Good for: used-car shoppers wanting a simple online shopping and financing experience
Carvana is an online used-car dealer that also provides direct financing for the cars it sells. Shoppers can browse the online inventory and complete the purchase from their couch. Your car will be delivered to you, or you can pick it up in some cities.
Carvana is a good fit for those who:
- Dislike negotiating for a used car.
- Want to shop rates with only a soft credit pull.
- Have bad credit; no minimum credit score is required to apply.
Carvana at a glance
| APR* | 3.90% - 27.90% |
| Minimum requirements | Credit score: None Income: $10,000/year |
| Soft credit check to see financing terms? | Yes |
| Availability | Cars delivered in 48 states to date; free delivery in many urban areas |
| Late fees? | Yes |
Carvana review details
Carvana has pioneered a unique retail model that could revolutionize the way used cars are sold. You can pick a car from its inventory of more than 10,000 cars, select financing terms and fill out the paperwork all online. The company sells used vehicles, mostly with low mileage, that are given a 150-point inspection and come with a free CarFax vehicle history report. Carvana prices are non-negotiable, but seem in line with Kelley Blue Book prices for certified pre-owned cars in very good condition. Additionally, Carvana accepts some trade-ins in local markets.
The company “extends credit to customers with a broad range of credit profiles,” says Ryan Keeton, Carvana co-founder and chief brand officer. This includes car buyers with very poor credit who may have trouble getting loans from traditional dealerships and lenders. Carvana has no minimum credit score; however, you must make at least $10,000 annually and not have any current bankruptcies.
Car shoppers can get pre-qualified financing offers with a soft credit inquiry, which won’t lower their credit score, making it good for rate shoppers. Though most customers who finance a purchase use Carvana financing, you can also pay with cash or financing from an outside lender.
Car Loan Rates
Carvana offers interest rates as low as 3.90% for buyers with excellent credit. State regulations vary but the highest interest rate the online seller charges is 27.90%.
Using Carvana’s “build my deal” calculator shows sample APRs for user-provided credit scores. To estimate loan rates, NerdWallet ran the numbers on a Carvana vehicle for a buyer in California, using loan terms of 36 months and a down payment of about 10% of the car’s price. Income was not provided in the calculations, but taxes and fees were included for an out-the-door monthly payment.
Car: 2017 Mazda3 Sport Sedan 4D (35,757 miles)
Price: $15,000
Down payment: $1,400
| Credit score | APR | Monthly payment |
|---|---|---|
| Excellent (780) | 4.43% | $463 |
| Good (680) | 8.25% | $490 |
| Average (630) | 12.28% | $520 |
| Below average (588) | 17.42% | $559 |
| Credit score | Average APR, new car | Average APR, used car |
|---|---|---|
| Source: Experian Information Solutions | ||
| Superprime: 781-850 | 3.68% | 4.34% |
| Prime: 661-780 | 4.56% | 5.97% |
| Nonprime: 601-660 | 7.52% | 10.34% |
| Subprime: 501-600 | 11.89% | 16.14% |
| Deep subprime: 300-500 | 14.41% | 19.98% |
Bad credit
Carvana’s deal-builder tool doesn’t provide sample rates for credit scores below 588, but the rate comparison tool shows average rates by state. For example, for someone in California with a credit score of 550, buying a $20,000 car and making an 11% down payment, Carvana’s estimated rate is 19.28%, compared with the state average of 21.34%, according to Carvana’s analysis of Experian data.
Carefully explore your car loan options if you have bad credit, and consider buying an inexpensive used car. To get the best deal on financing, check rates from multiple auto lenders and attempt to refinance your car loan after your credit improves in six to 12 months. Or, if your credit score will get you double-digit APRs, consider saving to buy a car entirely with cash.
» MORE: Find a car loan for good, fair or bad credit
Applying to Carvana
- No hard credit inquiry required for pre-qualification.
- Decision for pre-qualification within minutes; more information and hard pull required for final approval.
- Pre-qualified financing terms valid for 45 days.
- No application fee or prepayment penalty; may charge late fees.
- Carvana does not allow co-buyers.
Restrictions
- Financing only available for Carvana vehicles.
- Applicant must be at least 18 years old.
- No current bankruptcies.
- Minimum income: $10,000/year.
- Maximum loan term: 72 months. (NerdWallet doesn’t recommend loans longer than 36 months for used cars and 60 months for new cars.)
- Cars delivered in 48 states to date; Carvana will deliver to Alaska and Hawaii, though delivery fees will likely be prohibitively expensive.
Carvana History and Background
Carvana was founded in 2012 as a wholly owned subsidiary of DriveTime Automotive Group, a nationwide used-car retailer and finance company, and was spun off in 2014. With Carvana financing, loans are actually serviced by subprime auto lender Bridgecrest, an affiliate of DriveTime.
DriveTime and its finance arm, DT Acceptance Corporation, are the country’s biggest buy-here-pay-here dealer, according to the Consumer Financial Protection Bureau, which fined the company $8 million in 2014 as part of a settlement over its debt-collection practices and other issues.
More from Carvana
Delivery: Carvana delivers its vehicles for free in a growing list of cities, or for a fee, which depends on your location. You can also pick up your car from a Carvana “vending machine.” If you fly to a pickup city, Carvana will subsidize up to $200 of your airfare, and pick you up from the airport.
Return policy: All vehicles sold by Carvana come with a seven-day “test own” period. During that time customers can return their car, receive a refund for their down payment and unwind their loan before the first payment. Delivery fees are nonrefundable, and check the fine print, as you may be responsible for excess mileage fees.
Trade-ins: Carvana accepts trade-ins (even if you don’t purchase one of their vehicles) and will give you a price for your car if you provide the vehicle identification number and a brief description of your vehicle. In free delivery areas, Carvana does the final trade-in inspection when your purchased car is delivered.
Warranties and other products: All Carvana vehicles come with a 100-day (4,189 mile) limited warranty. For some cars, buyers may also be able to purchase CarvanaCare, an extended warranty. Carvana also offers gap insurance in some states.
Shopping for an auto loan
- Fees and penalties: Most lenders don’t charge an application fee to apply for a purchase or refinance loan. Once you receive the loan, late payment fees will vary by lender.
- Rate shopping: Make all applications within a short time to minimize the impact on your credit score. Credit bureaus typically group multiple car-loan requests and treat them as a single inquiry if done within a short window, generally 14, 30 or 45 days. But it’s also smart to check your report afterward to confirm this is the case.
- Run the numbers: Just because you can qualify for a loan doesn’t mean you have to take it if it stretches your budget. Use our auto loan calculator to see how offers compare and what best fits in your car budget. When refinancing, NerdWallet doesn’t recommend extending your loan term since you’ll end up paying more in interest and could wind up owing more than the car is worth.
Many lenders and loan marketplaces share your information with other lenders and partners to get you the best deal. This means you could get emails and phone calls from lenders and possibly even car dealers. Be sure to read the privacy information on a lender’s website.
To avoid unwanted calls and emails, consider creating a new email account and get a Google Voice phone number that you can check separately. Both options are free and can be used for other shopping needs.
- Vehicle information, including the year, make, model and current mileage of the car; the vehicle identification number; an accurate description of all the vehicle’s trim level, features and options; proof of vehicle registration and insurance; and a copy of your driver’s license.
- Personal and financial information, including proof of income, employment information, banking and credit history, Social Security number and proof of residence.
When refinancing a car loan or trading in a car with a loan on it, you’ll also need your current loan information, including the name of the lending institution and account number of your current car loan; and your remaining loan term and balance.
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METHODOLOGY
To review Carvana, NerdWallet collected more than 30 data points from the lender, interviewed company executives, completed the online application process with sample data and compared the lender with others that seek the same customer or offer a similar product.
