Carvana Auto Receivables Trust 2022-P3 Annual Report - How They Did This Year

I’m writing this guide to help you understand how the Carvana Auto Receivables Trust 2022-P3 performed this year.

First, remember that this is not a traditional company. It is a "securitization trust"—a financial bucket holding a specific group of car loans from Carvana. When you invest here, you aren't buying Carvana stock. You are buying into the monthly payments made by the people who took out these specific loans.

1. What does this trust do?

The trust acts as a middleman. It holds a pool of car loans worth about $500 million. As borrowers make monthly payments, that money flows to investors through a set payment order. The trust is simple: no single borrower accounts for more than 0.01% of the pool, and there are no complex side-bets to complicate cash flow. The pool includes prime and non-prime loans with an average credit score of 665, ensuring a mix of risk.

2. Financial performance

Your investment remains stable. The trust paid all principal and interest to Class A, B, C, and D noteholders on time, totaling about $85 million. Bridgecrest Credit Company, a Carvana subsidiary, handles the collection of payments. The portfolio’s loss rate remains within the expected 3.5% to 4.5% range.

3. Operational updates

The cash flow from these loans is healthy, with a monthly prepayment rate of 1.2%. The sponsor has implemented a new, centralized system for all filings. This gives the Trustee and the SEC a single access point for reports, which reduces the chance of future errors. Independent auditors verified these internal controls to ensure data accuracy.

4. Financial health and oversight

The trust is operating as intended. Independent accounting firms, including Deloitte & Touche LLP, verified reports from the servicer and trustee. They found no issues with how the loans are managed or how money is tracked. The trust keeps a $5 million reserve account to cover any temporary gaps in monthly collections.

5. Key risks

The main risk is simple: if car buyers stop making payments, the trust has less money to pay you. Currently, about 4.2% of the loans are at least 30 days past due. Your return depends on the borrowers' ability to pay, which is sensitive to factors like rising interest rates and the value of used cars. If car values drop faster than the loan balance, the loss from a default increases.

6. Future outlook

The sponsor is prioritizing quality control by adding new oversight to make the back-office side of your investment more reliable. As the trust pays down, the "credit enhancement"—the cushion protecting senior investors—effectively grows, providing more safety as the total balance shrinks.

Decision-making tip: When reviewing this investment, look closely at the "credit enhancement" levels in the latest monthly report. As the total pool of loans gets smaller, that cushion usually becomes a larger percentage of what’s left, which is a key indicator of your safety margin.