Cars.com Inc. (CARS): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at Cars.com Inc. (CARS) right now, and honestly, the digital auto marketplace is a pressure cooker, even as they target an Adjusted EBITDA margin of 29% to 31% for FY 2025. We've seen dealer revenue dip a bit, down 1% year-over-year in Q2 2025, which tells you the competitive heat is real, despite locking in 19,412 dealer customers with sticky, full-stack tools. With consumer traffic hitting a record 27.8 million unique visitors in H1 2025, the battle for eyeballs and dealer dollars against rivals like CarGurus is defintely fierce, and direct-to-consumer models are definitely looming. To truly map out where Cars.com Inc. (CARS) stands-balancing supplier stickiness against customer choice-you need a clear look at Porter's Five Forces, so let's break down the leverage points below.

Cars.com Inc. (CARS) - Porter's Five Forces: Bargaining power of suppliers

When we look at the power held by the entities supplying inputs to Cars.com Inc., we see a mixed picture. The leverage these suppliers have depends heavily on whether they are providing essential third-party data or if Cars.com Inc. has developed its own proprietary alternative.

The immediate customer base, the dealers, are the primary buyers in the Cars.com Inc. model, but their financial health directly impacts the quality of the revenue stream Cars.com Inc. receives from them. You saw that subscription-based Dealer revenue was down 1% year-over-year in Q2 2025. This pricing pressure on the dealer side suggests that while dealers are a large customer base, their own cost sensitivity might limit how much Cars.com Inc. can push pricing on its services, indirectly affecting the cost/value equation with its own upstream suppliers.

Cars.com Inc. serves a substantial number of dealer customers, which, in a different context, might suggest a large, but concentrated, supplier base for the platform itself. As of Q2 2025, Cars.com Inc. reported having 19,412 dealer customers. This scale is a strength for Cars.com Inc. in its buyer power dynamic, but for its own suppliers, it represents a large, attractive market they serve.

For dealers using the full platform, the outline suggests high switching costs, though the specific migration estimate of $1.2 million is not a publicly confirmed figure I can cite. Still, the stickiness of a deeply integrated platform is a real factor that can reduce a dealer's ability to switch to a competitor, which is a positive for Cars.com Inc.'s own revenue stability.

When it comes to data providers, the situation is more typical for a tech platform. You have concentrated suppliers, like those providing core market data-think of firms like IHS Markit, for example. These providers, often few in number, hold moderate leverage because their data is critical for accurate market intelligence and valuation tools. If Cars.com Inc. cannot easily substitute this data, these suppliers can command higher prices or less favorable terms.

However, Cars.com Inc. is actively working to mitigate this supplier power through internal development. The push on proprietary tools is clear, especially in the valuation space. Consider AccuTrade, which is a direct countermeasure to reliance on external valuation data. Here are the numbers showing its traction:

Also, the Dealer Inspire brand is noted as a preferred provider with nearly every OEM in the United States, which suggests that for certain digital experience and marketing services, Cars.com Inc. has established strong, embedded relationships that may reduce the power of other potential third-party marketing or technology vendors.

The bargaining power of suppliers is therefore:

• Data Providers: Moderate to High, due to concentration.
• Technology/Platform Inputs: Lower, due to proprietary alternatives like AccuTrade.
• OEM Relationships (via Dealer Inspire): Lower, as Cars.com Inc. is an established, preferred partner.

Cars.com Inc. (CARS) - Porter's Five Forces: Bargaining power of customers

The bargaining power of the end consumer-the car shopper-is a critical lever in the automotive marketplace. For Cars.com Inc. (CARS), this power is multifaceted, stemming from the sheer volume of available digital choices and the improving supply of physical vehicles.

Consumers have high choice among rival marketplaces and direct sales models. This means Cars.com Inc. must continually demonstrate superior value to both the shopper and the dealer-customer. The marketplace is not a monopoly; dealer-customers have alternatives like Autotrader and CarGurus for listings, which compete directly for dealer advertising spend.

The platform's ability to attract high-intent shoppers is a key counter-force to buyer power. Cars.com Inc. reported a record high consumer traffic of 27.8 million average monthly unique visitors in H1 2025. This high volume of engaged users is a significant asset.

Still, the power dynamic is influenced by inventory availability. Increased new-car inventory, which rose 9% year-over-year in Q1 2025, gives consumers more leverage when negotiating or choosing where to shop. This improved supply means shoppers are less desperate and can afford to shop around more thoroughly.

However, the quality of the audience Cars.com Inc. delivers to its dealer-customers limits the dealer's power over the platform. Cars.com shoppers convert 5x higher than Google's audiences, according to a case study of 25 Cars Commerce media customers. Furthermore, other data suggests Cars.com referral traffic delivers up to 89% higher lead conversions versus Google traffic.

The competitive landscape among digital marketplaces also dictates customer power. A 2020 analysis comparing CarGurus, Autotrader, and Cars.com suggested that a consumer searching only on Cars.com was exposed to only about 60%-70% of the total vehicle inventory listed across all three platforms at that time.

Here is a comparison of key consumer and dealer-customer metrics:

The leverage held by the end-user is further demonstrated by the platform's focus on high-intent audiences:

• 91% of Cars.com visitors have not yet chosen a dealer.
• Cars.com is the No. 1 most recognized automotive marketplace.
• Dealer Inspire website users adding a Cars.com marketplace package sell inventory approximately four days faster.

For dealer-customers, the existence of strong rivals like Autotrader and CarGurus means Cars.com Inc. must maintain a competitive edge in lead quality and platform stickiness. One older study indicated that for dealers listing on CarGurus, adding a listing on Cars.com or Autotrader only reduced the average days on market by 6%.

Cars.com Inc. (CARS) - Porter's Five Forces: Competitive rivalry

The competitive rivalry within the digital automotive marketplace space remains fierce for Cars.com Inc. (CARS), demanding constant operational discipline and strategic investment. You see this pressure across multiple fronts, from established digital giants to new transactional models.

Rivalry with major players like CarGurus and Autotrader (Cox Automotive) is intense. While older data suggested a traffic gap, with CarGurus leading in traffic share at 25% versus Cars.com at 19% (2023 data), the landscape is dynamic. By October 2025, Similarweb data showed Cars.com capturing 47.66% of the traffic share from the United States when compared directly against Autotrader.com, which held 52.34% in that specific comparison for the last month. Still, Autotrader.com held a better Category Rank at #3 versus Cars.com at #5 in the Vehicles - Other category in the United States for October 2025.

Cars.com Inc. (CARS)'s focus on cost control is a direct response to this competitive environment. The company reaffirms its Full Year Adjusted EBITDA margin guidance for 2025 between 29% to 31%. This focus on efficiency is showing results, as the third quarter 2025 Adjusted EBITDA margin reached 30.1%, following a second quarter 2025 margin of 28.5%. Honestly, hitting the high end of guidance reflects strong operating leverage.

Competition also comes from direct-to-consumer (D2C) retailers like Carvana and CarMax, though the nature of competition shifts from pure lead generation to integrated transaction services. Cars.com Inc. (CARS) is actively building its moat by diversifying its platform beyond just listings. This strategy centers on integrating technology and transactional capabilities across its Cars Commerce platform.

The diversification efforts are concrete investments aimed at locking in dealer relationships and adding new revenue streams. For instance, the acquisition of DealerClub, a reputation-based digital wholesale auction, closed on January 23, 2025, for approximately $25 million in cash at closing, with a potential additional performance-based consideration of up to $88 million. Management noted that DealerClub is expected to have an immaterial contribution to revenue in 2025 and is not expected to be accretive to Adjusted EBITDA in 2025 due to scaling investments.

Growth in these solution-based products is a key metric to watch:

• Dealer count was up in the third quarter of 2025 based on strength across all major product brands.
• Websites grew sequentially by 67 subscribers in Q3 2025.
• AccuTrade grew by 82 subscribers sequentially in Q3 2025.
• AccuTrade Connected had expanded to approximately 1,000 subscribers by the end of 2024.

Here's a quick look at how Cars.com Inc. (CARS) is positioning its core metrics against its primary digital rivals, based on the latest available data points:

The company is clearly using cost discipline to fund strategic moves, like the DealerClub purchase, which is designed to extend influence into the wholesale market worth over $10 billion. You have to track the adoption of these new products closely, as they are the intended moat builders.

Cars.com Inc. (CARS) - Porter's Five Forces: Threat of substitutes

You're looking at the digital automotive landscape and wondering where the real pressure points are for Cars.com Inc. The threat of substitutes is definitely top of mind, as it represents non-traditional ways consumers can complete a vehicle transaction or research process without relying on the dealer-centric marketplace model. Honestly, this force is multifaceted, coming from new digital entrants and shifts in Original Equipment Manufacturer (OEM) strategy.

The threat from direct-to-consumer (DTC) digital retailers bypassing the traditional dealer model is real, though the final transaction point remains sticky. While 95% of car shoppers rely on online resources to start their journey, bypassing dealerships initially, the final closing point is still heavily weighted toward physical locations. Data from Altman Solon shows that only 5% of U.S. automotive purchases close through online platforms, with a massive 70% still closing at brick & mortar dealerships as of early 2025. This gap between research and transaction is where Cars.com Inc. currently thrives, but it's a gap that DTC players are actively trying to close.

Peer-to-peer platforms like Facebook Marketplace present a low-cost, local alternative, especially for used vehicle transactions. These platforms often feature minimal fees or zero commission, directly undercutting the dealer advertising model that forms the base of Cars.com Inc.'s revenue. While we don't have specific market share data for Facebook Marketplace's vehicle sales volume against Cars.com Inc.'s listings, the sheer user base and low friction for local, private sales represent an ever-present, albeit fragmented, substitute for consumers looking to avoid dealer overhead.

OEM direct sales models are an emerging, long-term threat to the dealer-centric platform. Automakers like Volkswagen and Mercedes-Benz have explored these hybrid models, which allow customers to buy new cars online directly from the OEM, often adhering to a manufacturer-set retail price (MSRP). The primary benefit for OEMs is capturing and owning critical customer relationship data, which is a direct challenge to the data aggregation role Cars.com Inc. plays with its dealer partners. This shift means the OEM could eventually become the primary digital destination, relegating third-party sites to a less critical role in the final sales funnel.

Cars.com Inc. counters this by aggressively pushing its full-stack platform, making it a 'must-have' tool that integrates multiple necessary dealer functions. The strategy is to embed so deeply into dealer operations-from appraisal to digital retailing-that cutting the marketplace becomes impractical. The numbers from early 2025 show the value proposition is working for their dealer customers:

The company's audience scale is also a key defense. In Q1 2025, Cars.com reached a record 29 million Average Monthly Unique Visitors. By Q2 2025, they maintained a strong base with 27.8 million Monthly Average Unique Visitors. Furthermore, their dealer customer base grew to 19,412 by the end of Q2 2025. This deep engagement and scale, coupled with the demonstrable ROI from their integrated tools like AccuTrade and Dealer Inspire, is how Cars.com Inc. aims to keep dealers reliant on its ecosystem rather than seeking substitutes.

The OEM and National revenue segment, which reflects automaker advertising spend, also showed growth, increasing 6% year-over-year in Q1 2025. This suggests that even as OEMs explore direct sales, they still view the Cars.com Inc. audience as a necessary channel to reach in-market shoppers, reinforcing the platform's current relevance. You see this in the dealer customer count, which grew sequentially from 19,250 in Q1 to 19,412 in Q2 2025.

The core of the counter-strategy relies on these tangible improvements for dealers, which you can summarize by looking at the platform's reach and efficiency:

• Dealer customers reached: 19,412 (Q2 2025)
• Average Monthly Unique Visitors: 27.8 million (Q2 2025)
• OEM/National Revenue Growth: 6% (Q1 2025 YoY)
• Inventory Turn Improvement from Full Stack: ~10%

If onboarding takes 14+ days, churn risk rises.

Cars.com Inc. (CARS) - Porter's Five Forces: Threat of new entrants

You're looking at the hurdles a new competitor faces trying to break into the Cars.com Inc. space as of late 2025. Honestly, the barriers are substantial, built up over years of consumer and dealer engagement. A new entrant doesn't just need a website; they need a digital footprint that rivals the incumbent's established presence.

The first major wall is audience scale and brand trust. Shoppers are already deep in the digital funnel before they even think about calling a dealer. We see that 95% of car shoppers rely on online resources to start their journey. Cars.com Inc. boasts being the No. 1 most recognized automotive marketplace, visited by more than 26 Million in-market consumers each month. While Q1 2025 saw a record 29 Million Average Monthly Unique Visitors, the Q2 2025 figure settled at 26.6 Million. Furthermore, Cars.com is the most cited public automotive marketplace across AI tools like Google AI Overviews and ChatGPT, holding double the citations of its closest peer. That level of top-of-mind awareness is defintely hard to replicate.

Here's a quick look at the scale Cars.com Inc. commands across its key operational areas:

Next, consider the capital investment required, particularly in technology. A new entrant must match the pace of innovation, which means significant spending on AI. Cars.com Inc. recently launched its AI-powered search experience, Carson™, on November 6, 2025. This isn't just a feature; it's a core platform shift. The market is already showing high adoption potential, with 44% of consumers opting to use AI-powered car search tools on marketplaces. Moreover, 97% of AI users state the technology will influence their purchase decision. Building and maintaining this level of AI capability requires deep pockets and specialized engineering talent.

The network effect stemming from dealer relationships creates a powerful moat. Entrants must build a comparable ecosystem from scratch. As of Q3 2025, Cars.com Inc. powered 19,526 dealers. This large, sticky base represents established contracts and integrated workflows. Overcoming this requires a new platform to simultaneously attract a critical mass of dealers while also capturing the majority of consumer traffic-a classic chicken-and-egg problem for newcomers.

Finally, the complexity bar is raised by Cars.com Inc.'s integrated platform strategy, which bundles services. A new entrant must offer a comparable, seamless suite of tools to compete effectively. For instance, retailers leveraging more than one of the platform's four core capabilities see up to 2x more leads. Specifically, retailers using a Dealer Inspire website alongside a Cars.com marketplace package sell inventory, on average, four days faster than those using only a Dealer Inspire website, translating to an approximately 10% lift in inventory turn time. This integration across marketplace, digital experience (Dealer Inspire), and wholesale/appraisal (DealerClub/AccuTrade) means a new competitor must build four best-in-class solutions that talk to each other perfectly.