Filed Pursuant to Rule 424(b)(5)

Registration No. 333-239650 and 333-239650-07

PROSPECTUS

$1,035,000,000⁽¹⁾

Carvana Auto Receivables Trust 2021-P3

Issuing Entity

(CIK: 0001843627)

$146,200,000 Class A-1 0.15838% Asset Backed Notes

$342,310,000 Class A-2 0.38% Asset Backed Notes

$342,310,000 Class A-3 0.70% Asset Backed Notes

$125,000,000 Class A-4 1.03% Asset Backed Notes

$33,640,000 Class B 1.42% Asset Backed Notes

$30,530,000 Class C 1.93% Asset Backed Notes

$15,010,000 Class D 2.25% Asset Backed Notes

 

(1) At least 5% (by initial principal amount) of each class of the Notes will initially be retained by Carvana or one or more of its majority-owned affiliates in satisfaction of Carvana’s risk retention obligations described under “Credit Risk Retention”. The Issuing Entity will also issue the Class N Notes, the Class XS Notes and the Certificates, which are not being offered by this prospectus. Some or all of the Notes may initially be retained by the Depositor or one or more affiliates thereof on the Closing Date.

 

Carvana Receivables Depositor LLC Depositor (CIK: 0001770373)		Carvana, LLC Sponsor and Administrator (CIK: 0001576462)

The Issuing Entity is offering the following classes of Notes pursuant to this prospectus (the “Offered Notes”):

 

		Price to Investor								Underwriting Discounts								Net Proceeds*
Class A-1 Notes			$138,890,000				100.00000%				$347,225				0.25%				$138,542,775				99.75000%
Class A-2 Notes			$325,159,074				99.98926%				$812,985				0.25%				$324,346,089				99.73926%
Class A-3 Notes			$325,119,856				99.97720%				$812,985				0.25%				$324,306,871				99.72720%
Class A-4 Notes			$118,728,138				99.98159%				$296,875				0.25%				$118,431,263				99.73159%
Class B Notes			$31,952,596				99.98309%				$79,895				0.25%				$31,872,701				99.73309%
Class C Notes			$28,998,545				99.98464%				$72,508				0.25%				$28,926,038				99.73464%
Class D Notes			$14,253,788				99.96345%				$35,648				0.25%				$14,218,141				99.71345%
Total			$983,101,997								$2,458,120								$980,643,877

 

*

See “Plan of Distribution” beginning on page 99 in this prospectus for additional information regarding compensation payable to the underwriters and the co-manager.

**

The net proceeds to the Depositor exclude expenses, estimated at $1,000,000.

YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 7 IN THIS PROSPECTUS.

The Notes will be obligations of the Issuing Entity only and will not be obligations of or interests in Carvana, the Depositor or any of their affiliates and are not insured or guaranteed by any governmental agency. The Notes are payable solely from the assets of the Issuing Entity. The primary assets of the Issuing Entity will be its indirect ownership of a pool of fixed rate retail installment contracts used to finance the purchase of used cars and light trucks. The Issuing Entity will pay interest and principal on the Notes on the 10th day of each month, or, if such day is not a Business Day, the next Business Day, starting on October 12, 2021. The Issuing Entity will generally pay principal sequentially to each class of Offered Notes in order of seniority (starting with the Class A-1 Notes) until each class is paid in full.

The credit enhancement for the Offered Notes will include subordination, overcollateralization, a reserve account and excess collections on the Receivables. Delivery of the Offered Notes, in book-entry form only, will be made through The Depository Trust Company against payments in immediately available funds on or about September 29, 2021.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

BNP PARIBAS		Citigroup		Wells Fargo Securities
Credit Suisse				Deutsche Bank Securities
		Co-Manager
		Baird

The date of this Prospectus is September 21, 2021.

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS			ii
PROSPECTUS SUMMARY			1
RISK FACTORS			7
RISKS RELATED TO THE RECEIVABLES			7
RISKS RELATED TO THE NOTES AND THE ISSUING ENTITY			11
RISKS RELATED TO THE TRANSACTION PARTIES			13
GENERAL RISK FACTORS			16
SPONSOR			18
DEPOSITOR			19
ISSUING ENTITY			20
GRANTOR TRUST			22
SERVICER			23
INDENTURE TRUSTEE AND COLLATERAL CUSTODIAN			24
OWNER TRUSTEE AND GRANTOR TRUST TRUSTEE			26
ASSET REPRESENTATIONS REVIEWER			27
BACKUP SERVICER			28
UNDERWRITING OF RECEIVABLES			29
SERVICING PROCEDURES			31
HISTORICAL PERFORMANCE			34
THE RECEIVABLES			37
REPURCHASE HISTORY			47
PREPAYMENT AND YIELD CONSIDERATIONS			48
USE OF PROCEEDS			62
DESCRIPTION OF THE NOTES			63
CREDIT ENHANCEMENT			66
DISTRIBUTION DATE PAYMENTS			68
THE TRANSACTION DOCUMENTS			70
TRANSACTION FEES AND EXPENSES			85
CERTAIN REGULATORY CONSIDERATIONS			86
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES			90
STATE AND LOCAL TAX CONSEQUENCES			95
CERTAIN ERISA CONSIDERATIONS			96
MONEY MARKET INVESTMENTS			98
PLAN OF DISTRIBUTION			99
CREDIT RISK RETENTION			102
AFFILIATIONS AND RELATIONSHIPS AMONG TRANSACTION PARTIES			103
RATINGS			104
LEGAL PROCEEDINGS			105
LEGAL OPINIONS			106
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE			107
WHERE YOU CAN FIND MORE INFORMATION			108
GLOSSARY			109
STATIC POOL INFORMATION			Annex I

 

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ABOUT THIS PROSPECTUS

You should rely only on the information provided in this prospectus, including the information incorporated by reference in this prospectus. We have not authorized anyone to provide you with other or different information. We are not offering the Notes in any state where the offer is not permitted.

This prospectus provides information regarding the pool of Receivables indirectly held by the Issuing Entity and the terms of the Offered Notes.

This prospectus begins with two introductory sections describing the Issuing Entity and the Offered Notes in abbreviated form:

 

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“Prospectus Summary,” which gives a brief introduction of the key features of the Offered Notes and a description of the Receivables; and

 

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“Risk Factors,” which describes risks that apply to the Offered Notes issued by the Issuing Entity.

This prospectus includes cross references to sections in this prospectus where you can find further related discussions. The “Table of Contents” in this prospectus identifies the pages where these sections are located.

You can find definitions of certain capitalized terms used in this prospectus in the “Glossary,” which appears at the end of this prospectus.

For all tables and charts in this prospectus, the balances and percentages may not total to 100% due to rounding.

To understand the structure of, and risks related to, the Notes, you must read carefully this prospectus in its entirety.

In this prospectus, the terms “Depositor,” “we,” “us” and “our” refer to Carvana Receivables Depositor LLC, and “Carvana” refers to Carvana, LLC, individually and in its roles as administrator and sponsor, as applicable.

TRADEMARKS AND TRADENAMES

This prospectus includes Carvana’s trademark and service mark, “Carvana,” which is protected under applicable intellectual property laws and is the property of the issuer or its subsidiaries. This prospectus also includes references to FICO scores. FICO is a federally registered servicemark of Fair Isaac Corporation. Solely for convenience, trademarks and trade names referred to in this prospectus supplement may appear without the ^® or ^™ symbols, but such references are not intended to indicate, in any way, that we or the Fair Isaac Corporation will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names.

FORWARD LOOKING STATEMENTS

This prospectus, including information included or incorporated by reference in this prospectus, may contain certain forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, such as statements about our future financial performance and the effects of the COVID-19 pandemic, including any underlying assumptions, are forward-looking statements.

Forward-looking statements include statements using the words “expect,” “anticipate,” “estimate,” “forecast,” “initiative,” “objective,” “plan,” “goal,” “project,” “outlook,” “priorities,” “target,” “explore,” “positions,” “intend,” “evaluate,” “pursue,” “seek,” “may,” “would,” “could,” “should,” “believe,” “potential,” “continue,” or the negative of these words, or similar expressions which are intended to identify these forward-looking statements. The absence of these words does not mean that a statement is not forward-looking. All statements herein, other than statements of historical fact, including statements about future events and financial performance, are forward-looking statements that involve certain risks and uncertainties. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results.

The forward-looking statements made in this prospectus speak only as of the date stated on the cover of this prospectus. The Issuing Entity and the Depositor undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by federal securities law.

 

 

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RISK FACTORS

Investment in the Offered Notes involves certain risks. In addition to the other information contained in this prospectus, prospective investors should carefully consider the following risk factors before purchasing the Offered Notes. Although the following risks are generally described separately, prospective investors in the Offered Notes should consider the potential effects of the occurrence of multiple risks simultaneously. Where more than one significant risk is present, the risk of loss may be significantly increased. The order in which these considerations are presented is not intended to represent the magnitude of risks discussed.

RISKS RELATED TO THE RECEIVABLES

Adverse events arising from the global COVID-19 outbreak could result in delays in payments or losses on your Securities

The global outbreak of a novel coronavirus (“COVID-19”) has led, and will likely continue to lead, to disruptions in global financial markets and the economies of many nations and is resulting in adverse impacts on the economy of the United States (which include a general curtailment of business activity and a significant increase in unemployment) and the global economy in general. The long-term effects of the social, economic and financial disruptions caused by the outbreak of COVID-19 are unknown.

It is unclear how many obligors have been and will continue to be adversely affected by the COVID-19 outbreak. While governments have and may continue to implement various stimulus and economic relief programs, including additional unemployment benefits, it is uncertain whether existing programs will be effective in mitigating the economic effects of COVID-19 and, with respect to future programs, to what extent obligors will be eligible to participate. Furthermore, it is not known how many obligors of the Receivables may have been receiving or may in the future receive any such benefits, or what the effect of any future reduction of such benefits may be on the ability of the obligors to meet their payment obligations under the Receivables. As discussed under “The Transaction Documents—The Servicing Agreement and Servicing of the Receivables—Modifications,” to the extent the COVID-19 outbreak and the related economic downturn result in increased financial hardship for obligors, the Servicer has implemented, and may continue to implement, a range of actions with respect to affected obligors to extend or modify the payment schedule of the related Receivables consistent with the Servicer’s customary servicing practices. During the early stages of the COVID-19 outbreak, servicers of motor vehicle receivables, including the Servicer, experienced a sharp increase in requests for extensions and modifications related to COVID-19, and a significant number of such extensions and modifications have been granted, including by the Servicer. Although the frequency of extensions and modifications related to the COVID-19 outbreak has since declined and the Servicer has since resumed involuntary repossessions and other collections activity where permitted by local law, the frequency of extensions and modifications may increase in the future and the Servicer may again elect (or be required) to suspend repossession activity in the future. Also, there may be an increase in the number of obligors seeking protection under bankruptcy or debtor relief laws as a result of the financial and economic disruptions related to the outbreak of COVID-19.

Because a pandemic such as COVID-19 has not occurred in recent years, historical loss experience is unlikely to accurately predict the performance of the Receivables. See “—Carvana’s proprietary credit scoring system may not perform as expected and may fail to properly quantify the credit risks associated with Carvana’s customers, resulting in higher than anticipated delinquencies and credit losses on the Receivables.” All of the foregoing could have a negative effect on the performance of the Receivables and, as a result, you may experience delays in payments or losses on your Securities.

Receivables with non-prime obligors have higher default rates than Receivables with prime obligors, which may affect the performance of the Receivables

Some of the Receivables in the Pool are obligations of non-prime obligors who do not qualify for conventional motor vehicle financing as a result of, among other things, a lack of or adverse credit history, low income levels or the inability to provide adequate down payments. While Carvana’s underwriting criteria are designed to establish that the obligor would be a reasonable credit risk, the Receivables will nonetheless experience higher default rates than a portfolio of Receivables with all prime obligors. In the event of a default, repossession of the related financed vehicle is the most likely alternative for recovery. As a result, losses on Charged-Off Receivables are likely because net liquidation proceeds from the sale of repossessed vehicles are expected to be insufficient to satisfy amounts owed by the related obligors under the Receivables in full. See “The Receivables—Certain Legal Considerations of the Receivables.” In addition, the concentration of Receivables in the Pool with non-prime obligors may also have the effect of heightening many of the other risks, including those relating to general macroeconomic forces and economic downturns, described in this “Risk Factors” section. If delinquencies and losses create shortfalls, which exceed the available credit enhancement, you may experience delays in payments due to you and you could suffer a loss on your Notes.

Carvana’s proprietary credit scoring system may not perform as expected and may fail to properly quantify the credit risks associated with Carvana’s customers, resulting in higher than anticipated delinquencies and credit losses on the Receivables

Carvana has developed, and revises from time to time, complex proprietary credit scoring models that use traditional and non-traditional variables to assess credit risk and determine credit offer parameters. There is no guarantee that Carvana’s credit scoring models will perform as intended.

 

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If Carvana made errors in developing or validating its credit scoring models, trained or validated its models on incomplete, inaccurate, or biased data sets, or used model development or validation techniques that result in bias or instability, Carvana may fail to gauge credit risk as expected and make credit decisions that result in higher delinquencies and credit losses.

Carvana’s credit scoring models are generally developed and validated on samples of consumer data and loan performance pertaining to a distinct period of time in the past. Changes in the macroeconomy, consumer behavior, creditor reporting behavior, and third party data reporting methods between a model’s development and validation periods and between a model’s development period and when the model is used by Carvana could materially impact the relationship between inputs to Carvana’s models and expected credit outcomes, resulting in a reduction of the ability of Carvana’s credit scoring models to assess credit risk as expected.

Carvana’s credit scoring models rely heavily on data obtained from third parties, including credit bureaus. If the data Carvana obtains from third parties for use in its models is incomplete, inaccurate, biased, or not provided consistent with the methods and practices used by such third parties during the time period of the sample upon which Carvana built or validated our models, the output of Carvana’s models may be unreliable and fail to properly quantify credit risk, resulting in it making credit decisions that result in higher delinquencies and credit losses.

Further, Carvana’s credit scoring models were built prior to the global outbreak of COVID-19, and consequently may not adequately take into account the longer-term impact of social, economic and financial disruptions caused by the pandemic.

Information provided to Carvana by customers, credit data partners, and others may be incorrect or fraudulent, and Carvana’s Verification Process may fail to ensure that reliable information is incorporated into the extension of credit offers to Carvana’s customers, resulting in higher than anticipated delinquencies and credit losses on the Receivables

In deciding whether to extend credit to customers and the parameters of such credit offers, Carvana relies heavily on information furnished to it by customers, credit data partners, and others, and such data may be incorrect or fraudulent. Carvana has developed a Verification Process that attempts to ensure that information considered by its proprietary financing technology belongs to the customer(s) receiving a credit offer, and that such information is reasonably accurate. There is no guarantee that Carvana’s Verification Process will perform as expected, detect fraudulent or incorrect data, or otherwise achieve its goals, which may result in credit loss and delinquency rates on the Receivables being higher than anticipated.

Further, Carvana utilizes identity and fraud checks based on customer provided documents and inputs, as well as data provided by external databases to authenticate each customer’s identity. There have been instances in the past in which these checks have failed or been ineffective, and there is a risk that these checks could also fail or be ineffective in the future, which could result in significant losses related to fraud being borne by investors in the Securities. Fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negatively impacting the operating results and reputation of both Carvana and the Servicer.

Historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the Receivables.

Historical loss and delinquency information as set forth in this prospectus under “Historical Performance” are affected by several variables, including general economic conditions and market interest rates, that are expected to differ in the immediate future, and are likely to differ in the longer term future. Consequently, the net loss experience calculated and presented in this prospectus with respect to Carvana’s managed portfolio may not reflect actual experience with respect to the Receivables in the Pool. Further, the prices of used vehicles, including the prices at which the Servicer is able to sell repossessed vehicles, are variable, and such prices declined during the early stages of the COVID-19 outbreak and may decline again in the future, resulting in increased credit losses on defaulted Receivables. In addition, future delinquency rates, rates of repossession, recovery rates on repossessed vehicles or loss experience with respect to the Receivables may be better or worse than that set forth in the static pool information and historical delinquency and loss information contained in this prospectus. Consequently, payments on the Notes could be adversely affected.

Economic developments may adversely affect the performance of the Receivables and the market value of your Securities

The United States economy experienced a recession following the start of the COVID-19 outbreak, which may adversely affect the performance of the Receivables and the performance and market value of your Notes. Periods of economic slowdown or recession are often characterized by high unemployment and diminished availability of credit, generally resulting in increases in delinquencies, defaults, repossessions and losses on automobile loans.

If an economic downturn is experienced for a prolonged period of time, it is expected that delinquencies will increase and losses on the Receivables could increase, which could result in losses on your Securities. An improvement in economic conditions could result in prepayments by the obligors of their payment obligations under the Receivables, either because obligors elect to make payments more frequently or in larger-than-required amounts or because obligors sell the financed vehicles more frequently in connection with the purchase of new vehicles. As a result, you may receive principal payments of your Notes earlier than anticipated.

Market factors may reduce the value of used vehicles, which could result in increased losses on the Receivables

Vehicles that are repossessed are typically sold at vehicle auctions. The pricing of used cars is affected by the supply and demand for those cars, which, in turn, is affected by consumer demand and tastes, recalls, economic factors (including the price of gasoline and closure of dealerships), the introduction and pricing of new car models and other factors, including legislation related to emissions and fuel efficiency. Decisions by a manufacturer with respect to new vehicle production and brands, pricing and incentives may affect used

 

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car prices, particularly those for the same or similar models. Adverse changes in these factors may depress the price at which repossessed motor vehicles may be sold or delay the timing of those sales. Additionally, the COVID-19 pandemic and related economic and financial disruption have had an adverse effect on the supply and demand of both new and used motor vehicles. An increase in the supply or a decrease in the demand for used cars may negatively impact the resale value of the vehicles securing the Receivables, which could result in losses on the Securities.

Further, periods of economic slowdown may also be accompanied by decreased consumer demand for light-duty trucks, SUVs or other vehicles and declining values of automobiles securing outstanding retail installment sale contracts, which weakens collateral coverage and increases the amount of a loss in the event of default by an obligor. Vehicle sales and other activity in the consumer automotive market sharply declined in the early stages of the COVID-19 outbreak and may decline again in the future, especially if directives requiring stay-at-home orders and the closure of “nonessential” businesses in an effort to slow the COVID-19 outbreak continue for a prolonged period of time or are re-implemented. Decreases in the value of those vehicles may, in turn, reduce the incentive of obligors to make payments on the Receivables and decrease the proceeds realized from vehicle repossessions, which could result in losses on the Securities.

Longer term Receivables may increase the frequency and amount of losses

The frequency and amount of losses may be greater for Receivables with longer terms, because these Receivables tend to have a somewhat greater frequency of delinquencies and defaults and because the slower rate of amortization of the principal balance of a longer term Receivable may result in a longer period during which the value of the related financed vehicle is less than the remaining principal balance of such Receivable. See “The Receivables—Distribution of the Receivables by Original Term to Maturity as of the Cutoff Date” for the percentage of Receivables with original terms of greater than 72 months as of the Cutoff Date.

Prepayments on and repurchases of the Receivables could shorten the average life of the Notes

Obligors may prepay the Receivables in full or in part at any time. We cannot predict the rate of prepayments on the Receivables. A variety of unpredictable economic, social, and other factors influence prepayment rates. In addition, the Receivables may be prepaid as a result of defaults, from credit life, disability or physical damage insurance, or, in limited circumstances, voluntarily by Carvana. Also, Carvana may be required to repurchase Receivables in specified circumstances and the Servicer (or its designee) may purchase all remaining Receivables pursuant to the optional redemption. See “The Transaction Documents—Repurchases of Receivables.”

A prepayment, repurchase, purchase or liquidation of the Receivables, including liquidation of Charged-Off Receivables, could shorten the average life of the Notes.

You will bear all reinvestment risk resulting from a faster or slower rate of prepayment, repurchase or extension of the Receivables held by the Grantor Trust.

Consumer protection laws and limited enforceability of the Receivables may reduce or delay the funds available to make payments on your Securities

Federal and state consumer protection laws impose requirements upon creditors in connection with extensions of credit and collections on retail installment loans and retail installment contracts such as the Receivables. Specific statutory liabilities are imposed upon creditors who fail to comply with these regulatory provisions. In some cases, this liability could affect an assignee’s ability to enforce secured loans such as the Receivables or make an assignee of the loan or contract liable to the obligor for any violation by the originator. Any liabilities of the Issuing Entity under these laws could reduce Available Funds.

Since March 2020, the United States has enacted complex legislation to address the COVID-19 pandemic, including various measures intended to help consumers, such as new requirements affecting credit reporting, direct payments to workers, and unemployment relief, including additional unemployment benefits. Compliance with implementing the regulations under these and future legislative acts may impose costs on, or create operational constraints for, Carvana and may have an adverse impact on the ability of the Servicer to effectively service the Receivables.

It is not known how many obligors of the Receivables may have been receiving or may in the future receive any such additional unemployment benefits, or what the effect of any reduction of such benefits may be on the ability of the obligors to meet their payment obligations under the Receivables.

If an obligor had a claim for violation of these laws prior to the its applicable Cutoff Date that materially and adversely affected the interests of the investors, taken as a whole, in the related Receivables, Carvana must repurchase the Receivable under the circumstances set forth under “The Transaction Documents—Repurchases of Receivables” unless the breach is cured. If Carvana fails to repurchase the Receivable, you might experience reductions or delays in payments on your Securities. See “Certain Regulatory Considerations—Consumer Protection Laws.”

Terrorist attacks and conflicts involving the United States military could result in delays in payment or losses on your Securities

Any effect that terrorist attacks, any current or future military action by or against the United States and the rising tensions in certain regions of the world may have on the performance of the Receivables is unclear, but there could be an adverse effect on general economic conditions, consumer confidence and general market liquidity. Investors should consider the possible effects on delinquency, default and prepayment experience of the Receivables. In particular, under the Servicemembers Civil Relief Act, members of the military on

 

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active duty, including reservists, who have entered into an obligation, such as a retail installment contract or retail installment loan for the purchase of a vehicle, before entering into military service may be entitled to reductions in interest rates to 6% and a stay of foreclosure and similar actions. In addition, pursuant to the laws of various states, under certain circumstances residents thereof called into active duty with the National Guard or the reserves can apply to a court to delay payments on retail installment contracts or installment loans such as the Receivables. No information can be provided as to the number of Receivables that may be affected. If the Servicer reduces the APR or Principal Balance of a Receivable in accordance with the Servicer’s procedures for complying with the Servicemembers Civil Relief Act and any similar applicable state law, the Servicer will not be required to indemnify for any such reduced amounts and the Issuing Entity will bear the risk of any shortfalls. Any resulting shortfalls in interest or principal will reduce Available Funds and you may experience delays or reductions in payments on your Notes.

For more information regarding the Servicemembers Civil Relief Act, see “Certain Regulatory Considerations—Consumer Protection Laws” and “The Receivables—Certain Legal Considerations of the Receivables—Other Matters.”

Lack of first priority liens on financed vehicles or the Receivables could make the Receivables uncollectible and reduce or delay payments on the Securities

Financing statements under the UCC will be filed reflecting the sale of the Receivables by Carvana to the Depositor, by the Depositor to the Issuing Entity, by the Issuing Entity to the Grantor Trust, and the pledge by the Issuing Entity of substantially all of its assets to the Indenture Trustee. The financing statements will perfect the security interests of the Depositor, the Issuing Entity, the Grantor Trust, and the Indenture Trustee in the Receivables. The security interest in the financed vehicles will be assigned also to the Grantor Trust. Due to the administrative burden and expenses, however, the certificates of title to the financed vehicles will not be amended or reissued to identify the Grantor Trust as the new secured party.

If the security interests in the financed vehicles as described in “The Receivables—Certain Legal Considerations of the Receivables —Security Interests in the Financed Vehicles” are not properly perfected, the interests of the Depositor, the Issuing Entity, Grantor Trust, and the Indenture Trustee in the financed vehicles would be subordinate to, among others, the following:

 

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bankruptcy trustee of the obligor,

 

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subsequent purchaser of the financed vehicle and

 

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holder of a perfected security interest.

The Issuing Entity, the Grantor Trust, and the Indenture Trustee may not be able to collect on a Charged-Off Receivable in the absence of a perfected security interest in the related financed vehicle. Even if the Issuing Entity, the Grantor Trust, and the Indenture Trustee were to have a perfected security interest in the financed vehicles, events could jeopardize the enforceability of that interest, such as:

 

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fraud or forgery by the vehicle owner,

 

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negligence or fraud by the Servicer, the Collateral Custodian or another party,

 

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mistakes by government agencies,

 

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liens for repairs or unpaid taxes, and

 

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confiscations of vehicles by the government.

See “The Receivables—Certain Legal Considerations of the Receivables —Security Interests in the Financed Vehicles.”

Carvana will be obligated to repurchase any Receivable as to which a perfected security interest in favor of the Depositor (or its affiliate) in the related financed vehicle did not exist and the interests of the investors, taken as a whole, in such Receivable are materially and adversely affected by such breach. The Servicer may be obligated to provide indemnification for actual losses on a Receivable if the security interest in a financed vehicle or the related Receivable becomes impaired. As a result of the foregoing, the Issuing Entity may not have a perfected interest in certain Receivables or its interest, although perfected, could be junior to that of another party. Either circumstance could affect the Servicer’s ability to repossess and sell the underlying financed vehicles. Therefore, you may be subject to delays in payment on your Securities and you may incur losses on your investment in the Securities.

If the Collateral Custodian does not maintain control of the Receivables evidenced by electronic contracts, the Grantor Trust may not have a perfected interest in those Receivables

As described in “Underwriting of Receivables—Electronic Contracts and Electronic Contracting,” Carvana and the Collateral Custodian have contracted with an e-vault provider, a third-party provider of electronic transaction management product and services, to process the origination and execution of, to vault and to manage contracts in electronic form through its technology system. The e-vault provider’s systems are designed to enable Carvana (and its subsequent assignees) to perfect their respective interests in the Receivables evidenced by electronic contracts by satisfying the UCC’s requirements for “control” of electronic chattel paper. See “Underwriting of Receivables—Electronic Contracts and Electronic Contracting” for a discussion on the features of electronic contracts.

It is possible that another person could acquire an interest in an electronic contract that is superior to Carvana’s interest. This could occur if Carvana ceases to have “control” over the electronic contract that is maintained by Carvana or on behalf of Carvana and another party purchases that electronic contract (without knowledge that such purchase violates Carvana’s rights in the electronic contract) and

 

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obtains “control” over the electronic contract. Carvana also could lose control over an electronic contract if through fraud, forgery, negligence or error, or as a result of a computer virus or a failure of or weakness in the e-vault provider’s technology system, a person other than Carvana (or its assignees) were able to modify or duplicate the authoritative copy of the contract.

Although Carvana will perfect the assignment of its interest in the electronic contracts to the Depositor, the Issuing Entity, the Grantor Trust and the Indenture Trustee by filing financing statements, the fact that Carvana’s interest in the Receivables may not be perfected by control may adversely affect the priority of the Issuing Entity’s interest in the Receivables, which may cause its interests in the Receivables junior to another party acquiring “control” over the electronic contract. Carvana and the Depositor will represent that Carvana has a perfected interest in the Receivables evidenced by electronic contracts by means of control and that such interest has been transferred to the Depositor and thereafter to the Issuing Entity and the Grantor Trust.

There can be no assurances that the e-vault provider’s technology system will perform as represented to Carvana in maintaining the systems and controls required to provide assurance that Carvana (and its subsequent assignees) maintains control over an electronic contract. In that event, there may be delays in obtaining copies of the electronic contract or confirming ownership and control of the electronic contract.

There has been limited legal interpretation of the UCC provisions governing perfection of a security interests in electronic contracts by control. As a result, there is a risk that the systems employed by the e-vault provider to maintain control of the electronic contracts may not be sufficient as a matter of law to give Carvana (and accordingly, the Issuing Entity and the Grantor Trust) a perfected interest in the Receivables evidenced by electronic contracts.

As noted above, Carvana will file financing statements to perfect its assignment in the electronic contracts to the Depositor, the Issuing Entity and the Grantor Trust. The law governing the perfection of ownership and security interests in electronic contracts, electronic modifications and “control” has not been meaningfully tested in court. Accordingly, there can be no assurance that financing statements will be effective to perfect each party’s interest in any electronic contracts or electronic modifications of physical contracts.

Geographic concentrations of the Receivables may result in more risk to you and adversely affect payments on the Receivables and Notes

The Receivables related to obligors with mailing addresses in the following two states constituted the largest geographic concentrations as shown by percentage of Initial Pool Balance:

 

State		Percentage of Initial Pool Balance
Texas		10.08%
California		7.63%

If one or more of these states experience adverse economic changes (such as those precipitated by an increase in the unemployment rate, interest rates or the rate of inflation) and disruptions caused by directives (such as stay-at-home orders) intended to limit the spread of COVID-19 or mitigate the effects of COVID-19 and the related economic hardships (such as repossessions or creditors’ rights moratoriums) or extreme weather conditions or other natural events (such as hurricanes, tornadoes, floods, drought, wildfires, mudslides, earthquakes and other extreme conditions) or significant changes in the political environment and public policy, including increased state, local or federal taxation, obligors in those states may be unable to make timely payments on their Receivables and you may experience payment delays on your Notes, acceleration of payments on the Notes resulting from prepayments using insurance proceeds or losses on your investment. We cannot predict, for any state or region, whether adverse economic changes or other adverse events will occur or to what extent those events would affect the Receivables or repayment of your Notes.

RISKS RELATED TO THE NOTES AND THE ISSUING ENTITY

Only the assets of the Issuing Entity are available to pay the Notes

The Notes represent indebtedness of the Issuing Entity and will not be insured or guaranteed by Carvana, the Depositor, the Grantor Trust, the Servicer, the Backup Servicer, the Indenture Trustee, the Owner Trustee, the Grantor Trust Trustee, the Collateral Custodian, the Asset Representations Reviewer, any of their respective affiliates, or any other person or entity other than the Issuing Entity. The Issuing Entity’s ability to make principal and interest payments on the Notes will depend on the amount of collections on the Receivables and, if and to the extent available, any credit or cash flow enhancement for the Issuing Entity. Therefore, you must rely solely on the assets of the Issuing Entity for repayment of your Notes.

If there are decreased collections, increased defaults or insufficient funds in the Reserve Account you may experience delays or reductions in payments on the Notes, may not receive back your full principal investment or all interest due to you and may suffer losses on your Notes.

The Overcollateralization Target Amount may not be reached or maintained

The amount of overcollateralization is expected to increase over time to the Overcollateralization Target Amount as excess collections are applied to make principal payments on the Notes (other than the Class N Notes) in an amount greater than the decrease in the Pool

 

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Balance. There can be no assurance, however, that the Overcollateralization Target Amount will be reached or maintained or that the Receivables will generate sufficient collections to pay the Notes in full.

See “Credit Enhancement—Overcollateralization” for a further discussion of overcollateralization.

The amount on deposit in the Reserve Account may not be sufficient to assure payment of the Notes

The amount on deposit in the Reserve Account will be used to fund the payment of the Servicing Strip Amount, interest payments on the Notes (other than the Class N Notes), certain expenses of various service providers to the Issuing Entity, and certain distributions of principal on the Notes (other than the Class N Notes) on each Distribution Date if collections on the Receivables, including amounts recovered in connection with the repossession and sale of financed vehicles that secure Charged-Off Receivables, are not sufficient to make that payment. There can be no assurance that the amount on deposit in the Reserve Account will be sufficient on any Distribution Date to assure payment on the Notes (other than the Class N Notes). If the Receivables experience higher losses than were projected in determining the amount required to be on deposit in the Reserve Account, the amount on deposit in the Reserve Account may be insufficient to cover any shortfall in collections. If collections on the Receivables and any credit or cash flow enhancement, including the amount on deposit in the Reserve Account, are not sufficient on any Distribution Date to pay in full interest on the Notes (other than the Class N Notes), certain expenses, and certain distributions of principal on the Notes (other than the Class N Notes), you may experience payment delays with respect to your Notes. If the amount of that insufficiency is not offset by excess collections on the Receivables on subsequent Distribution Dates, you may experience losses with respect to your Notes.

See “Credit Enhancement—Reserve Account” for a further discussion of the Reserve Account.

You may receive an early return of your investment or incur a shortfall in the return of your investment following an Event of Default under the Indenture

If an Event of Default occurs under the Indenture, the Requisite Noteholders may declare the accrued interest and outstanding principal immediately due and payable. In that event, the Indenture Trustee may be directed to sell the Receivables and assets of the Issuing Entity and apply the proceeds to repay the Notes. The manner of sale will affect the amount of proceeds received and available for distribution. The liquidation and distribution of the Issuing Entity’s assets may result in an early return of principal to investors. You may not be able to reinvest the principal repaid to you for a rate of return or maturity date that is as favorable as those on your Notes. Also, the proceeds from sale of the Issuing Entity assets may not be sufficient to fully pay amounts owed on the Notes. Those circumstances may result in losses to certain investors. As long as a more senior class of Notes is outstanding, no holder of any subordinated class of Notes will be able to direct the Indenture Trustee’s actions and directions.

Some Notes have greater risk because they are subordinate to other classes of Notes

The Notes with a lower alphabetical designation are subordinated with respect to interest and principal payments to the Notes with a higher alphabetical designation. In addition, the Class A Notes with a higher numerical designation are generally subordinated with respect to principal payments to the Class A Notes with a lower numerical designation (the Class A-4 Notes are subordinated to the Class A-1, A-2 and A-3 Notes, the Class A-3 Notes are subordinated to the Class A-1 and A-2 Notes and the Class A-2 Notes are subordinated to the Class A-1 Notes). If the Notes have been accelerated following the occurrence of an Event of Default under the Indenture, the priority of interest and principal distributions will change. The subordination arrangements could result in delays or reductions in interest or principal payments on classes of Notes with lower alphabetical designations or, in the case of the Class A Notes in certain circumstances, higher numerical designations.

See “Description of the Notes—Interest Payments,” “Description of the Notes—Payments of Principal,” “Distribution Date Payments” and “Distribution Date Payments—Distribution Date Payments After Acceleration of the Notes” for a further discussion of interest and principal payments.

You may suffer losses because you have limited control over actions of the Issuing Entity and conflicts between classes of Notes may occur

If an Event of Default under the Indenture has occurred, the Indenture Trustee will, at the direction of the Requisite Noteholders, take one or more of the actions specified in the Indenture relating to the property of the Issuing Entity. In addition, the Indenture Trustee may, and at the direction of the Requisite Noteholders will, have the right to terminate the Servicer and the Requisite Noteholders may waive any Servicer Termination Event. The Requisite Noteholders constitute a majority of the Controlling Class, and the interests of the Controlling Class may differ from the interests of the other classes of Notes. The Controlling Class will not be required to consider the effect of its actions on the holders of the other classes of Notes.

In particular, purchasers of the Class A Notes should be aware that, each class of the Class A Notes will vote together as a single class. Accordingly, for purposes of any direction of the Controlling Class, the holders of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes may be unable to independently give such direction without the support of holders of the other such Class.

See “The Transaction Documents— The Servicing Agreement and Servicing of the Receivables—Termination of the Servicer,” “The Transaction Documents— The Servicing Agreement and Servicing of the Receivables—Waiver of Servicer Termination Events” and

 

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“The Transaction Documents— Indenture—Events of Default” for a further discussion of the rights of the Noteholders with respect to events of servicing termination and Events of Default.

The clean-up call may not be exercised

The Servicer is not obligated to exercise its option to purchase the Receivables. If the Servicer does not exercise its option at the earliest date permissible or does not exercise its option at all, the aggregate amount and timing of distributions on the Securities will be slower and more uncertain than if the Servicer does exercise its option at the earliest date permissible, which may reduce the yield on your Notes. You will bear all risks resulting from whether the option is exercised by the Servicer or not and, if exercised, the timing of such exercise, and the amount paid by the Servicer in connection with its exercise of its purchase option.

Tax withholding obligations of the Issuing Entity may affect amounts distributable to investors

The Issuing Entity will take the position that its income will not be treated as effectively connected to a United States trade or business and each holder of the Certificates (a “Certificateholder”) that is also a Foreign Person is required to certify that such income is not effectively connected to a United States trade or business of such Foreign Person. Accordingly, the Issuing Entity will not withhold based on the income allocable to a Foreign Person Certificateholder. If a taxing authority successfully asserts that the income of the Issuing Entity is effectively connected to a United States trade or business or a Foreign Person Certificateholder treats the income as effectively connected to a United States trade or business, the Issuing Entity could be required to withhold based on the net income allocable to a Foreign Person Certificateholder. Such withholding may limit the amount of cash available to the Issuing Entity to make distributions to the investors in the Notes.

The Issuing Entity will take the position that state and local income taxes do not need to be withheld from distributions to Certificateholders with respect to Receivables originated (or currently located) in such jurisdictions. If a state or local taxing authority determines that such withholding is required by the Issuing Entity, or that tax, interest or penalties are owed by the Issuing Entity or tax matters partner, the Issuing Entity will be required to withhold such amounts from distributions to Certificateholders. Any amounts withheld could reduce the distributions otherwise payable to the investors in the Notes.

Certain requirements regarding securitization may result in reduced liquidity

Prospective investors should be aware of the EU Securitization Rules and the UK Securitization Rules, as described under “Certain Regulatory Considerations—EU Securitization Rules and UK Securitization Rules”.

Neither Carvana, the Depositor nor any other person intends, or is required under the Transaction Documents, to retain a material net economic interest in the securitization constituted by the issuance of the Securities, or to take any other action with regard to such securitization, in a manner prescribed or contemplated by the EU Securitization Rules or the UK Securitization Rules. In particular, no such person undertakes to take any action for purposes of, or in connection with, compliance by any person with any applicable requirement of, the EU Securitization Rules or the UK Securitization Rules.

The arrangements described under “Credit Risk Retention” have not been structured with the objective of ensuring compliance by any person with the requirements of the EU Securitization Rules or the UK Securitization Rules.

Failure by any investor that is (or may become) subject to the EU Securitization Rules or the UK Securitization Rules to comply with any applicable requirements of such rules with respect to an investment in the Securities may result in the imposition of a penalty regulatory capital charge on that investment or of other regulatory sanctions and remedial measures. Consequently, the Securities may not be a suitable investment for any such investor. As a result, the price and liquidity of the Securities in the secondary market may be adversely affected.

In addition, there is no guidance from any US regulatory agency as to which terms and conditions of certain methods of financing arrangements comply or do not comply with Regulation RR. See “Credit Risk Retention.” Failure to comply with Regulation RR may negatively affect the Sponsor, which may reduce the value of your Securities.

RISKS RELATED TO THE TRANSACTION PARTIES

Bankruptcy or insolvency of Carvana could adversely affect the performance, liquidity and market value of the Securities

If Carvana filed for bankruptcy under the Bankruptcy Code or any state insolvency laws, a court may:

 

●

consolidate the assets and liabilities of Carvana with those of the Depositor,

 

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decide that the sale of the Receivables to the Depositor was not a “true sale” or

 

●

disallow a transfer of Receivables made by Carvana to the Depositor prior to the bankruptcy.

If the assets and liabilities of Carvana were consolidated with those of the Depositor or the Receivables became part of Carvana’s bankruptcy estate, you might experience reductions or delays in payments on your Securities.

 

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The replacement of the Servicer may reduce or delay payments on the Securities

If Bridgecrest were to cease acting as Servicer for any reason, collection practices of a successor servicer (which, under certain circumstances, may be the Backup Servicer) may vary from those of Bridgecrest. In addition, after a successor servicer is appointed, the successor servicer may experience some inefficiencies as a result of the transition. If Bridgecrest were to become incapable of acting as servicer, and a successor servicer had not yet accepted appointment, and the Backup Servicer failed to satisfy its obligations to act as replacement servicer, there could be a disruption in servicing that could result in a delay or decrease in collections on the Receivables. It may become increasingly difficult to identify a qualified successor servicer other than the Backup Servicer because the Servicing Strip Amount is calculated as a percentage of the Pool Balance and some cost components of servicing are fixed; consequently, as the pool amortizes, the Servicing Strip Amount will diminish at a greater rate than the cost of servicing. For the foregoing reasons, if there is a need to replace the Servicer, you may experience delays or reductions in the payments on your Securities.

Carvana and the Depositor have limited obligations to the Issuing Entity and they will not make payments on the Securities

Carvana, the Depositor and their respective affiliates other than the Issuing Entity are generally not obligated to make any payments on the Securities and do not guarantee payments on the Receivables or the Notes. Carvana will make representations and warranties regarding the characteristics of the Receivables. If Carvana breaches these representations and warranties, it may be required to repurchase the applicable Receivables. If Carvana fails to repurchase the applicable Receivables, as and when required, investors might experience reductions or delays in payments on the Notes. See “The Transaction Documents—Repurchases of Receivables.”

The Servicer’s discretion over the servicing of the Receivables, including the sale of Charged-Off Receivables, may impact the amount and timing of funds available to make payments on the Securities

The Servicer is obligated to service the Receivables in accordance with its customary servicing practices and applicable law, subject to limitations regarding permitted modifications. The Servicer has discretion in servicing the Receivables, including the ability to grant payment extensions, to sell Charged-Off Receivables and to determine the timing and method of collection and liquidation procedures. See “The Transaction Documents—The Servicing Agreement and Servicing of the Receivables—Modifications” The Servicer, in its own discretion, may permit an extension on or a deferral of payments due or halt repossession activity on a case-by-case basis or more broadly in accordance with its customary servicing practices, for example, in connection with a natural disaster or public health emergency affecting a large group of obligors. During the early stages of the COVID-19 outbreak, the Servicer experienced a sharp increase in requests for extensions and modifications related to COVID-19 nationwide and a significant number of such extensions and modifications were granted. Although the frequency of requests for extensions and modifications has since declined, there may be a sharp increase in requests from obligors for extensions and modifications related to COVID-19 or general financial hardship in the future. Further, following the start of the COVID-19 outbreak, the Servicer temporarily suspended involuntary repossession activities nationwide as a result of the COVID-19 outbreak. Although the Servicer has since resumed involuntary repossession activity where permitted by local law, it may elect (or be required) to again suspend such activity at any time in the future. See “—Adverse events arising from the Coronavirus outbreak could result in delays in payment or losses on your Securities.” There are additional requirements with respect to the exercise of this discretion because the entity owning the receivables is a grantor trust. The manner in which the Servicer exercises its discretion could have an impact on the amount and timing of collections on Receivables and, consequently, the amount and timing of Available Funds available to make payments on the Securities.

Additionally, if the Servicer breaches certain covenants with respect to the servicing of the Receivables, the Servicer may be required to indemnify for actual losses related to such Receivables. If the Servicer fails to pay for such actual losses, as and when required, investors might experience reductions or delays in payments on the Securities. See “The Transaction Documents—The Servicing Agreement and the Servicing of the Receivables.”

Temporary commingling of funds by the Servicer prior to their deposit into the Collection Account may result in losses or delays in payment on the Securities

The Servicer receives collections on the Receivables into accounts of the Servicer, or an affiliate of the Servicer, that contains other funds of the Servicer and amounts collected by the Servicer in respect of receivables other than the Receivables. In general, the Servicer is not required to transfer the funds to the Collection Account until two Business Days following identification. This temporary commingling of funds prior to the deposit of collections on the Receivables into the Collection Account may result in a delay or reduction in the amounts available to make payments on the Notes if the Servicer or the affiliate of the Servicer which maintains the account into which the collection on the Receivables are deposited were to become subject to a bankruptcy proceeding (in which case, those funds may be subject to the automatic stay under the bankruptcy laws or subject to competing claims by other creditors of the Servicer or owners of other receivables).

You may suffer losses on your investment because the Indenture Trustee does not have a direct perfected security interest in the financed vehicles underlying the Receivables

Payments on the Securities depend on collections on the Receivables and, in the case of non-payment of Receivables, the proceeds from the sale of the related financed vehicles. Each of the Depositor, the Issuing Entity, the Grantor Trust, and the Indenture Trustee derives its indirect perfected security interest in any financed vehicle through one or more assignments, commencing with an assignment from Carvana to the Depositor. In the event of a bankruptcy of Carvana, the Indenture Trustee may be hindered or delayed in its ability to enforce its rights in the financed vehicles relating to a defaulted Receivable because the Indenture Trustee is not the secured party of

 

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record. Those hindrances and delays may result in a shortfall in liquidation proceeds available to repay investors. As a result, under those circumstances, investors may experience a loss or delay in repayment of principal on the Notes and distributions on the Certificates.

Adverse events with respect to Carvana, the Servicer, any of their respective affiliates or the other transaction parties could affect the timing or amount of payments on your Notes or distributions on the Certificates or have other adverse effects on your Securities

Adverse events with respect to Carvana, the Servicer, their respective affiliates or a third-party provider to whom the Servicer outsources its activities may result in servicing disruptions or reduce the market value of the Securities. Servicing disruptions could result from unanticipated events beyond the Servicer’s control, such as natural disasters, civil unrest, public health emergencies (including COVID-19 or similar outbreaks) and economic disruptions, which could adversely impact the Servicer’s ability to operate its business or could cause a disruption in collection activities (including repossessions) and therefore delinquencies and credit losses could increase. Neither Carvana nor the Servicer can predict how the COVID-19 outbreak and the legal and regulatory responses to the COVID-19 outbreak and related economic disruptions will affect its respective businesses, including its liquidity or the ability to access the capital markets. If Carvana’s or the Servicer’s access to funding is reduced or if its costs to obtain such funding significantly increases, Carvana’s or the Servicer’s business, financial condition and results of operations could be materially and adversely affected.

Carvana will be required to repurchase certain Receivables that do not comply with representations and warranties made by Carvana and make refunds of cancelled ancillary product premiums and the Servicer will be required to indemnify for actual losses on such Receivables in connection with the Servicer’s breach of specific servicing obligations. If Carvana were to become unable to repurchase Receivables that do not comply with representations and warranties made by Carvana and Carvana or the Servicer were unable to indemnify the Issuing Entity, investors could suffer losses. No assurances can be given as to Carvana’s or the Servicer’s future financial ability to perform any repurchase or indemnification obligations. In addition, adverse corporate developments with respect to sponsors and servicers of asset-backed securities or their affiliates have in some cases also resulted in a reduction in the market value of the related asset-backed securities. If Carvana or the Servicer faced financial, reputational, regulatory or operational difficulties, those events may reduce the market value of your Securities.

Likewise, the Issuing Entity’s ability to make payments on the Notes, and accordingly the market value of your Securities, may be adversely impacted in the event the other transaction parties experience losses, regulatory action, litigation, systems breakdown or other difficulties. In particular, as described in greater detail in “Indenture Trustee and Collateral Custodian”, it is expected that Wells Fargo & Company will consummate the sale of substantially all of its Corporate Trust Services business to Computershare Ltd (“Computershare”) in the second half of 2021. To the extent such consummation does not occur, Wells Fargo Bank may suffer financial, reputational and/or operational difficulties, which may negatively impact its ability to serve in as Indenture Trustee and Collateral Custodian. In addition, there can be no assurances that the Indenture Trustee and Collateral Custodian could be replaced (whether in a timely manner or at all), even if this becomes necessary, or that any replacement would be able to perform such roles with the same degree of skill and care as does Wells Fargo Bank. Should circumstances so unfold, the market value of your Securities and any repayment prospects thereon may be adversely affected.

Federal financial and state regulatory reform could have an adverse impact on Carvana, the Depositor, or the Issuing Entity

The Dodd-Frank Act is extensive legislation that effects financial institutions and other non-bank financial companies, such as Carvana. The Dodd-Frank Act also effect the offering, marketing and regulation of consumer financial products and services and increases regulation of the securitization and derivatives markets. Many rules under the Dodd-Frank Act have been implemented by various federal regulatory agencies but, in some cases, the applicable rules have not become effective or additional rulemaking required under the Dodd-Frank Act has not been completed. Therefore, the full effect of the Dodd-Frank Act on the financial markets and its participants, and on the asset backed securities market in particular, will not be known for some time. No assurance can be given that the Dodd-Frank Act and its implementing regulations, or the imposition of additional regulations, including the orderly liquidation authority of the Dodd-Frank Act, will not have a significant adverse effect on Carvana, the Depositor, the Issuing Entity, the Grantor Trust, or the Servicer, including on the servicing of the Receivables, or the price that a subsequent purchaser would be willing to pay for the Securities.

The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the “CFPB”), a federal regulator, with rulemaking and enforcement authority over consumer finance businesses.

The Dodd-Frank Act created an alternative liquidation framework under which the FDIC may be appointed as receiver for the resolution of a non-bank financial company if the company is in default or in danger of default and the resolution of the company under other applicable law would have serious adverse effects on financial stability in the United States. There can be no assurance that this liquidation framework would not apply to Carvana, the Depositor, or the Issuing Entity, although we expect that the framework will be invoked only very rarely. Guidance from the FDIC indicates that this framework will be exercised in a manner consistent with the existing bankruptcy laws, which is the insolvency regime which would otherwise apply to Carvana, the Depositor, and the Issuing Entity. If the FDIC were appointed as receiver for Carvana, the Depositor, or the Issuing Entity, or if future regulations or subsequent FDIC actions are contrary to the FDIC guidance, you may experience losses or delays in payments on your Securities.

See “Certain Regulatory Considerations—The Dodd-Frank Act” for further discussion of the alternative liquidation framework established by the Dodd-Frank Act for certain non-bank financial companies.

 

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Each of the transaction parties relies on software and systems that are highly technical, and if the systems contain undetected errors or are damaged, the transaction parties’ ability to perform their obligations under the Transaction Documents could be adversely affected

Each of the transaction parties uses management information systems and software that are highly complex to perform its obligations under the Transaction Documents and hold certain electronic files. These parties rely on the ability of such systems to store, retrieve, process and manage substantial amounts of data. These systems are subject to damage or interruption from:

 

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power loss, computer systems failures and internet, telecommunications or data network failures,

 

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operator negligence or improper operation by, or supervision of, employees or contractors,

 

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physical and electronic loss of data or security breaches, misappropriation and similar events,

 

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computer bugs, viruses and errors,

 

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code production errors, including bugs and deployment errors,

 

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cyberattacks, intentional acts of vandalism and similar events, and

 

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hurricanes, earthquakes, fires, floods and other natural disasters.

Any failure of these systems due to any of their designated functions could cause an interruption in operations, could adversely affect such party’s ability to perform its obligations under the Transaction Documents and could result in reduced collections on the Receivables. In particular, if the Servicer were to experience any significant interruptions or losses in its information processing capabilities, the Servicer’s ability to effectively service the Receivables could be materially and adversely affected.

Though the parties have implemented contingency and disaster recovery processes in the event of one or several technology failures, any unforeseen failure, interruption or compromise of these systems or security measures could affect its collection on the Receivables. The risk of possible failures or interruptions may not be adequately addressed, and such failures or interruptions could occur.

In addition, errors in Carvana’s internal systems may cause Receivables to have been improperly underwritten and, as a result, the payment of the Notes may be delayed or otherwise adversely affected, which could result in losses on the Notes.

GENERAL RISK FACTORS

Lack of liquidity in the secondary market, volatility and financial market disruptions may adversely affect the market value of the Offered Notes and your ability to resell the Offered Notes

The Offered Notes will not be listed on any securities exchange. Therefore, in order to resell the Offered Notes, you will need to find a willing buyer. The underwriters of the Offered Notes may participate in making a secondary market in the Offered Notes but are under no obligation to do so. We cannot assure you that a secondary market will develop or, if it does develop, that it will continue or be sufficiently liquid to permit the resale of the Offered Notes. The secondary market for asset-backed securities generally has experienced, and may continue to experience, reduced liquidity. Any period of illiquidity may adversely affect the market value of the Offered Notes and, in some circumstances, you may not be able to resell the Offered Notes when you want to do so. Illiquidity can have a severe adverse effect on the prices of securities that are especially sensitive to prepayment, credit or interest rate risk on the underlying assets, such as the Receivables underlying the Notes and consequently the Notes themselves. As a result, you may be unable to obtain the price that you wish to receive for the Offered Notes or you may suffer a loss on your investment. Even if a sufficiently liquid secondary market develops, the market values of the Offered Notes are likely to fluctuate from time to time. These fluctuations may be significant and could result in significant losses on the Offered Notes.

Additionally, events in the global financial markets, including the failure, acquisition or government seizure of major financial institutions, the establishment of government bailout programs for financial institutions, problems related to financial assets, the de-valuation of various assets in secondary markets, the forced sale of asset-backed and other securities as a result of the de-leveraging of structured investment vehicles, hedge funds, financial institutions and other entities, the lowering of ratings on certain asset-backed securities and the exit of the United Kingdom (the “UK”) from the European Union (“EU”) (and the potential exit of any other country from the EU) have caused, and could in the future cause, a significant reduction in liquidity in the secondary market for asset-backed securities. Such market declines or disruptions could adversely affect the liquidity of, and market for, the Offered Notes independent of the performance of the Receivables. A period of illiquidity following market declines or disruptions may adversely affect both the market value of the Offered Notes and your ability to resell the Offered Notes.

Retained Notes may reduce the liquidity of your notes and subsequent sales by the Depositor may adversely affect their value

Some or all of the Notes may initially be retained by the Depositor or one or more majority affiliates thereof on the Closing Date, and, in any event, a portion of each class of Notes will be retained by Carvana or one or more of its majority-owned affiliates in satisfaction of Carvana’s risk retention obligations described under “Credit Risk Retention”. A significant reduction in liquidity in the secondary market for any classes of such retained Notes may result if the Depositor retains any class or classes of such Notes. In addition, if any retained Notes are subsequently sold by the Depositor, the demand and the market price of the Notes already in the market could be adversely affected.

 

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The ratings for the Notes are limited in scope, may be unsolicited, may not continue to be issued and do not consider the suitability of the Notes for you

We expect to hire two rating agencies to rate the Offered Notes for the Issuing Entity. The Notes may receive a rating from a rating agency not hired to rate the Notes. A rating is not a recommendation to buy, sell, or hold the Notes. The rating considers only the likelihood that the Issuing Entity will pay interest on time and will ultimately pay principal in full and are solely the view of the assigning rating agency and are subject to any limitations that the assigning rating agency may impose. Ratings on the Notes do not address the timing of distributions of principal on the Notes prior to their applicable Final Scheduled Distribution Date. The ratings do not consider the prices of the Notes or their suitability to a particular investor. To the extent the Notes are rated by any rating agency, that rating agency may change or withdraw its rating of the Notes if that rating agency believes that circumstances have changed, the performance of the Receivables has deteriorated, there were errors in analysis or otherwise. Any subsequent change in or withdrawal of a rating will likely affect the price that a subsequent purchaser would be willing to pay for the Notes and your ability to resell your Notes. Rating agencies not hired to rate the Notes may provide an unsolicited rating that is different from or lower than the ratings provided by the rating agencies hired to rate the Notes. If a Hired Rating Agency issues a rating lower than the solicited ratings, changes its rating or withdraws its rating, no party has an obligation to provide additional credit enhancement or to restore the original rating. None of Carvana, the Depositor, the Servicer or any of their respective affiliates is under any obligation to monitor or disclose any changes to the ratings. There may be a conflict of interest for the Hired Rating Agency because Carvana paid the fee charged by each Hired Rating Agency for its rating services. Additionally, if any rating agency provides an unsolicited rating that is lower than the ratings provided by the rating agencies hired to rate the Notes, the market value of the Notes may be adversely affected. None of Carvana, the Depositor, the Servicer, the underwriters, or any of their affiliates will have any obligation to inform you of any unsolicited ratings assigned to the Notes, and these parties may be aware of unsolicited ratings assigned to the Notes. If any non-hired rating agency assigns an unsolicited rating to the Notes, there can be no assurance that the unsolicited rating will not be lower than the ratings provided by the Hired Rating Agencies, which could adversely affect the market value of your Notes or limit your ability to resell your Notes. In addition, if Carvana fails to make available to any non-hired rating agency any information provided to any Hired Rating Agency for the purpose of assigning or monitoring the ratings on the Notes, a Hired Rating Agency could withdraw its ratings on the Notes, which could adversely affect the market value of your Notes or limit your ability to resell your Notes. Moreover, criminal, civil, or regulatory actions or other events adverse to a Hired Rating Agency may have a detrimental effect on the credibility of such Hired Rating Agency’s ratings, which could have an adverse effect on the market value of your Notes. Prospective investors in the Notes are urged to make their own evaluation of the creditworthiness of the Receivables and the credit enhancement on the Notes and not to rely solely on the ratings on the Notes.

 

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SPONSOR

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

Carvana provides refreshingly different and convenient experiences for used car buying and selling that can save customers time and money. On its platform, consumers can research and identify a vehicle, inspect it using Carvana’s patented 360-degree vehicle imaging technology, obtain financing and warranty coverage, purchase the vehicle, and schedule delivery or pick-up, all from their desktop or mobile devices. Alternatively, a customer can obtain a firm offer online for their vehicle by answering a few questions without needing to provide photos or service records. Carvana’s transaction technologies and online platform transform a traditionally time-consuming process by allowing customers to secure financing, complete a purchase or sale, and schedule delivery or pick-up online in as little as 10 minutes.

Carvana’s technology and infrastructure allow it to seamlessly and cost efficiently deliver this experience to its customers. Carvana uses proprietary algorithms to optimize its nationally pooled inventory of over 30,000 vehicles, inspect and recondition vehicles based on its 150-point inspection process, and operate its own logistics network to deliver cars directly to customers as soon as the next day. Customers in certain markets also have the option to pick up their vehicle at one of Carvana’s patented vending machines, which provides an exciting pick-up experience for the customer while decreasing Carvana’s variable costs, increasing scalability and building brand awareness.

The automotive retail industry’s large size, fragmentation, and lack of differentiated offerings present an opportunity for disruption. Carvana has demonstrated that its custom-built business model can capitalize on this opportunity. From the launch of its first market in January 2013 through June 30, 2021, Carvana purchased, reconditioned, sold, and delivered approximately 788,000 vehicles to customers through its website, generating approximately $18.5 billion in revenue. Carvana’s sales have grown as it increased its market penetration in current markets and added new markets. As of September 8, 2021, Carvana’s in-house distribution network services 303 metropolitan markets, and Carvana plans to continue to expand its network into additional markets. Since February 2013, Carvana has also offered and originated loans to consumers.

Since 2015, Carvana has entered into various agreements under which it sells Receivables to third parties. Since 2019, Carvana has completed eleven securitizations. This is Carvana’s seventh public securitization transaction and its fourth securitization transaction secured primarily by prime Receivables. Carvana utilizes the same origination procedures and systems for all of its receivables; Bridgecrest services all of the receivables originated by Carvana, including receivables sold or securitized by Carvana.

See “Underwriting of Receivables” for a discussion of Carvana’s experience with and overall procedures for underwriting Receivables. See “Historical Performance—Delinquencies and Net Losses” for information regarding historical performance of auto receivables originated by Carvana.

Carvana has ongoing obligations to repurchase certain Receivables and to authorize, execute or file financing statements relating to the Receivables, as further described in “The Transaction Documents.” In addition, as described under “Credit Risk Retention,” Carvana or a majority-owned affiliate of Carvana will retain at least 5% of each class of Notes and the certificates to satisfy Carvana’s obligations under Regulation RR.

Carvana, in its capacity as Administrator of the Issuing Entity, will enter into the Administration Agreement with the Issuing Entity, the Grantor Trust and the Indenture Trustee pursuant to which Carvana, as Administrator, will agree, to the extent provided in the Administration Agreement, to provide the notices and to perform other administrative obligations required by the Indenture, the Trust Agreement and the Grantor Trust Agreement. As compensation for the performance of the Administrator’s obligations under the Administration Agreement and as reimbursement for its expenses thereto, Carvana, as Administrator, will be entitled to an administration fee.

Carvana was formed on March 9, 2012 as an Arizona limited liability company. Carvana’s principal executive offices are located at 1930 W. Rio Salado Parkway, Tempe, Arizona 85281, and its telephone number is (480) 719-8809. Carvana, LLC is indirectly owned by Carvana Co.

 

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DEPOSITOR

The Depositor is organized for the limited purpose of purchasing motor vehicle receivables and associated rights, transferring such purchased assets, forming trusts, and other subsidiaries and engaging in similar activities for multiple securitizations of motor vehicle receivables on an ongoing basis.

The Depositor will acquire the Receivables from Carvana under the Receivables Purchase Agreement and will make various representations and warranties about the origination, characteristics, and transfers of the Receivables to the Issuing Entity under the Receivables Transfer Agreement. If these representations and warranties are breached and not cured and such breach materially and adversely affects the interests of the investors, taken as a whole, the Issuing Entity will have the right under the Receivables Transfer Agreement to require the Depositor to repurchase the relevant Receivables.

The Depositor has ongoing obligations to repurchase certain Receivables and to authorize, execute or file financing statements relating to the Receivables, as further described in “The Transaction Documents.”

The Depositor was formed on January 4, 2019 as a Delaware limited liability company. Carvana is the sole equity member of Carvana Receivables Depositor LLC. The Depositor’s principal executive offices are located at 1930 W. Rio Salado Parkway, Tempe, Arizona 85281, and its telephone number is (480) 719-8809.

CEO Certification

In connection with this offering, the chief executive officer of the Depositor will make the certifications required under the Securities Act about this prospectus, the disclosures made about the characteristics of the Receivables and the structure of this securitization transaction, the risks of owning the Offered Notes, and whether the securitization transaction will produce sufficient cash flows to make interest and principal payments on the Offered Notes when due. This certification will be filed by the Depositor with the SEC at the time of filing of this prospectus. Despite the fact that the chief executive officer will make these certifications, this certification does not reduce or eliminate the risks of investing in the Offered Notes.

The Depositor has met the registration requirements of General Instruction I.A.1 of Form SF-3 by filing no later than the date of the filing of the final prospectus, and determining that each of its affiliated depositors and issuing entities have filed within the prior 90 days:

 

●

the certification of the chief executive officer of the Depositor described above; and

 

●

the Transaction Documents containing the provisions described in “The Transaction Documents—Asset Representations Review Agreement,” and “The Transaction Documents— Indenture—Investor Communications.”

 

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ISSUING ENTITY

The Issuing Entity is a Delaware statutory trust with a fiscal year end of December 31.

Trust Agreement

The Issuing Entity will be operated pursuant to a trust agreement, which will be dated the date the Issuing Entity will initially issue the Securities.

The Issuing Entity will not engage in any activity other than:

 

●

acquiring the Receivables from the Depositor for contribution to the Grantor Trust,

 

●

acquiring, holding and managing the Grantor Trust Certificate and other assets and any proceeds from the Grantor Trust Certificate and other trust assets,

 

●

issuing the Securities,

 

●

making payments on the Securities, and

 

●

engaging in other activities and taking any actions necessary to fulfill the roles of the Issuing Entity in connection with the Securities.

Insolvency Event

The Trust Agreement provides that the Owner Trustee does not have the power to commence a voluntary proceeding in bankruptcy relating to the Issuing Entity without the prior approval of a majority of the Certificateholders. Under no circumstance will the Owner Trustee commence any proceeding prior to the date that is one year and one day after the termination of the Issuing Entity. In the Servicing Agreement, the Servicer, and in the Receivables Transfer Agreement, the Depositor, respectively, will covenant that it will not, for a period of one year and one day after the final distribution for the Notes and the certificates to the Note Distribution Account or the Certificate Distribution Account, as applicable, institute against the Issuing Entity any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar bankruptcy law. In the Receivables Purchase Agreement, Carvana will covenant that it will not, for a period of one year and one day after the final distribution for the Notes and the certificates to the Note Distribution Account or the Certificate Distribution Account, as applicable, institute against the Depositor, or the Issuing Entity, or the Grantor Trust any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar bankruptcy law.

Certificateholder Liability; Indemnification

Under the Trust Agreement, Certificateholders will be entitled to the same limitation of personal liability extended to stockholders of for profit corporations under the General Corporation Law of the State of Delaware.

Termination

The Issuing Entity will terminate upon the final distribution by the Indenture Trustee and the paying agent of all monies and other property of the Issuing Entity in accordance with the terms of the Trust Agreement, the Servicing Agreement and the Indenture, including in the case of the exercise by the Servicer (or its designee) of its option to purchase the Receivables as described above under “Description of the Notes—Optional Redemption.”

The Indenture Trustee will give written notice of redemption to each noteholder of record and the certificate registrar will give written notice of dissolution of the Issuing Entity to each Certificateholder of record. The final distribution to any noteholder or Certificateholder will be made only upon surrender and cancellation of that noteholder’s note at an office or agency of the Indenture Trustee specified in the notice of redemption or that Certificateholder’s certificate at an office or agency of the certificate registrar specified in the notice of dissolution.

Trust Property

The property of the Issuing Entity will include:

 

●

the Grantor Trust Certificate and all distributions on or in respect of the Grantor Trust Certificate,

 

●

amounts as from time to time may be held in the Designated Accounts, except for the Certificate Distribution Account, and

 

●

the rights of the Depositor under the Receivables Purchase Agreement.

The investment earnings on the amounts in the Reserve Account, the Class N Reserve Account, and the Collection Account will not be property of the Issuing Entity. These investment earnings, net of losses and investment expenses, will be payable to Carvana.

The Issuing Entity’s principal offices are in Wilmington, Delaware, in care of BNY Mellon Trust of Delaware, as owner trustee, at the address listed in “Owner Trustee and Grantor Trust Trustee” below.

 

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Capitalization of the Issuing Entity

The following table illustrates the expected capitalization of the Issuing Entity as of the Closing Date:

 

Class A-1 Asset Backed Notes		$	146,200,000.00
Class A-2 Asset Backed Notes		$	342,310,000.00
Class A-3 Asset Backed Notes		$	342,310,000.00
Class A-4 Asset Backed Notes		$	125,000,000.00
Class B Asset Backed Notes		$	33,640,000.00
Class C Asset Backed Notes		$	30,530,000.00
Class D Asset Backed Notes		$	15,010,000.00
Class N Asset Backed Notes		$	39,330,000.00
Overcollateralization		$	0.42
Reserve Account		$	5,175,000.00
Class N Reserve Account		$	517,500.00
Total		$	1,080,022,500.42

Some or all of the Notes may initially be retained by the Depositor or one or more affiliates thereof on the Closing Date. At least 5% (by initial principal amount) of each class of Notes and the Certificates will initially be retained by Carvana or one or more of its majority-owned affiliates in satisfaction of Carvana’s risk retention obligations described under “Credit Risk Retention.” The Class XS Notes, the Class N Notes and the Certificates (other than any portion thereof retained to satisfy Carvana’s risk retention obligations) will be sold in one or more private placements or retained initially by the Depositor or one of its affiliates and are not offered under this prospectus.

 

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GRANTOR TRUST

The Grantor Trust is a statutory trust formed under the laws of the State of Delaware with a fiscal year end of December 31. The Issuing Entity formed the Grantor Trust. The Grantor Trust will acquire the Receivables from the Issuing Entity in exchange for a certificate that evidences 100% of the beneficial interests in the Grantor Trust (the “Grantor Trust Certificate”) issued pursuant to the Grantor Trust Agreement, dated on or before the Closing Date. The Grantor Trust Certificate will be pledged by the Issuing Entity to the Indenture Trustee for the benefit of the investors pursuant to the Indenture.

The Grantor Trust will not engage in any activity other than:

 

●

acquiring, holding and managing the Receivables and other assets of the Grantor Trust and any proceeds from the Receivables and other trust assets,

 

●

issuing the Grantor Trust Certificate,

 

●

making payments on the Grantor Trust Certificate, and

 

●

engaging in other activities and taking any actions necessary to fulfill the roles of the Grantor Trust in connection with the Grantor Trust Certificate.

The property of the Grantor Trust will include:

 

●

the Receivables,

 

●

security interests in the financed vehicles,

 

●

the right to proceeds, if any, of any credit life, credit disability, physical damage or other insurance policies covering the financed vehicles, and

 

●

the rights of the Issuing Entity under the Receivables Transfer Agreement, including the rights of the Depositor under the Receivables Purchase Agreement.

The Grantor Trust’s principal offices are in Wilmington, Delaware, in care of BNY Mellon Trust of Delaware as Grantor Trust Trustee at the address listed in “Owner Trustee and Grantor Trust Trustee” below.

 

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SERVICER

Bridgecrest Credit Company, LLC, an Arizona limited liability company (“Bridgecrest”), or its affiliates have been servicing motor vehicle receivables for more than 20 years. Bridgecrest and its affiliates service motor vehicle receivables originated by DriveTime Car Sales Company, LLC and Carvana, including receivables securitized or sold in whole-loan purchases by DriveTime Car Sales Company, LLC, Carvana or their respective affiliates. Since 1996, Bridgecrest or its affiliates have serviced over 75 securitizations of motor vehicle receivables.

See “Servicing Procedures” for more information regarding Bridgecrest’s customary servicing practices.

As described more fully below under “The Transaction Documents,” the Servicer will be responsible for servicing and making collections on the Receivables in accordance with its customary servicing practices and applicable law. The Servicer’s duties will include collection and posting of all payments, responding to inquiries of obligors, pursuing delinquencies, recovery and remarketing of financed vehicles if required, making available payment or other information to obligors, accounting for collections, administering insurance claim filings and providing monthly reports. The Servicer will not have custodial responsibility for the receivable files.

Bridgecrest is an affiliate of Carvana and services all of the receivables originated by Carvana, including receivables sold or securitized by Carvana. See “Affiliations and Relationships Among Transaction Parties” for more information regarding Bridgecrest’s relationship with Carvana.

Bridgecrest was formed on December 30, 2009 as an Arizona limited liability company. Bridgecrest’s principal executive offices are located at 7300 E Hampton Avenue, Mesa, Arizona 85209, and its telephone number is (602) 852-6600.

 

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INDENTURE TRUSTEE AND COLLATERAL CUSTODIAN

Wells Fargo Bank, National Association (“Wells Fargo Bank”) will act as Indenture Trustee and Collateral Custodian under the Indenture, the Collateral Custodian Agreement and certain other Transaction Documents. Wells Fargo Bank is a national banking association and a wholly-owned subsidiary of Wells Fargo & Company, a U.S. bank holding company with approximately $1.9 trillion in assets as of June 30, 2021. Wells Fargo Bank provides retail and commercial banking services and corporate trust, custody, securities lending, securities transfer, cash management, investment management and other financial and fiduciary services. The transaction parties may maintain banking and other commercial relationships with Wells Fargo Bank and its affiliates. Wells Fargo Bank maintains corporate trust offices at 600 South 4^th Street, 7^th Floor, Minneapolis, Minnesota 55415.

On March 23, 2021, Wells Fargo & Company announced that it had entered into a definitive agreement with Computershare Ltd. (“Computershare”) to sell substantially all of its Corporate Trust Services (“CTS”) business. The transaction is expected to close in the second half of 2021, subject to customary closing conditions and regulatory approvals. Virtually all corporate trust services employees of Wells Fargo Bank, along with most existing CTS systems, technology and offices, are expected to transfer to one or more Computershare-affiliated entities as part of the sale.

Wells Fargo Bank will act as Indenture Trustee on the transaction described in this prospectus and perform its obligations in such roles through its CTS line of business. Subject to any requirements set forth in the Indenture and the Collateral Custodian Agreement and in the definitive agreement between Wells Fargo & Company and Computershare, Wells Fargo Bank intends to transfer to Computershare Trust Company, N.A. or another Computershare-affiliated entity its duties, obligations and rights with respect to the transaction described herein on or after the closing of the transaction with Computershare. In the event that the transfer of any duties, obligations and rights of Wells Fargo Bank under the Indenture and the Collateral Custodian Agreement to Computershare Trust Company, N.A. or another Computershare-affiliated entity does not occur on the closing of the transaction with Computershare, Wells Fargo Bank intends to continue to perform such duties, obligations and rights through a Computershare-affiliated entity as its agent.

Wells Fargo Bank will act as Indenture Trustee pursuant to the Indenture. Wells Fargo Bank has provided corporate trust services since 1934. Wells Fargo Bank acts as trustee for a variety of transactions and asset types, including numerous series of asset-backed securities. As of June 30, 2021, Wells Fargo Bank was acting as trustee on approximately 566 series of asset-backed securities with an aggregate principal balance of approximately $133 billion. The Indenture Trustee maintains a corporate trust office at 600 S. 4th Street, MAC: N9300-061, Minneapolis, Minnesota 55415, Attention: Asset-Backed Securities Department.

Wells Fargo Bank will also act as Collateral Custodian pursuant to the Collateral Custodian Agreement. The Collateral Custodian is responsible for holding and maintaining the asset files on behalf of the Indenture Trustee and the Noteholders. Wells Fargo Bank maintains each asset file using systems designed to assure loan-level file integrity and facilitate efficient inventory management. Files are segregated by transaction. Wells Fargo Bank has been engaged in the document custody business for more than 25 years. As of June 30, 2021, Wells Fargo Bank was acting as custodian on more than 3.7 million asset-backed collateral files.

In December 2014, Phoenix Light SF Limited and certain related entities and the National Credit Union Administration (“NCUA”) filed complaints in the United States District Court for the Southern District of New York against Wells Fargo Bank, alleging claims against Wells Fargo Bank in its capacity as trustee for a number of residential mortgage-backed securities trusts. Complaints raising similar allegations have been filed by Commerzbank AG in the Southern District of New York and by IKB International and IKB Deutsche Industriebank in New York state court. In each case, the plaintiffs allege that Wells Fargo Bank, as trustee, caused losses to investors, and plaintiffs assert causes of action based upon, among other things, the trustee’s alleged failure to notify and enforce repurchase obligations of mortgage loan sellers for purported breaches of representations and warranties, notify investors of alleged events of default, and abide by appropriate standards of care following alleged events of default. Wells Fargo Bank previously settled two class action lawsuits with similar allegations that were filed in November 2014 and December 2016 by institutional investors in the Southern District of New York and New York state court, respectively.

In addition to the foregoing cases, in August 2014 and August 2015 Nomura Credit & Capital Inc. (“Nomura”) and Natixis Real Estate Holdings, LLC (“Natixis”) filed a total of seven third-party complaints against Wells Fargo Bank in New York state court. In the underlying first-party actions, Nomura and Natixis have been sued for alleged breaches of representations and warranties made in connection with residential mortgage-backed securities sponsored by them. In the third-party actions, Nomura and Natixis allege that Wells Fargo Bank, as master servicer, primary servicer or securities administrator, failed to notify Nomura and Natixis of their own breaches, failed to properly oversee the primary servicers, and failed to adhere to accepted servicing practices. Natixis additionally alleges that Wells Fargo Bank failed to perform default oversight duties. Wells Fargo Bank has asserted counterclaims alleging that Nomura and Natixis failed to provide Wells Fargo Bank notice of their representation and warranty breaches.

With respect to each of the foregoing litigations, Wells Fargo Bank believes plaintiffs’ claims are without merit and intends to contest the claims vigorously, but there can be no assurances as to the outcome of the litigations or the possible impact of the litigations on Wells Fargo Bank or the related RMBS trusts.

Other than the above 8 paragraphs, Wells Fargo Bank has not participated in the preparation of, and is not responsible for, any other information contained in this prospectus.

 

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The Indenture Trustee’s duties are limited to those duties specifically set forth in the Indenture. Carvana and its affiliates may maintain normal commercial and investment banking relations with the Indenture Trustee and its affiliates. The Indenture Trustee’s fees and indemnity payments against certain losses, liabilities or expenses incurred by the Indenture Trustee in connection with the Transaction Documents will be paid out of Available Funds as described under “Distribution Date Payments” and “Distribution Date Payments—Distribution Date Payments After Acceleration of the Notes.”

The Indenture Trustee will not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers so long as the Indenture Trustee’s conduct does not constitute willful misconduct, negligence or bad faith. In addition, the Indenture Trustee will not be liable for interest on any money received by it except if it agrees in writing with the Issuing Entity and will have no liability or responsibility for the acts or omissions of any other party to any of the Transaction Documents. The Indenture Trustee does not have any obligation to independently verify or confirm any underlying data.

On each Distribution Date, Wells Fargo Bank or another paying agent under the Trust Agreement will be required to distribute to the Certificateholders amounts equal to the amounts deposited in the Certificate Distribution Account pursuant to the Indenture on or prior to such Distribution Date.

Wells Fargo Bank is authorized to act as collateral custodian and to retain physical possession of the tangible records related to the Receivables or, in connection with the e-vault provider, maintain “control” over the electronic records held by the Grantor Trust for purposes of the UCC and other documents relating thereto as collateral custodian for the Issuing Entity.

 

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OWNER TRUSTEE AND GRANTOR TRUST TRUSTEE

BNY Mellon Trust of Delaware (“BNY Delaware”) will be (1) the Owner Trustee under the Trust Agreement and (2) the Grantor Trust Trustee under the Grantor Trust Agreement. BNY Delaware is a Delaware banking corporation and an affiliate of The Bank of New York Mellon, a New York banking corporation, which provides support services on its behalf in this transaction. Its principal place of business is located at 301 Bellevue Parkway, 3rd Floor, Wilmington, DE 19809, Attention: Corporate Trust Administration. BNY Delaware has acted as a trustee on numerous asset-backed transactions, including the structure of the transaction referred to herein. You may contact BNY Delaware by calling (302) 791-3610.

In the ordinary course of business, The Bank of New York Mellon, The Bank of New York Mellon Trust Company, N.A., and BNY Mellon Trust of Delaware (collectively, “BNY Mellon”) are named as a defendant in legal actions. In connection with its role as trustee of certain residential mortgage-backed securitizations (“RMBS”) transactions, BNY Mellon has been named as a defendant in a number of legal actions brought by RMBS investors. These lawsuits allege that the trustee had expansive duties under the governing agreements, including the duty to investigate and pursue breach of representation and warranty claims against other parties to the RMBS transactions. While it is inherently difficult to predict the eventual outcomes of pending actions, BNY Mellon denies liability and intends to defend the litigations vigorously.

Pursuant to the Trust Agreement, the Owner Trustee will perform limited administrative functions of the Issuing Entity including the execution and delivery of the Transaction Documents and any related certificate or other document to which the Issuing Entity is a party. The Owner Trustee will also direct the Indenture Trustee to authenticate and deliver the Notes and will be authorized but not obligated to take all other actions required of the Issuing Entity pursuant to the Transaction Documents. The Owner Trustee is obligated to perform only those duties that are specifically assigned to it in the Trust Agreement, the Receivables Transfer Agreement, the Receivables Contribution Agreement or any other related documents.

Pursuant to the Grantor Trust Agreement, the Grantor Trust Trustee will perform limited administrative functions of the Grantor Trust including the execution and delivery of the Transaction Documents and any related certificate or other document to which the Grantor Trust is a party. The Grantor Trust Trustee is obligated to perform only those duties that are specifically assigned to it in the Grantor Trust Agreement, the Receivables Contribution Agreement or any other related documents.

The Owner Trustee’s liability in connection with the issuance and sale of the Securities is limited solely to the express obligations of the Owner Trustee set forth in the Trust Agreement governing the Issuing Entity. The Owner Trustee will not be liable for the default or failure of any of Carvana, the Issuing Entity, the Grantor Trust, the Servicer, the Backup Servicer, the Collateral Custodian, the Independent Accountant or other trustees to carry out their respective obligations under any of the Transaction Documents, nor will the Owner Trustee be liable under any Transaction Document under any circumstances, except for such liability and losses due to its willful misfeasance, bad faith or gross negligence (except errors in judgment) or from a breach of representation or warranties regarding itself in the Trust Agreement.

The Grantor Trust Trustee’s liability in connection with the issuance and sale of the Notes and certificates is limited solely to the express obligations of the Grantor Trust Trustee set forth in the Grantor Trust Agreement governing the Grantor Trust. The Grantor Trust Trustee will not be liable for the default or failure of any of the Administrator, the Issuing Entity, the Grantor Trust, the Servicer, the Backup Servicer, the Collateral Custodian, the Independent Accountant or other trustees to carry out their respective obligations under any of the Transaction Documents, nor will the Grantor Trust Trustee be liable under any Transaction Document under any circumstances, except for such liability and losses due to its willful misfeasance, bad faith or gross negligence (except errors in judgment) or from a breach of representation or warranties regarding itself in the Grantor Trust Agreement.

The Owner Trustee may resign at any time, in which event Carvana, or a successor administrator, will be obligated to appoint a successor owner trustee. Carvana or the Depositor may also remove the Owner Trustee if the Owner Trustee ceases to be eligible to continue as owner trustee under the Trust Agreement or if the Owner Trustee becomes insolvent. In those circumstances, Carvana, or a successor administrator, will be obligated to appoint a successor owner trustee. Any resignation or removal of an owner trustee and appointment of a successor owner trustee will not become effective until acceptance of the appointment by the successor owner trustee. Costs associated with the termination of the Owner Trustee and the appointment of a successor will be borne by the Issuing Entity.

The Grantor Trust Trustee may resign at any time, in which event Carvana, or a successor administrator, will be obligated to appoint a successor grantor trustee. The Issuing Entity or Administrator of the Grantor Trust may also remove the Grantor Trust Trustee if the Grantor Trust Trustee ceases to be eligible to continue as grantor trust trustee under the Grantor Trust Agreement or if the Grantor Trust Trustee becomes insolvent. In those circumstances, Carvana, or a successor administrator, will be obligated to appoint a successor grantor trust trustee. Any resignation or removal of a grantor trust trustee and appointment of a successor grantor trust trustee will not become effective until acceptance of the appointment by the successor grantor trust trustee. Costs associated with the termination of the Grantor Trust Trustee and the appointment of a successor will be borne by the Issuing Entity.

 

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ASSET REPRESENTATIONS REVIEWER

Clayton Fixed Income Services LLC (“Clayton”), a Delaware limited liability company, will act as the “asset representations reviewer” under the Asset Representations Review Agreement. Clayton is a wholly-owned subsidiary of Covius Services, LLC. Clayton and its affiliates have provided independent due diligence loan review and servicer oversight services since 1989. Clayton has been engaged as the asset representations reviewer on more than 400 auto and equipment loan, lease and dealer floorplan and credit card securitization transactions since 2015.

Clayton and its affiliates are providers of targeted due diligence reviews of securitized assets and policies and procedures of originators and servicers to assess compliance with representations and warranties, regulatory and legal requirements, investor guidelines and settlement agreements. Clayton and its affiliates have performed over 12 million loan reviews and have provided ongoing oversight on over $2 trillion of securitization transactions on behalf of investors, sponsors, issuers and originators, including government-sponsored enterprises and other governmental agencies. These services have been performed primarily on residential mortgage loan and residential mortgage-backed security transactions, although Clayton and its affiliates have also performed these services for transactions involving auto loans, credit cards, commercial mortgage loans, student loans, timeshare loans and boat and recreational vehicle loans.

The Asset Representations Reviewer is not, and will not so long as the Offered Notes remain outstanding, be affiliated with Carvana, the Depositor, the Servicer, the Backup Servicer, the Issuing Entity, the Grantor Trust, the Indenture Trustee, the Owner Trustee, the Grantor Trust Trustee or any of their affiliates and none of the Asset Representations Reviewer’s affiliates has been hired by Carvana or the underwriters to perform pre-closing due diligence work on the Receivables. The Asset Representations Reviewer may be appointed as an asset representations reviewer on other transactions for Carvana or its affiliates.

For so long as the Offered Notes remain outstanding, the Asset Representations Reviewer must satisfy these eligibility criteria. The Asset Representations Reviewer is not responsible for (a) reviewing the Receivables for compliance with the representations under the Transaction Documents, except in connection with a review under the Asset Representations Review Agreement or (b) determining whether noncompliance with any representation is a breach of the Transaction Documents or if any Receivable is required to be repurchased.

The Asset Representations Reviewer’s main obligations will be:

 

●

reviewing each Review Receivable following receipt of a review notice from the Indenture Trustee, and

 

●

providing a report on the results of the review to Carvana, the Depositor, the Servicer, the Issuing Entity and the Indenture Trustee.

For a description of the review to be performed by the Asset Representations Reviewer, you should read “The Transaction Documents—Asset Representations Review Agreement.”

 

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BACKUP SERVICER

Vervent Inc., a Delaware corporation, is the backup servicer of the Receivables pursuant to the Backup Servicing Agreement.

Vervent Inc. is headquartered in San Diego, California and was formed in July 2019 when First Associates Loan Servicing, LLC and Portfolio Financial Servicing Company combined operations to form a single servicing organization as a result of First Associates Loan Servicing, LLC’s investment round with Stone Point Capital (Vervent Inc. and its predecessors, “Vervent”). Vervent has been in business for more than 30 years, offering financial servicing support. It is the only consumer servicer to currently have a servicer rating from Morningstar, having received Morningstar’s top MOR ABS 1 ranking for three consecutive years. Vervent began servicing mobile home loans in 1986, small business and commercial loans and leases in 2005, consumer (non-mortgage) loans in 2008, auto loans in 2011, and credit cards in 2017. Vervent uses artificial intelligence driven speech analytics to monitor compliance and enhance performance. Vervent’s principal offices are located at 10182 Telesis Court, Suite 300, San Diego, CA 92121.

In certain circumstances, the Backup Servicing Agreement may be terminated. See “The Transaction Documents—Backup Servicing Agreement.”

 

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UNDERWRITING OF RECEIVABLES

Application and Purchase Process

Carvana’s credit application volume consists exclusively of customers seeking financing for the purchase of a vehicle from Carvana. Approximately 80% of Carvana’s retail unit sales are directly financed by Carvana.

At any time during the shopping experience, customers may submit a pre-qualification application in order to receive precise, conditionally approved financing offers on all vehicles in Carvana’s available inventory. The application captures basic customer identity, contact, and income information that enables Carvana to obtain data about the customer from its credit data partners. Within seconds of pre-qualification application submission, Carvana’s data partners provide it with third-party credit scores, such as FICO, as well as raw credit and alternative data that Carvana uses in its proprietary risk models, which are described below. Carvana’s proprietary financing technology quickly iterates through each vehicle in its inventory to calculate personalized financing offers for the customer based on customer-specific attributes, such as CarvanaScore, income, and state of residence, as well as vehicle-specific attributes, such as price, mileage, and model year.

Customers who submit a pre-qualification application will see personalized financing terms, which are automatically generated through Carvana’s proprietary financing technology, displayed alongside vehicle pricing information on both Carvana’s search and vehicle detail pages. This calculation of offers on all vehicles in Carvana’s available inventory allows customers to leverage Carvana’s search page to rapidly identify vehicles that both meet desired vehicle criteria and monthly payment and down payment options. Once a customer has identified a vehicle of interest, he or she can choose from hundreds of permutations, specific to such customer, of down payment amount, monthly payment, interest rate, and term offered by Carvana on that specific vehicle, providing the customers with flexibility in choosing their financing options.

After selecting a vehicle, customers begin the “Purchase Process”, a series of steps that allows the customer to complete a purchase in a little as 10 minutes. During the Purchase Process, the customer will:

 

●

Review and select ancillary product options, including vehicle service contracts and GAP waiver coverage,

 

●

Value and apply a trade-in to the purchase, if desired,

 

●

Upload images of requested documents, such as his or her driver’s license or recent paystubs,

 

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Provide bank account information for making the down payment and, if desired, enroll in auto-pay on the loan, and

 

●

Schedule the date, time, and location of the delivery of the purchased vehicle, including whether the vehicle is to be picked-up at one of Carvana’s patented car vending machine locations or delivered to the customer’s home.

The Purchase Process culminates in the customer confirming his or her order and financing application. Based on the information Carvana collects through the pre-qualification application and Purchase Process, Carvana’s proprietary financing technology automatically assesses the credit risk of the customer and determines the final terms of the financing offered by Carvana to the customer. Order confirmation triggers the generation of electronic contracts that the customer can sign immediately and must sign in advance of delivery, marking the beginning of Carvana’s Verification Process. None of the Receivables in the Pool were originated with exceptions to Carvana’s written underwriting guidelines or automated underwriting process.

Verification Process

Carvana has established a centralized “Verification Process” in which every order placed in the Purchase Process is verified by a team of specialized employees at its headquarters in Tempe, Arizona. In accordance with Carvana’s policies and procedures, all orders must successfully pass verification tests related to identity, income, employment, insurance, availability of down payment funds (if applicable), and residency prior to delivery of the vehicle and origination of the loan.

The Verification Process utilizes both manual and technology-enabled processes. For example, certain customers with lower expected credit risk may be eligible to pass income and employment verification tests based on information available from Carvana’s data partners, while other customers may be asked to provide paystubs, bank statements, or other information for manual verification of income and employment. Identity verification is a critical component of Carvana’s Verification Process, and generally involves review and image capture of the customer’s driver’s license by a Carvana employee at time of delivery, a web-based identity verification questionnaire, and review of identity information provided by Carvana’s data partners.

In addition to the verification processes described above, Carvana has developed multiple tools and processes to mitigate the risk of fraud in the origination process. One such tool is Carvana’s proprietary “FraudScore” model, which combines credit and alternative data obtained from data partners, details of the customer’s order and other proprietary data to score orders based on the risk of fraud. FraudScore highlights orders for additional review and diligence by specially-trained members of Carvana’s verifications team. Carvana’s “Red Flags” process involves comparison of information provided by the customer in the application with information obtained from data partners to detect inconsistencies which must be evaluated and cleared through research using vendor tools or additional documentation provided by the customer.

 

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Delivery and Post-Sale

Carvana allows customers to pick-up vehicles from any of its patented car vending machine locations and provides as soon as next-day home delivery using its fulfillment network and delivery advocate employees to customers who live in one of Carvana’s established delivery markets. During the delivery, images of the customer’s driver’s license and proof of insurance are captured and reviewed by a Carvana employee. The customer and delivery advocate complete any outstanding paperwork, including execution of a title application and other documents needed to perfect Carvana’s security interest in the vehicle, which are then sent to Carvana’s headquarters in Tempe, Arizona for processing.

Every Carvana purchase comes with a “7 Day Money Back Guarantee”, which allows the customer to return the vehicle within seven days of purchase. When a vehicle is returned, the associated retail installment contract is voided and any accrued interest is waived. Generally, upon expiration of the seven day period, if the customer has decided to keep the vehicle, a team of Carvana employees initiate the title and registration process. Information regarding the motor vehicle receivable (including with respect to the related obligor and financed vehicle) is sent by Carvana to Bridgecrest for onboarding, together with copies (but not the originals) of the contract and certain related documentation.

Proprietary Risk Models

Carvana has developed multiple proprietary risk models to support various aspects of its vertically integrated automotive lending business.

Carvana utilizes a custom credit risk model in addition to traditional third-party credit scores such as FICO for the purpose of evaluating credit risk and determining financing offers. Carvana’s primary credit risk model, CarvanaScore, incorporates traditional and non-traditional data from multiple third party data partners. CarvanaScore has been developed exclusively on loan performance data from past Carvana originations, and places emphasis on customer attributes that Carvana’s sophisticated, machine learning techniques have found to be most predictive of loan performance. The model is significantly more predictive than third-party credit scores on Carvana’s customer population, and has been validated out of time and out of model training sample on both Carvana and non-Carvana originated loans.

Carvana has also developed a “Deal Score” model for internal and external reporting and portfolio monitoring purposes. The Deal Score model produces scores that range from 0 to 100, with higher scores indicating lower expected risk of negative loan performance. Deal Score combines a customer’s CarvanaScore with deal-specific attributes, such as down payment, monthly payment amounts, payment-to-income ratio and vehicle characteristics, to enhance predictive power. Like CarvanaScore, Deal Score has been developed exclusively on Carvana loan performance data.

All proprietary risk models used in Carvana’s lending business are regularly monitored and tested. The risk models are updated from time to time to adjust for new performance data, changes in customer and economic trends, and additional sources of third party data.

Security Interest in Vehicles

Each motor vehicle receivable underwritten by Carvana in connection with the sale of a used motor vehicle is secured by that vehicle. For more information, see “The Receivables—Certain Legal Considerations of the Receivables—Security Interests in the Financed Vehicles.”

Electronic Contracts and Electronic Contracting

Carvana employs electronic contracting under which the related contracts are evidenced by an electronic record and are electronically signed by the related obligors. Carvana contracts with third parties to facilitate the process of creating and storing such electronic contracts in an electronic vault maintained by a third-party on behalf of Carvana. These third-party’s technology systems permit transmission, storage, access and administration of electronic contracts and is comprised of proprietary and third-party software, hardware, network communications equipment, lines and services, computer servers, data centers, support and maintenance services, security devices and other related technology that enable electronic contracting in the automobile retail industry.

The electronic vaulting system uses a combination of technological and administrative features that are designed to (i) designate a single copy of the record or records comprising an electronic contract as being the single authoritative copy of the Receivable, (ii) manage access to and the expression of the authoritative copy, (iii) identify Carvana as the owner of record of the authoritative copy and (iv) provide a means for transferring record ownership of, and the exclusive right of access to, the authoritative copy from the current owner of record to a successor owner of record.

 

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SERVICING PROCEDURES

The Servicer will be responsible for servicing and making collections on the Receivables. The Servicer’s duties will include collection and posting of all payments, responding to inquiries of obligors, pursuing delinquencies, recovery and remarketing of vehicles if required, making available payment or other information to obligors, accounting for collections, administering insurance claim filings and providing monthly reports.

The Servicer will generally be required to service the Receivables in accordance with its customary servicing practices, which are the customary servicing practices of the Servicer with respect to all comparable motor vehicle receivables that the Servicer services for itself or others, as such practices may be changed from time to time. The following discussion is a brief description of certain of the customary servicing practices, including the written servicing policy and procedures, of Bridgecrest applicable to its role as Servicer. The Servicer modifies these servicing practices from time to time to comply with applicable regulatory requirements and guidance. The Servicer most recently modified its written servicing policy and procedures in July 2020; however, the modifications to the written policy and procedures did not result in any material modifications to the Servicer’s servicing practices. In addition, the Servicer reviews its servicing practices periodically and revises them to improve the effectiveness or efficiency of its servicing and collection activities.

Payment Channels and Methods

The Servicer maintains a website where obligors can access information about their accounts. Obligors have a variety of available payment options, including through an online portal, by phone with a representative or through an automated phone system, mail, an app and third-party payment processing services. Currently, debit card, credit card, check (through mail) and automated clearing house (“ACH”) payments are accepted through these payment avenues. The Servicer continually evaluates emerging trends and payment technologies and may modify its accepted payment methods from those described above.

Payment Application and Partial Payments

Unless otherwise required by law or the applicable contract, payments received on an obligor’s account are generally applied in the following order: past due interest, past due principal, current scheduled payments, any assessed late fees and non-sufficient fund (“NSF”) fees and then to future scheduled payments. An obligor must pay at least 90% of a scheduled payment and all past due amounts to be considered current. The Servicer may waive accumulated late fees, NSF fees and other Supplemental Servicing Fees in its discretion and in accordance with its servicing practices.

Collections

The Servicer maintains its primary servicing centers in Mesa, Arizona and Dallas, Texas. In addition, the Servicer continues to invest in and consider alternate strategies for its servicing functions, including work-from-home options, and may have agents performing certain servicing functions from remote or alternate locations. The mission of the Servicer’s loan servicing department is to assist obligors to remain current on their payments. The Servicer generally works with obligors that are having difficulties making payments to bring the account current by either securing a payment or creating a plan to bring the account current. The loan servicing department is organized into several different teams based on payment and delinquency stage. The front end collections group generally handles delinquencies by contacting obligors and responding to inbound calls. The mid-range group relies primarily on contacting obligors with the goal of determining if the obligor is eligible for payment assistance (such as an extension). A late-stage collections group will continue to work with obligors to determine when the related vehicles should be assigned for repossession and/or reinstated.

Modification of Contracts-Due Date Changes and Extensions

The Servicer may change the due dates for payments to accommodate the date the obligor feels best suits its ability to make timely payments. Due date changes generally are not treated as extensions.

The Servicer’s servicing policy and procedures sets forth requirements for when the term of a receivable may be extended. Extensions are granted when an obligor’s payments are deferred to the end of the term to bring the account current. This extends the contract maturity date but does not affect any other terms of the receivable. Generally, extensions are granted after a determination is made that the extension will likely alleviate an obligor’s temporary hardship. Under the current customary servicing practices, extensions generally may not extend the final payment more than six months past the original maturity date of the contract and may not be available to an obligor until six monthly equivalent payments have been made. On a monthly pay frequency, an obligor may receive up to 6 payment extensions over the life of the loan or up to 3 payment extensions in a 12-month period as long as it is not extending 6 months beyond the original maturity date. Extensions may be processed within system and rule constraints without manual intervention or approval. Exceptions may also be granted by an authorized approver beyond the guidelines and established limits within specified parameters. Any extension or other permissible modification could have an impact on the amount and timing of collections on Receivables and, consequently, the amount and timing of Available Funds to make payments on the Securities. See “Risk Factors—Risks Related to the Transaction Parties—The Servicer’s discretion over the servicing of the Receivables, including the sale of Charged-Off Receivables, may impact the amount and timing of funds available to make payments on the Securities.”

 

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Disaster Relief and Recovery

In the event of a natural or manmade disaster (including a pandemic such as the outbreak of COVID-19), the Servicer may implement a range of actions with respect to impacted obligors and the related receivables, including the cessation of repossession and collection efforts, offering assistance through modification or extension of the receivable and assisting with the processing of insurance claims. The scope of any such action may exceed the general requirements for eligibility with respect to such action outside of a natural or manmade disaster situation.

Charge-off Guidelines

The Servicer’s charge-off policy is designed to provide a consistent approach in compliance with applicable law to the charge-off of delinquent receivables, as well as accounts for which insurance proceeds have been applied following a casualty or for which a vehicle has been abandoned. Generally, receivables in default are charged-off at the earlier of (a) the date which the obligor is 120 days past due at the end of the month or (b) the expiration of the notice of intent (i.e., notice to the obligor of the intent to sell the vehicle to recoup part of the loss from the default) following a repossession of the related vehicle. Vehicles abandoned by an obligor or with applied insurance proceeds are charged off at 120 days past due. In the event the customer presents GAP coverage at time of loss, proceeds are applied to the account and the leftover balance is written down to reflect the GAP coverage. If the GAP payment is applied prior to the account becoming 120 days past due, then the receivable will be noted as paid/settled and the balance will not be charged-off. Once an account charges-off, the obligor is no longer responsible for late fees and interest previously accrued on the receivable, nor will the obligor accrue any additional late fees and interest; instead, the obligor is only responsible for the principal balance.

Sales of Deficiency Balances

The Servicer may from time to time sell deficiency balances remaining after a receivable is charged-off to third-parties on either a flow or portfolio purchase basis.

Repossession, Reinstatements and Liquidations

The Servicer’s servicing policy and procedures includes guidance with respect to repossessions, the handling of an obligor’s voluntary surrender of a vehicle, the handling of vehicles that have been impounded and notice requirements related to the foregoing. Generally, the Servicer may repossess a vehicle if the obligor has missed a monthly payment or has otherwise defaulted under a receivable, but a decision to repossess a vehicle is determined on an account-by-account basis in accordance with guidelines that consider, among other things, the risk of loss associated with the account. If the Servicer determines that a vehicle should be repossessed, then the Servicer will assign the vehicle for repossession to an approved repossession agent. In certain states and in some circumstances, the Servicer must send a “right to cure” notice prior to repossessing the vehicle and, in some states, the Servicer must send a “notice of intent” letter informing the obligor of the intent to sell the repossessed vehicle. If a vehicle is submitted for repossession and has not been recovered, the customer is offered options to cancel the repossession through payment of the full principal balance (which is referred to as “redeemed”) or, for customers in certain states, payment of the full past due balance (which is referred to as “reinstated”). If the related obligor is in bankruptcy or subject to the Servicemembers Civil Relief Act, then the account will be referred to the Servicer’s bankruptcy department or military group within loan servicing prior to any repossession to ensure compliance with applicable legal requirements. Additionally, an obligor has the ability to voluntarily surrender a vehicle to the Servicer by requesting that the Servicer retrieve the vehicle, which is considered a voluntary repossession.

If a repossessed vehicle is not redeemed or reinstated, then the Servicer will sell the vehicle at auction and apply the net liquidation proceeds of the sale to the outstanding balance of the receivable. If the net liquidation proceeds exceed the outstanding balance, then the Servicer will refund the excess to the obligor; if the net liquidation proceeds are less than the outstanding balance, then the obligor will remain liable for the deficiency balance after rebates and credits, if any, are applied to the account.

Bankruptcy

The Servicer’s bankruptcy department is assigned to manage all receivables with obligors that have filed for bankruptcy. Once notice is received that an obligor has filed for bankruptcy, the account is moved to the bankruptcy department and all collection efforts are halted until the bankruptcy department reviews the account and determines the next steps. For obligors in bankruptcy, the Servicer will not engage in any collection efforts unless an oral notification of bankruptcy was not confirmed by documentation within a specified time period, the bankruptcy case has been dismissed (and not reinstated or appealed), the vehicle is sold and no amount remains due on the account or the account is reaffirmed and reaffirmation is approved by the bankruptcy court.

Impounds

From time to time vehicles are impounded. When an obligor abandons a vehicle by failing to retrieve the vehicle from the impound lot, the Servicer will determine whether to secure possession of the vehicle to satisfy the outstanding amounts under the related receivable. If the Servicer’s impound department determines that the cost of securing possession of the vehicle outweighs the benefit, the Servicer

 

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may abandon/forfeit the vehicle. If the vehicle is abandoned/forfeited, the account can be charged-off in accordance with the Servicer’s policies.

Insurance Policies and Processing

Although the retail installment contracts require obligors to insure the vehicle, the Servicer is not obligated to monitor compliance with this requirement or to force-place insurance. However, once the Servicer becomes aware of a damaged or totaled vehicle, the Servicer’s total loss department is responsible for ensuring insurance settlements are applied to the account and repair checks are distributed to an approved repair facility. In the event the customer presents GAP coverage at time of loss, proceeds are applied to the account and the leftover balance is written down to reflect the GAP coverage. Vehicles abandoned by a customer or with applied insurance proceeds are charged off according to the Servicer’s policies and procedures. If a GAP payment posts prior to the account charging off, the account will reflect as paid/settled.

 

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HISTORICAL PERFORMANCE

Delinquencies and Net Losses

The information below includes historical performance data of (1) all motor vehicle receivables that were originated by Carvana, whether or not such receivables have been previously sold or securitized (but are still serviced by Bridgecrest) or may be sold or securitized in the future, including receivables that do not meet the criteria for inclusion in, or were otherwise excluded from, this securitization transaction under the captions “All Obligors” and (2) all motor vehicle receivables that were originated by Carvana relating to obligors with a Deal Score of 50 or higher at the time of origination whether or not such receivables have been previously sold or securitized (but are still serviced by Bridgecrest) or may be sold or securitized in the future under the captions “Prime Obligors.”

There can be no assurance that the delinquency and net loss experience of the Pool will be comparable to that set forth below.

A Receivable is considered delinquent when a payment in excess of 10% of any scheduled payment has not been received by the payment due date as of the end of the monthly period.

The amounts and percentages included in the delinquency experience tables represent Principal Balances only. The delinquency periods included in the delinquency experience tables are calculated based on the number of days a payment is contractually past due, and do not include bankruptcies and repossessions. Net charge-offs represent the outstanding Principal Balance of Charged-Off Receivables in the period less recovery payments received during the period with respect to charged-off accounts. Net charge-offs reflect expenses associated with collection, repossession, or disposition of the related vehicle.

Delinquency Experience (All Obligors)

 

		As of December 31,
		2020								2019								2018								2017								2016
Principal Balances of Outstanding Receivables			$5,415,077,937								$3,359,895,920								$1,568,341,287								$648,549,452								$258,574,163
Delinquencies
31-60 Days			$199,242,420				3.68	%			$162,370,095				4.83	%			$67,419,569				4.30	%			$21,246,977				3.28	%			$8,346,731				3.23	%
61-90 Days			$77,206,736				1.43	%			$53,638,264				1.60	%			$24,286,651				1.55	%			$8,323,593				1.28	%			$3,404,384				1.32	%
91 Days or more			$16,693,581				0.31	%			$17,031,374				0.51	%			$8,734,642				0.56	%			$3,847,511				0.59	%			$727,006				0.28	%
Total 31+ Delinquencies			$293,142,737				5.41	%			$233,039,732				6.94	%			$100,440,862				6.40	%			$33,418,081				5.15	%			$12,478,121				4.83	%
Total 61+ Delinquencies			$93,900,317				1.73	%			$70,669,637				2.10	%			$33,021,293				2.11	%			$12,171,104				1.88	%			$4,131,390				1.60	%

Delinquency Experience (All Obligors)

 

		As of June 30,
		2021								2020
Principal Balances of Outstanding Receivables			$7,413,407,972								$4,278,775,548
Delinquencies
31-60 Days			$182,819,170				2.47	%			$124,117,821				2.90	%
61-90 Days			$73,513,846				0.99	%			$50,255,325				1.17	%
91 Days or more			$14,018,364				0.19	%			$15,619,417				0.37	%
Total 31+ Delinquencies			$270,351,380				3.65	%			$189,992,563				4.44	%
Total 61+ Delinquencies			$87,532,210				1.18	%			$65,874,742				1.54	%

Delinquency Experience (Prime Obligors)

 

		As of December 31,
		2020								2019								2018								2017								2016
Principal Balances of Outstanding Receivables			$2,719,223,935								$1,532,860,259								$731,518,484								$320,907,855								$138,298,799
Delinquencies
31-60 Days			$18,103,978				0.67	%			$14,845,014				0.97	%			$6,206,274				0.85	%			$1,806,395				0.56	%			$372,351				0.27	%
61-90 Days			$6,335,290				0.23	%			$4,377,507				0.29	%			$1,774,945				0.24	%			$798,488				0.25	%			$209,586				0.15	%
91 Days or more			$1,569,339				0.06	%			$1,760,677				0.11	%			$841,359				0.12	%			$262,408				0.08	%			$9,154				0.01	%
Total 31+ Delinquencies			$26,008,606				0.96	%			$20,983,198				1.37	%			$8,822,578				1.21	%			$2,867,291				0.89	%			$591,092				0.43	%
Total 61+ Delinquencies			$7,904,628				0.29	%			$6,138,184				0.40	%			$2,616,304				0.36	%			$1,060,896				0.33	%			$218,741				0.16	%

Delinquency Experience (Prime Obligors)

 

		As of June 30,
		2021								2020
Principal Balances of Outstanding Receivables			$4,018,396,141								$2,006,144,950
Delinquencies
31-60 Days			$17,015,654				0.42	%			$11,413,542				0.57	%
61-90 Days			$5,870,881				0.15	%			$4,332,881				0.22	%

 

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		As of June 30,
		2021								2020
91 Days or more			$1,532,321				0.04	%			$1,588,464				0.08	%
Total 31+ Delinquencies			$24,418,855				0.61	%			$17,334,886				0.86	%
Total 61+ Delinquencies			$7,403,202				0.18	%			$5,921,344				0.30	%

Net Loss Experience (All Obligors)

 

		Year Ended December 31,
		2020				2019				2018				2017				2016
Outstanding Principal Balances at Period End			$5,415,077,937				$3,359,895,920				$1,568,341,287				$648,549,452				$258,574,163
Average Month-End Amount During the Period			$4,395,408,756				$2,499,850,505				$1,096,969,841				$449,809,395				$176,904,208
Net Charge-Offs			$93,448,535				$74,006,927				$32,795,310				$11,293,289				$6,870,265
Net Charge-Offs as a Percentage of Average Month-End Principal Balances Outstanding			2.13	%			2.96	%			2.99	%			2.51	%			3.88	%

Net Loss Experience (All Obligors)

 

		Six Months Ended June 30,
		2021				2020
Outstanding Principal Balances at Period End			$7,413,407,972				$4,278,775,548
Average Month-End Amount During the Period			$6,484,430,752				$3,877,694,489
Net Charge-Offs			$36,254,354				$54,073,496
Net Charge-Offs as a Percentage of Average Month-End Principal Balances Outstanding			0.56	%			1.39	%
Annualized Net Charge-Offs as a Percentage of Average Month-End Principal Balances Outstanding			1.12	%			2.79	%

Net Loss Experience (Prime Obligors)

 

		Year Ended December 31,
		2020				2019				2018				2017				2016
Outstanding Principal Balances at Period End			$2,719,223,935				$1,532,860,259				$731,518,484				$320,907,855				$138,298,799
Average Month-End Amount During the Period			$2,094,885,911				$1,144,664,904				$516,045,504				$233,212,152				$89,031,177
Net Charge-Offs			$11,768,401				$9,147,575				$3,479,394				$1,089,521				$473,528
Net Charge-Offs as a Percentage of Average Month-End Principal Balances Outstanding			0.56	%			0.80	%			0.67	%			0.47	%			0.53	%

Net Loss Experience (Prime Obligors)

 

		Six Months Ended June 30,
		2021				2020
Outstanding Principal Balances at Period End			$4,018,396,141				$2,006,144,950
Average Month-End Amount During the Period			$3,380,302,712				$1,783,773,046
Net Charge-Offs			$4,295,741				$6,522,804
Net Charge-Offs as a Percentage of Average Month-End Principal Balances Outstanding			0.13	%			0.37	%
Annualized Net Charge-Offs as a Percentage of Average Month-End Principal Balances Outstanding			0.25	%			0.73	%

See “Underwriting of Receivables,” “Servicer” and “Servicing Procedures” for a discussion of Carvana’s and Bridgecrest’s experience with and overall procedures for originating, underwriting and servicing Receivables.

Static Pool Information

Information regarding Carvana’s delinquencies, prepayments and cumulative net losses with respect to (a) historical loan originations relating to all obligors, regardless of Deal Score, by vintage origination year within the preceding six years and (b) historical loan originations relating to Prime Obligors (obligors with Deal Scores of 50 or higher at the time of origination) by vintage origination year within the preceding six years are included in Annex I to this prospectus. Additional historical loan originations relating to Prime Obligors (obligors with Deal Scores of 50 or higher at the time of origination) has been filed by the Depositor with the SEC. See

 

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“Incorporation of Certain Documents by Reference.” The static pool data set forth in Annex I is incorporated by reference into this prospectus.

The characteristics of Receivables included in the static pool data presented in Annex I to this prospectus, as well as the social, economic and other conditions existing at the time when those Receivables were originated and repaid, may vary materially from the characteristics of the Receivables in the transaction described in the prospectus and the social, economic and other conditions existing at the time when these Receivables were originated and those that will exist in the future when they are required to be repaid. Losses, prepayments and delinquencies for the pool of Receivables in the transaction described in the prospectus may differ from the information shown in Annex I.

To further understand how differing pool characteristics and changing conditions could impact performance, see “Risk Factors—Risks Related to the Receivables—Carvana’s proprietary credit scoring system may not perform as expected and may fail to properly quantify the credit risks associated with Carvana’s customers, resulting in higher than anticipated delinquencies and credit losses on the Receivables”, “Risk Factors—Risks Related to the Receivables—Market factors may reduce the value of used vehicles, which could result in increased losses on the Receivables”, “Risk Factors—Risks Related to the Receivables— Geographic concentrations of the Receivables may result in more risk to you and adversely affect payments on the Receivables and Notes”, “Risk Factors—Risks Related to the Receivables—— Economic developments may adversely affect the performance of the Receivables and the market value of your Securities” and “Risk Factors—Risks Related to the Receivables—Adverse events arising from the global Coronavirus outbreak could result in delays in payment or losses on your Securities.”

 

36

THE RECEIVABLES

The discussion below describes certain material features of the Receivables, eligibility criteria for the Receivables, the characteristics of the Pool, and certain reviews the Depositor makes of the Receivables before it purchases them from Carvana.

Interest Accrual and Allocation

The Receivables are simple interest Receivables. Each monthly payment under a simple interest receivable consists of an amount of interest, which is calculated on the basis of the outstanding Principal Balance multiplied by the stated annual percentage rate and further multiplied by the period elapsed (as a fraction of a calendar year) since the last payment of interest was made. Payments received under a simple interest receivable generally are allocated between interest and principal based on the actual date on which the payment is received.

Accordingly, if an obligor pays a fixed monthly installment before its scheduled due date:

 

●

the portion of the payment allocable to interest for the period since the preceding payment was made will be less than it would have been had the payment been made as scheduled; and

 

●

the portion of the payment applied to reduce the unpaid Principal Balance will be correspondingly greater.

Conversely, if an obligor pays a fixed monthly installment after its scheduled due date:

 

●

the portion of the payment allocable to interest for the period since the preceding payment was made will be greater than it would have been had the payment been made as scheduled; and

 

●

the portion of the payment applied to reduce the unpaid Principal Balance will be correspondingly less.

The amount of the scheduled monthly payment will not change as a result of an early or late payment, although a late fee may be assessed to the obligor. The Servicer is entitled to receive any late fees collected from obligors as Supplemental Servicing Fees.

In either case, the obligor under a simple interest receivable pays fixed monthly installments until the its final scheduled payment date, at which time the amount of the final installment is increased or decreased as necessary to repay the then outstanding Principal Balance. If a simple interest receivable is prepaid, the obligor is required to pay interest only to the date of prepayment.

Criteria Applicable to the Selection of the Receivables

The Pool was selected from Carvana’s portfolio based on several criteria, including that each Receivable:

 

●

was originated by Carvana in the ordinary course of business,

 

●

is secured by a used car or light duty truck,

 

●

was originated in the United States,

 

●

had an original term to maturity of not more than 75 months,

 

●

is a simple interest receivable,

 

●

has a fixed annual percentage rate of not more than 28%,

 

●

provides for level scheduled monthly payments that fully amortize the amount financed over its original term to maturity except for last payment, which may be smaller or greater than the level payments,

 

●

did not have more than 10% of any scheduled payment that was more than 30 days past due,

 

●

has a Deal Score equal to or greater than 50 at the time of origination;

 

●

with respect to any Obligor with a FICO score, has a FICO score equal to or greater than 580 at the time of origination;

 

●

is not secured by a financed vehicle that has been repossessed without reinstatement of the related contract and

 

●

to Carvana’s knowledge, does not relate to an obligor who is currently the subject of a bankruptcy proceeding.

Each Receivable in the Pool meets the criteria described above and other criteria set forth in the Receivables Purchase Agreement. Carvana does not believe that the Pool was constructed using selection procedures adverse to investors. No expenses incurred in connection with the selection and acquisition of the Receivables are to be payable from the offering proceeds. Carvana did not incur any third party expenses constructing the Pool.

The information presented throughout this prospectus pertains to Receivables that satisfied, as of the Cutoff Date, the criteria for transfer to the Issuing Entity.

 

37

Characteristics of the Receivables

The following tables set forth information with respect to the Pool as of the Cutoff Date.

Composition of the Receivables as of the Cutoff Date

 

Initial Pool Balance			$1,035,000,000.42
Number of Receivables			44,046
Average Principal Balance			$23,498.16
Range of Principal Balances			$1,024.19 to $79,855.14
Weighted Average APR(1)			7.47%
Range of APRs			3.39% to 26.60%
Weighted Average Remaining Term(1)			70 months
Range of Remaining Terms			2 to 75 months
Weighted Average Original Term(1)			71 months
Range of Original Terms			12 to 75 months
Non-Zero Weighted Average FICO Score(1)(2)			705
Range of FICO Scores(2)			584 to 894

 

(1)	Weighted by Principal Balance of the Receivables as of the Cutoff Date.

(2)

Reflects only the Receivables with at least one obligor that has a FICO score at the time of application. The FICO score with respect to any Receivable with co-obligors is calculated as the average of each obligor’s FICO score at the time of application, if both co-obligors have FICO scores at that time.

As of the Cutoff Date, the non-zero weighted average FICO score of the Receivables was 705, with the non-zero minimum FICO score being 584 and the maximum FICO score being 894. The calculations in this paragraph reflect only Receivables with obligors that have a FICO score at the time of application.

The percentage of Receivables with obligors that did not have a FICO score at the time of application was 0.52% based on the Initial Pool Balance.

A FICO score is a measurement determined by Fair Isaac Corporation using information collected by the major credit bureaus to assess credit risk. Data from an independent credit reporting agency, such as FICO score, is one of several factors that Carvana may use in its credit scoring system to assess the credit risk associated with each applicant. See “Underwriting of Receivables.” FICO scores are based on independent third party information, the accuracy of which cannot be verified. FICO scores should not necessarily be relied upon as a meaningful predictor of the performance of the Receivables.

Since the time of origination, in accordance with the Servicer’s customary servicing practices, 0.01% of the Receivables included in the Pool have been subject to an extension based on the Initial Pool Balance.

 

Distribution of the Receivables by Remaining Term to Maturity

as of the Cutoff Date

 

Remaining Term to Maturity Range		Number of Receivables				Percentage of Total Number of Receivables				Aggregate Principal   Balance of Receivables				Percentage of Initial Pool   Balance
0 - 12 months			86				0.20%			$	402,611.13				0.04%
13 - 24 months			180				0.41%				1,590,324.02				0.15%
25 - 36 months			502				1.14%				6,349,890.90				0.61%
37 - 48 months			935				2.12%				14,793,388.29				1.43%
49 - 60 months			1,929				4.38%				37,300,157.00				3.60%
61 - 72 months			35,716				81.09%				844,544,553.54				81.60%
73 - 75 months			4,698				10.67%				130,019,075.54				12.56%
Total			44,046				100.00%			$	1,035,000,000.42				100.00%

 

38

Distribution of the Receivables by Original Term to Maturity

as of the Cutoff Date

 

Original Term to Maturity Range		Number of Receivables				Percentage of Total Number of Receivables				Aggregate Principal   Balance of Receivables				Percentage of Initial Pool Balance
0 - 12 months			46				0.10%			$	263,614.59				0.03%
13 - 24 months			144				0.33%				1,300,601.28				0.13%
25 - 36 months			441				1.00%				5,603,283.75				0.54%
37 - 48 months			874				1.98%				13,781,247.88				1.33%
49 - 60 months			1,688				3.83%				32,976,013.18				3.19%
61 - 72 months			35,847				81.39%				843,998,303.25				81.55%
73 - 75 months			5,006				11.37%				137,076,936.49				13.24%
Total			44,046				100.00%			$	1,035,000,000.42				100.00%

The following table sets forth the percentage of the Initial Pool Balance in the states with the largest concentration of Receivables.

The following breakdown by state is based on the billing addresses of the obligors of the Receivables in the Pool:

Distribution of the Receivables by Obligor Billing Address State

as of the Cutoff Date

 

Obligor Billing Address State		Number of     Receivables				Percentage of     Total Number     of Receivables				Aggregate Principal     Balance of Receivables				Percentage of     Initial Pool Balance
Texas			4,356				9.89%			$	104,305,682.35				10.08%
California			3,215				7.30%				78,983,658.28				7.63%
Florida			3,103				7.04%				73,575,327.70				7.11%
Georgia			3,004				6.82%				70,324,213.02				6.79%
Arizona			2,299				5.22%				55,450,314.51				5.36%
Pennsylvania			1,983				4.50%				46,595,836.41				4.50%
North Carolina			1,698				3.86%				38,603,881.83				3.73%
Illinois			1,628				3.70%				38,220,551.73				3.69%
Tennessee			1,591				3.61%				37,244,695.27				3.60%
Virginia			1,587				3.60%				36,338,909.06				3.51%
Ohio			1,520				3.45%				35,819,337.19				3.46%
New York			1,430				3.25%				34,419,210.99				3.33%
New Jersey			1,386				3.15%				32,838,333.57				3.17%
Michigan			1,285				2.92%				29,752,590.26				2.87%
Colorado			1,092				2.48%				25,788,119.73				2.49%
South Carolina			1,144				2.60%				25,670,679.40				2.48%
Indiana			1,022				2.32%				23,376,674.22				2.26%
Maryland			868				1.97%				20,711,595.87				2.00%
Alabama			883				2.00%				20,701,535.93				2.00%
Missouri			841				1.91%				19,144,505.30				1.85%
Nevada			775				1.76%				18,957,118.01				1.83%
Connecticut			656				1.49%				15,471,388.08				1.49%
Massachusetts			609				1.38%				14,144,331.38				1.37%
Kentucky			626				1.42%				14,007,818.62				1.35%
Wisconsin			568				1.29%				13,088,531.43				1.26%
Oklahoma			588				1.33%				12,684,055.21				1.23%
Minnesota			489				1.11%				11,224,178.46				1.08%
Kansas			456				1.04%				10,490,283.46				1.01%
Other(1)			3,344				7.59%				77,066,643.15				7.45%
Total			44,046				100.00%			$	1,035,000,000.42				100.00%

(1)	Each state included in the “other” category accounted for not more than approximately 1.00% of the Initial Pool Balance.

 

39

Distribution of the Receivables by Annual Percentage Rate

as of the Cutoff Date

 

Annual Percentage Rate Range		Number of     Receivables				Percentage of         Total Number         of Receivables		Aggregate Principal   Balance of Receivables				Percentage of Initial Pool Balance
2.001% - 4.000%			2,927			6.65%		$	73,226,691.98				7.08%
4.001% - 6.000%			15,719			35.69%			384,660,300.31				37.17%
6.001% - 8.000%			9,082			20.62%			214,598,484.41				20.73%
8.001% - 10.000%			6,185			14.04%			143,962,998.85				13.91%
10.001% - 12.000%			4,545			10.32%			103,358,970.75				9.99%
12.001% - 14.000%			3,041			6.90%			66,384,777.27				6.41%
14.001% - 16.000%			1,561			3.54%			31,345,599.86				3.03%
16.001% - 18.000%			659			1.50%			12,120,069.58				1.17%
18.001% - 20.000%			226			0.51%			3,739,924.79				0.36%
20.001% - 22.000%			74			0.17%			1,217,321.01				0.12%
22.001% - 24.000%			24			0.05%			347,108.93				0.03%
24.001% - 26.000%			2			0.00%*			22,989.89				0.00%*
26.001% - 28.000%			1			0.00%*			14,762.79				0.00%*
Total			44,046			100.00%		$	1,035,000,000.42				100.00%

 

*	Represents a value less than 0.005% but greater than 0.00%.

Distribution of the Receivables by Original Principal Balance

as of the Cutoff Date

 

Original Principal Balance Range		Number of         Receivables				Percentage of         Total Number         of  Receivables				Aggregate Principal Balance   of Receivables				Percentage of Initial   Pool Balance
$0.01 - $5,000.00			175				0.40%			$	650,970.54				0.06%
$5,000.01 - $10,000.00			1,211				2.75%				9,541,012.99				0.92%
$10,000.01 - $15,000.00			4,384				9.95%				55,933,135.03				5.40%
$15,000.01 - $20,000.00			10,256				23.28%				177,862,500.60				17.18%
$20,000.01 - $25,000.00			10,967				24.90%				241,885,550.29				23.37%
$25,000.01 - $30,000.00			7,601				17.26%				204,471,843.31				19.76%
$30,000.01 and above			9,452				21.46%				344,654,987.66				33.30%
Total			44,046				100.00%			$	1,035,000,000.42				100.00%

The average original Principal Balance of the Receivables was $23,885.31 as of the Cutoff Date.

Distribution of the Receivables by Remaining Principal Balance

as of the Cutoff Date

 

Remaining Principal Balance Range		Number of     Receivables				Percentage of Total Number of Receivables				Aggregate Principal Balance of Receivables				Percentage of Initial   Pool Balance
$0.01 - $5,000.00			247				0.56%			$	909,402.10				0.09%
$5,000.01 - $10,000.00			1,354				3.07%				10,958,506.03				1.06%
$10,000.01 - $15,000.00			4,720				10.72%				61,717,777.96				5.96%
$15,000.01 - $20,000.00			10,486				23.81%				184,916,175.55				17.87%
$20,000.01 - $25,000.00			10,883				24.71%				244,005,517.76				23.58%
$25,000.01 - $30,000.00			7,366				16.72%				201,071,480.23				19.43%
$30,000.01 and above			8,990				20.41%				331,421,140.79				32.02%
Total			44,046				100.00%			$	1,035,000,000.42				100.00%

The average remaining Principal Balance of the Receivables was $23,498.16 as of the Cutoff Date.

 

40

Distribution of the Receivables by FICO Score

as of the Cutoff Date

 

FICO Score Range (1)		Number of Receivables				Percentage of Total Number of Receivables				Aggregate Principal Balance of Receivables				Percentage of Initial Pool Balance
No FICO			380				0.86%			$	5,330,779.78				0.52%
551 - 600			1,937				4.40%				42,453,465.93				4.10%
601 - 650			8,941				20.30%				208,479,620.54				20.14%
651 - 700			11,678				26.51%				281,523,006.61				27.20%
701 - 750			9,518				21.61%				229,309,835.06				22.16%
751 and above			11,592				26.32%				267,903,292.50				25.88%
Total			44,046				100.00%			$	1,035,000,000.42				100.00%

(1)	The FICO score with respect to any Receivable with co-obligors is calculated as the average of each obligor’s FICO score at the time of application, if both co-obligors have FICO scores at that time.

Distribution of the Receivables by Deal Score

as of the Cutoff Date

 

Deal Score Range(1)		Number of Receivables				Percentage of Total Number of Receivables				Aggregate Principal Balance of Receivables				Percentage of Initial Pool Balance
50 - 59			8,323				18.90%			$	190,319,275.67				18.39%
60 - 69			7,507				17.04%				178,582,264.76				17.25%
70 - 79			10,458				23.74%				260,540,086.63				25.17%
80 - 89			10,630				24.13%				266,393,220.85				25.74%
90 - 100			7,128				16.18%				139,165,152.51				13.45%
Total			44,046				100.00%			$	1,035,000,000.42				100.00%

(1)    The Deal Score is a proprietary score used by Carvana. Deal Score is not comparable to a score from a credit bureau or a FICO score. Further, a Deal Score may not be an accurate predictor of the likely risk or quality of the related Receivable. See “Risk Factors—Risks Related to the Receivables—Carvana’s proprietary credit scoring system may not perform as expected and may fail to properly quantify the credit risks associated with Carvana’s customers, resulting in higher than anticipated delinquencies and credit losses on the Receivables” and “Underwriting of Receivables—Proprietary Risk Models.”

 

41

Depositor Review of the Pool

In connection with this offering, the Depositor performed a review of the Receivables in the Pool as of the Cutoff Date (such disclosure, the “Rule 193 Information”). This review was designed and effected to provide the Depositor with reasonable assurance that the Rule 193 Information is accurate in all material respects.

As part of the review, Carvana identified the Rule 193 Information to be covered and identified the review procedures for each portion of the Rule 193 Information. Descriptions consisting of factual information were reviewed and approved by Carvana senior management to ensure the accuracy of such descriptions in all material respects. Carvana also reviewed the Rule 193 Information consisting of descriptions of portions of the Transaction Documents and compared that Rule 193 Information to the related Transaction Documents to provide reasonable assurance the descriptions were accurate in all material respects. Carvana officers also consulted with internal regulatory personnel and counsel, as well as external counsel, with respect to the description of the legal and regulatory provisions that may materially and adversely affect the performance of the Receivables or payments on the Notes.

In addition, Carvana employees performed a review of the Rule 193 Information to confirm that the Receivables in the Pool, as of the Cutoff Date, satisfied the criteria set forth under “The Receivables—Criteria Applicable to the Selection of the Receivables.” Statistical information relating to the Receivables was recalculated using data tapes containing information from Carvana’s and Bridgecrest’s information systems, which includes databases containing certain attributes of the Receivables, as well as originations data. The review of Rule 193 Information relating to credit approvals consisted of the application of Carvana’s internal control procedures, which include regular quality assurance and information technology internal audits on origination, funding, and data systems to ensure accuracy of data and that previously originated Receivables complied with underwriting guidelines. In addition, 150 Receivables were randomly selected in order to compare certain characteristics selected by the Depositor to the applicable information on the data tapes. Based on this review, four discrepancies were identified. With respect to two randomly selected Receivables, no certificate of title could be located for such Receivables that reflected Carvana as the title lien nominee. Carvana made the decision to include these Receivables in the Pool based on the fact that it expects the related Department of Motor Vehicles to deliver certificates of title reflecting its lien on the vehicle in due course. With respect to two randomly selected Receivables, the discrepancy was related to the information related to the obligor for such Receivable. Carvana made the decision to not include such sampled Receivables in the pool of Receivables to be sold to the Issuing Entity on the Closing Date.

Portions of the review of legal matters and the review of statistical information were performed with the assistance of third parties engaged by the Depositor. The Depositor determined the nature, extent and timing of the review and the level of assistance provided by the third parties. The Depositor had ultimate authority and control over, and assumes all responsibility for, the review and the findings and conclusions of the review. The Depositor attributes all findings and conclusions of the review to itself.

After undertaking the review described above, the Depositor found and concluded that it has reasonable assurance that the Rule 193 Information is accurate in all material respects.

None of the Receivables were originated with exceptions to Carvana’s written underwriting guidelines.

Dispute Resolution

If a request is made for the repurchase of a Receivable due to a breach of a representation or warranty made by Carvana or the Depositor about the Receivables, and the repurchase request is not resolved within 180 days after receipt by Carvana or the Depositor of notice of the repurchase request, the requesting party, including a Noteholder, will have the right to refer the matter, in its discretion, to either mediation (including non-binding arbitration) or binding third-party arbitration. This right applies to all repurchase requests made in accordance with the Transaction Documents and is not limited to repurchase requests made in connection with a review pursuant to the asset representations review process described herein. This right is not a mechanism for requesting repurchase or other relief from losses resulting from changes in the credit quality of the Receivable or other market conditions. Carvana or the Depositor will not repurchase a Receivable with respect to which the related breach of a representation or warranty did not result in a material and adverse effect on the interests of the investors taken as a whole. Each notice must be given in writing to the other parties in accordance with the Transaction Documents and must specifically identify the Receivable(s) to be repurchased and specify the representations or warranties allegedly breached. The notice must also identify the alleged loss related to the Receivable and the material adverse effect on the requesting party. General allegations relating to the Pool or an unspecified subset of the Pool are not a sufficient description for purposes of the notice. If a Receivable is paid off, satisfied, substituted or repurchased, no demands to repurchase are permitted, and there is no further right to mediation or arbitration regarding that Receivable. None of the representations and warranties related to the Receivables relate to the performance of the Receivables or to any credit losses that may occur as a result of a default by the related obligor on the Receivable. Furthermore, the dispute resolution procedures described herein only to the specific Receivables that are related to the dispute. In order for a Receivable to be subject to repurchase, there must be a breach of a representation and warranty related to such Receivable which materially and adversely affects the requesting party. In the event that the Asset Representations Reviewer determines that the representations and warranties related to a Receivable have not failed, any repurchase request related to that Receivable will be deemed to be resolved.

 

42

The requesting party may choose either mediation (including non-binding arbitration) or third-party binding arbitration at its discretion. In each case, the process will be administrated by the American Arbitration Association (“AAA”) pursuant to the AAA’s Commercial Arbitration Rules and Mediation Procedures or any successor rules or procedures (the “AAA Rules”). The mediation or arbitration will take place in Phoenix, Arizona or such other location as agreed to by the parties. The Indenture Trustee, after direction from Carvana, will notify the requesting party at the end of the 180-day period if a repurchase demand is unresolved. Within 30 days of the delivery of the notice indicating that a repurchase demand has not been resolved following the end of the 180-day period, the requesting party must initiate the proceedings and provide notice (as defined by the AAA Rules) to Carvana and the Depositor of its intent to pursue resolution through mediation or arbitration at abs-transactions@carvana.com. Carvana or the Depositor must respond to the notice within 30 days and must submit to the method of dispute resolution requested.

If the requesting party chooses to refer the matter to mediation, Carvana or the Depositor and the requesting party will agree on a neutral mediator approved by the AAA within 15 days of notice service. If the parties cannot agree on a mediator, one will be appointed by the AAA in accordance with the applicable AAA Rules. For a mediation, the proceeding will start within 15 days after the selection of the mediator and conclude within 30 days after the start of the mediation. The parties will mutually agree on the allocation of expenses incurred in connection with the mediation and, should the parties not agree on the allocation of expenses, the expenses will be determined in accordance with AAA Rules. If the requesting party is unsatisfied with the result of the mediation, the requesting party may choose to submit the matter to binding arbitration or adjudicate the dispute in court.

If the requesting party chooses to refer the matter to binding arbitration, the matter will be referred to a panel of three arbitrators. The panel will be comprised of one arbitrator appointed by the requesting party, one arbitrator appointed by the Depositor and a third arbitrator appointed by the two arbitrators that are appointed by the requesting party and the Depositor, in each case selected in accordance with the Transaction Documents. Carvana and the Depositor will provide a notice of the commencement of any arbitration on the Form 10-D related to the monthly period in which the arbitration proceeding commences and will give other Noteholders or parties to the Transaction Documents the right to participate in the arbitration proceeding. The arbitrator will have the authority to schedule, hear and determine any motions, including dispositive and discovery motions, according to New York law, and will do so at the motion of any party. Discovery will be completed within 30 days of appointment of the panel and will be limited for each party to two witness depositions not to exceed five hours, two interrogatories, one document request and one request for admissions. The arbitrator may grant additional discovery on a showing of good cause that the additional discovery is reasonable and necessary or with the consent of all the parties. Briefs will be limited to no more than ten pages each, and will be limited to initial statements of the case, discovery motions and a pre-hearing brief. The evidentiary hearing on the merits will commence no later than 60 days following the appointment of the panel and will proceed for no more than 10 consecutive Business Days, with equal time allotted to each side for the presentation of direct evidence and cross examination. The panel will render its decision on the matter within 90 days of the selection of the panel. In each case, the panel will have discretion to modify these timeframes if, based on the facts and circumstances of the particular dispute, good cause exists, there is an unavoidable delay or with the consent of all of the relevant parties. The panel will decide the matter in accordance with the terms of the contract, including choice-of-law provisions, and the panel may not modify the Transaction Documents in any way or award remedies not consistent with the Transaction Documents. The panel will not be permitted to award punitive or special damages. The panel will also determine which party will be responsible for paying the dispute resolution fees, including attorneys’ fees, incurred in this process. Judgment on the award will be entered in any court having jurisdiction. Once the panel makes a decision with respect to a Receivable, the panel’s decision will be binding with respect to that Receivable, and such Receivable may not be the subject of any additional mediation or binding arbitration. By selecting binding arbitration, the requesting party will be giving up its right to adjudicate the dispute in court, including the right to a trial by jury.

No personally identifiable customer information will be provided for the purposes of any mediation or arbitration. In all cases, the proceedings of the mediation or binding arbitration, including the occurrence of such proceedings, the nature and amount of any relief sought or granted and the results of any discovery taken in the matter, will be kept strictly confidential by each of the parties to the dispute, except as necessary in connection with the investor communications and reports to investors described under “Statements to Investors”, in connection with a judicial challenge to or enforcement of an award, or as otherwise required by law.

Asset-Level Data for the Receivables

The Issuing Entity has provided asset-level data information for the Receivables and filed this information as an exhibit on Form ABS-EE. The Form ABS-EE is incorporated by reference into this prospectus. The asset-level data includes information with respect to each Receivable, the related financed vehicle, the related obligor, activities on the Receivables, charge offs, repossessions and modifications of the Receivables. Asset-level data will be provided each month as an exhibit to the monthly distribution reports filed on Form 10-D. Investors should carefully review the asset-level data.

The Issuing Entity will also prepare asset-level data about the Receivables for each Collection Period and file it with the SEC as an exhibit to Form ABS-EE at or before the time of filing the related Form 10-D. The exhibits to the Form ABS-EE will be incorporated by reference into the related Form 10-D.

 

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