Benefits of Carvana's Differentiated Business Model

Benefits of Carvana's Differentiated Business Model

• 3. OUR PURPOSE-BUILT, E-COMMERCE MODEL IS HIGHLY DIFFERENTIATED FROM THE TRADITIONAL BRICK-AND-MORTAR MODEL -National vehicle acquisition strategy -Selection optimized for single large scale inventory -Seamless online transaction with home pickup option for consumersourced vehicles -Local vehicle acquisition strategy -Selection optimized for many individual small scale dealership lots -In-person negotiation for customer-sourced vehicles -Large scale inspection and reconditioning centers with manufacturing processes backed by proprietary software -in-sourcing of most key reconditioning functions -Small scale reconditioning shops, limiting fixed cost leverage, labor efficiency, or volume discount opportunities -Some functions outsourced to third-party providers -National first-party fulfillment network optimized by proprietary selfdeveloped technology -Purpose-built home delivery service in more than 300 markets -Outsourced to regional trucking companies of variable efficiency, quality, and timeliness -National advertising -Large scale brand building drives long term gains in awareness -Low friction to visit Carvana.com website from desktop or mobile -Local advertising -Small scale leads to reliance on third-party listings sites to generate leads -Higher friction to visit a physical lot -In-house lending platform provides automated terms, proprietary credit scoring and centralized underwriting for all customers -Competitive cost of funds due to large scale platform with multiple monetization strategies -Financing outsourced to third parties, leading to higher costs and outsourced profit margin -Third-party lenders face higher costs, imperfect information about the customer and vehicle, and risk of adverse selection -Higher upfront technology and infrastructure investment, but lower costs at scale -Small scale, site level hierarchy including high cost F&I and sales labor -Outsourced technology turns fixed costs into variable costs

• 4. LEADING TO A MORE CUSTOMER-CENTRIC OFFERING -National vehicle acquisition strategy -Selection optimized for single large scale inventory -Seamless online transaction with home pickup option for consumersourced vehicles -Best possible selection due to centralized, large, and diverse inventory pools connected through first-party logistics network -Access to a national market allows Carvana to adjust pricing based on broader market trends rather than local supply and demand fluctuations -Large scale inspection and reconditioning centers with manufacturing processes backed by proprietary software -In-sourcing of most key reconditioning functions -Universal standards result in consistently high quality vehicles -150-point inspection provides transparency and peace of mind -Stand behind quality with 7-day return policy -National first-party fulfillment network optimized by proprietary selfdeveloped technology -Purpose-built home delivery service in more than 300 markets -Convenient, fast and reliable home delivery -Expands available selection through ability to move cars quickly and cost effectively nationwide -National advertising -Large scale brand building drives long term gains in awareness -Low friction to visit Carvana.com website from desktop or mobile -A self-guided, intuitive and easy-to-navigate website design ensures that users can effortlessly browse, buy, or sell vehicles from any device -Uniform experience in all geographic locations -In-house lending platform provides automated terms, proprietary credit scoring and centralized underwriting for all customers -Competitive cost of funds due to large scale platform with multiple monetization strategies -Self-guided, convenient process gives customers ability to shop based on budget, down payment, and monthly payment -Nearly instantaneous financing terms on every vehicle in inventory increases transparency and control -Higher upfront technology and infrastructure investment, but lower costs at scale -Savings can be passed on to the customer through lower prices -Technology investment creates new tools to enhance customer experience

• 5. AND BETTER UNIT ECONOMICS, DRIVEN BY OUR NATIONAL INVENTORY, VERTICAL INTEGRATION, AND SCALE UNIT ECONOMICS BENEFITS -National vehicle acquisition strategy -Selection optimized for single large scale inventory -Seamless online transaction with home pickup option for consumersourced vehicles -Inventory model benefits from regional price discrepancies and broad demand for long-tail of used vehicles -Customer-sourcing allows better margin on retail cars acquired from consumers vs. other channels and enables wholesale gross profit -Large scale inspection and reconditioning centers with manufacturing processes backed by proprietary software -In-sourcing of most key reconditioning functions -Scale allows higher capacity utilization, discounts in parts procurement, and lower per unit overhead costs -Vertical integration lowers costs, internalizes third-party profit margins, reduces reconditioning timelines -National first-party fulfillment network optimized by proprietary selfdeveloped technology -Purpose-built home delivery service in more than 300 markets -National logistics network makes inventory available to customers nationwide and enables additional revenue streams -Vertical integration lowers costs, internalizes third-party profit margins, and reduces transport timelines -National advertising -Large scale brand building drives long term gains in awareness -Low friction to visit Carvana.com website from desktop or mobile -Scaled national advertising leads to lower costs than local advertising -Model benefits from secular trend towards e-commerce over time -In-house lending platform provides automated terms, proprietary credit scoring and centralized underwriting for all customers -Competitive cost of funds due to large scale platform with multiple monetization strategies -Vertical integration lowers costs, internalizes third-party profit margins, improves quality of customer and vehicle information, eliminates adverse selection, and allows for optimization of terms across entire inventory -Scale improves funding efficiency -Higher upfront technology and infrastructure investment, but lower costs at scale -Customer self service and AI eliminates high cost functions and manual tasks -Centralization of support functions allows for higher capacity utilization

• 6. ALL BACKED BY PROPRIETARY CUSTOM-BUILT TECHNOLOGY -National vehicle acquisition strategy -Selection optimized for single large scale inventory -Seamless online transaction with home pickup option for consumersourced vehicles -AI purchasing algorithm informed by realized and expressed consumer demand providing near instantaneous offers -Customers can appraise, schedule pick-up, and sell car in minutes on their mobile device -Large scale inspection and reconditioning centers with manufacturing processes backed by proprietary software -In-sourcing of most key reconditioning functions -CARLI system automates integration of systemized standards for process flow, reconditioning standards, and parts procurement -Patented imaging technology provides interactive interior and exterior virtual tour of vehicle -National first-party fulfillment network optimized by proprietary selfdeveloped technology -Purpose-built home delivery service in more than 300 markets -Centralized scheduler optimizes network, hauler and labor utilization -Systems that standardize vehicle receiving, storing, staging and loading at all network locations -National advertising -Large scale brand building drives long term gains in awareness -Low friction to visit Carvana.com website from desktop or mobile -Robust testing of marketing spend over the last 10+ years -Products that nurture customers over time -AI to reduce transaction friction -In-house lending platform provides automated terms, proprietary credit scoring and centralized underwriting for all customers -Competitive cost of funds due to large scale platform with multiple monetization strategies -Scorecard trained on data from 10+ years and over $30B of loan originations -Digital financing interface provides terms and ability to sort by budget in a fraction of a second -AI automates key underwriting tasks -Higher upfront technology and infrastructure investment, but lower costs at scale -Integrated systems for customer service, title and registration, digital communication, and other functions to create a streamlined experience -High volume of data and technology focus enable AI leadership