Carvana and the Subprime Squeeze
not financial advice
Hindenburg’s Carvana thesis feels more relevant than ever today, Oct 22, 2025. Signs of subprime stress keep piling up.
Hindenburg Research claims Carvana’s turnaround is illusory, alleging $800 million of loan sales to a likely undisclosed related party linked to Cerberus, dependence on Ally financing, and lax underwriting skewed to subprime borrowers. It says Carvana inflates profitability via DriveTime transactions, cost shifting, and strategic timing of loan sales, while insiders cash out billions in stock. The report highlights rising delinquencies, frequent borrower extensions, deep subprime exposure in ABS, market headwinds, heavy debt, and junk ratings, plus a reported SEC probe. It argues valuation is extreme versus peers and solvency risks remain. Hindenburg discloses a short position.
PrimaLend filed for Chapter 11 on Oct 22, 2025. It is a Texas lender that finances “buy-here, pay-here” car lots, where customers with thin or low credit buy and pay at the same dealership. Court papers point to missed interest payments and a plan to sell the business while operating in bankruptcy. That points to real pressure at the most fragile end of used-auto credit.
Tricolor entered Chapter 7 liquidation in Sep 2025. It sold used cars and made the loans in-house for underserved borrowers. Going straight to liquidation rattled investors who fund riskier auto bonds, also called asset-backed securities.
Auto-loan delinquencies remain elevated in 2025, with the worst strain among low-FICO borrowers.
Put it together and funding becomes more selective, required yields rise, and cash from loan sales gets squeezed. That is exactly the risk Hindenburg highlighted, and it is flashing now.
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