Carvana Used-Car Financing: If you’re in the market for a used car, want to check your estimated rate before submitting a formal loan application, and are comfortable with an online car-buying experience, a Carvana auto loan might be a good fit for you. But Carvana only finances cars it sells, so you’ll have to select a vehicle from the inventory it has on hand.
Carvana is an online used-car dealer that also provides direct financing for the cars it sells. Shoppers can browse the online inventory and complete the purchase from their couch. Your car will be delivered to you, or you can pick it up in some cities.
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.
Carvana is a Good Fit for Those Who:
Dislike negotiating for a used car.
Want to shop rates with only a soft credit pull.
Have bad credit; no minimum credit score is required to apply.
What You Need to Know About Carvana Auto Loans
If you’re considering an auto loan from Carvana, which offers its customers the ability to pick up their vehicle from one of its car-vending machines, here are a few key features to consider before deciding.
Only one option
Carvana offers loans only from its own inventory of used cars. If you want an auto loan that offers more flexibility, consider working with a bank or credit union, where you’ll likely have more options, including new car loans, private-party loans and used-car loans that aren’t restricted to a single dealership.
Carvana offers a prequalification process that won’t affect your credit scores and can be completed online in as little as two minutes. After you fill out an application, you’ll see the estimated financing terms, including monthly payment, minimum down payment and annual percentage rate, that you might qualify for within minutes.
With many lenders, prequalification is often good for only 30 days. But Carvana’s prequalification offers are good for 45 days, giving you ample time to find a car that meets your needs.
All credit types welcome
Carvana considers working with consumers regardless of their credit history — although there are age and income minimums. Because Carvana doesn’t require borrowers to have minimum credit scores, you might qualify for a Carvana loan even if you have low credit scores.
Types of Auto Loans Available
Carvana offers auto loans for all credit types. Low income, low credit, no credit borrowers are all encouraged to apply and there’s no reason not to since pre-qualification is only a soft credit check.
As with all auto lenders, Carvana does use the tier process to determine what kind of rate you’ll receive should you decide to finance through them. To see what kind of tier you’ll be placed in, you’ll need to know what your auto industry credit score is first, which ranges from 250 to 900.
The tier ranges are broken down as follows:
1. Tier 5/ F Tier: (250 to 520)
2. Tier 4/ D Tier: (520 to 580)
3. Tier 3/ C Tier: (581 to 659)
4. Tier 2/ B Tier: (660 to 699)
5. Tier 1/ A Tier: (700 to 739)
6. Tier 0/ A+ Tier: (740 to 877)
The goal for every borrower is to be in the lowest tier possible. Borrowers in tier one and zero often don’t even have to make a down payment because they are not considered as much of a financial risk. Borrowers in higher tiers often have to make a down payment and also pay higher interest rates and monthly payments.
The rate borrowers receive are all contingent upon income and credit score. Once you apply for pre-qualification, any rate you’re given is good for 45 days provided the information you gave was correct This is 15 days longer than most lenders, whose offers expire after 30 days. This gives you more time to be as selective as you want when new car shopping.
Carvana Application Process
The pre-qualification process is done entirely online and doesn’t take long to complete. You’ll enter your full legal name, income, address, and date of birth. From there you’ll give them your email and phone number and agree to a few conditions. The conditions you’ll have to agree to include:
Continuing with e-sign as a basis for consent (meaning the entire process can occur online from there on out).
Agreeing to let Carvana call and text you about information related to your account (no worries, you can opt out of this).
The best thing about the pre-qualification process is that there is no hit to your credit score. So if you’re merely curious about the company, you can go fairly deep into the process before there are any hard credit checks, which hurt your credit score just a little bit.
After you fill out the application, you’ll see personalized financing terms under the picture of each vehicle they have listed. Monthly payment, minimum down payment, and APR will show up under each and every vehicle.
Again, you’ll be able to see all of these loan terms without there being any hit to your credit score, and all terms are good for 45 days. They could, however, stay the same after 45 days provided your personal information hasn’t changed.
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 leave the house or drive around to different dealerships.
No-haggle pricing: Carvana prices their vehicles competitively so you don’t have to haggle. Their prices are in line with Kelley BlueBook value estimates, so you know you’re getting a good deal on a used car.
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’s no application fee for Carvana qualification.
Pre-qualification in minutes: You can get pre-qualified online in minutes and begin shopping right away.
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 won’t be penalized with a prepayment fee.
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.
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 delivery fee, 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.
Things to Note While Comparing
If you’re shopping around, here are a few more things to be aware of when comparing a loan from Carvana to those from other lenders.
There’s no prepayment penalty for paying more than the minimum due each month or paying off your loan balance early. That can help you save on interest charges.
To finance a vehicle through Carvana you must be at least 18 years old, earn a minimum of $10,000 per year and have no active bankruptcies.
It’s easy to see personalized financing estimates. Once you’re prequalified, your financing terms will appear under the picture of every vehicle you view on Carvana’s website. But keep in mind that your estimated terms will differ based on the price of the car you choose.
Carvana offers repayment terms between 36 and 72 months, giving you the flexibility to find a loan term that’s right for your budget.
First, do I qualify?
Eligibility standards are straightforward, so you shouldn’t have much trouble determining if you meet prequalification standards. Here’s the basic eligibility criteria:
Annual income of at least $10,000
No active bankruptcies
At least 18 years old
What makes Carvana unique?
Carvana is trying to revolutionize car shopping. By providing a way to shop for a vehicle from the comfort of your home, it frees up time and effort that would otherwise be spent going from dealership to dealership weeding through sales talk.
What are the benefits of Carvana used car financing?
Most credit types welcome.While you still have to meet its minimum eligibility criteria, you can still get approved if you’re building or rebuilding your credit.
45-day preapproval.You have up to 45 days to choose the car you want from Carvana’s large selection — most lenders that only offer 30 days, if they have preapproval at all.
Seven-day guarantee.Test drive your new car for up to seven calendar days with Carvana’s trial period.
What to watch out for
Financing only for Carvana. While you can use a loan from a different lender to finance your purchase at Carvana, you won’t be able to use Carvana financing at a different dealership.
Free delivery limited by location.Markets are mostly limited to the East coast, South and Midwest. Customers outside of the free delivery range can choose to fly Carvana Used-Car Financing will cover $200 of your airfare, and you can drive home from there. Or you can have it delivered at an additional cost.
Imperfections may not be immediately visible.Carvana lists the top imperfections for each vehicle in its inventory and you get a 360 look at each car, but there are likely some dings that will go unlisted or unnoticed online. Thoroughly inspecting the car upon its arrival can potentially save you heartache down the line.
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.
Carvana Used-Car Financing does everything it can possibly do to make you a happy buyer. With a 7-day money-back guarantee and a 100-day or 4,189-mile warranty, it’s obvious they want your business. The bottom line is that Carvana Used-Car Financing has a lot going for it and should be on your list for both purchasing and financing your next new car.
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