Notes to purchase 350,000 Class A Non-Convertible Preferred Units.  In the event Carvana Co. makes payments on the Senior Notes, Carvana Group will make an equal cash distribution to the Class A Non-Convertible Preferred Units. For each $1,000 principal amount of Senior Notes that Carvana Co. repays or otherwise retires one Class A Non-Convertible Preferred Unit shall be canceled and retired.

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. 

Contribution of Class A Common Shares From Ernie Garcia, III

On September 10, 2018, the Company announced a commitment by its chief executive officer, Ernie Garcia, III ("Mr. Garcia"), to contribute 165 shares of Class A common stock from his personal shareholdings for every one of the Company's then-existing employees upon their satisfying certain employment tenure requirements (the "100k Milestone Gift"). On September 12, 2018, in connection with this ongoing commitment, the Company and Mr. Garcia entered into a contribution agreement, pursuant to which Mr. Garcia contributed approximately 0.2 million shares of the Company's Class A common stock to the Company, at no charge. The Company subsequently granted the first tranche of the 100k Milestone Gift of approximately 0.2 million restricted stock units with a one-day vesting period resulting in approximately $10.4 million of equity-based compensation expense during the three and nine months ended September 30, 2018, a portion of which related to the production of the Company's used vehicle inventory and was therefore capitalized to inventory. Although the Company does not expect Mr. Garcia to incur any tax obligations related to the share contribution, it has indemnified Mr. Garcia from any such obligations that may arise. 

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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 nine months ended September 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 $13.2 million, which has been included in exchanges of LLC Units in the accompanying unaudited condensed consolidated statement of stockholders' equity. During the nine months ended September 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 nine months ended September 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. During the nine months ended September 30, 2018, the holder of the Convertible Preferred Stock converted 75,000 shares of Convertible Preferred Stock into approximately 3.8 million shares of Class A common stock, Carvana Co. canceled and retired 75,000 Convertible Preferred Units, and Carvana Group issued approximately 4.8 million Class A Units to Carvana Co. The adjustment related to the conversion of Convertible Preferred Stock was an increase in non-controlling interests and a corresponding decrease in additional paid-in capital of approximately $51.3 million, which has been included in adjustment to non-controlling interests related to conversion of Class A Convertible Preferred Stock in the accompanying unaudited condensed consolidated statement of stockholders' equity.

As of September 30, 2018, Carvana Co. owned approximately 25.5% of Carvana Group with the LLC Unitholders owning the remaining 74.5%. 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.

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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

	Nine Months Ended September 30,
	2018		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	13,203		—
Decrease as a result of conversion of Class A Convertible Preferred Stock	(51,289)		—
Increase as a result of adjustments to non-controlling interests	—		333
Total transfers to non-controlling interests	$	(169,164)	$	(173,922)

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 nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Class B Units	$	791	$	597	$	1,831	$	1,237
Restricted Stock Units and Awards excluding those granted in relation to Mr. Garcia's 100k Milestone Gift contributions	1,459		823		3,104		1,973
Restricted Stock Units granted in relation to Mr. Garcia's 100k Milestone Gift contributions	10,393		—		10,393		—
Options	584		467		1,417		835
Class A Units	661		—		1,236		—
Total equity-based compensation expense	$	13,888	$	1,887	$	17,981	$	4,045

As of September 30, 2018, the total unrecognized compensation expense related to outstanding equity awards was approximately $34.9 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. The majority of the Company's equity awards vest over three- to five- year periods based on continued employment with the Company. As discussed in Note 9 — Stockholders' Equity, during the three and nine months ended September 30, 2018, the Company granted approximately 0.2 million RSUs with a vesting period of one day following receipt of Class A common stock from Mr. Garcia, and recognized approximately $10.4 million of equity-based compensation,

24

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

a portion of which related to the production of the Company's used vehicle inventory and was therefore capitalized to inventory.  As of September 30, 2018, approximately 12.1 million shares remain available for future equity award grants under this plan.

Class A Units

During the three and nine months ended September 30, 2018, the Company granted certain employees 0.0 million and 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 nine months ended September 30, 2018. During the three and nine months ended September 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.

25

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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Numerator:
Net loss	$	(64,419)	$	(39,769)	$	(168,341)	$	(117,078)
Net loss attributable to non-controlling interests	48,377		35,389		135,291		104,232
Dividends on Class A convertible preferred stock	(1,230)		—		(3,950)		—
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	$	(17,272)	$	(4,380)	$	(38,380)	$	(12,846)
Denominator:
Weighted-average shares of Class A common stock outstanding	34,924		15,520		27,258		15,254
Nonvested weighted-average restricted stock awards	(269)		(475)		(331)		(230)
Weighted-average shares of Class A common stock to compute basic and diluted net loss per Class A common share	34,655		15,045		26,927		15,024
Net loss per share of Class A common stock, basic and diluted	$	(0.50)	$	(0.29)	$	(1.43)	$	(0.86)

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 4.5 million and 4.9 million for the three and nine months ended September 30, 2018, respectively, 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 106.3 million and 117.2 million during the three months ended September 30, 2018 and September 30, 2017, respectively, and of approximately 110.2 million and 117.2 million during the nine months ended September 30, 2018 and September 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 6.5 million and 7.5 million at September 30, 2018 and September 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 nine months ended September 30, 2018 and of approximately 0.5 million and 0.2 million for the three and nine months ended September 30, 2017, respectively, were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive. As of September 30, 2018 and September 30, 2017, 0.8 million and 0.6 million options, respectively, were outstanding and evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive.

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

26

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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 12.2 million LLC Units during the nine months ended September 30, 2018 in connection with exchanges with Existing LLC Unitholders. During the nine months ended September 30, 2018, the Company recorded a gross deferred tax asset of approximately $71.4 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.

As described in Note 4 — Goodwill and Intangible Assets, Net, Carvana Group acquired Car360 during the nine months ended September 30, 2018. The acquisition included various intangible assets, and as a result the Company recognized a deferred tax liability of approximately $2.5 million which is reflected within other liabilities in the accompanying unaudited condensed consolidated balance sheet.

The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be realized. During the nine months ended September 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 September 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 September 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 September 30, 2018, the total unrecorded TRA liability is approximately $69.0 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 September 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 $1.5 million and $4.1 million for the three and nine months ended September 30, 2018 and $1.1 million and $2.9 million for the three and nine months ended September 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 $0.5 million and $1.1 million for the three and nine months ended September 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 $1.1 million and $0.8 million as of September 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 September 30, 2018 and December 31, 2017, the balance with the financial

28

CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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.

NOTE 15 — FAIR VALUE OF FINANCIAL INSTRUMENTS 

Items Measured at Fair Value on a Recurring Basis

As of September 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 September 30, 2018 and December 31, 2017 (in thousands):

As of September 30, 2018:

	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	438,386	$	438,386	$	—	$	—

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 and the Senior Notes was determined to approximate fair value as each of the notes has prevailing interest rates, which have not materially changed as of September 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 September 30, 2018 and December 31, 2017 were as follows (in thousands):

	September 30, 2018		December 31, 2017
Carrying value	$	88,151	$	45,564
Fair value	91,400		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 nine months ended September 30, 2018 and 2017 (in thousands):

	Nine Months Ended September 30,
	2018		2017
Supplemental cash flow information:
Cash payments for interest to third parties	$	11,976	$	4,668
Cash payments for interest to related parties	$	—	$	382
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	$	8,538	$	11,006
Capital expenditures financed through long-term debt	$	10,139	$	7,988
Issuance of LLC Units related to business acquisitions	$	9,981	$	—
Debt issuance costs included in accounts payable and accrued liabilities	$	1,733	$	—
Property and equipment acquired under capital leases	$	3,369	$	—
Conversion of Class A Convertible Preferred Stock to common stock	$	73,880	$	—
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):

	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	439,794	$	172,680	$	103,454	$	39,184
Restricted cash (1)	18,471		14,443		11,755		10,266
Total cash, cash equivalents and restricted cash	$	458,265	$	187,123	$	115,209	$	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 

Purchase and Sale and Master Transfer Agreement Amendments

On November 2, 2018, the Company amended the Purchase and Sale Agreement to, among other things and subject to the terms of the agreement, commit the purchaser to purchase up to a maximum additional $1.25 billion of principal balances of finance receivables.

On November 2, 2018, the Company amended the 2017 Master Transfer Agreement to, among other things and subject to the terms of the agreement, extend the purchaser's commitment to purchase finance receivables from the Company. The purchaser's currently available financing would permit up to $454.5 million in principal balances of finance receivables to be purchased and the 2017 Master Transfer Agreement's purchase commitment contemplates the purchaser securing up to three times the currently available financing in the aggregate.

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CARVANA CO. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Floor Plan Facility Amendment

On November 2, 2018, the Company amended the Floor Plan Facility to increase the line of credit to $650.0 million, extend the maturity date to October 31, 2020, and lower the interest rate to one month LIBOR plus 3.40%. 

Master Sale-Leaseback Agreement Amendment

On November 1, 2018, the Company amended the Master Sale-Leaseback Agreement to extend the date through which the Company can sell properties and after which the purchaser can sell properties back to the Company from November 2019 to November 2020.

Amendment to the Master Dealer Agreement

On November 5, 2018, the Company amended the Master Dealer Agreement to allow the Company to share in any excess cash reserves over realized claims with respect to VSCs sold by the Company, once a reasonable claims period for such VSCs has passed.

Contribution Agreement

In connection with an ongoing commitment from Mr. Garcia related to the previously announced 100k Milestone Gift program, the Company and Mr. Garcia entered into a contribution agreement on November 6, 2018, under which Mr. Garcia will contribute to the Company 32,932 shares of Class A common stock that he individually owns, at no charge. The contribution will take place on November 9, 2018 and is intended to fund restricted stock unit awards to certain employees of Carvana, LLC upon their satisfying applicable employment tenure requirements. Although the Company does not expect Mr. Garcia to incur any tax obligations related to the contribution, the Company has indemnified Mr. Garcia from any such obligations that may arise.

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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 September 30, 2018, we listed approximately 11,200 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 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.

On September 21, 2018, we issued Senior Notes (as defined in "Liquidity and Capital Resources") and received approximately $342.5 million in proceeds, net of debt issuance costs, with the intent to use such proceeds for general corporate purposes. These general corporate purposes include funding working capital, capital expenditures, 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 nine months ended September 30, 2018, the number of vehicles we sold to retail customers grew by 115.9% to 66,358 compared to 30,735 in the nine months ended September 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.

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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

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 34 in the first nine months of 2018, bringing our total number of markets to 78 as of September 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 $486.3 million and $1.3 billion during the three and nine months ended September 30, 2018, respectively, and $208.1 million and $550.4 million during the three and nine months ended September 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 $21.4 million and $48.2 million during the three and nine months ended September 30, 2018, respectively, and $7.5 million and $21.0 million during the three and nine months ended September 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 $27.2 million and $64.2 million during the three and nine months ended September 30, 2018, and $9.8 million and $22.4 million during the three and nine months ended September 30, 2017, respectively. In August, 2018, we received a fee of approximately $4.0 million for arranging and participating in the sale of finance receivables to a receivables purchaser in connection with a purchaser refinancing its ownership of the receivables, which is included in other sales and revenues. We expect other sales and revenues to increase with retail units sold. We also expect other sales and

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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.

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, all 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 has become delayed, we believe that the second quarter likely shows 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, all other factors being equal. 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.

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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 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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Retail units sold	25,324		11,719		66,358		30,735
Number of markets	78		39		78		39
Average monthly unique visitors (1)	2,433,815		1,171,208		2,168,789		938,352
Inventory units available on website	11,152		6,689		11,152		6,689
Average days to sale	63		97		66		99
Total gross profit per unit (incl. Gift)	$	2,263	$	1,742	$	2,118	$	1,503
Total gross profit per unit ex-Gift	$	2,302	$	1,742	$	2,134	$	1,503

(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.

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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.

Total Gross Profit per Unit (incl. Gift)

We define total gross profit per unit as the aggregate gross profit in a given period, including Gift (as defined below), divided by retail units sold in that period including gross profit generated from the sale of the used vehicle, gains on the sales of loans originated to finance the vehicle, commissions on sales of VSCs, revenue from GAP waiver coverage, and wholesale sales of vehicles we acquire from customers.

Total Gross Profit per Unit ex-Gift

On September 10, 2018, we announced a commitment by our chief executive officer, Ernie Garcia, III ("Mr. Garcia"), to contribute 165 shares of Class A common stock from his personal shareholdings for every one of our then-existing employees upon their satisfying certain employment tenure requirements. In connection with such contributions, we intend to make corresponding grants of 165 restricted stock units to each such employee under our 2017 Omnibus Incentive Plan (the "100k Milestone Gift" or "Gift"). Under U.S. GAAP, the 100k Milestone Gift is treated as compensation expense, a portion of which relates to the production of our used vehicle inventory and is therefore capitalized to inventory and subsequently recognized within costs of sales when the related inventory is sold.

We define total gross profit per unit ex-Gift as gross profit before compensation expense related to the 100k Milestone Gift included in cost of sales divided by retail units sold in that period. It has the same drivers noted above for total gross profit per unit, including Gift. We expect the 100k Milestone Gift from Mr. Garcia's one-time announcement to impact total gross profit per unit through the first half of 2020 and therefore believe total gross profit per unit ex-Gift is a key measure of our growth and long-term profitability over time. 

For more information regarding this and other non-GAAP financial measures, refer to reconciliations of our non-GAAP measurements to their most directly comparable GAAP-based financial measurements included herein under "Non-GAAP Financial Measures".

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, all other factors being equal.

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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 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.

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. Beginning in the second half of 2018, the labor portion of reconditioning costs and transportation costs includes the expense related to the 100k Milestone Gift, as described above. 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.

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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 and providing customer service 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 and Senior Notes (both defined in "Liquidity and Capital Resources"), and notes payable, finance leases 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 September 30,						Nine Months Ended September 30,
	2018		2017		Change		2018		2017		Change
	(dollars in thousands, except per unit amounts)
Net sales and operating revenues:
Used vehicle sales, net	$	486,269	$	208,113	133.7	%	$	1,258,247	$	550,442	128.6	%
Wholesale vehicle sales	21,440		7,459		187.4	%	48,195		21,003		129.5	%
Other sales and revenues (1)	27,212		9,807		177.5	%	64,187		22,372		186.9	%
Total net sales and operating revenues	$	534,921	$	225,379	137.3	%	$	1,370,629	$	593,817	130.8	%
Gross profit (incl. Gift):
Used vehicle gross profit	$	28,550	$	9,859	189.6	%	$	71,837	$	22,657	217.1	%
Wholesale vehicle gross profit	1,544		751		105.6	%	4,551		1,173		288.0	%
Other gross profit (1)	27,212		9,806		177.5	%	64,187		22,371		186.9	%
Total gross profit	$	57,306	$	20,416	180.7	%	$	140,575	$	46,201	204.3	%
Gross profit ex-Gift:(3)
Used vehicle gross profit ex-Gift	$	29,531	$	9,859	199.5	%	$	72,818	$	22,657	221.4	%
Wholesale vehicle gross profit ex-Gift	1,564		751		108.3	%	4,571		1173		289.7	%
Other gross profit(1)	27,212		9,806		177.5	%	64,187		22,371		186.9	%
Total gross profit ex-Gift	$	58,307	$	20,416	185.6	%	$	141,576	$	46,201	206.4	%
Market information:
Markets, beginning of period	65		30		116.7	%	44		21		109.5	%
Market launches	13		9		44.4	%	34		18		88.9	%
Markets, end of period	78		39		100.0	%	78		39		100.0	%
Unit sales information:
Used vehicle unit sales	25,324		11,719		116.1	%	66,358		30,735		115.9	%
Wholesale vehicle unit sales	4,408		1,797		145.3	%	10,408		4,665		123.1	%
Per unit selling prices:
Used vehicles	$	19,202	$	17,759	8.1	%	$	18,961	$	17,909	5.9	%
Wholesale vehicles	$	4,864	$	4,151	17.2	%	$	4,631	$	4,502	2.9	%
Per unit gross profit (incl. Gift):(2)
Used vehicle gross profit	$	1,127	$	841	34.0	%	$	1,083	$	737	46.9	%
Wholesale vehicle gross profit	$	350	$	418	(16.3)	%	$	437	$	251	74.1	%
Other gross profit	$	1,075	$	837	28.4	%	$	967	$	728	32.8	%
Total gross profit	$	2,263	$	1,742	29.9	%	$	2,118	$	1,503	40.9	%
Per unit gross profit ex-Gift:(2)(3)
Used vehicle gross profit ex-Gift	$	1,166	$	841	38.6	%	$	1,097	$	737	48.8	%
Wholesale vehicle gross profit ex-Gift	$	355	$	418	(15.1)	%	$	439	$	251	74.9	%
Other gross profit	$	1,075	$	837	28.4	%	$	967	$	728	32.8	%
Total gross profit ex-Gift	$	2,302	$	1,742	32.1	%	$	2,134	$	1,503	42.0	%

(1) Includes $6,696 and $2,414 for the three months ended September 30, 2018 and 2017, respectively, and $16,351 and $6,070 for the nine months ended September 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.

(3) Ex-Gift amounts exclude the expense related to the 100k Milestone Gift. See "Non-GAAP Financial Metrics" for a reconciliation to the most directly comparable GAAP-based measure, when applicable.

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Used Vehicle Sales

Three months ended September 30, 2018 Versus 2017. Used vehicle sales increased by $278.2 million to $486.3 million during the three months ended September 30, 2018 compared to $208.1 million during the three months ended September 30, 2017. The increase in revenue was primarily due to an increase in the number of used vehicles sold to 25,324 from 11,719 during the three months ended September 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 78 markets as of September 30, 2018 from 39 markets as of September 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 $19,202 during the three months ended September 30, 2018 from $17,759 during the three months ended September 30, 2017. Average selling prices increased primarily as result of changes in inventory mix, and to a lesser extent, a decrease in average days to sale to 63 days in the third quarter of 2018 from 97 days in the comparable prior year period.

Nine months ended September 30, 2018 Versus 2017. Used vehicle sales increased by $707.8 million to $1.3 billion during the nine months ended September 30, 2018 compared to $550.4 million during the nine months ended September 30, 2017. The increase in revenue was primarily due to an increase in the number of used vehicles sold to 66,358 from 30,735 during the nine months ended September 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 78 markets as of September 30, 2018 from 39 markets as of September 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 $18,961 during the nine months ended September 30, 2018 from $17,909 during the nine months ended September 30, 2017. Average selling prices increased primarily as a result of changes in inventory mix, and to a lesser extent, a decrease in average days to sale to 66 days in the nine months ended September 30, 2018 from 99 days in the comparable prior year period.

Wholesale Vehicle Sales

Three months ended September 30, 2018 Versus 2017. Wholesale vehicle sales increased by $14.0 million to $21.4 million during the three months ended September 30, 2018, compared to $7.5 million during the three months ended September 30, 2017. We primarily obtain our wholesale inventory by acquiring vehicles from customers. As our retail unit sales have increased, so have the trade-ins we receive. Moreover, during the three months ended September 30, 2018, we also acquired more vehicles from customers who did not purchase a retail unit from us. Therefore, we have had more units available for sale to wholesalers over time and our revenues attributed to wholesale vehicle sales have increased. In addition, the average selling price of our wholesale units sold increased to $4,864 during the three months ended September 30, 2018 from $4,151 during the three months ended September 30, 2017, due primarily to the mix of vehicles acquired from customers.

Nine months ended September 30, 2018 Versus 2017. Wholesale vehicle sales increased by $27.2 million to $48.2 million during the nine months ended September 30, 2018, compared to $21.0 million during the nine months ended September 30, 2017. We primarily obtain our wholesale inventory by acquiring vehicles from customers. 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. In addition, the average selling price of our wholesale units sold increased to $4,631 during the nine months ended September 30, 2018 from $4,502 during the nine months ended September 30, 2017.

Other Sales and Revenues

Three months ended September 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 $17.4 million to $27.2 million during the three months ended September 30, 2018, compared to $9.8 million during the three months ended September 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. The increase also includes a fee of $4.0 million that we received during the three months ended September 30, 2018 for arranging and participating in the sale of a pool of finance receivables.

Nine months ended September 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 $41.8 million to $64.2 million during the nine months ended September 30, 2018, compared to $22.4 million

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during the nine months ended September 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. The increase includes a fee of $4.0 million that we received during the nine months ended September 30, 2018 for arranging and participating in the sale of a pool of finance receivables.

Used Vehicle Gross Profit

Three months ended September 30, 2018 Versus 2017. Used vehicle gross profit, including Gift, increased by $18.7 million to $28.6 million during the three months ended September 30, 2018, compared to $9.9 million during the three months ended September 30, 2017.  Used vehicle gross profit ex-Gift, which excludes the impact of the 100k Milestone Gift on cost of sales,  increased by $19.7 million to $29.5 million during the three months ended September 30, 2018, compared to $9.9 million during the three months ended September 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, including Gift, and used vehicle gross profit per unit ex-Gift to $1,127 and $1,166, respectively, for the three months ended September 30, 2018 compared to $841 for the three months ended September 30, 2017. The per unit increase was primarily driven by a decrease in average days to sale to 63 days in the three months ended September 30, 2018 from 97 days in the three months ended September 30, 2017.

Nine months ended September 30, 2018 Versus 2017. Used vehicle gross profit, including Gift, increased by $49.2 million to $71.8 million during the nine months ended September 30, 2018, compared to $22.7 million during the nine months ended September 30, 2017. Used vehicle gross profit ex-Gift, which excludes the impact of the 100k Milestone Gift on cost of sales, increased by $50.2 million to $72.8 million during the nine months ended September 30, 2018, compared to $22.7 million during the nine months ended September 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, including Gift, and used vehicle gross profit per unit ex-Gift to $1,083 and $1,097, respectively, for the nine months ended September 30, 2018 compared to $737 for the nine months ended September 30, 2017. The per unit increase was primarily driven by a decrease in average days to sale to 66 days in the nine months ended September 30, 2018 from 99 days in the nine months ended September 30, 2017.

Wholesale Vehicle Gross Profit

Three months ended September 30, 2018 Versus 2017. Wholesale vehicle gross profit increased by $0.8 million to $1.5 million during the three months ended September 30, 2018, compared to $0.8 million during the three months ended September 30, 2017. This increase was driven primarily by an increase in wholesale units sold to 4,408 from 1,797, partially offset by a decrease in wholesale vehicle gross profit per wholesale unit, including Gift, and wholesale vehicle gross profit per wholesale unit ex-Gift to $350 and $355, respectively, compared to $418 in the three months ended September 30, 2017. 

Nine months ended September 30, 2018 Versus 2017. Wholesale vehicle gross profit increased by $3.4 million to $4.6 million during the nine months ended September 30, 2018, compared to $1.2 million during the nine months ended September 30, 2017. This increase was driven primarily by an increase in wholesale units sold to 10,408 from 4,665 and an increase in wholesale vehicle gross profit per wholesale unit, including Gift, and wholesale vehicle gross profit per wholesale unit ex-Gift to $437 and $439, respectively, from $251 in the nine months ended September 30, 2017.

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.

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Components of SG&A

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(in thousands)
Compensation and benefits (1)	$	34,411	$	19,404	$	88,649	$	54,496
100k Milestone Gift	6,760		—		6,760		—
Advertising expense	27,467		15,475		79,259		39,299
Market occupancy costs (2)	3,110		1,734		8,238		4,141
Logistics (3)	9,913		3,905		24,056		9,829
Other costs (4)	34,107		18,158		87,644		48,830
Total	$	115,768	$	58,676	$	294,606	$	156,595

(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 and those related to the 100k Milestone Gift.

(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 $57.1 million and $138.0 million to $115.8 million and $294.6 million during the three and nine months ended September 30, 2018, respectively, compared to $58.7 million and $156.6 million during the three and nine months ended September 30, 2017, respectively. The increase was primarily due to an increase in compensation and benefits by $15.0 million and $34.2 million during the three and nine months ended September 30, 2018, respectively, compared to the three and nine months ended September 30, 2017, which was primarily driven by expansion of our logistics and last-mile delivery network, as well as growth in our operations and technology teams. In addition, during the third quarter of 2018, the first tranche of the 100k Milestone Gift related to Mr. Garcia's contribution occurred resulting in $6.8 million of compensation expense within selling, general and administrative expense, which is presented separately above, compared to none in the three and nine months ended September 30, 2017.

The increase in selling, general and administrative expenses was also partially due to an increase in advertising expense of $12.0 million and $40.0 million during the three and nine months ended September 30, 2018, respectively, compared to the three and nine months ended September 30, 2017 primarily due to an increase in national television advertising and number of markets. Market occupancy, logistics and other expenses also increased during the three and nine months ended September 30, 2018 compared to the prior period primarily due our continued expansion. These expenses will increase in absolute terms as we expand to additional markets.

Interest Expense

Interest expense increased by $4.8 million and $8.0 million to $5.6 million and $13.4 million during the three and nine months ended September 30, 2018, respectively, compared to $0.8 million and $5.4 million during the three and nine months ended September 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 nine months ended September 30, 2018 related to the finance leases and notes payable entered into throughout 2017 and 2018, along with approximately $0.9 million of interest expense incurred on our Senior Notes. The increase in interest expense related to the Floor Plan Facility, finance leases, notes payable and Senior Notes is partially offset by the $1.4 million interest incurred related to the Verde Credit Facility during the nine months ended September 30, 2017. 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.

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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: gross profit ex-Gift, gross profit per unit ex-Gift, EBITDA ex-Gift, EBITDA margin ex-Gift, 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.

Gross Profit ex-Gift and Gross Profit per Unit ex-Gift

Gross Profit ex-Gift and Gross Profit per Unit ex-Gift are non-GAAP supplemental measures of operating performance that do not represent and should not be considered an alternative to gross profit, as determined by GAAP. Gross Profit ex-Gift is defined as gross profit before compensation expense related to the 100k Milestone Gift included in cost of sales. Gross Profit per Unit ex-Gift is Gross Profit ex-Gift divided by units sold. We use Gross Profit ex-Gift to measure the operating performance of our business and Gross Profit per Unit ex-Gift to measure our operating performance relative to our units sold. We believe that Gross Profit ex-Gift and Gross Profit per Unit ex-Gift are useful measures to us and to our investors because they exclude the expense associated with the 100k Milestone Gift recognized in cost of sales. We expect the 100k Milestone Gift to be a one-time award program for which we will recognize varying amounts of expense through the first half of 2020, and therefore we believe the related expense does not reflect our core operations, is not included in our past operations, and may not be indicative of our future operations. Additionally, the shares issued to settle the 100k Milestone Gift are offset by share contributions from Mr. Garcia to the Company, therefore we expect the impact on shares outstanding to be zero. We believe that excluding it enables us to more effectively evaluate our performance period-over-period and relative to our competitors. A reconciliation the Gross Profit ex-Gift amounts to each corresponding gross profit amount, which are the most directly comparable GAAP measures and include expenses attributable to the Gift, and calculations of each Gross Profit per Unit ex-Gift amount are as follows (dollars in thousands, except per unit amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Used vehicle gross profit	$	28,550	$	9,859	$	71,837	$	22,657
100k Milestone Gift in used vehicle cost of sales	981		—		981		—
Used Vehicle Gross Profit ex-Gift	$	29,531	$	9,859	$	72,818	$	22,657
Used vehicle unit sales	25,324		11,719		66,358		30,735
Used Vehicle Gross Profit per Unit ex-Gift	$	1,166	$	841	$	1,097	$	737
Wholesale vehicle gross profit	$	1,544	$	751	$	4,551	$	1,173
100k Milestone Gift in wholesale vehicle cost of sales	20		—		20		—
Wholesale Vehicle Gross Profit ex-Gift	$	1,564	$	751	$	4,571	$	1,173
Wholesale vehicle unit sales	4,408		1,797		10,408		4,665
Wholesale Vehicle Gross Profit per Unit ex-Gift	$	355	$	418	$	439	$	251
Total gross profit	$	57,306	$	20,416	$	140,575	$	46,201
100k Milestone Gift in total cost of sales	1,001		—		1,001		—
Total Gross Profit ex-Gift	$	58,307	$	20,416	$	141,576	$	46,201
Used vehicle unit sales	25,324		11,719		66,358		30,735
Total Gross Profit per Unit ex-Gift	$	2,302	$	1,742	$	2,134	$	1,503

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EBITDA ex-Gift and EBITDA Margin ex-Gift

EBITDA ex-Gift and EBITDA Margin ex-Gift 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 ex-Gift is defined as net loss before interest expense, income tax expense, depreciation and amortization expense, and the expense related to the 100k Milestone Gift. EBITDA Margin ex-Gift is EBITDA ex-Gift as a percentage of total revenues. We use EBITDA ex-Gift to measure the operating performance of our business and EBITDA Margin ex-Gift to measure our operating performance relative to our total revenues. We believe that EBITDA ex-Gift and EBITDA Margin ex-Gift are useful measures to us and to our investors because they exclude certain financial and capital structure items and the expense associated with the 100k Milestone Gift, 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. In particular, we expect the 100k Milestone Gift to be a one-time award program for which we will recognize varying amounts of expense through the first half of 2020, and therefore we believe the related expense does not reflect our core operations, is not included in our past operations, and may not be indicative of our future operations. Additionally, the shares issued to settle the 100k Milestone Gift are offset by share contributions from Mr. Garcia to the Company, therefore we expect the impact on shares outstanding to be zero. We believe that excluding these items enables us to more effectively evaluate our performance period-over-period and relative to our competitors. EBITDA ex-Gift and EBITDA Margin ex-Gift may not be comparable to similarly titled measures provided by other companies due to potential differences in methods of calculations.  A reconciliation of EBITDA ex-Gift to net loss (which includes Gift expense), the most directly comparable GAAP measure, and calculation of EBITDA Margin ex-Gift is as follows (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net loss	$	(64,419)		$	(39,769)		$	(168,341)		$	(117,078)
Depreciation and amortization expense	6,439			3,100			16,301			7,746
Interest expense	5,649			838			13,355			5,404
100k Milestone Gift	7,761			—			7,761			—
EBITDA ex-Gift	$	(44,570)		$	(35,831)		$	(130,924)		$	(103,928)
Total revenues	534,921			225,379			1,370,629			593,817
EBITDA Margin ex-Gift	(8.3)		%	(15.9)		%	(9.6)		%	(17.5)		%

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 and excluding the expense associated with the 100k Milestone Gift. 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 and excluding the expense associated with the 100k Milestone Gift for the reasons described above, 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 as well as the expense associated with the 100k Milestone Gift, 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 September 30,				Nine Months Ended September 30,
		2018		2017		2018		2017
Numerator:
	Net loss attributable to Carvana Co.	$	(16,042)	$	(4,380)	$	(33,050)	$	(57,361)
	Net loss attributable to non-controlling interests	(48,377)		(35,389)		(135,291)		(59,717)
	Dividends on Class A convertible preferred stock	(1,230)		—		(3,950)		—
	Accretion of beneficial conversion feature on Class A convertible preferred stock	—		—		(1,380)		—
	100k Milestone Gift	7,761		—		7,761		—
	Adjusted net loss attributable to Carvana Co. Class A common stock	$	(57,888)	$	(39,769)	$	(165,910)	$	(117,078)
Denominator:
	Weighted-average shares of Class A common stock outstanding(1)(3)	34,655		15,045		26,927		15,024
	Adjustments:
	Weighted-average assumed exchange of LLC Units for shares of Class A common stock (2)	111,157		121,989		114,971		121,805
	Adjusted shares of Class A common stock outstanding	145,812		137,034		141,898		136,829
	Adjusted net loss per share	$	(0.40)	$	(0.29)	$	(1.17)	$	(0.86)

(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 0.6 million nonvested restricted stock awards and units and 0.8 million vested and nonvested stock options outstanding at September 30, 2018, because they were determined to be anti-dilutive. Excludes approximately 0.5 million nonvested restricted stock awards and units and 0.6 million vested and nonvested stock options outstanding at September 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 issuance of senior unsecured notes 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 September 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 November 2, 2018, we amended the Floor Plan Facility to increase the capacity to $650.0 million and extend the maturity date to October 31, 2020 to finance more vehicle inventory purchases. As of September 30, 2018, we sell finance receivables under multiple agreements. On November 2, 2018, we increased the available amount under and extended the maturity of these facilities through November 1, 2019. We plan to extend or enter into new agreements to sell finance receivables to third parties prior to the expiration of the agreements. We believe that our existing sources of liquidity

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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 November 2018 to, among other things, extend the maturity date to October 31, 2020, and increase the available capacity to $650.0 million. 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 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 September 30, 2018, the interest rate on the Floor Plan Facility was approximately 5.9%. We had an outstanding balance under this facility of approximately $349.4 million, borrowing capacity available of approximately $0.6 million and held approximately $17.5 million in restricted cash related to this facility.

Senior Unsecured Notes

On September 21, 2018, we issued an aggregate of $350.0 million in senior unsecured notes due 2023 (the "Senior Notes") under an indenture entered into by and among us, each of the guarantors party thereto and U.S. Bank National Association, as trustee (the “Indenture”). The Senior Notes accrue interest at a rate of 8.875% per annum, which is payable semi-annually in arrears on April 1 and October 1 of each year beginning April 1, 2019. The Senior Notes mature on October 1, 2023, unless earlier repurchased or redeemed, and are guaranteed by our existing domestic restricted subsidiaries (other than our subsidiaries formed solely for the purpose of facilitating our sales of finance receivables). We may redeem some or all of the Senior Notes on or after October 1, 2020 at redemption prices set forth in the Indenture plus any accrued and unpaid interest. Prior to October 1, 2020, we may redeem up to 35.0% of the aggregate principal amount of the Senior Notes at a redemption price equal to 108.875%, together with accrued and unpaid interest to, but not including, the date of redemption, with the net cash proceeds of certain equity offerings. In addition, we may, at our option, redeem some or all of the Senior Notes prior to October 1, 2020, by paying a make-whole premium plus any accrued and unpaid interest, to, but not including, the redemption date. If we experiences certain change of control events, we must make an offer to purchase all of the Senior Notes at 101.0% of the principal amount thereof, plus any accrued and unpaid interest, to the repurchase date.

The Indenture governing the Senior Notes contains restrictive covenants that limit our ability to, among other things, incur additional debt or issue preferred stock, create liens, create restrictions on our ability to make intercompany payments, pay dividends and make other distributions in respect of our capital stock, redeem or repurchase our capital stock or prepay subordinated indebtedness, make certain investments or certain other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates, and effect mergers or

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consolidations. Certain of these covenants will be suspended if the Senior Notes are assigned an investment grade rating from any two of Moody’s Investors Service, Inc., Standard & Poor’s Rating Services, and Fitch Ratings, Inc., and there is no continuing default. As of September 30, 2018 we were in compliance with all covenants. See Item 1A - Risk Factors.

The outstanding principal of the Senior Notes, net of debt issuance costs, was approximately $342.5 million as of September 30, 2018.

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

Notes Payable

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 September 30, 2018, the outstanding principal of these notes had a weighted-average interest rate of 5.9% and totaled approximately $34.8 million, of which approximately $7.2 million is due within the next twelve months.

Finance Leases

Beginning in 2017, we have financed certain purchases and construction of our property and equipment through various sale and leaseback transactions. As of September 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 September 30, 2018, the outstanding liability associated with these sale and leaseback arrangements, net of debt issuance costs, is approximately $65.9 million.

In November 2017, we entered into a master sale-leaseback agreement (the "Master Sale-Leaseback Agreement" or "MSLA"), which was amended in November 2018, 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 2020. Under the MSLA, at any time we may elect to, and beginning in November 2020 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 September 30, 2018, the repurchase prices for all properties under the MSLA excluding unpaid rent totaled approximately $24.6 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 September 30, 2018, we may sell and lease back an additional approximately $50.4 million of our property and equipment under the MSLA.

Capital Leases

Beginning in August 2018, we have a capital lease obligation to finance certain equipment for our transportation fleet. The lease has a 5.2% fixed annual interest rate, a five-year term and requires monthly payments. As of September 30, 2018, the outstanding amount of the lease is approximately $3.4 million, of which $0.6 million is due within the next twelve months.

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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. On November 2, 2018, we amended the Purchase and Sale Agreement to, among other things and subject to the terms of the agreement, commit the purchaser to purchase up to a maximum additional $1.25 billion of principal balances of finance receivables. 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. On November 2, 2018, we amended our 2017 Master Transfer Agreement to, among other things and subject to the terms of the agreement, commit the purchaser to purchase up to a maximum additional $0.5 billion in principal balances of finance receivables.

During the nine months ended September 30, 2018, we sold approximately $521.7 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $306.5 million in principal balances of finance receivables under the 2017 Master Transfer Agreement. As of September 30, 2018, there was approximately $634.6 million and $18.4 million of unused capacity under the Purchase and Sale Agreement and the 2017 Master Transfer Agreement, respectively.

In August 2018, we purchased finance receivables that we previously sold to a purchaser's trust under the 2017 Master Transfer Agreement for a price of approximately $253.0 million and immediately resold such finance receivables to another trust owned by the same purchaser for the same price under a new transfer agreement. We are not obligated to, nor do we have a right to, purchase or sell finance receivables we have previously sold under the 2017 Master Transfer Agreement. The transaction completed in August 2018 was entered into in connection with a refinancing by the purchaser and was entered into independently from the terms of the 2017 Master Transfer Agreement. We received a fee of approximately $4.0 million for arranging and participating in the transaction.

Liquidity Upon Debt and 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. On September 21, 2018, we issued our Senior Notes (as defined in "Liquidity and Capital Resources") and received approximately $342.5 million in proceeds, net of debt issuance costs. We used the net proceeds to purchase Class A Non-Convertible Preferred Units of Carvana Group, and Carvana Group intends to use 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 nine months ended September 30, 2018 and 2017 (in thousands):

	Nine Months Ended September 30,
	2018		2017
Net cash used in operating activities	$	(263,875)	$	(116,014)
Net cash used in investing activities	(113,898)		(59,408)
Net cash provided by financing activities	648,915		241,181
Net increase in cash, cash equivalents and restricted cash	271,142		65,759
Cash, cash equivalents and restricted cash at beginning of period	187,123		49,450
Cash, cash equivalents and restricted cash at end of period	$	458,265	$	115,209

Operating Activities

For the nine months ended September 30, 2018, net cash used in operating activities was $263.9 million, an increase of $147.9 million compared to net cash used in operating activities of $116.0 million for the nine months ended September 30, 2017. Significant changes impacting net cash used in operating activities comparing the nine months ended September 30, 2018 and 2017 are as follows:

• Our net loss was $168.3 million during the nine months ended September 30, 2018, an increase of $51.3 million from a net loss of $117.1 million during the nine months ended September 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 $110.3 million during the nine months ended September 30, 2018 compared to a net increase in vehicle inventory of $6.0 million during the nine months ended September 30, 2017, resulting in a $104.4 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 $11.1 million during the nine months ended September 30, 2018, compared to net proceeds of $0.4 million during the nine months ended September 30, 2017 resulting in an increased use of cash of $11.5 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 $44.8 million during the nine months ended September 30, 2018 as compared to $8.7 million during the nine months ended September 30, 2017, resulting in an increase to cash of $36.1 million year over year.

Investing Activities

Cash used in investing activities was $113.9 million and $59.4 million during the nine months ended September 30, 2018 and 2017, respectively, an increase of $54.5 million. The increase primarily relates to the increase in purchases of property and equipment of $47.8 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 $648.9 million and $241.2 million during the nine months ended September 30, 2018 and 2017, respectively, an increase of $407.7 million. The net increase primarily relates to the net proceeds from the issuance of our Senior Notes of $342.5 million. The increase is also attributable to the proceeds from and payments on the Floor Plan Facility increasing by $623.0 million and $552.2 million, respectively, resulting in a net increase to sources of cash of $70.8 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 nine months ended September 30, 2018 compared to the nine months ended September 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

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increase in cash provided by financing activities relates to an increase of $38.6 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 from issuance of Class A common stock to $172.3 million from the follow-on offering in April 2018 compared to net proceeds of $206.3 million from the IPO in April 2017.

Contractual Obligations and Commitments

On September 21, 2018, we issued our Senior Notes (as defined and further described in "Liquidity and Capital Resources") and received approximately $342.5 million in proceeds, net of debt issuance costs. Our Senior Notes mature on October 1, 2023, unless earlier repurchased or redeemed, and are guaranteed by our restricted subsidiaries.  

Other than our Senior Notes, 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 September 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.

As of December 31, 2018, we will cease to be an “emerging growth company” because our revenues for the year ending December 31, 2018 will have exceeded $1.07 billion. Therefore, we will no longer be able to take advantage of those certain exemptions described above.

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;

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

• 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;

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

• 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.

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 nine months ended September 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 August 8, 2018 and as follows:

Our ability to sell automotive finance receivables and generate gains on sales of these finance receivables may decline in the future; any material reduction could harm our business, results of operations and financial condition.

We provide financing to customers and typically sell the receivables related to the financing contract to third-party investors or, in limited instances historically, DriveTime. For example, we entered into agreements in November 2018 pursuant to which third-party purchasers renewed their commitments, agreeing to purchase up to an additional aggregate $2.6 billion of automotive finance receivables we originate. We may exceed our capacity to sell automotive finance receivables under these agreements prior to the end of the fourth quarter of 2019. As we use the available capacity under each agreement, we plan to enter into new arrangements to sell additional vehicle finance receivables. If we reach our capacity under these or future arrangements, and we cannot replace them with new arrangements, we may be unable to generate adequate liquidity and our business, financial condition and results of operations may be adversely affected.

Additionally, there can be no assurance that our relationships with the investors who purchase these receivables will continue in the future, that such investors will renew our agreements with them when they expire, or that they will not terminate them by exercising certain constructive or other early termination rights, due to a breach by us of our agreements with them, or otherwise. If they cease to purchase these receivables, it would have a material adverse effect on our ability to continue originating finance receivables and adversely impact our operating results. Furthermore, we would be subject to the risk that some of these receivables are not paid when due and we are forced to incur unexpected asset write-offs and bad-debt expense.

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

Our ability to realize the tax benefits that we currently expect to be available as a result of the increases in tax basis created by any future exchanges of LLC Units (together with shares of our Class B common stock in the case of certain Class A Units) for our Class A common stock, the payments made pursuant to the Tax Receivable Agreement, and the interest deductions imputed under the Tax Receivable Agreement all depend on a number of assumptions, including that we earn sufficient taxable income each year during the period over which such deductions are available and that there are no changes in applicable law or regulations. For example, the reduction in corporate tax rates pursuant to recent changes in U.S. federal income tax law has the effect of reducing the expected value of the tax benefits we realize as a result of the increase in our proportionate share of the existing tax basis of the assets of Carvana Group arising from future exchanges of LLC Units held by an LLC Unitholder for shares of our Class A common stock or cash. The reduction in the value of such tax benefits is expected to have two primary consequences — it reduces the cash payments we expect to be required to make pursuant to the Tax Receivable Agreement and it reduces the expected value to us of the 15% of the amount of such tax benefits that we will retain pursuant to the Tax Receivable Agreement. Additionally, if our actual taxable income were insufficient or there were additional adverse changes in applicable laws or regulations, we may be further unable to realize all or a portion of the expected tax benefits and our cash flows and stockholders’ equity could be negatively affected.

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Our substantial indebtedness could adversely affect our financial flexibility and our competitive position and prevent us from fulfilling our obligations under our indebtedness, including the Senior Notes.

We have a substantial amount of indebtedness, which requires significant interest and principal payments. As of September 30, 2018, we had, on a consolidated basis, $804.2 million aggregate principal amount of outstanding indebtedness, including $350.0 million related to the Senior Notes, $349.4 million of borrowing under our Floor Plan Facility between us and Ally Financial and $38.1 million aggregate principal amount outstanding indebtedness represented by our promissory note agreements and capital leases between us and third-party providers of equipment financing. Also, as of September 30, 2018, we had, on a consolidated basis, $66.7 million of other long-term indebtedness related to our sale leaseback transactions. Our substantial indebtedness could have significant effects on our business and consequences to holder of the notes. For example, it could:

• make it more difficult for us to satisfy our obligations with respect to our current and future indebtedness, including the notes and our Floor Plan Facility;

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

• require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, the execution of our business strategy and other general corporate purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• increase our cost of borrowing;

• restrict us from exploiting business opportunities;

• place us at a disadvantage compared to our competitors that have fewer indebtedness obligations; and

• limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, indebtedness service

requirements, execution of our business strategy and other general corporate purposes.

We expect to use cash flows from operations to meet our current and future financial obligations, including funding our operations, indebtedness service requirements (including payments on the Senior Notes) and capital expenditures. The ability to make these payments depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business, economic and other factors beyond our control.

Our debt agreements, including the Indenture governing our Senior Notes, contain restrictions that could limit our flexibility in operating our business.

The operating and financial covenants and restrictions in the Indenture governing our Senior Notes and other indebtedness that we incur in the future may adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. The agreements governing our indebtedness will restrict, subject to certain important exceptions and qualifications, our and our subsidiaries’ ability to, among other things:

• incur additional indebtedness or guarantee indebtedness;

• pay dividends or make distributions or make certain other restricted payments;

• make certain investments;

• create liens on our or our guarantors’ assets;

• sell assets;

• enter into transactions with affiliates;

• enter into agreements restricting our subsidiaries’ ability to pay dividends;

• designate our subsidiaries as unrestricted subsidiaries; and

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• enter into mergers or consolidations or sell all or substantially all of our assets.

As a result of these restrictions, we may be:

• limited in how we conduct our business;

• unable to raise additional debt or equity financing to operate during general economic or business downturns; or

• unable to compete effectively or to take advantage of new business opportunities.

These restrictions may impair our ability to grow in accordance with our strategy, and may adversely affect our financial condition and results of operations.

In addition, a breach of the covenants or restrictions under the Indenture governing our Senior Notes or under the agreements governing our Floor Plan Facility could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the agreements that govern our Floor Plan Facility would permit the lenders under our Floor Plan Facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under our Floor Plan Facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or holders of our Senior Notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness or any other indebtedness that may become due and payable, and we may become insolvent as a result.

Our ability to service all of our indebtedness, including the Senior Notes, depends on many factors beyond our control, and if we cannot generate enough cash to service our indebtedness, we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our obligations with respect to our debt, including the Senior Notes, will depend on our financial and operating performance, which, in turn, is subject to prevailing economic, industry, financial, competitive, legislative, legal and regulatory factors and other factors beyond our control. Additionally, some of our indebtedness accrues interest at a variable rate that is based on LIBOR or other market rates. If those interest rates rise, so will the amount we need to pay to satisfy our debt obligations. In November 2018, we amended our Floor Plan Facility to, among other things, provide for a replacement interest rate if LIBOR is phased out, and such replacement rate may be an increase from the current rate. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to fund our day-to-day operations or to pay the principal, premium, if any, and interest on our indebtedness, including the notes.

Cash flows from operations are the principal source of funding for us. Our business may not generate cash flow from operations in an amount sufficient to fund our liquidity needs. If our cash flows are insufficient to service our indebtedness, including the notes, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness, including the notes. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital and credit markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations and limit our financial flexibility. In addition, the terms of existing or future debt agreements, including the Indenture governing the Senior Notes, may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness or increase the cost to us of any such indebtedness, and may cause a default under the terms of our outstanding indebtedness. These alternative measures may not be successful or may be insufficient and, as a result, our liquidity and financial condition could be adversely affected and we may not be able to meet our scheduled indebtedness service obligations.

If we cannot make scheduled payments on our indebtedness, we will be in default and holders of the Senior Notes could declare all outstanding principal and interest to be due and payable, the lenders under the Floor Plan Facility could foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation.

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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 nine months ended September 30, 2018, except as otherwise previously reported.

During the nine months ended September 30, 2018, pursuant to the terms of the Exchange Agreement entered into in connection with our IPO, certain LLC Unitholders exchanged approximately 12.3 million LLC Units and approximately 8.9 million shares of Class B common stock for approximately 9.8 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 November 2, 2018, we amended the Purchase and Sale Agreement to, among other things and subject to the terms of the agreement, commit the purchaser to purchase up to a maximum additional $1.25 billion of principal balances of finance receivables. The amendment to the Purchase and Sale Agreement is filed herewith as Exhibit 10.1.

On November 2, 2018, we amended our 2017 Master Transfer Agreement to, among other things and subject to the terms of the agreement, extend the purchaser's commitment to purchase finance receivables from us. The purchaser's currently available financing would permit up to $454.5 million in principal balances of finance receivables to be purchased and the 2017 Master Transfer Agreement's purchase commitment contemplates the purchaser securing up to three times the currently available financing in the aggregate. The amendment to the 2017 Master Transfer Agreement is filed herewith as Exhibit 10.2.

On November 2, 2018, we amended our Floor Plan Facility to increase the line of credit to $650.0 million, extend the maturity date to October 31, 2020, and lower the interest rate to one month LIBOR plus 3.40%. The amendment to the Floor Plan Facility is filed herewith as Exhibit 10.3.

On November 1, 2018, we amended our Master Sale-Leaseback Agreement to extend the date through which we can sell properties and after which the purchaser can sell properties back to us from November 2019 to November 2020. The amendment to the Master Sale-Leaseback Agreement is filed herewith as Exhibit 10.4.

On November 5, 2018, we amended the Master Dealer Agreement to allow us to share in any excess cash reserves over realized claims with respect to VSCs sold by us, once a reasonable claims period for such VSCs has passed. The amendment to the Master Dealer Agreement is filed herewith as Exhibit 10.5.

In connection with an ongoing commitment from Mr. Garcia related to the previously announced 100k Milestone Gift program, the Company and Mr. Garcia entered into a contribution agreement on November 6, 2018, under which Mr. Garcia will contribute to us 32,932 shares of our Class A common stock that he individually owns, at no charge. The contribution will take place on November 9, 2018 and is intended to fund restricted stock unit awards to certain employees of Carvana, LLC upon their satisfying applicable employment tenure requirements. Although we do not expect Mr. Garcia to incur any tax obligations related to the contribution, we have indemnified Mr. Garcia from any such obligations that may arise. The Contribution Agreement is filed herewith as Exhibit 10.6.

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ITEM 6. EXHIBITS

Exhibit No.	Description
10.1	Third Amendment to the Amended and Restated Master Purchase and Sale Agreement, filed herewith.
10.2	First Amendment to the Master Transfer Agreement, filed herewith.
10.3 *	Seventh Amendment to the Amended and Restated Inventory Financing and Security Agreement, fired herewith.
10.4 *	First Amendment to the Master Sale-Leaseback Agreement, filed herewith.
10.5	Amendment to Master Dealer Agreement, filed herewith.
10.6	Contribution 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.

* Confidential treatment requested as to certain portions, which portions have been provided separately to the Securities and Exchange Commission.

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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:	November 7, 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

Exhibit 10.1

THIRD AMENDMENT

THIRD AMENDMENT dated as of November 2, 2018 (this “Amendment”) to the Amended and Restated Master Purchase and Sale Agreement, dated as of March 6, 2017, as amended by the First Amendment, dated as of September 14, 2017, by the Second Amendment, dated as of November 3, 2017, and by Omnibus Amendment No. 2 to Basic Documents (Ally-Carvana Flow), dated as of January 4, 2018 (the “Master Purchase and Sale Agreement”), among CARVANA AUTO RECEIVABLES 2016-1 LLC, a Delaware limited liability company, as Transferor (the “Transferor”), ALLY BANK, a Utah chartered bank, as a Purchaser (in such capacity, a “Purchaser”), and ALLY FINANCIAL INC., a Delaware corporation, as a Purchaser (in such capacity, a “Purchaser” and, together with Ally Bank, the “Purchasers”).

W I T N E S S E T H:

WHEREAS, the Transferors and the Purchasers are parties to the Master Purchase and Sale Agreement pursuant to which the Purchasers have agreed to purchase specified portfolios of receivables and related property from the Transferor; and

WHEREAS, the parties wish to amend the Master Purchase and Sale Agreement to add and modify certain defined terms;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

1.1Defined Terms. Unless otherwise defined herein, capitalized terms used in the above recitals and in this Amendment are defined in and shall have the respective meanings assigned to them in (or by reference in) Appendix A to the Master Purchase and Sale Agreement.

SECTION 2. AMENDMENTS

2.1Amendments to Section 2.1 (Commitments to Sell and Purchase Receivables Pools). Section 2.1(a) and Section 2.1(b) of the Master Purchase and Sale Agreement is hereby amended as set forth below by inserting each term thereof which is double underlined in the place where such term appears below and deleting the stricken text:

(a)Transferor Obligation. Upon the terms and subject to the conditions set forth in this Agreement, and in reliance on the covenants, representations, warranties and agreements set forth herein, the Transferor commits to sell to the Purchasers one Receivables Pool each calendar week during the Commitment Period, except for the calendar weeks within the period from November 2, 2018 to November 24, 2018January 1, 2018 to January 15, 2018, with a total Cutoff Date Aggregate Outstanding Principal Balance for all such Receivables Pools sold during the Commitment Period, taken together, equal to the Commitment Amount and each Receivables Pool sold to the Purchaser shall have a Cutoff Date Aggregate Outstanding Principal Balance equal to at least 51%40% (adjusted downward for a nonmaterial amount resulting from application of the Selection Procedures, including the Freestyle Selection, at a Purchase Percentage of 51%40%) of the aggregate principal balance of all receivables originated by the Seller that meet the criteria described in the definition of “Eligible Receivable” during the second calendar week preceding the calendar week in which the related Closing Date shall occur related to such Receivables Pool during the Commitment Period; provided, that the Transferor shall not be obligated to sell any Receivables Pool if the related Second Step Receivables Purchase Price for such Receivables Pool is less than or equal to the Cutoff Date Aggregate Outstanding Principal Balance (collectively, the “Transferor Obligation”).

(b)Purchaser Obligation. Upon the terms and subject to the conditions set forth in this Agreement, including Section 2.1(c) below, and in reliance on the covenants, representations, warranties and agreements herein set forth, the Purchasers commit to purchase one Receivables Pool each calendar week during the Commitment Period, except for the calendar weeks within the period from November 2, 2018 to November 24, 2018January 1, 2018 to January 15, 2018, on each Closing Date designated by the Transferor pursuant to Section 4.1(a); provided that (i) the sum of the Cutoff Date Aggregate Outstanding Principal Balance for all Receivables Pools purchased during the Commitment Period shall not exceed the Commitment Amount, and (ii) the sum of the Cutoff Date Aggregate Outstanding Principal Balance for all Receivables Pools purchased during the period from the Extension Amendment Effective Date through December 31, 2017 shall not exceed $125,979,120 (the “Purchaser Obligation”).

2.2Amendments to Section 2.4 (Termination Options). Section 2.4(a)(iv) and Section 2.4(b)(xvi) of the Master Purchase and Sale Agreement are hereby amended as set forth below by inserting each term thereof which is double underlined in the place where such term appears below and deleting the stricken text:

(a)(iv) for any reason with one hundred eighty (180)ninety (90) days’ prior written notice to the Purchaser.

(b)(xvi) for any reason with one hundred eighty (180)ninety (90) days’ prior written notice to the Transferor; or

2.3Amendments to Section 6.2 (Conditions to Obligation of the Purchasers). Section 6.2(b) of the Master Purchase and Sale Agreement is hereby amended as set forth below by inserting each term thereof which is double underlined in the place where such term appears below and deleting the stricken text:

(b)Minimum Sales Amount. The Aggregate Outstanding Principal Balance as of the related Cutoff Date shall not be less than 51%40% (adjusted downward for a nonmaterial amount resulting from application of the Freestyle Selection at a Purchase Percentage of 51%40%) of the aggregate principal balance of all receivables meeting the criteria described in the definition of “Eligible Receivable” originated by the Seller during the second calendar week preceding the related Closing Date unless otherwise agreed by the Purchasers.

2.4Amendments to Appendix A (Definitions). Appendix A to the Master Purchase and Sale Agreement is hereby amended by:

(a)adding the following definitions of “Approved Financed Ancillary Products”, “Purchasing Guidelines & Parameters” and “Second Extension Amendment Effective Date” in the appropriate alphabetical order:

“Approved Financed Ancillary Products” means, the products mutually agreed to by the Purchasers and the Transferor with respect to vehicle service contracts, global positioning systems, gap insurance or waiver, prepaid maintenance, tire & wheel protection, paintless dent repair, and such other products as may be agreed to in writing by the Purchasers and Transferor from time to time.

“Purchasing Guidelines & Parameters” are as agreed upon by the Parties to the Master Purchase and Sale Agreement.

“Second Extension Amendment Effective Date” means November 2, 2018.”

(b) adding new paragraphs (xxxix), (xl) and (xli) to the Eligible Receivable definition, as set forth below:

“xxxix.No Receivable with a related Cutoff Date on or after the Second Extension Amendment Effective Date and secured by a Financed Vehicle includes Approved Financed Ancillary Products with parameters in excess of the ancillary product Purchasing Guidelines & Parameters;

xl.For Receivables with a related Cutoff Date on or after the Second Extension Amendment Effective Date, the Obligor has an ID Analytics Credit Optics 5.1 Auto score of not less than 450;

xli.No Receivable arises under a Contract that has been executed and delivered (or electronically authenticated) by, and constitutes the legal, valid and binding obligation of, more than one Obligor.”

(c)amending the following definitions as set forth below by inserting each term thereof which is double underlined in the place where such term appears below and deleting the stricken text:

“Commitment Amount” means the sum of (i) $1,500,000,000$1,250,000,000less 62.5% of the aggregate Outstanding Principal Balance of all retail installment sales contracts which would be Eligible Contracts under the definition thereof sold by the Seller during the Commitment Period to parties other than the Transferor plus (ii) the Outstanding Principal Balance of a Receivable that had been previously included in a Receivables Pool and was repurchased, remediated and resold to the Purchasers in a subsequent Receivables Pool.

“Commitment Period” means the period from the Second Extension Amendment Effective Date to the earliest of (i) the Scheduled Commitment Termination Date, (ii) the occurrence of a Commitment Termination Event and (iii) the purchase by the Purchasers of Receivables Pools with a total Cutoff Date Aggregate Outstanding Principal Balance in an amount equal to the Commitment Amount.

“Purchase Percentage” for an Origination Period, means, the percentage equal or greater than to (i) the aggregate Outstanding Principal Balance of all Receivables originated or acquired by the Seller to be sold to the Transferor on the related Closing Date pursuant to the Master Sale Agreement divided by (ii) the aggregate principal balance of all receivables originated or acquired by the Seller that meet the criteria described in the definition of “Eligible Receivable” during such Origination Period (which, for purposes of clause (ii) shall be reduced by the aggregate principal balance of receivables with respect to which the applicable obligor has exercised its right to return the related financed vehicle and terminate the related receivable). In the event that the Purchase Percentage is less than 100% in a Origination Period, the Commitment Amount shall be reduced by 62.5% of the amount that the Purchase Percentage has been reduced by with respect to the dollar value of the receivables that will not be sold to the Transferor for such Origination Period, provided, however, that in no event shall the Purchase Percentage be less than 51%40% and, in the event the Seller or the Transferor shall fail to notify the Purchasers of the Purchase Percentage for any Origination Period, the Purchase Percentage from the prior Origination Period shall apply; provided, further, however, in addition, for each Origination Period the Purchase Percentage under the Master Sale Agreement and the Master Purchase and Sale Agreement must be equal or greater than the purchase percentage for the corresponding origination period in the Master Sale Agreement (Warehouse).

“Scheduled Commitment Termination Date” means November 2, 2018November 1, 2019.”

and

(d) deleting the definition of “Master Sale Agreement (Warehouse)”.

SECTION 3.MISCELLANEOUS

3.1Effectiveness. This Amendment shall become effective as of the date first written above upon the receipt of the following:

(a)a signed counterpart to this Amendment, shall have been duly executed and delivered by each of the parties hereto,

(b)a signed counterpart to the Seventh Amended and Restated Letter Agreement re Master Purchase and Sale Agreement, dated as of the date hereof, shall have been duly executed and delivered by Carvana, LLC, Bridgecrest Credit Company, LLC, the Transferor, Ally Financial, and Ally Bank,

(c)a signed counterpart to the Third Amendment, dated as of the date hereof, to the Loan and Security Agreement, dated as of November 3, 2017, as amended by Omnibus Amendment No. 1, dated as of January 4, 2018, the First Amendment, dated as of August 7, 2018, and by the Second Amendment, dated as of October 4, 2018, shall have been duly executed and delivered by Sonoran Auto Receivables Trust 2017-1, the Transferor, Carvana, LLC and Ally Bank, and

(d)a signed counterpart to the Second Amended and Restated Fee Letter re Loan and Security Agreement, dated as of the date hereof, shall have been duly executed and delivered by Sonoran Auto Receivables Trust 2017-1, the Transferor, Carvana, LLC, Ally Bank and Bridgecrest Credit Company.

3.2Continuing Effect of the Master Purchase and Sale Agreement. Except as specifically amended and modified above, the Master Purchase and Sale Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Purchasers under the Master Purchase and Sale Agreement, nor constitute a waiver of any provision of the Master Purchase and Sale Agreement.

3.3Binding Effect. This Amendment shall be binding upon and inure to the benefit of the Purchasers, the Servicer and their respective successors and permitted assigns.

3.4Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. In case any provision in or obligation under this Amendment shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Amendment contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings other than any fee letter contemplated hereby.

3.5GOVERNING LAW, SUBMISSION TO JURISDICTION, ETC.

(a)THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF OR OF ANY OTHER JURISDICTION OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AMENDMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

(b)THE TRANSFEROR AND THE PURCHASERS HEREBY MUTUALLY AGREE TO SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF (a) ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT, ANY OTHER BASIC DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH OF THE TRANSFEROR AND THE PURCHASERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(c)THE TRANSFEROR AND THE PURCHASERS EACH HEREBY WAIVES (TO EXTENT THAT IT MAY LAWFULLY DO SO) ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS AMENDMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

[remainder of the page intentionally left blank]

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

CARVANA AUTO RECEIVABLES 2016-1, LLC,
as Transferor
By:	/s/ Paul Breaux
Name:	Paul Breaux
Title:	Vice President, Secretary, and General Counsel
ALLY BANK,
as Purchaser
By:	/s/ T. E. Elkins
Name:	T. E. Elkins
Title:	Senior Vice President, Direct Lending and Clearlane
ALLY FINANCIAL, INC.,
as Purchaser
By:	/s/ J. E. Schugel
Name:	J. E. Schugel
Title:	Chief Risk Officer

[SIGNATURES CONTINUE]

[Signature page to Third Amendment to Amended and Restated Master Purchase and Sale Agreement]

Agreed to and Accepted by:

CARVANA, LLC,
as Seller
By:	/s/ Paul Breaux
Name:	Paul Breaux
Title:	Vice President, Secretary, and General Counsel

[Signature page to Third Amendment to Amended and Restated Master Purchase and Sale Agreement]

Acknowledged by:

BRIDGECREST CREDIT COMPANY, LLC,
as Servicer
By:	/s/ Daniel Gaudreau
Name:	Daniel Gaudreau
Title:	Treasurer

[Signature page to Third Amendment to Amended and Restated Master Purchase and Sale Agreement]

EX-10.2

Exhibit 10.2

FIRST AMENDMENT

FIRST AMENDMENT, dated as of November 2, 2018 (this “Amendment”), to the Master Transfer Agreement, dated as of November 3, 2017 (the “Master Transfer Agreement”), between SONORAN AUTO RECEIVABLES TRUST 2017-1, a Delaware statutory trust (the “Trust”) and CARVANA AUTO RECEIVABLES 2016-1 LLC, a Delaware limited liability company (the “Transferor”).

W I T N E S S E T H:

WHEREAS, the Trust and the Transferor are parties to the Master Transfer Agreement pursuant to which the Transferor has agreed to sell, and the Trust has agreed to purchase, receivables that are in turn pledged by the Trust pursuant to that certain Loan and Security Agreement, dated as of November 3, 2017, between the Trust, the Transferor, Carvana, LLC, as trust administrator, Ally Bank, as the administrative agent and lender and the lenders party thereto from time to time (the “Loan and Security Agreement”); and

WHEREAS, the parties wish to amend the Master Transfer Agreement to specify a limit on the purchase obligation of the Trust.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

1.1.Defined Terms. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Master Transfer Agreement, and if not defined therein, in the Loan and Security Agreement.

SECTION 2. AMENDMENT

2.1.Amendment to Section 2.1(b). Section 2.1(b) of the Master Transfer Agreement is hereby amended by deleting the proviso thereof in its entirety and replacing it with the following:

“provided that (i) prior to November 2, 2018, in no event shall the Trust be obligated to purchase from Transferor hereunder Receivables with a principal amount exceeding an aggregate principal balance as of each Receivable’s applicable Closing Date of $357,142,857.14 plus the aggregate principal balance (as of each Receivable’s applicable resold Closing Date) of all Receivables previously sold to the Trust, repurchased, remediated, and resold to the Trust and (ii) on and after November 2, 2018, in no event shall the Trust be obligated to purchase additional Receivables from Transferor hereunder if, after giving effect to such additional purchase, the aggregate principal balance as of the applicable Closing Date of all Receivables purchased from Transferor on or after November 2, 2018 would exceed $1,363,636,363.64 plus the aggregate principal balance (as of each Receivable’s applicable resold Closing Date) of all Receivables previously sold to the Trust, repurchased, remediated, and resold to the Trust; providedfurther that the Trust shall have the right to terminate its agreement to purchase each such Receivables Pool described in Section 3.1(e) by providing ninety (90) days’ prior written notice of its intent to terminate to the Transferor.”

SECTION 3. MISCELLANEOUS

3.1.Effectiveness. This Amendment shall become effective as the date first written above (the “Effective Date”).

3.2.Representations and Warranties. Each of the Trust and the Transferor represents and warrants to the Initial Certificateholder that:

(a)the representations and warranties set forth in the Master Transfer Agreement and in the other Transaction Documents are true and correct in all material respects as of the date of this

Amendment (except to the extent such representations and warranties relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); provided that such materiality qualifier shall not apply if such representation or warranty is already subject to a materiality qualifier in the Master Transfer Agreement or such other Transaction Document; and

(b)(i) the execution, delivery, and performance of this Amendment are within the corporate power and authority of each of the Trust and the Transferor and have been duly authorized by appropriate proceedings and (ii) this Amendment constitutes a legal, valid, and binding obligation of each of the Trust and the Transferor, enforceable against each of the Trust and the Transferor in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the right s of creditors generally and general principles of equity; and

(c)as of the Effective Date and after giving effect to this Amendment, no Termination Event has occurred and is continuing.

3.3.Continuing Effect of the Master Transfer Agreement. Except as specifically amended and modified above, the Master Transfer Agreement is and shall continue to be in full force and effect and is here by in all respects ratified and confirmed. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any of party hereto under the Master Transfer Agreement, nor constitute a waiver of any provision of the Master Transfer Agreement.

3.4.Binding Effect. This Amendment shall be binding upon and inure to the benefit of the Trust and the Transferor and their respective successors and permitted assigns.

3.5.Counterparts. This Amendment may be executed in any number of counterparts and by different parties here to in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. In case any provision in or obligation under this Amendment shall be in valid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Amendment contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings.

3.6.GOVERNING LAW. THIS AMENDMENT 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 NON-EXCLUSIVE 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 IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

3.7.Concerning the Owner Trustee. It is expressly understood and agreed by the parties hereto that (a) this Amendment is executed and delivered by Wilmington Trust, National Association (“WTNA”), not individually or personally but solely as Owner Trustee of the Trust, 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 Trust 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 Trust, (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 Trust, 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 Trust in this Amendment and (e) under no circumstances shall WTNA be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Amendment or any other Transaction Documents.

[remainder of the page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the Effective Date.

CARVANA AUTO RECEIVABLES 2016-1
LLC, as Transferor
By:	/s/ Paul Breaux
Name:	Paul Breaux
Title:	General Counsel and Vice President
SONORAN AUTO RECEIVABLES TRUST
2017-1, as Trust
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

[Signature page to First Amendment to Master Transfer Agreement]

EX-10.3

Exhibit 10.3

SEVENTH AMENDMENT TO AMENDED AND RESTATED INVENTORY FINANCING AND SECURITY AGREEMENT

I. Parties

This Seventh Amendment to Amended and Restated Inventory Financing and Security Agreement (“Amendment”) is effective as of November 2, 2018, and is made by and among the following parties:

A.Ally Bank (Ally Capital in Hawaii, Mississippi, Montana and New Jersey), a Utah chartered state bank (“Bank”), with a business office located at 5851 Legacy Circle, Suite 200, Plano, TX 75024; and

B.Ally Financial Inc., a Delaware entity (“Ally”) with a business office located at 5851 Legacy Circle, Suite 200, Plano, TX 75024 (together with Bank, the “Ally Parties,” and Bank and Ally each being an “Ally Party”); and

C.Carvana, LLC, an Arizona limited liability company, with its principal executive office located at 4020 East Indian School Road, Phoenix, AZ 85018 (the “Dealership”).

II. Recitals

The essential facts relied on by Bank, Ally and the Dealership as true and complete, and giving rise to this Agreement, are as follows:

A.The Ally Parties and the Dealership are parties to an Amended and Restated Inventory Financing and Security Agreement, effective as of July 27, 2015, as amended by certain documents and agreements, including, but not necessarily limited to, the following:

(i)a Letter Agreement, dated December 30, 2015, by and among the Ally Parties, the Dealership, Ernest C. Garcia II, and 2014 Fidel Family Trust;

(ii)an Amendment to Amended and Restated Inventory Financing and Security Agreement, effective as of December 30, 2015;

(iii)a Third Amendment to Amended and Restated Inventory Financing and Security Agreement, effective as of November 9, 2016;

(iv)a Fourth Amendment to Amended and Restated Inventory Financing and Security Agreement, effective as of March 31, 2017;

(v)a Fifth Amendment to Amended and Restated Inventory Financing and Security Agreement, effective as of June 5, 2017; and

(vi)a Sixth Amendment to Amended and Restated Inventory Financing and Security Agreement, effective as of August 4, 2017

(collectively, the “IFSA”).

B.The parties desire to amend the IFSA as outlined in this Amendment.

III. Agreement

In consideration of the premises and the mutual promises in this Amendment, which are acknowledged to be sufficient, the Ally Parties and the Dealership agree to the following:

A.Capitalized terms used but not defined in this Amendment have the meanings given to them in the IFSA.

B.In connection with the Dealership’s request that the Ally Parties extend their commitment to provide financing, each of the Ally Parties commits to provide Inventory Financing to Dealership until October 31, 2020 (the “Extended Expiration Date”). At least 45 calendar days before the Extended Expiration Date, Dealership may request the Ally Parties extend this commitment by an additional period, and the Ally Parties may, in their sole

discretion, so extend the commitment. If the Ally Parties extend the commitment term, then, at least 45 calendar days before the end of such term, the Dealership may request the Ally Parties extend the commitment, and the Ally Parties may, in their sole discretion, further extend the commitment. This modifies Subsection III.A(2)(a) of the IFSA.

C.Section III.A.3 of the IFSA is amended and restated in its entirety as follows:

3.Amount of the Credit Line. The aggregate amount of the credit available pursuant to this Agreement (the “Credit Line”) shall be as follows:

(a)From August 4, 2017 through December 31, 2017 — $275,000,000.00;

(b)From January 1, 2018 through November 1, 2018 — $350,000,000.00; and

(c)From November 2, 2018 through October 31, 2020 — $650,000,000.00.

D.Dealership will pay the Ally Parties a one-time non-refundable “Seventh Amendment Commitment Fee” equal to [***], payable on the effective date of this Amendment.

E.Effective as of November 2, 2018, the Interest rate is 1‑M LIBOR Index Rate plus an “Increment” of 340 basis points. This modifies Subsection III.B(1) of the IFSA.

F.Section III.B(1) of the IFSA is further amended by adding the following at the end of such subsection:

The parties acknowledge that London Interbank Offered Rate (“LIBOR”) may be phased out in the future. In the event that the Ally Parties will no longer utilize a LIBOR-based rate for this Credit Line, the “1-M LIBOR Index Rate” will be re-defined as the successor base or reference rate applicable to this Credit Line designated by the Ally Parties in their reasonable discretion. In such event, the Increment may also be adjusted by the Ally Parties so that the total interest rate paid by the Dealership immediately after the conversion from the LIBOR-based rate will approximate the total interest rate paid by the Dealership immediately prior to the conversion. The Dealership will be notified of these changes, which will be made without requiring the necessity of an amendment to this Agreement.

G.All other provisions of the IFSA remain unchanged and in full force and effect as written. In the event of a conflict between the terms of the IFSA and this Amendment, the terms of this Amendment prevail.

H. Except as provided above, the IFSA and all other agreements between each of the Ally Parties and the Dealership remain in full force and effect as written.

I.If any provision of this Amendment is held to be invalid or unenforceable by a court of competent jurisdiction, all other provisions remain valid and enforceable.

J.This Amendment:

a.May be modified only by a writing signed by all parties.

b.May be signed in counterparts, each of which is deemed an original, and all of which taken together constitute one and the same agreement. The signatures of the parties, exchanged via fax or e-mail, shall constitute and be deemed original signatures for all purposes.

c.Binds and inures to the benefit of the parties and their respective successors and assigns.

d.Constitutes the entire agreement of the parties with respect to its subject matter.

---------------

[***] Indicates that text has been omitted which is the subject of a confidential treatment request. The text has been separately filed with the Securities and Exchange Commission.

IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed by its duly authorized representative effective the date first written above.

	Ally Bank		Carvana, LLC
Signature:	/s/ Stephen B. Gambrel	Signature:	/s/ Paul Breaux
By (Print):	Stephen B. Gambrel	By (Print):	Paul Breaux
Title:	Authorized Representative	Title:	General Counsel and Vice President
Date:	11/2/2018	Date:	11/2/2018
	Ally Financial Inc.
Signature:	/s/ Stephen B. Gambrel
By (Print):	Stephen B. Gambrel
Title:	Authorized Representative
Date:	11/2/2018

EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO

MASTER SALE-LEASEBACK AGREEMENT

I. PARTIES

This First Amendment to the Master Sale-Leaseback Agreement (“Amendment”) is effective as of November 1, 2018, and is made by and between the following parties:

A.CARVANA, LLC, an Arizona limited liability company (“Carvana”) and

B.VMRE, LLC, a Delaware limited liability company (“VMRE”).

II. RECITALS

The essential facts relied on by Carvana and VMRE as true and complete, and giving rise to this Amendment, are as follows:

A.Carvana and VMRE are parties to a certain Master Sale-Leaseback Agreement, effective as of November 3, 2017 (“MSLA”).

B.Under the terms of the MSLA, Carvana agreed to sell, convey, transfer, assign, and deliver to VMRE, and VMRE agreed to accept from Carvana all of Carvana’s right, title, and interest in certain Properties.

C.The parties desire to amend the MSLA as outlined in this Amendment.

III. AGREEMENT

Carvana and VMRE agree to the following:

1.Capitalized terms used but not defined in this Amendment have the meanings given to them in the MSLA.

2.Section 3.1 of the MSLA is amended and restated in its entirety as follows:

Purchase Facility. Commencing as of the Effective Date and continuing through the third anniversary of the Effective Date (the “Facility Term”), and subject to the terms of this Agreement, VMRE shall purchase Properties from Carvana from time to time, provided that at no time during the Facility Term will the aggregate amount of the Purchase Price for the Properties purchased by VMRE exceed $75,000,000 (the “Facility Cap”). Additionally, the sum of the aggregate amount of the Purchase Price of the Properties purchased by VMRE and the amount not yet disbursed under Budgets approved pursuant to the applicable Disbursement Agreements shall not exceed $100,000,000. The Properties to be purchased by VMRE shall be limited to (a) Properties used by Carvana in the operation of Carvana’s Business related to the fulfilling of the purchases of automobiles by customers utilizing automobile “vending machines” and (b) one non-vending machine Property related to the operation of Carvana’s Business of inspecting, repairing, reconditioning and storing vehicles (the “Permitted Operations”), unless otherwise explicitly consented to by VMRE in writing. To the extent that any Property is repurchased from VMRE during the Facility Term pursuant to Section 3.5, the amount paid to VMRE (but not exceeding the Purchase Price) (x) shall not be included in any calculation of the aforementioned limitation set forth in this Section 3.1 and (y) may be reallocated to permit the purchase of additional Properties and/or Improvements during the Facility Term up to, but not exceeding the Facility Cap.

4.As consideration for extending the Facility Term, Carvana shall pay VMRE a one-time non-refundable “First Amendment Commitment Fee” equal to [***] of the Facility Cap in the amount of [***], which amount shall be paid by Carvana upon execution of this Amendment.

5.All other provisions of the MSLA remain unchanged and in full force and effect as written. In the event of a conflict between the terms of the MSLA and this Amendment, the terms of this Amendment shall prevail.

6.If any provision of this Amendment is held to be invalid or unenforceable by a court of competent jurisdiction, all other provisions shall remain valid and enforceable.

7.This Amendment:

a.May be modified only by a writing signed by both parties.

b.May be signed in counterparts, each of which is deemed an original, and all of which taken together constitute one and the same agreement. The signatures of the parties, exchanged via e-mail, shall constitute and be deemed original signatures for all purposes.

c.Binds and inures to the benefit of the parties and their respective successors and assigns.

d.Constitutes the entire agreement of the parties with respect to its subject matter.

[Remainder of page intentionally left blank; signature page to follow]

[***] Indicates that text has been omitted which is the subject of a confidential treatment request. The text has been separately filed with the Securities and Exchange Commission.

IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed by its duly authorized representative effective the date first written above:

CARVANA, LLC,
an Arizona limited liability company
BY:	/s/ Paul Breaux
PRINT NAME:	Paul Breaux
TITLE:	General Counsel
VMRE, LLC,
a Delaware limited liability company
BY:	[***]
PRINT NAME:	[***]
TITLE:	[***]

[***] Indicates that text has been omitted which is the subject of a confidential treatment request. The text has been separately filed with the Securities and Exchange Commission.

EX-10.5

Exhibit 10.5

Effective 10/1/2018 this Dealer Agreement Addendum (“Addendum”) attaches to and becomes a part of the Dealer Agreement (“Agreement”) previously entered into between SilverRock Automotive, Inc. and SilverRock Automotive of Florida, Inc. (Collectively “SilverRock Automotive” or “Company”) and Carvana, LLC (“Dealer”). If Dealer consists of more than one Dealer, this Addendum attaches to and becomes a part of the Agreements of each of the Dealers listed in Section 4 of this Addendum.

Whereas the parties wish to amend the Agreement for the Dealer’s participation in the Dealer Profit Sharing Program (“Program”).

Definitions: The capitalized terms used herein shall have the following meanings:

a.Calculation Date: The dates, June 30^th and December 31st, on which Underwriting Profit calculations will be performed each year this Addendum is in effect.

b.Calendar Year Pool: QualifyingContracts sold between January 1 and December 31 of each year, including any contracts the Dealer issued which the Company is the obligor either directly or through risk transfer.

c.Claims: The cost of vehicle repairs, benefits, and loss adjustment expenses which have been paid or approved under the terms of Qualifying Contracts.

d.Net Earned Reserve: That portion of the Reserve, net of cancellation refunds, related to the portion of Claims expected to occur during a specific period of time during the term of a Qualifying Contract.

e.Inception-to-Date: Is the period of time between the effective date of a Qualifying Contract and the Calculation Date.

f.Loss Ratio: Claims divided by Net Earned Reserves, expressed as a percentage, as of the Calculation Date.

g.Profit Share: The amount of Underwriting Profit that Dealer earns if Loss Ratio targets are met; it is calculated as the Calendar Year Pool’s Underwriting Profit at the Calculation Date less previous Profit Share distributions.

h.Payment Date: The dates, August 31st and February 28th, immediately following the Calculation Dates by which any amounts due under this Addendum will be paid.

i.Qualifying Contracts: Company service contracts with terms of twelve (12) months or longer which were sold by Dealer pursuant to the Dealer Agreement and which have not been cancelled and fully (100%) refunded, in addition to those service contracts sold prior to the Dealer Agreement which have subsequently been transferred to the Company as obligor and which have not been cancelled and fully (100%) refunded.

j.Reserve: Dollar amounts, determined by Company using relevant historical loss experience, which have been set aside for the payment of Claims.

k.Underwriting Profit: Amount by which Net Earned Reserve exceeds Claims and taxes or fees for Qualifying Contracts.

l.Underwriting Loss: Amount by which Claims and taxes or fees exceeds Net Earned Reserve for Qualifying Contracts.

Now therefore, in consideration of the agreements contained herein to be mutually kept and performed, the parties agree to the following:

Program Terms and Qualification

a.Qualifying Contracts shall be aggregated into Calendar Year Pools.

b.Dealer must maintain Loss Ratio of less than one-hundred percent (100%) and Underwriting Profit on an Inception-to-Date basis for all Calendar Year Pools in the aggregate to be eligible for Profit Share.

c.Underwriting Profit will be calculated for each Calendar Year Pool as follows: sum of Net Earned Reserves less paid or approved claims, and less any applicable federal, state or local taxes or fees paid.

d.If Loss Ratio requirements are met, Dealer’s Profit Share for any Calendar Year Pool will be calculated as the Underwriting Profit less previous Calendar Year Pool Profit Share distributions.

e.When distributing the Dealer’s Profit Share, the Company shall, at its sole discretion, have the right to offset Calendar Year Pools that have Underwriting Profit against Calendar Year Pools that have Underwriting Loss at each Calculation Date.

f.First remittance of Profit Share for any Calendar Year Pool shall be made to Dealer on the Payment Date following the first Calculation Date after Net Earned Reserve exceeds a certain percentage of Reserve to be determined by the parties from time to time less cancellation refunds. Subsequent payments will be made every six (6) months thereafter.

g.This Addendum terminates automatically upon termination of the Dealer Agreement.

h.This Addendum can be terminated by either party with ninety (90) days’ prior written notice.

i.This Addendum terminates automatically upon any of the following acts by Dealer: fraud or intentional misconduct against Company, filing for bankruptcy, insolvency, assignment for benefit of creditors or any act of similar or like nature.

j.Upon termination, all Profit Share payments on existing Calendar Year Pools will continue to be paid out to the Dealer according to the terms and qualifications above until the total Underwriting Profit or Underwriting Loss is fully realized.

k.Company has the right to offset Profit Share payments under this Addendum by any amounts Dealer owes to Company under the Agreement.

IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by their duly authorized representatives.

SilverRock:		Dealer:
SilverRock Automotive, Inc.		Carvana, LLC
1720 W Rio Salado Pkwy		1930 W Rio Salado Pkwy
Tempe, AZ 85281		Tempe, AZ 85281
Signature:	/s/ Daniel Gaudreau	Signature:	/s/ Mark Jenkins
	Authorized Representative of SilverRock		Authorized Representative of Dealer
Name:	Daniel Gaudreau	Name:	Mark Jenkins
Title:	Treasurer	Title:	CFO
Date:	10/31/18	Date:	11/05/18
SilverRock Automotive of Florida, Inc.
1720 W Rio Salado Pkwy
Tempe, AZ 85281
Signature:	/s/ Mark Sauder
	Authorized Representative of SilverRock
Name:	Mark Sauder
Title:	President
Date:	10/31/18

EX-10.6

Exhibit 10.6

CARVANA CO.

CONTRIBUTION AGREEMENT

This Contribution Agreement (this “Agreement”) is made and entered into as of November 6, 2018 by and between Carvana Co., a Delaware corporation (the “Company”), and Ernest C. Garcia III (“Mr. Garcia”).

WHEREAS, Mr. Garcia wishes to transfer 32,932 shares of the Company’s common stock to the Company (the “Contributed Shares”);

WHEREAS, the Company desires to accept the Contributed Shares as a contribution to the capital of the Company; and

WHEREAS, the Compensation and Nominating Committee of the Company desires to approve restricted stock awards to certain employees of the Company and its subsidiaries under the Carvana Co. Omnibus Incentive Plan in an aggregate number of shares of the Company’s common stock equivalent to the Contributed Shares.

NOW, THEREFORE, the parties hereto agree as follows:

1.Contribution. On November 9, 2018 (the “Contribution Date”), Mr. Garcia shall contribute and transfer the Contributed Shares to the Company (the “Contribution”), without any cost or charge to the Company except as set forth in Section 5 below.

2.Acknowledgement. Mr. Garcia acknowledges that from and after the Contribution Date, the Company will be the owner of all right, title and interest in and to the Contributed Shares. In furtherance of the foregoing, from and after the Contribution Date, Mr. Garcia shall not at any time do or suffer to be done any act or thing which may adversely affect any rights of the Company in and to the Contributed Shares.

3.Representations and Warranties.

(a)Company represents and warrants that: (i) it has all necessary power and authority to enter into and perform this Agreement, and (ii) this Agreement constitutes a valid and binding obligation which is enforceable against Company in accordance with its terms.

(b)Mr. Garcia represents and warrants that: (i) he has good title to the Contributed Shares, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest, (ii) he has all necessary power and authority to enter into and perform this Agreement, and (iii) this Agreement constitutes a valid and binding obligation which is enforceable against Mr. Garcia in accordance with its terms.

4.Disclosure of Information. Mr. Garcia believes he has received all the information he considers necessary or appropriate for deciding whether to contribute the Contributed Shares to the Company pursuant to this Agreement. Mr. Garcia further represents that he has had an opportunity to ask questions and receive answers from the Company regarding the business, properties, prospects and financial condition of the Company.

5.Tax Indemnification. The Company will be solely liable for, and shall indemnify and hold harmless Mr. Garcia for, any and all Taxes (as defined below) incurred by Mr. Garcia as a result of the Contribution. As used herein, “Taxes” means all federal, state, local, foreign and other income, net income, gross income, gross receipts, estimated, add-on minimum, sales, use, ad valorem, gift, transfer, franchise,profits, registration, license, lease, service, service use, withholding, payroll, employment, unemployment, social security, welfare, workers’ compensation, disability, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties, levies, tariff, impost, escheat or other taxes, fees, assessments or charges of any kind whatsoever.

6.Further Assurances. From time to time, and without any further consideration, the parties hereto agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale, conveyances, instruments, notices, releases, acquittances and other documents, and to do all such other acts and things, all in accordance with applicable law, as may be necessary or appropriate (a) more fully to ensure that the applicable parties hereto own all of the properties, rights, titles, interests, estates, remedies, powers and privileges granted by this Agreement, or which are intended to be so granted, (b) more fully and effectively to vest in the applicable parties hereto and their respective successors and assigns beneficial and record title to the Contributed Shares assigned by this Agreement or intended to be so and (c) more fully and effectively to carry out the purposes and intent of this Agreement.

7.No Third Party Rights. The provisions of this Agreement are intended to bind the parties hereto as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement.

8.Specific Enforcement. It is agreed and understood that monetary damages would not adequately compensate an injured party for the breach of this Agreement by any party, that this Agreement shall be specifically enforceable, and that any breach or threatened breach of this Agreement shall be the proper subject of a temporary or permanent injunction or restraining order. Further, each party hereto waives any claim or defense that there is an adequate remedy at law for such breach or threatened breach. In any action, proceeding or dispute, with or without litigation, arising out of this Agreement, the successful party therein, regardless of whether the matter is pursued to judgment or is voluntarily dismissed, shall be entitled to recover from the other party thereto the reasonable attorneys’ and paralegals’ fees and all other expenses and/or costs incurred by the successful party in connection therewith.

9.Amendments and Waivers. Any term hereof may be amended and the observance of any term hereof may be waived only with the written consent of each party hereto. Any amendment or waiver so effected shall be binding upon the Company and Mr. Garcia and any assignee or transferee thereof.

10.Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

11.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

12.Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

13.Captions. The captions, headings and arrangements used in this Agreement are for convenience only and do not in any way limit or amplify the terms and provisions hereof.

14.Entire Agreement. This Agreement contains the entire understanding of the parties and there are not further or other agreements or understandings, written or oral, in effect between the parties relating to the subject matter hereof except as expressly referred to herein

15.Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successor and assigns of the parties.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

CARVANA CO.
By:	/s/ Paul Breaux
Name:	Paul Breaux
Title:	General Counsel and Secretary
ERNEST C. GARCIA III
/s/ Ernest C. Garcia III

[Contribution Agreement - Signature Page]

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

5. 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:	November 7, 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

5. 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:	November 7, 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 September 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:	November 7, 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 September 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:	November 7, 2018	/s/ Mark Jenkins
		Mark Jenkins
		Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 02, 2018
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
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)		38,849,394
Class B
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		105,215,869

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 439,794	$ 172,680
Restricted cash	18,471	14,443
Accounts receivable, net	23,498	14,105
Finance receivables held for sale, net	88,151	45,564
Vehicle inventory	339,005	227,446
Other current assets	26,446	15,480
Total current assets	935,365	489,718
Property and equipment, net	251,942	148,681
Intangible assets, net	9,243	0
Goodwill	9,353	0
Other assets	6,200	2,738
Total assets	1,212,103	641,137
Current liabilities:
Accounts payable and accrued liabilities	96,861	50,306
Accounts payable due to related party	3,512	1,802
Floor plan facility	349,392	248,792
Current portion of other long-term debt	7,838	5,131
Total current liabilities	457,603	306,031
Senior unsecured notes	342,481	0
Other long-term debt, excluding current portion	96,179	48,469
Other liabilities	9,072	7,093
Total liabilities	905,335	361,593
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock	0	0
Additional paid in capital	130,284	41,375
Accumulated deficit	(45,949)	(12,899)
Total stockholders' equity attributable to Carvana Co.	109,106	125,736
Non-controlling interests	197,662	153,808
Total stockholders' equity	306,768	279,544
Total liabilities & stockholders' equity	1,212,103	641,137
Class A Convertible Preferred Stock
Stockholders' equity:
Preferred stock	24,627	97,127
Class A
Stockholders' equity:
Common stock	38	18
Class B
Stockholders' equity:
Common stock	$ 106	$ 115

XML

Condensed Consolidated Balance Sheets (Unaudited) - Parenthetical - USD ($)	Sep. 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
Class A 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)	25,000	100,000
Preferred stock, shares issued (in shares)	25,000	100,000
Preferred stock, shares outstanding (in shares)	25,000	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)	38,269,000	18,096,000
Common stock, shares outstanding (in shares)	38,269,000	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)	105,813,000	114,664,000
Common stock, shares outstanding (in shares)	105,813,000	114,664,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Sales and operating revenues:
Used vehicle sales, net		$ 486,269	$ 208,113	$ 1,258,247	$ 550,442
Wholesale vehicle sales		21,440	7,459	48,195	21,003
Other sales and revenues, including $, $2,414, $ and $6,070, respectively, from related parties		27,212	9,807	64,187	22,372
Net sales and operating revenues		534,921	225,379	1,370,629	593,817
Cost of sales		477,615	204,963	1,230,054	547,616
Gross profit		57,306	20,416	140,575	46,201
Selling, general and administrative expenses		115,768	58,676	294,606	156,595
Interest expense, including $0, $0, $0 and $1,382, respectively, to related parties		5,649	838	13,355	5,404
Other expense, net		308	671	955	1,280
Net loss before income taxes		(64,419)	(39,769)	(168,341)	(117,078)
Income tax provision		0	0	0	0
Net loss		(64,419)	(39,769)	(168,341)	(117,078)
Net loss attributable to non-controlling interests		(48,377)	(35,389)	(135,291)	(59,717)
Net loss attributable to Carvana Co.		(16,042)	(4,380)	(33,050)	(57,361)
Dividends on Class A convertible preferred stock		(1,230)	0	(3,950)	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		$ (17,272)	$ (4,380)	$ (38,380)	$ (57,361)
Class A
Sales and operating revenues:
Net loss per share of Class A common stock, basic and diluted (in dollars per share)	[1]	$ (0.50)	$ (0.29)	$ (1.43)	$ (0.86)
Weighted-average shares of Class A common stock, basic and diluted (in shares)	[1],[2]	34,655	15,045	26,927	15,024

[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.

XML

Condensed Consolidated Statements of Operations (Unaudited) - Parenthetical - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Other sales and revenues, from related parties	$ 6,696	$ 2,414	$ 16,351	$ 6,070
Interest expense, from related parties	$ 0	$ 0	$ 0	$ 1,382

XML

Condensed Consolidated Statements of Stockholders' Equity / Members' Deficit (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Restricted Stock Units	Carvana Group	Class A	Class A Restricted Stock Units	Car360	Class A Convertible Preferred Stock	Members' Deficit	Preferred Stock Class A Convertible Preferred Stock	Common Stock Class A	Common Stock Class A Restricted Stock Units	Common Stock Class B	Additional Paid-in Capital	Additional Paid-in Capital Carvana Group	Additional Paid-in Capital Class A Convertible Preferred Stock	Accumulated Deficit	Non-controlling Interests	Non-controlling Interests Car360	Non-controlling Interests Class A Convertible Preferred Stock	Follow-On Public Offering	Follow-On Public Offering Common Stock Class A	Follow-On Public Offering Additional Paid-in Capital	Follow-On Public Offering Non-controlling Interests
Members' Deficit, beginning of the period at Dec. 31, 2016								$ (115,961)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss prior to Organizational Transactions	$ (117,078)
Net loss subsequent to Organizational Transactions	(117,078)
Accretion of beneficial conversion feature on Class A convertible preferred stock	0
Stockholders' Equity, end of the period (in shares) at Sep. 30, 2017										15,513		117,236
Stockholders' Equity, end of the period at Sep. 30, 2017	227,476									$ 16		$ 117	$ 35,447			$ (7,419)	$ 199,315
Stockholders' Equity, beginning of the period (in shares) at Dec. 31, 2017									100	18,096		114,664
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 prior to Organizational Transactions	(168,341)															(33,050)	(135,291)
Conversion of Class C Redeemable Preferred Units for Class A Units									(73,880)	4			73,876
Issuance, net of underwriters' discounts and commissions and offering expenses, value																				$ 172,287	$ 7	$ 172,280
Issuance, net of underwriters' discounts and commissions and offering expenses (in shares)		200			200						162										6,600
Net loss subsequent to Organizational Transactions	(168,341)															(33,050)	(135,291)
Adjustments to non-controlling interests										9		$ (9)	13,203		$ (51,289)		(13,203)	$ 1,297	$ 51,289			(132,375)	$ 132,375
Conversion of Class A Convertible Preferred Stock									$ (73,880)	$ 4			73,876
Conversions of Class A Convertible Preferred Stock (in shares)				3,800			75		75	3,808
Issuance of restricted stock awards, net of forfeitures						$ 9,981												9,981
Restricted stock surrendered in lieu of withholding taxes	(1,376)												(1,376)
Restricted stock surrendered in lieu of withholding taxes (in shares)										(64)
Equity-based compensation expense	17,981												17,981
Accretion of beneficial conversion feature on Class A convertible preferred stock	(1,380)						$ 1,380								(1,380)
Dividends on Class A Convertible Preferred Stock	(3,950)												(3,950)
Exchanges of LLC Units (in shares)										9,783		(8,851)
Exchanges of LLC Units										$ 9		$ (9)	13,203		$ (51,289)		(13,203)	$ 1,297	$ 51,289			$ (132,375)	$ 132,375
Establishment of deferred tax assets related to increases in tax basis in Carvana Group			$ 73,961											$ 73,961
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group			$ (73,961)											$ (73,961)
Contribution of Class A common stock from related party (in shares)										(165)
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes	(1,376)												(1,376)
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes (in shares)										(64)
Options exercised	642												642
Options exercised (in shares)										49
Stockholders' Equity, end of the period (in shares) at Sep. 30, 2018									25	38,269		105,813
Stockholders' Equity, end of the period at Sep. 30, 2018	$ 306,768								$ 24,627	$ 38		$ 106	$ 130,284			$ (45,949)	$ 197,662

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash Flows from Operating Activities:
Net loss subsequent to Organizational Transactions	$ (168,341)	$ (117,078)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	16,301	7,746
Loss on disposal of property and equipment	542	882
Provision for bad debt and finance receivable allowance	1,375	805
Gain on loan sales	(35,655)	(14,982)
Equity-based compensation expense	17,981	3,989
Amortization and write-off of debt issuance costs	1,055	1,407
Originations of finance receivables	(872,382)	(361,265)
Proceeds from sale of finance receivables	1,114,304	361,659
Payments to Acquire Finance Receivables	(253,041)	0
Changes in assets and liabilities:
Accounts receivable	(9,434)	(6,159)
Vehicle inventory	(110,312)	(5,962)
Other current assets	(11,879)	(1,206)
Other assets	(420)	(1,722)
Accounts payable and accrued liabilities	44,827	8,694
Accounts payable to related party	1,710	258
Other liabilities	(506)	6,920
Net cash used in operating activities	(263,875)	(116,014)
Cash Flows from Investing Activities:
Purchases of property and equipment	(107,228)	(59,408)
Payments to Acquire Businesses, Gross	(6,670)	0
Net cash used in investing activities	(113,898)	(59,408)
Cash Flows from Financing Activities:
Proceeds from floor plan facility	1,297,419	674,411
Payments on floor plan facility	(1,196,819)	(644,641)
Proceeds from issuance of senior unsecured notes	350,000	0
Proceeds from Verde Credit Facility	0	35,000
Payments on Verde Credit Facility	0	(35,000)
Proceeds from long-term debt	46,179	7,596
Payments on long-term debt	(8,817)	(1,137)
Payments of debt issuance costs, including $0 and $1,000 to related parties, respectively	(6,309)	(1,000)
Net proceeds from issuance of Class A common stock	172,287	206,323
Proceeds from exercise of stock options	642	28
Tax withholdings related to restricted stock awards	(1,376)	(399)
Dividends paid on Class A Convertible Preferred Stock	(4,279)	0
Net cash provided by financing activities	648,915	241,181
Net increase in cash, cash equivalents and restricted cash	271,142	65,759
Cash, cash equivalents and restricted cash at beginning of period	187,123	49,450
Cash, cash equivalents and restricted cash at end of period	458,265	115,209
Class A Convertible Preferred Stock
Cash Flows from Financing Activities:
Dividends paid on Class A Convertible Preferred Stock	(4,300)
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	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Statement of Cash Flows [Abstract]
Payments of debt issuance costs to related parties	$ 0	$ 1,000

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Business Organization

9 Months Ended

Sep. 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 September 30, 2018, Carvana Co. owned approximately 25.5% of Carvana Group and the LLC Unitholders owned the remaining 74.5%.

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

9 Months Ended

Sep. 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 September 30, 2018, results of operations for the three and nine months ended September 30, 2018 and 2017, and cash flows and changes in stockholders'

equity for the nine months ended September 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 September 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, the issuance of senior unsecured notes for net proceeds of approximately $342.5 million on September 21, 2018, 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 $0.6 million available under the Floor Plan Facility to fund future vehicle inventory purchases as of September 30, 2018. The Company amended the Floor Plan Facility on November 2, 2018 to increase the amount by $300.0 million and extend the maturity date to October 31, 2020. 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 September 30, 2018, the Company sells finance receivables under multiple agreements. On November 2, 2018, the Company increased the available amount under and extended these facilities. 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 nine months ended September 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 upon 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 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 September 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 nine months ended September 30, 2017, changes in restricted cash included within cash used in investing activities, as originally presented, was approximately $1.5 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 its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13") related to updated requirements over the disclosures of fair value measurements. Under ASU 2018-13, certain disclosure requirements for fair value measurements will be eliminated, modified or added to facilitate better communication around recurring and nonrecurring fair value measurements. ASU 2018-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with some amendments applied prospectively, some applied retrospectively and early adoption permitted. The Company plans to adopt ASU 2018-13 for its fiscal year beginning January 1, 2020 and is currently assessing the impact the guidance will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The intent of this pronouncement is to align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software as defined in ASC 350-40. Under ASU 2018-15, the capitalized implementation costs related to a cloud computing arrangement will be amortized over the term of the arrangement and all capitalized implementation amounts will be required to be presented in the same line items of the financial statements as the related hosting fees. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company plans to adopt ASU 2018-15 for its fiscal year beginning January 1, 2020 and is currently assessing the impact, if any, the guidance will have on its consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). ASU 2018-17 requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety for determining whether a decision-making fee is a variable interest. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the amendments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company is currently assessing the impact, if any, the guidance will have on its consolidated financial statements.

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Property and Equipment, Net

9 Months Ended

Sep. 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 September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018		December 31, 2017
Land and site improvements	$	44,042	$	11,656
Buildings and improvements	108,116		60,804
Transportation fleet	52,742		39,153
Software	32,335		21,009
Furniture, fixtures and equipment	18,005		12,239
Total property and equipment excluding construction in progress	255,240		144,861
Less: accumulated depreciation and amortization on property and equipment	(36,836)		(20,453)
Property and equipment excluding construction in progress, net	218,404		124,408
Construction in progress	33,538		24,273
Property and equipment, net	$	251,942	$	148,681

Depreciation and amortization expense on property and equipment was approximately $6.1 million and $3.1 million for the three months ended September 30, 2018 and 2017, respectively, and approximately $15.6 million and $7.7 million for the nine months ended September 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

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets, Net [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 and a related deferred tax liability of approximately $2.5 million. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed and the deferred tax liability was approximately $9.4 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 September 30, 2018 (in thousands):

	Useful Life	September 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		(696)
Intangible assets, net		$	9,243
Goodwill	N/A	$	9,353

Amortization expense during the three and nine months ended September 30, 2018 was approximately $0.4 million and $0.7 million, respectively. As of September 30, 2018, the remaining weighted-average amortization period for definite-lived intangible assets was approximately 6.3 years. The anticipated annual amortization expense to be recognized in future years as of September 30, 2018 is as follows (in thousands):

	Expected Future Amortization
Remainder of 2018	$	374
2019	1,494
2020	1,494
2021	1,494
2022	1,494
Thereafter	2,893
Total	$	9,243

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Accounts Payable and Other Accrued Liabilities

9 Months Ended

Sep. 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 September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018		December 31, 2017
Accounts payable	$	28,972	$	10,546
Sales taxes and vehicle licenses and fees	22,604		9,034
Reserve for returns and cancellations	9,501		4,545
Accrued compensation and benefits	7,991		5,054
Accrued property and equipment	7,138		8,325
Accrued advertising costs	3,835		4,265
Accrued interest	2,506		774
Other accrued liabilities	14,314		7,763
Total accounts payable and other accrued liabilities	$	96,861	$	50,306

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Related Party Transactions

9 Months Ended

Sep. 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 and 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 September 30, 2018, total costs related to these lease agreements were approximately $2.2 million with approximately $1.2 million and $1.0 million allocated to inventory and selling, general and administrative expenses, respectively. During the nine months ended September 30, 2018, total costs related to these lease agreements were approximately $6.7 million with approximately $3.3 million and $3.4 million allocated to inventory and selling, general and administrative expenses, respectively. During the three months ended September 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 nine months ended September 30, 2017, total costs related to these lease agreements were approximately $5.2 million with approximately $1.8 million and $3.4 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 nine months ended September 30, 2018, the rent expense incurred related to this first floor sublease was approximately $0.2 million and $0.6 million, respectively. During the three and nine months ended September 30, 2017, the rent expense incurred related to this first floor sublease was approximately $0.2 million and $0.5 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 $6.7 million and $16.4 million during the three and nine months ended September 30, 2018, respectively, and approximately $2.4 million and $6.1 million during the three and nine months ended September 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 $0.1 million and $0.2 million during the three and nine months ended September 30, 2018, respectively, and $0.0 million during the both the three and nine months ended September 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 $0.0 million, respectively, under this agreement during the three months ended September 30, 2018 and 2017, respectively, and approximately $0.4 million under this agreement during each of the nine months ended September 30, 2018 and 2017.

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, which was amended and restated in April 2017, 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 September 30,

2018 and December 31, 2017, approximately $3.5 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.

Contribution Agreement

On September 12, 2018, the Company and its chief executive officer, Ernie Garcia III ("Mr. Garcia"), entered into a contribution agreement (the “Contribution Agreement”). Pursuant to the Contribution Agreement, Mr. Garcia agreed to contribute to the Company, at no charge, approximately 0.2 million shares of the Company’s Class A common stock (the “Share Contribution”). The Share Contribution is intended to fund restricted stock unit awards to then-current employees of Carvana, LLC upon their satisfying certain employment tenure requirements. The Company does not expect Mr. Garcia to incur any tax obligations related to the Share Contribution, but it has indemnified Mr. Garcia from any such obligations that may arise.

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Finance Receivable Sale Agreements

9 Months Ended

Sep. 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 nine months ended September 30, 2018, the Company sold approximately $521.7 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $306.5 million in principal balances of finance receivables under the 2017 Master Transfer Agreement. As of September 30, 2018, there was approximately $634.6 million and $18.4 million of unused capacity under the Purchase and Sale Agreement and the 2017 Master Transfer Agreement, respectively. During the nine months ended September 30, 2017, the Company sold approximately $241.3 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $106.6 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 $13.3 million and $35.7 million during the three and nine months ended September 30, 2018, respectively, and approximately $6.6 million and $15.0 million during the three and nine months ended September 30, 2017, respectively, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

In August 2018, the Company purchased finance receivables that it previously sold to a purchaser's trust under the 2017 Master Transfer Agreement for a price of approximately $253.0 million and immediately resold such finance receivables to another trust owned by the same purchaser for the same price under a new transfer agreement. The Company is not obligated to, nor does it have a right to, purchase or sell finance receivables it has previously sold under the 2017 Master Transfer Agreement. The transaction completed in August 2018 was entered into in connection with a refinancing by the purchaser and was entered into independently from the terms of the 2017 Master Transfer Agreement. The Company received a fee of approximately $4.0 million for arranging and participating in the transaction, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

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Debt Instruments

9 Months Ended

Sep. 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 September 30, 2018, the interest rate on the Floor Plan Facility was approximately 5.91%, the Company had an outstanding balance under this facility of approximately $349.4 million, borrowing capacity available of approximately $0.6 million and held approximately $17.5 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

Senior Unsecured Notes

On September 21, 2018, the Company issued an aggregate of $350.0 million in senior unsecured notes due 2023 (the "Senior Notes") under an indenture entered into by and among the Company, each of the guarantors party thereto and U.S. Bank National Association, as trustee (the “Indenture”). The Senior Notes accrue interest at a rate of 8.875% per annum, which is payable semi-annually in arrears on April 1 and October 1 of each year beginning April 1, 2019. The Senior Notes mature on October 1, 2023, unless earlier repurchased or redeemed, and are guaranteed by the Company's existing domestic restricted subsidiaries (other than the subsidiaries formed solely for the purpose of facilitating the Company's sales of its finance receivables). The Company may redeem some or all of the Senior Notes on or after October 1, 2020 at redemption prices set forth in the Indenture, plus any accrued and unpaid interest to the redemption date. Prior to October 1, 2020, the Company may redeem up to 35.0% of the aggregate principal amount of the Senior Notes at a redemption price equal to 108.875%, together with accrued and unpaid interest to, but not including, the date of redemption, with the net cash proceeds of certain equity offerings. In addition, the Company may, at its option, redeem some or all of the Senior Notes prior to October 1, 2020, by paying a make-whole premium plus any accrued and unpaid interest, to, but not including, the redemption date. If the Company experiences certain change of control events, it must make an offer to purchase all of the Senior Notes at 101.0% of the principal amount thereof, plus any accrued and unpaid interest, to the repurchase date.

The Indenture governing the Senior Notes contains restrictive covenants that limit the ability of the Company to, among other things, incur additional debt or issue preferred stock, create liens, create restrictions on the Company’s ability to make intercompany payments, pay dividends and make other distributions in respect of the Company's capital stock, redeem or repurchase the Company’s capital stock or prepay subordinated indebtedness, make certain investments or certain other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates, and effect mergers or consolidations. Certain of these covenants will be suspended if the Senior Notes are assigned an investment grade rating from any two of Moody’s Investors Service, Inc., Standard & Poor’s Rating Services, and Fitch Ratings, Inc., and there is no continuing default. As of September 30, 2018, the Company was in compliance with all covenants.

The outstanding principal of the Senior Notes, net of debt issuance costs, was approximately $342.5 million as of September 30, 2018 and is included as long-term debt in the accompanying unaudited condensed consolidated balance sheet. In connection with the issuance of these Senior Notes, Carvana Group amended its LLC agreement to create a class of non-convertible preferred units, which Carvana Co. purchased with its net proceeds from the issuance of these Senior Notes, as further discussed in Note 9 — Stockholders' Equity.

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 September 30, 2018, the outstanding principal of these notes had a weighted-average interest rate of 5.9% and totaled approximately $34.8 million, of which approximately $7.2 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 September 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 September 30, 2018, the outstanding liability associated with these sale and leaseback arrangements, net of debt issuance costs, is approximately $65.9 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 "Master Sale-Leaseback Agreement" or "MSLA"), which was amended in November 2018, 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 2020. Under the MSLA, at any time the Company may elect to, and beginning in November 2020 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 September 30, 2018, the repurchase prices for all properties under the MSLA excluding unpaid rent totaled approximately $24.6 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 September 30, 2018, the Company may sell and lease back an additional approximately $50.4 million of its property and equipment under the MSLA.

Capital Leases

Beginning in August 2018, the Company has a capital lease obligation to finance certain equipment for its transportation fleet. The lease has a 5.2% fixed annual interest rate, a five-year term and requires monthly payments. As of September 30, 2018, the outstanding amount of the lease is approximately $3.4 million, of which approximately $0.6 million is due within the next twelve months and is included as current portion of other long-term debt in the accompanying unaudited condensed consolidated balance sheet.

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Stockholders' Equity

9 Months Ended

Sep. 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 September 30, 2018, there were approximately 180.5 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 nine months ended September 30, 2018, certain LLC Unitholders exchanged approximately 12.3 million LLC Units and approximately 8.9 million shares of Class B common stock for approximately 9.8 million newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, Carvana Co. received approximately 12.2 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. During the nine months ended September 30, 2018, the holder converted 75,000 shares of Convertible Preferred Stock into approximately 3.8 million shares of Class A common stock, Carvana Co. canceled and retired 75,000 Convertible Preferred Units, and Carvana Group issued approximately 4.8 million Class A Units to Carvana Co.

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 nine months ended September 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 $24.6 million and $97.1 million as of September 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 nine months ended September 30, 2018, the Company paid approximately $4.3 million of dividends to the holders of the Convertible Preferred Stock and Carvana Group distributed approximately $4.3 million to Carvana Co. with respect to the Convertible Preferred Units. As of September 30, 2018, dividends accrued related to the Convertible Preferred Stock were approximately $0.1 million, or $3.36 per share of Convertible Preferred Stock outstanding.

Class A Non-Convertible Preferred Units

On October 2, 2018, Carvana Group amended its LLC Agreement to create a class of non-convertible preferred units (the "Class A Non-Convertible Preferred Units"), effective September 21, 2018. The Class A Non-Convertible Preferred Units were created in connection with Carvana Co.'s issuance of the Senior Notes, as discussed further in Note 8 — Debt Instruments. Carvana Co. used its net proceeds from the Senior Notes to purchase 350,000 Class A Non-Convertible Preferred Units.  In the event Carvana Co. makes payments on the Senior Notes, Carvana Group will make an equal cash distribution to the Class A Non-Convertible Preferred Units. For each $1,000 principal amount of Senior Notes that Carvana Co. repays or otherwise retires one Class A Non-Convertible Preferred Unit shall be canceled and retired.

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. 

Contribution of Class A Common Shares From Ernie Garcia, III

On September 10, 2018, the Company announced a commitment by its chief executive officer, Ernie Garcia, III ("Mr. Garcia"), to contribute 165 shares of Class A common stock from his personal shareholdings for every one of the Company's then-existing employees upon their satisfying certain employment tenure requirements (the "100k Milestone Gift"). On September 12, 2018, in connection with this ongoing commitment, the Company and Mr. Garcia entered into a contribution agreement, pursuant to which Mr. Garcia contributed approximately 0.2 million shares of the Company's Class A common stock to the Company, at no charge. The Company subsequently granted the first tranche of the 100k Milestone Gift of approximately 0.2 million restricted stock units with a one-day vesting period resulting in approximately $10.4 million of equity-based compensation expense during the three and nine months ended September 30, 2018, a portion of which related to the production of the Company's used vehicle inventory and was therefore capitalized to inventory. Although the Company does not expect Mr. Garcia to incur any tax obligations related to the share contribution, it has indemnified Mr. Garcia from any such obligations that may arise.

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Non-controlling Interests

9 Months Ended

Sep. 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 nine months ended September 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 $13.2 million, which has been included in exchanges of LLC Units in the accompanying unaudited condensed consolidated statement of stockholders' equity. During the nine months ended September 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 nine months ended September 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. During the nine months ended September 30, 2018, the holder of the Convertible Preferred Stock converted 75,000 shares of Convertible Preferred Stock into approximately 3.8 million shares of Class A common stock, Carvana Co. canceled and retired 75,000 Convertible Preferred Units, and Carvana Group issued approximately 4.8 million Class A Units to Carvana Co. The adjustment related to the conversion of Convertible Preferred Stock was an increase in non-controlling interests and a corresponding decrease in additional paid-in capital of approximately $51.3 million, which has been included in adjustment to non-controlling interests related to conversion of Class A Convertible Preferred Stock in the accompanying unaudited condensed consolidated statement of stockholders' equity.

As of September 30, 2018, Carvana Co. owned approximately 25.5% of Carvana Group with the LLC Unitholders owning the remaining 74.5%. 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 nine months ended September 30, 2018 (in thousands):

	Nine Months Ended September 30,
	2018		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	13,203		—
Decrease as a result of conversion of Class A Convertible Preferred Stock	(51,289)		—
Increase as a result of adjustments to non-controlling interests	—		333
Total transfers to non-controlling interests	$	(169,164)	$	(173,922)

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Equity-Based Compensation

9 Months Ended

Sep. 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 nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Class B Units	$	791	$	597	$	1,831	$	1,237
Restricted Stock Units and Awards excluding those granted in relation to Mr. Garcia's 100k Milestone Gift contributions	1,459		823		3,104		1,973
Restricted Stock Units granted in relation to Mr. Garcia's 100k Milestone Gift contributions	10,393		—		10,393		—
Options	584		467		1,417		835
Class A Units	661		—		1,236		—
Total equity-based compensation expense	$	13,888	$	1,887	$	17,981	$	4,045

As of September 30, 2018, the total unrecognized compensation expense related to outstanding equity awards was approximately $34.9 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. The majority of the Company's equity awards vest over three- to five- year periods based on continued employment with the Company. As discussed in Note 9 — Stockholders' Equity, during the three and nine months ended September 30, 2018, the Company granted approximately 0.2 million RSUs with a vesting period of one day following receipt of Class A common stock from Mr. Garcia, and recognized approximately $10.4 million of equity-based compensation,

a portion of which related to the production of the Company's used vehicle inventory and was therefore capitalized to inventory.  As of September 30, 2018, approximately 12.1 million shares remain available for future equity award grants under this plan.

Class A Units

During the three and nine months ended September 30, 2018, the Company granted certain employees 0.0 million and 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 nine months ended September 30, 2018. During the three and nine months ended September 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

9 Months Ended

Sep. 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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Numerator:
Net loss	$	(64,419)	$	(39,769)	$	(168,341)	$	(117,078)
Net loss attributable to non-controlling interests	48,377		35,389		135,291		104,232
Dividends on Class A convertible preferred stock	(1,230)		—		(3,950)		—
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	$	(17,272)	$	(4,380)	$	(38,380)	$	(12,846)
Denominator:
Weighted-average shares of Class A common stock outstanding	34,924		15,520		27,258		15,254
Nonvested weighted-average restricted stock awards	(269)		(475)		(331)		(230)
Weighted-average shares of Class A common stock to compute basic and diluted net loss per Class A common share	34,655		15,045		26,927		15,024
Net loss per share of Class A common stock, basic and diluted	$	(0.50)	$	(0.29)	$	(1.43)	$	(0.86)

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 4.5 million and 4.9 million for the three and nine months ended September 30, 2018, respectively, 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 106.3 million and 117.2 million during the three months ended September 30, 2018 and September 30, 2017, respectively, and of approximately 110.2 million and 117.2 million during the nine months ended September 30, 2018 and September 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 6.5 million and 7.5 million at September 30, 2018 and September 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 nine months ended September 30, 2018 and of approximately 0.5 million and 0.2 million for the three and nine months ended September 30, 2017, respectively, were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive. As of September 30, 2018 and September 30, 2017, 0.8 million and 0.6 million options, respectively, were outstanding and evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive.

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Income Taxes

9 Months Ended

Sep. 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 12.2 million LLC Units during the nine months ended September 30, 2018 in connection with exchanges with Existing LLC Unitholders. During the nine months ended September 30, 2018, the Company recorded a gross deferred tax asset of approximately $71.4 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.

As described in Note 4 — Goodwill and Intangible Assets, Net, Carvana Group acquired Car360 during the nine months ended September 30, 2018. The acquisition included various intangible assets, and as a result the Company recognized a deferred tax liability of approximately $2.5 million which is reflected within other liabilities in the accompanying unaudited condensed consolidated balance sheet.

The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be realized. During the nine months ended September 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 September 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 September 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 September 30, 2018, the total unrecorded TRA liability is approximately $69.0 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

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 14 — COMMITMENTS AND CONTINGENCIES 

Lease Commitments

As of September 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 $1.5 million and $4.1 million for the three and nine months ended September 30, 2018 and $1.1 million and $2.9 million for the three and nine months ended September 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 $0.5 million and $1.1 million for the three and nine months ended September 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 $1.1 million and $0.8 million as of September 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 September 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

9 Months Ended

Sep. 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 September 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 September 30, 2018 and December 31, 2017 (in thousands):

As of September 30, 2018:

	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	438,386	$	438,386	$	—	$	—

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 and the Senior Notes was determined to approximate fair value as each of the notes has prevailing interest rates, which have not materially changed as of September 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 September 30, 2018 and December 31, 2017 were as follows (in thousands):

	September 30, 2018		December 31, 2017
Carrying value	$	88,151	$	45,564
Fair value	91,400		47,514

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Supplemental Cash Flow Information

9 Months Ended

Sep. 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 nine months ended September 30, 2018 and 2017 (in thousands):

	Nine Months Ended September 30,
	2018		2017
Supplemental cash flow information:
Cash payments for interest to third parties	$	11,976	$	4,668
Cash payments for interest to related parties	$	—	$	382
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	$	8,538	$	11,006
Capital expenditures financed through long-term debt	$	10,139	$	7,988
Issuance of LLC Units related to business acquisitions	$	9,981	$	—
Debt issuance costs included in accounts payable and accrued liabilities	$	1,733	$	—
Property and equipment acquired under capital leases	$	3,369	$	—
Conversion of Class A Convertible Preferred Stock to common stock	$	73,880	$	—
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):

	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	439,794	$	172,680	$	103,454	$	39,184
Restricted cash (1)	18,471		14,443		11,755		10,266
Total cash, cash equivalents and restricted cash	$	458,265	$	187,123	$	115,209	$	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

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

NOTE 17 — SUBSEQUENT EVENTS 

Purchase and Sale and Master Transfer Agreement Amendments

On November 2, 2018, the Company amended the Purchase and Sale Agreement to, among other things and subject to the terms of the agreement, commit the purchaser to purchase up to a maximum additional $1.25 billion of principal balances of finance receivables.

On November 2, 2018, the Company amended the 2017 Master Transfer Agreement to, among other things and subject to the terms of the agreement, extend the purchaser's commitment to purchase finance receivables from the Company. The purchaser's currently available financing would permit up to $454.5 million in principal balances of finance receivables to be purchased and the 2017 Master Transfer Agreement's purchase commitment contemplates the purchaser securing up to three times the currently available financing in the aggregate.

Floor Plan Facility Amendment

On November 2, 2018, the Company amended the Floor Plan Facility to increase the line of credit to $650.0 million, extend the maturity date to October 31, 2020, and lower the interest rate to one month LIBOR plus 3.40%. 

Master Sale-Leaseback Agreement Amendment

On November 1, 2018, the Company amended the Master Sale-Leaseback Agreement to extend the date through which the Company can sell properties and after which the purchaser can sell properties back to the Company from November 2019 to November 2020.

Amendment to the Master Dealer Agreement

On November 5, 2018, the Company amended the Master Dealer Agreement to allow the Company to share in any excess cash reserves over realized claims with respect to VSCs sold by the Company, once a reasonable claims period for such VSCs has passed.

Contribution Agreement

In connection with an ongoing commitment from Mr. Garcia related to the previously announced 100k Milestone Gift program, the Company and Mr. Garcia entered into a contribution agreement on November 6, 2018, under which Mr. Garcia will contribute to the Company 32,932 shares of Class A common stock that he individually owns, at no charge. The contribution will take place on November 9, 2018 and is intended to fund restricted stock unit awards to certain employees of Carvana, LLC upon their satisfying applicable employment tenure requirements. Although the Company does not expect Mr. Garcia to incur any tax obligations related to the contribution, the Company has indemnified Mr. Garcia from any such obligations that may arise.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 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 September 30, 2018, results of operations for the three and nine months ended September 30, 2018 and 2017, and cash flows and changes in stockholders'

equity for the nine months ended September 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 September 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, the issuance of senior unsecured notes for net proceeds of approximately $342.5 million on September 21, 2018, 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 $0.6 million available under the Floor Plan Facility to fund future vehicle inventory purchases as of September 30, 2018. The Company amended the Floor Plan Facility on November 2, 2018 to increase the amount by $300.0 million and extend the maturity date to October 31, 2020. 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 September 30, 2018, the Company sells finance receivables under multiple agreements. On November 2, 2018, the Company increased the available amount under and extended these facilities. 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 nine months ended September 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 upon 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 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 September 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 nine months ended September 30, 2017, changes in restricted cash included within cash used in investing activities, as originally presented, was approximately $1.5 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 its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13") related to updated requirements over the disclosures of fair value measurements. Under ASU 2018-13, certain disclosure requirements for fair value measurements will be eliminated, modified or added to facilitate better communication around recurring and nonrecurring fair value measurements. ASU 2018-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with some amendments applied prospectively, some applied retrospectively and early adoption permitted. The Company plans to adopt ASU 2018-13 for its fiscal year beginning January 1, 2020 and is currently assessing the impact the guidance will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The intent of this pronouncement is to align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software as defined in ASC 350-40. Under ASU 2018-15, the capitalized implementation costs related to a cloud computing arrangement will be amortized over the term of the arrangement and all capitalized implementation amounts will be required to be presented in the same line items of the financial statements as the related hosting fees. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company plans to adopt ASU 2018-15 for its fiscal year beginning January 1, 2020 and is currently assessing the impact, if any, the guidance will have on its consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). ASU 2018-17 requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety for determining whether a decision-making fee is a variable interest. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the amendments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company is currently assessing the impact, if any, the guidance will have on its 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)

9 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment

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

	September 30, 2018		December 31, 2017
Land and site improvements	$	44,042	$	11,656
Buildings and improvements	108,116		60,804
Transportation fleet	52,742		39,153
Software	32,335		21,009
Furniture, fixtures and equipment	18,005		12,239
Total property and equipment excluding construction in progress	255,240		144,861
Less: accumulated depreciation and amortization on property and equipment	(36,836)		(20,453)
Property and equipment excluding construction in progress, net	218,404		124,408
Construction in progress	33,538		24,273
Property and equipment, net	$	251,942	$	148,681

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Goodwill and Intangible Assets, Net (Tables)

9 Months Ended

Sep. 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 September 30, 2018 (in thousands):

	Useful Life	September 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		(696)
Intangible assets, net		$	9,243
Goodwill	N/A	$	9,353

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

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

	Expected Future Amortization
Remainder of 2018	$	374
2019	1,494
2020	1,494
2021	1,494
2022	1,494
Thereafter	2,893
Total	$	9,243

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Accounts Payable and Other Accrued Liabilities (Tables)

9 Months Ended

Sep. 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 September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018		December 31, 2017
Accounts payable	$	28,972	$	10,546
Sales taxes and vehicle licenses and fees	22,604		9,034
Reserve for returns and cancellations	9,501		4,545
Accrued compensation and benefits	7,991		5,054
Accrued property and equipment	7,138		8,325
Accrued advertising costs	3,835		4,265
Accrued interest	2,506		774
Other accrued liabilities	14,314		7,763
Total accounts payable and other accrued liabilities	$	96,861	$	50,306

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Non-controlling Interests (Tables)

9 Months Ended

Sep. 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 nine months ended September 30, 2018 (in thousands):

	Nine Months Ended September 30,
	2018		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	13,203		—
Decrease as a result of conversion of Class A Convertible Preferred Stock	(51,289)		—
Increase as a result of adjustments to non-controlling interests	—		333
Total transfers to non-controlling interests	$	(169,164)	$	(173,922)

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Equity-Based Compensation (Tables)

9 Months Ended

Sep. 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 nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Class B Units	$	791	$	597	$	1,831	$	1,237
Restricted Stock Units and Awards excluding those granted in relation to Mr. Garcia's 100k Milestone Gift contributions	1,459		823		3,104		1,973
Restricted Stock Units granted in relation to Mr. Garcia's 100k Milestone Gift contributions	10,393		—		10,393		—
Options	584		467		1,417		835
Class A Units	661		—		1,236		—
Total equity-based compensation expense	$	13,888	$	1,887	$	17,981	$	4,045

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Loss Per Share (Tables)

9 Months Ended

Sep. 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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Numerator:
Net loss	$	(64,419)	$	(39,769)	$	(168,341)	$	(117,078)
Net loss attributable to non-controlling interests	48,377		35,389		135,291		104,232
Dividends on Class A convertible preferred stock	(1,230)		—		(3,950)		—
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	$	(17,272)	$	(4,380)	$	(38,380)	$	(12,846)
Denominator:
Weighted-average shares of Class A common stock outstanding	34,924		15,520		27,258		15,254
Nonvested weighted-average restricted stock awards	(269)		(475)		(331)		(230)
Weighted-average shares of Class A common stock to compute basic and diluted net loss per Class A common share	34,655		15,045		26,927		15,024
Net loss per share of Class A common stock, basic and diluted	$	(0.50)	$	(0.29)	$	(1.43)	$	(0.86)

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Assets Measured on Recurring Basis

The following is a summary of fair value measurements at September 30, 2018 and December 31, 2017 (in thousands):

As of September 30, 2018:

	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	438,386	$	438,386	$	—	$	—

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.

Carrying Value and Fair Value of Finance Receivables

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

	September 30, 2018		December 31, 2017
Carrying value	$	88,151	$	45,564
Fair value	91,400		47,514

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2018

Supplemental Cash Flow Elements [Abstract]

Schedule of Supplemental Cash Flow Information

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

	Nine Months Ended September 30,
	2018		2017
Supplemental cash flow information:
Cash payments for interest to third parties	$	11,976	$	4,668
Cash payments for interest to related parties	$	—	$	382
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	$	8,538	$	11,006
Capital expenditures financed through long-term debt	$	10,139	$	7,988
Issuance of LLC Units related to business acquisitions	$	9,981	$	—
Debt issuance costs included in accounts payable and accrued liabilities	$	1,733	$	—
Property and equipment acquired under capital leases	$	3,369	$	—
Conversion of Class A Convertible Preferred Stock to common stock	$	73,880	$	—
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):

	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	439,794	$	172,680	$	103,454	$	39,184
Restricted cash (1)	18,471		14,443		11,755		10,266
Total cash, cash equivalents and restricted cash	$	458,265	$	187,123	$	115,209	$	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) $ / shares in Units, $ in Thousands				3 Months Ended	5 Months Ended	9 Months Ended
	Apr. 30, 2018 USD ($) $ / shares shares	Dec. 05, 2017 USD ($) $ / shares shares	May 03, 2017 USD ($) vote $ / shares shares	Sep. 30, 2018 $ / shares shares	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) $ / shares shares	Dec. 31, 2017 $ / shares shares
Subsidiary, Sale of Stock [Line Items]
Stock sold during period, net proceeds | $					$ 205,925
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
Carvana Group
Subsidiary, Sale of Stock [Line Items]
Ownership percentage by Carvana Co.				25.50%		25.50%
Ownership percentage by existing unitholders				74.50%		74.50%
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	4,800,000		4,800,000
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
Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion of stock, converted (in shares)	6,900,000					12,300,000
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
Issuance of Class A common stock sold in initial public offering, net of underwriters' discounts and commissions and offering expenses | $	$ 172,300
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
Issuance of Class A common stock sold in initial public offering, net of underwriters' discounts and commissions and offering expenses | $			$ 205,800
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
Class A | 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
Issuance of Class A common stock sold in initial public offering, net of underwriters' discounts and commissions and offering expenses | $	$ 0
Class A | Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion ratio			0.8
Conversion of stock, issued (in shares)	5,600,000					9,800,000
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 | Garcia Parties
Subsidiary, Sale of Stock [Line Items]
Number of votes | vote			10
Class B | Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion of stock, converted (in shares)						8,900,000
Convertible Preferred Stock
Subsidiary, Sale of Stock [Line Items]
Stock sold during period, net proceeds | $		$ 98,500
Preferred stock, shares authorized (in shares)		100,000		25,000		25,000	100,000
Preferred stock, par value (in dollars per share) | $ / shares		$ 0.01		$ 0.01		$ 0.01	$ 0.01
Conversion ratio		0.8
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 ($)					5 Months Ended	9 Months Ended
	Sep. 21, 2018	Apr. 30, 2018	Dec. 05, 2017	May 03, 2017	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Nov. 02, 2018
Debt Instrument [Line Items]
Stock sold during period, net proceeds					$ 205,925,000
Proceeds from issuance of senior unsecured notes						$ 350,000,000	$ 0
Line of Credit | Floor Plan Facility
Debt Instrument [Line Items]
Line of credit facility, remaining borrowing capacity						$ 600,000
Line of Credit | Floor Plan Facility | Subsequent Event
Debt Instrument [Line Items]
Line of credit, additional borrowing capacity								$ 300,000,000.0
Senior Notes | Senior Unsecured Notes Effective September 2018
Debt Instrument [Line Items]
Proceeds from issuance of senior unsecured notes	$ 342,500,000
Class A
Debt Instrument [Line Items]
Sale of stock, net proceeds received		$ 172,300,000
Class A | IPO
Debt Instrument [Line Items]
Sale of stock, net proceeds received				$ 205,800,000
Stock sold during period, net proceeds				$ 205,800,000
Class A Convertible Preferred Stock
Debt Instrument [Line Items]
Stock sold during period, net proceeds			$ 98,500,000

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Summary of Significant Accounting Policies - Segments (Details)	9 Months Ended
	Sep. 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		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Accounting Policies [Abstract]
Other comprehensive income	$ 0	$ 0	$ 0	$ 0

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Summary of Significant Accounting Policies - Restricted Cash (Details)	Sep. 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	9 Months Ended
	Sep. 30, 2017	Sep. 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]
Changes in restricted cash included within investing activities	$ 1.5

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Property and Equipment, Net - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation and amortization on property and equipment	$ (36,836)	$ (20,453)
Property and equipment, net	251,942	148,681
Land and site improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	44,042	11,656
Buildings and improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	108,116	60,804
Transportation fleet
Property, Plant and Equipment [Line Items]
Property and equipment, gross	52,742	39,153
Software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	32,335	21,009
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	18,005	12,239
Property and equipment excluding construction in progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	255,240	144,861
Property and equipment, net	218,404	124,408
Construction in progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 33,538	$ 24,273

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Property and Equipment, Net - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense			$ 16,301	$ 7,746
Property, Plant and Equipment
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense	$ 6,100	$ 3,100	$ 15,600	$ 7,700

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Goodwill and Intangible Assets, Net - Narrative (Details) - USD ($) $ in Thousands, shares in Millions		3 Months Ended	9 Months Ended
	Apr. 12, 2018	Sep. 30, 2018	Sep. 30, 2018	Dec. 31, 2017
Business Acquisition [Line Items]
Goodwill		$ 9,353	$ 9,353	$ 0
Amortization expense		400	$ 700
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 businesses, net	6,700
Number of shares issued to former stockholders (in shares)			0.5
Fair value, equity interested issued	10,000		$ 10,000
Acquired net working capital	200
Fair value, intangible assets	9,900
Deferred tax liability	2,500	2,500	2,500
Goodwill	$ 9,400	$ 9,353	$ 9,353
Weighted average amortization period, definite-lived intangible assets			6 years 3 months 18 days

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Goodwill and Intangible Assets, Net - Summary of Fair Value of Acquired Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Apr. 12, 2018	Dec. 31, 2017
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Net, Total	$ 9,243		$ 0
Goodwill	9,353		$ 0
Car360
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets	9,939
Less: accumulated amortization	(696)
Finite-Lived Intangible Assets, Net, Total	9,243
Goodwill	9,353	$ 9,400
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

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Goodwill and Intangible Assets, Net Goodwill and Intangible Assets, Net - Schedule of Future Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Business Combinations [Abstract]
Remainder of 2018	$ 374
2019	1,494
2020	1,494
2021	1,494
2022	1,494
Thereafter	2,893
Finite-Lived Intangible Assets, Net, Total	$ 9,243	$ 0

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Accounts Payable and Other Accrued Liabilities - Summary of Accounts Payable and Other Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Payables and Accruals [Abstract]
Accounts payable	$ 28,972	$ 10,546
Sales taxes and vehicle licenses and fees	22,604	9,034
Reserve for returns and cancellations	9,501	4,545
Accrued compensation and benefits	7,991	5,054
Accrued property and equipment	7,138	8,325
Accrued advertising costs	3,835	4,265
Accrued interest	2,506	774
Other accrued liabilities	14,314	7,763
Total accounts payable and other accrued liabilities	$ 96,861	$ 50,306

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Related Party Transactions - Lease Agreements (Details) - Affiliated Entity $ in Millions	1 Months Ended			3 Months Ended		9 Months Ended
	Feb. 28, 2017 renewal_option	Dec. 31, 2016 renewal_option	Nov. 30, 2014 location renewal_option	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)
DriveTime Automotive Group, Inc. | Related Party Lease Agreements | Building
Related Party Transaction [Line Items]
Operating lease, number of renewal options | renewal_option			2
Operating lease, renewal options, number of locations (up to) | location			10
Operating lease term			2 years
Operating leases, renewal term			1 year
DriveTime Automotive Group, Inc. | Lease Agreement for Fully-Operational Inspection and Reconditioning Center | Building | Winder, Georgia
Related Party Transaction [Line Items]
Operating lease, number of renewal options | renewal_option	3
Operating lease term	8 years
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, number of renewal options | renewal_option		4
Operating lease term		15 years
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 | $				$ 2.2	$ 1.8	$ 6.7	$ 5.2
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 | $				1.2	0.6	3.3	1.8
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 | $				$ 1.0	$ 1.2	$ 3.4	$ 3.4

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Related Party Transactions - Corporate Office Leases (Details) - Affiliated Entity - DriveTime Automotive Group, Inc.	1 Months Ended	3 Months Ended			9 Months Ended
	Sep. 30, 2016 USD ($) renewal_option	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)
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		$ 600,000	$ 500,000
Operating lease term	83 months
Operating lease, number of renewal options | renewal_option	3
Operating leases, renewal term	5 years

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Related Party Transactions - Master Dealer Agreement (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Related Party Transaction [Line Items]
Revenue from related parties	$ 6,696	$ 2,414	$ 16,351	$ 6,070
DriveTime Automotive Group, Inc. | Affiliated Entity | Master Dealer Agreement
Related Party Transaction [Line Items]
Revenue from related parties	6,700	2,400	16,400	6,100
Expenses related to administration of GAP waiver coverage	$ 100	$ 0	$ 200	$ 0

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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		9 Months Ended
	Oct. 22, 2015 aircraft	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)
Related Party Transaction [Line Items]
Number of aircrafts | aircraft	2
Contractual agreement term	12 months
Contractual agreement, perpetual automatic renewal termPerpetual 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	$ 0.0	$ 0.4	$ 0.4

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Related Party Transactions - Credit Facility with Verde (Details) - USD ($)		9 Months Ended
	May 03, 2017	Sep. 30, 2018	Sep. 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

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Related Party Transactions - Accounts Payable Due to Related Party (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Related Party Transaction [Line Items]
Accounts payable due to related party	$ 3,512	$ 1,802
Affiliated Entity
Related Party Transaction [Line Items]
Accounts payable due to related party	$ 3,500	$ 1,800

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Related Party Transactions - Contribution Agreement (Details) - Chief Executive Officer - Contribution Agreement - Class A shares in Millions	Sep. 12, 2018 USD ($) shares
Related Party Transaction [Line Items]
Contribution of Class A common stock from related party, fee charged | $	$ 0
Contribution of Class A common stock from related party (in shares) | shares	0.2

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Finance Receivable Sale Agreements - Narrative (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
	Aug. 31, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Nov. 03, 2017	Nov. 02, 2017	Dec. 31, 2016
Securitization or Asset-backed Financing Arrangement, Financial Asset for which Transfer is Accounted as Sale [Line Items]
Purchase of finance receivables				$ 253,041,000	$ 0
Consumer Loan | 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		$ 521,700,000	$ 241,300,000	521,700,000	241,300,000
Receivable purchase agreement, remaining unused capacity		634,600,000		634,600,000
Consumer Loan | 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		13,300,000	6,600,000	35,700,000	15,000,000.0
Consumer Loan | 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	$ 253,000,000.0	306,500,000	$ 106,600,000	306,500,000	$ 106,600,000
Receivable purchase agreement, remaining unused capacity		$ 18,400,000		$ 18,400,000
Purchase of finance receivables	253,000,000.0
Transfer of financial assets accounted for as sales, amount derecognized, transaction fee received	$ 4,000,000.0

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Debt Instruments - Floor Plan Facility (Details) - USD ($)	1 Months Ended	9 Months Ended
	Nov. 30, 2017	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Line of Credit Facility [Line Items]
Line of credit, outstanding		$ 349,392,000		$ 248,792,000
Restricted cash		$ 18,471,000		14,443,000	$ 11,755,000	$ 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	15 days
Principal repayment, term threshold after sale of related finance receivable	2 days	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		5.91%
Line of credit, outstanding		$ 349,400,000
Line of credit facility, remaining borrowing capacity		600,000
Restricted cash		$ 17,500,000		$ 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 ($)		9 Months Ended
	Sep. 21, 2018	Sep. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Notes Payable, Current		$ 7,838,000	$ 5,131,000
Senior Notes | Senior Unsecured Notes Effective September 2018
Debt Instrument [Line Items]
Face amount	$ 350,000,000.0
Interest rate	8.875%
Outstanding principal, net of debt issuance costs		$ 342,500,000
Senior Notes | Senior Unsecured Notes Effective September 2018 | Debt Instrument, Redemption, Period One
Debt Instrument [Line Items]
Redemption price, percentage of principal amount redeemed	35.00%
Redemption price, percentage	108.875%
Senior Notes | Senior Unsecured Notes Effective September 2018 | Debt Instrument, Redemption, Period Two
Debt Instrument [Line Items]
Redemption price, percentage	101.00%
Notes Payable, Other Payables | Promissory Note
Debt Instrument [Line Items]
Weighted average interest rate		5.90%
Notes payable		$ 34,800,000
Notes Payable, Current		$ 7,200,000
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)	1 Months Ended	12 Months Ended
	Nov. 30, 2017 USD ($) property	Dec. 31, 2017	Sep. 30, 2018 USD ($)
Sale Leaseback Transaction [Line Items]
Sale leaseback transaction, amount due under financing arrangement			$ 65,900,000
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			24,600,000
Sale leaseback transaction, maximum sales price of properties sold and leasing back	$ 75,000,000.0
Sale leaseback transaction, additional amount company may sell and lease back			$ 50,400,000
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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Debt Instruments - Capital Leases (Details) - USD ($) $ in Millions	1 Months Ended
	Aug. 31, 2018	Sep. 30, 2018
Debt Instrument [Line Items]
Capital lease obligations		$ 3.4
Other Long-term Debt, Current
Debt Instrument [Line Items]
Capital lease obligations		$ 0.6
Capital Lease Obligations
Debt Instrument [Line Items]
Fixed interest rate	5.20%
Debt instrument, term	5 years

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Stockholders' Equity - Organizational Transactions (Details)				3 Months Ended	9 Months Ended
	Dec. 05, 2017 $ / shares shares	May 03, 2017 vote $ / shares shares	May 02, 2017	Sep. 30, 2018 $ / shares shares	Sep. 30, 2018 $ / shares shares	Dec. 31, 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)				180,500,000	180,500,000
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			25,000	25,000	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
Conversion ratio	0.8

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Stockholders' Equity - Initial Public Offering (Details) $ / shares in Units, $ in Thousands		5 Months Ended
	May 03, 2017 USD ($) $ / shares shares	Sep. 30, 2017 USD ($)	Apr. 30, 2018 shares
Limited Partners' Capital Account [Line Items]
Stock sold during period, net proceeds | $		$ 205,925
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

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Stockholders' Equity - Follow-On Public Offering (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions		9 Months Ended
	Apr. 30, 2018	Sep. 30, 2018	May 03, 2017
Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion of stock, converted (in shares)	6,900	12,300
Carvana Group | Class A Common Units
Subsidiary, Sale of Stock [Line Items]
Investment owned, balance (in shares)	8,300		18,800
Class A
Subsidiary, Sale of Stock [Line Items]
Sale of stock, net proceeds received	$ 172.3
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
Sale of stock, price per share (in dollars per share)	$ 27.50
Class A | 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
Sale of stock, net proceeds received	$ 0.0
Class A | Exchange Agreement
Subsidiary, Sale of Stock [Line Items]
Conversion of stock, issued (in shares)	5,600	9,800

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Stockholders' Equity - Exchange Agreement (Details) shares in Millions			9 Months Ended
	Apr. 30, 2018 shares	May 03, 2017	Sep. 30, 2018 shares
Limited Partners' Capital Account [Line Items]
Conversion ratio			1.25
Class B
Limited Partners' Capital Account [Line Items]
Conversion ratio		0.8
Exchange Agreement
Limited Partners' Capital Account [Line Items]
Conversion of stock, converted (in shares)	6.9		12.3
LLC units received (in shares)			12.2
Exchange Agreement | Class A
Limited Partners' Capital Account [Line Items]
Conversion ratio		0.8
Conversion of stock, issued (in shares)	5.6		9.8
Exchange Agreement | Class B
Limited Partners' Capital Account [Line Items]
Conversion of stock, converted (in shares)			8.9

XML

Stockholders' Equity - Convertible Preferred Stock (Details) $ / shares in Units, $ in Thousands			3 Months Ended		5 Months Ended	9 Months Ended		11 Months Ended
	Dec. 11, 2017	Dec. 05, 2017 USD ($) $ / shares shares	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($)	Mar. 31, 2018 USD ($)	Jan. 29, 2018 $ / shares	Dec. 31, 2017 USD ($) $ / shares	May 03, 2017 $ / shares shares
Limited Partners' Capital Account [Line Items]
Stock sold during period, net proceeds					$ 205,925
Preferred stock, par value (in dollars per share) | $ / shares			$ 0.01			$ 0.01				$ 0.01	$ 0.01
Conversion ratio						1.25
Accretion of beneficial conversion feature on Class A convertible preferred stock			$ 0	$ 0		$ (1,380)	$ 0
Preferred stock			$ 0			0				$ 0
Dividends paid						$ 4,279	$ 0
Class A Common Units
Limited Partners' Capital Account [Line Items]
Conversion ratio			0.80			0.80
Carvana Group | Class A Common Units
Limited Partners' Capital Account [Line Items]
Convertible preferred stock, shares issued upon conversion (in shares) | shares			4,800,000			4,800,000					43,100,000
Convertible Preferred Stock
Limited Partners' Capital Account [Line Items]
Issuance of stock (in shares) | 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) | $ / shares		$ 0.01	$ 0.01			$ 0.01				$ 0.01
Preferred stock initial value per share (in dollars per share) | $ / shares		1,000
Conversion rate (in dollars per share) | $ / shares		$ 19.6945							$ 50.78
Percent of stock price for company option to convert preferred stock to common		150.00%
Conversion ratio		0.8
Conversions of Class A Convertible Preferred Stock (in shares) | shares						75,000
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			$ 24,627			$ 24,627				$ 97,127
Liquidation preference during change in control			101.00%			101.00%
Preferred stock dividend rate		5.50%
Dividends paid						$ 4,300
Accrued dividends			$ 100			$ 100
Accrued dividends (in dollars per share) | $ / shares			$ 3.36			$ 3.36
Convertible Preferred Stock | Carvana Group
Limited Partners' Capital Account [Line Items]
Sale of stock, number of shares issued in transaction (in shares) | shares		100,000
Class A
Limited Partners' Capital Account [Line Items]
Conversions of Class A Convertible Preferred Stock (in shares) | shares						3,800,000
Convertible Preferred Units
Limited Partners' Capital Account [Line Items]
Stock canceled and retired during period (in shares) | shares						75,000
Convertible Preferred Units | Carvana Group
Limited Partners' Capital Account [Line Items]
Dividends paid						$ 4,300

XML

Stockholders' Equity - Class A Non-Convertible Preferred Units (Details) - Subsequent Event	Oct. 02, 2018 USD ($) shares
Senior Notes | Senior Unsecured Notes Effective September 2018
Limited Partners' Capital Account [Line Items]
Repayment or retirement of debt, equity cancellation and retirement criteria | $	$ 1,000
Carvana Group | Class A Non-Convertible Preferred Units
Limited Partners' Capital Account [Line Items]
Issuance of stock (in shares) | shares	350,000

XML

Stockholders' Equity - Class C Redeemable Preferred Units (Details) - Class C Redeemable Preferred Units shares in Millions, $ in Millions	Dec. 31, 2016 USD ($) shares
Limited Partners' Capital Account [Line Items]
Temporary equity, coupon rate	12.50%
Conversion rate	1.0
Various Third Parties and Related Parties
Limited Partners' Capital Account [Line Items]
Temporary equity, stock issued during period (in shares) | shares	43.1
Temporary equity, value stock issued during period | $	$ 226.9

XML

Stockholders' Equity - Contribution of Class A Common Shares (Details) - USD ($)			3 Months Ended	9 Months Ended
	Sep. 12, 2018	Sep. 10, 2018	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017
Limited Partners' Capital Account [Line Items]
Equity-based compensation expense				$ 17,981,000	$ 3,989,000
Restricted Stock Units
Limited Partners' Capital Account [Line Items]
Issuance of stock (in shares)			200,000	200,000
Service-based vesting period			1 day	1 day
Equity-based compensation expense			$ 10,400,000	$ 10,400,000
Class A | Restricted Stock Units
Limited Partners' Capital Account [Line Items]
Issuance of stock (in shares)			200,000	200,000
Chief Executive Officer | Class A
Limited Partners' Capital Account [Line Items]
Stock contribution commitment, shares per employee (in shares)		165
Chief Executive Officer | Class A | Contribution Agreement
Limited Partners' Capital Account [Line Items]
Contribution of Class A common stock (in shares)	200,000
Contribution of Class A common stock from related party, fee charged	$ 0

XML

Non-controlling Interests - Narrative (Details) shares in Thousands, $ in Thousands			3 Months Ended	5 Months Ended	9 Months Ended
	Apr. 12, 2018 USD ($) shares	Dec. 05, 2017	Sep. 30, 2018 shares	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) shares	May 03, 2017 shares
Noncontrolling Interest [Line Items]
Conversion ratio					1.25
Carvana Group
Noncontrolling Interest [Line Items]
Ownership percentage by Carvana Co.			25.50%		25.50%
Ownership percentage by existing unitholders			74.50%		74.50%
Class A
Noncontrolling Interest [Line Items]
Conversions of Class A Convertible Preferred Stock (in shares) | shares					3,800
Class A Convertible Preferred Stock
Noncontrolling Interest [Line Items]
Conversion ratio		0.8
Conversions of Class A Convertible Preferred Stock (in shares) | shares					75
Convertible Preferred Units
Noncontrolling Interest [Line Items]
Stock canceled and retired during period (in shares) | shares					75
Non-controlling Interests
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests				$ (333)	$ (13,203)
Non-controlling Interests | Class A Convertible Preferred Stock
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests					51,289
Non-controlling Interests | Follow-On Public Offering
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests					132,375
Additional Paid-in Capital
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests				$ 333	13,203
Additional Paid-in Capital | Class A Convertible Preferred Stock
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests					(51,289)
Additional Paid-in Capital | Follow-On Public Offering
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	500
Class A Common Units | Carvana Group
Noncontrolling Interest [Line Items]
Convertible preferred stock, shares issued upon conversion (in shares) | shares			4,800		4,800	43,100
Car360
Noncontrolling Interest [Line Items]
Number of shares issued to former stockholders (in shares) | shares					500
Fair value, equity interested issued	$ 10,000				$ 10,000
Car360 | Non-controlling Interests
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests					(1,300)
Car360 | Additional Paid-in Capital
Noncontrolling Interest [Line Items]
Adjustments to non-controlling interests					$ 1,297

XML

Non-controlling Interests - Changes in Ownership (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Transfers (to) from non-controlling interests:
Increase as a result of exchanges of LLC Units	$ 13,203	$ 0
Increase as a result of adjustments to non-controlling interests	0	333
Total transfers to non-controlling interest	(169,164)	(173,922)
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)
Class A Convertible Preferred Stock
Transfers (to) from non-controlling interests:
Decrease as a result of Conversion of Class A Convertible Preferred Stock	$ (51,289)	$ 0

XML

Equity-Based Compensation - Equity-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	$ 13,888	$ 1,887	$ 17,981	$ 4,045
Unrecognized compensation expense	34,900		$ 34,900
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	791	597	$ 1,831	1,237
Restricted Stock Units and Awards excluding those granted in relation to Mr. Garcia's 100k Milestone Gift contributions
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	1,459	823	3,104	1,973
Restricted Stock Units granted in relation to Mr. Garcia's 100k Milestone Gift contributions | 2017 Omnibus Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	10,393	0	10,393	0
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	584	467	1,417	835
Class A Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	$ 661	$ 0	$ 1,236	$ 0

XML

Equity-Based Compensation - 2017 Omnibus Incentive Plan (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Equity-based compensation expense		$ 17,981	$ 3,989
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Service-based vesting period	1 day	1 day
Issuance of stock (in shares)	200,000	200,000
Equity-based compensation expense	$ 10,400	$ 10,400
Class A | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Issuance of stock (in shares)	200,000	200,000
2017 Omnibus Incentive Plan
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	14,000,000.0
2017 Omnibus Incentive Plan | Class A
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Number of shares available for grant (in shares)	12,100,000	12,100,000
2017 Omnibus Incentive Plan | Minimum
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Service-based vesting period		3 years
2017 Omnibus Incentive Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Service-based vesting period		5 years

XML

Equity-Based Compensation - Class A Units (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2018 $ / shares shares	Sep. 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 issued in the period (in shares) | shares	0.0	400,000
Number of units granted in the period (in dollars per share) | $ / shares	$ 18.58	$ 18.58
Conversion ratio	0.80	0.80
Minimum | Class A Common Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service-based vesting period	2 years	2 years
Maximum | Class A Common Units
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		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 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		9 Months Ended
	May 03, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 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)		4,500,000		4,900,000
Class B
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)		106,300,000	117,200,000	110,200,000	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)				6,500,000	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	500,000	400,000	200,000
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	600,000
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		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Numerator:
Net loss		$ (64,419)	$ (39,769)	$ (168,341)	$ (117,078)
Net loss attributable to non-controlling interests		48,377	35,389	135,291	104,232
Dividends on Class A convertible preferred stock		(1,230)	0	(3,950)	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		$ (17,272)	$ (4,380)	$ (38,380)	$ (12,846)
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)	[1],[2]	34,655	15,045	26,927	15,024
Net loss per share of Class A common stock, basic and diluted (in dollars per share)	[1]	$ (0.50)	$ (0.29)	$ (1.43)	$ (0.86)
Restricted Awards
Denominator:
Nonvested weighted-average restricted stock awards (in shares)		(269)	(475)	(331)	(230)
Class A Common Units
Denominator:
Weighted-average shares of Class A common stock outstanding (in shares)		34,924	15,520	27,258	15,254

[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.

XML

Income Taxes - Narrative (Details) - USD ($) shares in Thousands	9 Months Ended
	Sep. 30, 2018	Apr. 30, 2018	Apr. 12, 2018	Dec. 31, 2017	May 03, 2017
Income Tax Contingency [Line Items]
Uncertain tax positions	$ 0			$ 0
Related reserves	0			$ 0
Car360
Income Tax Contingency [Line Items]
Deferred tax liability	2,500,000		$ 2,500,000
Carvana Group
Income Tax Contingency [Line Items]
Gross deferred tax asset	$ 71,400,000
Exchange Agreement
Income Tax Contingency [Line Items]
LLC units received (in shares)	12,200
Class A Common Units | Carvana Group
Income Tax Contingency [Line Items]
Gross deferred tax asset		$ 2,500,000
Investment owned, balance (in shares)		8,300			18,800

XML

Income Taxes - Tax Receivable Agreement (Details) $ in Millions	Sep. 30, 2018 USD ($)
Income Tax Disclosure [Abstract]
Deferred tax liability, unrecorded, Tax Receivable Agreement	$ 69.0

XML

Commitments and Contingencies - Lease Commitments (Details) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Dec. 31, 2017	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) renewal_option	Sep. 30, 2017 USD ($)
Operating Leased Assets [Line Items]
Operating leases, rent expense		$ 1.5	$ 1.1	$ 4.1	$ 2.9
Transportation Equipment
Operating Leased Assets [Line Items]
Operating leases, renewal term	6 years
Operating leases, rent expense		$ 0.5		$ 1.1
Operating lease term	2 years
Minimum
Operating Leased Assets [Line Items]
Operating lease, number of renewal options (or more) | 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	9 Months Ended
	Sep. 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 | $	$ 1.1	$ 0.8

XML

Commitments and Contingencies - Letters of Credit (Details) - USD ($) $ in Millions	1 Months Ended
	Feb. 28, 2018	Sep. 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	Sep. 30, 2018	Dec. 31, 2017
Assets:
Money Market Funds	$ 438,386	$ 171,859
Level 1
Assets:
Money Market Funds	438,386	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	Sep. 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	$ 88,151	$ 45,564
Fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of finance receivables, net	$ 91,400	$ 47,514

XML

Supplemental Cash Flow Information - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Noncash or Part Noncash Acquisitions [Line Items]
Cash payments for interest to third parties	$ 11,976	$ 4,668
Cash payments for interest to related parties	0	382
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	8,538	11,006
Capital expenditures financed through long-term debt	10,139	7,988
Debt issuance costs included in accounts payable and accrued liabilities	1,733	0
Property and equipment acquired under capital leases	3,369	0
Accrual of return on Class C redeemable preferred units	0	9,439
Class A Convertible Preferred Stock
Non-cash investing and financing activities:
Conversion of stock, amount converted	73,880	0
Class C Redeemable Preferred Units
Non-cash investing and financing activities:
Conversion of stock, amount converted	0	260,411
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	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Supplemental Cash Flow Elements [Abstract]
Cash and cash equivalents	$ 439,794	$ 172,680	$ 103,454	$ 39,184
Restricted cash	18,471	14,443	11,755	10,266
Total cash, cash equivalents and restricted cash	$ 458,265	$ 187,123	$ 115,209	$ 49,450

XML

Supplemental Cash Flow Information - Narrative (Details)	Sep. 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)			9 Months Ended
	Nov. 06, 2018 USD ($) shares	Nov. 02, 2018 USD ($) multiplier	Sep. 30, 2018	Jan. 01, 2018 USD ($)	Dec. 31, 2017 USD ($)
Floor Plan Facility | Line of Credit
Subsequent Event [Line Items]
Line of credit facility, maximum borrowing capacity (up to)				$ 350,000,000.0	$ 275,000,000.0
Floor Plan Facility | Line of Credit | London Interbank Offered Rate (LIBOR)
Subsequent Event [Line Items]
Debt instrument, basis spread on variable rate			3.65%
Subsequent Event | Class A | Contribution Agreement | Chief Executive Officer
Subsequent Event [Line Items]
Stock contribution commitment (in shares) | shares	32,932
Contribution of Class A common stock from related party, fee charged	$ 0
Subsequent Event | Floor Plan Facility | Line of Credit
Subsequent Event [Line Items]
Line of credit facility, maximum borrowing capacity (up to)		$ 650,000,000.0
Subsequent Event | Floor Plan Facility | Line of Credit | London Interbank Offered Rate (LIBOR)
Subsequent Event [Line Items]
Debt instrument, basis spread on variable rate		3.40%
Subsequent Event | Consumer Loan | Purchase and Sale Agreement
Subsequent Event [Line Items]
Commitment of purchaser, current availability financing, principal balances of finance receivables (up to)		$ 1,250,000,000
Subsequent Event | Consumer Loan | Master Transfer Agreement
Subsequent Event [Line Items]
Commitment of purchaser, current availability financing, principal balances of finance receivables (up to)		$ 454,500,000
Purchase commitment multiplier | multiplier		3

XML

Label	Element	Value
Adjustments Related to Tax Withholding for Share-based Compensation	us-gaap_AdjustmentsRelatedToTaxWithholdingForShareBasedCompensation	$ 399,000
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue	3,831,000
Stock Issued During Period, Value, Stock Options Exercised	us-gaap_StockIssuedDuringPeriodValueStockOptionsExercised	28,000
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	85,227,000
Member Units [Member]
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
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	(85,227,000)
Retained Earnings [Member]
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	(7,419,000)
Additional Paid-in Capital [Member]
Stock Issued During Period, Value, New Issues	us-gaap_StockIssuedDuringPeriodValueNewIssues	205,910,000
Adjustments Related to Tax Withholding for Share-based Compensation	us-gaap_AdjustmentsRelatedToTaxWithholdingForShareBasedCompensation	399,000
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue	3,831,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	us-gaap_StockIssuedDuringPeriodValueRestrictedStockAwardNetOfForfeitures	(1,000)
Stock Issued During Period, Value, Stock Options Exercised	us-gaap_StockIssuedDuringPeriodValueStockOptionsExercised	28,000
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	(174,255,000)
Noncontrolling Interest [Member]
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	(59,717,000)
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	$ 259,365,000
Common Class B [Member] | Common Stock [Member]
Stock Issued During Period, Shares, Conversion of Units	us-gaap_StockIssuedDuringPeriodSharesConversionOfUnits	117,236,000
Stock Issued During Period, Value, Conversion of Units	us-gaap_StockIssuedDuringPeriodValueConversionOfUnits	$ 117,000
Common Class A [Member] | Common Stock [Member]
Stock Issued During Period, Value, New Issues	us-gaap_StockIssuedDuringPeriodValueNewIssues	$ 15,000
Shares Paid for Tax Withholding for Share Based Compensation	us-gaap_SharesPaidForTaxWithholdingForShareBasedCompensation	27,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	us-gaap_StockIssuedDuringPeriodSharesStockOptionsExercised	2,000
Stock Issued During Period, Shares, New Issues	us-gaap_StockIssuedDuringPeriodSharesNewIssues	15,000,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	us-gaap_StockIssuedDuringPeriodValueRestrictedStockAwardNetOfForfeitures	$ 1,000
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures	us-gaap_StockIssuedDuringPeriodSharesRestrictedStockAwardNetOfForfeitures	538,000