CVNA’s GAAP Illusion: Where the Losses Really Are

5,000 Repos, Zero Charge-Offs: The Carvana ABS Accounting Gap

Important Note: ABS Data Analysis overlayed with Financial Report Models is available only for our institutional clients. To become our client, email laks@unicusresearch.com.

CVNA’s Hidden Risk Is Already Repossessed. Just Not Recognized (Yet)

While Carvana’s Q1 earnings paint a picture of strength, the company’s ABS loan pools tell a very different story.

In CVNA 2025-P2 alone, over 5,000 loans are likely to have been repossessed, a repo rate of 20.2%, far above subprime norms. Every loan has been extended at least once, and most borrowers are in deep subprime FICO ranges.

Yet, Carvana reported a $3 million gain on these same securitizations.

This isn’t a glitch, it’s the structured finance playbook. Losses are accumulating within the trust but have not yet been reflected in the company’s GAAP income statement. We are triangulating the data to estimate the cushion left in each trust (this is for clients only).

In this free report, we map how trust-level deterioration becomes financial headline risk and why watching ABS data first gives you an edge over the market.

This is just a sample. Effective July 2025, detailed analysis will be available only for founding members. The prices go up, and the best time to upgrade at a discounted rate is now.

Trust-Level Reality (Data from CVNA 2025-P2)

• Repo Rate: 20.2% of 25,838 loans → ~5,221 repossessions (but the repos. are not in absolute terms, they are in aggregate terms - see in the upcoming analysis).

• Extension Rate: 100% — every loan has been modified or extended at least once

• FICO Profile: Many loans in the 570–700 range (deep subprime to fringe prime)

• Vintage Repossession Leader: 2024 cohort at 22.9% repo rate

This level of repo activity exceeds subprime norms (~8–12%) and points to severe embedded stress in CVNA’s off-balance-sheet loan books.

What CVNA’s 10-Q Shows (GAAP Accounting View)

From Q1 2025 filings:

CVNA is not recognizing the trust-level distress as actual charge-offs or impairments, meaning the losses are not hitting the income statement yet.

Key Red Flags and Implications

Timing Gap

Trusts are absorbing repos now, but GAAP charges are delayed via:

• Loan extensions

• Residual valuation assumptions

• Accounting treatment of retained interests

Cushion Modeling

• Credit enhancements (reserves + excess spread) might still be absorbing early losses.

• But 20%+ repo volume is aggressive.

• If residuals get written down or credit enhancement burns off — losses will re-enter GAAP.

Triggers to Watch

Bottom Line

CVNA is exhibiting a textbook case of off-balance-sheet stress being deferred, not absorbed, by its financial statements.

The balance sheet doesn’t lie, it just takes its time.

CVNA is not alone. We are tracking other lenders and they are the same, if not, worse.

The Unrealized Gain Paradox

This reflects non-cash mark-to-market adjustments CVNA applies to retained interests (excess spread) in ABS trusts.

When CVNA reports a $3M gain, it means they believe their future share of cash flows from the trust became more valuable.

Why is this suspicious?

• Repo rate in CVNA 2025-P2 = 20.2% (~5,221 repos)

• Cash flows to residual holders are likely declining, not rising

Marking up a deteriorating trust interest implies a delay or distortion in internal economic assumptions.

Implication:

• If trust cash flows disappoint, CVNA will need to write down residual values in future quarters

• This will hit the income statements after the actual deterioration occurred.

How Loss Recognition is Deferred

Off-Balance Sheet Structure

• ABS trusts are legally separate

• Repos within trusts do not affect CVNA’s P&L directly

Residual Mark-to-Market Delay

• Residual impairment depends on internal models.

• If models are not updated timely manner, losses remain hidden.

Servicing Fee Insulation

• CVNA still earns fees for managing the trust

• These income streams are untouched by repo spikes (unless triggers are breached)

Charge-Off Accounting Rules

• GAAP charge-offs happen only if:

  • CVNA holds the loan on-book

  • The residual interest is impaired.

  • A guarantee or support structure kicks in.

Sample Visual Timeline (Coming in Full Report)

Nov 2024: Loan enters delinquency
Dec 2024: Extension applied to stall charge-off
Jan 2025: Repossession logged in ABS
Feb 2025: Trust-level charge-off
Mar 2025: GAAP income statement may reflect impact (if at all)

approximation.

Final Thoughts

You’re now seeing the full deterioration cycle, starting in the ABS data and slowly creeping toward GAAP. This is where equity risk truly begins.

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