Carvana is a revolutionary way to buy a used car. Their entire inventory and the financing application are online, so you never set foot in a dealership or have to haggle for a reasonable price.
Carvana is convenient for those who hate the car buying experience.
DriveTime founded its wholly-owned subsidiary, Carvana, in 2012. In 2014, Carvana spun off on their own, but their auto loans are still serviced by the auto lender Bridgecrest, which is an affiliate of DriveTime.
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How Does Carvana Work?
When you go to Carvana’s website, you can pick out the car you want from their inventory. They have more than 10,000 cars and will ship to the 48 contiguous United States.
Their vehicles are all used with relatively low miles. They offer a 150-point inspection and a free CarFax report with every car they sell.
The most useful thing about Carvana is that their prices are non-negotiable, and they seem to be similar to the values that Kelley Blue Book suggests. Carvana will also accept a trade-in in some cases.
You have to make at least $10,000 per year to qualify, but there is no minimum credit score requirement. This process makes Carvana great for people of all credit profiles, especially those who have a hard time getting approved with traditional auto loan lenders.
There is no hard credit inquiry to get pre-qualified, and you get a pre-qualification decision within minutes. You also don’t have to worry about any application fees or prepayment penalties.
The Pros and Cons of Carvana Auto Loans
Carvana has some pros and cons you should seriously consider before deciding to finance and purchase your used car through their network.
- Convenient: Carvana is convenient. Your entire transaction takes place online, so you never have to get out of the house, drive around town to different dealerships, or haggle with the salesperson about the price.
- No-haggle pricing: Carvana prices their vehicles competitively so you don’t have to haggle. Their prices are in line with Kelley Blue Book value estimates, so you know you’re getting a good deal on a used car.
- 150-point inspections: All Carvana cars go through a 150-point inspection, so you know the issues have been fixed before purchase. That’s more than you can say for buying a used car from an individual.
- Pre-qualification in minutes: You can get pre-qualified online in minutes and begin shopping right away.
- No hard credit check until purchase: Your pre-qualification does not require a hard credit check until you find a vehicle and are ready to purchase.
- No application fee: There is no application fee for Carvana qualification.
- No prepayment fee: If you want to pay off your car early, you can always pay a little extra or pay a large lump sum, and you won’t be penalized with a prepayment fee.
- No minimum credit score: If you have bad credit, you can still get qualified through Carvana because they make it easier than traditional lenders.
- Seven-day returns: Carvana has a test-drive period of seven days. If you don’t like your car in the first seven days, you can return it and get a refund on your down payment.
- Trade-ins available: Carvana accepts trade-ins, even if you don’t purchase a car from them.
- Delivery: Carvana delivers for free in a lot of cities. Some locations require a fee for delivery, but you can also pick up your car from one of their vending machines. If you have to fly to a pickup city, they will subsidize a portion of your airfare and pick you up at the airport.
- You are buying sight unseen: The entire process is so convenient that you may forget you’re buying these cars sight unseen. Carvana provides pictures and details online, plus a seven-day test drive period, but you never quite know if you’ll like a car until you see it in person and experience the drive.
- They only deliver to 48 states: Carvana currently only delivers to the 48 contiguous United States. So, if you live in Alaska or Hawaii, you have to fly to a pickup city for a Carvana car.
- They only finance Carvana cars: Carvana only provides financing for Carvana cars, which makes sense, but it’s something to keep in mind.
- They only have used cars: Carvana only sells used cars, so if you would like a new car, Carvana is not an option.
- You must make $10,000 per year: Carvana requires you to make at least $10,000 per year to qualify for financing. This is a bummer for people who make less than that, but it also protects those who probably can’t afford to buy a car on their limited income anyway.
- The delivery fee is non-refundable: If you decide to return the car, your delivery fee is non-refundable.
How Much Can You Borrow?
How much Carvana is willing to loan you for your purchase will depend entirely on your credit score and income.
The maximum amount they will lend is not disclosed, but they only sell cars from their inventory, so the maximum amount you can borrow will depend on their current stock at the time you’re looking to buy.
What Is the APR with Carvana Auto Loans?
Your interest rate will vary depending on your credit score. With an excellent credit score, you may find rates as low as 4.43% through Carvana.
But with bad scores, you may find rates around 17.42%.
What Fees Do Carvana Auto Loans Charge?
Carvana charges a delivery fee that varies depending on your delivery location.
They also charge fees for late monthly payments. However, they don’t charge an application fee or a prepayment fee.
Is Carvana Auto Loan the Best Choice For You?
Carvana is an excellent choice for people who have bad credit and can’t get financed through a traditional lender.
The entire experience is convenient and easy. If you find a car in the Carvana inventory that you would like and you don’t want to haggle with the dealership, Carvana would be the right choice for you.