Lithia Motors, Inc.

What they do

Lithia Motors operates 467 locations representing 59 brands in the United States, the United Kingdom, and Canada, as of June 30, 2026. It sells new and used vehicles, offers finance and insurance products, and provides aftersales repair and maintenance services. The company also runs a captive financing division (Financing Operations) and online platforms including Driveway and GreenCars.

Revenue drivers

• New vehicle sales — Largest revenue line at $18.7 billion in 2025 (49.7% of total), with 402,575 units sold; gross margin was 6.3%.
• Used vehicle sales — Second-largest at $13.4 billion in 2025 (35.5% of total), with 425,381 retail units; gross margin was 5.5%.
• Aftersales (parts and service) — Revenue of $4.1 billion in 2025 with a high 57.7% gross margin, contributing $2.4 billion in gross profit.
• Finance and insurance (F&I) — Revenue of $1.5 billion in 2025, all gross profit (100% margin); includes captive financing through Financing Operations, which originated $884 million in Q2 2026 at a 17.5% penetration rate.

Recent performance

In Q2 2026, revenue rose 2% to $9.8 billion from $9.6 billion a year ago. Diluted EPS increased 17% to $11.54, but adjusted diluted EPS rose only 9% to $10.03, and adjusted net income declined 6% to $227.6 million. For the first half of 2026, revenue increased 2% to $19.1 billion, while diluted EPS fell 12% to $15.68. Used retail gross profit per unit rose $339 (20%) sequentially, and aftersales gross margin improved 120 basis points to 59.2% on a same-store basis. The company repurchased $242 million of shares in Q2 2026 and raised its quarterly dividend 23% to $0.70.

Strategy

Lithia is focused on growth through acquisitions and network optimization, having acquired 5 stores in Q2 2026 (expected $340 million annualized revenues) and divested 3 stores ($120 million annualized). It is investing in digital platforms (Driveway, GreenCars) and its captive finance division (DFC) to capture more of the vehicle ownership lifecycle. Management emphasizes operational excellence, cost discipline (SG&A improvement), and shareholder returns via buybacks and dividends. The company also explores synergistic adjacencies like fleet management.

Risks

• Margin normalization — New and used vehicle gross margins continue to decline toward pre-pandemic levels, with new vehicle gross profit per unit down 8.2% in 2025 and used vehicle gross profit down 0.7%.
• Economic cyclicality — Vehicle sales are sensitive to interest rates, inflation, and consumer confidence, which could reduce demand and pressure volumes and pricing.
• Integration and acquisition risk — The company's growth strategy relies on acquisitions; any failure to integrate acquired stores or achieve target returns could hurt profitability.
• Manufacturer concentration — Dependence on major OEMs for new vehicle inventory and brand availability, with changes in distribution models or production disruptions affecting revenue.

Outlook

Management says the company carries 'strong momentum into the second half of the year' with record quarterly revenues, stable new vehicle margins, and improved used vehicle profitability. The company expects continued SG&A improvement and expanded captive finance penetration. In the first half of 2026, it repurchased 7.6% of outstanding shares and added $500 million to its buyback authorization, signaling ongoing capital returns.