Carvana (CVNA) is heading into a more challenging 2026 as rising borrowing costs, higher gasoline prices and intensifying competition threaten demand and profitability, BofA Securities said Monday in a report.

The recent jump in oil prices is straining budgets for lower- and middle-income consumers, a core part of Carvana's customer base, and could curb auto spending, particularly among younger buyers who are more sensitive to fuel costs, the report said. At the same time, rising two-year Treasury yields are cutting into the profit Carvana makes on customer financing, BofA said.

Competitive pressure is also building from rival CarMax (KMX), which has been lowering margins to win business, the report said.

Even with strong tax refunds, BofA said it is "slightly less optimistic" about Carvana's near-term unit growth, noting that momentum has softened relative to expectations set earlier in the year.

BofA said it still sees long-term opportunities in Carvana's scale, market-share gains and potential improvements to its capital structure, though the combination of macro pressures and rising competition creates a tougher backdrop for the next several quarters.

BofA cut its rating on Carvana stock to neutral from buy and lowered its price target to $360 from $400.

Carvana shares fell 0.5% in Monday trading, and CarMax gained 1.6%.

Price: 312.65, Change: -1.26, Percent Change: -0.40