Carvana’s stock crashed roughly 99% from its peak. Analysts openly questioned whether the company would survive. Short sellers called it a “house of cards.” Now it sits on the Fortune 500 with $20.3 billion in revenue and a turnaround story that’s getting mainstream press coverage.
So what’s actually going on? Is Carvana stable, or is it one bad quarter away from collapse?
This article breaks down Carvana’s near-collapse, its reported recovery, the serious allegations still surrounding its accounting, and what all of it means if you’re a customer, an investor, or just trying to make sense of contradictory headlines.
How Carvana Built a High-Risk Business Model
Carvana was founded in 2012 as an online-only used-car retailer. The pitch was simple: buy a car like you’d buy anything else on the internet, skip the dealership, and get it delivered to your door — or pick it up from a giant glass vending machine.
The company makes money three ways: selling used cars, originating and securitizing auto loans, and selling add-ons like warranties. Each piece depends on the others working smoothly.
During the pandemic, used-car prices spiked. Carvana expanded hard — more inventory, more overhead, more marketing, and a lot more debt. That strategy looked brilliant when prices were rising. It became a serious problem when they weren’t.
When used-car prices normalized and interest rates rose sharply, demand dropped and margins compressed at the same time. The stock, which had risen roughly 31 times from its 2017 IPO to its 2021 peak, then lost nearly all of that value. At one point, Carvana was carrying approximately $8.9 billion in debt while posting large operating losses.
Why Bankruptcy Became a Real Conversation in 2022–2023
The bankruptcy talk wasn’t just media noise. It was grounded in real numbers.
A company with $8.9 billion in debt, falling revenue, and shrinking margins has limited room to maneuver. Carvana’s business model depended on credit markets being willing to buy its auto-loan securitizations. If that pipeline dried up — or if lenders lost confidence — cash flow would have gotten very tight, very fast.
Short sellers and critical analysts argued the model was structurally unprofitable under normal market conditions. Their view: Carvana had only looked good because the pandemic inflated used-car prices and hid the real economics of the business.
On top of the financial pressure, Carvana faced state-level regulatory problems — license suspensions in some markets and repeated complaints about title and registration failures. These issues fed the narrative of a company that had grown faster than its operations could handle.
The 99% stock decline wasn’t just sentiment. Equity markets were pricing in a real possibility the company wouldn’t make it. That’s a meaningful signal, even if it turned out not to be the final outcome.
What the Turnaround Actually Looked Like
Carvana didn’t go bankrupt. Instead, it cut costs aggressively, improved efficiency per vehicle sold, and restructured its debt obligations.
The results were significant. Carvana reported its first full-year profit in 2023 — approximately $810 million. It followed that with over $1 billion in net profit in 2024. By fiscal year 2025, Fortune reported record revenue of $20.3 billion and a Fortune 500 ranking of No. 314, up 169 spots from its 2021 debut.
A useful way to think about it: imagine a household that took on enormous debt during good times, nearly defaulted when income dropped, then cut spending hard, refinanced what they could, and returned to surplus. They’re not bankrupt. But they’re still carrying a heavy load and wouldn’t handle another shock well.
That’s roughly where Carvana sits. The turnaround is real in the sense that the company is generating profit and growing revenue. But Fortune 500 status is a measure of scale, not financial health. A company can be large and still be fragile.
Investors who bought near the bottom saw extraordinary gains — shares climbed hundreds of percent off the lows. But investors who bought at the 2021 peak lost nearly everything before the recovery even started. The volatility cuts both ways.
The Hindenburg Report and What Critics Are Alleging Now
On January 25, 2025, Hindenburg Research published a report titled “Carvana: A Father-Son Accounting Grift For The Ages.” Hindenburg is a well-known short-seller firm with a track record of publishing detailed critical analyses of public companies. Their reports move markets and have led to investigations — though they also have a financial interest in the stocks they target going down.
The core allegations are worth understanding clearly, because they go to whether Carvana’s reported profits are what they appear to be.
Allegation One: Inflated Gross Profit Per Vehicle
Carvana uses a metric called retail gross profit per unit (GPU) — essentially, how much money it makes on each car sold. This number matters a lot to investors because it shows whether the core business is actually getting more efficient.
Hindenburg alleged that Carvana inflated this metric by approximately 34.5% by reclassifying around $390 million of selling costs. Instead of counting those costs against the revenue from each car sale, Carvana reportedly moved them into a separate overhead category called SG&A (selling, general, and administrative expenses).
Think of it like a restaurant calculating “profit per meal.” If you move server wages from “cost of serving meals” to “general overhead,” your per-meal profit number looks better — even if your total costs haven’t changed at all. Hindenburg is alleging Carvana did something similar.
Allegation Two: Undisclosed Related-Party Loan Sales
Hindenburg also alleged that Carvana sold approximately $800 million of auto loans to an undisclosed related party — an entity reportedly affiliated with Ernest Garcia II, the CEO’s father — without properly disclosing this to investors or the SEC.
This matters because related-party transactions can be used to make a business look healthier than it is. If Carvana is offloading loans to a connected entity at favorable terms, the reported financials may not reflect what an arm’s-length sale would look like.
Carvana’s Response
Carvana publicly called Hindenburg’s report “intentionally misleading and inaccurate.” The company has not accepted the characterization of its accounting practices.
Law firm Hagens Berman subsequently announced an investigation into potential securities law violations. That investigation is ongoing, and no legal findings have been made public.
These are allegations, not proven facts. But they raise legitimate questions about the quality of the reported profits driving the turnaround narrative.
The Garcia Family and Governance Concerns
A thread running through most of the criticism is the relationship between Carvana’s CEO, Ernest Garcia III, and his father, Ernest Garcia II, who controls DriveTime — a related auto finance company.
Between 2020 and 2021, at the height of Carvana’s stock boom, the two men reportedly sold around $3.6 billion of Carvana stock combined. When the stock hit its lows in mid-2023, Garcia III reportedly bought back approximately $126 million worth of shares. The very next day, Carvana announced what it described as its best quarter ever. Garcia II later sold an additional $1.4 billion of stock during the recovery.
Critics describe this pattern as highly suspicious — timing that looks, at minimum, opportunistic. Whether it crosses any legal line is a matter for regulators and courts to determine, not financial commentators.
What’s relevant for the “going out of business” question: governance structures that favor insiders over external shareholders can make a distressed situation worse for outside investors if the company ever hits serious trouble again.
What This Means If You’re a Customer or Investor
If you’re thinking about buying a car from Carvana, the practical risk right now is low but not zero. Carvana is operating, processing orders, and not in bankruptcy. If you’re in the middle of a transaction and a company files for Chapter 11, the most common outcome is that operations continue during restructuring — but there can be delays, title complications, and warranty uncertainty.
For investors, the picture is more complicated. The stock has recovered dramatically from its lows, and the company is posting genuine profits. But it still carries significant debt, operates in a cyclical market sensitive to interest rates and consumer credit conditions, and is now facing serious accounting allegations that haven’t been resolved.
Buying Carvana stock today is not the same as buying a stable, de-risked business. It’s a bet on continued execution under conditions that could shift quickly. For more practical business analysis like this, The Business Briefs covers the kind of clear-eyed breakdowns professionals actually need.
So Is Carvana Going Out of Business?
Based on current public information, the honest answer has several parts.
No, Carvana is not currently going out of business. It is not in bankruptcy. It is generating profit and has record revenue. The mainstream business press is treating it as a turnaround story, and that framing is supported by real financial results.
But the 2022–2023 bankruptcy risk was real, not just a media story. The debt load, operating losses, and market conditions at the time created genuine solvency risk. The company avoided that outcome through aggressive restructuring and cost discipline — not because the fears were overblown.
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