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Carvana
Case Study

Intro.

History of Carvana

Carvana is a company established in 2012 by CEO Ernest Garcia III, co-founder Ryan Keeton, and co-founder Ben Huston in 2012. Carvana’s core idea was to create a platform in which people could buy and sell used cars conveniently. The company significantly expanded over 12 years, especially in retail units sold, total revenue, gross profit, etc. Carvana is a company that sells cars, giving the best experience to their customers with quick transactions and having over 53,000+ cars on their website. The company has a bright future, as it dominates the dealer brand market share in the U.S., have an average 4.7 customer reviews, sell 2.2 million retail units, and etc.

Business Model of Carvana

Carvana uses vertical integration to garner competitive advantage. Vertical integration refers to monopolizing the supply chain, and buying out all the companies that constitute the supply chain of the company’s product. Through vertical integration, Carvana employs large-scale reconditioning, internal logistics network, retail marketplace, fully-transactable e-commerce experience, creating their national consumer focused brand and leading customer ratings. Moreover, Carvana’s simple transaction processing stands out. Transactions can happen instantaneously through online search. For instance, purchase can be completed after vehicle selection within 10 minutes. Then, with the utilization of Carvana Vending Machine, the car will be delivered to one’s house after the transaction. This experience satisfies users, and makes Carvana stand out through their convenience.

Financial Performance

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Between 2024 and 2025, Carvana grew in retail, unit economics, and became the most profitable automobile retailer. For retail units, Carvana grew 46% year-over-year and was the fastest growing automobile retailer. Moreover, Carvana became the most profitable automobile retailer. Its net income margin expanded to 8.8% from 1.6%, and Adjusted EBITDA margin, acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization, grew to 11.5% from 7.7% (Amortization is a gradual expense recognition of the cost of an intangible asset such as buildings or equipments). To add on, Carvana improved in their unit economics. From 2024 to 2025, there was a 14% increase in sales, 30% decrease in inventory, and 45% decrease in advertising cost. Drivers behind this change include application of AI, growth of wholesale business, and increased advertising efficiency. These reasons suggest that Carvana is financially an outstanding performing company.

Balance Sheet Analysis (2024-2025)

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In Carvana’s balance sheet during 2024 and 2025, retail vehicle sales went up 37%, wholesale increased 31%, gross profit (revenue minus cost of goods) sold went up by 64%, operating income (profit after subtracting all operating expenses such as R%D, marketing, salaries, rent, etc) went up 194%, and net income (the actual money that the company is receiving after subtracting interest and tax) increased 661%.

Improvements in Customer Experience

Carvana has made many improvements in customer experience. Carvana had faster fulfillment delivering cars and more in the inventory. Moreover, they had simpler experiences, as it took less time for transactions and sales. Last but not least, there were more efficient operations, mitigating cost per unit. 

Future Outlook and Recommendation

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Carvana’s future remains on a positive note, as Carvana’s offers convenience to its customers. Carvana’s growth is unparalleled compared to its competitors, as Carvana is increasing in revenue, sales, and gross profit day-by-day. For instance, Carvana is expanding their delivery to the Denver area and is distributing themselves widely across the country to improve their company. Moreover, as mentioned earlier, Carvana is actively following trends, leveraging AI to stimulate growth. Carvana is using seamless digital auction across the US to allow wholesale buyers to make their system more convenient and efficient. Also, Carvana is bringing their service of inspection and reconditioning to Nashville. Daily improvements and expansion of the company contributed to the growth of the company. These continuous efforts allowed Carvana to present at the J.P Morgan Global Technology, media, and communications conference. Taken together, these efforts point to a bright future for Carvana.

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