CarGurus Earns A "Great Deal" Rating

brown and black vehicle steering wheel

Selling new and used vehicles online has been evolving over many years. CarGurus, Inc. (CARG) was founded in 2005 by Langley Steinert, also a cofounder of TripAdvisor (TRIP).

The company started as an automotive blog website where consumers could post information about local dealers, repair shops, and auto-related information.

The site has a wide variety of information for those researching, purchasing, or selling a vehicle, including test drive information, new and used vehicle listings, and financing.

For the most popular use of the site, consumers considering the purchase of used vehicles, the company applies a proprietary algorithm to each vehicle to generate a Deal Rating, one of: Great Deal, Good Deal, Fair Deal, High Priced, or Overpriced.

The Deal Rating illustrates how competitive a listing is compared to similar vehicles sold in the same region in recent history. CarGurus’ Deal Rating is backed by the largest number of vehicle listings of any major U.S. online marketplace and dealer reviews by its 36.2 million average monthly U.S. unique visitors.

The COVID-19 pandemic led to a 6% total revenue decline in 2020 after several years of rapid growth. For 2021, the company expects sales to recover as the rollout of COVID-19 vaccinations supports reopening economies. However, earnings are expected to stagnate as the company invests in brand advertising and expands its sales force to sign additional dealers.

Beyond 2021, CarGurus should experience expense leverage that supports more rapid earnings growth. To support long-term growth CarGurus is targeting additional digital retail capabilities and has expanded into the dealer wholesale auction market, defined as dealers selling inventory to other dealers.

For digital retail, the company has introduced Area Boost, a product that allows dealers to market vehicles to consumers without a showroom visit.

Another recently introduced offering, RouteOne, allows the customer to negotiate and complete the sale remotely, including financing, warranties, and after-market product add-ons. With the purchase already completed, the customer simply picks up the vehicle at a specified time.

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