OpenLane (KAR) Q3 2025: Dealer-to-Dealer Volumes Jump 14%, Accelerating Digital Share Gains
OpenLane’s digital marketplace strategy delivered a fourth consecutive quarter of double-digit dealer-to-dealer volume growth, outpacing industry trends and driving market share gains. Strategic investments in technology, customer experience, and cross-platform integration with AFC are compounding, while commercial volume recovery is set to unlock additional upside in 2026. Management’s guidance raise reflects confidence in both the business model’s scalability and future cash conversion.
Summary
- Dealer Marketplace Outperformance: Double-digit dealer-to-dealer growth and new dealer onboarding outpaced industry peers.
- Cross-Platform Synergy: Integration between AFC financing and marketplace drives higher engagement and share capture.
- 2026 Commercial Upside: Off-lease recovery and digital migration position OpenLane for sustained volume and margin expansion.
Performance Analysis
OpenLane’s Q3 2025 results underscore the power of its asset-light, digital-first marketplace model, with consolidated revenue up 8% and adjusted EBITDA margin expanding 130 basis points year over year. The marketplace segment, which processes vehicle auctions for dealers and commercial sellers, drove the majority of growth. Dealer-to-dealer volumes surged 14%—the fourth straight quarter of double-digit gains—while auction fee revenue rose 20% and marketplace adjusted EBITDA grew 22%. Notably, U.S. dealer activity led the charge, with high-teens volume growth and record customer engagement metrics, including double-digit increases in unique buyers and sellers.
The finance segment, AFC, saw average managed receivables rise 11% and maintained a low 1.6% loan loss rate, supporting 12% adjusted EBITDA growth. Free cash flow conversion was temporarily muted at 5% for the quarter due to earlier-than-usual loan portfolio expansion, but management reiterated a 75%+ rolling 12-month target as seasonal patterns normalize. Operating leverage was evident: core SG&A declined as a percentage of revenue, even as targeted go-to-market and incentive investments rose to capture share and drive future growth.
- Dealer-to-Dealer Acceleration: U.S. dealer-to-dealer volumes grew at high-teens rates, far ahead of the low single-digit industry average.
- Marketplace Margin Expansion: Marketplace adjusted EBITDA margin rose 110 basis points, with further upside excluding last year’s keys business divestiture.
- Financing Portfolio Growth: AFC’s receivables expanded $140 million, supporting dealer inventory and future auction activity.
OpenLane’s mix shift toward digital, dealer-driven transactions is compounding both top-line and margin leverage, while cross-platform synergy with AFC is deepening customer stickiness and wallet share.
Executive Commentary
"Our brand and platform consolidation work has dramatically simplified our company and clarified our purpose. That simplification enables us to focus our investments and resources on growth and prevents any distraction from pursuing non-core activities."
Peter Kelly, Chief Executive Officer
"We continue to have a high degree of confidence in our ability to grow our marketplace segment while simultaneously expanding margins due to the structural scale characteristics that generate high pass-through rates off of our technology platform."
Brad Herring, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Digital Marketplace Leadership
OpenLane’s focus on digital transformation is yielding tangible share gains, as both franchise and independent dealers accelerate adoption of online auction platforms. With only about 30% of the industry transacting digitally, OpenLane’s leadership in digital auction and ongoing investments in user experience, such as AI-powered condition reports and the new audio boost feature, are differentiating the platform and driving sustained double-digit dealer growth.
2. Cross-Platform Integration with AFC
The integration of AFC, floor plan financing for independent dealers, with the OpenLane marketplace is deepening customer engagement and expanding the addressable market. Nearly half of AFC’s 12,000 dealers are now registered on OpenLane, up 900 basis points in a single quarter, with new features like the AFC recommendations carousel driving incremental marketplace activity and registrations.
3. Commercial Volume Recovery Tailwind
Commercial vehicle volumes—primarily off-lease returns—remain below historical levels but are set to inflect in 2026 as new lease originations rebound and lease equity declines. OpenLane’s entrenched relationships with OEMs and captive finance partners, along with deep integration, position it to capture a disproportionate share of this cyclical upswing, especially as commercial vehicles flow deeper into the digital funnel with higher gross margins.
4. Technology and Customer Experience Investment
Strategic investments in technology and customer service are translating into higher NPS scores and record engagement, with innovations like AI-driven vehicle recommendations and streamlined inspection processes making the platform faster, fairer, and more transparent. These enhancements are supporting both customer acquisition and same-store volume growth.
5. Asset-Light Scalability and Capital Allocation
OpenLane’s asset-light model—minimal physical infrastructure, high digital throughput—enables margin expansion as volumes scale. Recent capital actions, including the repurchase of 53% of Series A convertible preferred shares and ongoing common share buybacks, reflect a disciplined approach to shareholder value and balance sheet optimization.
Key Considerations
This quarter’s results highlight OpenLane’s ability to execute on its digital-first vision while balancing disciplined investment and operational leverage. Several dynamics are shaping the company’s near- and medium-term trajectory:
Key Considerations:
- Dealer Penetration Opportunity: High-teens growth in U.S. dealer-to-dealer volumes highlights significant remaining whitespace, as OpenLane is still a small share player in the largest addressable market.
- Commercial Upswing Catalyst: The anticipated recovery in off-lease commercial volumes in 2026-2027 will test OpenLane’s readiness to convert OEM and captive finance relationships into profitable digital transactions.
- SG&A Flexibility: Management is balancing targeted go-to-market investments with ongoing back-office efficiency gains, with annual SG&A trends more meaningful than quarterly noise.
- Purchased Vehicle Revenue Quality: Growth in purchased vehicle revenue, especially in Europe, is largely “low-calorie” from a margin perspective, but supports broader platform liquidity and buyer confidence through guarantee programs.
Risks
OpenLane faces several external and execution risks: Prolonged economic uncertainty, new vehicle affordability pressures, and potential consumer credit tightening could impact both dealer and commercial transaction volumes. Tariff volatility remains a headwind, though current industry adaptation has reduced near-term risk. Any delay in commercial volume recovery or failure to convert new dealer registrations into active buyers and sellers could slow growth momentum.
Forward Outlook
For Q4 2025, OpenLane expects:
- Normal seasonal volume patterns, with continued strength in dealer-to-dealer activity.
- Stabilization of SG&A as growth investments and cost synergies offset each other.
For full-year 2025, management raised adjusted EBITDA guidance to $328 to $333 million (from $310 to $320 million prior):
- Drivers include continued dealer segment outperformance and prudent finance portfolio growth.
Management cited the following factors supporting the outlook:
- Dealer-to-dealer market share gains and record engagement metrics.
- Anticipated commercial volume recovery beginning in early 2026.
Takeaways
OpenLane’s Q3 results reinforce its position as a digital marketplace leader, with accelerating dealer-to-dealer volumes and deepening cross-platform integration driving both growth and margin expansion.
- Digital Share Gains: Sustained double-digit dealer-to-dealer growth and new dealer onboarding are compounding OpenLane’s competitive advantage as the industry shifts online.
- Commercial Recovery Setup: OpenLane is well-positioned to capitalize on the cyclical rebound in commercial off-lease volumes, with entrenched OEM and captive finance relationships ready to unlock incremental margin and volume upside.
- Execution Watchpoint: Investors should monitor the conversion of registered dealers into active buyers and sellers, as well as the pace of commercial volume recovery, for confirmation of the long-term growth thesis.
Conclusion
OpenLane’s disciplined execution, technology innovation, and asset-light digital model are driving market share gains and margin expansion, with cross-platform synergies and commercial recovery setting up a favorable multi-year growth trajectory. Investors should watch for continued dealer engagement and successful capture of the coming off-lease volume surge.
Industry Read-Through
The wholesale automotive remarketing industry is undergoing a structural shift from physical to digital channels, with OpenLane’s outperformance highlighting the rewards for platforms that invest in technology, customer experience, and ecosystem integration. Competitors reliant on legacy physical infrastructure or slow to integrate financing and digital auction solutions risk ceding share, while those able to deliver seamless, tech-enabled experiences will benefit from accelerating volume and margin tailwinds as the commercial recovery unfolds. The consolidation of smaller digital disruptors signals that scale, brand trust, and platform liquidity are increasingly critical to winning in this market.