Is Carvana (CVNA) Halal to invest in?

October 25, 2021

Mohamed Ghareeb

Table of Contents

How much of Carvana’s revenue comes from haram?

Carvana is a leading e-commerce platform for buying and selling used vehicles.

The company earns its revenue from the following segments:

Used Vehicle:

Includes revenue generated from selling used vehicles online through Carvana’s website.

Wholesale Vehicle:

Includes revenue generated from selling vehicles to wholesalers.

Other:

Includes revenue generated from financing activities. Carvana originates the car loan and then sells it in securitization transactions to financing partners.

The contributions from each of Carvana’s revenue segments in their latest annual report were as follows:

An area of concern for Practical Islamic Finance is Carvana’s “other revenue” which is mainly generated from financing activities.

Since over 7% of Carvana’s revenue comes from financing-related activities and this segment has grown by 59% from 2019 to 2020, greater than Carvana’s overall revenue growth of 42%, Practical Islamic Finance considers this revenue segment material to Carvana’s overall business.

Practical Islamic Finance concludes:

A material part of Carvana’s revenue comes from haram.

Does Carvana rely on interest to operate?

	Year-to-Date for period ended 6/30/2021	Fiscal year ended 12/31/2020	Fiscal year ended 12/31/2019
Interest Income	–	–	–
Total Revenue	$5,581,000	$5,586,565	$3,939,896
Interest Expense	$73,000	$131,528	$80,606
Total Expenses	$5,558,000	$5,918,961	$4,220,199
Interest Income / Revenue	–	–	–
Interest Expense / Total Expense	1.31%	2.22%	1.91%

*Numbers in thousands, U.S. dollars

Practical Islamic Finance concludes:

Riba is used but not currently relied upon in Carvana’s operations.

What is Carvana’s Environmental, Social, and Governance (ESG) impact?

Environment

No notable environmental highlights.

Social

Carvana has an average Glassdoor rating of 3.5 out of 5.0 from over 950 current and previous employees compared to a 3.3 average for all other Glassdoor rated companies.

In December 2020, Carvana awarded 21 vehicles to 21 of its team members for their hard work and perseverance during the pandemic.

Additionally, in 2021, Carvana launched a tuition reimbursement program called Carvana KEYS (Keeping Education in Your Sight), which hopes to assist its workers in pursuing an undergraduate degree.

Governance

In August 2021, Carvana was forced to pay a fine of $850,000 after it was discovered that the car dealership had been selling cars from 2015 to 2019 in California without proper licensing.

Practical Islamic Finance concludes:

Carvana has a net positive ESG impact.

Comfort Rating

From Carvana’s business, financials, and ESG reviews, Practical Islamic Finance rates Carvana stock as:

Uncomfortable to invest in from a Halal perspective.

Justification for our rating

Carvana earns a substantial portion of its revenue, over 7%, from giving its customers the option to finance their vehicles with interest. Given that this segment of Carvana’s business has been growing faster than its overall revenue growth, Practical Islamic Finance believes that this portion of Carvana’s revenue represents a material part of its total operations. Consequently, we are Uncomfortable investing in Carvana’s business from a Halal perspective.