Carvana Auto Receivables Trust 2025-P3 Annual Report - How They Did This Year

I’m here to help you break down what’s going on with the Carvana Auto Receivables Trust 2025-P3. Think of this as a plain-English guide to help you decide if this investment fits your goals.

1. What is this, exactly?

This trust is a bundle of car loans worth $500 million to $750 million. Carvana issued these loans to borrowers with lower or average credit scores. When you buy these notes (Class A, B, C, or D), you own a piece of the payments those borrowers make. The trust collects these monthly payments, takes out a small fee, and passes the rest to you based on a strict payment order.

2. How did they perform this year?

The trust performed just as expected. It collected payments consistently throughout 2025, and investors received their scheduled interest and principal on the 15th of every month. The trust makes money from the difference between the interest borrowers pay (12% to 18%) and the interest paid to you (5% to 9%).

3. Major wins and challenges

The trust kept its "overcollateralization" at 3% to 5%, which acts as a safety cushion against loan losses. Carvana also implemented a new "Reporting Control Framework" that requires both the Treasury and Legal departments to sign off on all filings. This ensures that all reporting remains consistent with SEC requirements.

4. Financial health and safety

The trust uses a "Reserve Account" to stay safe. This account holds 1% to 2% of the total loan pool in cash. If a payment is missed, the trust uses this money to cover the gap. The risk is also spread out: the pool includes over 20,000 loans. Because no single borrower makes up more than 0.01% of the total, the impact of any single default is minimized.

5. Key risks to watch

The biggest risk is the "Net Cumulative Loss." If more borrowers default than the expected 8% to 12%, the lower-tier notes (Class D and E) could lose value. You also face "prepayment risk." If interest rates fall, borrowers might refinance their loans elsewhere. You would get your money back early, but you would have to reinvest it at lower current rates.

6. Strategy and oversight

The strategy is to hold the loans until they are paid off. To keep things transparent, accounting firms like Grant Thornton and PWC perform annual checks. They verify that the company is collecting payments correctly, calculating interest accurately, and keeping the reserve account full.

7. Future outlook

The trust will continue paying out over the next 36 to 48 months. As the loans age, they typically become more stable and less likely to default. With the current filing controls in place, you can expect a predictable flow of cash for the remainder of the term.

Final Thought for Investors: If you are looking for a steady, predictable income stream and are comfortable with the risks associated with subprime auto loans, this trust offers a clear, well-monitored structure. Before moving forward, ensure that the current yield aligns with your personal risk tolerance and that you are prepared for the possibility of early repayment if interest rates shift.