Related Party Transactions |
9 Months Ended |
|---|---|
Sep. 30, 2026 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | NOTE 6 — RELATED PARTY TRANSACTIONS Lease Agreements In November 2014, the Company and DriveTime Automotive Group, Inc. (together with its subsidiaries and affiliates other than the Company, collectively, "DriveTime"), a related party of the Company due to Ernest Garcia II, Ernest Garcia III, and entities controlled by one or both of them (collectively the "Garcia Parties") controlling and owning substantially all of the interests in DriveTime, entered into a lease agreement that previously governed the occupation of two inspection and reconditioning centers in Blue Mound, Texas and Delanco, New Jersey. Pursuant to that lease agreement, the Company made monthly lease payments based on DriveTime's actual rent expense, and the Company was responsible for the actual insurance costs, tenant improvements required to conduct operations, and real estate taxes. In March 2025, the Company assumed DriveTime's lease at the Blue Mound, Texas location, which lease expires in 2029, with two five-year renewal options. The Company continues to lease the Delanco, New Jersey location from DriveTime, which lease expires in 2032 with no further renewal options. In February 2017, the Company entered into a lease agreement with DriveTime for sole occupancy of a fully operational inspection and reconditioning center in Winder, Georgia. In May 2024, the lease expiration for the Winder, Georgia location was extended to 2030, subject to two remaining renewal options of five years each. Expenses related to these operating lease agreements are allocated based on usage to inventory and selling, general and administrative expenses in the accompanying unaudited condensed consolidated balance sheets and statements of operations. Costs allocated to inventory are recognized as cost of sales when the inventory is sold. Total costs related to these operating lease agreements, including those noted above, were $1 million during each of the three months ended September 30, 2026 and 2025 and $2 million during each of the nine months ended September 30, 2026 and 2025, allocated between inventory and selling, general and administrative expenses. Office Lease In December 2019, DriveTime purchased an office building in Tempe, Arizona that the Company leased from an unrelated landlord prior to DriveTime's purchase. In connection with the purchase, DriveTime assumed that lease. The lease has an initial term of ten years expiring in 2029, subject to the right to exercise two five-year extension options. The rent expense incurred under the lease with DriveTime was less than $1 million during each of the three and nine months ended September 30, 2026 and 2025. Wholesale Vehicle Sales and Purchases DriveTime purchases wholesale vehicles from the Company through competitive auctions that are open to other dealers. As a result, the Company recognized $6 million and $8 million of wholesale sales and revenues from DriveTime during the three months ended September 30, 2026 and 2025, respectively, and $27 million and $18 million during the nine months ended September 30, 2026 and 2025, respectively. The Company purchased $3 million and $4 million of vehicles from DriveTime through competitive auctions that are open to other dealers during the three months ended September 30, 2026 and 2025, respectively, and $11 million and $10 million during the nine months ended September 30, 2026 and 2025, respectively. Wholesale Marketplace Revenues DriveTime sells vehicles to, and purchases vehicles from, third parties and the Company through the Company's wholesale marketplace platform. These transactions occur through competitive auctions in which all registered buyers and sellers are able to bid on and purchase, or list and sell, wholesale vehicles. In addition, beginning in September 2023, certain auction locations generally provide customers, including DriveTime, with reconditioning services. As a result, the Company recognized $2 million and $3 million of wholesale sales and revenues from DriveTime during the three months ended September 30, 2026 and 2025, respectively, and $7 million and $10 million during the nine months ended September 30, 2026 and 2025, respectively. The Company recognized less than $1 million of cost of sales to DriveTime related to reconditioning services during the three and nine months ended September 30, 2025. Master Dealer Agreement In December 2016, the Company entered into a master dealer agreement with DriveTime (the "Master Dealer Agreement"), most recently amended in April 2021, pursuant to which the Company may sell VSCs to customers purchasing a vehicle from the Company. The Company earns a commission on each VSC sold to its customers and DriveTime is obligated by and subsequently administers the VSCs. The Company collects the retail purchase price of the VSCs from its customers and remits the purchase price net of commission to DriveTime. The Master Dealer Agreement further allows the Company to receive payments for excess reserves based on the performance of the VSCs versus the reserves held by the VSC administrator, once a required claims period for such VSCs has passed. During the three months ended September 30, 2026 and 2025, the Company recognized $125 million and $91 million, respectively, and during the nine months ended September 30, 2026 and 2025, the Company recognized $349 million and $242 million, respectively, of commissions earned on VSCs sold to its customers and administered by DriveTime, net of a reserve for estimated contract cancellations, and payments for excess reserves to which it expects to be entitled, which are included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations. Beginning in 2017, DriveTime also administers the Company's limited warranty provided to all customers. The Company pays a per-vehicle fee to DriveTime to administer the limited warranty included with every purchase. The Company incurred $9 million and $7 million during the three months ended September 30, 2026 and 2025, respectively, and $26 million and $18 million during the nine months ended September 30, 2026 and 2025, respectively, related to the administration of limited warranty. Profit Sharing Agreement In June 2018, the Company entered into an agreement with an unaffiliated third party, pursuant to which the Company would sell certain Road Hazard ("RH") and Pre-Paid Maintenance ("PPM") contracts. Under this agreement, third parties would administer the RH and PPM contracts, including providing customer and administrative services, and pay a profit sharing component to the Company. In 2022, the Company began selling equivalent offerings from DriveTime pursuant to the Master Dealer Agreement discussed above, and all rights and obligations in connection with existing RH and PPM contracts were transferred to DriveTime (the "Transferred Contracts"). In December 2022, the Company entered into a profit sharing agreement with DriveTime with regard to the Transferred Contracts (the "Profit Sharing Agreement"). In March 2026, the Profit Sharing Agreement was amended to include additional vehicle service contracts. The Company recognized $4 million and $2 million in revenue during the three months ended September 30, 2026 and 2025, respectively, and $11 million and $6 million during the nine months ended September 30, 2026 and 2025, respectively, under the Profit Sharing Agreement. Servicing and Administrative Fees DriveTime provides servicing and administrative functions associated with the Company's finance receivables. The Company incurred expenses of $1 million and $2 million during the three months ended September 30, 2026 and 2025, respectively, and $5 million during each of the nine months ended September 30, 2026 and 2025, related to these services. The Company sold no finance receivables to DriveTime or any of its affiliates in each of the nine months ended September 30, 2026 and 2025. During the nine months ended September 30, 2026 and 2025, DriveTime, as servicer, exercised its optional clean-up call on certain 2019, 2020, and 2021 securitization trusts. Optional clean-up calls are customary features of automobile securitization transactions and are typically exercised when a loan pool has amortized down to a pre-determined percentage of its original balance. These clean-up calls resulted in the Company receiving less than $1 million during each of the three and nine months ended September 30, 2026 and 2025, attributable to its retained interests in such trusts at the time of exercise. Aircraft Time Sharing Agreement The Company entered into an agreement to share usage of two aircraft owned and operated by DriveTime on October 22, 2015, and the agreement was subsequently amended in 2017. Pursuant to the agreement, the Company agreed to reimburse DriveTime for actual expenses for each of its flights. The original agreement was for 12 months, with perpetual 12-month automatic renewals. Either the Company or DriveTime can terminate the agreement with 30 days’ prior written notice. The Company reimbursed DriveTime less than $1 million under this agreement during each of the three months ended September 30, 2026 and 2025, and $1 million and less than $1 million during the nine months ended September 30, 2026 and 2025, respectively. Accounts Payable Due to and Accounts Receivable Due from Related Party As of September 30, 2026 and December 31, 2025, $35 million and $21 million, respectively, was due to related parties primarily related to the agreements mentioned above, and is included in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets. As of September 30, 2026 and December 31, 2025, $5 million and less than $1 million, respectively, was due from related parties primarily related to the agreements mentioned above, and is included in other current assets in the accompanying unaudited condensed consolidated balance sheets. Tax Receivable Agreement Liability As further discussed in Note 14 — Income Taxes, as of September 30, 2026 and December 31, 2025, the Company recorded a tax receivable agreement ("TRA") liability of $2.2 billion and $2.3 billion, respectively, of which $1.7 billion in both periods is due to related parties. Refer to Note 14 — Income Taxes for further discussion of the TRA. During the nine months ended September 30, 2026 and 2025, the Company made TRA payments of $37 million and $17 million, respectively, of which $29 million and $13 million, respectively, was paid to related parties. Tax Payments on Behalf of Non-Controlling Members As further discussed in Note 14 — Income Taxes, as a partnership, Carvana Group is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members, including Carvana Co., based on its allocable share held in Carvana Group. Nonetheless, many states require that partnerships make mandatory tax payments on behalf of members who are non-residents of the respective states. Accordingly, if Carvana Group generates taxable income and is required to remit income tax on behalf of its members, it will make payments to the states through composite tax returns and non-resident withholding. These payments are treated as distributions to the affected members because the amounts remitted are a payment of income tax on behalf of the affected members. During each of the three months ended September 30, 2026 and 2025, the Company made mandatory composite and non-resident withholding tax payments on behalf of non-controlling members less than $1 million, of which less than $1 million was paid on behalf of related parties each period. During each of the nine months ended September 30, 2026 and 2025, the Company made mandatory composite and non-resident withholding tax payments on behalf of non-controlling members of $4 million, of which $3 million was paid on behalf of related parties.
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