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Lithia Motors NYSE: LAD reported record revenue in the fourth quarter as strong used-vehicle execution and after-sales growth helped offset ongoing margin compression across the industry. On its fourth quarter 2025 earnings call, President and CEO Bryan DeBoer said quarterly revenue reached $9.2 billion, contributing to a full-year revenue record of $37.6 billion, up 4% from 2024.
Adjusted diluted earnings per share were $6.74 for the quarter, and full-year adjusted EPS totaled $33.46, up 16% year over year. DeBoer said the company leaned into top-line growth and market share gains, particularly in used vehicles and value-priced units, while continuing to scale its captive financing business, Driveway Finance Corporation (DFC).
Margins pressured, but mix supported results
DeBoer said same-store revenue was essentially flat in the quarter and gross profit declined 1.2%, calling the performance strong relative to the broader market. Total vehicle gross profit per unit (GPU) was $3,946, down $258 year over year, reflecting what management described as industry-wide compression in new- and used-vehicle margins.
New-vehicle revenue fell 6.6% on an 8.3% unit decline as demand softened and supply normalized. New-vehicle GPU was $2,766, down $300 from the prior year. DeBoer said luxury revenue dropped 12.7%, in part due to a difficult comparison, while domestic and import brands were also soft late in the quarter when sales promotions did not materialize as expected.
Used retail was a bright spot. Used revenue increased 6.1% on 4.7% unit growth, with Lithia’s Value Auto platform delivering 10.9% unit growth. Used GPU was $1,575, down $151 year over year, which DeBoer attributed to prioritizing market share gains. In response to investor questions, he said the company sees opportunity to improve used profitability through more dynamic pricing, citing internal analysis that suggested underpricing in both older Value Auto units and certain “scarcer” late-model vehicles with unusually low mileage.
After-sales and financing remained key earnings pillars
The company’s after-sales business grew at a double-digit pace in the quarter. After-sales revenue increased 10.9% and gross profit rose 9.8%, with a 57.3% gross margin. Management said growth was broad-based, with customer-paid gross profit up 10.9% and warranty gross profit up 10.1%. DeBoer emphasized customer experience and retention efforts, including digital scheduling through the My Driveway portal, as drivers of performance. He added that a mid-single-digit after-sales growth rate is a “realistic” near-term expectation, while noting tougher comparisons ahead due to prior recall activity.
Finance and insurance (F&I) gross profit per unit was $1,874, up $10 year over year. DeBoer said the metric was resilient despite record DFC penetration, which intentionally shifts some finance gross profit from traditional F&I reporting into the captive finance platform.
DFC’s growth was a focal point of the call. Senior Vice President of Driveway Finance Chuck Lietz and CFO Tina Miller said financing operations income reached $23 million in the fourth quarter and $75 million for full-year 2025, an increase of $67 million from the prior year. Managed receivables grew to $4.8 billion, up 23% year over year, and net interest margin expanded to 4.8%, up 55 basis points.
- North American DFC penetration was 15% for the quarter, up 650 basis points.
- Management said January penetration hit a record 17.5%.
- Fourth quarter credit metrics cited included an average origination FICO score of 751, 95% loan-to-value, and a 3% annualized provision rate.
Lietz said higher penetration can create near-term pressure on financing income due to CECL reserve builds, but called the strategy appropriate as the platform scales. He also said the team remains confident in long-term targets, including $500 million in pre-tax income for financing operations over an “achievable” time frame.
SG&A de-leverage and efficiency initiatives
Miller said the quarter reflected a “more challenging environment,” with year-over-year earnings pressure from margin compression and SG&A de-leverage. Adjusted SG&A as a percentage of gross profit was 71.4%, compared with 66.3% a year earlier; on a same-store basis it was 71.2%. DeBoer attributed part of the quarterly increase to weaker-than-typical sales in the final days of December and incremental marketing spend aimed at driving volume.
Looking forward, executives highlighted a mix of near-term cost actions and longer-term structural initiatives. Miller pointed to performance management and technology investments, including early work on AI-powered chatbots and customer service automation, simplifying the tech stack, renegotiating vendor contracts, and automating back-office workflows. DeBoer and Miller also discussed Pinewood AI, with DeBoer saying the company plans to pilot the Pinewood dealer management system in its first North American store.
Capital allocation: buybacks accelerated amid “discounted” valuation
Management emphasized a balanced approach to capital allocation, while leaning more heavily into repurchases given what it described as an attractive valuation. DeBoer said the company retired 3.8% of its shares in the quarter and 11.4% in 2025. Miller said the company repurchased shares at an average price of $314 in both the quarter and the full year, allocating roughly 40% of deployed capital to buybacks.
Miller reported fourth quarter adjusted EBITDA of $364.1 million, down 8.9% year over year, and free cash flow of $97 million. She said leverage remains below the company’s target, with a leverage ratio intended to stay under three times, and described liquidity as ample for both acquisitions and shareholder returns.
On M&A, DeBoer reiterated a long-term target of $2 billion to $4 billion of acquired revenue annually. He said the pace of deal activity appears consistent with that range, while noting that the mix between acquisitions and repurchases depends on the relative attractiveness of Lithia’s share price versus acquisition pricing. DeBoer also said the company acquired $2.4 billion in expected annualized revenue during 2025 and highlighted fourth quarter additions in luxury, imports, and Canada.
Executives also discussed the U.K. business, where DeBoer said the team delivered a 10% increase in same-store gross profit despite challenging market conditions and regulatory labor cost increases. He said adjusted pre-tax income for the U.K. rose 53% for the full year versus 2024.
In early 2026, DeBoer said trends have been similar to the latter part of the fourth quarter across new, used, and after-sales, with some weather-related impacts in parts of the business. He added that the company sees an opportunity for a stronger first quarter given seasonal dynamics in the U.K. market.
About Lithia Motors NYSE: LAD
Lithia Motors, Inc is an American automotive retailer headquartered in Medford, Oregon. Founded in 1946 as a small auto body and glass shop, the company has grown through organic expansion and strategic acquisitions to become one of the largest automotive retail networks in North America. Lithia operates dealerships across the United States and Canada, offering a broad portfolio of new and pre-owned vehicles from more than 40 different manufacturers.
The company’s core business activities include vehicle sales, financing, insurance, parts and service.
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