UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.    )

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DealerTrack Holdings, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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May 13, 2009

Dear Stockholder:

On behalf of the board of directors and management of DealerTrack Holdings, Inc., I invite you to attend our Annual Meeting of Stockholders. The meeting will be held on Wednesday, June 17, 2009, at 10:00 a.m. local time, at DealerTrack Holdings, Inc. Corporate Headquarters, 1111 Marcus Avenue, Suite M04, Lake Success, New York 11042.

The details of the business to be conducted at the Annual Meeting are provided in the attached Notice of the Annual Meeting of Stockholders and in the attached Proxy Statement.

It is important that your stock is represented, regardless of the number of shares you hold. After reading the enclosed Proxy Statement, please vote your proxy in accordance with the instructions provided.

If you have any questions about the meeting, please contact our Investor Relations Department at (888) 450-0478.

We look forward to seeing you at the Annual Meeting.

Sincerely,

Mark F. O’Neil
Chairman of the Board,
President and Chief Executive Officer

NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS

Date:		Wednesday, June 17, 2009
Time:		10:00 a.m. local time
Location:		DealerTrack Holdings, Inc. 1111 Marcus Ave, Suite M04 Lake Success, New York 11042
Matters To Be Voted On:		(1) To elect three members of the board of directors for three-year terms as Class I directors to serve until our 2012 Annual Meeting of Stockholders or until their successors are elected;
		(2) To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009;
		(3) To approve amendments to our Second Amended and Restated 2005 Incentive Award Plan to allow for a one-time option exchange program for employees other than our executive officers and directors; and
		(4) To amend and restate our Second Amended and Restated 2005 Incentive Award Plan to provide for an increase in the number of shares of common stock we may issue under the 2005 Plan by 4.9 million to 10.9 million shares.

Record Date:		April 24, 2009. You are eligible to vote if you were a stockholder of record at the close of business on this date.
Voting Methods:		By Mail In Person
Importance Of Vote:		Submit a proxy as soon as possible to ensure that your shares are represented.
		Voting promptly will insure that we have a quorum at the Annual Meeting and will save us proxy solicitation expenses.

By Order of the Board of Directors,

Gary N. Papilsky
Secretary

Lake Success, New York
May 13, 2009

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 17, 2009.
The Proxy Statement and Annual Report on Form 10-K are available on our website at
http://ir.dealertrack.com/annual-proxy.cfm.

Table of Contents

General Information			3
The Annual Meeting			3
Purpose of Meeting			3
Information Concerning Voting and Solicitation of Proxies			3
Who Can Vote?			3
How You Can Vote			3
How To Revoke Your Proxy or Change Your Vote			4
How Many Votes You Have			4
Quorum			4
Votes Required			5
Proposal One: Election of Directors			6
General Information about our Board of Directors			6
Nominees			6
Recommendation of our Board of Directors			6
Information about Nominees for Election as Class III Directors			6
Information about the Members of Our Board of Directors Whose Terms of Office Do Not Expire at the Annual Meeting			7
Board Meetings Held During 2008			8
Board Independence			8
Stockholder Communications with the Board of Directors			8
Director Attendance at Annual Meeting			8
Code of Business Conduct and Ethics			8
Committees			9
Non-Management Directors’ Compensation for Fiscal Year 2008			11
Audit Committee Report			14
Principal Accountant Fees and Services			15
Proposal Two: Ratification of Selection of Independent Registered Public Accounting Firm			15
Proposal Three: Proposal to Amend our Second Amended and Restated 2005 Incentive Award Plan to Allow for a One-Time Option Exchange Program for Employees Other than our Executive Officers and Directors			16
Summary of Material Terms			17
Implementation of the Option Exchange Program			19
Description of the Option Exchange Program			20
Proposal Four: Proposal to Amend and Restate Our Amended and Restated 2005 Incentive Award Plan			23
Summary of the Restated 2005 Plan			25
Vote Required			28
Recommendation of our Board of Directors			28
Executive Officers			29
Compensation Discussion and Analysis			30
Compensation Committee Report			35
Executive Compensation			36
Summary Compensation Table			36
All Other Compensation Table			37
Grants of Plan Based Awards in 2008			38
Outstanding Equity Awards at 2008 Fiscal Year End			39
Option Exercises and Stock Vested in Fiscal 2008			40
Non-Qualified Deferred Compensation			41
Potential Payments upon Termination			42
Compensation Committee Interlocks and Insider Participation			44
Employment Agreements with Named Executive Officers			44
Equity Compensation Plan Information			46
Security Ownership of Certain Beneficial Owners and Management			47
Section 16(a) Beneficial Ownership Reporting Compliance			48
Certain Relationships and Transactions			48
Miscellaneous			50
Solicitation of Proxies			50
Deadline for Receipt of Stockholder Proposals for our 2010 Annual Meeting			50
Annual Report			51
Exhibit I: Third Amended and Restated DealerTrack Holdings, Inc. 2005 Incentive Award Plan			A-1
Exhibit II: Form of Proxy

DEALERTRACK HOLDINGS, INC.
1111 Marcus Ave., Suite M04
Lake Success, New York 11042

PROXY STATEMENT

For the Annual Meeting of Stockholders
to be held June 17, 2009

GENERAL INFORMATION

THE ANNUAL MEETING

Our board of directors is soliciting proxies to be used at our Annual Meeting of Stockholders to be held on June 17, 2009. This Proxy Statement, the accompanying Notice of Annual Meeting of Stockholders and form of proxy are being made available to our stockholders on or about April 30, 2009.

PURPOSE OF MEETING

The specific proposals to be considered and acted upon at the Annual Meeting are summarized in the accompanying Notice of Annual Meeting. The proposals are described in more detail in this Proxy Statement.

INFORMATION CONCERNING VOTING AND SOLICITATION OF PROXIES

WHO CAN VOTE?

Only stockholders of record at the close of business on April 24, 2009 may vote at the Annual Meeting. As of April 24, 2009, there were 40,117,782 shares of our common stock outstanding.

HOW YOU CAN VOTE

You may vote using one of the following methods:

	•		By Mail. You may vote by mail by marking your proxy card, dating, signing and returning it in the postage-paid envelope provided.
	•		In Person. You may vote your shares in person by attending the Annual Meeting.

Stockholders of Record. If your shares are registered directly in your name with our transfer agent, American Stock and Transfer & Trust Company, LLC, you are considered a stockholder of record with respect to those shares, and the proxy materials, including the Proxy Statement and proxy card, were sent directly to you by the Company.

Street Name Holders. If you hold your shares in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name.” The proxy materials, including the Proxy Statement and voting instruction card, were forwarded to you by the organization holding your account, who is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account.

If the bank, broker or organization that holds your shares does not have discretion to votes shares held in street name on a particular proposal and does not receive voting instructions on how to vote those shares, the bank, broker or other organization may return the proxy card without voting on that proposal. This is generally referred to as a “broker non-vote.” Your bank or broker generally may vote without instructions on routine matters such as the election of directors and the ratification of our independent registered public accounting firm. Your bank or broker generally may not vote without instructions on non-routine matters such as amendments to our employee stock plan.

All shares that have been voted properly by an unrevoked proxy will be voted at the Annual Meeting in accordance with your instructions. If you sign your proxy card, but do not give voting instructions, the shares represented by that proxy will be voted as our board of directors recommends.

If any other matters are brought properly before the Annual Meeting, the persons named as proxies in the enclosed proxy card will have the discretion to vote on those matters for you. As of the date of this Proxy Statement, we did not know of any other matter to be raised at the Annual Meeting.

HOW TO REVOKE YOUR PROXY OR CHANGE YOUR VOTE

You can revoke your proxy or change your vote before your proxy is voted at the Annual Meeting by:

	•		Giving written notice of revocation to: Secretary, DealerTrack Holdings, Inc., 1111 Marcus Ave., Suite M04, Lake Success, NY 11042;
	•		Submitting another timely proxy or voting instruction card with a later date by mail; or
	•		Attending the Annual Meeting and voting in person. If your shares are held in street name, to vote at the Annual Meeting you must obtain a proxy executed in your favor from the holder of record. Attendance at the Annual Meeting will not, by itself, revoke your prior proxy.

HOW MANY VOTES YOU HAVE

Each stockholder has one vote for each share of common stock that he or she owned on the record date for all matters being voted on.

QUORUM

A quorum is constituted by the presence, in person or by proxy, of holders of our common stock representing a majority of the aggregate number of shares of common stock entitled to vote. Abstentions and broker non-votes will be considered present to determine the presence of a quorum. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.

VOTES REQUIRED

Election of Directors. The three nominees for director receiving the highest vote totals will be elected. Abstentions will have no effect on the election of directors.

Ratification of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm. To pass, this proposal must receive a “for” vote of a majority of the votes present and entitled to vote in person or by proxy at the Annual Meeting. Abstentions will have the effect of a vote against the ratification of our independent registered public accounting firm.

Approval of Stock Option Exchange Program. To pass, this proposal must receive a “for” vote of a majority of the votes present and entitled to vote in person or by proxy at the Annual Meeting. Abstentions will have the effect of a vote against this proposal and broker non-votes will not be counted as present with respect to this proposal.

Amendment and Restatement of our Second Amended and Restated 2005 Incentive Award Plan. To pass, this proposal must receive a “for” vote of a majority of the votes present and entitled to vote in person or by proxy at the Annual Meeting. Abstentions will have the effect of a vote against this proposal and broker non-votes will not be counted as present with respect to this proposal.

PROPOSAL ONE:

GENERAL INFORMATION ABOUT OUR BOARD OF DIRECTORS

Each of our directors is elected for a three-year staggered term. The eight members of our board of directors are divided into three classes: Class I, Class II and Class III. One class of directors is elected at each Annual Meeting. The following table shows our current directors, when the term of each class of directors expires and how each director is classified:

Class		Directors
Class I: Term expires 2009 and every three years thereafter		Messrs. Foy, Power and Tischler
Class II: Term expires 2010 and every three years thereafter		Ms. Lane and Messrs. McDonnell and Zwarenstein
Class III: Term expires 2011 and every three years thereafter		Ms. Cirillo-Goldberg and Mr. O’Neil

NOMINEES

The three nominees are listed below. If any nominee is unable or declines unexpectedly to stand for election as a director at the Annual Meeting, proxies will be voted for a nominee designated by the present board of directors to fill the vacancy. Each person elected as a director will continue to be a director until the 2012 Annual Meeting or until a successor has been elected.

RECOMMENDATION OF OUR BOARD OF DIRECTORS

Our board of directors recommends that you vote FOR the nominees listed below:

	•		James Foy
	•		James David Power III
	•		Howard L. Tischler

None of our directors or executive officers is related to another director or executive officer by blood, marriage or adoption. Mr. O’Neil’s employment agreement provides that he shall serve as Chairman of the board of directors during the term of his agreement. Mr. Tischler was initially appointed to our board of directors pursuant to a stockholders’ agreement, which terminated on our initial public offering and is no longer in effect. There are no other arrangements between any director or nominee and any other person pursuant to which the director or nominee was selected. In 2008, our Nominating and Corporate Governance Committee retained a third-party executive search firm to identify and evaluate potential director candidates. The firm assisted the committee in identifying Mr. Foy, who was appointed to our board of directors in September 2008.

INFORMATION ABOUT NOMINEES FOR ELECTION AS CLASS I DIRECTORS

James Foy, 62, has served on our board of directors since September 2008. Mr. Foy has been President and Chief Executive Officer of privately held Aspect Software, Inc. and two predecessor companies (Concerto Software, Inc. and Davox Corporation) since 2001. In 1991, he founded Constellation Software, Inc., a technology company, and served as its President and Chief Executive Officer for three years. In 1994, Constellation was acquired by VMark Software, Inc. a predecessor company of Ardent Software, which was subsequently acquired by Informix Corp. Mr. Foy remained with the surviving companies in a variety of senior executive positions including President of Informix until IBM acquired Informix in 2001. Earlier in his career, he was with Prime Computer, Inc. and International Computers Limited (ICL). Mr. Foy serves on the boards of both Aspect Software and privately held Kalido, Inc., an enterprise software company.

James David Power III, 77, has served on our board of directors since June 2002. Mr. Power has spent more than 35 years at, is a founder of and, from 1996 until April 2005, served as the Chairman of the Board of J.D. Power and Associates, a marketing information firm. Mr. Power also serves as a director of IMPCO Technologies, Inc., a public company, which supplies alternative fuel products to the transportation, industrial and power generation industries. In 1992, Mr. Power was a recipient of the Automotive Hall of Fame’s Distinguished Service Citation, awarded each year to seven of the industry’s most accomplished leaders. Mr. Power holds honorary doctorate degrees from College of the Holy Cross, California Lutheran University, California State University, Northridge and College Misericordia. He also serves as an adjunct professor of marketing at California State University, Northridge. Mr. Power holds a BA from the College of the Holy Cross and an MBA from The Wharton School of Finance at the University of Pennsylvania.

Howard L. Tischler, 55, has served as lead director since April 2006 and on our board of directors since March 2003. Since January 2009, Mr. Tischler has been employed as Chairman and CEO of Enfocel, LLC, a management consulting and online marketing consulting firm. From September 2005 through December 2008, Mr. Tischler was employed by First Advantage Corporation, where he served as Group President of First Advantage Dealer Services. From 2001 until September 2005, Mr. Tischler was President and Chief Executive Officer of First American Credit Management Solutions, Inc., or CMSI, which was a subsidiary of The First American Corporation, as well as Teletrack, Inc. From 1999 until our acquisition of Credit Online, Inc. from CMSI in 2003, Mr. Tischler was President and Chief Executive Officer of Credit Online. Mr. Tischler currently serves on the Engineering Advisory Board at George Washington University. He holds a BS in Mathematics from the University of Maryland and an MS in Engineering and Operations Research from The George Washington University.

INFORMATION ABOUT THE MEMBERS OF OUR BOARD OF DIRECTORS WHOSE TERMS OF OFFICE DO NOT EXPIRE AT THE ANNUAL MEETING

Class II Directors (term expires at the 2010 Annual Meeting)

Barry Zwarenstein, 60, has served on our board of directors since November 2007. Since September 2008, Mr. Zwarenstein has been employed by SMART Modular Technologies, Inc., where he serves as Senior Vice President and Chief Financial Officer. From June 2004 through August 2008, Mr. Zwarenstein served as Executive Vice President and Chief Financial Officer for VeriFone Holdings, Inc. Prior to joining VeriFone, Mr. Zwarenstein served as Chief Financial Officer of Iomega Corporation from November 2001 to June 2004, of Mellanox Technologies Limited from January 2001 to June 2001, of Acuson Corporation from October 1998 to December 2000 and of Logitech S.A. from July 1996 to September 1998. Mr. Zwarenstein started his career at FMC Corporation, where he held a variety of financial positions, including, at the time of his departure, Chief Financial Officer for FMC Europe in Brussels, Belgium. Mr. Zwarenstein received a Bachelor of Commerce degree from the University of Natal, South Africa and an M.B.A. from the Wharton School of Business at the University of Pennsylvania. He is qualified as a Chartered Accountant (South Africa).

Ann B. Lane, 54, has served on our board of directors since July 2007. From April 2000 to January 2005, Ms. Lane was Managing Director, Co-Head of Syndicated & Leveraged Finance and Head of Bank Loan Capital Markets at JPMorgan. From 1997 to 2000, Ms. Lane was Managing Director and Global Co-Head of Bank Loan Syndications at Citigroup Inc. From 1995 to 1997, Ms. Lane was Global Industry Head, Aviation and Defense at Citigroup Inc., and from 1982 to 1995, Ms. Lane held a number of senior level positions at Citigroup, including Global Head of Corporate Debt Restructuring. Ms. Lane is a Board Member of Musical Masterworks in Old Lyme, Connecticut. Ms. Lane holds a BS in Economics from the University of California at Berkeley.

John J. McDonnell Jr., 71, has served on our board of directors since July 2005. Mr. McDonnell has been Chief Executive Officer and a Director of ExaDigm, Inc., a leading innovator of modular IP-based technology, since October 2008. Mr. McDonnell is the founder of TNS, Inc., a leading provider of data communications services to processors of credit card, debit card and ATM transactions worldwide. Mr. McDonnell served as Chairman and Chief Executive Officer of TNS, Inc. from April 2001 to September 2006. Previously, he served as chairman and CEO of PaylinX Corp., a software provider for transaction processing, from November 1999 until it was sold to CyberSource Corp. in September 2000. He remains a director of CyberSource, a publicly held company. Prior to that, Mr. McDonnell was President, Chief Executive Officer and a director of Transaction Network Services, Inc. from the time he founded the company in 1990. Mr. McDonnell is also a founder and director of the Electronic Funds Transfer Association. He was the recipient of KPMG Peat Marwick LLP’s 1997 High Tech Entrepreneur Award and the Rensselaer Polytechnic Institute 2002 Entrepreneur of the Year Award. Mr. McDonnell holds a BS in Electrical Engineering from Manhattan College, a MSEE from Renssalaer Polytechnic Institute and an Honorary Doctorate of Humane Letters from Marymount University.

Class III Directors (term expires at the 2011 Annual Meeting)

Mary Cirillo-Goldberg, 61, has served on our board of directors since December 2002, and served as lead director from May 2005 to April 2006. Since September 2003, Ms. Cirillo-Goldberg has served as an advisor to Hudson Venture Partners, L.P., a venture capital fund. Ms. Cirillo-Goldberg served as the Chairman and Chief Executive Officer of OPCENTER, LLC, a privately held company that provides help desk, e-commerce and network operations services, from March 2000 to September 2003. From June 1997 through March 2000, she served as Executive Vice President and Managing Director of Bankers Trust Corporation. Ms. Cirillo-Goldberg currently serves as a director of three other public companies: ACE Limited, Health Care Property Investors, Inc. and Thomson Reuters Corporation.

Mark F. O’Neil, 50, has served as our Chairman of the Board, President and Chief Executive Officer since May 2005 and has served as a member of the board of directors since August 2001. From August 2001 to May 2005, Mr. O’Neil served as our Chief Executive Officer and President. Mr. O’Neil began his career at Intel Corporation, where he first developed knowledge of the technology industry. He subsequently worked for McKinsey & Co. before moving to the automotive industry in the late 1980s. His experience in the automotive industry includes serving as President of Ertley MotorWorld, a dealer group based in Pennsylvania. From this traditional retail dealer group, Mr. O’Neil went on to co-found and lead the development and rollout of CarMax, Inc., a publicly-held used automobile retailer. From June 2000 through January 2001, Mr. O’Neil was President and Chief Operating Officer of Greenlight.com, an online automotive sales website. He also serves as a director of DealerTire LLC, a privately held company. Mr. O’Neil holds a BS in Industrial Engineering from Worcester Polytechnic Institute and an MBA from Harvard Business School.

BOARD MEETINGS HELD DURING 2008

Our board of directors held six meetings during 2008 and acted one time by written consent. During 2008, each director attended at least 75% of the board of directors and committee meetings held while such director served as a director and committee member. At each regular meeting of the board of directors, the non-management directors met in executive session with our lead director presiding.

BOARD INDEPENDENCE

The Nominating and Corporate Governance Committee and our board of directors annually assess the independence of the non-management directors by reviewing the financial and other relationships between the directors and us. This review is designed to determine whether these directors are independent under the criteria established by the NASDAQ Stock Market (“NASDAQ”) for independent board members. The Nominating and Governance Committee and our board of directors have determined that all of our non-management directors and our director nominees qualify as independent under those standards.

STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

Stockholders and other interested parties may communicate with any of our directors, including our non-management directors, by writing to them c/o Secretary, DealerTrack Holdings, Inc., 1111 Marcus Ave., Suite M04, Lake Success, NY 11042. Our Secretary will forward all correspondence to the board of directors, except for spam, junk mail, mass mailings, products complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Our Secretary may forward certain correspondence, such as product-related inquiries, elsewhere within DealerTrack for review and possible response.

DIRECTOR ATTENDANCE AT ANNUAL MEETING

Our board of directors’ policy regarding director attendance at the Annual Meeting is that they are welcome to attend, and that we will make all appropriate arrangements for directors who choose to attend. Mr. O’Neil attended our 2008 Annual Meeting.

CODE OF BUSINESS CONDUCT AND ETHICS

We have adopted a “code of ethics,” as defined by regulations promulgated under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, that applies to all of our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A current copy of our Code of Business Conduct and Ethics is available on our website at www.dealertrack.com. A copy of our Code of Business Conduct and Ethics may also be obtained, free of charge, from us upon request directed to: DealerTrack Holdings, Inc., 1111 Marcus Avenue, Suite M04, Lake Success, NY 11042, Attention: Investor Relations. We intend to disclose any amendment to or waiver of a provision of the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, by posting such information on our website at www.dealertrack.com and/or in our, public filings with the Securities and Exchange Commission (the “SEC”).

COMMITTEES

Our board of directors has four standing committees: Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Investment Committee. All committee members are non-management directors who, in the opinion of our board of directors, are independent as defined under applicable NASDAQ listing standards. Our board of directors has approved a written charter for each committee which is available at www.dealertrack.com.

Audit Committee. Our Audit Committee consists of Ms. Lane and Messrs. Zwarenstein and McDonnell. Mr. Zwarenstein serves as chairperson of the Audit Committee. Our board of directors has determined that each member of the Audit Committee is independent and that Ms. Lane and Mr. Zwarenstein are each audit committee financial experts, as defined by SEC rules, and have financial sophistication, in accordance with the applicable NASDAQ listing standards. During 2008, the Audit Committee held 16 meetings. The purpose of the Audit Committee is to oversee our accounting and financial reporting processes and the audits of our financial statements. The Audit Committee’s responsibilities include assisting our board of directors in its oversight and evaluation of:

	•		the integrity of our financial statements;
	•		the independent registered public accounting firm’s qualifications and independence; and
	•		the performance of our independent registered public accounting firm.

The Audit Committee has the sole and direct responsibility for appointing, evaluating and retaining our independent registered public accounting firm and for overseeing their work. All audit and non-audit services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our Audit Committee. The Audit Committee also reports to stockholders as required by the SEC (please see page [ ]).

Compensation Committee. We have a Compensation Committee consisting of Ms. Cirillo-Goldberg and Messrs. Foy and McDonnell. Ms. Cirillo-Goldberg serves as chairperson of the Compensation Committee. Mr. Foy joined our Compensation Committee in September 2008. During 2008, the Compensation Committee held 11 meetings and acted one time by written consent. The purpose of our Compensation Committee is to discharge the responsibilities of our board of directors relating to compensation of our executive officers. Specific responsibilities of our Compensation Committee include:

	•		reviewing and recommending approval of compensation of our executive officers;
	•		administering our stock incentive and employee stock purchase plans;
	•		reviewing and making recommendations to our board of directors with respect to incentive compensation and equity plans; and
	•		reviewing and planning for the succession of the Chief Executive Officer and other key executives.

Our board of directors has determined that each member of the Compensation Committee is independent in accordance with the applicable NASDAQ listing standards. The Compensation Committee also reports to stockholders on executive compensation items as required by the SEC (please see page [ ]).

Nominating and Corporate Governance Committee. We have a Nominating and Corporate Governance Committee consisting of Ms. Cirillo-Goldberg and Messrs. Power and Tischler. Mr. Tischler serves as chairperson of the Nominating and Corporate Governance Committee. During 2008, the Nominating and Corporate Governance Committee held five meetings. The responsibilities of the Nominating and Corporate Governance Committee include:

	•		identifying and recommending nominees for election to our board of directors;
	•		determining committee membership and composition; and
	•		overseeing the evaluation of our board of directors.

The board of directors has determined that each member of the Nominating and Corporate Governance Committee is independent in accordance with the applicable NASDAQ listing standards.

Candidates may come to the attention of the Nominating and Corporate Governance Committee through current members of the board of directors, stockholders or other persons. These candidates are evaluated at regular or special meetings of the Nominating and Corporate Governance Committee. Stockholders wishing to recommend director candidates for consideration by the committee may do so by writing to the Secretary at 1111 Marcus Avenue, Suite M04, Lake Success, NY 11042 who will forward all recommendations to the committee. Stockholders must submit their recommendations by or before January 1, 2010 and provide the following information:

	•		the name, address and telephone number of the recommending stockholder;
	•		a representation that the stockholder is a record holder of our securities, or evidence of ownership;
	•		the number of shares owned by the recommending stockholder and the time period for which such shares have been held;
	•		a statement from the recommending stockholder as to whether the stockholder has a good faith intention to continue to hold the reported shares through the date of our next Annual Meeting;
	•		the name, age, business and residential address, educational background, current principal occupation or employment, and principal occupation or employment for the preceding five full fiscal years of the proposed director candidate;
	•		a description of the qualifications and background of the proposed director candidate;
	•		a description of all arrangements or understandings between the recommending stockholder and the proposed director candidate;
	•		the consent of the proposed director candidate (i) to be named in the proxy statement and (ii) to serve as a director if elected; and
	•		any other information regarding the proposed director candidate that is required to be included in a proxy statement filed pursuant to SEC rules.

The Nominating and Corporate Governance Committee may consider the following criteria in recommending candidates for election to the board of directors:

	•		personal and professional integrity, ethics and values;
	•		experience in corporate management, such as serving as an officer or former officer of a publicly held company;
	•		experience in the company’s industry and with relevant social policy concerns;
	•		experience as a board member of another publicly held company;
	•		academic expertise in an area of the company’s operations; and
	•		practical and mature business judgment.

Investment Committee. We have an Investment Committee consisting of Ms. Lane and Messrs. Foy and Tischler. Mr. Foy joined our Investment Committee in September 2008. Ms. Lane serves as chairperson of the Investment Committee. The Investment Committee was formed in January 2006. The purpose of our Investment Committee is to review investment and acquisition opportunities, approve certain acquisition and investment transactions and also make recommendations to our board of directors. During 2008, the Investment Committee held nine meetings.

NON-MANAGEMENT DIRECTORS’ COMPENSATION FOR FISCAL YEAR 2008

Directors who are also employees receive no fees for their services as directors. During 2008, all other directors received the following compensation for their services:

Annual Fee:		$50,000 per director.
Initial Equity Grant:		Options to purchase 30,000 shares of our common stock upon becoming a director. The grant vests in three equal annual installments commencing on the first anniversary of the grant date, subject to the director’s continued service on the board.
Annual Equity Grant:		Restricted common stock equal to a fixed dollar value of $135,000 is granted each year on the date of our Annual Meeting. This grant vests on the day of the following Annual Meeting, subject to the director’s continued service on the board.

Directors are eligible to participate in the Directors’ Deferred Compensation Plan, a non-qualified retirement plan. The Directors’ Deferred Compensation Plan allows our non-employee directors to elect to defer between zero and 100% of the fees they would otherwise be entitled to receive in cash for services rendered as directors. Amounts deferred under the Directors’ Deferred Compensation Plan are general liabilities of ours and are represented by bookkeeping accounts maintained on behalf of the participants. Such accounts are deemed to be invested in share units that track the value of our common stock. Distributions will generally be made to a participant either following the end of the participant’s service on our board of directors, following a change of control if so elected, or at a specified time elected by the participant prior to the deferral. Distributions will generally be made in the form of shares of our common stock. Our Directors’ Deferred Compensation Plan is intended to comply with Section 409A of the Internal Revenue Code.

Our stock ownership and retention program requires non-employee members of our board of directors to own shares equal in value to four times their annual retainer. Directors are expected to attain the required share ownership level within five years from joining our board of directors.

The following table sets forth our non-management directors’ compensation for 2008.

		Fees Earned
		or Paid in Cash				Stock				Option
Name		(1)				Awards (2)				Awards (3)				Total
Mary Cirillo-Goldberg		$	50,000			$	171,274			$	20,900			$	242,174
James Foy			14,167				37,295				25,083				76,545
Ann B. Lane			50,000				135,692				178,800				364,492
John J. McDonnell, Jr.			50,000				173,549				5,367				228,916
James David Power III			50,000				171,274				20,900				242,174
Howard L. Tischler			50,000				171,274				20,900				242,174
Barry Zwarenstein			50,000				183,700				214,400				448,100

		Compensation				Number of Deferred
Name		Deferred				Stock Units
Mary Cirillo-Goldberg		$	50,000				3,298
James Foy			14,167				1,150
Ann B. Lane			50,000				3,298
James David Power III			50,000				3,298
Howard L. Tischler			50,000				3,298
Barry Zwarenstein			50,000				3,298

		Restricted												Outstanding
		Common Stock				Number				Grant Date				Restricted
Name		Grant Date				Granted				Fair Value				Common Stock
Mary Cirillo-Goldberg			5/26/2005				3,500			$	17.10				0
			6/14/2006				3,500				21.94				1,167
			7/11/2007				3,500				39.05				0
			6/03/2008				6,828				19.77				6,828
James Foy			9/19/2008				4,888				20.71				4,888
Ann B. Lane			7/11/2007				3,500				39.05				0
			6/03/2008				6,828				19.77				6,828
John J. McDonnell, Jr.			7/28/2005				3,500				18.00				0
			6/14/2006				3,500				21.94				1,167
			7/11/2007				3,500				39.05				0
			6/03/2008				6,828				19.77				6,828
James David Power III			5/26/2005				3,500				17.10				0
			6/14/2006				3,500				21.94				1,167
			7/11/2007				3,500				39.05				0
			6/03/2008				6,828				19.77				6,828
Howard L. Tischler			5/26/2005				3,500				17.10				0
			6/14/2006				3,500				21.94				1,167
			7/11/2007				3,500				39.05				0
			6/03/2008				6,828				19.77				6,828
Barry Zwarenstein			11/06/2007				2,625				47.98				0
			6/03/2008				6,828				19.77				6,828

														Grant				Outstanding Stock
		Option				Number				Exercise				Date				Options
Name		Grant Date				Granted				Price				Fair Value				(Exercisable)
James Foy			9/19/2008				30,000			$	20.71			$	8.60				0
Mary Cirillo-Goldberg			1/30/2003				6,250				2.80				0.00				6,250
			5/26/2005				50,000				12.92				4.18				50,000
Ann B. Lane			7/11/2007				30,000				39.05				17.88				10,000
John J. McDonnell, Jr.			7/28/2005				30,000				17.08				0.92				10,000
James David Power III			6/18/2002				6,250				2.80				0.00				6,250
			5/26/2005				50,000				12.92				4.18				50,000
Howard L. Tischler			5/26/2005				40,000				12.92				4.18				40,000
Barry Zwarenstein			11/06/07				30,000				47.98				21.44				10,000

AUDIT COMMITTEE REPORT

The Audit Committee of DealerTrack Holdings, Inc. hereby reports as follows:

1. Management has the primary responsibility for the consolidated financial statements and the reporting process, including the system of internal accounting controls. The Audit Committee, in its oversight role, has reviewed and discussed the audited consolidated financial statements with the Company’s management.

2. The Audit Committee has discussed the overall scope of and plans for its audit with the company’s independent registered public accounting firm. The Audit Committee has met with the independent registered public accounting firm, with and without management present, to discuss the Company’s financial reporting process and internal accounting controls in addition to other matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (Communications with Audit Committee), as adopted by the Public Company Accounting Oversight Board.

3. The Audit Committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP, or PwC, required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with PwC its independence.

4. The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee of all fees paid to, and all services performed by, the Company’s independent registered public accounting firm, unless entered into pursuant to the pre-approval policies and procedures established by the Audit Committee. At the beginning of each year, the Audit Committee approves the proposed services, including the nature, type and scope of service contemplated and the related fees, to be rendered by the firm during the year. In addition, Audit Committee pre-approval is also required for those engagements that may arise during the course of the year that are outside the scope of the initial services and fees approved by the Audit Committee. For each category of proposed service, the independent registered public accounting firm is required to confirm that the provision of such services does not impair their independence.

5. Based on the review and discussions referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the board of directors of DealerTrack Holdings, Inc. that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, for filing with the SEC.

Respectfully Submitted by the Audit Committee,
Barry Zwarenstein (chairperson)
Ann B. Lane
John J. McDonnell, Jr.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table represents the fees billed by PwC for 2008 and 2007:

		2008				2007
Audit fees (1) :		$	1,098,565			$	1,130,030
Audit-related fees (2) :			288,102				57,500
Tax fees (3) :			—				—
All other fees (4) :			1,500				1,500
Total:		$	1,388,167			$	1,189,030

PROPOSAL TWO:
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of our board of directors has selected, subject to ratification by our stockholders, PwC to serve as our independent registered public accounting firm for the 2009 fiscal year. Additional information concerning the Audit Committee and its activities with PwC can be found in the “Audit Committee Report” on page [ ] and the section titled “Principal Accountant Fees and Services.”

The Sarbanes-Oxley Act of 2002 and Section 10A of the Securities Exchange Act of 1934 require that the Audit Committee of the board of directors be directly responsible for the appointment, compensation and oversight of the audit work of our independent registered public accounting firm. Ratification by the stockholders of the selection of PwC is not required by law, our bylaws or otherwise. However, the board of directors is submitting the selection of PwC for stockholder ratification to ascertain stockholders’ views on the matter.

A representative of PwC will attend the Annual Meeting to respond to appropriate questions and to make a statement if he or she desires to do so.

Our board of directors recommends that you vote FOR the Proposal to ratify the selection of PwC as our independent registered public accounting firm for fiscal 2009.

PROPOSAL THREE:
PROPOSAL TO APPROVE AN AMENDMENT TO OUR EXISTING INCENTIVE AWARD PLAN TO ALLOW
FOR A ONE-TIME STOCK OPTION EXCHANGE PROGRAM FOR EMPLOYEES OTHER THAN OUR
DIRECTORS AND EXECUTIVE OFFICERS

Introduction

On April 28, 2009, our board of directors, upon recommendation by our Compensation Committee, authorized amendments to our Second Amended and Restated 2005 Incentive Award Plan to allow for a one-time stock option exchange program. If implemented, the exchange program will allow us to cancel certain stock options currently held by some of our employees in exchange for the grant of a lesser amount of stock options with lower exercise prices. The shares subject to the cancelled stock options will not be available for reissuance. Exchange ratios will be designed to result in a fair value of the replacement options to be granted that will be approximately equal to the fair value of the options that are surrendered. We will use the 52-week high trading price of our common stock (measured from the start date of the exchange program) as a threshold for options eligible to be exchanged. In other words, only options with exercise prices above the 52-week high trading price will be eligible for the exchange. The use of this threshold is intended to ensure that only outstanding options that are substantially “underwater” are eligible for the exchange program. “Underwater” options are those options with exercise prices that are greater than our current stock price. Our executive officers and directors will not be eligible to participate in the exchange program. Stockholder approval is required for the amendment to the incentive award plan under the NASDAQ listing rules. If DealerTrack stockholders approve this proposal to amend our existing incentive award plan, the board intends to commence the exchange program as soon as practicable after the annual meeting. If DealerTrack stockholders do not approve this proposal, the exchange program will not take place.

Background

Our stock price has experienced a significant decline due in large part to the continued weak economy as well as other factors related specifically to the retail automotive industry and indirect automotive finance industry. DealerTrack may continue to be adversely impacted by the current economic climate. Despite our significant efforts to continue our annual growth and maintain our company’s performance in this environment, our stock price remains at a relatively low level compared to its historical performance. Consequently, our employees hold a significant number of stock options with exercise prices that greatly exceed both the current market price of DealerTrack common stock and the average market price of our stock over the prior twelve months. Further, there can be no assurance that our efforts to maintain and grow our business and improve our performance will ultimately result in significant increases in our stock price in the near-term, if at all. Thus, the board and the Compensation Committee believe these underwater options no longer provide the long-term incentive and retention objectives that they were intended to provide. The board and the Compensation Committee believe the exchange program is an important component in our strategy to align employee and stockholder interests through our equity compensation programs. We believe that the exchange program is important for DealerTrack because it will permit us to:

	•		Provide renewed incentives to our employees who participate in the exchange program. As of April 1, 2009, approximately 61.7% of our outstanding stock options granted to employees who would be eligible to participate in the exchange (not including those granted to executive officers or directors, who are not eligible to participate in the exchange) were underwater. Approximately 44.8 % of our total outstanding stock options (including those granted to executive officers and directors, who are not eligible to participate in the exchange) were underwater. The weighted average exercise price of all of our underwater options, including those granted to executive officers and directors, was $26.04 on April 1, 2009, as compared with a $13.75 closing price of our common stock on that date. As a result, we believe our outstanding stock options do not currently provide meaningful retention or incentive value to our employees.
			As of April 1, 2009, approximately 913,000 options, or approximately 43% of the outstanding stock options held by eligible employees (which is approximately 18.3% of our total outstanding options), had exercise prices higher than our stock’s 52 week high trading price of $22.72, which would make them eligible to be exchanged for a smaller number of options with a lower exercise price.. We believe the exchange program will enable us to enhance long-term stockholder value by providing greater assurance that DealerTrack will be able to retain experienced and productive employees by improving the morale of our employees generally and by aligning the interests of our employees more fully with the interests of our stockholders.

•

Meaningfully reduce our total number of outstanding stock options, or “overhang,” represented by outstanding options that have high exercise prices and may no longer provide adequate incentives to our employees. Overhang is equity awards outstanding but not exercised, plus equity awards available to be granted, divided by total common shares outstanding at the end of the year. Our existing outstanding stock options currently create an equity award overhang to our stockholders of approximately 13.6%. As of April 1, 2009, the total number of shares of DealerTrack common stock outstanding was approximately 40 million, the number of equity awards outstanding was 5,002,623, and the number of shares eligible for equity awards was 436,797. Keeping underwater options outstanding maintains this overhang, does not serve the interests of our stockholders and does not provide the benefits intended by our equity compensation program. If all options eligible for exchange were to be exchanged, our overhang would decrease to approximately 12.6%, a decrease of 7.4%. The overhang represented by the options granted pursuant to the exchange program is intended to reflect an appropriate balance between DealerTrack’s goals for its equity incentive program and our interest in minimizing our overhang and the dilution of our stockholders’ interests.

•

Recapture value from compensation costs that we already are incurring with respect to outstanding underwater stock options. These options were granted at the then fair market value of our common stock. Under applicable accounting rules, we will have to recognize a total of approximately $11.1 million in compensation expense related to underwater options that would be eligible for the exchange, $4.8 million of which has already been expensed as of April 1, 2009 and $6.3 million of which we will continue to be obligated to expense, even if these options are never exercised because they remain underwater. We believe it is not an efficient use of DealerTrack’s resources to recognize compensation expense on options that are not perceived by our employees as providing value. By replacing those options that have little or no retention or incentive value that will be eligible for exchange with options that will provide both retention and incentive value while not creating additional compensation expense (other than immaterial expense that might result from fluctuations in our stock price after the exchange ratios have been set but before the exchange actually occurs), DealerTrack will be making more efficient use of its resources.

If our stockholders do not approve the incentive award plan amendment authorizing the exchange program, eligible options will remain outstanding and in effect in accordance with their existing terms. We will continue to recognize compensation expense for these eligible options, even though these options have little or no retention or incentive value.

Summary of Material Terms

If stockholders approve the requisite amendments to our existing incentive award plan, the material terms of the exchange program will include eligibility, the exchange ratios to be applied to eligible options and the vesting schedule to apply to replacement options granted pursuant to the exchange program. These terms are summarized here and described in further detail below.

	•		The exchange program will be open to all employees, except as described below, who are employed by us as of the start of the exchange program and remain employees through the date the exchange program ends. Eligible employees will be required to elect to exchange either all or none of their eligible options for replacement options.
	•		The members of our board and our executive officers will not be eligible to participate in the exchange program.

	•		The exchange ratios of shares subject to eligible options surrendered in exchange for replacement options granted will be determined in a manner intended to result in the grant of replacement options that have a fair value approximately equal to the fair value of the eligible options they replace. The exchange ratios will be established shortly before the start of the exchange program and will depend on the original exercise price of the eligible option and the then-current fair value of the option (calculated using the Black-Scholes option pricing model). The exchange program will not be a one-for-one exchange. Instead, participating employees will receive replacement options covering a lesser numbers of shares (with a lower exercise price) than are covered by the surrendered eligible options.
	•		Each replacement option will have an exercise price per share equal to the closing price of our common stock on the date of grant and will have a new term equal to the weighted average remaining life of the options eligible for exchange.
	•		None of the replacement options will be vested on the date of grant. The replacement options will be scheduled to vest as follows: 25% six months from the replacement option grant date, 25% twelve months from the replacement option grant date, and 1/24 of the remaining options each month thereafter.
	•		The exchange program will begin within twelve months of the date of stockholder approval. The board and the Compensation Committee will determine the actual start date within that time period. If the exchange program does not commence within twelve months of stockholder approval, we will consider any future exchange or similar program to be a new one, requiring new stockholder approval before it could be implemented.

While the terms of the option exchange program are expected to be materially similar to the terms described in this proposal, the board and the Compensation Committee may change the terms of the exchange program in their sole discretion to take into account a change in circumstances, as described below, and may determine not to implement the exchange program even if stockholder approval is obtained.

Reasons for the Option Exchange Program

We believe that an effective and competitive employee incentive program is imperative for the success of our business. We rely on our experienced and productive employees and their efforts to help DealerTrack achieve its business objectives. At DealerTrack, stock options constitute a key component of our incentive and retention programs. The board and the Compensation Committee believe that equity compensation enhances our ability to attract and retain employees, further align employee and stockholder interests, continue to link employee compensation with Company performance and maintain a culture of ownership.

Due to the significant decline of our stock price, many of our employees now hold stock options with exercise prices significantly higher than the current market price of our common stock. For example, the closing price of our common stock on NASDAQ on April 1, 2009 was $13.75, whereas, the weighted average exercise price of all outstanding options held by our employees was $15.91. As of April 1, 2009, approximately 61.7% of the outstanding stock options held by our non-executive employees (or 44.8% of our total outstanding stock options) were underwater. Approximately 43% of the outstanding stock options held by our non-executive employees (or 18.3% of our total outstanding stock options) have exercise prices above our stock’s 52 week high, which would make them eligible to be exchanged in the exchange program. Although we continue to believe that stock options are an important component of our employees’ total compensation, many of our employees view their existing options as having little or no value due to the significant difference between the exercise prices and the current market price of our common stock. As a result, for many employees, these options are ineffective at providing the incentives and retention value that our board and the Compensation Committee believe is necessary to motivate and retain our employees.

Alternatives Considered

When considering how best to continue to incentivize and reward our employees who have underwater options, we considered the following alternatives:

•

Increase cash compensation. To replace equity incentives, we considered whether we could substantially increase base and target bonus cash compensation. However, significant increases in cash compensation would substantially increase our compensation expenses and reduce our cash flow from operations, which could adversely affect our business and operating results. In addition, these increases would not reduce our overhang.

•

Grant additional equity awards. We also considered special grants of additional stock options at current market prices or another form of equity award such as restricted stock units. However, these additional grants would substantially increase our overhang, as well as the dilution to our stockholders, and increase our compensation expenses.

•

Exchange options for cash. We also considered implementing a program to exchange underwater options for cash payments. However, an exchange program for cash would increase our compensation expenses and reduce our cash flow from operations, which could adversely affect our business and operating results. In addition, we do not believe that such a program would have significant long-term retention value.

•

Exchange options for restricted stock units. We also considered implementing a program to exchange underwater options for restricted stock units. However, in order to ensure that the exchange program is approximately expense-neutral from an accounting perspective, the exchange ratios for an options-for-restricted stock units exchange program would need to be substantially higher than for an options-for-options exchange program (i.e., fewer replacement awards granted). Thus, we believe that employee participation in an options-for-restricted stock units exchange program would be lower than with an options-for-options exchange program. Additionally, restricted stock units would be a new form of equity for many of our employees and we believe that a lack of familiarity with restricted stock units could negatively impact employee participation in the exchange program.

Implementation of the Option Exchange Program

We determined that a program under which our employees could exchange underwater stock options with higher exercise prices for a lesser number of replacement stock options with a lower exercise price was the most attractive alternative for a number of reasons, including the following:

•

The option exchange program offers a reasonable, balanced and meaningful incentive for our eligible employees. Under the exchange program, participating employees will surrender eligible underwater options for replacement options covering fewer shares with a lower exercise price and that will vest as follows: 25% six months from the replacement option grant date, 25% twelve months from the replacement option grant date, and 1/24 of the remaining options each month thereafter, subject to continued employment on each vesting date.

•

The exchange ratio will be calculated to return value to our stockholders. We will calculate the exchange ratios to result in a fair value, for accounting purposes, of the replacement options that will be approximately equal to the fair value of the eligible options that are exchanged, which we believe will have no significant adverse impact on our reported earnings. We believe the combination of fewer shares subject to options with lower exercise prices, no expected significant adverse impact on our reported earnings, and a new vesting schedule, represents a reasonable and balanced exchange program with the potential for a significant positive impact on employee retention, motivation and performance. Additionally, stock options will provide value to employees only if DealerTrack’s share price increases over time, aligning employee and stockholder interests.

•

The option exchange program will reduce our equity award overhang. Not only do the underwater options have little or no retention value, but they cannot be removed from our equity award overhang until they are exercised. Our exchange program will reduce our overhang while eliminating ineffective options that are currently outstanding. Because employees who participate in the exchange program will receive a lesser number of replacement options in exchange for their surrendered eligible options, the number of shares of stock subject to all outstanding equity awards will be reduced, reducing our overhang. Based on the assumptions described below, if all eligible options are exchanged, options to purchase approximately 913,091 shares will be surrendered and cancelled, while replacement options covering approximately 512,644 shares will be granted, resulting in a net reduction in the equity award

overhang by approximately 400,447 shares, a decrease of 7.4%. The options that are exchanged for replacement options will be cancelled and will not be available for reissuance pursuant to the incentive plan. Following the exchange, if all eligible options were exchanged, the total number of shares subject to outstanding equity awards as of April 1, 2009 (including non-exchangeable options held by executive officers would be approximately 4.6 million shares, taking into account the net reduction of outstanding shares described in the previous sentence. As of April 1, 2009, the total number of shares of DealerTrack common stock outstanding was approximately 40 million. All eligible options that are not exchanged will remain outstanding and in effect in accordance with their existing terms.

•

Members of our board and our executive officers will not be eligible to participate in the exchange program. Although our directors and executive officers also hold options that are significantly underwater, these individuals are not eligible to participate in the exchange program because we believe that their compensation should remain at greater risk based on our stock price.

Description of the Option Exchange Program

Implementing the Exchange Program. We have not commenced the exchange program and will not do so unless our stockholders approve this proposal. If we receive stockholder approval of the incentive award plan amendment permitting the exchange program, the exchange program may commence at a time determined by the board or the Compensation Committee, with terms expected to be materially similar to those described in this proposal. If we receive the required stockholder approval for the plan amendments, the approval will be for a one-time exchange program. Even if the stockholders approve this proposal, the board or the Compensation Committee may still later determine not to implement the exchange program. It is currently anticipated that the exchange program will commence as soon as practicable following approval of this proposal by our stockholders. However, if the exchange program does not commence within twelve months after the date of stockholder approval, DealerTrack will not commence an exchange or similar program without again seeking and receiving stockholder approval.

Upon commencement of the exchange program, employees holding eligible options would receive written materials (the “offer to exchange”) explaining the precise terms and timing of the exchange program. Employees would be given at least 20 business days (or such longer period as we may elect to keep the exchange program open) to elect to exchange all or none of their eligible options for replacement options. After the offer to exchange is closed, the eligible options surrendered for exchange would be cancelled and the Compensation Committee would approve grants of replacement options to participating employees in accordance with the applicable exchange ratios. The cancelled options would not be available for reissuance pursuant to the incentive plan. All such replacement options would be granted under the Second Amended and Restated 2005 Incentive Award Plan (or, if Proposal Four receives stockholder approval, the Third Amended and Restated 2005 Incentive Award Plan) and would be subject to the terms of the plan.

At or before commencement of the exchange program, we would file the offer to exchange and other related documents with the SEC as part of a tender offer statement on Schedule TO. Employees, as well as stockholders and members of the public, will be able to access the offer to exchange and other documents we file with the SEC free of charge from the SEC’s web site at www.sec.gov or on our Investor Relations web site at http://ir.DealerTrack.com.

If you are both a stockholder and an employee holding eligible options, please note that voting to approve the incentive award plan amendment authorizing the exchange program does not constitute an election to participate in the exchange program.

Eligible Options. To be eligible for exchange under the exchange program, an underwater option, as of a date specified by the terms of the offer to exchange (which date will be not more than 20 business days prior to the date that the exchange program commences), must not (i) have a per share exercise price at or below the 52-week high trading price of our common stock as reported by NASDAQ at such time or (ii) have been granted within 12 months of the date that the exchange program commences.

Eligible Participants. The exchange program would be open to all employees who hold eligible options, except as described below. Although DealerTrack intends to include all employees located outside the United States, the Company may exclude such employees if, for any reason, the Compensation Committee believes that their participation would be illegal, inadvisable or impractical. To be eligible, an individual must be employed on the date the offer to exchange commences and must remain employed through the date that replacement options are granted. The exchange program would not be open to members of our board or our executive officers. As of April 1, 2009, there were approximately 642 employees eligible to participate in the option exchange program (based on the assumptions below).

Exchange Ratios. Exchange ratios would be designed to result in a fair value, for accounting purposes, of the replacement options that will be approximately equal to the fair value of the eligible options that are surrendered in the exchange (based on valuation assumptions made when the offer to exchange commences). These ratios will be designed to make the grant of replacement options accounting expense neutral. The actual exchange ratios would be determined by the Compensation Committee shortly before the start of the exchange program.

The exchange ratios will be established by grouping together eligible options with similar exercise prices and assigning an appropriate exchange ratio to each grouping. These exchange ratios will be based on the fair value of the eligible options (calculated using the Black-Scholes model of option pricing) within the relevant grouping. The calculation of fair value using Black-Scholes takes into account many variables, such as the volatility of our stock and the expected term of an option. As a result, the exchange ratios do not necessarily increase as the exercise price of the option increases. Setting the exchange ratios in this manner is intended to result in the issuance of replacement options that have a fair value approximately equal to or less than the fair value of the surrendered eligible options they replace. This will limit the additional compensation cost that we must recognize on the replacement options to the immaterial compensation expense that might result from fluctuations in our stock price after the exchange ratios have been set but before the exchange actually occurs. For instance, eligible options with exercise prices from $22.72 to $31.75 per share might have an exchange ratio of 1.65 eligible option shares for each replacement option share to be received in exchange, while eligible option with exercise prices from $31.76 to $38.00 per share might have an exchange ratio of 1.90 eligible option shares for each replacement option share to be received in exchange.

Although the exchange ratios cannot be determined now, we can provide an example if we make certain assumptions regarding the start date of the offer to exchange, the fair value of the eligible options, and the fair market value of our common stock. For illustration purposes, assume we were to begin the exchange program on April 1, 2009, which would allow us to include in the exchange program a substantial percentage of our outstanding underwater options, and assume that our then-applicable 52-week high would be $22.72. As a result, options with an exercise price above $22.72 per share and that were granted at least 12 months prior to April 1, 2009 would be eligible for the exchange program. If, at the time we set the exchange ratios, the fair market value of our common stock was $13.75 per share, then based on the above method of determining the exchange ratio, the following exchange ratios would apply:

The Exchange

If the

Ratio Would

Exercise

Be (Eligible

Weighted

Price of an

Option to

Exchange Eligible

Weighted

Average

Eligible

Replacement

Option Shares

Average

Exercise

Replacement

Option Is

Option):

Outstanding

Remaining Life

Price

Option Shares

$22.72 to $31.75

1.65 to 1

721,191

6.51 years

$

25.69

437,085

$31.76 to $38.00

1.90 to 1

38,750

6.96 years

$

32.93

20,395

$38.01 to $47.97

2.65 to 1

126,750

5.31 years

$

38.20

47,830

$47.98 and Above

3.60 to 1

26,400

5.60 years

$

47.98

7,333

Total

913,091

6.33 years

512,644

The foregoing exchange ratios are provided merely as an example of how we would determine the exchange ratios if we were commencing the exchange offer based on a $13.75 share price. We will apply the same methodology once these factors are decided closer to the time of commencement of the exchange program. The number of options eligible to be exchanged as of the date the program starts will increase from the number that would be eligible if the exchange started on April 1, 2009 to the extent our 52 week high stock price decreases following the date hereof. The total number of replacement options a participating employee will receive with respect to a surrendered eligible option will be determined by converting the number of shares underlying the surrendered eligible option according to the applicable exchange ratio and rounding down to the nearest whole share. The exchange ratios will be applied on a grant-by-grant basis.

For purposes of example only, if a participating employee exchanged eligible options to purchase 1,000 shares with an exercise price of $35.00 per share and the exchange ratio was one replacement option for every 1.90 surrendered eligible option shares, the employee would receive options to purchase 526 shares in exchange for the surrendered eligible options (1,000 divided by 1.90).

Election to Participate. Participation in the exchange program will be voluntary. Eligible employees will be required to elect to exchange all or none of their eligible options for replacement options.

Exercise Price of Replacement Options. All replacement options will be granted with an exercise price equal to the closing price of our common stock on the replacement option grant date as reported by NASDAQ.

Vesting of Replacement Options. The replacement options will vest 25% six months from the replacement option grant date, 25% twelve months from the replacement option grant date, and 1/24 of the remaining options each month thereafter.

Term of the Replacement Options. The replacement options will have a term equal to the weighted average remaining life of the options eligible for exchange.

Other Terms and Conditions of the Replacement Options. The other terms and conditions of the replacement options will be set forth in an option agreement to be entered into as of the replacement option grant date. Any additional terms and conditions will be comparable to the other terms and conditions of the eligible options. All replacement options will be nonstatutory stock options granted under our Second Amended and Restated 2005 Incentive Award Plan (or, if Proposal Four receives stockholder approval, the Third Amended and Restated 2005 Incentive Award Plan).

Return of Eligible Options Surrendered. The eligible options surrendered for exchange will be cancelled and will not be available for reissuance under future grants.

Accounting Treatment. Under SFAS 123(R), the exchange of options under the option exchange program is treated as a modification of the existing options for accounting purposes. The incremental compensation cost will be measured as the excess, if any, of the fair value of each replacement option granted to employees in exchange for surrendered eligible options, measured as of the date the replacement options are granted, over the fair value of the surrendered eligible options in exchange for the replacement options, measured immediately prior to the cancellation. Because the exchange ratios will be calculated to result in the fair value of surrendered eligible options being equal to the fair value of the options replacing them, we do not expect to recognize any significant incremental compensation expense for financial reporting purposes as a result of the exchange program. In the event that any of the replacement options are forfeited prior to their vesting due to termination of service, any incremental compensation cost for the forfeited replacement options will not be recognized; however, we would recognize any unamortized compensation expense from the surrendered options which would have been recognized under the original vesting schedule.

U.S. Federal Income Tax Consequences. The following is a summary of the anticipated material U.S. federal income tax consequences of participating in the exchange program. A more detailed summary of the applicable tax considerations to participating employees will be provided in the offer to exchange. We believe the exchange of eligible options for replacement options pursuant to the exchange program should be treated as a non-taxable exchange and neither we nor any of our employees should recognize any income for U.S. federal income tax purposes upon the surrender of eligible options and the grant of replacement options. However, the tax consequences of the exchange program are not entirely certain and the Internal Revenue Service is not precluded from adopting a contrary position. The law and regulations themselves are also subject to change. All holders of eligible options are urged to consult their own tax advisors regarding the tax treatment of participating in the exchange program under all applicable laws prior to participating in the exchange program. The tax consequences for non-U.S. employees may differ from the U.S. federal income tax consequences described in the preceding sentence.

Potential Modification to Terms to Comply with Governmental Requirements. The terms of the exchange program will be described in an offer to exchange that will be filed with the SEC. Although we do not anticipate that the SEC will require us to materially modify the exchange program’s terms, it is possible that we will need to alter the terms of the exchange program to comply with comments from the SEC. Changes in the terms of the exchange program may also be required for tax purposes for participants in the United States as the tax treatment of the exchange program is not entirely certain. In addition, we intend to make the exchange program available to our employees who are located outside the United States, where permitted by local law and where we determine it is feasible and practical to do so. It is possible that we may need to make modifications to the terms offered to employees in countries outside the United States to comply with local requirements, or for tax or accounting reasons. The Compensation Committee will retain the discretion to make any such necessary or desirable changes to the terms of the exchange program for purposes of complying with comments from the SEC or optimizing the U.S. federal or foreign tax consequences.

Plan Benefits Relating to the Option Exchange Program

Because participation in the exchange program is voluntary, the benefits or amounts that will be received by any participant, if this proposal is approved and the exchange program is implemented, are not currently determinable, since we are not able to predict who or how many participants will elect to participate, how many options will be surrendered for exchange or the number of replacement options that may be granted. None of our board members or executive officers will be eligible to participate in the exchange program. Based on the assumptions described above, including an assumed $22.72 52-week high trading price of our common stock and a $13.75 share price, the maximum number of shares underlying options that would be cancelled (and not available for reissuance) would be 913,091 shares, and the maximum number of shares underlying new options that would be granted would be 512,644 shares.

Effect on Stockholders

We are unable to predict the precise impact of the exchange program on our stockholders because we are unable to predict how many or which employees will exchange their eligible options. The exchange program was designed in the aggregate to be expense-neutral to our stockholders while reducing the overhang. Based on the assumptions described above, including an assumed $22.72 52-week high trading price of our common stock and a $13.75 share price, if all eligible options are exchanged, options to purchase approximately 913,000 shares will be surrendered, cancelled and not made available for reissuance, while replacement options covering approximately 512,644 shares will be granted resulting in a net reduction in the equity award overhang by approximately 400,447 shares. Following the exchange program, based on the assumptions described above, if all eligible options are exchanged, we will have approximately 4.6 million options outstanding, with a weighted average exercise price of $12.92 and a weighted average remaining term of 5.38 years. As of April 1, 2009, the total number of shares of DealerTrack common stock outstanding was approximately 40 million.

Text of Amendment to Existing Equity Plan

In order to permit DealerTrack to implement the one-time stock option exchange program in compliance with the Second Amended and Restated 2005 Incentive Award Plan and applicable NASDAQ listing rules, the Compensation Committee recommended and the board approved amendments to the Second Amended and Restated 2005 Incentive Award Plan, subject to approval of the amendments by its stockholders. The Company is seeking stockholder approval to amend its Second Amended and Restated 2005 Incentive Award Plan to allow for the exchange program. The amendment would add a new Section 15.15, which will read as follows:

“Notwithstanding any other provision of the Plan to the contrary, upon approval of our stockholders, the Committee may provide for, and the Company may implement, a one-time-only option exchange offer, pursuant to which certain outstanding Options could, at the election of the person holding such Option, be tendered to the Company for cancellation in exchange for the issuance of a lesser amount of Options with a lower exercise price, provided that such one-time-only option exchange offer is commenced within twelve months of the date of such stockholder approval. The shares subject to any options cancelled by the Company pursuant to this option exchange will not be available for reissuance under any award under the Plan.”

Recommendation of our Board of Directors

OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF AN AMENDMENT TO OUR EXISTING INCENTIVE AWARD PLAN TO ALLOW FOR A ONE-TIME STOCK OPTION EXCHANGE PROGRAM FOR EMPLOYEES OTHER THAN OUR EXECUTIVE OFFICERS AND DIRECTORS.

THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3

PROPOSAL FOUR:
PROPOSAL TO AMEND AND RESTATE OUR SECOND AMENDED AND RESTATED 2005 INCENTIVE
AWARD PLAN

On April 28, 2009, our board of directors voted to amend and restate the Second Amended and Restated DealerTrack Holdings, Inc. 2005 Incentive Award Plan, or the Second Restated 2005 Plan, and to rename it the Third Amended and Restated DealerTrack Holdings, Inc. 2005 Incentive Award Plan, or the Third Restated 2005 Plan. Accordingly, the board of directors is recommending this proposal to our stockholders for approval.

As of April 1, 2009, there were 436,797 shares of common stock available under the existing Second Restated 2005 Plan. The Third Restated 2005 Plan increases the reserved shares of our common stock under the plan by 4,855,847 shares. The addition of these shares of common stock allows the Compensation Committee to continue to use stock-based awards to attract and retain employees and directors, further align employee and stockholder interests, continue to link employee compensation with Company performance and maintain a culture of ownership.

After the stock option exchange described in Proposal Three, but without the approval of this Proposal Four (assuming all eligible options are exchanged, and not including any grants after April 1, 2009), there would be a negative balance of 75,847 shares available for grant (calculated by subtracting the regranted options from the number of options we have available prior to approval of this proposal), 4,602,176 options and SARs outstanding (5,002,623 as of April 1, 2009 less 913,091 exchanged options plus 512,644 options granted as part of the exchange) and 1,368,202 full value awards (including deferred compensation shares) outstanding. These outstanding options and SARs would have a weighted average exercise price of $12.92 and a weighted average remaining term of approximately 5.38 years. Please see the table below for a side-by-side comparison of before and after the stock option exchange:

										After the Exchange
		As of April 1, 2009				After the Exchange (as if				and with Approval of
		(rounded)				occurring on April 1, 2009)				Proposal Four
Shares available for grant			436,797				(75,847)				4,780,000
Deferred Compensation shares available for grant			176,411				176,411				176,411
Stock options and SARs outstanding			5,002,623				4,602,176				4,602,176
Weighted Average Exercise Price		$	15.91			$	12.92			$	12.92
Weighted Average Remaining Term		5.47 years				5.38 years				5.38 years
Full Value Awards Outstanding (including Deferred Compensation shares)			1,368,202				1,368,202				1,368,202
Total Equity Incentive Awards Outstanding			6,370,825				5,970,378				5,970,378

Shares issued in respect of any “full-value award” granted under the Third Restated 2005 Plan will be counted against the Plan’s share limit as 1.53 shares for every one share actually issued in connection with the award. For example, if the Company were to grant 100 shares of its common stock under the Third Restated 2005 Plan, 153 shares would be charged against the share limit with respect to that award. For this purpose, a “full-value award” generally means any award granted under the plan other than a stock option or stock appreciation right.

The material features of the Third Restated 2005 Plan are:

	•		in connection with the Third Restated 2005 Plan, 4,855,847 new shares will be authorized for issuance, provided, that shares issued in respect of any “full-value award” will be counted against the Plan’s share limit as 1.53 shares for every one share actually issued in connection with the award;
	•		any shares underlying grants under the Third Restated 2005 Plan that terminate, expire or lapse for any reason (other than by exercise and other than by exchange if Proposal Three is approved) in the future are added back to the shares of common stock available for issuance under the Third Restated 2005 Plan;
	•		shares tendered or held back for taxes or exercise price payment will not be added to the reserved pool under the Third Restated 2005 Plan;
	•		upon the exercise of a SAR, the gross number of shares will be reduced from the reserved pool;
	•		we may grant non-qualified stock options, restricted common stock, SARs, performance shares, performance stock units, stock payment awards, deferred stock awards, restricted stock units, performance-based awards (payable either in cash or in shares) to our employees, directors or consultants, and additionally, we may grant incentive stock options to our employees;
	•		the term of new stock option grants and SARs is limited to seven years;
	•		the maximum number of shares of common stock that may be awarded under the Third Restated 2005 Plan to any one person during any one year is 750,000 shares and the maximum amount payable with respect to cash performance bonus awards to a “Covered Employee” (as defined in the Internal Revenue Code of 1986, or the Code) during any fiscal year is limited to $3,000,000;

	•		to ensure that certain awards granted under the Third Restated 2005 Plan to a Covered Employee qualify as “performance-based compensation” under Section 162(m) of the Code, the Third Restated 2005 Plan provides that the Compensation Committee may require that the vesting of such awards be conditioned on the satisfaction of performance criteria that may include any or all of the following: earnings before interest, taxes, depreciation and amortization, net income (loss) (either before or after interest, taxes, depreciation and/or amortization), economic value-added, sales or revenue, acquisitions or strategic transactions, operating income (loss), cash flow (including, but not limited to, operating cash flow and free cash flow or cash net income), cash net income, return on capital, return on assets, return on stockholders’ equity, total stockholder return, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings (loss) per share, price per share of stock, market share, number of customers and market capitalization, any of which may be measured in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Compensation Committee will select the particular performance criteria within 90 days following the commencement of a performance cycle; and
	•		The term of the Third Restated 2005 Plan ends on April 29, 2019.

Based solely on the closing price of our common stock as reported by NASDAQ on April 15, 2009, the maximum aggregate market value of the additional 4,855,847 new shares of common stock that could be issued under the Third Restated 2005 Plan is $70 million. The shares we issue under the Third Restated 2005 Plan will be authorized but unissued shares.

Summary of the Third Restated 2005 Plan

The following description of certain features of the Third Restated 2005 Plan is intended to be a summary only. The summary is qualified in its entirety by the full text of the Third Restated 2005 Plan that is attached hereto as Exhibit I.

Administration

The Compensation Committee of the board of directors is authorized to administer the Third Restated 2005 Plan. The Compensation Committee has the power, subject to the provisions of the Third Restated 2005 Plan, to designate participants to receive awards, determine the type or types of awards to be granted to each participant, determine the number of awards to granted and the number of shares of stock to which an award will relate, determine the terms and conditions of any award, including the exercise price, grant price, purchase price, any restrictions or limitations on the award, any schedule for lapse of forfeiture restrictions or restrictions on exercisability, and provisions dealing with non-competition and recapture of gain on an award, to determine whether, and to what extent and pursuant to what circumstances an award may be settled in or the exercise price may be paid in cash, stock other awards or other property, determine when an award may be canceled, forfeited or surrendered, prescribe the form of each award agreement, establish adapt or revise any rules and regulations necessary or advisable to administer the plan, interpret the terms of the plan or any award agreement and make all other decisions and determinations that may be required pursuant to the plan or in the determination of the Compensation Committee. The Compensation Committee may also delegate to one or more of our officers the power to designate which of our non-officer employees shall receive stock awards and the number of shares of common stock that will be subject to each award, subject to a maximum aggregate number of shares specified by the Compensation Committee at the time the delegation to the officers is made.

Eligibility

Persons eligible to participate in the Third Restated 2005 Plan will be officers, employees, non-employee directors and consultants of the Company. As of April 1, 2009, approximately 1,034 individuals were eligible to participate in the Third Restated 2005 Plan.

Types of Equity-Based Awards

Stock Options. The Compensation Committee may grant stock options to eligible persons under the Third Restated 2005 Plan. Each option granted pursuant to the Third Restated 2005 Plan is designated at the time of grant as either an incentive stock option or as a non-qualified stock option. Non-qualified stock options may be granted to all eligible persons, but incentive stock options may be granted only to employees of the Company and its related entities. The option term of new option grants is limited to seven years. All options must have a per share option exercise price that is not less than the fair market value of shares of our common stock on the grant date.

Restricted Common Stock. Participants’ rights with respect to grants of restricted common stock awarded under the Third Restated 2005 Plan are subject to transferability and forfeiture restrictions during a restricted period. While the restrictions are in place, the participant generally has the rights and privileges of a stockholder, including the right to vote the restricted common stock and to receive dividends.

Restricted Stock Units and Deferred Stock Units. Each restricted stock unit and deferred stock unit awarded by the Compensation Committee entitles the participant to receive one share of common stock for each unit at the end of the vesting or deferral periods. A holder of restricted stock units or deferred stock units has no voting rights, rights to receive cash distributions or other rights as a stockholder until shares of common stock are issued to the holder in settlement of the stock units.

Stock Appreciation Rights. SARs are awards that give the recipient the right to receive an amount equal to (1) the number of shares exercised under the right, multiplied by (2) the amount by which our stock price exceeds the fair market value of shares of our common stock on the grant date. Payment may be in shares of our common stock with equivalent value. The term of SARs is limited to seven years. SARs expire under the same rules that apply to stock options.

Performance Awards. Holders of performance shares or units will be entitled to receive payment in shares of our common stock if the performance goals established by the Compensation Committee are achieved. The Compensation Committee may also award incentive bonuses in the form of cash upon the attainment of performance goals established by the Compensation Committee.

Change of Control

In connection with any change of control, except as may otherwise be provided in any applicable award or employment agreement, unless awards granted pursuant to the Third Restated 2005 Plan are converted, assumed or replaced by the successor entity, the awards will automatically become fully vested and exercisable and all forfeiture restrictions with respect to such awards shall lapse prior to the consummation of the change in control, unless otherwise provided in an award agreement. In addition, with respect to any awards, in connection with any change in control (or other unusual or nonrecurring transaction affecting us or our consolidated financial statements), the Compensation Committee, in its sole discretion, may:

	•		provide for the termination of any award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such award or realization of the participant’s rights as of the date of such change in control or other transaction;
	•		replace outstanding awards with other rights or property selected by the Committee;
	•		provide that after the occurrence of the transaction, the award cannot vest, be exercised or become payable;
	•		provide that an award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Third Restated 2005 Plan or the applicable award agreement; or
	•		provide that each outstanding option shall be assumed or substituted for an equivalent award, right or property by any successor corporation.

Any such action may be effected by the Compensation Committee either by the terms of the applicable award agreement or by action of the Compensation Committee taken prior to the change of control.

Adjustments for Stock Dividends, Stock Splits, Etc.

The Compensation Committee shall make appropriate adjustments to the number of shares of common stock that are subject to the Third Restated 2005 Plan and to any outstanding awards to reflect stock dividends, stock splits, extraordinary cash dividends and similar events.

Tax Withholding

Participants in the Third Restated 2005 Plan are responsible for the payment of any federal, state or local taxes that the Company is required by law to withhold upon any option exercise or vesting of other awards. Subject to approval by the Compensation Committee, participants may elect to have the minimum tax withholding obligations satisfied by authorizing us to withhold shares of common stock to be issued pursuant to an option exercise or vesting of other awards.

Amendments, Suspension and Termination

The Compensation Committee is generally authorized to adopt, amend and rescind rules relating to the administration of the Third Restated 2005 Plan, and to amend, suspend and terminate the Third Restated 2005 Plan. However, we must generally obtain approval of our stockholders: (i) to increase the number of shares of our common stock that may be issued under the Third Restated 2005 Plan; (ii) to permit the Compensation Committee to grant options with an exercise price below fair market value on the date of grant, (iii) to permit the Compensation Committee to extend the exercise period for an option or an SAR beyond seven years from the date of grant, or (iv) that results in a material increase in benefits or a change in eligibility requirements.

New Plan Benefits

If the Third Restated 2005 Plan is approved by our stockholders, it is anticipated that the Compensation Committee will make the following grants of restricted common stock and stock options as set forth in the table below. We can not project the grants that may be made to our officers and employees because such grants are made at the discretion of the Compensation Committee.

		Restricted Common Stock								Stock Options								Restricted Stock Units
																		Dollar
Name and Position		Dollar Value ($)				Number (#)				Dollar Value ($)				Number (#)				Value ($)				Number (#)
All current executive officers, as a group			—				—				—				—				—				—
All current directors who are not executive officers, as a group (1)		$	—				—	(1)			—				—				—				—
All current employees who are not executive officers, as a group			—				—	(1)			—				—				—				—

Tax Aspects Under the Code

The following is a summary of the principal federal income tax consequences of certain transactions under the Third Restated 2005 Plan. It does not describe all federal tax consequences under the Third Restated 2005 Plan, nor does it describe state or local tax consequences.

Stock Options. The grant of stock options under the Plan will not result in taxable income at the time of the grant for either the Company or the optionee. Upon exercising an incentive stock option, the optionee will have no taxable income (except for the alternative minimum tax, if applicable) and the Company will receive no deduction. Upon exercising a non-qualified stock option, the optionee will recognize ordinary income in the amount by which the fair market value of the common stock at the time of exercise exceeds the option exercise price, and the Company will be entitled to a deduction for the same amount. The optionee’s income is subject to withholding tax as wages. The tax treatment of the optionee upon a disposition of shares of common stock acquired through the exercise of a stock option is dependent upon the length of time that the shares have been held and whether such shares were acquired by exercising an incentive stock option or a non-qualified stock option. If an employee exercises an incentive stock option and holds the shares for two years from the date of grant and one year after exercise, then any gain or loss upon the sale of the underlying shares will be treated as long-term capital gain or loss. Shares obtained upon exercise of an incentive stock option that are sold without satisfying these holding periods will be treated as shares received from the exercise of a non-qualified stock option. Generally, upon the sale of shares obtained by exercising a non-qualified stock option, the optionee will treat the gain realized on the sale as a short-term or long-term capital gain, depending on the length of the holding period. Generally, there will be no tax consequence to the Company in connection with the disposition of shares of common stock acquired under an option, except that the Company may be entitled to a deduction in the case of a disposition of shares acquired upon exercise of an incentive stock option before the applicable holding periods have been satisfied.

Restricted Common Stock. An award of restricted common stock will not result in taxable income to the participant at the time of grant. Upon the lapse of the restrictions, the participant will recognize ordinary income in the amount of the fair market value of the shares of common stock at the time that the restriction lapses. Alternatively, within 30 days after receipt of the restricted common stock, a participant may make an election under Section 83(b) of the Code, which would allow the participant to include in income in the year that the restricted common stock is awarded an amount equal to the fair market value of the restricted common stock on the date of such award determined without regard to the restrictions.

The Company will be entitled to a deduction for the year in which the participant recognizes ordinary income with respect to the restricted common stock in an amount equal to such income.

Other Awards. The current federal income tax consequences of other awards authorized under the Third Restated 2005 Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as non-qualified stock options. Restricted stock units and deferred stock units are taxed and deductible when the recipient receives shares of common stock in settlement of such units. Stock-based or cash-based performance awards, and other types of awards are generally subject to tax at the time of payment. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income.

Parachute Payments

The vesting of any portion of an option or other award that is accelerated due to the occurrence of a change of control may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments” as defined in the Code. Any such parachute payments may be non-deductible to us, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).

Limitation on Deductions

Under Section 162(m) of the Code, our deduction for certain awards under the Third Restated 2005 Plan may be limited to the extent that the Chief Executive Officer or other executive officer whose compensation is required to be reported in the Summary Compensation Table receives compensation in excess of $1 million a year (other than performance-based compensation that otherwise meets the requirements of Section 162(m) of the Code). The Third Restated 2005 Plan is structured to allow grants to qualify as performance-based compensation.

Vote Required

Under our bylaws, the affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the approval of the Third Restated 2005 Plan. Abstentions shall be included in determining the number of shares present and entitled to vote on the proposal, thus having the effect of a vote against the proposal. Broker non-votes are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome.

Recommendation of our Board of Directors

OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE THIRD AMENDED AND RESTATED DEALERTRACK HOLDINGS, INC. 2005 INCENTIVE AWARD PLAN.

EXECUTIVE OFFICERS

The following individuals serve as our executive officers:

Name		Age		Title
Mark F. O’Neil		50		Chairman of the Board, President and Chief Executive Officer
Ana M. Herrera		52		Senior Vice President, Human Resources
Eric D. Jacobs		42		Senior Vice President, Chief Financial Officer, Chief Administrative Officer and Treasurer
Richard McLeer		44		Senior Vice President and Chief Information Officer
Raj Sundaram		42		Senior Vice President, Solutions and Services Group
Rick G. Von Pusch		47		Senior Vice President, Sales, Marketing and International

Mark F. O’Neil has served as our Chairman of the Board, President and Chief Executive Officer since May 2005 and has served as a member of the board of directors since August 2001. From August 2001 to May 2005, Mr. O’Neil served as our Chief Executive Officer and President. Mr. O’Neil began his career at Intel Corporation, where he first developed knowledge of the technology industry. He subsequently worked for McKinsey & Co. before moving to the automotive industry in the late 1980’s. His experience in the automotive industry includes serving as President of Ertley MotorWorld, a dealer group based in Pennsylvania. From this traditional retail dealer group, Mr. O’Neil went on to co-found and lead the development and rollout of CarMax, Inc., a publicly-held used automobile retailer. From June 2000 through January 2001, Mr. O’Neil was President and Chief Operating Officer of Greenlight.com, an online automotive sales website. He also serves as a director of DealerTire LLC, a privately held company. Mr. O’Neil holds a BS in Industrial Engineering from Worcester Polytechnic Institute and an MBA from Harvard Business School.

Ana M. Herrera has served as Senior Vice President, Human Resources since February 2007. From May 2005 to January 2007, Ms. Herrera served as Vice President, Human Resources, of DealerTrack, Inc. From September 2002 to May 2005, Ms. Herrera was Vice President of Human Resources at MeadWestvaco Corporation, where she led the global human resources function for the company’s Consumer Packaging Group. Prior to this, Ms. Herrera spent two years as a consultant, working on a wide range of human resources assignments for a diverse group of clients. Other previous experience includes having served as Vice President of Human Resources for Revlon Consumer Products Corporation’s International Division, and as, first, Director and later Vice President of Human Resources for Duracell Corporation. Ms. Herrera holds a BS in Business Administration from California State Polytechnic University.

Eric D. Jacobs has served as Senior Vice President and Chief Administrative Officer since January 2009 and has also served as Chief Financial Officer and Treasurer since March 2009. From January 2004 through January 2009 Mr. Jacobs served as our Senior Vice President, General Counsel and Secretary. From August 2006 through January 2009 Mr. Jacobs also served as President of DealerTrack Canada, Inc., our Canadian subsidiary, formerly known as dealerAccess Canada, Inc. From April 2002 to December 2003, Mr. Jacobs served as our Vice President, General Counsel and Secretary. Mr. Jacobs was an associate at the international law firm of O’Melveny & Myers LLP where he specialized in general corporate and securities law from August 1998 to April 2002. Prior to becoming an attorney, Mr. Jacobs was an audit manager and CPA at KPMG LLP. Mr. Jacobs holds a BS in Business Administration with a major in Accounting, magna cum laude, from Rider University and a JD, with honors, from the Rutgers School of Law-Newark.

Richard McLeer has served as Senior Vice President and Chief Information Officer since January 2009. From August 2006 through January 2009, Mr. McLeer served as Senior Vice President, Strategy & Development. From April 2005 to August 2006, Mr. McLeer served as Vice President, Credit and Contract Solutions for DealerTrack, Inc., and served as our National Lender Development Manager from February 2001 to April 2005. From 1996 to 2001, Mr. McLeer was Senior Vice President and National Product Director for the Bank of America Auto Group, and previously held a variety of marketing, sales and business development positions at Bank of America. Prior to that, Mr. McLeer worked at Trans Union Corporation from 1993 to 1996. Other previous experience includes two years serving as controller of Ellesse, U.S.A., a division of Reebok, and four years in public accounting. Mr. McLeer holds a BS in Accounting from Hofstra University and is a CPA.

Rajesh (Raj) Sundaram has served as Senior Vice President, Solutions and Services Group, since January 2009. From August 2006 through January 2009, Mr. Sundaram served as Senior Vice President, Dealer Solutions. Mr. Sundaram served as President of Automotive Lease Guide (alg), Inc. and President of Automotive Lease Guide (alg), LLC, from 2002 until its acquisition by us in May 2005, and continued to hold those positions from May 2005 to August 2006. Prior to joining ALG as Vice President and General Manager in 1999, Mr. Sundaram served as Senior Manager, Strategic Planning and Pricing at Nissan North America, Inc. from 1997 to 1999, and held various positions in financial planning including Finance Manager, Infiniti division at Nissan North America, Inc. from 1994 to 1997. Mr. Sundaram previously held roles in the controller’s office of the Ford division of Ford Motor Company from 1991 to 1994. Mr. Sundaram holds a BS and MS in Accounting from the University of Mumbai in India and an MBA in Finance from Lehigh University.

Rick G. Von Pusch has served as Senior Vice President, Sales, Marketing and International, since January 2009. Mr. Von Pusch served as Senior Vice President, Customer Development from August 2006 through January 2009. From April 2006 to August 2006, Mr. Von Pusch served as President of Sales and Marketing at 5Square Systems, a provider of CRM, desking and menu products. Mr. Von Pusch served as Vice President of U.S. Retail Sales at Reynolds and Reynolds Corporation from April 2005 to October 2005, Area Vice President from October 2001 to April 2005 and held various positions in sales and sales management at Reynolds and Reynolds from 1988 to 2001. Mr. Von Pusch also was a sales representative for NCR Corporation from 1985-1987. Mr. Von Pusch holds a BA in Management Information Systems from the University of South Florida.

COMPENSATION DISCUSSION AND ANALYSIS

This section contains a discussion of the material elements of compensation awarded to, earned by or paid to our executive officers. These executive officers include the Chief Executive Officer, Chief Financial Officer and the three most highly compensated officers of DealerTrack, who we refer to in this section as the “named executive officers.”

Overview

The Company’s compensation philosophy is designed to support the key objective of creating value for the stockholders by growing the revenue and earnings before interest, taxes, depreciation and amortization, or EBITDA, increasing the total market capitalization and growing the share price. The Compensation Committee is responsible for establishing and approving the compensation of our executive officers.

DealerTrack believes that a sound compensation philosophy and strategy serve to align the team members and focus the executive team and the whole company on the vision and the achievement of our stated strategic objectives and goals.

The Compensation Committee has established the following principles in determining the compensation of the executive officers:

	•		balance rewards for executives between short-term results and the long-term strategic decisions needed to ensure sustained success for the Company and its stockholders over time;
	•		attract and retain high-performing executive talent by paying competitive compensation;
	•		provide rewards consistent with performance by tying both the annual cash incentive program and the long term equity incentive program to corporate performance; and
	•		provide equity-based long term incentives which align management and stockholder interests.

The Compensation Committee has established a number of processes, described below, to ensure that the executive compensation achieves these objectives.

Compensation Processes and Criteria

Peer Group Information and Benchmarking

In connection with compensation decisions for 2008, the Compensation Committee reviewed market compensation data of a peer group of companies established by Ernst & Young, an independent compensation consultant that is retained by and reports to the Compensation Committee. The companies that comprised our 2008 peer group were: Choicepoint, Inc., Digital River, Inc., f5 Networks Inc., Radiant Systems, Inc., Salesforce.com, Inc., Tier Technologies, Inc., Websense, Inc., Blackbaud, Inc., Blackboard Inc., Heartland Payment Systems, Jack Henry & Associates, TNS, Inc. and Witness Systems, Inc.

The Compensation Committee uses the peer group compensation data primarily to ensure that the total direct compensation for executives is within the broad middle range of comparative pay while providing an opportunity for the annual cash bonus to attain the 75th percentile when targeted performance levels are exceeded. While peer group market data provides a useful starting point for compensation decisions, the Compensation Committee also takes into account factors such as level of responsibility, prior experience and individual performance in arriving at final compensation decisions. The elements of executive compensation include base salary, annual and long term incentive plans, and annual grants of equity awards. Executive compensation has a high proportion of total direct compensation delivered through pay-for-performance incentive and long-term equity compensation, equating to a greater proportion of at-risk compensation.

On November 12, 2008, the Compensation Committee re-evaluated the 2008 peer group companies to determine if any revisions should be made in connection with compensation decisions for 2009. The Compensation Committee elected to remove two companies whose legal structures made them no longer appropriate peers for the Company: Choicepoint, Inc. and Witness Systems, Inc.

Assessment of Company and Individual Performance

The Compensation Committee, in collaboration with senior management, annually establishes specific revenue and EBITDA targets that determine the size of bonus payouts under the annual incentive bonus plan. Individual performance directly determines total direct compensation levels (consisting of annual salary, annual bonus awards and long-term incentives) for the Chief Executive Officer and other executive officers.

The Compensation Committee meets with the Chief Executive Officer at the beginning of the year to establish the Chief Executive Officer’s performance objectives (both individual and company) for the year. At the end of the year, the Compensation Committee conducts a performance review of the Chief Executive Officer based on his achievement of the pre-established objectives. The overall performance of the Chief Executive Officer and the company are considered by the Compensation Committee in setting the Chief Executive Officer’s compensation.

For all other executive officers, the Compensation Committee receives a performance assessment and compensation recommendation from the Chief Executive Officer. The performance evaluation of the other executive officers is based on achievement of pre-established objectives. The objectives for all executive officers are established by the CEO and include both corporate and individual objectives.

Total Compensation Review

The Compensation Committee annually reviews each executive officer’s base pay, bonus and equity incentive awards with the guidance of the Compensation Committee’s independent consultant. In addition to these compensation elements, the Compensation Committee reviews the long-term incentive program, deferred compensation program and the payments that would be required under various severance and change-in-control scenarios.

Components of Executive Compensation for 2008

Base Salary

Base salaries for DealerTrack’s named executive officers are pegged at the market median and are competitive with similar positions at the peer group companies. The base salaries of all executive officers are reviewed annually against market data and adjusted to reflect individual roles and performance. Adjustments to base salary are determined based upon market trends as well as individual performance and experience. Base salary may be adjusted during the year if a change in the scope of the executive officer’s responsibilities justifies such consideration. In 2008, the Compensation Committee increased the base salaries of each of the named executive officers from 2007 by approximately 3.77%. These salary increases were consistent with the base salary increases for the rest of the company’s employees.

None of DealerTrack’s named executive officers received an increase in base salary from 2008 to 2009. As of April 16, 2009, DealerTrack instituted a company-wide decrease of 5.29% in base salary for the rest of 2009 for all employees, including all executive officers.

Annual Incentive Bonus Plan

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Under the annual incentive bonus plan, the cash incentive bonus amounts are targeted at the 50th percentile of the peer group’s annual bonus compensation. Awards under the annual incentive plan are based upon the achievement of both corporate and individual goals, including EBITDA, total revenue and business unit revenue targets and individual performance. If we exceed the targets and achieve the stretch goals, the annual incentive bonus amount is then targeted at the 75th percentile of the peer group’s annual bonus compensation in order to provide rewards consistent with performance. The 2008 corporate performance targets were: an EBITDA target of $74.1 million, a corporate-wide revenue target of $282.4 million, as well as separate revenue targets for each of the business units. Under this plan, no annual bonuses were required to be paid in 2008 if the company did not meet an EBITDA threshold of $67.3 million. The company did not meet this threshold; accordingly, the payout of the 2008 bonus was at the discretion of the Compensation Committee.

•

EBITDA was used as the principal metric to review and assess the operating performance and the performance of the management team because EBITDA provides useful information with respect to the performance of the fundamental business activities and is also frequently used by equity research analysts and others in the evaluation of the company. For executive officers with company-wide responsibility, equal weight is given to total corporate revenue and EBITDA targets. For other executive officers who are responsible for business units, depending on their position, different weights are given to corporate and business unit revenues. In each case, additional weight is given to individual performance and attainment of individual goals.

•

The annual incentive bonus target amounts, expressed as a percentage of base salary, are established for the named executive officers each year, with a target range of 50% to 80% of base salary for 2008 and a maximum range of 175% to 210% of base salary for 2008, depending on the executive officer’s position. As stated above, no bonuses are required to be paid under the plan if the company does not meet the pre-determined EBITDA threshold amount. If the EBITDA threshold amount and the respective revenue targets are exceeded, the Compensation Committee may increase or reduce payouts by up to 5% depending on performance relative to specific subscription and transaction revenue targets. The Compensation Committee may further positively or negative adjust the actual award to each executive officer depending on its assessment of each individual’s performance. In making this assessment, the Compensation Committee also considers the input of the Chief Executive Officer with respect to awards to the other executive officers. In the case of the Chief Executive Officer, the Compensation Committee considers additional non-financial factors such as leadership, leadership development, talent management and succession planning in determining the annual incentive bonus amount. The Compensation Committee may adjust the financial metrics in appropriate circumstances, such as the acquisition or divestiture of a business or the impact of foreign exchange rates. In 2008, the financial metrics were not adjusted.

The company had a challenging year in 2008 due to the unprecedented decline in the number of vehicles financed. However, despite the challenging economic environment for our business, the company achieved 3.8% growth in revenue. The growth achieved reflects the fact that the company was able to grow its subscription business 26.2%. Growing the subscription business is a key focus to eliminate our dependency on the transaction business.

The actual revenue and EBITDA in 2008 were $242.7 million and $41.4 million, respectively. Although no bonuses were required to be paid under the plan because the minimum EBITDA target for 2008 was not met, the Compensation Committee used its discretion to award cash incentive bonuses to executive officers that ranged from 0% to 45% of their respective base salaries. The Chief Executive Officer requested that the Compensation Committee not consider awarding him a bonus for 2008. The other named executive officers received bonus payouts equal to less than 45% of their respective bonus target amounts.

Annual Equity Grants

In order to align the executive officers’ interests with those of the stockholders, the Compensation Committee makes an annual equity grant each year to each executive officer. The Compensation Committee reviewed and considered competitive market information at or near the 50^th percentile of the company’s peer group and established awards within the competitive range of the 50^th percentile of the peer group. The following factors were also considered in determining the level of long-term incentives awarded to the executive officers:

	•		the executive’s performance;
	•		the executive’s potential future contributions to the company;
	•		the current compensation of the executive; and
	•		the current overall value of the executive’s long-term incentives.

The Compensation Committee uses non-qualified stock options instead of incentive stock options in order to preserve the company’s compensation expense tax deduction. The 2008 equity grants to our executive officers consisted solely of time-vesting stock options. The rationale for a grant consisting solely of stock options was the Compensation Committee’s desire to focus our executive officers directly on increasing stockholder value through the growth in share price. In future years the Compensation Committee may elect to provide equity in the form of restricted stock, stock options or restricted stock units.

The annual equity grants also serve as a retention device because they are vested and earned through service with us over a four-year period and the options have a seven-year life. These equity grants further the long-term perspective necessary for continued success of the business.

The Compensation Committee typically makes the annual stock option grants at the first regularly scheduled meeting of the Compensation Committee of the year. Option grants to new hires are generally made at the first regularly scheduled Compensation Committee meeting that follows the date of hire. We set the exercise price of the options at the closing price of the stock on the date of grant. All equity grants to our named executive officers in 2008 were made pursuant to the Amended and Restated 2005 Incentive Award Plan.

Stock Ownership Requirements

The Compensation Committee has also implemented stock ownership requirements for members of the executive team equal to multiples of their base salary, which vary from one time to six times base salary. The CEO is required to hold shares with a value equal to six times his base salary, and the other named executive officers are required to hold shares with a value equal to two times their base salaries.

Each executive officer is expected to attain his or her stock ownership level within five years of becoming an executive officer. Stock options are not included in determining compliance with the share ownership requirement. Named executive officers are expected to retain 25% of the net after-tax shares acquired pursuant to the exercise of a stock option until they achieve the minimum share ownership position. The Compensation Committee reviews each named executive officer’s compliance with the minimum stock ownership requirement once a year. Shares acquired through the company’s Employee Stock Purchase Plan are counted toward the stock ownership requirement.

As of the end of 2008, each executive officer met the minimum share ownership requirement.

Long-Term Equity Incentive Program

In August 2006, the Compensation Committee implemented a performance-based long-term equity incentive program and made significant grants of restricted common stock to the named executive officers. These grants are targeted to deliver total direct compensation (annual base salary, annual bonus awards and long-term incentives) at the 75th percentile of the peer group upon the achievement of exceptional performance. These grants will be fully earned and vested only if during the three fiscal year measurement period: (i) we achieve annual growth for the EBITDA and market capitalization metrics as set forth below; and (ii) if the executive officers remain continuously employed with us through January 31, 2010. As provided in the award agreements, the EBITDA goals are adjusted by the Compensation Committee from time to time to reflect both the positive and negative impact of acquisitions, in order to neutralize the impact of those acquisitions. Awards of performance-based long-term equity incentive awards were granted pursuant to the Amended and Restated 2005 Incentive Award Plan.

Performance Goals		EBITDA				Market Cap
December 31, 2007		$54.1 million				$928 million
December 31, 2008		$66.9 million				$1,136 million
December 31, 2009		$82.9 million				$1,400 million

The company met its performance goals for fiscal year 2007 related to both EBITDA and market capitalization but did not meet its performance goals for fiscal year 2008 for either EBITDA or market capitalization. The awards related to each 2008 performance goal remain eligible for vesting should the company meet its 2009 performance goals in that category. For example, if the company meets its 2009 EBITDA performance goal, participants in the company’s Long-Term Equity Incentive Plan will be entitled to receive their performance awards for EBITDA for both 2008 and 2009.

Employment Agreements

The company has entered into employment agreements with each of the named executive officers. These agreements were amended in 2007 to reduce the amount of severance provided in the event of termination without cause or for good reason from two years of base salary to one year of base salary generally payable over the one year period following the executive’s termination. The purpose of these amendments was to bring the company’s employment agreements more in line with peer group companies. Additionally, these agreements provide for pro-rata annual cash incentive and limited accelerated vesting of equity grants (other than performance-based restricted common stock) in the event of a termination of employment by us without cause or by a named executive officer for good reason. In return, each executive covenants not to compete or solicit the employees for one year from the date of termination. Severance is stopped if the executive violates these covenants during the one-year severance period.

The employment agreements also provide change in control benefits. In the event we were to undergo a change in control, the employment agreements provide for 36 months of accelerated vesting for time-based stock option and restricted common stock grants and full vesting of such grants in the event of termination within 12 months of the change in control. The performance-based restricted common stock grants provide for full acceleration upon a change in control. We believe that it is fair to provide for accelerated vesting because equity grants provide such a high proportion of the total compensation. Very often, members of senior management lose their jobs in connection with a change of control. By agreeing up front to protect the named executive officers from losing their equity in the event of a change in control, we believe we can reinforce and encourage the continued attention and dedication of the executive officers to their assigned duties without distraction in the face of an actual or threatened change in control. This protection also aligns the interests of the named executive officers with that of the stockholders.

The employment agreements also provide for a tax gross-up payment to the named executive officers in the event they become subject to the 20% golden parachute excise tax. We have agreed to this payment because it is market practice and because we believe that the named executive officers should be able to receive what they have bargained for without being subject to this punitive tax.

Please see page [ ] for more information regarding the material terms of the named executive officers’ employment agreements.

Mr. Sundaram’s employment agreement contains an additional term that results from his joining us upon the acquisition of certain assets of Automotive Lease Guide (alg), LLC. We agreed to honor an existing arrangement that he had in regards to a promissory note owed to his former employer in order to encourage Mr. Sundaram to remain with us after the acquisition.

In 2006, Mr. Sundaram’s promotion to Senior Vice President, Dealer Solutions, required him to move across the country to corporate headquarters in Lake Success, New York. Accordingly, we entered into a relocation agreement with Mr. Sundaram that provided, among other things, reimbursement of his moving expenses, temporary housing expenses, forfeited tuition deposits and certain expenses in connection with the purchase and sale of his primary residence, as well as a car allowance.

In 2008, Mr. Sundaram was paid a gross amount of $37,814.67. This amount represents the final reimbursement for certain expenses (described above) in connection with his relocation. Specifically, the expenses included the forfeiture of automobile benefits and the differential in property taxes.

Perquisites

We believe that cash and equity compensation are the two key components in attracting and retaining management talent and therefore do not generally provide any substantial perquisites other than relocation expenses.

Deferred Compensation Plan

We have a deferred compensation plan that allows the named executive officers to defer bonus compensation by investing it in deferred stock units based on the fair market value of the common stock on the date the bonuses would otherwise be paid. This plan provides a tax effective means of allowing the executive officers to invest in the stock and fulfills the objective of encouraging equity ownership. None of our named executive officers elected to have any portion of their 2008 bonuses deferred.

401(k) Plan

We maintain a 401(k) plan which covers substantially all employees. The 401(k) plan is an essential part of the retirement package needed to attract and retain employees in the industry. The 401(k) plan permits employees to contribute up to the lesser of 20% of earnings or the annual dollar limit prescribed by the tax laws. The company provides a matching contribution, the amount of which is determined at our discretion. For 2008, the matching contribution was 50% of each employee’s contribution up to 6% of eligible pay, subject to IRS limitations. The matching contribution vests incrementally over a five-year period.

Section 162(m) Policy

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to their chief executive officers and the four other most highly compensated executive officers unless certain tests are met. The Compensation Committee’s general intent is to design and administer our executive compensation programs to preserve the deductibility of compensation payments to named executive officers. However, our goal of preserving the deductibility of compensation is secondary in importance to achievement of the Companies’ compensation objectives. We believe that the potential increased tax liability is of insufficient magnitude to warrant alteration of our current executive compensation programs, which we believe are achieving our desired compensation objectives while retaining our flexibility to exercise judgment in assessing our named executive officers’ performance.

Compensation Committee Actions Taken After Fiscal Year 2008

In January 2009, DealerTrack announced a realignment of its workforce, including plans to reduce its workforce by approximately 90 individuals. This included the departures of Robert Cox, Senior Vice President and Chief Financial Officer (effective March 2. 2009) and David Trinder, Senior Vice President, Network Solutions. Additionally Charles Giglia, Senior Vice President and Chief Information Officer, moved to a non-executive role.

Effective April 16, 2009, DealerTrack implemented a 5.29% reduction in the base salaries of all employees, including the executive officers.

COMPENSATION COMMITTEE REPORT

This report is submitted by the Compensation Committee of the Board of Directors. The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed that Analysis with management. Based on its review and discussion with management, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for filing with the Securities and Exchange Commission.

No portion of this Compensation Committee Report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that the company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be considered soliciting material or deemed filed under either the Securities Act or the Exchange Act.

Respectfully submitted by the Compensation Committee,
Mary Cirillo-Goldberg (chairperson)
James D. Foy
John J. McDonnell, Jr.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

																		Non-Equity
																		Incentive Plan				All Other
Name and										Stock				Option				Compensation				Compensation
Principal Position		Year				Salary				Awards (1)				Awards (2)				(3)				(4)				Total
Mark F. O’Neil			2008			$	525,000			$	928,718			$	912,581			$	0	(5)		$	6,750			$	2,373,049
Chairman and Chief Executive Officer			2007				510,000				969,198				873,180				525,000				10,669				2,888,047
			2006				495,040				369,913				695,967				660,000				9,799				2,230,719
Robert J. Cox III			2008				288,500				322,564				334,784				43,300				6,750				995,898
Senior Vice President,			2007				280,000				329,759				260,858				212,000				6,750				1,089,367
Chief Financial Officer and Treasurer (6)			2006				260,000				126,370				204,412				198,000				6,500				795,282
Eric D. Jacobs			2008				278,500				276,867				297,986				68,900				6,750				929,003
Senior Vice President, Chief Financial Officer,			2007				270,000				278,724				195,539				222,500				6,750				973,513
Chief Administrative Officer and Treasurer (7)			2006				260,000				112,433				150,595				208,000				6,600				737,628
Raj Sundaram			2008				278,500				251,027				267,068				61,300				116,937				974,832
Senior Vice President, Dealer Solutions			2007				268,000				242,184				159,715				180,400				510,307				1,360,606
			2006				235,527				49,879				61,780				169,000				199,659				715,845
David Trinder			2008				278,500				229,607				240,640				0	(8)			0				748,747
Senior Vice President, Network Solutions			2007				270,000				220,764				137,490				156,500				55,000				839,754
			2006				260,000				79,632				97,020				179,000				55,000				670,652

ALL OTHER COMPENSATION TABLE

The following table describes each component of the All Other Compensation column in the Summary Compensation Table.

						401(k)				Tax
Name		Year				Match(1)				Gross-Up				Relocation				Other				Total
Mark F. O’Neil			2008			$	6,750			$	—				—			$	—			$	6,750
			2007				6,750				—				—				3,919	(4)			10,669
			2006				6,600				—				—				3,199	(4)			9,799
Robert J. Cox III			2008				6,750				—				—				—				6,750
			2007				6,750				—				—				—				6,750
			2006				6,500				—				—				—				6,500
Eric D. Jacobs			2008				6,750				—				—				—				6,750
			2007				6,750				—				—				—				6,750
			2006				6,600				—				—				—				6,600
Raj Sundaram			2008				5,893				13,815	(2)			24,000	(3)			73,229	(5)			116,937
			2007				5,852				144,305	(2)			276,150	(3)			84,000	(5)			510,307
			2006				5,686				41,715	(2)			68,258	(3)			84,000	(5)			199,659
David Trinder			2008				—				—				—				—				—
			2007				—				—				55,000	(6)			—				55,000
			2006				—				—				55,000	(6)			—				55,000

Please see the discussions under “Components of Executive Compensation for 2008” and “Employment Agreements With Named Executive Officers” for a discussion of the material factors necessary to an understanding of the information disclosed in this table.

GRANTS OF PLAN-BASED AWARDS IN 2008

The following table provides information about equity and non-equity awards granted to the named executives in 2008:

																		All Other
																		Option								Grant
																		Awards;				Exercise				Date Fair
						Estimated Future Payouts Under												Number of				or Base				Value of
						Non-Equity Incentive Plan												Securities				Price of				Stock and
		Grant				Awards (1)												Underlying				Option				Option
Name		Date				Threshold				Target				Maximum				Options (2)				Awards (3)				Awards (4)
Mark F. O’Neil			1/24/2008			$	315,000			$	420,000			$	882,000				100,000			$	24.50			$	998,400
Robert J. Cox III			1/24/2008			$	129,825			$	173,100			$	320,234				45,000			$	24.50			$	449,280
Eric D. Jacobs			1/24/2008			$	114,881			$	153,175			$	283,373				45,000			$	24.50			$	449,280
Raj Sundaram			1/24/2008			$	114,881			$	153,175			$	268,056				40,000			$	24.50			$	399,360
David Trinder			1/24/2008			$	114,881			$	153,175			$	268,056				40,000			$	24.50			$	399,360

Please see the discussions under “Components of Executive Compensation for 2008” and “Employment Agreements With Named Executive Officers” for a discussion of the material factors necessary to an understanding of the information disclosed in this table.

OUTSTANDING EQUITY AWARDS AT 2008 FISCAL YEAR END

The following table provides information on the current holdings of equity awards by the named executive officers. This table includes unexercised and unvested option awards; unvested restricted common stock; and restricted common stock with performance conditions that have not yet been satisfied. Each equity grant is shown separately for each named executive officer. The vesting schedule for each grant is shown following this table, based on the award grant date.

																																						Equity
																																						Incentive
																																		Equity				Plan
																																		Incentive				Awards:
																																		Plan				Market or
																																		Awards:				Payout
																														Market				Number of				Value of
						Number of				Number of																Number				Value				Unearned				Unearned
						Securities				Securities																of Shares				of Shares				Shares,				Shares,
						Underlying				Underlying																or Units of				or Units of				Units or				Units or
						Unexercised				Unexercised				Option				Option				Stock				Stock That				Stock That				Other Rights				Other Rights
		Option				Options				Options				Exercise				Expiration				Award				Have Not				Have Not				That Have				That Have
Name		Grant Date				Exercisable				Unexercisable				Price				Date				Grant Date				Vested (1)				Vested (2)				Not Vested (3)				Not Vested (4)
Mark F. O’Neil			1/16/2002				164,941				—			$	3.12				1/15/2012				5/26/2005				7,500			$	89,175				—				—
			1/30/2003				197,452				—				2.80				1/29/2013				1/27/2006				17,500				208,075				—				—
			5/3/2004				7,501				—				2.80				2/13/2011				8/2/2006												170,000			$	2,021,300
			5/3/2004				235,000				—				2.80				5/2/2014				2/6/2007				30,000				356,700				—				—
			8/18/2004				167,000				—				2.80				8/17/2014				8/8/2007				7,500				89,175				—				—
			5/26/2005				111,977				13,023				12.92				5/25/2015				—				—				—				—				—
			1/27/2006				65,624				24,376				20.68				1/26/2016				—				—				—				—				—
			2/6/2007				18,333				21,667				28.73				2/5/2017				—				—				—				—				—
			8/8/2007				3,333				6,667				38.98				8/7/2014				—				—				—				—				—
			1/24/2008				—				100,000				24.50				1/23/2015				—				—				—				—				—
Robert J. Cox III			1/16/2002				25,781				—				3.12				1/15/2012				5/26/2005				2,500				29,725				—				—
			1/30/2003				18,620				—				2.80				1/29/2013				1/27/2006				6,000				71,340				—				—
			5/3/2004				11,697				—				2.80				6/26/2011				8/2/2006												60,000				713,400
			5/3/2004				35,000				—				2.80				5/02/2014				2/6/2007				9,000				107,010				—				—
			8/18/2004				65,000				—				2.80				8/17/2014				8/8/2007				3,750				44,588				—				—
			5/26/2005				44,791				5,209				12.92				5/25/2015				—				—				—				—				—
			1/27/2006				18,228				6,772				20.68				1/26/2016				—				—				—				—				—
			2/6/2007				5,499				6,501				28.73				2/5/2017				—				—				—				—				—
			8/8/2007				1,666				3,334				38.98				8/7/2014				—				—				—				—				—
			1/24/2008				—				45,000				24.50				1/23/2015				—				—				—				—				—
Eric D. Jacobs			5/15/2002				26,250				—				2.80				5/14/2012				5/26/2005				2,500				29,725				—				—
			1/30/2003				9,753				—				2.80				1/29/2013				1/27/2006				5,000				59,450				—				—
			1/30/2004				45,000				—				2.80				1/29/2014				8/2/2006												50,000				594,500
			8/18/2004				50,000				—				2.80				8/17/2014				2/6/2007				6,750				80,258				—				—
			5/26/2005				44,791				5,209				12.92				5/25/2015				8/8/2007				3,750				44,588				—				—
			1/27/2006				14,583				5,417				20.68				1/26/2016				—				—				—				—				—
			2/6/2007				4,124				4,876				28.73				2/5/2017				—				—				—				—				—
			8/8/2007				1,666				3,334				38.98				8/7/2014				—				—				—				—				—
			1/24/2008				—				45,000				24.50				1/23/2015				—				—				—				—				—
Raj Sundaram			5/26/2005				22,395				2,605				12.92				5/25/2015				1/27/2006				2,500				29,725				—				—
			1/27/2006				7,291				2,709				20.68				1/26/2016				11/2/2006				5,000				59,450				—				—
			11/2/2006				10,416				9,584				25.39				11/1/2016				8/2/2006												35,000				416,150
			2/6/2007				4,124				4,876				28.73				2/5/2017				2/6/2007				6,750				80,258				—				—
			8/8/2007				1,666				3,334				38.98				8/7/2014				8/8/2007				3,750				44,588				—				—
			1/24/2008				—				40,000				24.50				1/23/2015				—								—				—				—
David Trinder			1/30/2004				8,334				—				2.80				1/29/2014				5/26/2005				1,250				14,863				—				—
			7/01/2004				3,000				—				2.80				7/20/2014				1/27/2006				4,500				53,505				—				—
			8/18/2004				10,000				—				2.80				8/17/2014				8/2/2006												35,000				416,150
			5/26/2005				31,353				3,647				12.92				5/25/2015				2/6/2007				6,750				80,258				—				—
			1/27/2006				13,124				4,876				20.68				1/26/2016				8/8/2007				3,750				44,588				—				—
			2/6/2007				4,124				4,876				28.73				2/5/2017				—				—				—				—				—
			8/8/2007				1,666				3,334				38.98				8/7/2014				—				—				—				—				—
			1/24/2008				—				40,000				24.50				1/23/2015				—				—				—				—				—