Carvana rode cheap debt to $2.2B in acquisitions — then the music stopped

Carvana grew rapidly from 2013 to 2021 by selling used cars online through its signature car vending machines. The model was capital-intensive: Carvana bought cars, reconditioned them, and held inventory until sold. During the low-interest-rate era, the company fueled growth with cheap debt, culminating in the $2.2 billion acquisition of ADESA, the nation's second-largest wholesale auto auction chain, in 2022.

When interest rates rose sharply in 2022, Carvana's business model cracked. The company had borrowed aggressively to buy inventory and expand, but rising borrowing costs and falling used-car prices created a cash crunch. The stock fell 90% from its 2021 peak. In May 2022, Carvana laid off 12% of its workforce, and by early 2024 it had cut more than 4,000 jobs. The company spent 18 months restructuring its debt to avoid bankruptcy.

Carvana survived by cutting $1.1 billion in annualized costs, renegotiating debt terms, and developing proprietary software to improve efficiency. The restructuring was painful but ultimately kept the company out of bankruptcy. However, the stock remained volatile, and a 2025 Hindenburg Research report accused Carvana of accounting manipulation, alleging that transactions with DriveTime (owned by founder Ernest Garcia II) inflated revenue and profitability.