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Fair Value of Financial Instruments
 9 Months Ended
Sep. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
NOTE 17 — FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company holds certain assets that are required to be measured at fair value on a recurring basis, and beneficial interests in securitizations for which it elected the fair value option. A description of the fair value hierarchy and the Company's methodologies are included in Note 2 — Summary of Significant Accounting Policies in its most recent Annual Report on Form 10-K.

The following tables are a summary of fair value measurements and hierarchy level at September 30, 2026 and December 31, 2025:

September 30, 2026
Carrying Value
Level 1
Level 2
Level 3
(in millions)
Assets:
Money market funds
$7 $7 $— $— 
Beneficial interests in securitizations
$557 $— $— $557 
Warrants$14 $— $— $14 
Interest rate swap$17 $— $17 $— 

December 31, 2025
Carrying Value
Level 1
Level 2
Level 3
(in millions)
Assets:
Money market funds
$1,297 $1,297 $— $— 
Beneficial interests in securitizations
$486 $— $— $486 
Warrants$58 $— $— $58 

Money Market Funds

Money market funds consist of highly liquid investments with original maturities of three months or less and are classified in cash and cash equivalents and restricted cash in the accompanying unaudited condensed consolidated balance sheets.

Beneficial Interests in Securitizations

Beneficial interests in securitizations include rated notes and certificates of the securitization trusts, the same securities as issued to other investors as described in Note 8 — Securitizations and Variable Interest Entities. Beneficial interests in
securitizations are initially treated as Level 2 assets when the securitization transaction occurs in close proximity to the end of the period and there is a lack of observable changes in the economic inputs. When the securitization transaction does not occur in close proximity to the end of the period and there have been observable changes in the economic inputs, beneficial interests in securitizations are classified as Level 3.

The Company's beneficial interests in securitizations include rated notes and certificates and other assets, all of which are classified as Level 3 due to the lack of observable market data. The Company determines the fair value of its rated notes based on non-binding broker quotes. The non-binding broker quotes are based on models that consider the prevailing interest rates, recent market transactions, and current business conditions. The Company determines the fair value of its certificates and other assets using a combination of non-binding market quotes and internally developed discounted cash flow models. The discounted cash flow models use discount rates based on prevailing interest rates and the characteristics of the specific instruments. As of September 30, 2026 and December 31, 2025, the range of discount rates were 5.7% to 10.0% and 5.2% to 10.0%, respectively, and the weighted average of discount rates were 9.2% and 9.0%, respectively. Significant increases or decreases in the inputs to the models could result in a significantly higher or lower fair value measurement. The Company elected the fair value option on its beneficial interests in securitizations, which allows it to recognize changes in the fair value of these assets in the period the fair value changes. Changes in the fair value of the beneficial interests in securitizations are reflected in other expense, net in the accompanying unaudited condensed consolidated statements of operations.

For beneficial interests in securitizations measured at fair value on a recurring basis, the Company's transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period on a quarterly basis. There were no transfers out of Level 3 during the three and nine months ended September 30, 2026 or 2025.

The Company sells certain of its beneficial interests in securitizations that are not required to be retained by the Risk Retention Rules. For the three and nine months ended September 30, 2026, the Company sold zero and $29 million, respectively, in beneficial interests in securitizations. For the three and nine months ended September 30, 2025, the Company did not sell any beneficial interests in securitizations.

The following table presents additional information about Level 3 beneficial interests in securitizations measured at fair value on a recurring basis for the three and nine months ended September 30, 2026 and 2025:

Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
(in millions)
Opening Balance$502 $466 $486 $464 
Received in securitization transactions113 71 266 173 
Payments received(65)(55)(178)(159)
Change in fair value7 4 12 8 
Sales of beneficial interests— — (29)— 
Ending Balance$557 $486 $557 $486 

Warrants

Root Warrants

In October 2021, the Company purchased Series A convertible preferred shares in Root, Inc. ("Root"), an equity security that does not have a readily determinable fair value. The Company elected to measure this investment using a measurement alternative pursuant to the accounting standards and recorded the investment at its cost of $126 million, which will subsequently be adjusted for observable price changes. The Company considered all relevant transactions since the date of its investment and has not recorded any impairments or upward or downward adjustments to the carrying amount of its investment in Root, as there have not been changes in the observable price of its equity interest through September 30, 2026.
Also in October 2021, the Company entered into a commercial agreement with Root, under which the Root auto insurance products were embedded into the Company's e-commerce platform. In accordance with the provisions of the commercial agreement, the Company received eight tranches of warrants to purchase shares of Root's Class A common stock (the "Original Root Warrants"). Three tranches of Original Root Warrants, for 2.4 million, 3.2 million, and 1.6 million shares of Root's Class A common stock, respectively, expired on September 1, 2025. Also on September 1, 2025, a fourth tranche of Original Root Warrants for 1.4 million shares of Root's Class A common stock became exercisable and on February 28, 2026, a fifth tranche of Original Root Warrants for 1.5 million shares of Root's Class A common stock became exercisable, both upon achievement of certain insurance sales metrics through the integrated auto insurance solution embedded into the Company's e-commerce platform. These five tranches (collectively, the "Original Long-Term Warrants") were considered derivative instruments and were scheduled to expire September 1, 2027.

On August 31, 2026, the Company entered into a series of agreements with Root to exchange the Original Long-Term Warrants and extend the term of the commercial agreement (collectively, the "2026 Warrant Exchange"). Pursuant to a Warrant Cancellation and Exchange Agreement, the Company surrendered, and Root cancelled, all five tranches of the Original Long-Term Warrants, including the two tranches that had previously become exercisable, representing an aggregate of approximately 7.2 million shares of Root’s Class A common stock, in exchange for a new common stock purchase warrant entitling the Company to purchase up to 1.5 million shares of Root's Class A common stock (the "New Root Warrants"). The New Root Warrants are comprised of five tranches of 305,112 shares, each of which vest cumulatively upon the achievement of certain insurance sales metrics through the integrated auto insurance solution embedded into the Company's e-commerce platform. The New Root Warrants are considered derivative instruments and expire August 31, 2028, subject to certain exceptions.

The Company evaluated the 2026 Warrant Exchange under Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606") and concluded that it represents a modification of the Company's existing contract with Root rather than a termination of that contract. Accordingly, the 2026 Warrant Exchange was accounted for prospectively and the Company's unamortized deferred revenue associated with the Long-Term Warrants immediately prior to the modification was combined with the fair value of the New Root Warrants on the modification date, and the resulting balance is being recognized as revenue on a straight-line basis over the New Root Warrant's remaining two-year term. Separately, the cancellation of the Original Long-Term Warrants and issuance of the New Root Warrants were accounted for as a derecognition of the Original Long-Term Warrants derivative asset at its fair value immediately prior to cancellation and a recognition of a new derivative asset for the New Root Warrants at its fair value on the issuance date, with a resulting loss of $11 million recognized in other expense, net during the three months ended September 30, 2026.

Through June 30, 2025, the Company used a Monte Carlo simulation to estimate the fair value of the Original Root Warrants. The expiration of the first three tranches of Original Root Warrants on September 1, 2025 eliminated the prior interdependencies between the different tranches of Original Root Warrants. After September 2025, and through the 2026 Warrant Exchange, the Company used a Black-Scholes model to estimate the fair value of the Original Long-Term Warrants, which were classified as Level 3. In connection with the 2026 Warrant Exchange, the Company continued to estimate the fair value of the New Root Warrants using a Black-Scholes model. The primary unobservable input utilized in determining the fair value of the Original Long-Term Warrants and the New Root Warrants was the expected volatility of Root's Class A common stock, which was implied from the historical volatility of such common stock. As of September 30, 2026 and 2025, the expected volatility utilized in the valuations were 85% and 100%, respectively.

At contract inception, the Company recognized an asset of $30 million for the Original Root Warrants and deferred revenue, classified in other assets and other liabilities, respectively. In 2022, the Company determined it was probable that the volume of insurance products required to earn the Original Root Warrants would be achieved and recorded an additional $75 million of Original Root Warrants and deferred revenue based on the contract inception date fair value as determined by the Monte Carlo simulation applied as of such date. In connection with the 2026 Warrant Exchange, the Company recorded additional deferred revenue of $19 million, representing the fair value of the New Root Warrants on the modification date, in accordance with the prospective modification accounting. As of September 30, 2026 and December 31, 2025, the deferred revenue balance was $39 million and $36 million, respectively. During each of the three months ended September 30, 2026 and 2025, the Company recognized $5 million in Root Warrant revenue. During each of the nine months ended September 30, 2026 and 2025, the Company recognized $16 million in Root Warrant revenue. The deferred revenue is recognized over the expected contract performance period within other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.
The following table presents changes in the Company's Level 3 Original Long-Term Warrants and New Root Warrants measured at fair value:

Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
(in millions)
Opening balance$11 $243 $56 $120 
Cancellation of Original Root Warrants(11)— (11)— 
New Root Warrants to acquire Root's Class A common stock19 — 19 — 
Unrealized (loss) gain
(5)(120)(50)3 
Ending balance$14 $123 $14 $123 

In relation to the Original Long-Term Warrants and New Root Warrants, the Company recognized decreases in fair value of $5 million and $120 million during the three months ended September 30, 2026 and 2025, respectively, and a decrease in fair value of $50 million and an increase in fair value of $3 million during the nine months ended September 30, 2026 and 2025, respectively, which are included in other expense, net in the accompanying unaudited condensed consolidated statements of operations.

Interest Rate Swap

The Company is exposed to variability in its interest payments on its Term Loan B facility, which bears interest at a floating rate based on one-month Term SOFR. To manage this exposure, the Company entered into an interest rate swap, under which the Company pays a fixed rate of 4.055% and receives one-month Term SOFR, economically converting a portion of its floating-rate interest payments to a fixed rate. The Company has designated the swap as a cash flow hedge of the variability in cash flows attributable to changes in one-month Term SOFR on the forecasted interest payments on the Term Loan B. The swap has an initial notional amount of $1.660 billion, which amortizes by $4 million each quarter beginning March 31, 2027 to a final notional amount of $1.635 billion, and terminates on July 31, 2028. Because the swap terminates prior to the maturity of the Term Loan B, the hedging relationship is a partial-term hedge, and the Company has designated as hedged only those interest payments occurring through July 31, 2028. The Company's obligations under the agreement are secured by the same collateral and guaranteed by the same guarantors that secure and guarantee the Term Loan B.

The Company determines the fair value of the interest rate swap using a discounted cash flow model with observable market inputs, including the forward one-month Term SOFR curve and discount factors derived from the SOFR curve, adjusted for non-performance risk. Because the significant inputs are observable, the measurement is classified as Level 2. Amounts recorded in AOCI are reclassified into interest expense, net in the same periods in which the hedged interest payments affect earnings, and the Company estimates that approximately $7 million of gains currently recorded in AOCI will be reclassified into interest expense over the next twelve months. The Company transacted the swap with a single counterparty, a major financial institution, and is therefore exposed to a concentration of credit risk with respect to that counterparty. The Company monitors the counterparty's credit standing and does not currently anticipate non-performance.

The notional and fair value of the interest rate swap as of September 30, 2026 was as follows:

(In millions)Notional AmountBalance Sheet LocationAssetLiability
Interest rate swap - cash flow hedge$1,660 Other current assets and other assets$17 $— 

The effect of the interest rate swap on comprehensive income and earnings for the three and nine months ended September 30, 2026 was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
20262026
(in millions)
Gain recognized in other comprehensive income, pre-tax$16 $16 
Loss reclassified from AOCI into interest expense, net, pre-tax$(1)$(1)
Total interest expense, net in which reclassified amounts are recorded$98 $298 

Fair Value of Financial Instruments

The carrying amounts of restricted cash, accounts receivable, accounts payable and accrued liabilities, and accounts payable to related party approximate fair value due to their respective short-term maturities. The carrying value of the short-term revolving facilities was determined to approximate fair value due to their short-term duration and variable interest rates that approximate prevailing interest rates as of each reporting period. The carrying value of sale leasebacks was determined to approximate fair value as each of the transactions were entered into at prevailing interest rates during each respective period and they have not materially changed as of or during the periods ended September 30, 2026 and December 31, 2025. The carrying value of the financing of beneficial interests in securitizations was determined to approximate fair value because in the event of a decline in the fair value of the pledged collateral of the financing, the repurchase price of the pledged collateral will be increased by the amount of the decline.

The fair value of the Senior Notes and the Term Loan B, which are not carried at fair value on the accompanying unaudited condensed consolidated balance sheets, was determined using Level 2 inputs based on quoted market prices for the identical liability. The fair value of the Senior Notes and the Term Loan B as of September 30, 2026 and December 31, 2025 were as follows:

September 30,
2026		December 31,
2025
(in millions)
Senior Notes
Carrying value, net of unamortized debt issuance costs and unamortized premium
$2,371 $4,025 
Fair value$2,543 $4,403 
Term Loan B
Carrying value, net of unamortized debt issuance costs and original issue discount$1,639 $— 
Fair value$1,652 $— 

The fair value of finance receivables, which are not carried at fair value on the accompanying unaudited condensed consolidated balance sheets, was determined utilizing the estimated sales price based on the historical experience of the Company. Such fair value measurement of the finance receivables, net is considered Level 2 under the fair value hierarchy. The carrying value and fair value of the finance receivables as of September 30, 2026 and December 31, 2025 were as follows:

September 30,
2026		December 31,
2025
(in millions)
Carrying value$896 $813 
Fair value$962 $886