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Reeling from the Covid-19 crisis, online car retailer Carvana received $2 billion from Ally Financial to sustain its car loan business. Carvana’s shares, which had nosedived more than 70% since Covid-19 erupted in the U.S., bounced back more than 50% on the news. 

Ally is Carvana’s main financial affiliate and supports the retailer’s in-house auto finance program by buying loans that Carvana makes to consumers. Ally’s decision commits “up to $2.0 billion of capacity for the purchase of finance receivables over the next 12 months” and will “broaden the set of customers covered” by its contract with Carvana, according to a statement.

The new agreement increases Ally’s purchase commitment by about $1.6 billion, according to a March 24 filing with the U.S. Securities and Exchange Commission.

Carvana, like the rest of the automotive industry, has been hit hard by the Covid-19 outbreak as consumers put major purchases on hold. 

In a way, Carvana’s approach was already geared to the crisis. The company already offers a “touchless” purchase process wherein buyers can buy a car online and have it delivered to their doorstep. But the company has also made some changes, including temporarily closing some of its trademark car vending machines

Carvana’s in-house loans cater to low-credit customers. The company doesn’t require a minimum credit score and will give loans to customers making as little as $10,000 per year.

If Ally’s agreement allows Carvana to “broaden the set of customers,” Carvana may be able to further lower the income threshold for its car loans. That could help the company reach buyers who’ve lost work due to the crisis.

Carvana did not respond to the AIM Group’s request for comment.

The Ally announcement couldn’t have come at a better time for Carvana. Right before Covid-19, the company released a financial report that predicted drastically reduced revenue growth in 2020 and meager improvement on its per-car sales margins.

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