Copart: A Buy After a 40% Drawdown
Copart ($CPRT): Investment Thesis
Today’s Investment Thesis is free for everyone. Merry Christmas, and thanks for reading.
Copart operates the leading online marketplace for total-loss and salvage vehicles, connecting insurers and other sellers with a massive global base of buyers.
Despite its qualities, including massive scale, buyer liquidity, and a dense yard network, shares are in a 40% drawdown. Growth has slowed in recent quarters, and the long-term risk of autonomous driving could shrink the supply of total-loss vehicles.
The market is concerned, but my view is different: the long-term AV risk isn’t as much of a risk as it seems, and recent growth concerns can be explained by cyclical reasons.
In this thesis, I’ll explain what really drives salvage volumes and prices, separate real risks like autonomous driving from short-term noise, and show why today’s valuation assumes a slowdown that looks too pessimistic given Copart’s fundamentals and long-term growth history.
What You’ll Read Today
Industry Overview
Business Model and Moat
Key Financials
Management and Incentives
Risks, Valuation, Verdict
Industry Overview
Copart operates within the salvage vehicle auction industry as a global online marketplace for total-loss vehicles. The industry exists to price, liquidate, and redistribute vehicles that have become uneconomic to repair. When a vehicle crosses that threshold, the industry “converts” it into cash by matching sellers that value speed and reliable price discovery with a global buyer base seeking aftermarket or arbitrage opportunities.
From this perspective, the industry is best understood as an asset-liquidation business, with vehicles as the underlying asset class.
Supply is highly concentrated and dominated by insurance companies such as GEICO, Progressive, and State Farm. When an insured vehicle is damaged through accidents, weather events, theft, or vandalism, insurers must decide whether to repair the vehicle or declare it a total loss.
That decision is driven by a simple economic comparison: expected repair costs versus the vehicle’s Pre-Accident Value (PAV). To account for uncertainty and execution risk, insurers typically declare a total loss when repair costs approach roughly 70–80% of PAV.
Secondary suppliers include rental and fleet operators, banks, charities, and individual vehicle owners, but insurers account for the majority of consistent volume.
On the demand side, the customer base is global and highly fragmented. Buyers include dismantlers and parts recyclers, rebuilders, exporters, and used-vehicle dealers. Demand for salvage vehicles exists for two primary reasons.
First, there is regulatory and income arbitrage across geographies. A large portion of salvage supply originates in developed markets such as the U.S., where safety, emissions, and inspection standards are strict. In many developing markets, standards are lower, allowing vehicles declared total losses in the U.S. to be repaired and driven, often after relatively minor work.
Second, there is significant value in parts reuse. Copart’s largest buyer segment consists of dismantlers, who monetize salvaged vehicles by breaking them down and selling individual components.
Although the industry operates largely through digital auction platforms, it is fundamentally asset-heavy, unlike traditional digital marketplaces such as eBay, Uber, or Airbnb. Vehicles must be physically stored, inspected, photographed, and transported, which requires extensive salvage yard infrastructure, logistics capabilities, and regulatory compliance. As a result, the industry’s cost structure is characterized by high fixed costs, significant operating leverage, and strong benefits from scale and utilization. Once yards and infrastructure are in place, incremental volume tends to carry high contribution margins.
This physical footprint also creates formidable barriers to entry. Suitable industrial land near densely populated areas is scarce and expensive, while zoning and permitting are often difficult due to community resistance—”not in my backyard.” At the same time, proximity to population centers is critical for logistics efficiency and insurer relationships.
The result is a market structure with few scaled players and local monopoly dynamics at the salvage-yard level.
Now, there are several secular trends and moving parts within the industry that either positively or negatively affect long-term growth and returns.
The most obvious trend is that vehicle miles traveled in the U.S. has quadrupled since 1960. More miles driven should, in theory, translate into more accidents.
But that conclusion is too simple.
A second trend has been the continuous advancement of vehicle safety technology. Over time, this has led to a slow but steady decline in the number of accidents per mile driven. Because miles driven increased so dramatically, the absolute number of accidents in the U.S. has only declined by roughly 8% over the past 30 years. Accident volume has been resilient, but the direction is still down over time.
From that perspective, this is an industry facing secular pressure on accident volume.
Yet the industry has grown significantly because total loss frequency has more than offset declining accident rates.
“Modern light vehicles now house some 1,000-3,000+ semiconductors vs. literally zero 50 years ago. An accident today identical to one 20 years ago in physical severity—the nature and speed of impact—would force a repair now that costs much more in time and money by virtue of the dramatic increase in vehicle complexity.”
—Copart CEO Jeff Liaw
While accident volume has slightly declined, the share of claimed vehicles declared total loss has surged. In 2013, roughly 14% of insurance claims resulted in a total loss. Today, that figure is closer to 22-23%, and management believes it will eventually move toward 25–30%.
This increase in total loss frequency is a direct consequence of rising repair costs driven by advanced electronics, sensors and cameras, semiconductors, and increasingly complex vehicle architectures.
Crucially, a “totaled” vehicle today often looks very different from a totaled vehicle 30 years ago. People often imagine a completely wrecked car when they think of a totaled car, but that’s not necessarily true.
As an example, EVs like Teslas can be declared total loss when the battery pack is damaged, even though the car is otherwise fine.
“EVs constitute only a fraction of vehicles on the road, making industry-wide data hard to come by, but the trend of low-mileage zero-emission cars being written off with minor damage is growing.”
—Reuters
Many vehicles are declared total losses not because they are physically destroyed, but because repairing damaged sensors or electronics is uneconomic. In many cases, the vehicle still functions well (after minor repairs).
This matters because standards abroad are often less strict. Vehicles that are totaled in developed markets like the U.S. may require only minor repairs before being legally driven elsewhere. As insurers total vehicles sooner, salvage inventory is gradually becoming higher quality over time.
As this trend continues, Copart’s inventory increasingly resembles that of a traditional wholesale vehicle auction, rather than a yard filled with heavily damaged cars. This is something we’ll discuss in more detail later, in relation the final major trend: autonomous driving.
Autonomous driving is the next step in the long-running arc of vehicle technology. The primary risk for the industry is straightforward: fewer accidents means fewer claims and potentially fewer total-loss vehicles over time.
However, when accidents do occur, repair costs are likely to be far higher than they are today. Autonomous vehicles (obviously) rely on expensive sensors, cameras, and compute. That makes each incident more costly to fix, which should keep total loss frequency per accident high.
And importantly, autonomous driving remains a long-term story. Today, AVs operate in tightly fenced urban environments and are accessible only through ride-hailing services. The vehicles are extremely expensive and not available for private ownership in any meaningful way. The global vehicle fleet remains non-autonomous, and fleet turnover takes decades. In the U.S., the average vehicle is now 12.8 years old. And this does not even account for the vast number of developing markets, where vehicles are less advanced and technology is years behind.
With the industry context established, we can now turn to Copart’s business model and how it operates within this industry.
Business Model and Moat
Copart is one of the two largest salvage vehicle auction platforms globally, alongside IAA. Together, the two control roughly 80% of the U.S. market.
Within this industry, Copart’s role is to efficiently convert unwanted or uneconomic vehicles into cash. In most cases, the company does not take ownership of the vehicles it auctions. Instead, it acts as an intermediary, facilitating transactions between sellers and a global buyer base.
Copart operates through two distinct models:
The consignment model is Copart’s preferred approach. Under this model, Copart does not take ownership of the vehicle. It facilitates the auction and earns fees from both buyers and sellers. This is the superior model: it is high-margin and, crucially, aligns incentives. Both Copart and insurers benefit from achieving the highest possible sale price, since Copart’s fee scales with the value of the vehicle. Copart primarily operates under this model and is actively transitioning international markets toward it.
The purchase contract model is the alternative. Here, Copart purchases vehicles outright from suppliers and resells them at a markup. This model has historically been more common outside the U.S., but it is structurally inferior. Incentives are misaligned: Copart seeks to buy vehicles as cheaply as possible, while insurers want the highest price. Margins are lower and capital intensity is higher.
In addition to the marketplace, Copart provides ancillary services. Vehicles are stored at Copart-owned salvage yards, processed (photography, administration, title work), and transported as needed. This physical layer is inseparable from the digital auction platform.
Copart’s marketplace includes roughly 300,000 registered buyers worldwide. Buyer concentration is low. In the U.S., the top ten buyers collectively account for only a low single-digit percentage of total auction volume. No individual buyer is critical to the system.
A broad buyer base ensures more bidding, which improves price discovery and raises recovery values for sellers. Higher recoveries reinforce insurer trust, which drives more supply onto the platform. This feedback loop sits at the core of Copart’s model.
Because Copart primarily operates under the consignment model, the bulk of its revenue is fee-based. Buyer fees typically range from 7–13% of the final sale price. Seller fees are not disclosed in detail but are generally estimated at around 6–7%. On top of transaction fees, Copart generates ancillary revenue as mentioned.
The financial impact of shifting toward consignment internationally is already visible. In fiscal 2025, international service revenue increased from $435 million to $517 million, while vehicle sales revenue declined from $337 million to $275 million. Total international revenue rose by only $20 million, yet operating income increased by $72 million.
“[The consignment model] better aligns our interest with the insurance companies. We've talked about that in the past, too, that we always prefer to sell on a consignment basis because it meets the insurance carrier, and we are rooting for the same outcome as opposed to the very naturally adversarial relationship when we buy cars from them.”
—Copart CEO Jeff Liaw
Another important and well-known aspect of Copart’s business model is its decision to own the land on which its salvage yards operate. Competitor IAA, by contrast, leases its yards. Leasing offers lower upfront costs and greater flexibility, but Copart’s ownership-heavy approach has proven superior over time. Rising land values and restrictive permitting environments have made control of suitable locations a durable advantage.
This is part of why Copart operates at operating margins of roughly 37%, compared to around 18% for RB Global, IAA’s parent company.
The second pillar of Copart’s moat is its network of buyers and sellers. Copart was an early mover in digital auctions, launching its online platform as early as 2003. Many competitors followed more than a decade later, while some still rely on in-person, physical auctions. That early start allowed Copart to build a global buyer base at scale, reinforcing liquidity and making the platform increasingly difficult to replicate.
On the supply side, the seller network, consisting largely of insurers, has grown attached to Copart’s platform. Copart handles claims-related workflows such as vehicle pickup coordination, title processing, settlement timelines, and administrative tasks, reducing complexity and administrative work for insurers.
The relationship between insurers and Copart becomes especially important during catastrophic events such as hurricanes and floods. These events create sudden surges in volume and intense operational pressure. Copart has deliberately positioned itself as a partner that shows up during these periods, even when short-term economics are unattractive, while IAA has at times stepped back.
Copart has therefore become a preferred and trusted partner for many insurers. The company maintains roughly 2,000 acres of salvage land that may sit idle for years until a major storm occurs, allowing it to respond quickly when demand spikes.
“Catastrophic events are surely not per se profitable for Copart. It's a service offering we provide for our insurance industry. They know that we are the backstop. So we are the insurance provider, so to speak, for the insurance industry themselves. We bend over backwards and acquire land that sits idle for years until a major storm arrives, some owned trucks and employee drivers to make sure that we have the flexible capacity to address their needs at that time.”
—Copart CEO Jeff Liaw
Finally, Copart’s salvage yards often function as local monopolies. Once an incumbent yard is established in a given area, adding a second yard nearby is extraordinarily difficult due to zoning and permitting hurdles, and it is unattractive economically because it would compete away profits.
Now, as technology continues to evolve, accident rates decline, and total loss frequency rises, Copart’s business model is evolving and will continue to do so.
As CEO Jeff Liaw has mentioned, insurers increasingly “total ever lesser-damaged vehicles,” which has resulted in Copart’s “marketplace inventory evolving to resemble that of a traditional wholesale auction.” You could say Copart is indirectly moving upmarket.
For the business, this is positive. Copart earns revenue through fees as a percentage of sale prices, and sale prices of used (but intact) vehicles are much higher than totaled vehicles. At the same time, this shift in inventory also mitigates against the risk of AVs, which will further lower accident rates. As Copart’s inventory consists of less and less totaled vehicles, it relies less and less on accidents “needing” to happen.
Copart isn’t just slowly moving away from salvage vehicles because of insurers. It’s also actively expanding into adjacent industries. Copart organically built Blue Car, a specific business channel for non-insurance sellers (banks, rental car companies, corporate fleets, etc.) to sell non-totaled vehicles. There’s an important flywheel going on at Blue Car in relation to the core insurer business:
“Rising total loss frequency means that an increasing portion of the cars that we sell on behalf of the insurance industry are actually cars that will be repaired and drivable again, both in the U.S. and overseas. As we draw buyers of those types of vehicles to our platform, they are increasingly the right fit as well for sellers such as rental car companies, financial institutions, corporate fleets, and the like. We've also contributed to this flywheel effect by building purpose-built enhancements for commercial sellers as well.”
—Copart CEO Jeff Liaw
Blue Car grew 15% in 2025, outpacing the core insurance business.
Copart also acquired National Powersport Auctions (NPA) in 2017, an auction platform focused on motorcycles, jet skis, snowmobiles and the like.
Finally, in 2023, Copart acquired 80% of Purple Wave, an auction platform for heavy equipment like tractors, excavators, trucks, forklifts, etc.
Key Financials
Copart has grown revenue at a long-term rate of roughly 15% per year. Growth accelerated in 2021 and 2022, when vehicle prices surged following the COVID pandemic and a global semiconductor shortage.
In the short term, however, growth has slowed meaningfully. In Q1 2026, revenue increased just 0.7% YoY.
There is no single explanation. The slowdown reflects a combination of factors:
First, Q1 2025 set a difficult comparison. That quarter benefited from multiple severe weather events, including hurricanes Helene and Milton, as well as flooding across the Middle East, Germany, and Brazil. Excluding catastrophic events, revenue would have grown 2.9% YoY.
Second, the insurance industry is in a cyclical downturn. U.S. insurance vehicle units declined 9.5% YoY, or 7.3% excluding catastrophic events. As insurance premiums rise, some consumers reduce coverage or drop optional policies, resulting in fewer vehicles entering the total-loss funnel.
Third, mix effects matter. Copart is shifting away from purchasing low-value junk vehicles through Cash for Cars and toward a “Direct Buy” referral model. Because these vehicles are no longer owned by Copart, they are excluded from units sold, which weighs on reported volume and revenue growth even though the channel is more profitable and efficient.
At the same time, the non-insurance business grew 5.3% YoY, fee revenue per unit increased 7%, and average selling prices rose 8.5%. This is consistent with Copart’s inventory gradually moving toward higher-value vehicles.
The point is that low near-term revenue growth reflects cyclicality and mix effects, not structural decline.
Long term, the revenue mix continues to improve. Vehicle sales revenue, generated through the lower-margin purchase contract model, has stagnated, while service revenue has grown consistently as Copart emphasizes consignment.
Copart’s quality also shows up in margins. Gross margins of roughly 45% are modest for a digital marketplace due to the asset-heavy yard network, but operating margins are consistently in the mid- to high-30s. Over time, margins expanded through scale economies, a shift toward consignment, and rising unit economics as vehicles become more complex and valuable.
Margins peaked in 2021 and declined gradually since, but remain well above pre-COVID levels. During the pandemic, used vehicle prices surged, allowing Copart to generate higher profit per vehicle without a corresponding increase in costs. Margins were further amplified by Copart’s heavier reliance on the purchase contract model internationally at the time.
Copart’s return on invested capital today stands at roughly 15% and has trended down alongside margins. Another factor is Copart’s rapidly growing cash balance, which is included in the invested capital base.
Over the past five years, Copart’s cash position compounded at nearly 60% annually and now stands at around $5 billion. Excluding excess cash, ROIC is closer to 30%.
While Copart does reinvest capital, primarily into new salvage yards, management has consistently favored slow, disciplined growth over aggressive capital deployment.
“One of the fears for a given company and accumulating too much cash or too strong a balance sheet is that they would in turn become reckless with their capital… We still treat each dollar as though it’s as precious as the last and our P&L should reflect that… the standards for what we will invest capital in have not changed in the ten years I’ve been here. I don’t think they changed in the twenty years before I got here either.”
—Copart CEO Jeff Liaw
This philosophy traces back to founder Willis Johnson, who prioritized disciplined growth at high returns on capital over rapid topline expansion. That cultural DNA remains embedded at Copart today.
Copart does not pay a dividend, and buybacks have been sporadic, with none in the past five years. Copart is strict when it comes to buying back shares, which is good to see.
Ultimately, returns on invested capital remain strong, even if temporarily obscured by a growing cash balance. That cash provides flexibility when the right opportunities arise.
Management and Incentives
Copart’s management team is rare, in a good way. Few teams operate with such deeply rooted long-termism and an investor’s mindset.
Since its founding in 1982, Copart has had only three CEOs.
Founder Willis Johnson led the company from 1982 until 2010. He was succeeded by Jayson Adair, Johnson’s son-in-law, who joined Copart as a manager at the age of 19 and worked his way up to CEO. Adair later served as co-CEO alongside Jeff Liaw from 2022 to 2024, before Liaw became Copart’s sole CEO.
Liaw joined Copart in 2016 as CFO and became President in 2019. Based on earnings calls and public commentary, I can tell Liaw is not changing Copart’s culture, but rather continuing it.
Willis Johnson remains actively involved as Chairman of the Board, while Jayson Adair serves as Executive Chairman. Adair refuses nearly all forms of compensation, receiving only a symbolic $1 annual salary. Yes, just a dollar.
He does, however, receive non-cash “compensation” of roughly $400,000 related to the personal use of company-owned automobiles and aircraft, as well as medical care.
CEO Jeff Liaw receives a base salary of $900,000, alongside cash bonuses tied to operating income targets. Incentivizing profitability rather than revenue growth is a good design choice in my opinion.
Liaw’s total compensation in 2025 amounted to just over $2 million, which is extremely low for a company with a market capitalization approaching $40 billion. This speaks to the frugal culture instilled at Copart and is consistent with the company’s disciplined capital allocation, ownership mentality, and long-term orientation.
Insider ownership further reinforces this alignment. Collectively, insiders hold nearly 10% of Copart. Willis Johnson owns approximately 5.75% of the company, while Jayson Adair holds about 3.14%.
Jeff Liaw “holds” roughly 3.3 million shares, equivalent to about 0.3% of the company. This figure has increased steadily, from around 2 million shares two years ago to roughly 2.7 million shares a year ago.
However, it’s important to be precise. Liaw directly owns just 237,274 shares. The vast majority of his reported holdings, roughly 3 million shares, consist of stock options that are exercisable within sixty days after October 10, 2025. While he does not yet own these shares outright, the structure still incentivizes him to drive share price appreciation.
With Willis Johnson and Jayson Adair still deeply involved and holding substantial stakes, Copart’s culture and incentives remain firmly aligned with long-term shareholders.
Risks, Valuation, Verdict
I might be naive, but I don’t think the Copart thesis comes with substantial risks. The big elephant in the room is, of course, the long-term risk of AVs.
Based on my research, however, I don’t think this risk is as large as it first appears. I’ve already discussed this throughout the post, but it’s worth briefly recapping. AV adoption is slow-moving, and Copart has time to adapt. It is already broadening beyond insurance salvage into used but undamaged vehicles and other adjacent verticals. The AV risk also comes with an offsetting force: higher repair costs leading to higher total loss frequency per accident, consistent with the pattern observed over decades of vehicle innovation.
Lastly, there are still decades ahead in which the global vehicle fleet will consist primarily of traditional, human-driven vehicles.
The reasons behind Copart’s recent stock drawdown also don’t concern me. They appear cyclical rather than structural.
Yet market expectations have clearly reset. At today’s price, Copart needs to grow free cash flow at roughly 12% annually to justify its valuation.
Historically, Copart has grown free cash flow at around 20% per year.
Base-rate analysis provides a reality check. Based on Michael Mauboussin’s research, companies with $3.5–6 billion in revenue have roughly a 12% chance of growing at 10–15% annually over the subsequent decade, and about a 20% chance of growing at 5–10% per year.
While the odds aren’t in Copart’s favor, the sample includes many average and structurally constrained businesses. Copart is not one of them.
Copart continues to reinvest and has no intention of slowing down. It benefits from clear secular tailwinds, including rising total loss frequency and increasing average vehicle selling prices. International expansion remains early, and Copart’s own historical growth suggests it is far from an average company.
Still, even if Copart can reasonably achieve 12% free cash flow growth, that does not automatically mean the stock has become a bargain.
If the stock were to fall into the low $30s, Copart would need to grow free cash flow at a rate below 10% to justify the price. At that point, the risk-reward would become very compelling in my view.
Even at today’s price, however, I consider Copart a buy. I plan to initiate a small position of around 2% of the portfolio and add more if the stock continues to fall.
Below $40, I consider Copart a buy.
I hope you found this investment thesis valuable. If you have thoughts or questions, feel free to leave a comment in the app, reply directly to this email, or message me on Substack.
Thanks for reading.
Lucas
Author & Founder, Summit Stocks
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Disclaimer: the information provided is for informational purposes only and should not be considered as financial advice. I am not a financial advisor, and nothing on this platform should be construed as personalized financial advice. All investment decisions should be made based on your own research.
Great breakdown. Out of curiosity, when I was analyzing this business myself I stumbled upon a short thesis on Copart in the Value Investor Club which posited that it was going to lose market share to its main competitor as they were at peak market share, and its competitor had reached the maximum it could fumble. The short was successful, but not 100% clear whether for this reason. In my opinion, it could be very possible that this was the main cause of the slowdown, on top of the cyclical headwinds the business faces. Is this something you've had a look at? Do you know anything about this?
I love the use of base rates here