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Carvana branches out into subprime auto ABS

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E-commerce auto seller Carvana is branching out into subprime auto ABS for the first time.

Following four prior securitizations of prime auto-loan originations on its Carvana Auto Receivables Trust (CRVNA), the firm will sponsor its first pool of non-prime retail used auto loans underwritten via its online origination platform.

The 19,998 loan contracts in the pool bear a weighted average FICO of 554 with an average APR of 19.2%. That compares to Carvana’s prime pools with average FICOs ranging from 634 to 636 and APRs between 13.47%-13.84%.

The $494.85 million CRVMA 2020-NP1 deal includes a Class A tranche totaling $223.42 million with 56.1% credit enhancement, with preliminary triple-A ratings from Moody’s Investors Service and Kroll Bond Rating Agency.

Carvana’s most recent prime securitization required only 48.85% credit enhancement to meet triple-A standards.

The notes are backed by a pool of loans totaling $348.5 million, with average remaining loan size of $17,428 on accounts carrying average APRs of 19.2%. The loans are seasoned an average of two months with 71-month average original terms. The WA LTV is 101.85%.

All loans are originated by Tempe, Ariz.-based Carvana, which launched as a subsidiary of DriveTime Automotive Group in 2012 before spinning off in 2014. The company went public with a 2017 initial public offering as Carvana Co. (NYSE: CVNA), raising $205.8 million.

The Carvana loans are serviced by Bridgecrest Credit Co., an affiliate of DriveTime.

Moody’s projects cumulative credit losses of 18.75% on the deal, a mid-range loss expectation compared to pools of other auto-loan ABS pools of non-prime collateral, according to the agency. Kroll has a base case loss range of 16%-18% on the deal, versus the 9.25%-11.25% range on Carvana’s most recent prime ABS deal in December.

Wells Fargo is the lead underwriter.

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Auto ABS Subprime lending
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