10q10k10q10k.net

What changed in LITHIA MOTORS INC's 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of LITHIA MOTORS INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+266 added−272 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-24)

Top changes in LITHIA MOTORS INC's 2025 10-K

266 paragraphs added · 272 removed · 218 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

26 edited+10 added−19 removed47 unchanged
Biggest changeCertain jurisdictional franchise laws also restrict us from relocating our dealerships, or establishing new dealerships of a particular brand, within any area that is served by another dealer with the same brand. To the extent that a market has multiple dealers of a particular brand, as certain markets we operate in do, we are subject to significant intra-brand competition.
Biggest changeIn addition, our franchise agreements typically limit our ability to acquire multiple dealerships of a given brand within a particular market area. Certain jurisdictional franchise laws also restrict us from relocating our 6 dealerships, or establishing new dealerships of a particular brand, within any area that is served by another dealer with the same brand.
Examples of forward-looking statements in this Form 10-K include, among others, statements regarding: • Future market conditions, including anticipated car and other sales and gross profit levels and the supply of inventory • Our business strategy and plans, including our achieving our long-term financial targets • The growth, expansion, make-up, and success of our network, including our finding accretive acquisitions that meet our target valuations and acquiring additional stores • Annualized revenues from acquired stores or achieving target returns • The growth and performance of our Driveway e-commerce home solution and DFC, their synergies and other impacts on our business and our ability to meet Driveway and DFC-related targets • The impact of sustainable vehicles and other market and regulatory changes on our business, including evolving vehicle distribution models • Our capital allocations and uses and levels of capital expenditures in the future • Expected operating results, such as improved store performance, continued improvement of SG&A as a percentage of gross profit and any projections • Our anticipated financial condition and liquidity, including from our cash and the future availability of our credit facilities, unfinanced real estate, and other financing sources • Our continuing to purchase shares under our share repurchase program • Our compliance with financial and restrictive covenants in our credit facilities and other debt agreements • Our programs and initiatives for team member recruitment, training, and retention • Our strategies and targets for customer retention, growth, market position, operations, financial results, and risk management Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control.
Examples of forward-looking statements in this Form 10-K include, among others, statements regarding: • The profitability of our strategy and growth • Future market conditions, including anticipated vehicle and other sales, gross profit and inventory supply • Our business strategy and plans, including our achieving our long-term financial targets • The growth, expansion, make-up, and success of our network, including our finding accretive acquisitions that meet our target valuations and acquiring additional stores • Annualized revenues from acquired stores or achieving target returns • The growth and performance of our Driveway e-commerce home solution and DFC, their synergies and other impacts on our business and our ability to meet Driveway and DFC-related targets • The impact of sustainable vehicles and other market and regulatory changes on our business, including evolving vehicle distribution models • Our capital allocations and uses and levels of capital expenditures in the future • Expected operating results, such as improved store performance, continued improvement of SG&A as a percentage of gross profit and any projections • Our anticipated financial condition and liquidity, including from our cash and the future availability of our credit facilities, unfinanced real estate, and other financing sources • Our continuing to purchase shares under our share repurchase program • Our compliance with financial and restrictive covenants in our credit facilities and other debt agreements • Our programs and initiatives for team member recruitment, training, and retention • Our strategies and targets for customer retention, growth, market position, operations, financial results, and risk management Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control.
These online channels provide customers with simple, transparent ways to search new and used inventories, view current pricing, apply incentives and offers, calculate payments for purchase or lease, apply for financing, buy online, sell their vehicle, schedule service appointments both in store or at home, schedule vehicle pick-up and delivery, and provide us feedback about their experience. 4 Driveway, our online experience, puts customers in control of every aspect of their car ownership.
These online channels provide customers with simple, transparent ways to search new and used inventories, view current pricing, apply incentives and offers, calculate payments for purchase or lease, apply for financing, buy online, sell their vehicle online and/or in-store, schedule service appointments both in store or at home, schedule vehicle pick-up and delivery, and provide us feedback about their experience. 4 Driveway.com, our online experience, puts customers in control of every aspect of their car ownership.
The remediation or clean-up of facilities where the release of a regulated hazardous substance occurred is required under CERCLA and other laws. We incur certain costs to comply with environmental, health and safety laws and regulations in the ordinary course of our business.
The remediation or clean-up of facilities where the release of a regulated hazardous substance occurred is required under CERCLA and other laws. 7 We incur certain costs to comply with environmental, health and safety laws and regulations in the ordinary course of our business.
These claims may expose us to significant damages or other penalties, including revocation or suspension of our licenses to conduct store operations and fines. 6 The vehicles we sell are also subject to rules and regulations of various federal and state regulatory agencies.
These claims may expose us to significant damages or other penalties, including revocation or suspension of our licenses to conduct store operations and fines. The vehicles we sell are also subject to rules and regulations of various federal and state regulatory agencies.
Our long-term strategy to create value for our customers, team members, and shareholders includes the following elements: Driving operational excellence, innovation, and diversification LAD builds magnetic customer loyalty across our 459 stores, our Driveway and GreenCars e-commerce platforms, and our entire omnichannel ecosystem by focusing on convenient and transparent experiences supported by proprietary data science.
Our long-term strategy to create value for our customers, team members, and shareholders includes the following elements: Driving operational excellence, innovation, and diversification LAD builds magnetic customer loyalty across our 455 stores, our Driveway and GreenCars e-commerce platforms, and our entire omnichannel ecosystem by focusing on convenient and transparent experiences supported by proprietary data science.
GreenCars is a leading source of knowledge designed to promote the acceleration of electric vehicle adoption by educating the consumer on such topics as fuel-efficient offerings from model comparisons, personalized incentives, and local rebates to charging network. GreenCars connects consumers with the largest new-and-preowned inventory when they are ready to purchase a sustainable vehicle.
GreenCars is a leading source of knowledge designed to promote the acceleration of electric vehicle and alternative powertrain offerings like Hybrid adoption by educating the consumer on such topics as fuel-efficient offerings from model comparisons, personalized incentives, and local rebates to charging network. GreenCars connects consumers with the largest new-and-preowned inventory when they are ready to purchase a sustainable vehicle.
In every jurisdiction in which we operate, we must obtain various licenses to operate our businesses, including dealer, sales and finance and insurance licenses issued by regulatory authorities. Numerous laws and regulations govern our business, including those relating to our sales, operations, financing, insurance, advertising and employment practices.
A number of laws and regulations affect our business. In every jurisdiction in which we operate, we must obtain various licenses to operate our businesses, including dealer, sales and finance and insurance licenses issued by regulatory authorities. Numerous laws and regulations govern our business, including those relating to our sales, operations, financing, insurance, advertising and employment practices.
They can browse a vast nationwide inventory of new, used, and certified pre-owned vehicles (CPO), and get their vehicle shipped straight to their driveway or pick it up at one of Lithia’s 290+ stores in the Driveway network.
They can browse a vast nationwide inventory of new, used, and certified pre-owned (CPO) vehicles, and get their vehicle shipped straight to their driveway or pick it up at one of Lithia’s 300+ U.S. stores in the Lithia & Driveway network.
As of December 31, 2024, we operated 459 locations representing 52 brands in the United States, the United Kingdom, and Canada. We offer a wide array of products and services fulfilling the entire vehicle ownership lifecycle including new and used vehicles, financing and insurance products, and aftersales automotive repair and maintenance services.
As of December 31, 2025, we operated 455 locations representing 54 brands in the United States, the United Kingdom, and Canada. We offer a wide array of products and services fulfilling the entire vehicle ownership lifecycle including new and used vehicles, financing and insurance products, and aftersales automotive repair and maintenance services.
These advertising credits are not tied to specific vehicles and are earned as qualifying expenses are incurred. These reimbursements are recognized as a reduction of advertising expense. Manufacturer cooperative advertising credits were $56.2 million in 2024, $54.2 million in 2023 and $46.3 million in 2022.
These advertising credits are not tied to specific vehicles and are earned as qualifying expenses are incurred. These reimbursements are recognized as a reduction of advertising expense. Manufacturer cooperative advertising credits were $62.5 million in 2025, $56.2 million in 2024 and $54.2 million in 2023.
GreenCars.com was an important part of the shopping and selection process for 19,000 vehicles across our dealer network in 2024. Total advertising expense, net of manufacturer credits, was $250.7 million in 2024, $248.2 million in 2023 and $253.6 million in 2022. Over 89% of our advertising spent in 2024 was on digital, social, listings, and one-to-one owner communications.
GreenCars.com was an important part of the shopping and selection process for over 10,000 vehicles across our dealer network in 2025. Total advertising expense, net of manufacturer credits, was $257.0 million in 2025, $250.7 million in 2024 and $248.2 million in 2023. Over 88% of our advertising spent in 2025 was on digital, social, listings, and one-to-one owner communications.
Our current free cash flow deployment strategy has shifted to an allocation of 35% to 45% investment in acquisitions, 25% investment in capital expenditures, innovation, and diversification and 30% to 40% in shareholder return in the form of dividends and share repurchases due to current valuation trends in acquisitions relative to stock price performance.
Our current free cash flow deployment strategy includes a target allocation of 25% to 35% investment in acquisitions, 25% investment in capital expenditures, innovation, and diversification and 40% to 50% in shareholder return in the form of dividends and share repurchases due to current valuation trends in acquisitions relative to stock price performance.
During 2024, we utilized $351.4 million for capital expenditures investing in our existing business and paid $56.5 million in dividends. As of December 31, 2024, we had available liquidity of approximately $1.4 billion, which was comprised of $225.1 million in unrestricted cash, $53.4 million in marketable securities, and $1.1 billion availability on our credit facilities.
During 2025, we utilized $350.9 million for capital expenditures investing in our existing business and paid $55.3 million in dividends. As of December 31, 2025, we had available liquidity of approximately $1.5 billion, which was comprised of $109.2 million in unrestricted cash, $56.4 million in marketable securities, and $1.4 billion availability on our credit facilities.
Under certain laws, a manufacturer may not terminate or fail to renew a franchise without good cause or prevent any reasonable changes in the capital structure or financing of a store. 5 Our typical franchise agreement provides for early termination or non-renewal by the manufacturer upon: • a change of management or ownership without manufacturer consent; • insolvency or bankruptcy of the dealer; • death or incapacity of the dealer/manager; • conviction of a dealer/manager or owner of certain crimes; • misrepresentation of certain sales or inventory information to the manufacturer; • failure to adequately operate the store; • failure to maintain any license, permit or authorization required for the conduct of business; • poor market share; or • low customer satisfaction index scores.
Our typical franchise agreement provides for early termination or non-renewal by the manufacturer upon: • a change of management or ownership without manufacturer consent; • insolvency or bankruptcy of the dealer; • death or incapacity of the dealer/manager; • conviction of a dealer/manager or owner of certain crimes; • misrepresentation of certain sales or inventory information to the manufacturer; • failure to adequately operate the store; • failure to maintain any license, permit or authorization required for the conduct of business; • poor market share; or • low customer satisfaction index scores.
We rely on advertising and merchandising, pricing, our customer guarantees and sales model, our sales expertise, service reputation, and the location of our stores to sell new vehicles. Regulation Automotive and Other Laws and Regulations We operate in a highly regulated industry. A number of laws and regulations affect our business.
We do not have any cost advantage in purchasing new vehicles from manufacturers. We rely on advertising and merchandising, pricing, our customer guarantees and sales model, our sales expertise, service reputation, and the location of our stores to sell new vehicles. Regulation Automotive and Other Laws and Regulations We operate in a highly regulated industry.
This platform allows us to significantly increase the geographic reach of our network. With the industry transitioning to more sustainable practices and alternative-fuel vehicles, we are excited that GreenCars, our online education resource for sustainable mobility, had approximately 11.2 million unique visitors in 2024 at GreenCars.com, a 48% increase from 2023.
This platform allows us to significantly increase the geographic reach of our network. With the industry transitioning to more sustainable practices and alternative-fuel vehicles, we are excited that GreenCars, our online education resource for sustainable mobility, had approximately 9.0 million unique visitors in 2025 at GreenCars.com, of which we saw a 50% increase in direct and organic traffic.
We also target an investment in intangibles as a percentage of annualized revenues in the range of 15% to 30%. During 2024, we acquired 146 stores and divested 10 stores. We invested $1.1 billion, net of floor plan debt, to acquire these stores and we anticipate these acquisitions to add nearly $5.9 billion in annualized revenues.
We also target an investment in intangibles as a percentage of annualized revenues in the range of 15% to 30%. During 2025, we acquired 17 stores and divested 12 stores. We invested $751.0 million, net of floor plan debt, to acquire these stores and we anticipate these acquisitions to add nearly $2.4 billion in annualized revenues.
In 2024, we reduced our cost per order by 32.5% and our cost per acquisition by 96.3%, through relentlessly testing our media efficiency in conjunction with operational gains. Driveway provides a differentiated retail experience for customers who prefer the simplicity of online shopping and the optionality of home delivery.
In 2025, we reduced our marketing cost per retail delivery by 21% and our marketing cost per purchase pickup by 51%, through relentlessly testing our media efficiency in conjunction with operational gains. Driveway provides a differentiated retail experience for customers who prefer the simplicity and convenience of online shopping and the optionality of home delivery.
Currently, there are nearly 17,000 new vehicle franchise dealers in the United States, 4,500 in the United Kingdom, and 3,500 in Canada. Many of these franchised dealers are independent stores managed by individuals, families or small retail groups. We compete primarily with other automotive retailers, both publicly- and privately-held and other used-only automotive retailers such as CarMax, Carvana, and Cazoo.
Currently, there are nearly 17,000 new vehicle franchise dealers in the United States, 4,500 in the United Kingdom, and 3,800 in Canada. Many of these franchised dealers are independent stores managed by individuals, families or small retail groups.
The designation of the market areas and the allocation of new vehicles among stores are at the discretion of the manufacturer. Franchise agreements do not, however, guarantee exclusivity within a specified territory.
Typical vehicle franchise agreements specify the locations within a designated market area at which the store may sell vehicles and related products and perform approved services. The designation of the market areas and the allocation of new vehicles among stores are at the discretion of the manufacturer. Franchise agreements do not, however, guarantee exclusivity within a specified territory.
To place ease and value at our customers’ fingertips, we are constantly evolving the retail experience so customers can choose transparent, convenient ways to buy, sell, or service their vehicles wherever, whenever, and however they desire. Our national, regional, and local brands connect with consumers through advertising tailored to the individual brand and market.
Marketing Lithia & Driveway’s core value, “Earn Customers for Life,” drives our marketing strategy to empower consumers throughout the vehicle ownership lifecycle. To place ease and value at our customers’ fingertips, we are constantly evolving the retail experience so customers can choose transparent, convenient ways to buy, sell, or service their vehicles wherever, whenever, and however they desire.
Most consumers begin their shopping, buying, or selling activity on our store websites, Driveway.com, and GreenCars.com. Our proprietary customer lifecycle communication platform targets specific stages in the shopping process or ownership lifecycle. In an industry where the competition often relies on third parties to manage their customer data, we manage our data internally.
Our proprietary customer lifecycle communication platform targets specific stages in the shopping process or ownership lifecycle. In an industry where the competition often relies on third parties to manage their customer data, we manage our data internally. This strategy allows us to leverage our customer insights across many revenue streams and goes beyond automotive needs.
Utilizing data and omnichannel communications, we strive to create deeper and richer offerings to build lifelong loyalty throughout the vehicle ownership lifecycle. With a vast selection represented by the largest U.S. new and preowned vehicle inventory for sale online, we employ search engine optimization, search engine marketing, online display, retargeting, social advertising, traditional media, and direct marketing to reach consumers.
With a vast selection represented by the largest U.S. new and preowned vehicle inventory for sale online, we employ search engine optimization, search engine marketing, online display, retargeting, social advertising, traditional media, and direct marketing to reach current owners and new consumers. Most consumers begin their shopping, buying, or selling activity on our store websites, Driveway.com, and GreenCars.com.
We are larger and have more financial resources than most private automotive retailers with which we currently compete in the majority of our regional markets. We compete directly with retailers with similar or greater resources in our existing metro and non-metro markets. We also compete based on dealer reputation in the various markets.
We compete directly with retailers with similar or greater resources in our existing metro and non-metro markets. We also compete based on dealer reputation in the various markets. If we enter other new markets, we may face competitors that have access to greater financial resources or have strong brands.
Franchise Agreements Each of our stores operates under a separate franchise agreement with the manufacturer of the new vehicle brand it sells. Typical vehicle franchise agreements specify the locations within a designated market area at which the store may sell vehicles and related products and perform approved services.
We believe that our human capital resources, together with our management practices and culture, support the execution of our strategy and contribute to our long-term performance. Franchise Agreements Each of our stores operates under a separate franchise agreement with the manufacturer of the new vehicle brand it sells.
Removed
In addition, our unfinanced real estate could provide additional liquidity of approximately $290.0 million. Marketing Lithia & Driveway’s core value, “Earn Customers for Life,” drives our marketing strategy to empower consumers throughout the vehicle ownership lifecycle.
Added
Our national, regional, and local brands connect with consumers through advertising tailored to the individual brand and market. Utilizing data and omnichannel communications, we strive to create deeper and richer offerings to build lifelong loyalty throughout the vehicle ownership lifecycle.
Removed
This strategy allows us to leverage our customer insights across many revenue streams and goes beyond automotive needs.
Added
Human Capital Our human capital strategy is guided by our mission of Growth Powered by People, which reflects management’s focus on aligning workforce capability, leadership development, and performance with the execution of our business strategy. As of December 31, 2025, our subsidiaries employed approximately 30,000 persons on a full-time equivalent basis across 455 retail locations worldwide.
Removed
Vehicle manufacturers have designated specific marketing and sales areas within which only one dealer of a vehicle brand may operate. In addition, our franchise agreements typically limit our ability to acquire multiple dealerships of a given brand within a particular market area.
Added
Our success depends on the skills, experience, engagement, and performance of our workforce. We believe that a stable, skilled workforce supports operational performance and customer satisfaction. Management focuses on human capital practices that are material to the business, including workforce planning, leadership capability, employee development, engagement, and workplace safety.
Removed
If we enter other new markets, we may face competitors that have access to greater financial resources or have strong brands. We do not have any cost advantage in purchasing new vehicles from manufacturers.
Added
Management seeks to attract, develop, and retain qualified team members by providing competitive compensation and benefits, opportunities for professional development, and pathways for internal advancement. A core focus of our talent strategy is the development and promotion of internal team members to support leadership continuity, operational excellence, and long-term growth.
Removed
Human Capital Our Human Capital and Development strategy is guided by our mission of “Growth Powered by People.” We place a strong emphasis on the professional success, well-being, and safety of each team member. Our strategy for attracting, retaining, rewarding, and developing top talent involves setting clear expectations, offering exceptional training, and celebrating team member milestones and achievements.
Added
We use structured talent and performance assessment approaches to inform workforce and leadership decisions. These include management frameworks designed to evaluate performance, potential, and readiness for expanded responsibility, as well as succession planning processes intended to identify and develop future leaders for key roles. These practices support continuity in leadership and informed talent investment across the organization.
Removed
These initiatives are key to driving high performing results; allowing us to reach potential, earn customers for life, and grow through our dynamic teams. We cultivate an entrepreneurial, high-performance, customer-centric culture that supports internal promotions, skill development, and continuous professional growth opportunities.
Added
We invest in learning and development initiatives designed to build technical, operational, and leadership capabilities aligned with business needs and job responsibilities. These efforts support internal mobility, leadership readiness, and the ongoing development of our workforce. Management seeks to foster a workplace culture that emphasizes accountability, ethical conduct, collaboration, and respect.
Removed
Our manage by thirds approach to talent management allows us to effectively and efficiently make people related decisions that drive us towards our shared goals. As of December 31, 2024, our subsidiaries employed approximately 30,000 persons on a full-time equivalent basis in our global network of 459 retail locations.
Added
Workforce-related information and employee feedback are periodically reviewed to inform talent, organizational, and succession planning decisions. 5 Safety and well-being are integral to our operations, particularly in retail and service environments. We maintain policies, training, and practices designed to promote a safe and healthy workplace for employees and customers.
Removed
Our total workforce was comprised of approximately 22% female team members and approximately 41% of minorities. Our management consisted of approximately 23% females and approximately 28% minorities in leadership positions.
Added
Under certain laws, a manufacturer may not terminate or fail to renew a franchise without good cause or prevent any reasonable changes in the capital structure or financing of a store.
Removed
Some examples of our team member focused efforts include: • The Lithia Partners Group (LPG), our flagship recognition program which has been running for over 10 years, continues to identify, recognize, and reward our top-performing Leaders. The LPG celebrates exceptional leaders who embody our core values and exemplify Loyalty, Potential, and Growth.
Added
We compete primarily with other automotive retailers, both publicly- and privately-held, including automotive retailers that are primarily used-vehicle focused, such as CarMax, Carvana, and Cazoo. Vehicle manufacturers have designated specific marketing and sales areas within which only one dealer of a vehicle brand may operate.
Removed
These leaders serve as role models for organizational success and earn the prestigious title of LPG Winner—an honor that every team member aspires to achieve.
Added
To the extent that a market has multiple dealers of a particular brand, as certain markets we operate in do, we are subject to significant intra-brand competition. We are larger and have more financial resources than most private automotive retailers with which we currently compete in the majority of our regional markets.
Removed
LPG Winners gain access to exclusive events and 7 opportunities, designed to advance their careers, expand their professional networks, and foster continued personal and professional growth. • In 2023, we launched a company-wide Culture Poll to amplify the team member voice.
Removed
With an 80% participation rate, the survey revealed engagement scores surpassing benchmarks, indicating positive progress in creating a positive workplace experience that fosters team member loyalty.
Removed
The survey also offered valuable insights, leading to the development of action plans by managers to address opportunities to “Improve Constantly.” • Introduced in 2015, our Women LEAD (Learn, Explore, Achieve, and Develop) program offers a platform for women within the organization to connect, learn, and grow together.
Removed
Featuring events throughout the year, the program facilitates networking, role modeling, and learning opportunities aimed to foster professional development. • Originally launched in 2000 as a General Manager readiness cohort, our AMP (Accelerate My Potential) program has evolved to provide high potential leaders an opportunity to showcase General Manager competencies through targeted action plan development, cross-store exposure, and results oriented evaluation.
Removed
These opportunities combined with coaching, networking, and strategy alignment discussions help accelerate leaders into key roles giving LAD a pipeline of ready candidates which drives internal promotion and growth. • Our DART (Develop, Analyze, Research, and Transform) program started in 2020 as rotational program for early career talent to gain a diversity of exposure to various areas of the Organization.
Removed
The DART program targets fact-based, customer-focused, proactive talent with leadership potential who will push our teams to be their best for our customers.
Removed
DART participants learn the ins and outs of performance standards, gain on the job experience, and build relationships cross-functionally to accelerate their careers. • Our learning and development initiatives are dedicated to promoting team member growth through curated content paths, specialized curriculums, and tuition reimbursement benefits covering up to 75% of undergraduate or graduate tuition costs.
Removed
Additional programs provide Master Automotive Service Excellence (ASE) training and certification, along with manufacturer training for technicians. As one of the largest global automotive retailers, we are committed to ongoing investments in expanding the roles and skills of our workforce to drive customer excellence and operational performance.
Removed
As our business continues to evolve, our unwavering focus remains on ensuring that our human capital capabilities, systems, and processes are well-aligned with and in support of our strategic objectives and growth plans.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

76 edited+17 added−17 removed102 unchanged
Biggest changeIf these or similar activities were to significantly restrict our ability to generate revenue from arranging financing for our customers, we could be adversely affected. In the United Kingdom, the Financial Conduct Authority (FCA) regulates financial services firms and financial markets, including the practice of dealerships acting as the broker in arranging the financing for vehicle sales.
Biggest changeThese activities have led many lenders to limit the amounts that may be charged to customers as fee income for these activities. If these or similar activities were to significantly restrict our ability to generate revenue from arranging financing for our customers, we could be adversely affected.
Changes or additions to our offerings or businesses may not prove sufficiently profitable, attract, or engage our customers, and may reduce confidence in our brands, expose us to increased market or legal risks, subject us to new laws and regulations, or otherwise harm our business.
Changes or additions to our offerings or businesses may not prove sufficiently profitable or attract or engage our customers, and may reduce confidence in our brands, expose us to increased market or legal risks, subject us to new laws and regulations, or otherwise harm our business.
If our sales volume or commissions are reduced as a result of any such changes in the United Kingdom, the United States, or Canada, it could negatively affect our revenues, results of operations, and financial condition. Import product restrictions, currency valuations, U.S. and foreign trade policies and risks may impair our ability to sell foreign vehicles or parts profitably.
If our sales volume or commissions are reduced as a result of any such changes in the United Kingdom, the United States, or Canada, it could negatively affect our revenues, results of operations, and financial condition. Import product restrictions, currency valuations, tariffs, U.S. and foreign trade policies and risks may impair our ability to sell vehicles or parts profitably.
We collect, process, share, disclose, transfer, and otherwise use personal information about 15 identifiable individuals including, but not limited to, our customers, team members, partners, and vendors, and so are subject to U.S. and international laws and regulations, regarding data privacy and security such as the California Consumer Privacy Act and the U.K. General Data Protection Regulation.
We collect, process, share, disclose, transfer, and otherwise use personal information about identifiable individuals including, but not limited to, our customers, team members, partners, and vendors, and so are subject to U.S. and international laws and regulations, regarding data privacy and security such as the California Consumer Privacy Act and the U.K. General Data Protection Regulation.
In addition, other changes by manufacturers to their distribution models may impact our operations in the United Kingdom. Certain manufacturers, such as Honda, Volvo, Volkswagen, Mercedes-Benz and Smart, have already transitioned to an agency model in the United Kingdom, whereby the consumer places an order directly with the manufacturer and names a preferred delivery dealer.
In addition, other changes by manufacturers to their distribution models may impact our operations in the United Kingdom. Certain manufacturers, such as Honda, Volvo, Volkswagen, Mini, Mercedes-Benz and Smart, have already transitioned to an agency model in the United Kingdom, whereby the consumer places an order directly with the manufacturer and names a preferred delivery dealer.
Further, private causes of action on behalf of individuals or a class of individuals could result in significant damages or injunctive relief. We may be involved in legal proceedings arising from the conduct of our business, including litigation with customers, team member-related lawsuits, class actions, purported class actions and actions brought by or on behalf of governmental authorities.
Further, private causes of action on behalf of individuals or a class of individuals could result in significant damages or injunctive relief. We may be involved in legal proceedings arising from the conduct of our business, including litigation with customers, team member-related lawsuits, class actions, purported class actions and actions brought by or on 17 behalf of governmental authorities.
In the past, manufacturers have not consented to our purchase of certain franchised stores and we cannot assure you that manufacturers will approve future acquisitions timely, if at all, which could significantly impair the execution of our acquisition strategy. We make a substantial capital investment when we acquire dealerships.
In the past, manufacturers have not consented to our purchase of certain franchised stores and we cannot assure you that manufacturers will approve future acquisitions timely, if at all, which could significantly impair the execution of our acquisition strategy. 18 We make a substantial capital investment when we acquire dealerships.
If manufacturers obtain the ability to directly retail vehicles in our markets, our role in the auto retail market would change and we could experience a loss of revenue and profits and could experience other negative impacts that have a material adverse effect on our business, results of operations, financial condition, and cash flows.
If manufacturers obtain the ability to directly retail vehicles in our markets, our role in the auto retail market would change and we could experience a loss of revenue and profits 12 and other negative impacts that have a material adverse effect on our business, results of operations, financial condition, and cash flows.
Upon the occurrence of a change in control, as defined in the indentures 20 governing our senior notes, the holders of our senior notes will have the right to require us to purchase all or any part of such holders’ notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any.
Upon the occurrence of a change in control, as defined in the indentures governing our senior notes, the holders of our senior notes will have the right to require us to purchase all or any part of such holders’ notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any.
Because the automotive market in the United States is mature and the overall level of new vehicle sales may not increase in the coming years, the success of new competitors will likely be at the expense of other, established brands. This could have a material adverse impact on our success in the future.
Because the automotive market in the United States is mature and the overall level of new vehicle sales may not increase in the coming years, the success of new competitors will likely be at the expense of other, established brands. This could have material adverse impact on our success in the future.
As a result, our operations are subject to customary risks of importing merchandise, including currency fluctuation, import duties, exchange rates, trade restrictions, work stoppages, transportation costs, natural or man-made disasters, and general political and socioeconomic conditions in other countries.
As a result, our operations are subject to customary risks of importing merchandise, including currency fluctuation, import duties or tariffs, exchange rates, trade restrictions, work stoppages, transportation costs, natural or man-made disasters, and general political and socioeconomic conditions in other countries.
Additionally, other economic factors, such as rising and sustained periods of high crude oil and fuel prices, may impact consumer demand and preferences. As we operate internationally, including across the United States, the United Kingdom, and Canada, changes in and the severity of economic conditions may vary by market.
Additionally, other economic factors, such as rising and sustained periods of high crude oil and fuel prices and other inflation, may impact consumer demand and preferences. As we operate internationally, including across the United States, the United Kingdom, and Canada, changes in and the severity of economic conditions may vary by market.
Even if new financing were available, it may not be on terms acceptable to us. As a result of this risk, we could be forced to take actions that we otherwise would not take, or not take actions that we otherwise might take, in order to comply with these agreements.
Even if new financing were available, it may not be on terms acceptable to us. As a result of this risk, we could be 13 forced to take actions that we otherwise would not take, or not take actions that we otherwise might take, in order to comply with these agreements.
Customers who finance a vehicle purchase or lease a vehicle through a DFC auto loan or lease may be unable to repay the loans based on the original terms and that the fair value of the vehicles used as collateral against the loans may not be sufficient to ensure full repayment.
Customers who finance a vehicle purchase or lease a vehicle through a DFC auto loan or lease may be unable to repay the loans based on the original terms and the fair value of the vehicles used as collateral against the loans may not be sufficient to ensure full repayment.
Any cost increase that disproportionately applies to manufacturers that sell to us could adversely affect our business compared to other vehicle retailers. 17 Our operations are subject to extensive governmental laws and regulations.
Any cost increase that disproportionately applies to manufacturers that sell to us could adversely affect our business compared to other vehicle retailers. Our operations are subject to extensive governmental laws and regulations.
We have granted a security interest in a substantial portion of our assets to certain of our lenders and other secured parties, including those under our $6.0 billion syndicated credit facility and $1.1 billion CAD Canadian syndicated credit facility.
We have granted a security interest in a substantial portion of our assets to certain of our lenders and other secured parties, including those under our $6.5 billion syndicated credit facility and $1.1 billion CAD Canadian syndicated credit facility.
The FCA is investigating the historic use of discretionary commission arrangements amid concerns that this practice may have been unfair to customers. We await the outcome of the FCA’s investigation which is expected sometime in 2025.
The FCA is investigating the historic use of discretionary commission arrangements amid concerns that this practice may have been unfair to customers. We await the outcome of the FCA’s investigation which is expected sometime in 2026.
Certain manufacturers and governments have declared commitments to various electric vehicle and zero emissions goals, such as the state of California’s executive order to require all new cars and passenger trucks sold in the state to be zero-emission vehicles by 2035.
Certain governments have declared commitments to various electric vehicle and zero emissions goals, such as the state of California’s executive order requiring all new cars and passenger trucks sold in the state to be zero-emission vehicles by 2035.
We are subject to federal, state, and local laws and regulations in the geographic regions in which we operate, such as those relating to franchising, motor vehicle sales, retail installment sales, leasing, F&I, marketing, licensing, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety.
We are subject to federal, state, and local laws and regulations in the geographic regions in which we operate, such as those relating to franchising, motor vehicle sales, retail installment sales, leasing, F&I, marketing, licensing, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety, as well as consumer financing as discussed above.
Vehicle manufacturers would be adversely affected by economic downturns or recessions, adverse fluctuations in currency exchange rates, significant declines in the sales of their new vehicles, increases in interest rates, declines in their credit ratings, port closures, labor strikes or similar disruptions (including within their major suppliers), supply shortages or rising raw material costs, rising team member benefit costs, adverse publicity that may reduce consumer demand for their products, product defects, vehicle recall campaigns, litigation, poor product mix or unappealing vehicle design, or other adverse events.
Vehicle manufacturers would be adversely affected by economic downturns or recessions, adverse fluctuations in currency exchange rates, significant declines in the sales of their new vehicles, increases in interest rates, constraints on financing, port closures, labor strikes or similar disruptions (including within their major suppliers), supply shortages or rising raw material costs, rising team member costs, adverse publicity that may reduce consumer demand for their products, product defects, vehicle recall campaigns, litigation, poor product mix or unappealing vehicle design, or other adverse events.
For the year ended December 31, 2024, approximately 24% of our aftersales revenue was for work covered by manufacturer warranties or manufacturer-sponsored maintenance services. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty work, our aftersales volume could be adversely affected.
For the year ended December 31, 2025, approximately 25% of our aftersales revenue was for work covered by manufacturer warranties or manufacturer-sponsored maintenance services. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty work, our aftersales volume could be adversely affected.
Our floor plan notes payable, credit facilities and a portion of our real estate debt are subject to variable interest rates. As of December 31, 2024, 66% of our total debt was variable rate. In the event interest rates increase, our borrowing costs may increase substantially.
Our floor plan notes payable, credit facilities and a portion of our real estate debt are subject to variable interest rates. As of December 31, 2025, 63% of our total debt was variable rate. In the event interest rates increase, our borrowing costs may increase substantially.
Any event that adversely affects a manufacturer’s ability to timely deliver new vehicles may adversely affect us by reducing our supply of popular new vehicles, leading to lower sales in our stores during those periods than would otherwise occur.
Any event that adversely affects a manufacturer’s timely delivery of new vehicles may adversely affect us by reducing our supply of popular new vehicles, leading to lower sales in our stores during those periods than may otherwise occur.
Any regulatory or judicial outcome that ultimately results in the refund of historical commissions paid to us or that reduces the commissions paid to us could materially and adversely affect us.
Any regulatory or judicial outcome that ultimately results in the refund of historical commissions paid to us or that reduces the commissions paid to us could materially and adversely affect us. Similarly, the U.S.
The most popular vehicles usually produce the highest profit margins and are frequently in short supply. If we cannot obtain sufficient quantities of the most popular models, our profitability may be adversely affected.
The most popular vehicles usually produce the highest profit margins and are frequently in short supply. If we cannot obtain sufficient quantities of the most popular models, our profitability may be adversely affected. Sales of less desirable models may reduce our profit margins.
Cybersecurity Regulatory Risks Our dealerships and our new vehicle sales model may not be protected if state dealer laws are repealed or weakened, a manufacturer becomes bankrupt or there is a shift to other sales models.
Cybersecurity. 15 Regulatory Risks Our dealerships and our new vehicle sales model may not be protected if U.S. or Canadian state or provincial dealer laws are repealed or weakened, a manufacturer becomes bankrupt, or there is a shift to other sales models.
Technology and Cybersecurity Risks Changes to the retail delivery model and increased e-commerce and omnichannel competition could adversely affect our business, results of operations, financial condition and cash flows.
Changes to the retail delivery model and increased e-commerce and omnichannel competition could materially adversely affect our business, results of operations, financial condition, and cash flows.
If dealer laws are repealed in the states where we operate, manufacturers may be able to terminate our franchises without providing advance notice, an opportunity to cure or a showing of good cause.
If dealer laws are repealed in the states in which we operate, manufacturers may be able to terminate our franchises without an opportunity to cure or a showing of good cause.
Changes in U.S. trade policies, including the U.S.-Mexico-Canada Agreement or policies intended to penalize foreign manufacturing or imports, and policies of foreign countries in reaction to those changes, could increase the prices we pay for some of the new vehicles and parts we sell.
Changes in U.S. trade policies, including policies intended to penalize foreign manufacturing or imports, and policies of foreign countries in reaction to those changes, could increase the prices we pay for, or limit the supply of, the new vehicles and parts we sell.
For example, the shortage of chip supply and labor disruptions in 2021 and 2022 caused a significant constraint in the supply of new vehicles resulting in reduced volumes and increased gross profit margins on retail vehicle sales. As new vehicle availability has improved, gross profit margins have been negatively impacted. We depend on our manufacturers to deliver high-quality, defect-free vehicles.
For example, the shortage of semiconductor chips and labor disruptions during 2021 and 2022 significantly constrained the supply of new vehicles resulting in reduced sales volumes and increased gross profit margins on retail vehicle sales. As new vehicle availability has improved, gross profit margins have been negatively impacted. We depend on our manufacturers to deliver high-quality, defect-free vehicles.
Federal regulations around fuel economy standards and “greenhouse gas” emissions have continued to increase. New requirements may adversely affect any manufacturer’s ability to profitably design, market, produce, and distribute vehicles that comply with such regulations. We could be adversely impacted in our ability to market and sell these vehicles at affordable prices and in our ability to finance these inventories.
Regulations around fuel economy standards and carbon emissions may continue to increase. New requirements may adversely affect any manufacturer’s ability to profitably design, market, produce, and distribute vehicles that comply with such regulations. Our ability to market and sell these vehicles at affordable prices and to finance these inventories could be adversely impacted.
DeBoer in most of our store franchise agreements as the individual who controls the franchises and upon whose financial resources and management expertise the manufacturers may rely when awarding or approving the transfer of any franchise. If we lose these key personnel, our business may suffer.
DeBoer in most of our store franchise agreements as the individual who controls the franchises and upon whose financial resources and management expertise the manufacturers may rely when awarding or approving the transfer of any franchise.
Many new manufacturers are entering the automotive industry. New companies have raised capital to produce fully electric vehicles or to license battery technology to existing manufacturers. Tesla and Rivian have demonstrated the ability to successfully introduce electric vehicles to the marketplace.
In addition, new manufacturers with whom we do not have franchises are entering the automotive industry. New companies have raised capital to produce fully electric vehicles or to license battery technology to existing manufacturers. Tesla and Rivian have demonstrated the ability to successfully introduce electric vehicles to the marketplace.
Adverse conditions affecting one or more key manufacturers may negatively affect our business, results of operations, financial condition, and cash flows. We depend on our manufacturers to provide a supply of vehicles which supports expected sales levels.
These regulations could have a material adverse effect on our business, results of operations, financial condition, and cash flows. Adverse conditions affecting one or more key manufacturers may negatively affect our business, results of operations, financial condition, and cash flows. We depend on our manufacturers to provide a supply of vehicles that support expected sales levels.
These and other risks could materially adversely affect any manufacturer and limit its ability to profitably design, market, produce or distribute new vehicles, which, in turn, could materially adversely affect our business, results of operations, financial condition, and cash flows.
These and other risks could materially adversely affect any manufacturer and limit its ability to profitably design, market, produce or distribute new vehicles, which, in turn, could materially adversely affect our business, results of operations, financial condition, and cash flows. New vehicles from five manufacturers, Honda, Toyota, Ford, BMW, and Stellantis, represent 25% of our sales.
Our failure to address these risks or other problems encountered in connection with our acquisitions could cause us to fail to realize the anticipated benefits of these acquisitions, cause us to incur unanticipated liabilities and otherwise harm our business.
Our failure to address these risks or other problems encountered in connection with our acquisitions could cause us to fail to realize the anticipated benefits of these acquisitions, cause us to incur unanticipated liabilities and otherwise harm our business. Any of these risks, if realized, could materially and adversely affect our business, financial condition, and results of operations.
Our dealerships are in states and regions in the United States, the United Kingdom, and Canada in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, fires, floods, landslides, wind and/or hail storms) or other extraordinary events have in the past, and may in the future, disrupt our dealership operations and impair the value of our dealership property.
Our dealerships operate in geographic areas in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, fires, floods, landslides, wind and/or hailstorms) or other extraordinary events have in the past, and may in the future, disrupt our dealership operations and impair the value of our dealership property.
BEVs generally require less maintenance than traditional cars and trucks. The effects of BEVs on the automotive industry are uncertain and may include reduced aftersales revenues, as well as changes in the level of sales of certain F&I products such as extended warranty and lifetime lube, oil and filter contracts. Technological advances are also facilitating the development of driverless vehicles.
These vehicles generally require less maintenance than traditional cars and trucks. The effects of electric-based vehicles on the automotive industry are 10 uncertain and may include reduced after-sales revenues, as well as changes in the level of sales of certain F&I products such as extended warranty programs and lifetime lube, oil, and filter contracts.
As such, supply chain disruptions resulting from natural disasters, adverse weather events, or public health emergencies may affect the flow of inventory or parts to us or our manufacturing partners. Such disruptions could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
A disruption in our operations may adversely impact our business, results of operations, financial condition, and cash flows. The automotive manufacturing supply chain spans the globe. As such, supply chain disruptions resulting from natural disasters, adverse weather events, or public health emergencies may affect the flow of inventory or parts to us or our manufacturing partners.
See Note 12 – Derivative Financial Instruments, related to current hedge activity. 14 We may experience greater credit losses in DFC’s portfolio of finance receivables than anticipated.
See Note 12 – Derivative Financial Instruments, related to current hedge activity. We may experience greater credit losses in DFC’s finance receivable portfolio than anticipated, which will create losses for us.
Our indebtedness and lease obligations could have important consequences to us, including the following: • limitations on our ability to make acquisitions; • impaired ability to obtain additional financing for acquisitions, capital expenditures, working capital or general corporate purposes; • reduced funds available for our operations and other purposes, as a larger portion of our cash flow from operations would be dedicated to the payment of principal and interest on our indebtedness; and • exposure to the risk of increasing interest rates as certain borrowings are, and will continue to be, at variable rates of interest.
Our substantial indebtedness and lease obligations could have important consequences to us, including the following: • difficulty satisfying our debt service obligations and maintaining financial covenants, which if we fail to comply with these requirements, an event of default could result; • limitations on our ability to make acquisitions; • impaired ability to obtain additional financing for acquisitions, capital expenditures, working capital or general corporate purposes; • reduced funds available for our operations and other purposes, as a larger portion of our cash flow from operations would be dedicated to the payment of principal and interest on our indebtedness; • exposure to the risk of increasing interest rates as certain borrowings are, and will continue to be, at variable rates of interest; and • increased risk in the event of an economic downturn.
Our U.K. dealerships are subject to different regulatory frameworks than our U.S. and Canada operations, and changes to these regulatory frameworks could negatively affect our results of operations. 16 The majority of our dealerships in the United Kingdom currently operate under franchise agreements with vehicle manufacturers, however, unlike in the United States, the United Kingdom generally does not have automotive dealership franchise laws and, as a result, our U.K. dealerships operate without these types of specific protections that exist in the United States.
The majority of our dealerships in the United Kingdom currently operate under franchise agreements with vehicle manufacturers, however, unlike in the United States, the United Kingdom generally does not have automotive dealership franchise laws and, as a result, our U.K. dealerships operate without these types of specific protections that exist in the United States.
If manufacturers continue to transition to an agency model in the United Kingdom or another new model is implemented in the United Kingdom or other countries and regions in which we operate, including in the United States and Canada, for the sale of electric or other vehicles, it could negatively affect our revenues, results of operations, and financial condition. 13 Our indebtedness and lease obligations could materially adversely affect our financial health, limit our ability to finance future acquisitions and capital expenditures and prevent us from fulfilling our financial obligations.
If manufacturers continue to transition to an agency model in the United Kingdom or another new model is implemented in the United Kingdom or other countries and regions in which we operate, including in the United States and Canada, for the sale of electric or other vehicles, it could negatively affect our revenues, results of operations, and financial condition.
In addition, certain manufacturers use criteria such as a dealership’s manufacturer-determined customer satisfaction index (CSI score), facility image compliance, team member training, digital marketing and parts purchase programs as factors governing participation in incentive programs.
Our financial condition could be materially adversely impacted by a discontinuation or change in our manufacturers’ or distributors’ incentive programs. In addition, certain manufacturers use criteria such as a dealership’s manufacturer-determined customer satisfaction index (CSI score), facility image compliance, team member training, 11 digital marketing and parts purchase programs as factors governing participation in incentive programs.
While our operations outside of the United States currently represent less than 25% of our revenues, we anticipate that our international operations will expand. We face regulatory, operational, political, and economic risks and uncertainties with respect to our international operations that may be different from those in the United States.
We face regulatory, operational, political, and economic risks and uncertainties with respect to our international operations that may be different from those in the United States.
Consumer demand may be further adversely impacted if interest rates continue to increase or are sustained at current levels. In an inflationary environment, depending on automotive industry and other economic conditions, we may be unable to raise prices to keep up with the rate of inflation, which would reduce our profit margins.
In an inflationary environment, depending on automotive industry and other economic conditions, we may be unable to raise prices to keep up with the rate of inflation, which would reduce our profit margins, and if we do raise prices, we may experience less demand.
In addition, some states are considering introducing legislation to permit direct to consumer auto sales in certain circumstances, allowing additional electric vehicle manufacturers such as Rivian to enter the market. Other manufacturers, such as Scout have signaled a desire to commence a direct-to-consumer model.
In addition, some states have passed, or may consider introducing, legislation to permit direct to consumer auto sales in certain circumstances, allowing additional electric vehicle manufacturers such as Rivian to enter the market.
Failure to comply with applicable laws and regulations, or significant additional expenditures required 18 to maintain compliance therewith, may have a material adverse effect on our business, results of operations, financial condition, cash flows, and prospects.
Failure to comply with applicable laws and regulations, or significant additional expenditures required to maintain compliance therewith, may have a material adverse effect on our business, results of operations, financial condition, cash flows, and prospects. Structural and Organizational Risks Our ability to increase revenues and profitability through acquisitions depends on our ability to acquire and successfully integrate new vehicle franchises.
Our finance receivable portfolio is funded through a combination of free cash flows from operations and securitized funding, including asset-backed securitization. Changes in the condition of the asset backed securitization market may result in increased costs to access funds in the market or require us to explore new financing options to fund new auto loans and leases.
Changes in the condition of the asset backed securitization market may result in increased costs to access funds in the market or require us to explore new financing options to fund new auto loans and leases.
In addition, larger traditional automotive retailers are transforming their models to support omnichannel retail experiences, providing consumers with vehicle purchasing experiences outside of the traditional brick and mortar automotive dealership model. We continue to develop our own internal technology solutions to further expand the reach of the networks of service and delivery points in our geographic markets.
In addition, larger traditional automotive retailers are transforming their models to support omnichannel retail experiences, providing consumers with vehicle purchasing experiences outside of the traditional brick and mortar automotive dealership model.
Any of these risks, if realized, could materially and adversely affect our business, financial condition, and results of operations. 19 Risks associated with our international operations may negatively affect our business, results of operations and, financial condition. We operate dealerships in the United States, the United Kingdom, and Canada.
Risks associated with our international operations may negatively affect our business, results of operations and, financial condition. We operate dealerships in the United States, the United Kingdom, and Canada. While our operations outside of the United States currently represent 22% of our revenues, our international operations may expand.
Additionally, interest rates remain significantly elevated above the rates available in 2021, which has impacted new and used vehicle sales and vehicle affordability due to the direct relationship between interest rates and monthly loan payments, a critical factor for many vehicle buyers, and the impact interest rates have on customers’ borrowing capacity and disposable income.
A period of sustained inflationary and interest rate pressures could impact our profitability. 8 Additionally, elevated interest rates, along with higher vehicle prices, have impacted new and used vehicle sales and vehicle affordability due to the direct relationship between interest rates and monthly loan payments, a critical factor for many vehicle buyers, and the impact interest rates have on customers’ borrowing capacity and disposable income.
Item 1A. Risk Factors You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company.
Item 1A. Risk Factors You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us, or that we currently deem immaterial, may also impair our business operations.
Such agreements contain provisions for termination or non-renewal for a variety of causes, including service retention, facility compliance, customer satisfaction, and sales and financial performance.
As a result of the terms of our franchise agreements, manufacturers exert significant control over the day-to-day operations at our stores. Such agreements contain provisions for termination or non-renewal for a variety of causes, including service retention, facility compliance, customer satisfaction, and sales and financial performance.
Our F&I business and other related businesses, which have higher margins than sales of new and used vehicles, are subject to strong competition from various financial institutions and others. The Internet has become a significant part of the sales process in our industry.
We do not have any cost advantage in purchasing new vehicles from manufacturers due to the volume of purchases or otherwise. Our F&I business and other related businesses, which have higher margins than sales of new and used vehicles, are subject to strong competition from various financial institutions and others.
In recent years, private plaintiffs and state attorneys general in the United States have increased their scrutiny of advertising, sales, and F&I activities in the sale and leasing of motor vehicles. These activities have led many lenders to limit the amounts that may be charged to customers as fee income for these activities.
Some jurisdictions regulate finance, documentation, and administrative fees that may be charged in connection with vehicle sales. In recent years, private plaintiffs and state attorneys general in the United States have increased their scrutiny of advertising, sales, and F&I activities in the sale and leasing of motor vehicles.
Each of our stores may obtain new vehicles from manufacturers, service vehicles, sell new vehicles, and display vehicle manufacturers’ brand only to the extent permitted under these agreements. As a result of the terms of our franchise agreements, manufacturers exert significant control over the day-to-day operations at our stores.
Each of our stores operates pursuant to a franchise agreement with each of the respective manufacturers for which it serves as franchisee. Each of our stores may obtain new vehicles from manufacturers, service vehicles, sell new vehicles, and display vehicle manufacturers’ brands only to the extent permitted under these agreements.
The effect of driverless vehicles on the automotive industry is uncertain and could include changes in the level of new and used vehicle sales, the price of new vehicles, and the role of franchised dealers, any of which could materially and adversely affect our business. 10 We compete in a dynamic industry, and we may invest significant resources to pursue strategies, develop new offerings, and enter into adjacent businesses that do not prove effective.
The effect of driverless vehicles and other technologies that may result in lower vehicle ownership on the automotive industry is uncertain and could include changes in the level of new and used vehicle sales, the price of new vehicles, and the role of franchised dealers, any of which could materially and adversely affect our business.
Accordingly, a principal component of our growth strategy is to make dealership acquisitions in our existing markets and in new geographic markets. Restrictions by our manufacturers and limitations on our access to capital resources may directly or indirectly limit our ability to acquire additional dealerships.
Restrictions by our manufacturers and limitations on our access to capital resources may directly or indirectly limit our ability to acquire additional dealerships.
In addition, as we expand into new markets and develop our digital e-commerce solutions, we will need to hire additional managers, engineers, data scientists, and other team members. The market for qualified team members in the automotive and technology-related industries is highly competitive and may subject us to increased labor costs during periods of low unemployment.
The market for qualified team members in the automotive and technology-related industries is highly competitive and may subject us to increased labor costs during periods of low unemployment.
See the risk factor “If manufacturers or distributors discontinue or change sales incentives, warranties, and other promotional programs, our business, results of operations, financial condition, and cash flows may be materially adversely affected” below.
If manufacturers or distributors discontinue or change sales incentives, warranties, and other promotional programs, our business, results of operations, financial condition, and cash flows may be materially adversely affected. We depend upon the manufacturers and distributors for sales incentives, warranties, and other programs that are intended to promote new vehicle sales or supplement dealer income.
Economic conditions may be anemic for an extended period of time, or deteriorate in the future. This would have a material adverse effect on our retail business, particularly sales of new and used vehicles. The economies of the United States, the United Kingdom, and Canada have recently experienced heightened inflationary pressures, impacting the costs of labor, fuel, and other costs.
Economic conditions may be anemic for an extended period of time or deteriorate in the future. This would have a material adverse effect on our retail business, particularly sales of new and used vehicles. These economic conditions and other factors may also materially impact our parts and repair and maintenance aftersales, and automotive finance and insurance (F&I) products.
Additional risks not presently known to us, or that we currently deem immaterial, may also impair our business operations. 8 Risks Related to Our Business The automotive retail industry is sensitive to changing economic conditions and various other factors.
Risks Related to Our Business The automotive retail industry is sensitive to changing economic conditions and various other factors.
Our financing activities are subject to federal truth-in-lending, consumer leasing, and equal credit opportunity laws and regulations, as well as motor vehicle finance laws, installment finance laws, insurance laws, usury laws and other installment sales laws and regulations. Some states regulate finance, documentation and administrative fees that may be charged in connection with vehicle sales.
Changes to laws or regulatory frameworks applicable to automotive consumer financing transactions could negatively affect our results of operations. Our financing activities are subject to federal truth-in-lending, consumer leasing, and equal credit opportunity laws and regulations, as well as motor vehicle finance laws, installment finance laws, insurance laws, usury laws, and other installment sales laws and regulations.
The growth and success of our DFC business is dependent upon obtaining sufficient capital to grow our finance receivable portfolio. Changes in the availability or cost of financing to support our finance receivable portfolio under DFC could adversely affect our results of operations.
Changes in the availability or cost of financing to support our finance receivable portfolio under DFC could adversely affect our results of operations. Our finance receivable portfolio is funded through a combination of free cash flows from operations and securitized funding, including asset-backed securitization.
Such actions may expose us to substantial monetary damages and legal defense costs, injunctive relief, criminal and civil fines and penalties, and damage our reputation and sales.
Such actions may expose us to substantial monetary damages and legal defense costs, injunctive relief, criminal and civil fines and penalties, and damage our reputation and sales. In the United Kingdom, the Financial Conduct Authority (FCA) regulates financial services firms and financial markets, including the practice of dealerships acting as the broker in arranging the financing for vehicle sales.
Key incentive programs include: • customer rebates; • dealer incentives on new vehicles; • special financing rates on certified, pre-owned vehicles; and • below-market financing on new vehicles and special leasing terms. Our financial condition could be materially adversely impacted by a discontinuation or change in our manufacturers’ or distributors’ incentive programs.
Manufacturers and distributors routinely make changes to their incentive programs. Key incentive programs include: • customer rebates; • dealer incentives on new vehicles; • special financing rates on certified, pre-owned vehicles; and • below-market financing on new vehicles and special leasing terms.
Many of our competitors sell the same or similar makes of new and used vehicles that we offer in our markets at competitive prices. We do not have any cost advantage in purchasing new vehicles from manufacturers due to the volume of purchases or otherwise.
Our franchise agreements do not grant us the exclusive right to sell a manufacturer’s product within a given geographic area and many of our competitors sell the same or similar makes of new and used vehicles that we offer in our markets at competitive prices, as well as competitive vehicles we may not sell.
Our sales volume could be 11 materially adversely impacted by a manufacturer’s or distributor’s inability to supply our stores with an adequate supply of vehicles. In the event of a manufacturer or distributor bankruptcy, we could be held liable for damages related to product liability claims, intellectual property suits or other legal actions.
We are subject to a concentration of risk in the event of financial distress, including potential reorganization or bankruptcy, or other issue affecting one or more of these manufacturers. In the event of a manufacturer or distributor bankruptcy, we could be held liable for damages related to product liability claims, intellectual property suits or other legal actions.
Changes to laws or regulatory frameworks applicable to automotive consumer financing transactions could negatively affect our results of operations. Auto finance agreements between consumers and finance lenders typically include amounts to be paid as commissions to the dealership of purchase. In October 2024, the U.K.
The CFPB can use this authority to conduct supervisory examinations or initiate enforcement actions and/or litigation to ensure compliance with various federal consumer protection laws. 16 Auto finance agreements between consumers and finance lenders typically include amounts to be paid as commissions to the dealership of purchase. In October 2024, the U.K.
The occurrence of public health emergencies or other extraordinary events, such as regional epidemics or a global pandemic, such as COVID-19, may adversely impact our business, results of operations, financial condition, and cash flows.
In addition, the occurrence of public health emergencies or other extraordinary events, such as regional epidemics or a global pandemic, such as COVID-19, and the governmental, business, and individuals’ actions in response to the event, particularly with respect to our stores that rely on in-person experiences, could also disrupt our operations.
The vehicle retailing industry is experiencing significant changes as the expectations and behaviors of customers are shifting, and e-commerce and digital technology have become a more significant part of the sales process.
We compete in a dynamic industry, and we may invest significant resources to pursue strategies, develop new offerings, and enter into adjacent businesses that do not prove effective or profitable. The expectations and behaviors of vehicle customers are shifting as e-commerce and digital technology have become a more significant part of the sales process.
Increasing competition among automotive retailers reduces our profit margins on vehicle sales and related businesses. Further, the use of the Internet, e-commerce, and digital technology in the car purchasing process could materially adversely affect us. Vehicle retailing is a highly competitive business. Our competitors include publicly and privately-owned dealerships.
Such disruptions could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Intense competition among automotive retailers and new brands may reduce our vehicle sales and profit margins on vehicle sales and related businesses. Vehicle retailing is a highly competitive business. Our competitors include many publicly and privately-owned dealerships.
Structural and Organizational Risks Our ability to increase revenues and profitability through acquisitions depends on our ability to acquire and successfully integrate new vehicle franchises. The vehicle industry in the United States, the United Kingdom, and Canada is considered a mature industry in which minimal growth is expected in unit sales of new vehicles.
The vehicle industry in the jurisdictions in which we operate is considered a mature industry in which minimal growth is expected in unit sales of new vehicles. Accordingly, a principal component of our growth strategy is to make dealership acquisitions in our existing markets and in new geographic markets.
In addition, the U.K. government has proposed a ban on the sale of gasoline engines in new cars and new vans that would take effect as early as 2030 and a ban on the sale of gasoline hybrid engines in new cars and new vans as early as 2035.
The U.K. government has announced a ban on the sale of gasoline-only engines in new cars and vans after 2030, and beginning in 2035, only electric vehicles will be allowed to be sold. Manufacturers continue to invest in increasing production and quality of electric vehicles, including Battery-Electric Vehicles (BEVs), Hybrid Electric Vehicles, and Plug-in Hybrid Electric Vehicles.
Much of our debt is secured by a substantial portion of our assets. Much of our debt has a variable interest rate component that may significantly increase our interest costs in a rising rate environment.
Much of our debt has a variable interest rate component that may significantly increase our interest costs in a rising rate environment. As of December 31, 2025, we had $5.1 billion of total non-vehicle long-term debt and $6.1 billion of vehicle inventory financing, as well as substantial lease obligations and non-recourse debt under our warehouse facilities and ABS structure.
Removed
A period of sustained inflationary and interest rate pressures could impact our profitability. If new vehicle production exceeds the rate at which new vehicles are sold, our gross profit per vehicle could be adversely affected by this excess and any resulting changes in manufacturer incentive and marketing programs.
Added
The economies of the United States, the United Kingdom, and Canada have recently experienced heightened inflationary pressures, impacting the costs of labor, fuel, and other costs.
Removed
Economic conditions and the other factors described above may also materially adversely impact our parts and repair and maintenance aftersales, and automotive finance and insurance (F&I) products. Natural disasters, adverse weather conditions, and public health emergencies can disrupt our business.
Added
Consumer demand may be further adversely impacted if interest rates continue to increase or are sustained at current levels. Natural disasters, adverse weather conditions, and public health emergencies can disrupt our business.

… 30 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

12 edited+3 added−2 removed2 unchanged
Biggest changeRisks are prioritized based on their severity and likelihood of occurrence before implementing appropriate controls, safeguards, and mitigation measures to address and manage these risks effectively. We have developed a well-defined and frequently updated information security incident response plan that outlines procedures to be followed in the event of a cybersecurity incident.
Biggest changeWe assess cybersecurity risks for their potential impact on our operations, data, financial condition, and reputation. Risks are prioritized based on their severity and likelihood of occurrence before implementing appropriate controls, safeguards, and mitigation measures designed to manage and reduce those risks to acceptable levels.
The Senior Director of Information Security has over 10 years of experience in senior level information security roles, has over 20 years' experience in Fortune 500 enterprise IT roles, and holds Associate and Bachelor Degrees and the Certified Information Security Manager (CISM) Professional certification, amongst others.
The Senior Director of Information Security has over 10 years of experience in senior level information security roles, has over 20 years' experience in Fortune 500 enterprise IT roles, and holds Associate and Bachelor Degrees and the Certified Information Security Manager (CISM) Professional certification.
The members of our information security management team have extensive experience in technology and security roles, possessing cybersecurity certifications such as Certified Information Systems Security Professional (CISSP), Cisco Certified Network Professional (CCNP) and Global Certified Incident Handler (GCIH), amongst others."
The members of our information security management team have extensive experience in technology and security roles, possessing cybersecurity certifications such as Certified Information Systems Security Professional (CISSP), Cisco Certified Network Professional (CCNP) and Global Certified Incident Handler (GCIH). 21
The Senior Director of Information Security reports to the Chief Technology and Innovation Officer (CTIO) and provides frequent and up to date reporting on cyber risk to our ERM Committee, a cross functional executive-level steering group, which includes the CTIO and has a wealth of experience in enterprise risk.
The Senior Director of Information Security reports to the Chief Innovation and Technology Officer (CITO) and provides frequent, up-to-date reporting on cyber risk to our ERM Committee, a cross functional executive-level steering group, which includes the CITO.
The ERM Committee meets on a quarterly basis or as necessary to assess and respond to enterprise risks, including cybersecurity, and reports updates to the Board.
The ERM Committee meets on a quarterly basis or as necessary to assess and respond to enterprise risks, including cybersecurity, and reports updates to the Board. Management has authority to escalate significant cybersecurity matters to the Board as appropriate.
Item 1C. Cybersecurity Assessing, identifying, and managing material risks from cybersecurity threats We are committed to maintaining robust cybersecurity practices to safeguard our information assets and ensure the confidentiality, integrity, and availability of our operations. We employ a comprehensive approach to assess, identify, and manage material risks arising from cybersecurity threats.
Item 1C. Cybersecurity Assessing, identifying, and managing material risks from cybersecurity threats We are committed to maintaining cybersecurity practices designed to safeguard our information assets and ensure the confidentiality, integrity, and availability of our operations.
While no company can or will be completely immune from cybersecurity threats, especially as they relate to vendors and government agencies that we rely on, we know of no cybersecurity incident that has or is likely to materially affect us, our business strategy, or our results of operations, or financial condition. 21 Board of Directors Cybersecurity Oversight Our Board oversees our cybersecurity and data protection strategy and appoints a director to lead the Board’s efforts.
While no company can or will be completely immune from cybersecurity threats, especially as they relate to vendors and government agencies that we rely on, we know of no cybersecurity incident that has or is reasonably likely to materially affect us, our business strategy, or our results of operations, or financial condition.
This includes continuous monitoring, intrusion detection systems, and anomaly detection mechanisms, to promptly identify any unusual activities or security breaches. Threat intelligence sharing with industry partners helps us stay informed about the latest cybersecurity threats. We assess cybersecurity risks for their potential impact on our operations, data, and reputation.
We use threat detection and monitoring tools and technologies to identify potential cybersecurity risks. This includes continuous monitoring, mechanisms designed to detect unusual or anomalous activity, to promptly identify any unusual activities or security breaches. Threat intelligence sharing with industry partners helps us stay informed about the latest cybersecurity threats.
Our Board is briefed on our cybersecurity posture, current and future risks and potential incidents or vulnerabilities on a quarterly basis. Board members and executives participate in engagements on cybersecurity, such as simulated cyber incident response and crisis management exercises. Our Board also regularly receives and reviews third-party cybersecurity assessments, which include assessments of our cyber maturity and cyber risk.
Board members and executives participate in engagements on cybersecurity, such as simulated cyber incident response and crisis management exercises. Our Board also receives and reviews third-party cybersecurity assessments at least annually, which include assessments of our cyber maturity and cyber risk.
The identification and oversight of material cybersecurity risks is included in continuous ERM Committee and Board meetings and reporting. We complete regular cybersecurity assessments to identify potential vulnerabilities and threats, analyzing our infrastructure, systems, and data. Assessments are conducted both internally and by third parties and consider internal and external factors, technological changes, regulatory requirements, and emerging cyber threats.
The identification and oversight of material cybersecurity risks is integrated into our enterprise risk management (ERM) program and included in ongoing ERM Committee and Board meetings and reporting. 20 We complete regular cybersecurity risk assessments to identify potential vulnerabilities and threats, analyzing our infrastructure, systems, and data.
Our cybersecurity program adheres to widely recognized standards for managing cybersecurity risk, including the National Institute of Standards and Technology Cybersecurity Framework, Center for Internet Security Controls and U.K. Cyber Essentials. We use advanced threat detection tools and technologies to identify potential cybersecurity risks.
Assessments are conducted both internally and by third parties and consider internal and external factors, technological changes, regulatory requirements, and emerging cyber threats. Our cybersecurity program is informed by widely recognized standards for managing cybersecurity risk, including the National Institute of Standards and Technology Cybersecurity Framework, Center for Internet Security Controls and U.K. Cyber Essentials.
The plan is periodically drilled with incident response team members and includes robust processes for identification, categorization, escalation and reporting of incidents. Team members are regularly trained on key cybersecurity subjects to ensure awareness.
We have developed a documented information security incident response plan that outlines procedures to be followed in the event of a cybersecurity incident. The plan is periodically tested through tabletop exercises and simulations with incident response team members and includes processes for identification, categorization, escalation and reporting of incidents and remediation, as appropriate.
Removed
In June 2024, a cybersecurity incident occurred involving CDK, a third-party provider of certain information systems used by us, that triggered our information security incident response plan. Although the incident disrupted our operations, we believe our response plan operated substantially as we intended and the incident did not materially impact our financial condition or results of operations.
Added
We employ a comprehensive risk-based approach to assess, identify, and manage risks arising from cybersecurity threats that could reasonably be expected to materially affect our business, financial condition, results of operations, or reputation.
Removed
The incident, however, provided us an opportunity to test our response plan, refine our procedures and consider improvements.
Added
Team members are regularly trained on key cybersecurity subjects to ensure awareness.
Added
Board of Directors Cybersecurity Oversight Our Board oversees our cybersecurity and data protection strategy and has designated a director to lead its cybersecurity efforts. Our Board is briefed on our cybersecurity posture, current and future risks and potential incidents or vulnerabilities on a quarterly basis.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeCertain of our owned properties are mortgaged or secured as part of commitments on our various real estate credit facilities. As of December 31, 2024, we had outstanding mortgage debt of $904.6 million, none outstanding on our real estate credit facilities, and $1.8 billion committed as part of availability on our working capital lines of credit.
Biggest changeCertain of our owned properties are mortgaged or secured as part of commitments on our working capital lines of credit. As of December 31, 2025, we had outstanding mortgage debt of $1.0 billion and $2.3 billion committed as part of availability on our working capital lines of credit.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed1 unchanged
Biggest changeItem 4. Mine Safety Disclosure s Not applicable PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations : 25 Results of operations 25 Liquidity and capital resources 37 Critical accounting estimates 41 Item 7A.
Biggest changeItem 4. Mine Safety Disclosure s Not applicable PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations : 25 Results of operations 25 Liquidity and capital resources 37 Critical accounting estimates 42 Item 7A.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−0 removed1 unchanged
Biggest change(2) On June 4, 2024, our Board approved an additional $350 million repurchase authorization of our common stock. This authorization was in addition to the amount previously authorized by the Board for repurchase.
Biggest change(2) On June 4, 2024, our Board approved an additional $350 million repurchase authorization of our common stock, in March 2025, our Board approved an additional $350 million repurchase authorization of our common stock, and in August 2025, our Board approved an additional $750 million repurchase authorization of our common stock.
There is no expiration date for this share repurchase authorization. 23 Stock Performance Graph The stock performance graph and table that follow compare the cumulative total stockholder return on Lithia Motors, Inc.’s common stock with the cumulative total return of the Standard & Poor’s 500 Stock Index (S&P 500 Index), and an auto peer group index composed of Penske Automotive Group, AutoNation, Sonic Automotive, Group 1 Automotive, Asbury Automotive Group, and CarMax for the five years ended December 31, 2024.
There is no expiration dates for the share repurchase authorizations. 23 Stock Performance Graph The stock performance graph and table that follow compare the cumulative total stockholder return on Lithia Motors, Inc.’s common stock with the cumulative total return of the Standard & Poor’s 500 Stock Index (S&P 500 Index), and an auto peer group index composed of Penske Automotive Group, AutoNation, Sonic Automotive, Group 1 Automotive, Asbury Automotive Group, and CarMax for the five years ended December 31, 2025.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the NYSE under the symbol LAD. The number of shareholders of record and approximate number of beneficial holders of common stock as of February 24, 2025 was 424 and 97,452, respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the NYSE under the symbol LAD. The number of shareholders of record and approximate number of beneficial holders of common stock as of February 25, 2026 was 411 and 113,195, respectively.
Repurchases of Equity Securities We made the following repurchases of our common stock during the fourth quarter of 2024: For the full calendar month of Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plan (2) Maximum dollar value of shares that may yet be purchased under publicly announced plan (in thousands) October — $ — — $ 560,867 November 70,233 374.70 70,147 534,579 December 173,324 378.25 173,324 469,020 Total 243,557 377.22 243,471 (1) 86 shares repurchased in the fourth quarter of 2024 were related to tax withholding on the vesting of RSUs.
Repurchases of Equity Securities We made the following repurchases of our common stock during the fourth quarter of 2025: For the full calendar month of Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plan (2) Maximum dollar value of shares that may yet be purchased under publicly announced plan (in thousands) October 574,059 $ 321.80 573,984 $ 725,350 November 300,820 295.93 300,663 636,375 December 42,780 346.41 42,780 621,556 Total 917,659 314.47 917,427 (1) 232 shares repurchased in the fourth quarter of 2025 were related to tax withholding on the vesting of RSUs.
(1) Base Period Indexed Returns for the Year Ended December 31, Company/Index 2019 2020 2021 2022 2023 2024 Lithia Motors, Inc. $100.00 $ 200.80 $ 204.49 $ 141.84 $ 229.83 $ 251.20 S&P 500 Index - Total Return 100.00 118.40 152.39 124.79 157.59 197.02 Auto Peer Group 100.00 128.09 178.97 134.01 187.12 204.20 (1) The graph and table assume that $100 was invested on the last day of trading for the calendar year ended December 31, 2019 in Lithia Motors, Inc’s common stock, the S&P 500 Index, and peer group indexes, and that all dividends were reinvested. 24
(1) Base Period Indexed Returns for the Year Ended December 31, Company/Index 2020 2021 2022 2023 2024 2025 Lithia Motors, Inc. $100.00 $ 101.84 $ 70.64 $ 114.46 $ 125.10 $ 117.15 S&P 500 Index - Total Return 100.00 128.71 105.40 133.10 166.40 196.16 Auto Peer Group 100.00 148.69 112.90 153.08 166.99 146.89 (1) The graph and table assume that $100 was invested on the last day of trading for the calendar year ended December 31, 2020 in Lithia Motors, Inc’s common stock, the S&P 500 Index, and peer group indexes, and that all dividends were reinvested. 24
Added
These authorizations were in addition to the amounts previously authorized by the Board for repurchase.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

89 edited+15 added−15 removed32 unchanged
Biggest changeThese measures should not be considered an alternative to GAAP measures. 35 The following tables reconcile certain reported non-GAAP measures to the most comparable GAAP measure from our Consolidated Statements of Operations: Year Ended December 31, 2024 ($ in millions, except per share amounts) As reported Net gain on disposal of stores Insurance reserves Acquisition expenses Premium on redeemable NCI buyout Tax attribute Adjusted Selling, general and administrative $ 3,755.2 $ 8.2 $ (6.1) $ (10.0) $ — $ — $ 3,747.3 Operating income (loss) 1,575.6 (8.2) 6.1 10.0 — — 1,583.5 Income (loss) before income taxes $ 1,078.3 $ (8.2) $ 6.1 $ 10.0 $ — $ — $ 1,086.2 Income tax (provision) benefit (256.7) 4.1 (1.6) (0.5) — (13.1) (267.8) Net income (loss) 821.6 (4.1) 4.5 9.5 — (13.1) 818.4 Net income attributable to non-controlling interest (4.8) — — — — — (4.8) Net income attributable to redeemable non-controlling interest (14.8) — — — 11.6 — (3.2) Net income (loss) attributable to Lithia Motors, Inc. $ 802.0 $ (4.1) $ 4.5 $ 9.5 $ 11.6 $ (13.1) $ 810.4 Diluted earnings (loss) per share attributable to Lithia Motors, Inc. $ 29.65 $ (0.15) $ 0.17 $ 0.35 $ 0.43 $ (0.49) $ 29.96 Diluted share count 27.1 Year Ended December 31, 2023 ($ in millions, except per share amounts) As reported Net gain on disposal of stores Insurance reserves Acquisition expenses Contract buyouts Adjusted Selling, general and administrative $ 3,294.8 $ 31.2 $ (5.4) $ (27.2) $ (14.3) $ 3,279.1 Operating income (loss) 1,692.4 (31.2) 5.4 27.2 14.3 1,708.1 Income (loss) before income taxes $ 1,362.3 $ (31.2) $ 5.4 $ 27.2 $ 14.3 $ 1,378.0 Income tax (provision) benefit (350.6) 8.2 (1.4) (1.0) (3.8) (348.6) Net income (loss) 1,011.7 $ (23.0) 4.0 26.2 10.5 1,029.4 Net income attributable to non-controlling interest (6.5) — — — — (6.5) Net income attributable to redeemable non-controlling interest (4.4) — — — — (4.4) Net income (loss) attributable to Lithia Motors, Inc. $ 1,000.8 $ (23.0) $ 4.0 $ 26.2 $ 10.5 $ 1,018.5 Diluted earnings (loss) per share attributable to Lithia Motors, Inc. $ 36.29 $ (0.83) $ 0.15 $ 0.95 $ 0.38 $ 36.94 Diluted share count 27.6 36 Year Ended December 31, 2022 ($ in millions, except per share amounts) As reported Net gain on disposal of stores Insurance reserves Acquisition expenses Adjusted Selling, general and administrative $ 3,044.1 $ 66.0 $ (4.9) $ (15.0) $ 3,090.2 Operating income (loss) 1,941.1 (66.0) 4.9 15.0 1,895.0 Income (loss) before income taxes $ 1,730.0 $ (66.0) $ 4.9 $ 15.0 $ 1,683.9 Income tax (provision) benefit (468.4) 19.1 (1.3) (4.0) (454.6) Net income (loss) 1,261.6 (46.9) 3.6 11.0 1,229.3 Net income attributable to non-controlling interest (4.8) — — — (4.8) Net income attributable to redeemable non-controlling interest (5.8) — — — (5.8) Net income (loss) attributable to Lithia Motors, Inc. $ 1,251.0 $ (46.9) $ 3.6 $ 11.0 $ 1,218.7 Diluted earnings per share attributable to Lithia Motors, Inc. $ 44.17 $ (1.65) $ 0.13 $ 0.39 $ 43.04 Diluted share count 28.3 Liquidity and Capital Resources We manage our liquidity and capital resources in the context of our overall business strategy, continually forecasting and managing our cash, working capital balances, and capital structure to meet the short-term and long-term obligations of our business while maintaining liquidity and financial flexibility.
Biggest changeThe following tables reconcile certain reported non-GAAP measures to the most comparable GAAP measure from our Consolidated Statements of Operations: Year Ended December 31, 2025 ($ in millions, except per share amounts) As reported Net gain on disposal of stores Asset impairment Investment loss Insurance reserves Acquisition expenses Tax attribute Adjusted Asset impairment $ 5.8 $ — $ (5.8) $ — $ — $ — $ — $ — Selling, general and administrative 3,944.7 20.3 — — (6.7) (17.0) — 3,941.3 Operating income (loss) 1,594.7 (20.3) 5.8 — 6.7 17.0 — 1,603.9 Other income, net 17.4 — — 23.8 — — — 41.2 Income (loss) before income taxes $ 1,108.4 $ (20.3) $ 5.8 $ 23.8 $ 6.7 $ 17.0 $ — $ 1,141.4 Income tax (provision) benefit (282.5) 11.9 (1.5) (6.0) (1.7) (0.8) (6.1) (286.7) Net income (loss) 825.9 (8.4) 4.3 17.8 5.0 16.2 (6.1) 854.7 Net income attributable to non-controlling interest (6.3) — — — — — — (6.3) Net income (loss) attributable to Lithia Motors, Inc. $ 819.6 $ (8.4) $ 4.3 $ 17.8 $ 5.0 $ 16.2 $ (6.1) $ 848.4 Diluted earnings (loss) per share attributable to Lithia Motors, Inc. $ 32.32 $ (0.33) $ 0.17 $ 0.70 $ 0.20 $ 0.64 $ (0.24) $ 33.46 Diluted share count 25.4 36 Year Ended December 31, 2024 ($ in millions, except per share amounts) As reported Net gain on disposal of stores Investment gain Insurance reserves Acquisition expenses Premium on redeemable NCI buyout Tax attribute Adjusted Selling, general and administrative $ 3,755.2 $ 8.2 $ — $ (6.1) $ (10.0) $ — $ — $ 3,747.3 Operating income (loss) 1,568.6 (8.2) — 6.1 10.0 — — 1,576.5 Other income (expense), net 39.3 — (30.2) — — — — 9.1 Income (loss) before income taxes $ 1,071.3 $ (8.2) $ (30.2) $ 6.1 $ 10.0 $ — $ — $ 1,049.0 Income tax (provision) benefit (255.0) 4.1 7.5 (1.6) (0.5) — (13.1) (258.6) Net income (loss) 816.3 $ (4.1) (22.7) 4.5 9.5 — (13.1) 790.4 Net income attributable to non-controlling interest (4.8) — — — — — — (4.8) Net income attributable to redeemable non-controlling interest (14.8) — — — — 11.6 — (3.2) Net income (loss) attributable to Lithia Motors, Inc. $ 796.7 $ (4.1) $ (22.7) $ 4.5 $ 9.5 $ 11.6 $ (13.1) $ 782.4 Diluted earnings (loss) per share attributable to Lithia Motors, Inc. $ 29.45 $ (0.15) $ (0.84) $ 0.17 $ 0.35 $ 0.43 $ (0.49) $ 28.92 Diluted share count 27.1 Year Ended December 31, 2023 ($ in millions, except per share amounts) As reported Net gain on disposal of stores Investment loss Insurance reserves Acquisition expenses Contract buyouts Adjusted Selling, general and administrative $ 3,294.8 $ 31.2 $ — $ (5.4) $ (27.2) $ (14.3) $ 3,279.1 Operating income (loss) 1,692.4 (31.2) — 5.4 27.2 14.3 1,708.1 Other income, net 22.0 — 1.7 — — — 23.7 Income (loss) before income taxes $ 1,362.3 $ (31.2) $ 1.7 $ 5.4 $ 27.2 $ 14.3 $ 1,379.7 Income tax (provision) benefit (350.6) 8.2 (4.0) (1.4) (1.0) (3.8) (352.6) Net income (loss) 1,011.7 (23.0) (2.3) 4.0 26.2 10.5 1,027.1 Net income attributable to non-controlling interest (6.5) — — — — — (6.5) Net income attributable to redeemable non-controlling interest (4.4) — — — — — (4.4) Net income (loss) attributable to Lithia Motors, Inc. $ 1,000.8 $ (23.0) $ (2.3) $ 4.0 $ 26.2 $ 10.5 $ 1,016.2 Diluted earnings per share attributable to Lithia Motors, Inc. $ 36.29 $ (0.83) $ (0.08) $ 0.15 $ 0.95 $ 0.38 $ 36.86 Diluted share count 27.6 Liquidity and Capital Resources We manage our liquidity and capital resources in the context of our overall business strategy, continually forecasting and managing our cash, working capital balances, and capital structure to meet the short-term and long-term obligations of our business while maintaining liquidity and financial flexibility.
Our disciplined approach focuses on acquiring new vehicle franchises that are accretive and cash flow positive at reasonable valuations. We are able to subsequently floor new vehicle inventory acquired as part of an acquisition; however, the cash generated by these transactions are recorded as borrowings on floor plan notes payable, non-trade.
Our disciplined approach focuses on acquiring new vehicle franchises that are accretive and cash flow positive at reasonable valuations. 39 We are able to subsequently floor new vehicle inventory acquired as part of an acquisition; however, the cash generated by these transactions are recorded as borrowings on floor plan notes payable, non-trade.
We calculate days’ supply of inventory on-ground inventory unit levels and a 30-day total units sales volume, both at the end of each reporting period. We have continued to focus on managing our unit mix and maintaining an appropriate level of new and used vehicle inventory.
We calculate days’ supply of inventory on-ground inventory unit levels and a 30-day total units sales volume, 38 both at the end of each reporting period. We have continued to focus on managing our unit mix and maintaining an appropriate level of new and used vehicle inventory.
To better understand the impact of changes in inventory, other 37 assets, and the associated financing, we also consider our adjusted net cash provided by operating activities to include borrowings or repayments associated with our new vehicle floor plan commitment and exclude the impact of our financing receivables activity.
To better understand the impact of changes in inventory, other assets, and the associated financing, we also consider our adjusted net cash provided by operating activities to include borrowings or repayments associated with our new vehicle floor plan commitment and exclude the impact of our financing receivables activity.
We believe each of the non-GAAP financial measures below improves the transparency of our disclosures, provides a meaningful presentation of our results from the core business operations because they exclude items not related to our ongoing core business operations and other non-cash items, and improves the period-to-period comparability of our results from the core business operations.
We believe each of the non-GAAP financial measures below improves the transparency of our disclosures, provides a meaningful presentation of our results from the core business 35 operations because they exclude items not related to our ongoing core business operations and other non-cash items, and improves the period-to-period comparability of our results from the core business operations.
See Note 1 – Summary of Significant Accounting Policies and Note 17 – Acquisitions of Notes to Consolidated Financial Statements included in Part II, Item 8. Financial Statements and Supplementary Financial Data of this Annual Report. 42
See Note 1 – Summary of Significant Accounting Policies and Note 17 – Acquisitions of Notes to Consolidated Financial Statements included in Part II, Item 8. Financial Statements and Supplementary Financial Data of this Annual Report.
The annual goodwill impairment analysis resulted in no indications of impairment in 2024, 2023, or 2022. We have determined the appropriate unit of accounting for testing franchise rights for impairment is on an individual legal entity basis. We have the option to qualitatively or quantitatively assess indefinite-lived intangible assets for impairment.
The annual goodwill impairment analysis resulted in no indications of impairment in 2025, 2024, or 2023. We have determined the appropriate unit of accounting for testing franchise rights for impairment is on an individual legal entity basis. We have the option to qualitatively or quantitatively assess indefinite-lived intangible assets for impairment.
In 2024, we evaluated our indefinite-lived intangible assets using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the fair value of the individual entity’s franchise value exceeds the carrying amount, the franchise value is not impaired, and the second step is not necessary.
In 2025, we evaluated our indefinite-lived intangible assets using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the fair value of the individual entity’s franchise value exceeds the carrying amount, the franchise value is not impaired, and the second step is not necessary.
For example, a store acquired in November 2023 would be included in same store operating data beginning in December 2024, after its first complete comparable month of operations. The fourth quarter operating results for the same store comparisons would include results for that store in only the period of December for both comparable periods.
For example, a store acquired in November 2024 would be included in same store operating data beginning in December 2025, after its first complete comparable month of operations. The fourth quarter operating results for the same store comparisons would include results for that store in only the period of December for both comparable periods.
Adjusting for non-core charges, including acquisition expenses, one-time contract buyouts, and storm insurance charges, offset by a net disposal gain on disposal of stores, our operating margin decreased 120 basis points.
Adjusting for non-core charges, including acquisition expenses, one-time contract buyouts, and storm insurance charges, offset by a net disposal gain on disposal of stores, our operating margin decreased 110 basis points.
On a same store basis, gross profit per new vehicle decreased 24.1%. Used Vehicles Used vehicle retail sales are a strategic focus for organic growth. We offer three categories of used vehicles: CPO vehicles; core vehicles, which are late-model vehicles with lower mileage; and value autos, which are vehicles with over 80,000 miles.
On a same store basis, gross profit per new vehicle decreased 25.9%. Used Vehicles Used vehicle retail sales are a strategic focus for organic growth. We offer three categories of used vehicles: CPO vehicles; core vehicles, which are late-model vehicles with lower mileage; and value autos, which are vehicles with over 80,000 miles.
(4) Debt issuance costs are presented on the balance sheet as a reduction from the carrying amount of the related debt liability. See Note 10 – Credit Facilities and Long-Term Debt of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
(4) Debt issuance costs are presented on the balance sheet as a reduction from the carrying amount of the related debt liability. See Note 10 – Credit Facilities and Long-Term Debt of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. (5) Non-GAAP financial measure.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with Item 1. Business, Item 1A. Risk Factors, and our Consolidated Financial Statements and Notes thereto. Overview We are a global automotive retailer ranked #140 on the Fortune 500 in 2024.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with Item 1. Business, Item 1A. Risk Factors, and our Consolidated Financial Statements and Notes thereto. Overview We are a global automotive retailer ranked #124 on the Fortune 500 in 2025.
If the qualitative assessment determines it is more likely than not the fair value is less than the carrying amount, we would further evaluate for potential impairment. As of December 31, 2024, we had $2.1 billion of goodwill on our balance sheet associated with our reporting units.
If the qualitative assessment determines it is more likely than not the fair value is less than the carrying amount, we would further evaluate for potential impairment. As of December 31, 2025, we had $2.5 billion of goodwill on our balance sheet associated with our reporting units.
Non-Operating Expenses Other Interest Expense Other interest expense includes interest on debt incurred related to issued senior notes, real estate mortgages, our used and service loaner vehicle inventory financing commitments, and our revolving lines of credit.
Other Interest Expense Other interest expense includes interest on debt incurred related to issued senior notes, real estate mortgages, our used and service loaner vehicle inventory financing commitments, and our revolving lines of credit.
Adjusting for non-core charges, including acquisition expenses and storm related insurance charges, offset by a net disposal gain on disposal of stores, our operating margin decreased 110 basis points. 2023 vs. 2022 Our operating margin decreased 140 basis points compared to the prior year, driven by an increase in SG&A as a percentage of gross profit.
Adjusting for non-core charges, including acquisition expenses and storm related insurance charges, offset by a net disposal gain on disposal of stores, our operating margin decreased 10 basis points. 2024 vs. 2023 Our operating margin decreased 120 basis points compared to the prior year, driven by an increase in SG&A as a percentage of gross profit.
Investing Activities Net cash used in investing activities totaled $1.9 billion and $1.3 billion, respectively, for 2024 and 2023. Cash flows from investing activities relate primarily to capital expenditures, acquisition and divestiture activity and sales of property and equipment.
Investing Activities Net cash used in investing activities totaled $1.0 billion and $1.9 billion, respectively, for 2025 and 2024. Cash flows from investing activities relate primarily to capital expenditures, acquisition and divestiture activity and sales of property and equipment.
See the discussion under “Liquidity and Capital Resources” for additional information. 33 Operating Income Operating income as a percentage of revenue, or operating margin, was as follows: Year Ended December 31, 2024 2023 2022 Operating margin 4.4 % 5.5 % 6.9 % Operating margin adjusted for non-core charges (1) 4.4 5.5 6.7 (1) See “Non-GAAP Reconciliations” for additional information 2024 vs. 2023 Our operating margin decreased 110 basis points compared to the prior year, driven by a decline in gross profit per new and used unit sold.
See the discussion under “Liquidity and Capital Resources” for additional information. 33 Operating Income Operating income as a percentage of revenue, or operating margin, was as follows: Year Ended December 31, 2025 2024 2023 Operating margin 4.2 % 4.3 % 5.5 % Operating margin adjusted for non-core charges (1) 4.3 4.4 5.5 (1) See “Non-GAAP Reconciliations” for additional information 2025 vs. 2024 Our operating margin decreased 10 basis points compared to the prior year, driven by a decline in gross profit per new and used unit sold.
Adjusted net cash paid for acquisitions, a non-GAAP measure, as well as certain other acquisition-related information is presented below: Year Ended December 31, ($ in millions) 2024 2023 2022 Number of stores acquired 146 56 31 Number of stores opened 1 — 1 Cash paid for acquisitions, net of cash acquired $ (1,248.5) $ (1,185.1) $ (1,243.6) Add: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory 105.5 109.2 116.5 Cash paid for acquisitions, net of cash acquired – adjusted $ (1,143.0) $ (1,075.9) $ (1,127.1) 39 We evaluate potential capital investments primarily based on targeted rates of return on assets and return on our net equity investment.
Adjusted net cash paid for acquisitions, a non-GAAP measure, as well as certain other acquisition-related information is presented below: Year Ended December 31, ($ in millions) 2025 2024 2023 Number of stores acquired 17 146 56 Number of stores opened 7 1 — Cash paid for acquisitions, net of cash acquired $ (886.4) $ (1,248.5) $ (1,185.1) Add: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory 135.4 105.5 109.2 Cash paid for acquisitions, net of cash acquired – adjusted $ (751.0) $ (1,143.0) $ (1,075.9) We evaluate potential capital investments primarily based on targeted rates of return on assets and return on our net equity investment.
Contract Obligations Refer to Note 9 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements for further information of our obligations and the timing of expected payments.
Contract Obligations Refer to Note 9 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements for further information of our obligations and the timing of expected payments. 41 Operating and Finance Leases Refer to Note 9 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements for further information of our obligations and the timing of expected payments.
(2) The amounts available on the credit facilities are limited based on borrowing base calculations and fluctuate monthly. (3) Available credit is based on the borrowing base amount effective as of November 30, 2024. This amount is reduced by $25.0 million for outstanding letters of credit.
(2) The amounts available on the credit facilities are limited based on borrowing base calculations and fluctuate monthly. (3) Available credit is based on the borrowing base amount effective as of November 30, 2025. This amount is reduced by $6.4 million for outstanding letters of credit.
Vehicle Operations, and U.S. and Canada Financing Operations. We have the option to qualitatively or quantitatively assess goodwill for impairment and, in 2024, we evaluated our goodwill using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired.
We have the option to qualitatively or quantitatively assess goodwill for impairment and, in 2025, we evaluated our goodwill using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired.
Income Tax Provision Our effective income tax rate was as follows: Year Ended December 31, 2024 2023 2022 Effective income tax rate 23.8 % 25.7 % 27.1 % Effective income tax rate excluding non-core items (1) 24.7 25.3 27.0 (1) See “Non-GAAP Reconciliations” for more details Our effective income tax rate was 23.8% for 2024 compared to 25.7% for 2023.
Income Tax Provision Our effective income tax rate was as follows: Year Ended December 31, 2025 2024 2023 Effective income tax rate 25.5 % 23.8 % 25.7 % Effective income tax rate excluding non-core items (1) 25.1 24.6 25.5 (1) See “Non-GAAP Reconciliations” for more details Our effective income tax rate was 25.5% for 2025 compared to 23.8% for 2024.
On a same store basis, used vehicle revenues decreased 8.0%, due to a 4.1% decrease in average selling price per retail unit and a 4.0% decrease in unit volume.
On a same store basis, used vehicle revenues decreased 9.0%, due to a decrease in retail unit sales of 4.1% and a decrease in average selling price per retail unit of 4.1%.
Below are highlights of significant activity related to our cash flows from investing activities: Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change 2022 Change Capital expenditures $ (351.4) $ (230.2) $ (121.2) $ (303.1) $ 72.9 Cash paid for acquisitions, net of cash acquired (1,248.5) (1,185.1) (63.4) (1,243.6) 58.5 Cash paid for other investments (354.7) (11.1) (343.6) (11.8) 0.7 Proceeds from sales of stores 85.7 142.9 (57.2) 212.1 (69.2) 38 Capital Expenditures Below is a summary of our capital expenditure activities: Many manufacturers provide assistance in the form of additional incentives or assistance if facilities meet manufacturer image standards and requirements.
Below are highlights of significant activity related to our cash flows from investing activities: Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change 2023 Change Capital expenditures $ (350.9) $ (351.4) $ 0.5 $ (230.2) $ (121.2) Cash paid for acquisitions, net of cash acquired (886.4) (1,248.5) 362.1 (1,185.1) (63.4) Cash paid for other investments (15.3) (354.7) 339.4 (11.1) (343.6) Proceeds from sales of stores 194.0 85.7 108.3 142.9 (57.2) Capital Expenditures Below is a summary of our capital expenditure activities: Many manufacturers provide assistance in the form of additional incentives or assistance if facilities meet manufacturer image standards and requirements.
The following table details the carrying costs for vehicle inventory and include vehicle floor plan interest net of floor plan assistance earned: Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change % 2022 Change % Floor plan interest expense $ 278.8 $ 150.9 $ 127.9 84.8 % $ 38.8 $ 112.1 288.9 % Floor plan assistance (included as an offset to cost of sales) (170.3) (160.8) (9.5) (5.9) (130.1) (30.7) (23.6) Net vehicle carrying costs (benefit) $ 108.5 $ (9.9) $ 118.4 1,196.0 % $ (91.3) $ 81.4 89.2 % Depreciation and Amortization Depreciation and amortization is comprised of depreciation expense related to buildings, significant remodels or improvements, furniture, tools, equipment and signage and amortization related to non-compete agreements.
The following table details the carrying costs for vehicle inventory and include vehicle floor plan interest net of floor plan assistance earned: Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change % 2023 Change % Floor plan interest expense $ 228.2 $ 278.8 $ (50.6) (18.1) % $ 150.9 $ 127.9 84.8 % Floor plan assistance (included as an offset to cost of sales) (168.5) (170.3) 1.8 1.1 (160.8) (9.5) (5.9) Net vehicle carrying costs (benefit) $ 59.7 $ 108.5 $ (48.8) (45.0) % $ (9.9) $ 118.4 1,196.0 % Depreciation and Amortization Depreciation and amortization is comprised of depreciation expense related to buildings, significant remodels or improvements, furniture, tools, equipment and signage and amortization related to non-compete agreements.
We use these measures in conjunction with GAAP financial measures to assess our business, including our compliance with covenants in our credit facilities and in communications with our Board concerning financial performance.
We use these measures in conjunction with GAAP financial measures to assess our business, including our compliance with covenants in our credit facilities and in communications with our Board concerning financial performance. These measures should not be considered an alternative to GAAP measures.
We review our estimates, judgments, and assumptions periodically and reflect the effects of revisions in the period that they are deemed to be necessary. We believe that these estimates are reasonable.
We review our estimates, judgments, and assumptions periodically and reflect the effects of revisions in the period that they are deemed to be necessary. We believe that these estimates are reasonable. However, actual results could differ materially from these estimates.
As of February 24, 2025, we offered 52 brands of new vehicles and all brands of used vehicles in 460 stores in the United States, the United Kingdom, and Canada and online at nearly 400 websites. We offer a wide range of products and services including new and used vehicles, F&I products, and vehicle repair and maintenance aftersales.
As of February 25, 2026, we offered 54 brands of new vehicles and all brands of used vehicles in 458 stores in the United States, the United Kingdom, and Canada and online at over 400 websites. We offer a wide range of products and services including new and used vehicles, F&I products, and vehicle repair and maintenance aftersales.
As of December 31, 2024, we had $2.6 billion of franchise value on our balance sheet. No individual entity accounted for more than 3% of our total franchise value as of December 31, 2024. The annual franchise value impairment analysis, which we perform as of October 1 each year, resulted in no indications of impairment in 2024, 2023, or 2022.
As of December 31, 2025, we had $2.8 billion of franchise value on our balance sheet. No individual entity accounted for more than 2% of our total franchise value as of December 31, 2025. The annual franchise value impairment analysis, which we perform as of October 1 each year, resulted in indications of impairment at an individual entity.
On a same store basis and excluding non-core charges, adjusted SG&A as a percentage of gross profit increased across all categories to 66.0% from 62.2% in the prior year. 2023 vs. 2022 SG&A increased 8.2%, or $250.7 million, primarily due to increased personnel costs and other costs which resulted from our growth through acquisitions.
On a same store basis and excluding non-core charges, adjusted SG&A as a percentage of gross profit increased across all categories to 68.1% from 66.3% in the prior year. 2024 vs. 2023 SG&A increased 14.0%, or $460.4 million, primarily due to increased personnel costs and other costs which resulted from our growth through acquisitions.
DFC Portfolio Information (1) Year Ended December 31, ($ in millions) 2024 2023 2022 Loan origination information Net loans originated $ 2,073.3 $ 2,118.5 $ 1,933.9 Vehicle units financed 70,647 70,154 59,604 Total penetration rate (2) 11.6 % 11.0 % 10.2 % Weighted average contract rate 9.8 % 9.6 % 7.7 % Weighted average credit score (3) 738 732 718 Weighted average FE LTV (4) 95.4 % 95.5 % 99.4 % Weighted average term (in months) 73 73 73 Loan performance information Allowance for credit losses as a percentage of ending managed receivables 3.2 % 3.2 % 3.1 % Net credit losses on managed receivables 88.0 62.0 42.9 Net credit losses as a percentage of total average managed receivables 2.5 % 2.3 % 3.0 % Past due accounts as a percentage of ending managed receivables (5) 4.8 % 4.6 % 5.4 % Average recovery rate (6) 44.3 % 49.6 % 59.3 % (1) Excludes Canadian and U.K. portfolios (2) Units financed as a percentage of total U.S. new and used vehicle retail units sold.
DFC Portfolio Information (1) Year Ended December 31, ($ in millions) 2025 2024 2023 Loan origination information Net loans originated $ 2,804.1 $ 2,073.3 $ 2,118.5 Vehicle units financed 90,977 70,647 70,154 Total penetration rate (2) 14.5 % 11.6 % 11.0 % Weighted average contract rate 8.6 % 9.8 % 9.6 % Weighted average credit score (3) 747 738 732 Weighted average FE LTV (4) 94.7 % 95.4 % 95.5 % Weighted average term (in months) 72 73 73 Loan performance information Allowance for credit losses as a percentage of ending managed receivables 3.0 % 3.2 % 3.2 % Net credit losses on managed receivables 74.8 88.0 62.0 Net credit losses as a percentage of total average managed receivables 1.8 % 2.5 % 2.3 % Past due accounts as a percentage of ending managed receivables (5) 4.2 % 4.8 % 4.6 % Average recovery rate (6) 45.8 % 44.3 % 49.6 % (1) Excludes Canadian and U.K. portfolios.
See Note 19 – Segments for additional information on Financing Operations income and Note 5 – Finance Receivables of Notes to Consolidated Financial Statements for information on finance receivables, including credit quality. 30 Selected Financing Operations Financial Information Year Ended December 31, ($ in millions) 2024 % (1) 2023 % (1) 2022 % (1) Interest and fee income $ 347.8 9.5 $ 249.4 8.9 $ 116.3 7.5 Interest expense (195.1) (5.3) (170.5) (6.1) (52.2) (3.4) Total interest margin 152.7 4.2 78.9 2.8 64.1 4.2 Lease income 74.6 19.1 17.8 Lease costs (60.3) (8.4) (9.5) Lease income, net 14.3 10.7 8.3 Provision expense (106.7) (2.9) (98.8) (3.5) (44.4) (2.9) Other financing operations expenses (44.9) (36.7) (32.0) Financing operations (loss) income $ 15.4 $ (45.9) $ (4.0) Total average managed finance receivables $ 3,659.9 $ 2,802.8 $ 1,542.6 (1) Percent of total average managed finance receivables.
See Note 19 – Segments of Notes to Consolidated Financial Statements for additional information on Financing Operations income and Note 5 – Finance Receivables of Notes to Consolidated Financial Statements for information on finance receivables, including credit quality. 30 Selected Financing Operations Financial Information Year Ended December 31, ($ in millions) 2025 % (1) 2024 % (1) 2023 % (1) Interest and fee income $ 407.4 9.2 % $ 340.8 9.3 % $ 249.4 8.9 % Interest expense (202.1) (4.6) (195.1) (5.3) (170.5) (6.1) Total interest margin 205.3 4.6 145.7 4.0 78.9 2.8 Lease income 91.6 74.6 19.1 Lease costs (73.5) (60.3) (8.4) Lease income, net 18.1 14.3 10.7 Provision expense (97.3) (2.2) (106.7) (2.9) (98.8) (3.5) Other financing operations expenses (51.5) (44.9) (36.7) Financing operations income (loss) $ 74.6 $ 8.4 $ (45.9) Total average managed finance receivables $ 4,421.9 $ 3,659.9 $ 2,802.8 (1) Percent of total average managed finance receivables.
Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change % 2022 Change % Depreciation and amortization $ 245.6 $ 195.8 $ 49.8 25.4 % $ 163.2 $ 32.6 20.0 % Acquisition activity contributed to the increases in depreciation and amortization in 2024 compared to 2023 and in 2023 compared to 2022.
Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change % 2023 Change % Depreciation and amortization $ 262.4 $ 245.6 $ 16.8 6.8 % $ 195.8 $ 49.8 25.4 % Acquisition activity contributed to the increases in depreciation and amortization in 2025 compared to 2024 and in 2024 compared to 2023.
To better understand the impact of these items, adjusted net cash provided by operating activities, a non-GAAP measure, is presented below: Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change 2022 Change Net cash provided by (used in) operating activities – as reported $ 425.1 (472.4) $ 897.5 $ (610.1) $ 137.7 Add: Net borrowings on floor plan notes payable: non-trade 304.8 878.7 (573.9) 737.9 140.8 Less: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory (105.5) (109.2) 3.7 (116.5) 7.3 Adjust: Financing receivables activity 629.4 1,052.0 (422.6) 1,372.5 (320.5) Net cash provided by operating activities – adjusted $ 1,253.8 $ 1,349.1 $ (95.3) $ 1,383.8 $ (34.7) Inventories are one of the most significant components of our cash flow from operations.
To better understand the impact of these items, adjusted net cash provided by operating activities, a non-GAAP measure, is presented below: Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change 2023 Change Net cash provided by (used in) operating activities – as reported $ 356.7 $ 425.1 $ (68.4) $ (472.4) $ 897.5 Add: Net borrowings on floor plan notes payable: non-trade 191.7 304.8 (113.1) 878.7 (573.9) Less: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory (135.4) (105.5) (29.9) (109.2) 3.7 Adjust: Financing receivables activity 878.3 622.4 255.9 1,052.0 (429.6) Net cash provided by operating activities – adjusted $ 1,291.3 $ 1,246.8 $ 44.5 $ 1,349.1 $ (102.3) Inventories are one of the most significant components of our cash flow from operations.
However, actual results could differ materially from these estimates. 41 Goodwill and Franchise Value We are required to test our goodwill and franchise value for impairment at least annually on October 1, or more frequently if conditions indicate that an impairment may have occurred. Our reporting units for goodwill impairment testing are North America Vehicle Operations, U.K.
Goodwill and Franchise Value We are required to test our goodwill and franchise value for impairment at least annually on October 1, or more frequently if conditions indicate that an impairment may have occurred. Our reporting units for goodwill impairment testing are North America Vehicle Operations, U.K. Vehicle Operations, and U.S. and Canada Financing Operations.
SG&A adjusted for non-core charges was as follows: Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change % 2022 Change % Personnel $ 2,394.3 $ 2,163.1 $ 231.2 10.7 % $ 2,086.3 $ 76.8 3.7 % Rent and facility costs 371.1 273.1 98.0 35.9 222.9 50.2 22.5 Advertising 250.7 248.2 2.5 1.0 253.6 (5.4) (2.1) Adjusted other (1) 731.2 594.7 136.5 23.0 527.4 67.3 12.8 Total adjusted SG&A (1) $ 3,747.3 $ 3,279.1 $ 468.2 14.3 % $ 3,090.2 $ 188.9 6.1 % 32 Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 As a % of gross profit 2024 2023 Change 2022 Change Personnel 43.1 % 41.4 % 170 bps 40.5 % 90 bps Rent and facility costs 6.7 5.2 150 4.3 90 Advertising 4.5 4.7 (20) 4.9 (20) Adjusted other (1) 13.1 11.4 170 10.3 110 Total adjusted SG&A (1) 67.4 % 62.7 % 470 bps 60.0 % 270 bps (1) See “Non-GAAP Reconciliations” for more details.
SG&A adjusted for non-core charges was as follows: Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change % 2023 Change % Personnel $ 2,480.2 $ 2,394.3 $ 85.9 3.6 % $ 2,163.1 $ 231.2 10.7 % Rent and facility costs 407.6 371.1 36.5 9.8 273.1 98.0 35.9 Advertising 257.0 250.7 6.3 2.5 248.2 2.5 1.0 Adjusted other (1) 796.5 731.2 65.3 8.9 594.7 136.5 23.0 Total adjusted SG&A (1) $ 3,941.3 $ 3,747.3 $ 194.0 5.2 % $ 3,279.1 $ 468.2 14.3 % 32 Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 As a % of gross profit 2025 2024 Change 2023 Change Personnel 43.3 % 43.1 % 20 bps 41.4 % 170 bps Rent and facility costs 7.1 6.7 40 5.2 150 Advertising 4.5 4.5 — 4.7 (20) Adjusted other (1) 13.8 13.1 70 11.4 170 Total adjusted SG&A (1) 68.7 % 67.4 % 130 bps 62.7 % 470 bps (1) See “Non-GAAP Reconciliations” for more details.
Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change % 2022 Change % Personnel $ 2,394.3 $ 2,163.1 $ 231.2 10.7 % $ 2,086.3 $ 76.8 3.7 % Rent and facility costs 371.1 273.2 97.9 35.8 222.9 50.3 22.6 Advertising 250.7 248.2 2.5 1.0 253.6 (5.4) (2.1) Other 739.1 610.3 128.8 21.1 481.3 129.0 26.8 Total SG&A $ 3,755.2 $ 3,294.8 $ 460.4 14.0 % $ 3,044.1 $ 250.7 8.2 % Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 As a % of gross profit 2024 2023 Change 2022 Change Personnel 43.1 % 41.4 % 170 bps 40.5 % 90 bps Rent and facility costs 6.7 5.2 150 4.3 90 Advertising 4.5 4.7 (20) 4.9 (20) Other 13.2 11.7 150 9.4 230 Total SG&A 67.5 % 63.0 % 450 bps 59.1 % 390 bps 2024 vs. 2023 SG&A increased 14.0%, or $460.4 million, primarily due to increased personnel and other costs resulting from our growth through acquisitions.
Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change % 2023 Change % Personnel $ 2,480.2 $ 2,394.3 $ 85.9 3.6 % $ 2,163.1 $ 231.2 10.7 % Rent and facility costs 407.6 371.1 36.5 9.8 273.2 97.9 35.8 Advertising 257.0 250.7 6.3 2.5 248.2 2.5 1.0 Other 799.9 739.1 60.8 8.2 610.3 128.8 21.1 Total SG&A $ 3,944.7 $ 3,755.2 $ 189.5 5.0 % $ 3,294.8 $ 460.4 14.0 % Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 As a % of gross profit 2025 2024 Change 2023 Change Personnel 43.3 % 43.1 % 20 bps 41.4 % 170 bps Rent and facility costs 7.1 6.7 40 5.2 150 Advertising 4.5 4.5 — 4.7 (20) Other 13.9 13.2 70 11.7 150 Total SG&A 68.8 % 67.5 % 130 bps 63.0 % 450 bps 2025 vs. 2024 SG&A increased 5.0%, or $189.5 million, primarily due to increased personnel and other costs resulting from our growth through acquisitions.
See also Note 10 – Credit Facilities and Long-Term Debt of Notes to Consolidated Financial Statements for additional information. 2023 vs. 2022 The increase in other interest expense was due to higher interest rates and increased borrowings on our credit facilities.
See 34 also Note 10 – Credit Facilities and Long-Term Debt of Notes to Consolidated Financial Statements for additional information. 2024 vs. 2023 The increase in other interest expense was due to higher interest rates and increased borrowings on our credit facilities. Other Income, Net Other income, net primarily includes other income associated with investment income and other non-recurring transactions.
We acquired approximately $409.5 million and $260.5 million of depreciable property as part of our 2024 and 2023 acquisitions, respectively. Capital expenditures totaled $351.4 million and $230.2 million, respectively, in 2024 and 2023. These investments increase the amount of depreciable assets.
We acquired approximately $121.8 million and $409.5 million of depreciable property as part of our 2025 and 2024 acquisitions, respectively. Capital expenditures totaled $350.9 million and $351.4 million, respectively, in 2025 and 2024. These investments increased the amount of depreciable assets.
Same store new vehicle revenue was primarily impacted by a 2.3% increase in unit sales, offset by a decrease in average selling prices of 0.5%. New vehicle gross profit declined 11.8%, primarily due to a 25.1% decrease in average gross profit per unit, partially offset by a 17.8% increase in unit sales driven by acquisitions.
Same store new vehicle revenue was primarily impacted by an increase in average selling prices of 2.0%, offset by a decrease in unit sales of 1.2%. New vehicle gross profit decreased 9.0%, due to a decrease in average gross profit per unit of 8.2% and a decrease in unit sales of 0.9%.
Our free cash flow deployment strategy targets an allocation of 35% to 45% investment in acquisitions, 25% investment in capital expenditures, innovation, and diversification, and 30% to 40% in shareholder return in the form of dividends and share repurchases.
Our free cash flow deployment strategy targets an allocation of 25% to 35% investment in acquisitions, 25% investment in capital expenditures, innovation, 37 and diversification, and 40% to 50% in shareholder return in the form of dividends and share repurchases based on current valuation trends in acquisitions relative to stock price performance.
Financing Activities Adjusted net cash provided by financing activities, a non-GAAP measure, which is adjusted for borrowings and repayments on floor plan facilities: non-trade and borrowings and repayments associated with our Financing Operations segment was as follows: Year Ended December 31, ($ in millions) 2024 2023 2022 Cash provided by financing activities, as reported $ 907.6 2,409.8 $ 2,035.9 Less: Net borrowings on floor plan notes payable: non-trade (304.8) (878.7) (737.9) Less: Net borrowings on non-recourse notes payable (403.7) (1,283.4) (104.6) Cash provided by financing activities, as adjusted $ 199.1 $ 247.7 $ 1,193.4 Below are highlights of significant activity related to our cash flows from financing activities, excluding borrowings and repayments on floor plan notes payable: non-trade and non-recourse notes payable, which are discussed above: Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change 2022 Change Net borrowings on lines of credit $ 346.8 $ 324.3 $ 22.5 $ 2,023.8 $ (1,699.5) Principal payments on long-term debt and finance lease liabilities, scheduled (64.9) (35.2) (29.7) (51.2) 16.0 Principal payments on long-term debt and finance lease liabilities, other (74.3) (10.6) (63.7) (171.7) 161.1 Proceeds from the issuance of long-term debt 408.2 79.8 328.4 113.3 (33.5) Proceeds from the issuance of common stock 27.3 29.7 (2.4) 36.1 (6.4) Payment of debt issuance costs (10.7) (16.7) 6.0 (11.8) (4.9) Repurchases of common stock (365.9) (48.9) (317.0) (688.3) 639.4 Dividends paid (56.5) (52.8) (3.7) (45.2) (7.6) Other financing activity 0.8 (7.9) 8.7 (4.4) (3.5) Borrowing and Repayment Activity During 2024, we raised net proceeds of $408.2 million through the issuance of debt, and had net borrowings of $346.8 million on our lines of credit.
Financing Activities Adjusted net cash provided by financing activities, a non-GAAP measure, which is adjusted for borrowings and repayments on floor plan facilities: non-trade and borrowings and repayments associated with our Financing Operations segment was as follows: Year Ended December 31, ($ in millions) 2025 2024 2023 Cash provided by financing activities, as reported $ 612.1 907.6 $ 2,409.8 Less: Net borrowings on floor plan notes payable: non-trade (191.7) (304.8) (878.7) Less: Net borrowings on non-recourse notes payable (364.5) (403.7) (1,283.4) Cash provided by financing activities, as adjusted $ 55.9 $ 199.1 $ 247.7 Below are highlights of significant activity related to our cash flows from financing activities, excluding borrowings and repayments on floor plan notes payable: non-trade and non-recourse notes payable, which are discussed above: Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change 2023 Change Net borrowings on lines of credit $ 408.6 $ 346.8 $ 61.8 $ 324.3 $ 22.5 Proceeds from the issuance of long-term debt 786.8 408.2 378.6 79.8 328.4 Repurchases of common stock (960.9) (365.9) (595.0) (48.9) (317.0) Borrowing and Repayment Activity During 2025, we raised net proceeds of $786.8 million through the issuance of debt, and had net borrowings of $408.6 million on our lines of credit.
Other expenses in 2024 included acquisition expenses of $10.0 million and $6.1 million of storm related insurance charges. We also recognized a gain on the disposal of stores of $8.2 million.
Other expenses in 2025 included acquisition expenses of $17.0 million and $6.7 million of storm related insurance charges. We also recognized a net gain on the disposal of stores of $20.3 million.
See Note 1 – Summary of Significant Accounting Policies and Note 6 – Goodwill and Franchise Value of Notes to Consolidated Financial Statements included in Part II, Item 8. Financial Statements and Supplementary Financial Data of this Annual Report.
No impairment charges were recorded in 2024 or 2023. See Note 1 – Summary of Significant Accounting Policies, Note 4 – Property and Equipment, Note 6 – Goodwill and Franchise Value, and Note 15 – Fair Value Measurements of Notes to Consolidated Financial Statements included in Part II, Item 8. Financial Statements and Supplementary Financial Data of this Annual Report.
On a same store basis, new and used vehicle retail gross profits experienced declines primarily driven by decreases in gross profit per unit as margins normalize to pre-pandemic levels. Net income decline was primarily driven by this margin normalization, increased interest expense, and increased SG&A as a percentage of gross profit.
On a same store basis, new and used vehicle retail gross profit declined due to lower gross profit per unit as margins continued to normalize toward pre-pandemic levels. The decline in net income was driven by this margin normalization, higher SG&A as a percentage of gross profit, and a higher effective income tax rate, partially offset by lower interest expense.
(3) The credit scores represent FICO scores and reflect only receivables with obligors that have a FICO score at the time of application. For receivables with co-borrowers, the FICO score is the primary borrower’s.
(2) Units financed as a percentage of total U.S. new and used vehicle retail units sold. (3) The credit scores represent FICO scores and reflect only receivables with obligors that have a FICO score at the time of application. For receivables with co-borrowers, the FICO score is the primary borrower’s.
We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures.
As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures.
Available Sources Below is a summary of our immediately available funds: As of December 31, ($ in millions) 2024 2023 Change % Change Cash and cash equivalents $ 225.1 $ 825.0 $ (599.9) (72.7) % Marketable securities 53.4 — 53.4 NM Available credit on the credit facilities 1,075.3 870.4 204.9 23.5 % Total current available funds $ 1,353.8 $ 1,695.4 $ (341.6) (20.1) % Information about our cash flows, by category, is presented in our Consolidated Statements of Cash Flows.
Available Sources Below is a summary of our immediately available funds: As of December 31, ($ in millions) 2025 2024 Change % Change Cash and cash equivalents $ 109.2 $ 225.1 $ (115.9) (51.5) % Marketable securities 56.4 53.4 3.0 5.6 % Available credit on the credit facilities 1,359.2 1,075.3 283.9 26.4 % Total current available funds $ 1,524.8 $ 1,353.8 $ 171.0 12.6 % Information about our cash flows, by category, is presented in our Consolidated Statements of Cash Flows.
The following accounting policies involve critical accounting estimates because they are particularly dependent on assumptions made by management. While we have made our best estimates based on facts and circumstances available to us at the time, different estimates could have been used in the current period.
While we have made our best estimates based on facts and circumstances available to us at the time, different estimates could have been used in the current period.
GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and reported amounts of revenues and expenses at the date of the financial statements. Certain accounting policies require us to make difficult and subjective judgments on matters that are inherently uncertain.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and reported amounts of revenues and expenses at the date of the financial statements.
Furthermore, if a manufacturer becomes insolvent, we may be required to record a partial or total impairment on the franchise value and/or goodwill related to that manufacturer. No individual manufacturer accounted for more than 20% of our total franchise value as of December 31, 2024.
Furthermore, if a manufacturer becomes insolvent, we may be required to record a partial or total impairment on the franchise value and/or goodwill related to that manufacturer.
Same store new vehicle revenue was primarily impacted by a 3.4% increase in unit sales, complemented by an increase in average selling prices of 2.0%. New vehicle gross profit declined 11.7%, primarily due to a 23.7% decrease in average gross profit per unit, partially offset by a 15.7% increase in unit sales driven by acquisitions.
Same store new vehicle revenue was primarily impacted by a 1.4% increase in unit sales, offset by a decrease in average selling prices of 0.1%. New vehicle gross profit decreased 10.0%, primarily due to a decrease in average gross profit per unit of 26.5%, partially offset by an increase in unit sales of 22.4%.
On a same store basis, gross profit per new vehicle decreased 26.4%, continuing to normalize to pre-pandemic levels. 2023 vs. 2022 New vehicle revenue grew 17.5%, resulting from a 15.7% increase in unit sales due to acquisitions, complemented by a 1.6% increase in average selling prices.
On a same store basis, gross profit per new vehicle decreased 8.5%, continuing to normalize to pre-pandemic levels. 2024 vs. 2023 New vehicle revenue increased 17.4%, resulting from an increase in unit sales of 22.4%, offset by a decrease in average selling prices of 2.8%.
Our used vehicle operations provide an opportunity to generate sales to customers unable or unwilling to purchase a new vehicle, sell brands other than the store’s new vehicle franchise(s), access additional used vehicle inventory through trade-ins, and increase sales from F&I products and aftersales. 28 2024 vs. 2023 Used vehicle revenues increased 17.7%, due to increased volume from acquisitions, offset by decreased volume at our seasoned stores.
Our used vehicle operations provide an opportunity to generate sales to customers unable or unwilling to purchase a new vehicle, sell brands other than the store’s new vehicle franchise(s), access additional used vehicle inventory through trade-ins, and increase sales from F&I products and aftersales. 28 2025 vs. 2024 Used vehicle revenues increased 5.9%, resulting from an increase in retail unit sales of 3.3% and an increase in average selling price per retail unit of 2.8%.
The interest rates on these floor plan notes payable commitments vary by lender and are variable rates. 2024 vs. 2023 Floor plan interest expense increased $127.9 million, primarily due to higher interest rates and increases in vehicle inventory levels from acquisitions.
The interest rates on these floor plan notes payable commitments vary by lender and are variable rates. 2025 vs. 2024 Floor plan interest expense decreased $50.6 million, primarily due to lower interest rates and decreases in average vehicle inventory levels throughout the year.
The following table summarizes our cash flows: Year Ended December 31, ($ in millions) 2024 2023 2022 Net cash provided by (used in) operating activities $ 425.1 $ (472.4) $ (610.1) Net cash used in investing activities (1,854.4) (1,270.3) (1,329.8) Net cash provided by financing activities 907.6 2,409.8 2,035.9 Operating Activities Cash provided by operating activities increased $897.5 million in 2024 compared to 2023, primarily as a result of maturation of our financing receivables portfolio and a decrease in inventory levels at our seasoned stores, partially offset by net changes in floor plan notes payable and reduced net income.
The following table summarizes our cash flows: Year Ended December 31, ($ in millions) 2025 2024 2023 Net cash provided by (used in) operating activities $ 356.7 $ 425.1 $ (472.4) Net cash used in investing activities (1,027.9) (1,854.4) (1,270.3) Net cash provided by financing activities 612.1 907.6 2,409.8 Operating Activities Cash provided by operating activities decreased $68.4 million in 2025 compared to 2024, primarily as a result of changes in floor plan notes payable, finance receivables, and other assets, partially offset by changes in inventories, trade receivables, and other long-term liabilities and deferred revenue.
Our effective income tax rate was positively affected by an increase in general business credits and a reduction in valuation allowance.
Our effective income tax rate was negatively affected by a decrease in general business credits and tax basis differences on divested assets, offset by a reduction in valuation allowance.
As of December 31, 2024, our new vehicle days’ supply was 59 days, or nine days higher than our days’ supply as of December 31, 2023. Our days’ supply of used vehicles was 53 days, which was eleven days higher than our days’ supply as of December 31, 2023.
As of December 31, 2025, our new vehicle days’ supply was 54 days, or five days lower than our days’ supply as of December 31, 2024. Our days’ supply of used vehicles was 48 days, which was five days lower than our days’ supply as of December 31, 2024.
Our aftersales operations are an integral part of our customer retention and the largest contributor to our overall profitability. Earnings from aftersales have historically been more resilient during economic downturns, when owners have tended to repair their existing vehicles rather than buy new vehicles.
Earnings from aftersales have historically been more resilient during economic downturns, when owners have tended to repair their existing vehicles rather than buy new vehicles.
On a same store basis, F&I revenue decreased 4.6%, to $2,011 per unit. This decrease was driven by a decline in service contract penetration rates and lower finance reserve paid per unit from third-party lenders as a result of the higher interest rate environment. 2023 vs. 2022 F&I revenue increased 4.0%, primarily due to increased volume related to acquisitions.
This increase was driven by higher finance reserve paid per unit from third-party lenders. 2024 vs. 2023 F&I revenue increased 6.0%, primarily due to increased unit sales related to acquisitions. On a same store basis, F&I revenue decreased 4.6%, to $2,017 per unit.
Adjusting for non-deductible acquisition costs and the benefit of transferable federal tax credits during 2024, our effective income tax rate excluding non-core items is 24.7%, a decrease of 60 basis points compared to the effective income tax rate excluding non-core items for 2023.
Adjusting for non-deductible acquisition costs, tax basis differences on divested assets, and the benefit of transferable federal tax credits during 2025, our effective income tax rate excluding non-core items was 25.1%, an increase of 50 basis points compared to the effective income tax rate excluding non-core items for 2024.
These product offerings add diversity to the business model and provide an opportunity to capture additional profits, cash flows, and sales while managing our reliance on third-party finance sources. Management regularly analyzes Financing Operations’ results by assessing profitability, the performance of the finance receivables, including trends in credit losses and delinquencies, and expenses directly related to Financing Operations.
In the United Kingdom, Financing Operations is related to our fleet funding and management division. These product offerings add diversity to the business model and provide an opportunity to capture additional profits, cash flows, and sales while managing our reliance on third-party finance sources.
(4) Front-end loan-to-value represents the ratio of the amount financed to the total collateral value, which is measured as the vehicle selling price plus applicable taxes, title and fees.
(4) Front-end loan-to-value represents the ratio of the amount financed to the total collateral value, which is measured as the vehicle selling price plus applicable taxes, title and fees. (5) Past due is defined as loans that have been on the books greater than or equal to 3 months and are 30 or more days delinquent.
Floor plan interest expense increased 41.5% due to higher interest rates, 38.9% due to acquisition volume, and 4.4% due to increases in inventory at existing locations. 2023 vs. 2022 Floor plan interest expense increased $112.1 million, primarily due to higher interest rates, increases in vehicle inventory levels from acquisitions as well as existing locations recovering from prior year inventory shortages.
Floor plan interest expense decreased 16.8% due to lower interest rates and 1.3% due to decreases in inventory at our stores. 2024 vs. 2023 Floor plan interest expense increased $127.9 million, primarily due to higher interest rates and increases in vehicle inventory levels from acquisitions as well as at existing locations.
The same store revenue decrease was driven by a decrease in our CPO vehicle category of 10.0% and a decrease in our core vehicles of 8.3%, partially offset by an increase in our value autos of 1.4%. The decrease in our CPO vehicle category includes an 8.0% decrease in volume and a 2.2% decrease in average selling price per vehicle.
The increase in our CPO vehicle category includes an increase in unit sales of 6.7% and an increase in average selling price per vehicle of 3.2%. The increase in our value auto category includes an increase in unit sales of 29.2%, partially offset by a decrease in average selling price per vehicle of 3.0%.
The decrease in our core vehicle category includes a 5.8% decrease in volume and a 2.7% decrease in average selling price per vehicle. Used vehicle gross profits increased 1.0%, due to an increase in unit volume of 26.4%, offset by a 20.1% decrease in average gross profit per unit.
Used vehicle gross profits increased 2.7%, due to an increase in retail unit sales of 26.4%, offset by a decrease in average gross profit per retail unit of 20.1%. On a same store basis, used vehicle gross profit decreased 10.0%, led by a decrease in average gross profit per retail unit of 6.2%.
Financing Operations In the United States, Financing Operations is a captive lender, originating loans only from our stores and Driveway. In Canada, Financing Operations originates loans and leases from both our Canadian stores and third-party dealerships. In the United Kingdom, Financing Operations is related to our fleet funding and management division.
On a same store basis, aftersales revenue and gross profit increased 2.7% and 4.5%, respectively. Financing Operations In the United States, Financing Operations is a captive lender, originating loans only from our stores and Driveway. In Canada, Financing Operations originates loans and leases from both our Canadian stores and third-party dealerships.
We focus on retaining customers by offering competitively-priced routine maintenance and through our marketing efforts. 2024 vs. 2023 Our aftersales revenue growth was driven by increases in warranty and customer pay service work, primarily due to our strategic acquisition growth.
We focus on retaining customers by offering competitively-priced routine maintenance and through our marketing efforts. 29 2025 vs. 2024 Aftersales revenue increased 7.0%, primarily driven by increases in customer pay and warranty service work. On a same store basis, aftersales revenue increased 6.3%, primarily driven by an increase in warranty revenue of 13.9% and customer pay of 7.1%.
Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change % 2022 Change % Senior notes interest $ 76.1 $ 76.1 $ — — % $ 76.1 $ 0.0 — % Mortgage interest 50.8 35.8 15.0 41.9 25.9 9.9 38.2 Other interest 136.3 91.9 44.4 48.3 29.7 62.2 209.4 Capitalized interest (5.4) (2.6) (2.8) (107.7) (2.6) — — Total other interest expense $ 257.8 $ 201.2 $ 56.6 28.1 % $ 129.1 $ 72.1 55.8 % 2024 vs. 2023 The increase in other interest expense was due to higher interest rates and increased borrowings on our credit facilities.
Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change % 2023 Change % Senior notes $ 86.7 $ 76.1 $ 10.6 13.9 % $ 76.1 $ 0.0 — % Mortgages 60.6 50.8 9.8 19.3 35.8 15.0 41.9 Credit facilities and other 136.7 136.3 0.4 0.3 91.9 44.4 48.3 Capitalized interest (8.5) (5.4) (3.1) (57.4) (2.6) (2.8) (107.7) Total other interest expense $ 275.5 $ 257.8 $ 17.7 6.9 % $ 201.2 $ 56.6 28.1 % 2025 vs. 2024 The increase in other interest expense was due to the issuance of $600 million in aggregate principal amount of 5.500% senior notes due 2030 issued in September 2025, as well as new mortgages on owned real estate.
On a same store basis and excluding non-core charges, adjusted SG&A as a percentage of gross profit increased across all categories to 61.9% from 59.5% in the prior year. We also recognized a gain on the disposal of stores of $31.2 million.
Other expenses in 2024 included acquisition expenses of $10.0 million, and $6.1 million of storm related insurance charges, offset by a net gain on the disposal of stores of $8.2 million. On a same store basis and excluding non-core charges, adjusted SG&A as a percentage of gross profit increased across all categories to 66.1% from 62.3% in the prior year.
Financial Performance We experienced growth of revenue in all major business lines in 2024 compared to 2023, primarily driven by increases in volume related to acquisitions, complemented by organic growth in new vehicles, and aftersales. Acquisition volume contributed to growth of our total company gross profit, offset by a decrease in new vehicle gross profit.
Financial Performance We experienced revenue growth across all major business lines in 2025 compared to 2024, driven by same store growth and complemented by acquisitions. Improvements in same store aftersales and third-party finance and insurance gross profit contributed to total company gross profit growth, partially offset by decreases in new and used vehicle gross profit.
During 2024, we paid dividends on our common stock as follows: Dividend paid: Dividend amount per share Total amount of dividends paid ($ in millions) March 2024 $ 0.50 $ 13.8 May 2024 0.53 14.4 August 2024 0.53 14.2 November 2024 0.53 14.1 We evaluate performance and make a recommendation to the Board on dividend payments on a quarterly basis. 40 Summary of Outstanding Balances on Credit Facilities and Long-Term Debt Below is a summary of our outstanding balances on credit facilities and long-term debt: ($ in millions) Outstanding as of December 31, 2024 Remaining Available as of December 31, 2024 Floor plan notes payable: non-trade $ 2,848.0 $ — (1) Floor plan notes payable 2,055.1 — Used and service loaner vehicle inventory financing commitments 975.3 23.3 (2) Revolving lines of credit 1,633.2 1,034.6 (2),(3) Warehouse facilities 834.0 17.4 (2) Non-recourse notes payable 2,109.3 — 4.625% Senior notes due 2027 400.0 — 4.375% Senior notes due 2031 550.0 — 3.875% Senior notes due 2029 800.0 — Real estate mortgages, finance lease obligations, and other debt 1,085.9 — Unamortized debt issuance costs (25.1) — (4) Total debt $ 13,265.7 $ 1,075.3 (1) As of December 31, 2024, we had a $2.8 billion new vehicle floor plan commitment as part of our USB credit facility, and a $1.1 billion CAD wholesale floorplan commitment as part of our BNS credit facility.
Summary of Outstanding Balances on Credit Facilities and Long-Term Debt Below is a summary of our outstanding balances on credit facilities and long-term debt: ($ in millions) Outstanding of December 31, 2025 Remaining available as of December 31, 2025 Floor plan notes payable: non-trade $ 3,016.3 $ — (1) Floor plan notes payable 1,992.6 — Used and service loaner vehicle inventory financing commitments 1,043.0 15.4 (2) Revolving lines of credit 1,570.8 1,316.7 (2),(3) Warehouse facilities 1,251.0 27.1 (2) Non-recourse notes payable 2,473.9 — 4.625% Senior notes due 2027 400.0 — 3.875% Senior notes due 2029 800.0 — 5.500% Senior notes due 2030 600.0 4.375% Senior notes due 2031 550.0 — Real estate mortgages, finance lease obligations, and other debt 1,152.1 — Unamortized debt issuance costs (27.8) — (4) Total debt $ 14,821.9 $ 1,359.2 Less: Inventory related debt (6,051.9) Less: Financing operations related debt (3,724.9) Less: Unrestricted cash and cash equivalents (109.2) Less: Marketable securities (56.4) Less: Availability on used and service loaner financing facilities (15.4) Net debt (5) $ 4,864.1 (1) As of December 31, 2025, we had a $3.0 billion new vehicle floor plan commitment as part of our USB credit facility, and a $1.1 billion CAD wholesale floorplan commitment as part of our BNS credit facility.
We also offer related products such as extended warranties, insurance contracts, and vehicle and theft protection. Third-party extended warranty and insurance contracts yield higher profit margins than vehicle sales and contribute significantly to our profitability. 2024 vs. 2023 F&I revenue increased 6.0%, primarily due to increased volume related to acquisitions.
Third-party extended warranty and insurance contracts yield higher profit margins than vehicle sales and contribute significantly to our profitability. 2025 vs. 2024 F&I revenue increased 3.9%, primarily due to increased unit sales related to acquisitions. On a same store basis, F&I revenue increased 3.1%, to $1,863 per unit.
We are subject to financial statement risk to the extent that our goodwill or franchise rights become impaired due to decreases in the fair value.
We tested the franchise value for this location, which resulted in an impairment charge of $5.8 million. There were no indications of impairment in 2024 or 2023. We are subject to financial statement risk to the extent that our goodwill or franchise rights become impaired due to decreases in the fair value.
Excluding the impact of acquisitions, on a same store basis, used vehicle revenues decreased 10.7%, due to a 5.5% decrease in average selling price per retail unit and 5.5% decrease in unit volume. Used vehicle gross profits decreased 12.6%, due to a 16.4% decrease in average gross profit per unit, partially offset by a 4.5% increase in units sold.
On a same store basis, used vehicle gross profit decreased 1.1%, due to a decrease in average gross profit per retail unit of 3.1%, partially offset by an increase in retail unit sales of 3.6%.
(5) Past due is defined as loans that have been on the books greater than or equal to 3 months and are 30 or more days delinquent (6) The average recovery rate represents the average percentage of the outstanding principal balance we receive when a vehicle is repossessed and liquidated, generally at wholesale auctions.
(6) The average recovery rate represents the average percentage of the outstanding principal balance we receive when a vehicle is repossessed and liquidated, generally at wholesale auctions.
On a same store basis, F&I revenue decreased 3.6%, to $2,152 per unit. Aftersales We provide automotive repair and maintenance services for customers for the new vehicle brands sold by our stores, as well as service and repairs for most other makes and models.
Aftersales We provide automotive repair and maintenance services for customers for the new vehicle brands sold by our stores, as well as service and repairs for most other makes and models. Our aftersales operations are an integral part of our customer retention and the largest contributor to our overall profitability.
On a fully discounted basis, we target earnings at least three times the net finance income earned from third party lenders (finance reserve less commissions paid) over the life of the finance receivable. Actual return of the finance receivables may differ based on the changing risk profile of originations, economic conditions, and rates of recovery for charged off vehicles.
Our proprietary credit model performs a return on investment (ROI) calculation for each application, ensuring that the return obtained is appropriately balanced with the consumer’s credit risk. On a fully discounted basis, we target earnings at least three times the net finance income earned from third party lenders (finance reserve less commissions paid) over the life of the finance receivable.
Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 ($ in millions) 2024 2023 Change % 2022 Change % Other income (expense), net $ 39.3 $ 22.0 $ 17.3 NM $ (43.2) $ 65.2 NM 2024 vs. 2023 Other income (expense), net increased $17.3 million in 2024 compared to 2023, primarily as a result of increases in equity method investment income and insurance proceeds, partially offset by foreign currency translation losses and reduced interest income from foreign currency deposit accounts. 34 2023 vs. 2022 Other income (expense), net increased $65.2 million in 2023 compared to 2022, primarily as a result of a reduction in equity method investment losses, foreign currency translation gains, and interest income from foreign currency deposit accounts.
Year Ended December 31, 2025 vs. 2024 2024 vs. 2023 ($ in millions) 2025 2024 Change % 2023 Change % Equity method investment $ (15.1) $ 32.8 $ (47.9) NM $ 1.7 $ 31.1 1,829.4% Foreign currency remeasurement 5.7 (17.6) 23.3 NM 5.1 (22.7) NM Net pension benefit 9.4 2.6 6.8 261.5% 2.6 — —% Miscellaneous 17.4 21.5 (4.1) (19.1)% 12.6 8.9 70.6% Other income, net $ 17.4 $ 39.3 $ (21.9) (55.7)% $ 22.0 $ 17.3 78.6% 2025 vs. 2024 Other income, net decreased $21.9 million in 2025 compared to 2024, primarily as a result of a decrease in equity method investment income, partially offset by foreign currency translation gains. 2024 vs. 2023 Other income, net increased $17.3 million in 2024 compared to 2023, primarily as a result of an increase in equity method investment income, offset by foreign currency translation losses.

… 39 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−1 removed9 unchanged
Biggest changeWe maintain risk management controls to monitor interest rate cash flow attributable to both our outstanding and forecasted debt obligations, as well as our offsetting hedge positions. The risk management controls include assessing the impact to future cash flows of changes in interest rates. 43
Biggest changeIn managing market risk, we monitor our credit ratings and evaluate the cost and availability of financing alternatives and risk management strategies. We maintain risk management controls to monitor interest rate and foreign exchange exposures associated with our outstanding and forecasted debt obligations and operating cash flows, as well as any related hedging activities.
As of December 31, 2024, we had $8.7 billion outstanding under such agreements at a weighted average interest rate of 5.8% per annum. A 10% increase in interest rates, or 57.7 basis points, would increase annual interest expense by approximately $37.9 million, net of tax, based on amounts outstanding as of December 31, 2024.
As of December 31, 2024, we had $8.7 billion outstanding under such agreements at a weighted average interest rate of 5.8% per annum. A 10% increase in interest rates, or 57.7 basis points, would increase annual interest expense by approximately $38.0 million, net of tax, based on amounts outstanding as of December 31, 2024.
Based on discounted cash flows using current interest rates for comparable debt, we have determined that the fair value of this long-term fixed interest rate debt was approximately $4.1 billion as of December 31, 2024.
Based on discounted cash flows using 43 then current interest rates for comparable debt, we determined that the fair value of this long-term fixed interest rate debt was approximately $4.4 billion as of December 31, 2024.
Based on discounted cash flows using then current interest rates for comparable debt, we determined that the fair value of this long-term fixed interest rate debt was approximately $3.9 billion as of December 31, 2023.
Based on discounted cash flows using current interest rates for comparable debt, we have determined that the fair value of this long-term fixed interest rate debt was approximately $5.5 billion as of December 31, 2025.
As of December 31, 2023, we had $6.9 billion outstanding under such agreements at a weighted average interest rate of 6.8% per annum. A 10% increase in interest rates, or 68.1 basis points, would increase annual interest expense by approximately $35.0 million, net of tax, based on amounts outstanding as of December 31, 2023.
As of December 31, 2025, we had $9.3 billion outstanding under such agreements at a weighted average interest rate of 5.6% per annum. A 10% increase in interest rates, or 55.8 basis points, would increase annual interest expense by approximately $38.8 million, net of tax, based on amounts outstanding as of December 31, 2025.
A 10% devaluation in average exchange rates would have resulted in a $798.5 million and $306.3 million decrease to our revenues for the years ended December 31, 2024, and 2023, respectively.
A 10% devaluation in average exchange rates would have resulted in an $806.8 million and a $794.1 million decrease to our revenues for the years ended December 31, 2025, and 2024, respectively.
As of December 31, 2023, we had $4.1 billion of long-term fixed interest rate debt outstanding and recorded on the balance sheet, with maturity dates between January 1, 2024 and December 31, 2050.
As of December 31, 2025, we had $5.6 billion of long-term fixed interest rate debt outstanding and recorded on the balance sheet, with maturity dates between April 1, 2026 and July 1, 2038.
Risk Management Policies We assess interest rate cash flow risk by identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. Our policy is to manage this risk through monitoring our mix of fixed rate and variable rate debt.
Risk Management Policies Our risk management policies are designed to identify, monitor, and manage exposure to market risks, including interest rate risk and foreign currency exchange rate risk, that may impact future cash flows. We manage interest rate risk by monitoring the mix of fixed-rate and variable-rate debt within our capital structure.
Removed
We currently utilize bank debt, mortgage financing, high-yield debt and internally generated cash flows for growth and investment. We monitor our credit ratings and evaluate the benefit and cost of various debt types to manage, and minimize as best as possible, our interest cost.
Added
We manage foreign currency exchange rate risk by monitoring exposures arising from foreign currency–denominated transactions and obligations and by evaluating available hedging strategies. We finance our operations and growth through a combination of bank debt, mortgage financing, high-yield debt, and internally generated cash flows.
Added
These policies do not permit the use of derivative instruments for speculative purposes.

Other LAD 10-K year-over-year comparisons