CarGurus posted revenue of $219.4 million, down 49% year-on-year but better than the company expected due to growth of its core marketplace.
The company surprised some investors by announcing it would exercise its option, earlier than expected, to invest fully in digital wholesaler CarOffer, whose sales have cratered amid a broader market decline in wholesale transactions.
Having bought an initial 51% stake in CarOffer in 2021 for $140 million, CarGurus said it would buy the rest of the company for $75 million, with the transaction to close by December (We covered the deal here.)
Wholesale revenue via CarOffer was $21.7 million, down 54% y-o-y, CarGurus reported.
But marketplace revenue of $177.9 million was up 8%. While the number of paying dealers at the end of September was roughly flat y-o-y at 31,191, the company managed to nudge many to higher priced tiers, including several who had dropped CarGurus subscriptions but have since returned, the company reported.
CarGurus reported progress with its Digital Deal platform, intended to help customers complete initial steps of car purchases online, along with a trial in a small number of markets that allows remote customers to buy cars entirely online and enjoy curbside delivery.
CarGurus continues its efforts to revive CarOffer in a much harsher wholesale market than in 2021-2022, when it nearly tripled CarGurus’s revenue.
In October, CarGurus rolled out CarOffer 2.0, offering beefed up inspection processes for traded cars, quicker delivery times and more efficient titling.
In the Q3 announcement, it announced a rebranding of CarOffer’s consumer trade-in tool: Formerly called Instant Max Cash Offer, it is now called Sell My Car / Top Dealer Offer.
The new name reflects new optionality for the customer: they can either sell their car completely online, and have it picked up from their home (as with Instant Max Cash Offer) or they can take it to the purchasing dealer themselves and receive a higher price.
The rejiggered service was trialed in three initial markets and has since been rolled out to 18 metro areas comprising 40% of the U.S. population, CarGurus said.
For Q4, the company predicted total revenue of $208 million to $228 million, down about 26% y-o-y. The guidance envisions accelerated growth for the marketplace but flat revenue for the wholesale business, the company said.