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DYTTIGAF t1_j9bjlk5 wrote

Carvana isn't in the used car business. They are in the note securitization business (which means they lend money on used cars to consumers who can qualify and bundle those thousands of notes and sell the bundled pile as a financial product).

Carvana needs volume. They need a pipeline of notes and that requires a pipeline of sales. This requires a pipeline of people who can qualify on a 11% car loan that is almost $40,000. This is now a very small percentage of consumers. Most are carrying credit card, mortgage, student loan, and miscellaneous personal debt that could choke a pig.

The Federal Reserve is getting ready to raise rates again in June. Carvana's models worked at 2% interest rates. They don't work at 11%.

Carvana is dead.

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Far_Introduction527 t1_j9bvqhe wrote

Try 22% they go high too. I bet you earnings will be better than expected

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DYTTIGAF t1_j9bwq1l wrote

Consumers need to qualify for these cars. Carvana does not hold the notes. The notes are repackaged an sold to investors.

Institutional investors will not buy securities from Carvana with car loans from people who live paycheck to paycheck (paying 21% ).

They did this with subprime mortgages back in 2007. They won't do it again.

Carvana is finished.

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jawn_blaze t1_j9bzg3y wrote

You have a lot of confidence but don’t really know what you’re talking about.

21% auto notes can absolutely be a good investment. Where in the capital structure? How much excess spread? What triggers?

All that said, Carvanas is a shady company and their losses will be worse than peers as most people who purchased from them way overpaid and the stated collateral value is too high. (So their stated LTV’s are artificially depressed)

Be careful dude, blind confidence can blow yourself up.

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Pepepopowa t1_j9f94by wrote

I’m tempted to break your comment down but I doubt we want to waste more time here.

“Institutional investors will not buy securities from Carvana with car loans from people who live paycheck to paycheck (paying 21% ).”

You reply that 21% car loans CAN be good investments. Really? In what way? For who?

Do you believe saying excess spread and trigger is a winning argument? Is your argument that you know more than him and his attitude upset you?

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DYTTIGAF t1_j9c1mqb wrote

That's why Carvana is done 90%. That's why billions in market capitalization has been lost. Where did those loses come from? Guys like you.

Carry on....

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jawn_blaze t1_j9c5ui4 wrote

I offered no one financial advice. You offered up emphatic truths to strangers in a subject you have a cursory knowledge of.

I’ll let others decide what’s better.

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Pepepopowa t1_j9f8dbr wrote

Bro the vocab isn’t impressive and it’s a little pretentious to agree with him but nit-pick his response for not being completely nuanced.

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DYTTIGAF t1_j9c6ief wrote

The market will decide and test. It will approve. It has already spoken but you will not discern the feedback.

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sound-of-impact t1_j9co4jx wrote

>The Federal Reserve is getting ready to raise rates again in June. Carvana's models worked at 2% interest rates. They don't work at 11%. > >Carvana is dead.

Simple. 15+ year auto loans. 🚀

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gaurav0792 t1_j9cqol1 wrote

Yea, a lot of people are regarded, but not that regarded.

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where_is_my_avocado t1_j9exeo7 wrote

Youre absolutely right but with >50% of shares short and even sellside getting bearish, who the fuck knows how bad it has to be to move the stock down

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Puzzleheaded_War6849 t1_j9h87lf wrote

They do a lot less of this now. Bulk of finance receivables are just pushed off onto Ally through forward-flow, not through CVNA sponsored securitizations.

They make a bit on the forward-flows, but it's dwarfed by the rest of the purported business model.

They really are just a (bad) car business. They need an absolutely astronomical amount of sales to support the bloated, debt laden company when they have unimpressive gross margins.

It's probably a $0 by 2025.

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Feeling_Inspector890 t1_j9md02s wrote

>lot less of this now. Bulk of finance receivables are just pushed off onto Ally through forward-flow, not thro

And with that foresight, you can't even double your money haha. Seems priced in.

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