Carvana's GPU Declines in Q4: What Will Drive Improvement?

Carvana Co. CVNA reported a decline in its non-GAAP retail gross profit per unit (GPU) by $255 in the fourth quarter of 2025, while non-GAAP wholesale GPU fell by $148. The decline in retail GPU was primarily due to higher non-vehicle costs, increased depreciation rates and lower shipping fees charged to customers. 

Carvana has been placing vehicles closer to buyers, which reduced logistics costs by about $60 per vehicle. Instead of keeping those savings, the company passed them directly to customers through lower shipping fees. While this improves customer value, it temporarily weighs on the GPU.

Operational factors also played a role. Rapid growth and the expansion of reconditioning facilities created some short-term inefficiencies, particularly as new sites and managers ramp up operations. These challenges increased costs in the fourth quarter, contributing to the dip in GPU.

Despite this decline, the company expects GPU to improve sequentially in the first quarter of 2026. Carvana expects the recent cost pressures to be temporary, and operational improvements will help restore margins. The company is focusing heavily on scaling its reconditioning network, improving automation in its inspection centers and leveraging AI-driven systems to streamline operations and enhance the customer experience.

In addition, Carvana continues to reduce financing costs by adding loan partners and improving transaction efficiency, which helps maintain profitability while offering customers lower interest rates.

Overall, while GPU declined in the short term, Carvana’s investments in scale, automation and operational efficiency suggest that profitability per vehicle could improve as the business continues to grow. CVNA carries a Zacks Rank #3 (Hold) at present. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GPUs of Carvana’s Competitors

Lithia Motors, Inc.’s LAD gross profit per unit sold on new vehicles declined to $2,781 in the fourth quarter of 2025 from $3,053 reported in the fourth quarter of 2024. Gross profit per unit sold on used vehicles declined to $1,555 from $1,694 in 2024. Lithia believes that the lower GPU is mainly due to under-pricing. To improve the GPU, Lithia is training store managers to price cars correctly.

In the fourth quarter of 2025, Group 1 Automotive, Inc.’s GPI gross profit per unit sold on new vehicles declined significantly to $3,370 from $3,525 reported in 2024. Gross profit per unit sold on old vehicles fell to $1,295 from $1,433 reported in 2024. Group 1 expects some improvement in U.S. old vehicle GPUs going forward. In the United Kingdom, Group 1 sees greater upside in pre-owned GPUs and is working to introduce stronger pricing and operational discipline in that business. These efforts are expected to support improved GPU performance over time.

Carvana’s Price Performance, Valuation and Estimates

Carvana has outperformed the Zacks Internet – Commerce industry in the last six months. CVNA shares have lost 15.1% compared with the industry’s decline of 15.2%.

From a valuation perspective, Carvana appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 2.48, higher than its industry’s 1.87.

 
The Zacks Consensus Estimate for 2025 and 2026 EPS has moved down 17 cents and $1.77, respectively, in the past 30 days. 

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This article originally published on Zacks Investment Research (zacks.com).

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