
Copart Inc
NASDAQ:CPRT

Copart Inc
In the world of auto auctions, Copart Inc. stands as a silent yet dynamic player transforming how vehicles find their second lives. Founded in 1982 by Willis Johnson, Copart has steadily evolved, becoming a titan in the field of online vehicle auctions. The company specializes in connecting buyers and sellers of used, wholesale, and salvage cars through its virtual marketplace. Aimed primarily at insurance companies, who find themselves laden with vehicles deemed uneconomical to repair, Copart plays a pivotal role. It facilitates the sale of these vehicles to a diverse pool of buyers, ranging from dismantlers and recyclers to individual enthusiasts and dealers. This robust platform, underlined by a sophisticated inventory technology and an intuitive bidding process, has enabled Copart to channel the intricacies of the salvage car market into a seamless online experience, underscoring its importance in the automotive ecosystem.
Copart's monetization strategy is impressively multifaceted and resilient. The company's revenue streams primarily from transaction fees charged to both buyers and sellers—each side paying for the ability to connect with the other on this vast platform. Moreover, Copart enhances its revenue generation through ancillary services such as vehicle transportation, storage, and financing options to its clientele. Its global network of auction locations ensures efficient logistics and helps cultivate a sense of urgency and competition among buyers. By leveraging its scale and technological innovation, Copart has not only streamlined an otherwise cumbersome aspect of the automotive industry but has also positioned itself strategically across the globe, ensuring that its operational efficiencies translate into tangible financial returns. This dual focus on cutting-edge digital infrastructure and strategic expansion allows Copart to maintain its influence and continue thriving in an increasingly competitive marketplace.
Earnings Calls
In the third quarter, Copart achieved global revenue of $1.2 billion, reflecting a 9% increase due to strong international performance. U.S. service revenue grew by 8%, while purchased vehicle revenue saw a 22% rise. Inventory levels decreased by nearly 10%, suggesting positive unit sales trends. The company anticipates continued growth from rising total loss frequency and ongoing investments in technology and infrastructure, particularly for storm preparedness. However, increasing facility-related costs by about 12% and external factors like tariffs create uncertainty. Looking ahead, management expects sustainable long-term growth fueled by strategic investments across its operations.
Management
Willis J. Johnson is the founder and former CEO of Copart Inc., a leading company specializing in online vehicle auctions. Founded in 1982, Copart has grown to be a global enterprise, providing vehicle remarketing services in various countries. Willis J. Johnson played a pivotal role in revolutionizing the salvage auto auction industry by introducing innovative technology and online auction platforms. His vision transformed Copart from a single salvage yard in California into a major international corporation. Under his leadership, Copart expanded its reach and services, significantly impacting the way vehicles are bought and sold at auctions worldwide. Johnson's dedication and entrepreneurial spirit have been integral in shaping Copart's success and influence in the automotive industry.
A. Jayson Adair is a notable executive in the automotive salvage industry, primarily known for his role at Copart, Inc., a global leader in online vehicle auctions. Jayson Adair has been instrumental in transforming Copart's business model and expanding its global footprint. He joined Copart in 1989, working in various capacities and learning the intricacies of the business. Over the years, Adair's strategic vision has been crucial in shifting Copart towards a more technology-driven approach by pioneering its move to an entirely online auction platform, which revolutionized how salvage vehicles were bought and sold. In 2010, Jayson Adair became the CEO of Copart, succeeding his father-in-law, Willis Johnson, the company's founder. Under Adair’s leadership, Copart has significantly increased its international presence, conducting operations across North America, Europe, the Middle East, and other regions. He has been key in driving innovation within the company, adopting advanced technologies to enhance user experience and improve operational efficiencies. His leadership style emphasizes adaptability and integration of technological solutions to meet customer needs within the automotive market.
Jeffrey Liaw is a notable executive who is best recognized for his role at Copart, Inc., a global leader in online vehicle auctions. Liaw has served in key leadership positions at Copart, where his financial and operational expertise has been instrumental in the company's growth and success. He joined Copart in 2016 as Chief Financial Officer and later ascended to senior executive roles, including President, contributing significantly to strategic corporate initiatives and financial management. Before his tenure at Copart, Liaw brought valuable experience from his work at prominent firms in the financial sector. His professional background includes roles at Bain & Company, a global management consulting firm, where he honed his skills in strategic planning and corporate development. Additionally, he has experience in the investment industry, having worked at Hellman & Friedman LLC, a private equity firm, where he refined his financial analysis and investment strategies. Jeffrey Liaw's comprehensive background in both consultancy and finance, combined with his leadership capabilities, have made him a vital asset to Copart and a respected figure in the business community. He holds a Bachelor of Business Administration degree from the University of Texas at Austin and a Master of Business Administration from Harvard Business School, further adding to his credentials and expertise in the corporate world.
Ms. Leah C. Stearns is known for holding significant roles in the financial sector, including her position as the Chief Financial Officer (CFO) at Copart Inc., a global online vehicle auction company. In her role, she is responsible for managing the financial actions of the company, including financial planning, risk management, record-keeping, and financial reporting. With a strong background in finance and strategic planning, Stearns has been instrumental in guiding financial operations and supporting the company's objectives. Her experience and leadership have been crucial in navigating the financial complexities of the industry and contributing to Copart's growth and stability. Prior to joining Copart, Ms. Stearns has held other leadership positions that highlight her expertise and contributions to the field of finance, further establishing her as a reputable figure in the industry.
Hessel Verhage is an accomplished executive with extensive experience in the logistics and supply chain industry. He serves as the Chief Operating Officer and President of Copart Inc., a global leader in online vehicle auctions. Before joining Copart, Verhage had a significant career with prominent roles in various multinational companies. With a strong background in the logistics sector, Verhage has held senior leadership positions at companies like CEVA Logistics and DAMCO, where he focused on driving growth and operational efficiency. His expertise lies in strategically managing complex supply chain operations, enhancing customer service, and fostering innovation. Verhage is recognized for his leadership skills and his ability to build high-performing teams, as well as his commitment to leveraging technology to improve business processes. His international experience has equipped him with a deep understanding of global markets, which he brings to his role at Copart. In his role at Copart, Hessel Verhage plays a crucial part in overseeing the company’s operations and ensuring the efficiency and effectiveness of its business model, contributing to Copart’s continued growth and success in the industry.
Mr. Rama Prasad is a notable executive associated with Copart Inc., where he has contributed significantly to the company's growth and operational efficiency. Within Copart, he has been integral to strategic planning and project management, implementing innovative solutions that enhance the company's competitive edge in the vehicle auction industry. His leadership and expertise, particularly in operations and technology, have reinforced Copart's position as a leader in the market. Prior to his tenure at Copart, Mr. Prasad held various leadership roles that allowed him to accumulate a wealth of experience in business development and technology-driven transformations. His educational background and professional certifications further complement his capacity to drive organizational success.
David Kang is the Chief Financial Officer (CFO) of Copart Inc., a global leader in online vehicle auctions and remarketing services. Kang joined Copart with a wealth of experience in finance and strategic management. Before assuming his role at Copart, he held senior leadership positions in financial management, which equipped him with a robust background in corporate finance, strategic planning, and financial operations. At Copart, David Kang is responsible for overseeing the company’s financial operations, including financial planning and analysis, reporting, investor relations, and capital management. His role is crucial in ensuring the financial health and sustainability of the company as it continues to expand its global footprint in the vehicle auction industry. Kang's leadership is characterized by a focus on enhancing operational efficiencies and driving growth initiatives that align with Copart’s long-term strategic goals. His previous experiences and expertise in financial strategy play a vital role in guiding Copart through the complexities of international markets and evolving industry dynamics. As CFO, he contributes to the executive team with insights that support Copart's mission to innovate and lead in the online vehicle auction space.
Good day, everyone, and welcome to the Copart, Inc. Third Quarter Fiscal 2025 Earnings Call. Just a reminder, today's conference is being recorded. Before turning the call over to management, I will share Copart's safe harbor statement.
The company's comments today include forward-looking statements within the meaning of federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in the company's markets. These forward-looking statements involve substantial risks and uncertainties. For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors in the company's annual report on Form 10-K for the year ended July 31, 2024, and in each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements.
I will now turn the call over to the company's CEO, Jeff Liaw.
Welcome, and thank you for joining us. I'll begin with some remarks on our insurance business, including comments about our preparation for the 2025 cat season before passing it to Leah to describe the results of our financial performance for the quarter.
Starting with our insurance business, our global insurance volume remained relatively flat year-over-year with a nominal decline of 0.3% globally in unit sales and 0.9% in the United States. Accounting for the extra business day of leap year 2024, global insurance and U.S. insurance units sold grew by 1.3% and 0.6%, respectively.
At the same time, total loss frequency continues to rise as it has throughout the vast majority of the history of our industry. In the United States, total loss frequency reached 22.8% in the first calendar quarter of 2025, up 100 basis points or thereabouts in comparison to last year. And while individual quarters can fluctuate and from time to time, we observed even seasonal effects, the underlying drivers of total loss frequency remain quite consistent over time.
First, the economics of vehicle repairs become less economically attractive to our client base, the insurance industry, with increasing vehicle complexity, rising parts prices, rising labor rates, storage fees, rental car expenses as well. At the same time, on the other side of the ledger, the economics of total loss become more attractive over time. For emerging economies around the world, our salvaged vehicles are an essential source of mobility for them. Copart's auction technology and our ecosystem of sellers and members is uniquely well suited to finding the highest and best use for every vehicle we touch.
In anticipating a question about why nominal insurance volumes haven't kept pace with what appears to be rising total loss frequency, we'd offer a couple of notes. First, the precision of total loss frequency measures do vary or does vary. The varying nature of the calculation is to assess what portion of the claims in any individual quarter are ultimately resolved to be a total loss in the end, meaning some figures are even revised after the fact for historical periods. And notably, we observe that there are cyclical forces at work as well, including an increase in the rate of uninsured and underinsured drivers. According to the Insurance Research Council, they observed meaningful increases in both over the course of the past 4 years. And we would note cyclical trends over the decades in terms of the rate of uninsured and underinsured drivers. What that means in practical -- in practice is that drivers with coverage of that type may never bring their vehicles into the traditional insurance claim settlement pathway in the first place. We would expect, over time, as has been proven over the decades, that these cyclical forces will reverse -- will revert at some point as well.
I wanted to turn my attention to the 2025 storm season. Meteorologists and experts have released a number of forecasts for how they expect 2025 storm season to unfold, noting that 2024 was an active season itself. Most would expect based on above-average oceanic temperatures that this form season could well be an active one as well, perhaps as active as 2024. In anticipation of these types of events, we continue to invest in real estate, infrastructure, technology, our people and other aspects of operational readiness. Our preparation is not an ad hoc spring event, but in fact, a year-round exercise for us as a company. One tangible example is our acquisition of Hall Ranch, a property located in South Florida, which offers nearly 400 usable acres of vehicle storage for a storm. With this addition, we now have the physical footprint to handle a storm more than 3x the size of the largest Florida storms on record in Copart history.
In closing, we are excited to continue to invest our time and resources in growing and enhancing our capabilities, both for storms and for our day-to-day business. We'll invest in our physical storage capacity, our technology platform, our people and our seller member ecosystem, each of which is essential to delivering superior auction outcomes to our sellers and a superior purchasing experience for our members.
With that, I'll turn it over to our CFO, Leah Stearns, and we'll both take your questions thereafter.
Thank you, Jeff. I'll begin with our third quarter sales trends. During the quarter, our global unit sales increased 1%, which reflects the modest headwind from the prior period being leap year. On a per business day basis, our global unit sales increased over 2%. Consignment or fee units continue to constitute most of our global unit volume.
In our U.S. segment, unit sales were flat, reflecting flat fee unit growth and purchase unit growth of nearly 7%. Our U.S. insurance unit volume decreased close to 1% year-over-year and decreased approximately 2%, excluding cat units. We continue to see noninsurance U.S. unit volume growth outpace that of our U.S. insurance business.
Blue Car, which services our bank, rental and fleet partners, continued its strong trend with year-over-year growth of almost 14%. Dealer sales volume consisting of Copart Dealer Services and National Powersports auctions grew over 3% year-over-year. Low-value units increased just over 4%.
Turning to our International segment. We saw unit sales growth of 6% in the quarter and about 5% excluding cat units, with fee units increasing 9% and purchase units decreasing 13% for the quarter. Our purchase units continued to decline as certain insurance customers shift from purchase contracts to consigning units.
On a final note, we have observed softness in the heavy equipment auction space, due in part to widespread uncertainty regarding infrastructure spending and tariffs. Our partner in the equipment space Purple Ways was nevertheless maintained flat GTV year-over-year for the trailing 12 months ending April 30. Our global ASPs increased by approximately 3% for the quarter compared to the year ago period. Our U.S. insurance ASPs increased over 2% over the same period and our International segment insurance ASPs increased approximately 5%. We believe our actions are outperforming other platforms on delivered ASPs to our sellers, attributable to the active participation of our global member base as well as our unique digital auction platform.
We have not observed any hesitation from our buyers, which we would attribute to proposed or enacted tariffs. Our global inventory decreased nearly 10% from the year ago period. Overall inventory levels in the U.S. decreased approximately 11%. There are 3 main drivers of the inventory decline: lower assignments, faster cycle times and the reduction in low-value unit aged inventory. As we've noted previously, year-over-year changes in inventory levels can be a directional indicator of prospective unit sales trends. The trends we are observing in our inventory levels reflect the cyclical impacts associated with an increasing share of [indiscernible] and noninsured motorists and varying growth trajectories amongst insurance carriers. We continue to believe that the secular trends in favor of rising total loss frequency will drive our long-term growth.
In addition, our continuous focus on reducing our operational cycle times had reduced inventory levels. For example, deploying our Title Express solution to a number of new carriers has reduced in-yard cycle times and physical inventory. Our International business ended the quarter with inventory levels flat from the prior year.
Turning to our financial performance. Global revenue increased to $1.2 billion. Global service revenue increased nearly $88 million or over 9% from the third quarter of '24 due to increased international volume and overall higher revenue per unit. U.S. service revenue grew by 8% for the quarter and 7% when excluding cat units and international service revenue grew by about 18%. Global purchased vehicle sales for the third quarter decreased approximately 2%, while global purchased vehicle gross profit decreased in the third quarter.
In the U.S., purchased vehicle revenue was up about $20 million or 22%, while purchased vehicle gross profit decreased $13 million or about 187% in the quarter. This includes the impact of a $12 million out-of-period adjustment, which was related to the cost of vehicles sold in Q1 and Q2 of this year. Year-to-date, our U.S. purchase unit margins were just over 6%. Internationally, purchased vehicle revenue decreased by over $23 million or 25% and gross profit increased by over $2 million or about 22% in the third quarter. The reduction in international purchased vehicle revenue accompanied by an increase in gross margin to be driven by higher ASP insurance vehicles in Germany, which have transitioned from a purchase contract to a consignment model as well as stronger purchase unit margins in the U.K.
Global facility-related costs, which include facility operations, depreciation and amortization and stock-based compensation increased $51 million or about 12% and about 10% pro forma if you reflect cap costs. In the U.S., facility-related costs increased $43 million or nearly 12%. During the quarter, we recognized $6 million in incremental costs associated with Hurricane Selene and Milton. This reflects the recognition of deferred expenses associated with cat units sold during the period. Excluding the costs associated with the hurricanes, facility-related costs per unit increased about 10% from the prior year. This increase on a per unit basis reflects our ongoing investments in expanded operational capacity to support our continued growth.
International facility-related costs were up almost $8 million, an increase of nearly 11% or less than 5% on a per unit basis. During the quarter, global gross profit was approximately $552 million, an increase of $27 million or about 5%, and our gross profit -- our gross margin percentage was 46% for the quarter. In the U.S., our gross profit was approximately $480 million, an increase of about 3% and gross margin was about 48% for the quarter. Our international gross profit was approximately $73 million, an increase of about 26% and our gross margin was about 35% in the quarter.
Third quarter GAAP operating income increased over 3% to approximately $452 million, which reflects the growth in gross profit and our general and administrative expenditures of $101 million, which are up about $12 million year-over-year.
Finally, third quarter GAAP net income increased by over 6% to $407 million or $0.42 per diluted common share. During the quarter, we benefited from an increase of nearly $7 million from interest income as we have actively invested our cash in the treasury securities. For the quarter, our tax rate was a little over 19%. Turning to our capital structure. As of the end of April, we had over $5.6 billion of liquidity, which is comprised of nearly $4.4 billion in cash and our capacity under our revolving credit facility of approximately $1.3 billion.
With that, Jeff and I would be happy to take some questions.
[Operator Instructions] And our first question comes from the line of Bob Labick with CJS Securities.
So obviously, you guys have a tremendous asset in your land and you keep purchasing more, and it's a clear benefit to your insurance salvage customers, which is why you keep buying it. I was hoping you could talk about how do you think about this land asset. Are there any current or future benefits from this land for your growing Blue Car or Whole Car customers, particularly with the shift of -- to digital for whole car auctions going on?
Thanks, Bob. Great question. We think that physical storage and logistics are essential to our value proposition for many sellers, insurance companies as well as the Blue Car, the finance companies, rental car companies, corporate fleets and the like. In many instances, physical storage is a necessity. We, of course, as you know, in the past, have also developed products for purely virtual sales. But as it turns out, physical storage, certainly in the case of insurance, when salvage titles and processing through state DMVs is a necessary step as well, proves essential there, but also in many cases for the other types of sellers you described.
So we view it as an essential portion of our service offering. Certainly, the digital product platform you described as well as equally so, but it is a two-pronged approach to serving that universe.
I'd also to perhaps add some further context would say that, that storage is increasingly difficult to procure anywhere in the United States, anywhere in any of the countries we serve, frankly. So we view it also as -- we view it as our responsibility in being stewards of the industry as well to make sure that we can continue to support insurance companies and the other companies you described as well to make sure that we can continue to offer the service that we do for decades and for generations to come.
Okay. Great. And then you touched on this in your opening remarks a little bit and last call. But could you just maybe elaborate a little further on the shift of insured, less collision insurance, insured motorists and how that's typically played out over previous cycles and where you see it impacting volumes in the near or medium term?
Yes. I think, Bob, it's -- unfortunately, this exercise is necessarily imprecise. So we have pieced together a number of different sources, including the insurance council we described in the prepared remarks as well as other sources for registered vehicles for the types of coverage folks have. So whether it's collision liability comprehensive and so forth, we can derive then the portion of the registered vehicle fleet that has or doesn't have insurance and to what extent they are underinsured as well.
So we see cyclicality in it. It won't surprise you that around the time of the global financial crisis in '08 and 2009, there was a local trough in insurance coverage. I think it's not a surprise that we're experiencing that again now. As I think you know, Bob, from following the insurance industry as well, though the rest of the world experienced very meaningful inflation in 2021, 2022, in many cases, insurance rates lagged that inflation because the insurance carriers in turn had to obtain regulatory approval to make modifications to their books of business. And so on the tail end of inflation with an already stressed consumer, in some cases, I think we are seeing and they are seeing folks with higher deductibles or opting for liability only coverage or in some cases, despite statutory requirements going without insurance altogether. So we think that's a cyclical phenomenon, at least it has been for the past 20, 30 years for as long as we can see the data. It does go up and down over time.
Our next question comes from the line of Craig Kennison with Baird.
Wanted to ask about Purple Wave. I think you're about a year into that partnership. And I'm curious what you've learned so far and how you expect to invest in that business going forward, understanding that at this moment, it's not growing.
Yes. Craig, I think it's a very fair question. I think we were -- as you know, the original thesis here is that Purple Wave, really for any kind of M&A activity we pursue, NPA now 7 years ago, 8 years ago or so when we made that investment as well. The two-pronged test that we always subject any investment like this to is, one, do we like it fundamentally as an investment in and of itself, meaning if this were simply a growth equity or a control equity acquisition, would we like the nature of the risk-adjusted expected returns from the business itself; and then secondarily, we ask the question, to what extent does this help Copart's core business. And then you start to evaluate the strategic overlap to what extent Copart's capabilities can help the business, to what extent can the business capabilities help Copart as it stands now.
And Purple Wave, I think the logic for the Purple Wave transaction was very much on both fronts. It was that we affirmatively liked the investment on its own merits, and we also thought it was beneficial to Copart. We are even just day-to-day, a huge purveyor of equipment of construction, agricultural equipment, heavy-duty trucks and the like. the expertise that they brought was meaningful to us. And certainly, the expertise that we bring in the form of managing large physical storage facilities, large liquid digital auctions and so forth made for a very good fit.
So I think it's probably not quite fair to say that it's flat. I think they're operating in a very uncertain environment, courtesy of the tariffs, as you know. So there are a lot of folks in a lot of these businesses who are awaiting more certainty on both infrastructure spending as well as tariffs to decide what to do with their equipment, whether to buy, to sell, et cetera. So I think they're facing some inertia, which other public companies, I think, have certainly seen as well in their results in terms of the volume of activity in the heavy equipment arena.
And you mentioned tariffs. How are you thinking about the very broad implications of trade policy as it relates to your business as it currently stands, knowing that it's been changing a little bit?
Yes. I think that's an understatement, Craig. It is certainly a very dynamic picture. And I'd say that is probably, first and foremost, the most important observation here is that it has created meaningful uncertainty for our clients, the insurance industry and otherwise. We now are facing or the industry broadly is facing tariffs on parts -- the parts industry. I think 2024 day, would say, the $220 billion industry or thereabouts for both new and replacement parts the vast majority of which come from half a dozen countries. Canada, Mexico, China, South Korea, Japan, Germany, I think, account for the vast majority of those parts. Virtually all of those parts as it stands now, we're facing tariffs to some extent, which increases the cost of the repair for the insurance industry. So for any given claim, they're evaluating their choices, considering their choices, which can be to repair the car or to total it. It assuredly has made the repair path less attractive because the parts are more expensive. In some cases, the parts will be delayed and delayed parts, of course, compromises the policyholder experience and likely extends the duration of the rental as well. That's that side of the ledger.
On Copart side of the ledger, when you consider the total loss, I think there are offsetting considerations there. On the one hand, if used car prices should rise and ACVs should rise because new cars become more scarce, then the cost of a total loss indemnity may be higher but by the same token, our salvage returns will be higher as well.
So I think the best analogy we can draw is to the 2021 or thereabout to the semiconductor crisis you may certainly recall. That was less about parts per se. So it wasn't all repair parts. It was a very narrow subset of the parts that go into the production of a vehicle. And in that moment, I would say we experienced higher ASPs for the cars that we sell. Probably all else equal, we experienced a mild suppression of demand relative to where it otherwise would have been. I think today's catalyst is probably marginally more favorable to us than the semiconductor shortage because it is repair parts, the vast majority of which comes from places outside of the United States.
So we think the repair path will become relatively less attractive in comparison to the total loss path by virtue of the tariffs. That said, overwhelmingly, the conclusion is for now that there's tremendous uncertainty, right? The federal government, I think, is intending to provide guidance as to what constitutes exceptions under USMCA, what counts as USMCA content for parts. So there's still much of this picture that's still left to be painted.
our next question comes from the line of Chris Bottiglieri with BNP Paras.
So the first one, Jeff, Copart has taken a lot of share over the last 5 years you've been CEO and the 10 years before that. What are you currently seeing from a market share perspective? And is there any reason why your peer could be putting higher reported growth numbers? Like how would you think about that? .
Chris, a very fair question. I think market share, as you might imagine, is a very complicated, very downstream metric. So it is affected by things like the relative growth of individual insurance carriers that we serve. And so if on any given day, we happen to be serving an insurance carrier who is growing faster or slower, that can affect the overall volume trends for us relative to the rest of the industry. I think we've gained share, frankly, for many years and decades before I arrived even at the company at all. So that's a long-standing trend. And I think the drivers there won't surprise you. We are committed to delivering the very best possible net returns to our clients by investing in the land we've already talked about, by investing in the digital auction platform and by making our partners, our clients faster, more accurate, more efficient at what they do.
We've talked in previous calls, I won't drag you through all of it here, about advanced charges and how important they are to our insurance companies and the suite of tools. In some cases, computer vision, artificial intelligence enabled that empower them to address those opportunity sets as well. We know that if we take care of those particular objectives, if we are exceptional along those dimensions, like our stock price, the stock price and market share will take care of itself. We know what the input variables are. We know where to invest our time, attention and resources, and we have high confidence that if we execute on those fronts that the market share dynamic will take care of itself.
But I think the short answer to your question is that it is more of the random fluctuations in the misalignment of reporting periods and so forth, we don't line up precisely. It's underlying insurance carrier growth trends, all of which I think are generally cyclical by nature, right? All of those kinds of variables will move in both directions over time.
Got you. Okay. And then a bigger picture question. What sets prices in your end markets? Like is it somehow derived off of U.S. vehicle prices? Or is it derived by the local economies of your buyers? Just trying to think if like the tariffs primarily affect the U.S. vehicle prices, like how does that affect with the international buyers, which may not see new car prices rising in their local markets? What does that do? Just kind of curious what your thoughts.
Chris, I'll take a portion of that, and I'll let Jeff jump in if there's anything he wants to add. But I think what we've seen historically is that the arbitrage that's available for our global buyer base because the affordability of mobility solutions locally is so out of reach that they have a significant amount of ability to maximize the value of that vehicle in an emerging market relative to what a domestic buyer would be able to monetize that vehicle for.
And so if you look at simply just the relative price of a newer used vehicle in some of the markets like in Eastern Europe or in Latin America, the affordability index, if you index that to what a consumer in the U.S. would be able to achieve, is drastically more expensive. And as a result, they default to seeking out repairable vehicles, and Copart is a key source for them to go to, to find them.
So the -- I would say the sensitivity of price, we don't have a perfect answer to, but we do think that the spread between the alternative is quite dramatic. And therefore, we have not seen any significant impact to buyer activity and bidding activity as a result of the pending or enacted tariffs so far.
Chris, I'd add to that. An illustration with 2 just -- consider this a stylized illustration or 2 extremes. In one case, you have a very old car that is entirely destroyed for which the value is entirely the metal, maybe a few parts, maybe some precious metals from the catalytic converter or otherwise. The value of that car is largely domestic. In fact, it's largely local, right? It's unlikely this car for a few hundred dollars will move more than 10, 20, 30 miles even from the side of the Copart facility.
That is nearly entirely domestic, even quasi-local asset. That is also a very, very tiny fragment of the value of Copart's auction overall and of our business overall. At the other extreme, consider a lively damaged hail car or a vehicle we have consigned to us from a rental car company that is in -- that is at the end of its rental fleet life. That vehicle then is valuable to a host of different places, including locals, including folks in other states and including folks in Poland and Lithuania and otherwise. That vehicle then is subject to the specific substitutes available to each of those buyers. So in the U.S., assuredly, those buyers are now facing cars that will cost more on the new market courtesy of tariffs, at least on a portion of the parts. For our international buyers, they, of course, will have to bid against those domestic buyers as well. So they have to compete for that vehicle.
The individual circumstances any given country. I think we tend to find that the biggest purchasing countries for Copart vehicles our fast-growing economies that don't have local domestic auto production. So their alternatives aren't fantastic, right? They can buy vehicles from other salvage markets. They can buy cars from the U.K., subject to the right-hand, left-hand drive problem. They can buy cars from Copart Germany and Spain, and there are certainly other sources of vehicles like it.
But it's a long-winded way of saying that it varies very much by car, but it's ultimately an auction. So whatever your highest and best use is, whatever the highest and best uses for that given vehicle, anywhere in the world, we'll generally find it.
[Operator Instructions] And our next question comes from the line of Jash Patwad with JPMorgan Chase.
I was just curious about the trends in G&A spend. Typically, we've seen a seasonal sequential uptick in the third quarter. But this time around, the trends appear flat, was the stability driven by the reduction of some onetime expenses related to projects you've alluded to previously. And is the 3Q run rate a new baseline or other additional onetime expenses that are yet to roll off? And I have a follow-up.
Sure, Josh. I'll take that. With respect to G&A, I would say year-over-year, the main driver of the increase was attributable to our continued investment in the sales force within Purple Wave. The rest was really just some minor investments across our platform services to support our global organization. We don't necessarily look to that or provide guidance in terms of whether or not that is a steady-state number. We make investments from time to time in projects and solutions that we think and believe will drive greater operating leverage for the business in the future. And so I wouldn't point you to that as being a run rate, but each individual investment that we do make into G&A, we do take an investment mindset approach to it and ensure that there are tangible returns that we will achieve, whether it's through cost reduction efficiency or other opportunities for the business more generally.
Understood. That's helpful. And just as a follow-up, reflecting on a few quarters back, based on Jeff's commentary, I was under the impression that despite the increasing number of underinsured and uninsured motorists on the road, these vehicles would eventually end up at Copart auctions as it seemed to be the most economically efficient outcome. However, based on your comments today, it appears that's not the case. Could you provide some insight into the channels that are effectively facilitating the scrappage or potentially the remarketing of these vehicles? .
Yes, I think that's a fair question. I think the vehicles, in many cases, could or should still end up back at Copart via our Cash for Cars business, which purchases vehicles directly from consumers; our Copart Dealer Services business. I think in some cases, the policyholders will ultimately monetize their vehicles by trading and even a damaged car to a local dealer, independent franchise or otherwise. So we do have multiple shots on goal, so to speak, to earn the right to sell that car.
I do, and we continue to argue that we are the right liquid marketplace to dispose of that vehicle wherever it ends up, but it's certainly most efficient, right? It wouldn't be an immediate consignment. If you, Jash, God forbid, were in a car accident tomorrow and notified your carrier right away, we might be selling that car 2 weeks from now, depending on the state in which you live. In some cases, other states take far longer than that. But the point is that there's an immediacy to that consignment that simply won't exist if that vehicle does not enter the traditional insurance company funnel, so to speak.
Appreciate it. If I could just sneak one more in. There are several potential legislative actions being considered in various states that could potentially cap storage fees, which I believe would be beneficial for Copart. And on the other hand, there's also legislative actions being considered that could raise the threshold for total losses, which might be a downside. Could you walk us through how these changes, if applied on a broader basis, could impact Copart's business model? .
Yes, I think your observation about storage is likely accurate that the -- I think the legislation you have in mind would cap what inbound facilities probably unaffiliated repair shops can charge insurance companies for storing vehicles. In that case, I think that benefits the insurance industry more broadly. I know naturally, we -- in some sense, we compete against all alternatives for a car. We compete against it being sold elsewhere. We compete against the car being repaired. But in this case, reducing the cost of storage, I think, would affirmatively benefit the insurance companies. We likely would equip them with the tools to still move quickly to resolve those claims as fast as possible. There's a lot of value in shortening the intervals by which insurance companies manage their claims.
To your second question about the total loss thresholds, in general, I think our belief is that our principled approach to this that the insurance companies shouldn't make the best total loss decisions for their business. In many cases, we think they aren't totaling enough vehicles, right, for a host of reasons that we've talked about on prior calls.
Legislation in the past has generally been such that the insurance companies are required to total a car above a certain repair threshold. That's, I think, what you're referring to in this case. In most cases, insurance companies should economically total cars at lower thresholds than the statutorily required thresholds. So we think that left to its own devices, that should not have a huge distortion on the decisions that an insurance company may make.
If on the other hand, you had mandatory repair legislation, which, by and large, did not exist in the United States, such that the insurance companies were required to repair a vehicle for a certain percentage threshold that could alter the picture somewhat. We think the insurance industry is certainly motivated enough to want to preserve the discretion to make that decision on their own as opposed to allowing the states to dictate that decision for them. So we don't think that's a meaningful distortion, but we certainly do track that aspect of our business.
And with that, there are no further questions at this time. I'd like to pass the call back to Jeff Liaw for closing remarks.
Great. Thank you, everybody. We'll talk to you next quarter.
Thank you. And with that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.