Grant Thornton seems to take on the worst clients. They've been featured by Hindenburg at three other companies [0][1][2], two of whom switched to them from E&Y [1][2], like Carvana.
> Around 2019, Wells Fargo was considering becoming Carvana’s second financing partner, according to a Senior Manager at Wells Fargo we spoke with:
> “Their underwriting practices were not something that we were particularly comfortable with. [...] In one anecdotal example, when we had someone look at a proof of employment or a pay stub, it did not look to be legitimate. So we had significant concerns about some of those controls. To say you work for a large company, your pay stub shouldn’t look like someone built it in Microsoft Word. It should have a little bit more substance to it and look more official.”
With standards this low, they should hit up Block/Square [3], it's a match made in heaven.
I have to wonder if the reason Ally has been buying fewer loans is purely market-based (the risk-reward for subprime is worse in a high interest rate environment, unhappy with rising delinquency rates, etc.) or if Carvana's standards have taken a dive.
Too late to edit, but I scrolled right past the "Morningstar Pre-Sale Report, September 2024 [Pg. 14]" table. They've been primarily lending to deep subprime borrowers since at least 2021.
Considering other subprime lenders have reduced extensions while Carvana has doubled them, I'm guessing their lending standards have cratered even by subprime standards and Ally isn't happy.
> Around 2019, Wells Fargo was considering becoming Carvana’s second financing partner, according to a Senior Manager at Wells Fargo we spoke with:
> “Their underwriting practices were not something that we were particularly comfortable with. [...] In one anecdotal example, when we had someone look at a proof of employment or a pay stub, it did not look to be legitimate. So we had significant concerns about some of those controls. To say you work for a large company, your pay stub shouldn’t look like someone built it in Microsoft Word. It should have a little bit more substance to it and look more official.”
With standards this low, they should hit up Block/Square [3], it's a match made in heaven.
I have to wonder if the reason Ally has been buying fewer loans is purely market-based (the risk-reward for subprime is worse in a high interest rate environment, unhappy with rising delinquency rates, etc.) or if Carvana's standards have taken a dive.
[0]: https://hindenburgresearch.com/eros-international-on-the-gro...
[1]: https://hindenburgresearch.com/crius-energy-trust-an-unsusta...
[2]: https://hindenburgresearch.com/lpp/
[3]: https://hindenburgresearch.com/block/