CarGurus, Inc. Commitments Disclosure

10. Commitments and Contingencies

Contractual Obligations and Commitments

As of December 31, 2025, all of the Company’s property and equipment and capitalized hosting arrangements have been purchased with cash with the exception of unpaid amounts as disclosed in the consolidated statements of cash flows.

Leases

The Company’s material lease obligations consist of various leases for office space in: Boston, Massachusetts; Cambridge, Massachusetts; and Addison, Texas.

The Company has non-cancellable lease terms through 2039 for its various commenced operating leases, certain of which include the option to extend the lease term up to two additional periods of five years. These options are not recognized within the right-of-use asset and lease liability. Additionally, certain leases provide for annual rent increases through the terms of the leases, leasehold improvement incentives, and variable payments related to operating expenses, taxes, utilities, insurance, and maintenance expenses. Certain leases also contain non-lease components in the contract. Non-lease components relate to operating expenses, parking, utilities, and maintenance expenses.

The Company had non-cancellable lease terms through 2025 for its various operating subleases for which the Company acted as the lessor. Additionally, certain subleases provided for annual rent increases through the terms of the leases and variable payments related to operating expenses, taxes, parking, and utilities. Certain subleases also contained both lease and non-lease components in the contract. Non-lease components related to operating expenses, parking, utilities, and maintenance expenses. As of December 31, 2025, the lease terms for the Company’s subleases expired.

Addison, Texas Lease Impairment

For the years ended December 31, 2025 and 2024, the Company performed interim impairment tests at the CarOffer reporting unit and recognized non-cash impairment charges of $0.5 million and $4.7 million, respectively, related to right-of-use assets.

Following the completion of the wind-down of CarOffer, the Company is holding the Addison lease right-of-use assets as corporate assets and as a result, the lease costs and impairments related to these right-of-use assets are presented in continuing operations for the years ended December 31, 2025, 2024, and 2023.

Lease Expenses

For the years ended December 31, 2025, 2024, and 2023, the Company recognized operating lease costs of $19.2 million, $26.6 million, and $31.0 million, respectively. For the years ended December 31, 2025 and 2024, the Company recognized variable lease payments of $9.1 million and $6.7 million, respectively. For the year ended December 31, 2023, variable lease payments were immaterial. Finance lease costs were immaterial for all periods.

For the years ended December 31, 2025, 2024, and 2023, the Company recognized $1.2 million, $2.0 million, and $1.6 million, respectively, of sublease income.

As of December 31, 2025 and 2024, the weighted average remaining lease term was 12.0 years and 12.8 years, respectively, and the weighted average discount rate was 6.2% and 6.2%, respectively. As the Company’s leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments. The Company estimated the incremental borrowing rate based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term. The Company has no historical debt transactions and a collateralized rate is estimated based on a group of peer companies. The Company used the incremental borrowing rate on January 1, 2019, for leases that commenced prior to that date.

Lease Commitments

The table above does not include options to extend lease terms that are not reasonably certain of being exercised or leases signed but not yet commenced as of December 31, 2025. As of December 31, 2025, there were no leases signed but not commenced.

As of December 31, 2025, there are no future minimum sublease income payments after the year ending December 31, 2025, as the subleases expired during the year ended December 31, 2025.

Letters of Credit

As of December 31, 2025 and 2024, $9.4 million and $9.9 million, respectively, in letters of credit associated with the Company’s leases were included under the 2022 Revolver Sub-facility.

Restricted Cash

As of December 31, 2025, there was no restricted cash. As of December 31, 2024, restricted cash was $2.0 million and related to pass-through payments from dealers. As of December 31, 2024, all restricted cash was classified as a current asset, as disclosed in the consolidated balance sheets.

Tax Contingencies

The Company is subject to taxation in the U.S. and certain other jurisdictions in which it operates, which could include corporate income tax, sales and use tax, value added tax, excise tax, gross receipts tax, and property tax. State, local, and foreign jurisdictions have differing rules and regulations governing corporate income, sales, use, value added, and other taxes. These rules and regulations are complex and subject to varying interpretations that may change over time due to new court interpretations and newly enacted rules and regulations. As a result, the Company could face the possibility of tax assessments and audits, and its liability for these taxes and associated penalties could exceed its original estimates, which could be material.

Legal Matters

From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. The Company recognizes a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. The Company is not presently subject to any pending or threatened litigation that it believes, if determined adversely to the Company, individually or taken together, would reasonably be expected to have a material adverse effect on its business or financial results. However, litigation is inherently unpredictable and the future outcome of legal proceedings and other contingencies may be unexpected or differ from the Company’s estimated liabilities, which could have a material adverse effect on the Company’s future financial results.