In their respective first quarter earnings calls in May, executives with Cars.com and CarGurus spent a good bit of time discussing their moves into the wholesale marketplace

The roots of both companies are retail-facing, but with the CarGurus acquisition of CarOffer a year-and-a-half ago and the Cars.com purchase of Accu-Trade earlier this year, each has planted a flag in the growing online wholesale space.

And from both a long- and short-term perspective, those moves appear to be bearing fruit.

Cars.com chief executive officer Alex Vetter said that vehicle acquisition is the biggest dealer need in the current inventory-constrained environment.

He pointed to the NADA Show 2022 in March, where attendees showed a strong interest in Cars.com’s Accu-Trade and CreditIQ product, he said.

“Our booth was packed with dealers wanting to learn more about our suite of solutions that are seamlessly integrated into our platform,” Vetter said. “I'm more than pleased with our strong performance and reception to our new digital solutions, which will begin to launch in the second quarter and have a larger revenue impact in 2023.”

He went on to say, “So it wasn't surprising that our most sought-after solution was Accu-Trade, a digital vehicle acquisition appraisal and valuation solution.”

CarGurus chief executive officer Jason Trevisan started the company’s earnings call by saying 2022 was off to a strong start, using the words, “transformed” and “transformation” to describe 2021.

“While macroeconomic factors continue to challenge the automotive industry, CarGurus remains at the forefront of providing innovative solutions to both our dealer partners and consumer audience during these dynamic times,” Trevisan said.

He continued, “In 2021, we transformed our business by acquiring CarOffer, launching CarGurus’ Instant Max Cash Offer and accelerating our digital retail capabilities.”

Transformation to activation

After noting that that 2021 was a year of transformation for CarGurus, Trevisan said 2022 is the year of “activation in which we plan to execute on the potential built last year by activating Digital Deal on our platform, lighting up new geographies for CarGurus Instant Max Cash Offer, adding more dealers on CarOffer’s matrix and introducing new bundling options across our different offerings.”

Starting off the year of activation — 2022 — CarGurus reported total first-quarter revenue of $430.6 million, an increase of 151% year-over-year.

Trevisan said the company is unlocking synergies that are made possible through the combined potential of its foundational listings business with the digital retail and digital wholesale businesses to create what he described as “an end-to-end transaction-enabled marketplace for consumers and dealers alike.”

That means a place for consumers to transparently shop, finance, buy and sell from what he said was “the largest selection of dealers' inventory in the U.S.”

Dealers gain the ability to efficiently source, market and sell to what he described as “the largest and highest-intent consumer audience in the U.S.”

Trevisan noted that CarGurus exceeded its forecasted revenue guidance for the quarter, and he described CarOffer’s contribution to that, stating that revenue for the quarter from the CarOffer business inclusive of its dealer-to-dealer business and Instant Max Cash Offer was $267 million.

That was growth of 50% quarter over quarter, and year-over-year growth was more than 1,600%.

“The industry’s first instant trade platform for vehicle acquisition and disposition continues to garner dealer traction as indicated by the dealer base expanding to 10,850 enrolled dealer rooftops at the end of Q1,” Trevisan said. He said the joint CarOffer and CarGurus sales teams added an additional 1,750 rooftops this past quarter.

Dealers looking at Accu-Trade to drive sales

Accu-Trade is one contributor toward Cars.com reporting revenue of $158.2 million for the quarter, an increase of $4.9 million, or 3% year-over-year.

Vetter of Cars.com said single-store dealers and multi-store operators are interested in Accu-Trade as a product that can help them efficiently source inventory with the right valuation and appraisal data “to help them buy cars with ease.”

In March, Cars.com began piloting Accu-Trade in select markets and is expanding the pilot program during the second quarter.

“We're extending our end-to-end capabilities and equipping dealers with a much-needed set of solutions to help them drive sales,” Vetter said.

A conference call participant during the Q&A portion of the conference call asked Vetter to expand on how Accu-Trade is different than competing consumer digital platforms and whether he expected “normalization in the growth rate of that business.”

The questioner also asked what Vetter thought the growth rate of Accu-Trade would be once used inventory levels normalize.

Vetter answered that dealers are spending money on various tools from different suppliers, and he said that “we can bring them all together through Accu-Trade.”

He said that was the case “whether that's pricing and analytics or trade-in widgets on their Web site or third-party services that allow them to source cars. In many cases, dealerships have three to five different vendors trying to do these things for them at any given time.”

He went on to say Cars.com offers various tools to help dealers buy cars without any friction with the seller.

“And we're doing it in a Software-as-a-Service type model where dealers know that we're enabling them to do this, not just online, but in their physical stores, in their service lanes, they are using Accu-Trade across their whole business and aren't using it as one narrow buying channel,” Vetter said.

Vetter said that next quarter the company would reveal some success stories that it finds through its pilot program.

“But there's no reason every dealer in the country wouldn't want Accu-Trade,” he said.

Other news

CarGurus highlighted its new digital retail offering, called Digital Deal, which Trevisan said helps dealers close more business from the 60% of CarGurus auto shoppers who wish to conduct more of the car-buying process from home.

“Our Digital Deal solution provides dealers with high-quality sales opportunities by moving shoppers further down the purchase funnel before a dealership visit by allowing them to build a near penny-perfect deal online, including dealership finance and insurance offerings and scheduling an appointment to visit the dealership to finalize the sale,” Trevisan said.

As for Cars.com, Vetter said its digital financing product, CreditIQ, also drew strong interest at NADA. The company is in the early stages of online financing but is seeing strong demand from dealers and what Vetter described as “household names in the auto finance industry,” who are enthusiastic about using the technology to reach larger end-market audiences.

“The power of our platform is in our high-intent audience, with 148 million visits to Cars.com plus an incremental 304 million visits across Dealer Inspire Web sites,” Vetter said. “Our opportunity continues to expand with the addition of Accu-Trade and CreditIQ, and we look forward to updating you on the rollout of these solutions.”