stockrowWhat it does
Lithia Motors is an automotive retailer that sells new and used vehicles, arranges financing and insurance, and provides repair and maintenance services. It serves vehicle buyers and owners through dealerships and online channels. Founded in 1946, the company is headquartered in Medford. Bryan B. DeBoer is its chief executive officer.
As of December 31, 2025, Lithia operated 455 locations representing 54 brands across the United States, the United Kingdom and Canada. Each new-vehicle store operates under a franchise agreement with the manufacturer of the brand it sells. Lithia also sells used vehicles from brands other than those represented by a store’s new-vehicle franchises.
Customers can research vehicles, arrange financing, buy or sell vehicles, and schedule service through the company’s online channels. Driveway offers online vehicle shopping and home delivery or pickup at a Lithia store. GreenCars provides information about electric and alternative-powertrain vehicles and connects shoppers to available inventory.
Lithia also lends to vehicle customers through its financing operations and offers fleet funding and management. Its stores and online services are designed to serve customers at different stages of ownership, from a first purchase through maintenance, trade-in and another purchase.
How it makes money
Lithia operates two reportable segments: Vehicle Operations and Financing Operations. Vehicle Operations includes vehicle merchandising and service, while Financing Operations provides loans and leases to vehicle customers and supports fleet leasing.
In FY2025, Vehicle Operations revenue was $37.6 billion; company revenue was just shy of $10 billion in Q3 2026.
New-vehicle sales brought in $18.7 billion in FY2025, and used vehicles generated $13.4 billion. A new-vehicle sale can also lead to a trade-in, which supplies used inventory, and to financing, protection products and future service work. Used vehicles include certified pre-owned, late-model and lower-priced older vehicles.
Lithia attempts to arrange financing for every vehicle it sells. It offers products such as extended warranties, insurance contracts and vehicle and theft protection. Third-party extended warranty and insurance contracts carry higher profit margins than vehicle sales.
Aftersales revenue, from repair and maintenance and related work, was $4.1 billion in FY2025. Lithia services the brands sold by its stores as well as most other makes and models. Service visits and financing income can continue after the original sale.
In the United States, Lithia’s captive lender originates loans through its stores and Driveway. In Canada, it also originates loans and leases through third-party dealerships; in the United Kingdom, financing operations relate to fleet funding and management. Financing income reflects interest, fees and lease income, less funding costs, estimated credit losses and directly related expenses.
| Product or service | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| New vehicle | $18.7 billion | 49.7% | 2.08% |
| Used vehicles | $13.4 billion | 35.5% | 5.88% |
| Aftersales | $4.1 billion | 10.9% | 7.02% |
| Finance and insurance | $1.5 billion | 3.92% | 3.94% |
Customers and how it sells
Lithia serves people buying, selling, financing and servicing vehicles, as well as fleet customers. Its used-vehicle range includes certified vehicles, late-model vehicles and older value vehicles. The company also services vehicles from makes beyond the new brands sold at its stores.
The United States accounted for 78.5% of FY2025 revenue, the United Kingdom for 18.4%, and Canada for 3.10%. As of December 31, 2025, the company had 455 locations across those countries. Lithia seeks to diversify its brands and locations to reduce dependence on any one manufacturer and manage exposure to changing customer preferences.
Customers can use store websites and Lithia’s online platforms to search inventory, view prices, calculate payments, apply for financing and schedule service. Driveway customers can have a vehicle delivered to their home or pick it up at a U.S. store. GreenCars offers education on alternative-powertrain vehicles, including model comparisons, incentives and charging.
North American operations generally have lower volumes in the first quarter, while U.K. operations generally have higher volumes in the first and third quarters because of vehicle registration practices. Lithia also identified the fourth quarter as its toughest, citing its Snow Belt exposure and the absence of a major U.K. registration month.
| Region | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| United States | $29.6 billion | 78.5% | 4.63% |
| United Kingdom | $6.9 billion | 18.4% | 1.85% |
| Canada | $1.2 billion | 3.10% | 1.19% |
Suppliers and costs
Lithia relies on vehicle manufacturers and distributors for new-vehicle inventory, sales incentives, warranties and other programs. Each store has a separate franchise agreement with the manufacturer of the new brand it sells. Manufacturers determine market-area designations and allocate new vehicles among stores; agreements do not guarantee territorial exclusivity.
Franchise agreements can require investments in facilities, equipment, inventory, working capital and employee training. They also set performance standards, including market share and customer satisfaction. Manufacturers monitor compliance and receive monthly financial statements from stores.
Lithia incurs costs for store personnel, facilities, advertising, technology and financing. Many employees have incentive-based pay plans that consider customer satisfaction, profitability and individual performance. The company centralizes some administrative functions while local managers run store operations.
Advertising expense, net of manufacturer credits, was $257.0 million in 2025. Some qualifying advertising costs are reimbursed through manufacturer cooperative programs. Financing receivables are funded through securitizations, warehouse facilities, third-party asset funding and internal capital. Changes in funding costs or competitive pressure on customer rates can affect the financing business’s interest margin.
- Revenue$37.6B
- Cost of revenue−$31.9B
- Selling, general and administrative−$3.9B
- Other operating costs−$193.6M
- Operating income$1.6B
Competitive position
Lithia competes with public and private automotive retailers, including used-vehicle-focused CarMax, Carvana and Cazoo. It also competes with independent stores managed by individuals, families and smaller retail groups. The company identifies reputation, pricing, advertising, sales expertise, service reputation and store location as factors in selling vehicles.
The company faces competition between dealerships selling the same brand in markets where multiple dealers operate. Franchise agreements and some jurisdictional laws can restrict where a dealership may be acquired, relocated or established. At the same time, Lithia says its franchise agreements do not guarantee exclusivity, and it has no cost advantage when purchasing new vehicles from manufacturers.
Our reading: The franchise network offers some protection through manufacturer relationships and laws governing dealership locations, but that protection is limited by nonexclusive agreements and competition within brands. Our reading: The physical network and online channels give Lithia ways to reach customers and connect vehicle sales with service, although the evidence does not establish that those channels are difficult for competitors to replicate. Our reading: Scale offers access to financial resources relative to many private retailers, but it does not provide a new-vehicle purchasing cost advantage.
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| CarMax | Used-vehicle retail | Medium |
| Carvana | Used-vehicle retail | Medium |
| Cazoo | Used-vehicle retail | Medium |
Growth opportunities
Lithia seeks to grow by acquiring new-vehicle franchises, improving existing stores, expanding used-vehicle sales and developing financing and service offerings. It also divests stores as it adjusts its network. In 2025, it acquired 17 stores and divested 12, investing $751.0 million net of floor plan debt. The company expects those acquisitions to add nearly $2.4 billion in annualized revenue.
By Q3 2026, Lithia had acquired stores with $1.2 billion in annualized revenue during the year and divested a quarter billion dollars of underperforming revenue. It also acquired four Gossett Hyundai and Kia stores in Memphis, which it expects to add $250 million in annualized revenue.
Within existing stores, Lithia targets used-vehicle retail growth across certified, late-model and older vehicles. It also seeks to retain owners for maintenance and repairs. In Q3 2026, same-store used-vehicle gross profit grew 9.3% year over year and aftersales gross profit grew 2.4%.
Lithia is expanding its captive financing business and rolling out Pinewood.AI to North American stores. The company targets financing penetration of 20% or more and a global selling, general and administrative expense ratio below 60% of gross profit. It expects the Pinewood integration to be completed by the end of 2028, with the targeted expense reduction following the store rollout.
- $22.8BFY2021
- $28.2BFY2022
- $31.0BFY2023
- $36.2BFY2024
- $37.6BFY2025
Structural risks
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Economic conditions and affordability: Automotive retail is sensitive to economic conditions, interest rates, consumer debt and confidence. Lithia has also identified affordability as a drag on customers’ purchases of optional service contracts and lifetime oil products.
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Manufacturer dependence: Lithia depends on manufacturers and distributors for incentives, warranties and other programs. Manufacturers can change those programs and control new-vehicle allocations. Franchise agreements impose operating requirements and can be terminated or not renewed in specified circumstances.
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Debt and funding: Debt obligations can limit funds available for operations and acquisitions. Some borrowings carry variable interest rates, and failure to meet financial covenants could cause a default. Financing margins can also be affected by funding costs and customer rates.
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Acquisitions: Growth through acquisitions depends on finding suitable franchises and integrating them. Risks include overpaying, failing to assimilate operations and personnel, unforeseen liabilities, and higher renovation or operating costs.
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Regulation and legal claims: Dealership and financing activities are subject to licensing, consumer protection, privacy, employment and environmental rules. Claims or violations may result in damages, fines or suspension of licenses.
Bottom line
Our reading
Lithia combines vehicle dealerships with financing and service businesses that can continue earning after a sale. Its network and acquisitions extend its reach, while franchise restrictions and the absence of a new-vehicle purchasing cost advantage leave it exposed to competition (item1; item7). Its growth also depends on integrating acquisitions and managing debt, funding costs and credit risk through changes in the automotive market (item1a; item7).