Hindenburg Says Carvana’s Subprime Loans Are Déjà Vu of the 2008 Crash

Hindenburg Research, Wall Street’s favorite doom and gloomer is coming out of their cave… this time with their sights set on Carvana, the online car vending machine that defied all odds to claw its way back from near-death in 2022. (Insert your own “Lazarus” joke here.) After watching Carvana’s miraculous stock resurgence (up 284% in 2024), Hindenburg decided it was time to check under the hood. And they don’t like what they found.

If you’re unfamiliar with Hindenburg, they’ve built their reputation on digging up dirt on companies skating on thin ice. They’ve taken down Nikola (a truck company that couldn’t roll downhill), Lordstown Motors (electric cars minus the electricity), and Adani Group (basically a corporate Ponzi scheme with better branding). Now, they’re accusing Carvana of some accounting oopsies that would make SBF blush (from his prison cell).

Hindenburg alleges Carvana has been playing fast and loose with its accounting, pointing to $800 million in loan sales to a suspected related party as a prime example. That’s some “family discount” type of deal if you ask them. Oh, and those subprime auto loans Carvana’s been offloading? Hindenburg likened the company’s practices to the early 2000s mortgage-backed securities playbook. You know, the one that led to a little thing called the Global Financial Crisis.

At the heart of the chaos are the Garcias… Carvana’s founding family. Ernest Garcia II (dad) sold $3.6 billion worth of stock between 2020 and 2021, just as Carvana’s fortunes started to crumble. Hit the fast-forward button to the stock’s second wind in 2024, and Papa Garcia has offloaded another $1.4 billion. Carvana’s CEO Ernie Garcia III (son) insists everything is fine, but the numbers, however, tell a different story. The company carries $4.8 billion in net debt, trades at a valuation premium of 845% compared to peers like CarMax, and has loan delinquency rates higher than Snoop Dogg.

Hindenburg’s report paints a pretty scary picture. Nearly 26% of Carvana’s gross profit comes from selling loans, many of them to subprime borrowers. With Ally Financial, one of their major financing partners, pulling back, Carvana seems to have found a mysterious new buyer for $800 million worth of loans. Hindenburg suspects this “unrelated third party” is actually related to Carvana, raising questions about transparency. Even Carvana’s much-hyped “turnaround” isn’t safe from Hindenburg’s sharp critique. The short-seller notes that the company’s cost-cutting measures have translated into lower-quality cars, with a former reconditioning leader politely calling their standards “adjusted” (translation: downgraded to "barely passable").

Despite these allegations, Carvana’s stock has stubbornly climbed to $205.90 after dipping to $186.86 earlier this week (apparently investors are feeling optimistic… or they’re just tired of used car salesmen). But with Hindenburg Research turning up the heat and putting Carvana’s financials under the microscope, the big question is clear: Are we witnessing the beginning of the next big corporate scandal, or is this just a short seller crying wolf? Because let’s be honest… where there’s smoke, there’s usually fire.

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