CARVANA CO.CVNA
CARVANA CO. Leases Disclosure
NOTE 15 — LEASES
The Company is party to various lease agreements for real estate and transportation equipment. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company also assesses whether each lease is an operating or finance lease at the lease commencement date. Rent expense of operating leases is recognized on a straight-line basis over the lease term and includes scheduled rent increases as well as amortization of tenant improvement allowances.
Operating Leases
As of December 31, 2025, the Company is a tenant under various operating leases related to certain of its hubs, vending machines, inspection and reconditioning centers, auction locations, storage, parking, dealerships, and corporate offices. The initial terms expire at various dates between 2026 and 2038. Many of the leases include one or more renewal options ranging from to twenty years and some contain purchase options. The Company leases and subleases certain of its real estate to third parties. Lease and sublease income for the years ended December 31, 2025, 2024, and 2023 was $9 million, $7 million, and $5 million, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.
The Company's operating leases are included in operating lease right-of-use assets, other current liabilities, and operating lease liabilities on the accompanying consolidated balance sheets.
Refer to Note 6 — Related Party Transactions for further discussion of operating leases with related parties.
Finance Leases
The Company has finance leases for certain equipment in its transportation fleet. The leases have initial terms of to five years, some of which include extension options for up to additional years, and require monthly payments. The Company's finance leases are included in current portion of long-term debt and long-term debt on the accompanying consolidated balance sheets.
Lease Costs and Activity
The Company's lease costs and activity during the years ended December 31, 2025, 2024, and 2023 were as follows:
Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Lease costs: | |||||||||||||||||
| Finance leases: | |||||||||||||||||
| Amortization of finance lease assets | $ | 96 | $ | 96 | $ | 108 | |||||||||||
| Interest obligations under finance leases | 10 | 13 | 17 | ||||||||||||||
| Total finance lease costs | $ | 106 | $ | 109 | $ | 125 | |||||||||||
| Operating leases: | |||||||||||||||||
Fixed lease costs to non-related parties | $ | 63 | $ | 61 | $ | 66 | |||||||||||
| Fixed lease costs to related parties | 3 | 4 | 5 | ||||||||||||||
| Total operating lease costs | $ | 66 | $ | 65 | $ | 71 | |||||||||||
| Cash payments related to lease liabilities included in operating cash flows: | |||||||||||||||||
| Operating lease liabilities to non-related parties | $ | 99 | $ | 93 | $ | 109 | |||||||||||
| Operating lease liabilities to related parties | $ | 4 | $ | 4 | $ | 5 | |||||||||||
| Interest payments on finance lease liabilities | $ | 10 | $ | 13 | $ | 18 | |||||||||||
| Cash payments related to lease liabilities included in financing cash flows: | |||||||||||||||||
| Principal payments on finance lease liabilities | $ | 94 | $ | 81 | $ | 115 | |||||||||||
Maturity Analysis of Lease Liabilities
The following table summarizes maturities of lease liabilities as of December 31, 2025:
Operating Leases (1) | |||||||||||||||||||||||||||||
| Finance Leases | Related Party (2) | Non-Related Party | Total Operating | Total | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| 2026 | $ | 83 | $ | 2 | $ | 104 | $ | 106 | $ | 189 | |||||||||||||||||||
| 2027 | 47 | 2 | 98 | 100 | 147 | ||||||||||||||||||||||||
| 2028 | 20 | 2 | 91 | 93 | 113 | ||||||||||||||||||||||||
| 2029 | 13 | 2 | 73 | 75 | 88 | ||||||||||||||||||||||||
| 2030 | 8 | — | 67 | 67 | 75 | ||||||||||||||||||||||||
| Thereafter | — | — | 180 | 180 | 180 | ||||||||||||||||||||||||
| Total minimum lease payments | 171 | 8 | 613 | 621 | 792 | ||||||||||||||||||||||||
| Less: amount representing interest | (14) | (1) | (140) | (141) | (155) | ||||||||||||||||||||||||
| $ | 157 | $ | 7 | $ | 473 | $ | 480 | $ | 637 | ||||||||||||||||||||
(1) Leases that are on a month-to-month basis, short-term leases, and lease extensions that the Company does not expect to exercise are not included.
(2) Related party lease payments exclude rent payments due under the DriveTime lease agreements for locations where the Company shares space with DriveTime, as those are variable lease payments contingent upon the Company's utilization of the leased assets.
As of December 31, 2025 and 2024, none of the Company's lease agreements contain material residual value guarantees or material restrictive covenants.
Lease Terms and Discount Rates
The weighted-average remaining lease terms and discount rates as of December 31, 2025, 2024, and 2023 were as follows, excluding short-term operating leases:
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted average remaining lease terms (years) | |||||||||||||||||
| Operating leases | 7.0 | 7.2 | 7.8 | ||||||||||||||
| Finance leases | 2.7 | 2.6 | 3.5 | ||||||||||||||
| Weighted-average discount rate | |||||||||||||||||
| Operating leases | 7.0 | % | 7.3 | % | 7.1 | % | |||||||||||
| Finance leases | 6.3 | % | 5.9 | % | 5.9 | % | |||||||||||
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.