Citizen has worked for the media company since 2012 when it won a four-way pitch to work on a six-figure brief to drive consumer engagement, replacing Hotwire.
It is understood it was given two to three months' notice last month, but will be invited to repitch for the account.
Meanwhile it is understood that the owners of AutoTrader, private equity group Apax, is considering an IPO of the company. A spokesperson from Apax declined to comment.
Carl Zide, head of comms at Auto Trader, said: "PR is a key priority for AutoTrader. We are continuously evaluating how our current agencies are performing and benchmark them towards the leading PR agencies in the United Kingdom. AutoTrader is currently using JJ Marketing for automotive and Citizen for consumer media. When our current contracts end, we will send out a brief to selected agencies."
Citizen has undergone several management changes in the past 12 months following the departure of its chief executive Frankie Cory in October 2013. Managing director Misha Dhanak left the agency in August this year, with creative director Joe Sinclair departing months later.
Citizen declined to comment.