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What changed in SONIC AUTOMOTIVE INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of SONIC AUTOMOTIVE 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.

+377 added−422 removedSource: 10-K (2026-02-23) vs 10-K (2025-02-19)

Top changes in SONIC AUTOMOTIVE INC's 2025 10-K

377 paragraphs added · 422 removed · 326 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

31 edited+0 added−1 removed70 unchanged
Biggest changeThe following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand: Percentage of New Vehicle Revenues Year Ended December 31, Brand 2024 2023 2022 Luxury: BMW 25 % 25 % 26 % Mercedes 14 % 14 % 13 % Audi 5 % 6 % 6 % Lexus 5 % 5 % 5 % Land Rover 5 % 4 % 3 % Porsche 4 % 4 % 4 % Cadillac 2 % 2 % 2 % MINI 1 % 1 % 1 % Other luxury (1) 2 % 2 % 1 % Total Luxury 63 % 63 % 61 % Mid-line Import: Honda 11 % 10 % 9 % Toyota 9 % 9 % 9 % Volkswagen 2 % 2 % 2 % Hyundai 1 % 1 % 1 % Other mid-line imports (2) — % 1 % 1 % Total Mid-line Import 23 % 23 % 22 % Domestic: General Motors (3) 6 % 6 % 7 % Chrysler Dodge Jeep RAM 4 % 4 % 6 % Ford 4 % 4 % 4 % Total Domestic 14 % 14 % 17 % Total 100 % 100 % 100 % (1) Includes Alfa Romeo, Infiniti, Jaguar, Maserati and Volvo.
Biggest changeThe following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand: Percentage of New Vehicle Revenues Year Ended December 31, Brand 2025 2024 2023 Luxury: BMW 23 % 25 % 25 % Mercedes 13 % 14 % 14 % Land Rover 7 % 5 % 4 % Lexus 6 % 5 % 5 % Audi 5 % 5 % 6 % Porsche 4 % 4 % 4 % Cadillac 4 % 2 % 2 % Other luxury (1) 1 % 3 % 3 % Total Luxury 63 % 63 % 63 % Mid-line Import: Honda 11 % 11 % 10 % Toyota 9 % 9 % 9 % Volkswagen 1 % 2 % 2 % Other mid-line imports (2) 2 % 1 % 2 % Total Mid-line Import 23 % 23 % 23 % Domestic: General Motors (3) 6 % 6 % 6 % Chrysler Dodge Jeep RAM 5 % 4 % 4 % Ford 3 % 4 % 4 % Total Domestic 14 % 14 % 14 % Total 100 % 100 % 100 % (1) Includes Alfa Romeo, Infiniti, Jaguar, Maserati, MINI, Polestar and Volvo.
Our Fixed Operations sales carry a higher gross margin than new and used vehicle sales and generally are not as sensitive to economic conditions as new or used vehicle sales. We also offer guests assistance in obtaining third-party financing and a range of automobile-related warranty, insurance and other aftermarket products. Execute Our EchoPark Segment Strategy.
Our Fixed Operations sales carry a higher gross margin than new and used vehicle sales and generally are not as sensitive to economic conditions as new or used vehicle sales. We also offer guests assistance in obtaining third-party financing and a range of automobile-related third-party warranty, insurance and other aftermarket products. Execute Our EchoPark Segment Strategy.
In addition to new automobile sales, our revenue sources include used automobile sales (including through our EchoPark Segment), which we believe are generally less sensitive to economic cycles, production challenges and other factors that may affect new automobile sales. Our Powersports Segment further diversifies our vehicle sales offerings to include motorcycles, personal watercraft and all-terrain vehicles.
In addition to new vehicle sales, our revenue sources include used vehicle sales (including through our EchoPark Segment), which we believe are generally less sensitive to economic cycles, production challenges and other factors that may affect new vehicle sales. Our Powersports Segment further diversifies our vehicle sales offerings to include motorcycles, personal watercraft and all-terrain vehicles.
For 2024, approximately 86% of our total new vehicle revenue was generated by luxury and mid-line import dealerships, which typically have higher operating margins, more stable Fixed Operations departments, lower associate turnover and lower inventory levels than other brand categories. We actively evaluate acquisition opportunities and other strategic transactions that we believe will strengthen or diversify our brand portfolio.
For 2025, approximately 86% of our total new vehicle revenue was generated by luxury and mid-line import dealerships, which typically have higher operating margins, more stable Fixed Operations departments, lower associate turnover and lower inventory levels than other brand categories. We actively evaluate acquisition opportunities and other strategic transactions that we believe will strengthen or diversify our brand portfolio.
Sales operations for EchoPark began in 2014, and, as of December 31, 2024, we operated 18 stores in the EchoPark Segment in 10 states. Under our current EchoPark long-term growth strategy, we plan to continue to enhance our nationwide EchoPark distribution network to reach 90% of the U.S. population at maturity. Expand Our Omnichannel Capabilities.
Sales operations for EchoPark began in 2014, and, as of December 31, 2025, we operated 18 stores in the EchoPark Segment in 10 states. Under our current EchoPark long-term growth strategy, we plan to continue to enhance our nationwide EchoPark distribution network to reach 90% of the U.S. population at maturity. Expand Our Omnichannel Capabilities.
Approximately 230 of our associates, primarily service technicians in northern California, are represented by a labor union. Although only a small percentage of our associates is represented by a labor union, we may be affected by labor strikes, work slowdowns and walkouts at automobile manufacturers’ manufacturing facilities. As we manage our workforce, we focus on associate satisfaction, turnover and training.
Approximately 200 of our associates, primarily service technicians in northern California, are represented by a labor union. Although only a small percentage of our associates is represented by a labor union, we may be affected by labor strikes, work slowdowns and walkouts at automobile manufacturers’ manufacturing facilities. As we manage our workforce, we focus on associate satisfaction, turnover and training.
Except as otherwise stated in these documents, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we transmit to the SEC. 8 SONIC AUTOMOTIVE, INC. RISK FACTORS
Except as otherwise stated in these documents, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we transmit to the SEC. 9 SONIC AUTOMOTIVE, INC. RISK FACTORS
Conditions and competitive pressures affecting the markets in which we operate, such as price-cutting by dealers in these areas, or in any new markets we enter, could adversely affect our results, even though the retail automotive industry as a whole might not be significantly affected. 6 SONIC AUTOMOTIVE, INC.
Conditions and competitive pressures affecting the markets in which we operate, such as price-cutting by dealers in these areas, or in any new markets we enter, could adversely affect our results, even though the retail automotive industry as a whole might not be significantly affected.
Each manufacturer may terminate a franchise or dealer agreement under certain circumstances, such as a change in control of the dealership without manufacturer approval, significant damage to the reputation or financial condition of the dealership, the death, removal or withdrawal of the dealer operator, the conviction of the dealership or the dealership’s owner or dealer operator of certain crimes, the failure to adequately operate the dealership or maintain new vehicle inventory or financing arrangements, insolvency or bankruptcy of the dealership or a material breach of other provisions of the applicable franchise or dealer agreement.
Each manufacturer may terminate a franchise or dealer agreement under certain circumstances, such as a change in control of the dealership without manufacturer approval, significant damage to the reputation or financial condition of the dealership, the death, removal or withdrawal of the dealer operator, the conviction of the dealership or the dealership’s owner or dealer operator of certain crimes, the failure to adequately operate the dealership or maintain new vehicle inventory or financing arrangements, insolvency or bankruptcy of the dealership or a material breach of other provisions of the applicable franchise or dealer agreement. 5 SONIC AUTOMOTIVE, INC.
Byrd 58 Executive Vice President and Chief Financial Officer David Bruton Smith was elected as Chairman of the Board in July 2022 and as Chief Executive Officer of Sonic in September 2018. Previously, Mr.
Byrd 59 Executive Vice President and Chief Financial Officer David Bruton Smith was elected as Chairman of the Board in July 2022 and as Chief Executive Officer of Sonic in September 2018. Previously, Mr.
As a result of the way we manage our business, we had three reportable segments as of December 31, 2024: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment.
As a result of the way we manage our business, we had three reportable segments as of December 31, 2025: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment.
In 2024, Powersports Segment revenue represented approximately 1.1% of total revenue (compared to 1.1% in 2023). See Note 14, “Segment Information,” to the accompanying consolidated financial statements for additional financial information regarding our three reportable segments. 1 SONIC AUTOMOTIVE, INC.
In 2025, Powersports Segment revenue represented approximately 1.3% of total revenue (compared to 1.1% in 2024). See Note 14, “Segment Information,” to the accompanying consolidated financial statements for additional financial information regarding our three reportable segments. 1 SONIC AUTOMOTIVE, INC.
In particular, pricing has become more important as a result of well-informed customers using a variety of sources available on the internet to determine current retail market prices. Other competitive factors include customer preference for makes of automobiles, vehicle brand reputation, and coverage under manufacturer warranties.
In particular, pricing has become more important as a result of well-informed customers using a variety of sources available on the internet to determine current retail market prices. Other competitive factors include customer preference for makes of automobiles, vehicle brand reputation, and coverage under manufacturer warranties. 6 SONIC AUTOMOTIVE, INC.
Smith is also a director, an officer and a co-owner of Sonic Financial Corporation (“SFC”), the largest stockholder of Sonic, and a director and a co-owner of Speedway Motorsports, LLC (“Speedway Motorsports”). He is the brother of B. Scott Smith and Marcus G. Smith, who are also directors of Sonic. 7 SONIC AUTOMOTIVE, INC.
Smith is also a director, an officer and a co-owner of Sonic Financial Corporation (“SFC”), the largest stockholder of Sonic, and a director and a co-owner of Speedway Motorsports, LLC (“Speedway Motorsports”). He is the brother of B. Scott Smith and Marcus G. Smith, who are also directors of Sonic.
Each executive officer of the Company is elected by our Board of Directors and holds office from the date of election until thereafter removed by the Board. Name Age Position(s) and Office(s) with Sonic David Bruton Smith 50 Chairman and Chief Executive Officer Jeff Dyke 57 President and Director Heath R.
Each executive officer of the Company is elected by our Board of Directors and holds office from the date of election until thereafter removed by the Board. Name Age Position(s) and Office(s) with Sonic David Bruton Smith 51 Chairman and Chief Executive Officer Jeff Dyke 58 President and Director Heath R.
These platforms also allow us to market all of our products and services to a national audience and, at the same time, support the local market penetration of our individual stores. Focus on the Guest Experience . We focus on providing a high-quality guest experience and maintaining high levels of customer satisfaction.
These platforms also allow us to market all of our products and services to a national audience and, at the same time, support the local market penetration of our individual stores. 4 SONIC AUTOMOTIVE, INC. Focus on the Guest Experience . We focus on providing a high-quality guest experience and maintaining high levels of customer satisfaction.
Our Business The following charts depict the multiple sources of revenue and gross profit for the year ended December 31, 2024: As of December 31, 2024, we operated in the following states: Market Number of Stores in Franchised Dealerships Segment Number of Stores in EchoPark Segment Number of Stores in Powersports Segment Percent of 2024 Total Revenue Texas 29 6 8 27.3 % California 18 1 — 23.8 % Colorado 7 3 — 8.4 % Tennessee 9 1 — 7.4 % Florida 9 — — 5.5 % Alabama 7 1 — 4.6 % North Carolina 3 2 2 4.1 % Georgia 5 1 — 4.1 % Idaho 3 — — 3.0 % Maryland 4 — — 1.9 % Virginia 1 — — 2.0 % Washington — — — 0.1 % Nevada 2 1 — 1.8 % South Carolina 2 — — 1.3 % Indiana 3 — — 1.2 % Missouri 3 1 — 1.1 % New Mexico 1 — — 0.7 % New York 1 — — 0.3 % Arizona — 1 — 0.5 % South Dakota — — 5 0.3 % Louisiana 1 — — — % Disposed stores and holding companies — — — 0.6 % Total 108 18 15 100.0 % 2 SONIC AUTOMOTIVE, INC.
Our Business The following charts depict the multiple sources of revenue and gross profit for the year ended December 31, 2025: As of December 31, 2025, we operated in the following states: Market Number of Stores in Franchised Dealerships Segment Number of Stores in EchoPark Segment Number of Stores in Powersports Segment Percent of 2025 Total Revenue Texas 27 6 7 26.2 % California 23 1 — 24.6 % Colorado 7 3 — 7.8 % Tennessee 9 1 — 7.4 % Florida 9 — — 5.9 % Alabama 7 1 — 4.6 % North Carolina 3 2 2 4.2 % Georgia 5 1 — 4.0 % Idaho 3 — — 3.3 % Maryland 4 — — 1.8 % Virginia 1 — — 1.8 % Nevada 2 1 — 1.8 % South Carolina 2 — — 1.4 % Indiana 3 — — 1.1 % Missouri 3 1 — 1.1 % New Mexico 1 — — 0.7 % New York 1 — — 0.3 % Arizona — 1 — 0.5 % South Dakota — — 5 0.4 % Louisiana 1 — — 0.4 % Disposed stores and holding companies — — — 0.7 % Total 111 18 14 100.0 % 2 SONIC AUTOMOTIVE, INC.
In addition, in connection with our past or future acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material.
In addition, in connection with our past or future acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. 7 SONIC AUTOMOTIVE, INC.
Byrd served as a Manager in the Management Consulting Division of Ernst & Young LLP. Human Capital Resources As of December 31, 2024, we had approximately 10,800 employees, which we refer to as associates or teammates, with whom we strive to maintain good relationships, which benefit both our Company and our teammates.
Byrd served as a Manager in the Management Consulting Division of Ernst & Young LLP. Human Capital Resources As of December 31, 2025, we had approximately 11,000 employees, which we refer to as associates or teammates, and with whom we strive to maintain good relationships, which benefit both our Company and our teammates.
For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2024, we operated 108 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 15 stores in the Powersports Segment.
For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2025, we operated 111 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 14 stores in the Powersports Segment.
We regularly review repurchase activity and consider a number of factors in determining when to execute repurchases, including, but not limited to, historical and projected results of operations, the current economic environment and the market price of our Class A Common Stock. During 2024, we repurchased approximately 0.6 million shares of our Class A Common Stock for approximately $34.4 million.
We regularly review repurchase activity and consider a number of factors in determining when to execute repurchases, including, but not limited to, historical and projected results of operations, the current economic environment and the market price of our Class A Common Stock. During 2025, we repurchased approximately 1.3 million shares of our Class A Common Stock for approximately $82.4 million.
(2) Includes Mazda, Nissan and Subaru. (3) Includes Buick, Chevrolet and GMC. 4 SONIC AUTOMOTIVE, INC. Increase Sales of Higher-Margin Products and Services .
(2) Includes Hyundai, Mazda, Nissan and Subaru. (3) Includes Buick, Chevrolet and GMC. 3 SONIC AUTOMOTIVE, INC. Business Strategy Increase Sales of Higher-Margin Products and Services .
As of December 31, 2024, our total remaining share repurchase authorization was approximately $252.3 million. 3 SONIC AUTOMOTIVE, INC. Maximize Asset Returns Through Process Execution. We have developed standardized operating processes that are documented in operating playbooks for our stores.
As of December 31, 2025, our total remaining share repurchase authorization was approximately $169.9 million. Maximize Asset Returns Through Process Execution. We have developed standardized operating processes that are documented in operating playbooks for our stores.
The majority of our revenue is related to our Franchised Dealerships Segment. In 2024, Franchised Dealerships Segment revenue represented approximately 83.9% of total revenue (compared to 82.0% in 2023). In 2024, EchoPark Segment revenue represented approximately 15.0% of total revenue (compared to 16.9% in 2023).
The majority of our revenue is related to our Franchised Dealerships Segment. In 2025, Franchised Dealerships Segment revenue represented approximately 85.0% of total revenue (compared to 83.9% in 2024). In 2025, EchoPark Segment revenue represented approximately 13.7% of total revenue (compared to 15.0% in 2024).
As CPO vehicles can only be sold by franchised dealerships and CPO warranty repair work can only be performed at franchised dealerships, we believe CPO vehicles add additional sales volume and will increase our Fixed Operations business over the long term.
As CPO vehicles can only be sold by franchised dealerships and CPO warranty repair work can only be performed at franchised dealerships, we believe CPO vehicles add to our unit sales volume and will increase our Fixed Operations business over the long term. Maintain Diverse Revenue Streams. We have multiple revenue streams across our three operating segments.
To the extent that new or amended manufacturer policies restrict the number of dealerships that may be owned by a dealership group or the transferability of our common stock, such policies could have a material adverse effect on us.
To the extent that new or amended manufacturer policies restrict the number of dealerships that may be owned by a dealership group or the transferability of our common stock, such policies could have a material adverse effect on us. We believe that we will continue to be able to renew at expiration all of our existing franchise and dealer agreements.
Our notable health, welfare, retirement and training benefits include: • Company-subsidized health insurance; • 401(k) plan with Company matching contributions; • Company-wide $15 per hour minimum wage for all hourly employees; • paid vacation, sick and bereavement leave; • paid community service and volunteer leave; and • tuition assistance programs and Company-paid training opportunities.
Our notable health, welfare, retirement and training benefits include: • Company-subsidized health insurance; • 401(k) plan with Company matching contributions; 8 SONIC AUTOMOTIVE, INC. • paid vacation, sick and bereavement leave; • paid community service and volunteer leave; and • tuition assistance programs and Company-paid training opportunities.
The Franchised Dealerships Segment consists of 133 new vehicle franchises (representing 25 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment operates in 10 states and the Powersports Segment operates in three states.
The Franchised Dealerships Segment consists of 134 new vehicle franchises (representing 24 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment consists of 18 stores and operates in 10 states. The Powersports Segment consists of 41 franchises at 14 locations (11 full-service dealerships and three authorized retail outlets) in three states.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for a discussion of our plans for the use of capital generated from operations. Business Strategy Maintain Diverse Revenue Streams. We have multiple revenue streams across our three operating segments.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for a discussion of our plans for the use of capital generated from operations.
We believe that we will continue to be able to renew at expiration all of our existing franchise and dealer agreements. 5 SONIC AUTOMOTIVE, INC. Many states have placed limitations upon manufacturers’ and distributors’ ability to sell new motor vehicles directly to customers in their respective states in an effort to protect dealers from practices they believe constitute unfair competition.
Many states have placed limitations upon manufacturers’ and distributors’ ability to sell new motor vehicles directly to customers in their respective states in an effort to protect dealers from practices they believe constitute unfair competition.
During calendar year 2024, approximately 16.1 million new cars and 13.1 million used cars were sold at retail, many of which were accompanied by trade-ins that could then be resold as used vehicles. Competition The retail automotive industry is highly competitive.
According to industry sources, there were approximately 298.7 million light vehicles in operation in the U.S. as of December 31, 2025. During calendar year 2025, approximately 16.3 million new cars and 38.4 million used cars were sold in the U.S. Competition The retail automotive industry is highly competitive.
Removed
The supply of late-model used vehicles in 2024 continued to be affected by shortfalls in new vehicle manufacturing which occurred during the COVID-19 pandemic, which caused fewer vehicles to be manufactured in the affected years. According to industry sources, there were approximately 291.1 million light vehicles in operation in the U.S. as of December 31, 2024.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

57 edited+4 added−11 removed185 unchanged
Biggest changeThe U.S. or the countries from which our products are imported may, in the future, impose new quotas, duties, tariffs or other restrictions, or adjust presently prevailing quotas, duties or tariffs, which may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices, which may negatively affect affordability to consumers of certain new vehicles and reduce demand for certain vehicle makes and models.
Biggest changeAlthough the implementation of many of these tariffs and retaliatory measures have been paused or delayed and negotiations and the state of international trade policy and relations continue to evolve, these tariffs, and other quotas, duties, tariffs or other restrictions, or adjustments to presently existing quotas, duties or tariffs in the future, imposed by the U.S. or the countries from which our products are imported, may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices, which may negatively affect affordability to consumers of certain vehicles and reduce demand for certain vehicle makes and models. 12 SONIC AUTOMOTIVE, INC.
As a result, our operations are subject to risks of importing merchandise, including in the relative values of currencies, import duties or tariffs, exchange controls, trade restrictions, fluctuations in the relative values of currencies, work stoppages, supply chain disruptions or production delays, inflation, increases in interest rates, and general political and socioeconomic conditions in other countries.
As a result, our operations are subject to risks of importing merchandise, including import duties or tariffs, exchange controls, trade restrictions, fluctuations in the relative values of currencies, work stoppages, supply chain disruptions, production delays, inflation, increases in interest rates, and general political and socioeconomic conditions in other countries.
Changes in consumer demand toward fuel-efficient plug-in hybrid electric vehicles and battery electric vehicles, and resulting shifts by manufacturers to meet demand, could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations.
Changes in consumer demand toward fuel-efficient hybrid vehicles, plug-in hybrid electric vehicles and battery electric vehicles, and resulting shifts by manufacturers to meet demand, could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations.
Many of these operating leases require compliance with financial and operating covenants similar to those under the Credit Facilities and require monthly payments of rent that may fluctuate based on interest rates and local consumer price indices.
Many of these leases require compliance with financial and operating covenants similar to those under the Credit Facilities and require monthly payments of rent that may fluctuate based on interest rates and local consumer price indices.
Our inability to source high-quality used vehicle inventory from third-party auctions could reduce the demand for our used vehicle inventory offerings. See “ Increasing competition among automotive retailers and the use of the internet in automotive retail may reduce our profit margins on vehicle sales and related businesses ” above in this “Item 1A. Risk Factors” for further discussion.
Our inability to source high-quality used vehicle inventory from third-party auctions could reduce the demand for our used vehicle inventory offerings. See “ Competition among automotive retailers and the use of the internet in automotive retail may reduce our profit margins on vehicle sales and related businesses ” above in this “Item 1A. Risk Factors” for further discussion.
Such endeavors involve significant risks and uncertainties, including allocating management resources away from our other operations, insufficient revenues to offset expenses associated with these new investments, inadequate return of capital on our investments and unidentified issues not discovered in our due diligence of such strategies and offerings.
Such endeavors involve significant risks and uncertainties, including allocating management time and resources away from our other operations, insufficient revenues to offset expenses associated with these new investments, inadequate return of capital on our investments and unidentified issues not discovered in our due diligence of such strategies and offerings.
In recent years, financial markets have experienced elevated interest rates, which may make it more difficult for us to obtain financing on attractive terms. Using cash to complete acquisitions or to invest in our EchoPark expansion plans could substantially limit our operating and financial flexibility.
In recent years, financial markets have experienced elevated interest rates, which may make it more difficult for us to obtain financing on attractive terms. Using cash to complete acquisitions or to invest in our expansion plans could substantially limit our operating and financial flexibility.
To the extent that the market share for PHEVs, BEVs and other non-internal combustion engine vehicles increases rapidly or such vehicles comprise a significant percentage of new or used vehicles being sold or operated nationwide, we may experience a disruption in our parts, service and collision repair revenues or revenues from certain warranty and maintenance products that we sell, any of which could have a material adverse effect on our overall business and results of operations. 12 SONIC AUTOMOTIVE, INC.
To the extent that the market share for PHEVs, BEVs and other non-internal combustion engine vehicles increases rapidly or such vehicles comprise a significant percentage of new or used vehicles being sold or operated nationwide, we may experience a disruption in our parts, service and collision repair revenues or revenues from certain warranty and maintenance products that we sell, any of which could have a material adverse effect on our overall business and results of operations. 13 SONIC AUTOMOTIVE, INC.
A significant number of our dealership properties are subject to long-term operating lease arrangements that commonly have initial terms of 10 to 20 years with renewal options generally ranging from five to 10 years.
A significant number of our dealership properties are subject to long-term lease arrangements that commonly have initial terms of 10 to 20 years with renewal options generally ranging from five to 10 years.
The total future minimum lease payments related to these operating leases and certain equipment leases are significant and are disclosed in Note 12, “Commitments and Contingencies,” to the accompanying consolidated financial statements.
The total future minimum lease payments related to these leases and certain equipment leases are significant and are disclosed in Note 12, “Commitments and Contingencies,” to the accompanying consolidated financial statements.
Further, it is difficult to predict whether such a model may be adopted by manufacturers or permitted by state laws in the U.S. Adoption of this sales model by manufacturers in the geographic markets in which we operate could have a material adverse effect on our business, results of operations, financial condition and cash flows. 14 SONIC AUTOMOTIVE, INC.
Further, it is difficult to predict whether such a model may be adopted by manufacturers or permitted by state laws in the U.S. Adoption of this sales model by manufacturers in the geographic markets in which we operate could have a material adverse effect on our business, results of operations, financial condition and cash flows. 15 SONIC AUTOMOTIVE, INC.
The franchised dealer’s participation in that potential future transaction type is unclear and our operations and financial results may be negatively impacted if the role of franchised dealers diminishes. 9 SONIC AUTOMOTIVE, INC. RISK FACTORS Our dealers depend upon new vehicle sales and, therefore, their success depends in large part upon consumer demand for and manufacturer supply of particular vehicles.
The franchised dealer’s participation in that potential future transaction type is unclear and our operations and financial results may be negatively impacted if the role of franchised dealers diminishes. 10 SONIC AUTOMOTIVE, INC. RISK FACTORS Our dealers depend upon new vehicle sales and, therefore, their success depends in large part upon consumer demand for and manufacturer supply of particular vehicles.
Additionally, any such bankruptcy may result in us being required to incur impairment charges with respect to the inventory, fixed assets and intangible assets related to certain dealerships, which could adversely impact our results of operations and financial condition and our ability to remain in compliance with the financial ratios contained in our debt agreements. 16 SONIC AUTOMOTIVE, INC.
Additionally, any such bankruptcy may result in us being required to incur impairment charges with respect to the inventory, fixed assets and intangible assets related to certain dealerships, which could adversely impact our results of operations and financial condition and our ability to remain in compliance with the financial ratios contained in our debt agreements. 17 SONIC AUTOMOTIVE, INC.
Events such as stop-sale orders, labor strikes or other disruptions in production, including those caused by natural disasters, which may adversely affect a manufacturer may also adversely affect us. In particular, labor strikes at a manufacturer that continue for a substantial period of time could have a material adverse effect on our business.
Events such as stop-sale orders, labor strikes or other disruptions in production, including those caused by natural disasters or cybersecurity incidents, which may adversely affect a manufacturer may also adversely affect us. In particular, labor strikes at a manufacturer that continue for a substantial period of time could have a material adverse effect on our business.
As of December 31, 2024, we had interest rate cap agreements related to a portion of our Secured Overnight Financing Rate (“SOFR”)-based variable rate debt to limit our exposure to rising interest rates. See the heading “Derivative Instruments and Hedging Activities” under Note 6, “Long-Term Debt,” to the accompanying consolidated financial statements.
As of December 31, 2025, we had interest rate cap agreements related to a portion of our Secured Overnight Financing Rate (“SOFR”)-based variable rate debt to limit our exposure to rising interest rates. See the heading “Derivative Instruments and Hedging Activities” under Note 6, “Long-Term Debt,” to the accompanying consolidated financial statements.
Used vehicle inventory is subject to depreciation risk. Accordingly, if we develop excess inventory, the inability to liquidate such inventory at prices that allow us to meet desirable profit margins or to recover our costs could have a material adverse effect on our results of operations. 10 SONIC AUTOMOTIVE, INC.
Used vehicle inventory is subject to depreciation risk. Accordingly, if we develop excess inventory, the inability to liquidate such inventory at prices that allow us to meet desirable profit margins or to recover our costs could have a material adverse effect on our results of operations. 11 SONIC AUTOMOTIVE, INC.
In addition, severe or sustained changes in gasoline prices or overall shifts in consumer sentiment toward alternative fuel vehicles may lead to a shift in consumer buying patterns. Availability of preferred models may not exist in sufficient quantities to satisfy consumer demand and allow our stores to meet sales expectations. 20 SONIC AUTOMOTIVE, INC.
In addition, severe or sustained changes in gasoline prices or overall shifts in consumer sentiment toward alternative fuel vehicles may lead to a shift in consumer buying patterns. Availability of preferred models may not exist in sufficient quantities to satisfy consumer demand and allow our stores to meet sales expectations. 21 SONIC AUTOMOTIVE, INC.
If we determine that the amount of certain long-lived asset groups are impaired, we are required to reduce the balances recorded on our consolidated balance sheet, which may result in a significant non-cash impairment charge. 23 SONIC AUTOMOTIVE, INC. Item 1B. Unresolved Staff Comments. None.
If we determine that the amount of certain long-lived asset groups are impaired, we are required to reduce the balances recorded on our consolidated balance sheet, which may result in a significant non-cash impairment charge. 24 SONIC AUTOMOTIVE, INC. Item 1B. Unresolved Staff Comments. None.
Our failure to comply with certain covenants in these agreements could materially adversely affect our ability to access our borrowing capacity, subject us to acceleration of our outstanding debt, result in a cross default on other indebtedness and have a material adverse effect on our ability to continue our business. 17 SONIC AUTOMOTIVE, INC.
Our failure to comply with certain covenants in these agreements could materially adversely affect our ability to access our borrowing capacity, subject us to acceleration of our outstanding debt, result in a cross default on other indebtedness and have a material adverse effect on our ability to continue our business. 18 SONIC AUTOMOTIVE, INC.
To the extent that used vehicle inventory levels remain low (compared to historical levels) and the costs to acquire high-quality inventory remain high, we may experience decreased sales volume and margins on sales of our used vehicle inventory, which may have a material negative impact on our business, results of operations and profitability, particularly in the EchoPark Segment.
To the extent that used vehicle inventory levels are low (compared to historical levels) and the costs to acquire high-quality inventory are high, we may experience decreased sales volume and margins on sales of our used vehicle inventory, which may have a material negative impact on our business, results of operations and profitability, particularly in the EchoPark Segment.
Our business may be adversely affected by tariffs, import product restrictions and foreign trade risks that may impair our ability to sell the products that we offer profitably. A significant portion of our new vehicle business involves the sale of vehicles, parts or vehicles composed of parts that are manufactured outside the U.S.
Our business may be adversely affected by tariffs, import product restrictions and foreign trade risks that may impair our ability to sell the products that we offer profitably. A significant portion of our business involves the sale of vehicles, parts or vehicles composed of parts that are manufactured outside the U.S.
Our facilities and operations are subject to extensive governmental laws and regulations. If we are found to be in violation of, or subject to liabilities under, any of these laws or regulations or if new laws or regulations are enacted that adversely affect our operations, then our business, operating results, financial condition, cash flows and prospects could suffer.
RISK FACTORS Our facilities and operations are subject to extensive governmental laws and regulations. If we are found to be in violation of, or subject to liabilities under, any of these laws or regulations or if new laws or regulations are enacted that adversely affect our operations, then our business, operating results, financial condition, cash flows and prospects could suffer.
We have up to $350.0 million of maximum borrowing availability under an amended and restated syndicated revolving credit facility (the “Revolving Credit Facility”) and up to $2.6 billion of maximum borrowing availability for combined syndicated new and used vehicle inventory floor plan financing (the “Floor Plan Facilities” and, together with the Revolving Credit Facility, the “Credit Facilities”).
We have up to $350.0 million of maximum borrowing availability under an amended and restated syndicated revolving credit facility (the “Revolving Credit Facility”) and up to $$2.1 billion of maximum borrowing availability for combined syndicated new and used vehicle inventory floor plan financing (the “Floor Plan Facilities” and, together with the Revolving Credit Facility, the “Credit Facilities”).
Although we have substantial insurance, subject to certain deductibles, limitations and exclusions, we may be exposed to uninsured or under insured losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows. 21 SONIC AUTOMOTIVE, INC.
Although we have substantial insurance, subject to certain deductibles, limitations and exclusions, we may be exposed to uninsured or under insured losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows. 22 SONIC AUTOMOTIVE, INC.
If any of these adverse events were to occur in the future, it could result in a substantial withdrawal liability assessment that could have a material adverse effect on our business, financial condition, results of operations or cash flows. 22 SONIC AUTOMOTIVE, INC.
If any of these adverse events were to occur in the future, it could result in a substantial withdrawal liability assessment that could have a material adverse effect on our business, financial condition, results of operations or cash flows. 23 SONIC AUTOMOTIVE, INC.
In the event that interest rates remain at elevated levels or rise further, lenders tighten their credit standards, or there is a decline in the availability of credit in the consumer lending market, the costs of financing could influence consumer buying decisions and the ability of consumers to purchase vehicles could be limited, which could have a material adverse effect on our business, revenues and profitability.
In the event that interest rates are at elevated levels or rise, lenders tighten their credit standards, or there is a decline in the availability of credit in the consumer lending market, the costs of financing could influence consumer buying decisions and the ability of consumers to purchase vehicles could be limited, which could have a material adverse effect on our business, revenues and profitability.
Manufacturers routinely modify their incentive programs in response to changing market conditions. A reduction or discontinuation of a manufacturer’s incentive programs may materially adversely impact vehicle demand and affect our results of operations. 15 SONIC AUTOMOTIVE, INC.
Manufacturers routinely modify their incentive programs in response to changing market conditions. A reduction or discontinuation of a manufacturer’s incentive programs may materially adversely impact vehicle demand and affect our results of operations. 16 SONIC AUTOMOTIVE, INC.
We cannot assure you that manufacturers will approve future acquisitions or do so on a timely basis, which could impair the execution of our acquisition strategy. 13 SONIC AUTOMOTIVE, INC.
We cannot assure you that manufacturers will approve future acquisitions or do so on a timely basis, which could impair the execution of our acquisition strategy. 14 SONIC AUTOMOTIVE, INC.
Our Chairman and Chief Executive Officer, David Bruton Smith, as well as Marcus G. Smith and B. Scott Smith, also serve as directors of Speedway Motorsports. Further, the Smith family and certain trusts, the beneficiaries of which are members of the Smith family, directly and indirectly control a substantial majority of our voting stock.
Our Chairman and Chief Executive Officer, David Bruton Smith, as well as Marcus G. Smith and B. Scott Smith, also serve as directors of Speedway Motorsports. Further, the Smith family and certain trusts, the beneficiaries of which are members of the Smith family, directly and indirectly control a substantial majority of the voting power of our company’s outstanding voting stock.
Potential conflicts of interest could arise in the future between us and our officers or directors in the enforcement, amendment or termination of arrangements existing between them. 19 SONIC AUTOMOTIVE, INC.
Potential conflicts of interest could arise in the future between us and our officers or directors in the enforcement, amendment or termination of arrangements existing between them. 20 SONIC AUTOMOTIVE, INC.
A failure on our part to effectively hedge interest rate exposure may adversely affect our financial condition and results of operations. 18 SONIC AUTOMOTIVE, INC.
A failure on our part to effectively hedge interest rate exposure may adversely affect our financial condition and results of operations. 19 SONIC AUTOMOTIVE, INC.
Recently, the U.S. economy experienced elevated levels of inflation, heightened interest rates and volatile gasoline prices, which, combined with higher vehicle prices, have created affordability challenges for our consumers. In the event that the cost to consumers remains elevated, or increases further, consumers may be less willing to purchase vehicles.
Recently, the U.S. economy experienced elevated levels of inflation, tariff pressures, heightened interest rates and volatile gasoline and automobile insurance prices, which, combined with higher vehicle prices, have created affordability challenges for our consumers. In the event that the cost to consumers remains elevated, or increases further, consumers may be less willing to purchase vehicles.
In addition, armed conflict and increased international political or economic instability, including the escalation of trade tensions, may cause disruptions to foreign and domestic supply chains and manufacturing operations—including as a result of economic sanctions imposed by the U.S.—or result in price increases that adversely impact automotive manufacturers or our new vehicle business.
In addition, armed conflict and increased international political or economic instability, including the escalation of trade tensions as a result of economic sanctions imposed in the U.S. or otherwise, may cause disruptions to foreign and domestic supply chains and manufacturing operations or result in price increases that adversely impact automotive manufacturers or our business.
Our use of hedging transactions could limit our financial gains or result in financial losses. To reduce our exposure to fluctuations in cash flow due to interest rate fluctuations, we have entered into, and in the future may enter into, certain derivative instruments (or hedging agreements).
Our use of hedging transactions could limit our financial gains or result in financial losses. To reduce our exposure to interest rate fluctuations, we have entered into, and in the future may enter into, certain derivative instruments (or hedging agreements).
Our ability to make acquisitions, execute our growth strategy for our EchoPark business and grow organically may be restricted by our ability to obtain capital, the terms of the instruments governing our long-term debt and the need to obtain consent from manufacturers.
Our ability to make acquisitions, execute our growth strategy for each of our business segments and grow organically may be restricted by our ability to obtain capital, the terms of the instruments governing our long-term debt and the need to obtain consent from manufacturers.
In recent years, certain manufacturers whose new vehicles we sell have announced plans to develop an “agency” model of selling new vehicles in certain European markets, which is intended to facilitate sales directly by the manufacturer to the customer, using the existing franchised dealership as a logistics and delivery partner.
In recent years, certain manufacturers whose new vehicles we sell have implemented an “agency” model of selling new vehicles in certain European markets, which is intended to facilitate sales directly by the manufacturer to the customer, using the existing franchised dealership as a logistics and delivery partner.
In recent years, gross profit per unit has normalized and, while remaining higher than historic levels before the COVID-19 pandemic, has trended downwards as inventory, particularly for new vehicles, has become more readily available. If gross profit per unit continues to decline, as we anticipate it will, it will adversely affect our business and results of operation.
In the years following the pandemic, gross profit per unit normalized and, while remaining higher than historic levels before the COVID-19 pandemic, has trended downwards as inventory, particularly for new vehicles, has become more readily available. If gross profit per unit continues to decline, as we anticipate it may, it could adversely affect our business and results of operation.
The pace and scale of the growth of our EchoPark and powersports businesses may be limited in the event other sources of capital are unavailable.
The pace and scale of the growth of our businesses may be limited in the event other sources of capital are unavailable.
As of December 31, 2024, our total outstanding indebtedness was approximately $3.5 billion, which includes floor plan notes payable, long-term debt and short-term debt.
As of December 31, 2025, our total outstanding indebtedness was $3.5 billion, which includes floor plan notes payable, long-term debt and short-term debt.
For 2024, approximately 15.9% of our Fixed Operations revenues was for work covered by manufacturer warranties and complimentary maintenance programs. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty repair work, our Fixed Operations revenues and margins could be adversely affected.
For 2025, approximately 18% of our Fixed Operations revenues was for work covered by manufacturer warranties and complimentary maintenance programs. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty repair work, our Fixed Operations revenues and margins could be adversely affected.
Under currently proposed agency models, our franchised dealerships would receive a fee or similar compensation for facilitating the sale by the manufacturer of a new vehicle, but the purchased new vehicle would not be held in inventory. The timing and extent of implementation and relative success of agency sales models in European markets are uncertain and difficult to predict.
Under current agency models, franchised dealerships receive a fee or similar compensation for facilitating the sale by the manufacturer of a new vehicle, but the purchased new vehicle would not be held in inventory. The timing and extent of further implementation and evaluating the relative success of agency sales models in European markets are uncertain and difficult to predict.
Three of our dealership subsidiaries actively contribute to the AI Pension Plan under collective bargaining agreements with the IAM. These subsidiaries employ approximately 160 individuals, which constitutes less than 1% of our total workforce.
Three of our dealership subsidiaries actively contribute to the AI Pension Plan under collective bargaining agreements with the IAM. These subsidiaries employ approximately 170 individuals, which constitutes less than 2% of our total workforce.
Although we are working with CDK and other information technology vendors and taking steps to strengthen our systems infrastructure, there can be no assurance that we will not be affected by another cyberattack or other cybersecurity incident affecting our information systems, including those provided to us by third parties.
Although we continue to work with CDK and other information technology vendors to take steps to strengthen our systems infrastructure, there can be no assurance that we will not be affected by another cyberattack or other cybersecurity incident affecting our information systems, including those provided to us by third parties.
We obtain a significant percentage of our used vehicle inventory through our proprietary trade-in appraisal system as this sourcing outlet is generally more profitable and more convenient for our guests and potential guests.
We obtain a significant percentage of our used vehicle inventory through our proprietary trade-in appraisal system as this sourcing outlet is generally more profitable and more convenient for our guests and potential guests. A significant portion of our used vehicle inventory is sourced through trade-ins for purchases of new vehicles.
We are able to borrow under the Revolving Credit Facility only if, at the time of the borrowing, we have met all representations and warranties and are in compliance with all financial and other covenants contained therein.
We are permitted to borrow under the Revolving Credit Facility only if, at the time of the borrowing, we can provide all representations and warranties and are in compliance with all financial and other covenants contained therein.
As of December 31, 2024, we had approximately $338.5 million available for additional borrowings under the Revolving Credit Facility based on the borrowing base calculation, which is affected by numerous factors, including eligible asset balances.
As of December 31, 2025, we had $300.3 million available for additional borrowings under the Revolving Credit Facility based on the applicable borrowing base calculation, which is affected by numerous factors, including eligible asset balances.
Moreover, many of our mortgage notes’ principal and interest payments are based on an amortization period longer than the actual terms (maturity dates) of the notes. We will be required to repay or refinance the remaining principal balances for certain of our mortgages with balloon payments at the notes’ maturity dates, which range from 2025 to 2033.
Moreover, many of our mortgage notes’ principal and interest payments are based on an amortization period that extends beyond the maturity dates of the notes. We will be required to repay or refinance the remaining principal balances for certain of our mortgages with balloon payments at the notes’ maturity dates, which range from 2026 to 2031.
In addition, our 4.625% Senior Notes due 2029 (the “4.625% Notes”), our 4.875% Senior Notes due 2031 (the “4.875% Notes”) and our other debt instruments allow us to incur additional indebtedness, including secured indebtedness, as long as we comply with the terms thereunder.
In addition, our 4.625% Senior Notes due 2029 (the “4.625% Notes”), our 4.875% Senior Notes due 2031 (the “4.875% Notes”), our real estate-based credit agreement entered into in December 2024 (the “Sidecar Facility”) and our other debt instruments allow us to incur additional indebtedness, including secured indebtedness, as long as we comply with the terms thereunder.
If a default were to occur, we may be unable to adequately finance our operations because of acceleration and cross-default provisions and the value of our common stock would be materially adversely affected.
Even if new financing were available, it may not be on terms acceptable to us. If a default were to occur, we may be unable to adequately finance our operations because of acceleration and cross-default provisions and the value of our common stock would be materially adversely affected.
RISK FACTORS Our business is dependent on global economies and supply chains that could be adversely affected by natural and man-made disasters, including the effects of pandemics like the COVID-19 pandemic. The automotive manufacturing supply chain spans the globe.
RISK FACTORS Our business is dependent on global economies and supply chains that could be adversely affected by natural and man-made disasters, adverse weather and public health crises. The automotive manufacturing supply chain spans the globe.
As of December 31, 2024, our balance sheet reflected a carrying amount of approximately $358.5 million in goodwill and approximately $430.3 million in other intangible assets, net.
As of December 31, 2025, our balance sheet reflected a carrying amount of approximately $421.8 million in goodwill and approximately $454.1 million in other intangible assets, net.
The violation of other laws and regulations to which we are subject also can result in administrative, civil or criminal sanctions against us, which may include a cease and desist order against the subject operations 11 SONIC AUTOMOTIVE, INC.
The violation of other laws and regulations to which we are subject also can result in administrative, civil or criminal sanctions against us, which may include a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business, as well as significant liability, fines and penalties.
The instruments that govern our long-term indebtedness contain certain provisions that may cause all or a substantial portion of the outstanding principal amount of our indebtedness to become immediately due and payable. The Credit Facilities, the Mortgage Facility, the indentures governing the 4.625% Notes and the 4.875% Notes, and many of our operating leases contain numerous financial and operating covenants.
The instruments that govern our long-term indebtedness contain certain provisions that may cause all or a substantial portion of the outstanding principal amount of our indebtedness to become immediately due and payable.
The events that constitute a change of control under the indentures governing the 4.625% Notes and the 4.875% Notes may also constitute a default under the Credit Facilities and the Mortgage Facility. The agreements or instruments governing any future debt that we may incur may contain similar provisions regarding repurchases in the event of a change of control triggering event.
The agreements or instruments governing any future debt that we may incur may contain similar provisions regarding repurchases in the event of a change of control triggering event.
A breach of any of these covenants could result in a default under the applicable agreement. In addition, a default under one agreement could result in a cross default and acceleration of our repayment obligations under the other agreements or prevent us from borrowing under such other agreements.
In addition, a default under one agreement could result in a cross default and acceleration of our repayment obligations under the other agreements or prevent us from borrowing under such other agreements. If a default or cross default were to occur, we may not be able to pay our debts or to borrow sufficient funds to refinance them.
As of December 31, 2024, we had approximately $120.0 million of total remaining availability under our delayed draw-term loan credit agreement entered into in November 2019 (the "Mortgage Facility") based on the borrowing base calculation which varies in borrowing limit based on the appraised value of the collateral underlying the Mortgage Facility.
As of December 31, 2025, we had $95.0 million of total availability for revolving loans under a real estate-based credit agreement entered into in November 2019 (the “Mortgage Facility”).
Manufacturers have also increased production focus on the manufacture of fuel-efficient plug-in hybrid electric vehicles (“PHEVs”) and battery electric vehicles (“BEVs”). The rate at which our customers will demand such vehicles, as well as the ability of manufacturers to accurately predict and meet such demand, is dependent on various factors.
In recent years, manufacturers increased production focus on the manufacture of fuel-efficient hybrid vehicles, plug-in hybrid electric vehicles (“PHEVs”) and battery electric vehicles (“BEVs”). Subsequently, the supply of BEVs exceeded actual demand, which resulted in rising inventory levels and declines in new vehicle margins as dealers attempted to match inventory levels with consumer demand.
Removed
A significant portion of our used vehicle inventory is sourced through trade-ins for purchases of new vehicles, which, because of lower production levels during the COVID-19 pandemic, remain limited in supply.
Added
In 2025, the U.S. government announced the imposition of various tariffs, including tariffs targeting imported automobiles and automobile parts and other tariffs on goods from specific countries and trading blocs. The U.S. has been targeted with reciprocal tariffs and other retaliatory actions in response.
Removed
In 2024, sustained high consumer retail automotive lending rates negatively impacted finance and insurance product penetration rates and the negative impact to affordability reduced new and used retail unit volumes industry-wide.
Added
While the expiration of the federal tax credit on certain electric vehicles on September 30, 2025 resulted in a higher rate of electric vehicle sales during 2025, many manufacturers have significantly curtailed their expansion of PHEV and BEV production.
Removed
In February 2025, the U.S. government announced the imposition of tariffs on imports from Canada, Mexico and China. Subsequently, the U.S. agreed to pause the implementation of the tariffs on imports from Canada and Mexico and the extent to which these or similar tariffs will take effect remains uncertain.
Added
The Credit Facilities, the Mortgage Facility and the Sidecar Facility, the indentures governing the 4.625% Notes and the 4.875% Notes, and many of our leases contain numerous financial and operating covenants. A breach of any of these covenants could result in a default under the applicable agreement.
Removed
RISK FACTORS or even revocation or suspension of our license to operate the subject business, as well as significant liability, fines and penalties.
Added
The events that constitute a change of control under the indentures governing the 4.625% Notes and the 4.875% Notes may also constitute a default under the Credit Facilities, the Mortgage Facility and the Sidecar Facility.
Removed
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law on July 21, 2010, established the Consumer Financial Protection Bureau (the “CFPB”), an independent federal agency funded by the U.S. Federal Reserve with broad regulatory powers and limited oversight from the U.S. Congress.
Removed
Although automotive dealers are generally excluded, the Dodd-Frank Act has led to additional, indirect regulation of automotive dealers, in particular, their sale and marketing of finance and insurance products, through its regulation of automotive finance companies and other financial institutions.
Removed
The CFPB has recommended that financial institutions under its jurisdiction take steps to ensure compliance with the Equal Credit Opportunity Act, which may include imposing controls on discretionary markup of wholesale interest rates offered by financial institutions (“dealer markup”), monitoring and addressing the effects of dealer markup policies and eliminating dealer discretion to markup buy rates and fairly compensating dealers using a different mechanism that does not result in disparate impact to certain groups of consumers.
Removed
In December 2023, the U.S. Federal Trade Commission announced the Combating Auto Retail Scams Final Rule (the “CARS Rule”), which prohibits certain sales and marketing practices and establishes new disclosure and record-keeping requirements for dealers. Originally set to be effective on July 30, 2024, the CARS Rule has been stayed, pending resolution of legal challenges to the rule.
Removed
If the CARS Rule were to become effective, it may impose additional administrative burdens, increased liability and compliance costs and reduce our revenue through slowing or limiting our ability to close retail sales which would have an adverse effect on our business and results of operation.
Removed
Recently, the supply of BEVs has exceeded actual demand, which has resulted in rising inventory levels.
Removed
If a default or cross default were to occur, we may not be able to pay our debts or to borrow sufficient funds to refinance them. Even if new financing were available, it may not be on terms acceptable to us.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have experienced, and may in the future experience, whether directly or through our supply chain or other channels, cybersecurity incidents. Specifically, on June 19, 2024, CDK, a third-party provider of certain information systems, notified us that CDK had suspended certain systems used by us in response to a cybersecurity incident impacting CDK.
Biggest changeWe have experienced cybersecurity incidents in the past and may continue to experience them in the future, whether directly or through our supply chain or other channels.
By following industry best practices, the team has established a recognized baseline for engaging external firms to audit and test the resiliency of the cybersecurity program. 24 SONIC AUTOMOTIVE, INC.
By following industry best practices, the team has established a recognized baseline for engaging external firms to audit and test the resiliency of the cybersecurity program.
See “General Risk Factors” in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Governance Our Board of Directors is responsible for overseeing enterprise risk and has delegated the responsibility for the oversight of cybersecurity and information technology risks, and the Company’s preparedness for these risks, to the Audit Committee.
Governance Our Board of Directors is responsible for overseeing enterprise risk and has delegated the responsibility for the oversight of cybersecurity and information technology risks, and the Company’s preparedness for these risks, to the Audit Committee.
Although we have been working with CDK and other information technology vendors and taking steps to strengthen our systems infrastructure, and our processes are designed to help prevent, detect, respond to, and mitigate the impact of such incidents, there is no guarantee that another cyber incident would not materially affect our business strategy, results of operations or financial condition.
Since that event, we have been working with CDK and other information technology vendors to take steps to strengthen our systems infrastructure, and our processes are designed to help prevent, detect, respond to, and mitigate the impact of such incidents.
As a result, we experienced disruptions to our dealer management system (the “DMS”), our customer relationship management system (the “CRM”) and other systems that support sales, inventory and accounting functions (collectively with the DMS and CRM the “Affected Systems”). On June 26, 2024, CDK began restoring access to certain of the Affected Systems.
In 2024, CDK, a third-party provider of certain of our information systems, experienced a cybersecurity incident that resulted in temporary suspension of certain of the systems used by us, including our dealer management system (the “DMS”), our customer relationship management system (the “CRM”) and other systems that support sales, inventory and accounting functions (collectively with the DMS and CRM the “Affected Systems”).
As a result of the CDK outage, our business and results of operations during the second and third fiscal quarters of 2024 were adversely affected.
Access to the Affected Systems was restored by July 31, 2024, and we implemented internal risk assessment and data validation procedures before resuming full operations. This incident adversely affected our business and results of operations during the second and third fiscal quarters of 2024.
Removed
We performed internal risk assessments and data validation procedures on the Affected Systems, and beginning June 30, 2024, we resumed processing transactions in the DMS. As of July 31, 2024, we regained access to all of the Affected Systems, including the CRM and inventory management applications.
Added
However, there is no guarantee that another cyber incident would not materially affect our business strategy, results of operations or financial condition. See “General Risk Factors” in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe prefer to acquire dealerships or build dealership facilities located along major thoroughfares, which can be easily visited by prospective guests. For information regarding the states in which we operate and the breakdown of our stores among our operating segments, see the discussion under the heading “Our Business” in “Item 1.
Biggest changeOne of the principal factors we consider in evaluating a potential acquisition is its location. We prefer to acquire dealerships or build dealership facilities located along major thoroughfares, which can be easily visited by prospective guests.
The properties utilized by our dealership operations that are owned by us or one of our subsidiaries are pledged as security for the Credit Facilities, the Mortgage Facility or other mortgage financing arrangements. We believe that our facilities are adequate for our current needs.
The properties utilized by our dealership operations that are owned by us or one of our subsidiaries are pledged as security for the Credit Facilities, the Mortgage Facility and Sidecar Facility or other mortgage financing arrangements. We believe that our facilities are adequate for our current needs.
Item 2. Properties. Our principal executive offices are located at a property owned by us at 4401 Colwick Road, Charlotte, North Carolina 28211, and our telephone number at that location is (704) 566-2400. Our dealerships are generally located along major U.S. or interstate highways. One of the principal factors we consider in evaluating a potential acquisition is its location.
Item 2. Properties. Our principal executive offices are located at a property owned by us at 4401 Colwick Road, Charlotte, North Carolina 28211, and our telephone number at that location is (704) 566-2400. 25 SONIC AUTOMOTIVE, INC. Our dealerships are generally located along major U.S. or interstate highways.
Business.” We lease a significant number of the properties utilized by our dealership operations from affiliates of Capital Automotive Real Estate Services, Inc. and other individuals and entities. Under the terms of our franchise and dealer agreements, each of our dealerships must maintain an appropriate appearance and design of its dealership facility and is restricted in its ability to relocate.
Under the terms of our franchise and dealer agreements, each of our dealerships must maintain an appropriate appearance and design of its dealership facility and is restricted in its ability to relocate.
Added
For information regarding the states in which we operate and the breakdown of our stores among our operating segments, see the discussion under the heading “Our Business” in “Item 1. Business.” We lease a significant number of the properties utilized by our dealership operations from affiliates of Capital Automotive Real Estate Services, Inc. and other individuals and entities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. For information regarding legal proceedings, see the discussion under the heading “Legal Proceedings” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Item 4. Mine Safety Disclosures. Not applicable. 25 SONIC AUTOMOTIVE, INC. PART II
Biggest changeItem 3. Legal Proceedings. For information regarding legal proceedings, see the discussion under the heading “Legal Proceedings” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Item 4. Mine Safety Disclosures. Not applicable. 26 SONIC AUTOMOTIVE, INC. PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. [Reserved] 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 77
Biggest changeItem 4. Mine Safety Disclosures 26 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 6. [Reserved] 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 77

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following table sets forth information about the shares of Class A Common Stock we repurchased during the three months ended December 31, 2024: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (In millions, except per share data) October 2024 — $ — — $ 259.6 November 2024 123.5 $ — 123.5 $ 252.3 December 2024 — $ — — $ 252.3 Total 123.5 123.5 (1) On July 28, 2022, we announced that our Board of Directors had increased the dollar amount authorized for us to repurchase shares of our Class A Common Stock pursuant to our share repurchase program.
Biggest changeIssuer Purchases of Equity Securities The following table sets forth information about the shares of Class A Common Stock we repurchased during the three months ended December 31, 2025: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (In millions, except per share data) October 2025 0.2 $ 63.73 0.2 $ 196.7 November 2025 0.4 $ 62.76 0.4 $ 169.9 December 2025 — $ 61.86 — $ 169.9 Total 0.6 0.6 (1) On July 28, 2022, we announced that our Board of Directors had increased the dollar amount authorized for us to repurchase shares of our Class A Common Stock pursuant to our share repurchase program.
Our Board of Directors issued four quarterly cash dividends on all outstanding shares of Class A and Class B Common Stock totaling $1.25 per share, $1.16 per share and $1.03 per share for each of the years ended December 31, 2024, 2023 and 2022, respectively.
Our Board of Directors issued four quarterly cash dividends on all outstanding shares of Class A and Class B Common Stock totaling $1.46 per share, $1.25 per share and $1.16 per share for each of the years ended December 31, 2025, 2024 and 2023, respectively.
Subsequent to December 31, 2024, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.35 per share for stockholders of record on March 14, 2025 to be paid on April 15, 2025.
Subsequent to December 31, 2025, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.38 per share for stockholders of record on March 13, 2026 to be paid on April 15, 2026.
Our share repurchase program does not have an expiration date and current remaining availability under the program is as follows: (In millions) July 2022 authorization $ 500.0 Total active program repurchases prior to December 31, 2024 (247.7) Current remaining availability as of December 31, 2024 $ 252.3 26 SONIC AUTOMOTIVE, INC.
Our share repurchase program does not have an expiration date and current remaining availability under the program is as follows: (In millions) July 2022 authorization $ 500.0 Total active program repurchases prior to December 31, 2025 (330.1) Current remaining availability as of December 31, 2025 $ 169.9 27 SONIC AUTOMOTIVE, INC.
As of February 7, 2025, there were 21,692,669 shares of our Class A Common Stock and 12,029,375 shares of our Class B Common Stock outstanding. As of February 7, 2025, there were 545 record holders of the Class A Common Stock and two record holders of the Class B Common Stock.
As of February 6, 2026, there were 21,546,494 shares of our Class A Common Stock and 12,029,375 shares of our Class B Common Stock outstanding. As of February 6, 2026, there were 516 record holders of the Class A Common Stock and two record holders of the Class B Common Stock.
The closing stock price for the Class A Common Stock on February 7, 2025 was $72.97.
The closing stock price for the Class A Common Stock on February 6, 2026 was $62.46.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for retail used vehicles: Year Ended December 31, Better / (Worse) 2024 2023 Change % Change (In millions, except unit data) Total retail used vehicle revenue: Same market $ 1,828.3 $ 1,788.6 $ 39.7 2 % New markets/closed markets 9.7 355.2 (345.5) NM Total as reported $ 1,838.0 $ 2,143.8 $ (305.8) (14) % Total retail used vehicle gross profit (loss): Same market $ 15.6 $ (8.3) $ 23.9 288 % New markets/closed markets (0.4) (8.8) 8.4 NM Total as reported $ 15.2 $ (17.1) $ 32.3 189 % Total retail used vehicle unit sales: Same market 68,690 62,605 6,085 10 % New markets/closed markets 363 11,071 (10,708) NM Total as reported 69,053 73,676 (4,623) (6) % NM = Not Meaningful 47 SONIC AUTOMOTIVE, INC.
Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for retail used vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Total retail used vehicle revenue: Same market $ 1,747.8 $ 1,828.3 $ (80.5) (4) % New markets/closed markets — 9.7 (9.7) NM Total as reported $ 1,747.8 $ 1,838.0 $ (90.2) (5) % Total retail used vehicle gross profit (loss): Same market $ 16.5 $ 15.8 $ 0.7 4 % New markets/closed markets — (0.6) 0.6 NM Total as reported $ 16.5 $ 15.2 $ 1.3 9 % Total retail used vehicle unit sales: Same market 67,636 68,690 (1,054) (2) % New markets/closed markets — 363 (363) NM Total as reported 67,636 69,053 (1,417) (2) % NM = Not Meaningful The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/ closed market basis for F&I: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Total F&I revenue: Same market $ 220.3 $ 195.5 $ 24.8 13 % New markets/closed markets (1.1) (1.5) 0.4 27 % Total as reported $ 219.2 $ 194.0 $ 25.2 13 % Our EchoPark Segment reported retail used vehicle and F&I results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported retail used vehicle and F&I: Retail used vehicle revenue $ 1,747.8 $ 1,838.0 $ (90.2) (5) % Retail used vehicle gross profit (loss) $ 16.5 $ 15.2 $ 1.3 9 % Retail used vehicle unit sales 67,636 69,053 (1,417) (2) % Retail used vehicle revenue per unit $ 25,841 $ 26,617 $ (776) (3) % F&I revenue $ 219.2 $ 194.0 $ 25.2 13 % Combined retail used vehicle gross profit and F&I revenue $ 235.7 $ 209.2 $ 26.5 13 % Total retail used vehicle and F&I gross profit per unit $ 3,484 $ 3,029 $ 455 15 % 49 SONIC AUTOMOTIVE, INC.
(3) For 2024, amount includes approximately $3.0 million of pre-tax gain on exit of leased properties, approximately $2.9 million of pre-tax charges for severance and long-term compensation expense, approximately $2.1 million of pre-tax gain on real estate dispositions, approximately $2.1 million of pre-tax charges related to closed store accrued expenses related to the indefinite suspension of operations at certain EchoPark locations, and approximately $0.4 million of pre-tax charges related to excess compensation as a result of the CDK outage.
For 2024, amount includes approximately $3.0 million of pre-tax gain on exit of leased properties, approximately $2.9 million of pre-tax charges for severance and long-term compensation expense, approximately $2.1 million of pre-tax charges related to closed store accrued expenses related to the indefinite suspension of operations at certain EchoPark locations, approximately $2.1 million of pre-tax gain on real estate dispositions, and approximately $0.4 million of pre-tax charges related to excess compensation as a result of the CDK outage.
Capital Expenditures Our capital expenditures include the purchase of land and buildings, the construction of new franchised dealerships, EchoPark and powersports stores and collision repair centers, building improvements and equipment purchased for use in our franchised dealerships and EchoPark and powersports stores. We selectively construct or improve new franchised dealership facilities to maintain compliance with manufacturers’ image requirements.
Capital Expenditures Our capital expenditures include the purchase of land and buildings, the construction of new franchised dealerships, EchoPark and powersports stores and collision repair centers, building improvements and equipment purchased for use in our franchised dealerships and EchoPark and powersports stores. We selectively construct new or improve existing franchised dealership facilities to maintain compliance with manufacturers’ image requirements.
In accordance with the terms of agreements entered into for the sale of our dealerships, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreements.
In accordance with the terms of agreements entered into for the sales of our dealerships, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreements.
Used Vehicles and F&I - EchoPark Segment Our EchoPark operating strategy focuses on maximizing total used vehicle-related gross profit (based on a combination of retail used vehicle unit sales volume, front-end retail used vehicle gross profit (loss) per unit and F&I gross profit per retail unit) rather than realizing traditional levels of front-end retail used vehicle gross profit per unit.
Used Vehicles and F&I - EchoPark Segment Our EchoPark operating strategy focuses on maximizing total used vehicle-related gross profit (based on a combination of retail used vehicle unit sales volume, front-end retail used vehicle gross profit (loss) per unit and F&I gross profit per retail unit sold) rather than realizing traditional levels of front-end retail used vehicle gross profit per unit.
Selling, General and Administrative (“SG&A”) Expenses - Consolidated Consolidated SG&A expenses are comprised of four major groups: compensation expense, advertising expense, rent expense and other expense. Compensation expense primarily relates to store personnel who are paid a commission or a salary plus commission and support personnel who are generally paid a fixed salary.
Selling, General and Administrative (“SG&A”) Expenses SG&A expenses are comprised of four major groups: compensation expense, advertising expense, rent expense and other expense. Compensation expense primarily relates to store personnel who are paid a commission or a salary plus commission and support personnel who are generally paid a fixed salary.
We believe the yield spread premium we earn for arranging vehicle financing represents value to the consumer in numerous ways, including the following: • lower cost, below-market financing is often available only from the manufacturers’ captives and franchised dealers; • ease of access to multiple high-quality lending sources; • lease-financing alternatives are largely available only from manufacturers’ captives or other indirect lenders; 36 SONIC AUTOMOTIVE, INC.
We believe the yield spread premium we earn for arranging vehicle financing represents value to the consumer in numerous ways, including the following: • lower cost, below-market financing is often available only from the manufacturers’ captives and franchised dealers; • ease of access to multiple high-quality lending sources; • lease-financing alternatives are largely available only from manufacturers’ captives or other indirect lenders; 37 SONIC AUTOMOTIVE, INC.
The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) F&I services. All three segments generally operate independently of one another with the exception of certain shared back-office functions and corporate overhead costs. 28 SONIC AUTOMOTIVE, INC.
The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) F&I services. All three segments generally operate independently of one another with the exception of certain shared back-office functions and corporate overhead costs. 29 SONIC AUTOMOTIVE, INC.
The effects of availability of new and used vehicle inventory, interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2025 new vehicle industry volume to vary from expectations.
The effects of availability of new and used vehicle inventory, interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2026 new vehicle industry volume to vary from expectations.
More recently acquired franchise assets are at a greater risk of impairment than older franchise assets which have significant clearance between fair value and recorded balances. Many factors affect the valuation of franchise assets such as the discount rate and projected revenue amounts. Unfavorable changes in these factors increases the risk of future impairments. 64 SONIC AUTOMOTIVE, INC.
More recently acquired franchise assets are at a greater risk of impairment than older franchise assets which have significant clearance between fair value and recorded balances. Many factors affect the valuation of franchise assets such as the discount rate and projected revenue amounts. Unfavorable changes in these factors increases the risk of future impairments. 68 SONIC AUTOMOTIVE, INC.
The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2025 new vehicle industry volume to vary from expectations.
The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2026 new vehicle industry volume to vary from expectations.
The Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $0.12 per share so long as no Event of Default has occurred and is continuing and provided that we remain in compliance with all financial covenants under the Credit Facilities.
The Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $0.18 per share so long as no Event of Default has occurred and is continuing and provided that we remain in compliance with all financial covenants under the Credit Facilities.
An unfavorable resolution of one or more of these matters could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects. There were no significant liabilities related to legal matters as of December 31, 2024 and December 31, 2023. 76 SONIC AUTOMOTIVE, INC.
An unfavorable resolution of one or more of these matters could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects. There were no significant liabilities related to legal matters as of December 31, 2025 and December 31, 2024. 76 SONIC AUTOMOTIVE, INC.
Barriers to long-term growth may include reductions in the rate paid by manufacturers to dealers for warranty repair work performed, as well as the improved quality and design of vehicles that may affect the level and frequency of future customer pay or warranty-related repair revenues. 35 SONIC AUTOMOTIVE, INC.
Barriers to long-term growth may include reductions in the rate paid by manufacturers to dealers for warranty repair work performed, as well as the improved quality and design of vehicles that may affect the level and frequency of future customer pay or warranty-related repair revenues. 36 SONIC AUTOMOTIVE, INC.
Other expense includes various fixed and variable expenses, including gain on disposal of franchises, certain customer-related costs such as gasoline and service loaners, and insurance, training, legal and information technology expenses, which may not change in proportion to gross profit levels. 61 SONIC AUTOMOTIVE, INC.
Other expense includes various fixed and variable expenses, including gain on disposal of franchises, certain customer-related costs such as gasoline and service loaners, and insurance, training, legal and information technology expenses, which may not change in proportion to gross profit levels. 62 SONIC AUTOMOTIVE, INC.
Changes in contract assets from December 31, 2023 to December 31, 2024 were primarily due to ordinary business activity, including the receipt of cash for amounts earned and recognized in prior periods. Historically, our actual F&I retro revenue amounts earned have not been materially different from our recorded estimates.
Changes in contract assets from December 31, 2024 to December 31, 2025 were primarily due to ordinary business activity, including the receipt of cash for amounts earned and recognized in prior periods. Historically, our actual F&I retro revenue amounts earned have not been materially different from our recorded estimates.
Going forward, we generally expect to maintain a used vehicle inventory days’ supply in our Powersports Segment in the 75- to 100-day range, depending on seasonality (typically the second and third quarters have more demand and lower days’ supply compared to the first and fourth quarters). 53 SONIC AUTOMOTIVE, INC.
Going forward, we generally expect to maintain a used vehicle inventory days’ supply in our Powersports Segment in the 75 to 100-day range, depending on seasonality (typically the second and third quarters have more demand and lower days’ supply compared to the first and fourth quarters). 54 SONIC AUTOMOTIVE, INC.
Results of Operations - Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2023 and 2024, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
Results of Operations - Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2024 and 2025, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility into 2025 or beyond.
We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility into 2026 or beyond.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (ASC Topic 740): Improvements to Income Tax Disclosures.” The amendments require the disclosure of a reconciliation between income tax expense from continuing operations and the amount computed by multiplying income from continuing operations before income taxes by the applicable statutory rate as well as an annual disaggregation of the income tax rate reconciliation between certain specified categories by both percentage and reported amounts, along with other changes to income tax disclosure requirements.
Recent Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, “Income Taxes (ASC Topic 740): Improvements to Income Tax Disclosures.” The amendments require the disclosure of a reconciliation between income tax expense from continuing operations and the amount computed by multiplying income from continuing operations before income taxes by the applicable statutory rate as well as an annual disaggregation of the income tax rate reconciliation between certain specified categories by both percentage and reported amounts, along with other changes to income tax disclosure requirements.
This deposit balance is not designated as a prepayment of notes payable - floor plan, nor is it our intent to use this amount to offset principal amounts owed under notes payable - floor plan in the future, although we have the right and ability to do so.
This deposit balance is not designated as a prepayment of notes payable - floor plan, nor is it our intent to use this amount to settle principal amounts owed under notes payable - floor plan in the future, although we have the right and ability to do so.
Wholesale vehicle revenues are also significantly affected by our corporate inventory management strategy and policies, which are designed to optimize our total used vehicle inventory and expected gross profit levels and minimize inventory carrying risks. 34 SONIC AUTOMOTIVE, INC.
Wholesale vehicle revenues are also significantly affected by our corporate inventory management strategy and policies, which are designed to optimize our total used vehicle inventory and expected gross profit levels and minimize inventory carrying risks. 35 SONIC AUTOMOTIVE, INC.
Unless otherwise noted, all discussion of increases or decreases are for 2024 compared to 2023. The following discussion is on a same store basis (which excludes results from disposed stores), except where otherwise noted.
Unless otherwise noted, all discussion of increases or decreases are for 2025 compared to 2024. The following discussion is on a same store basis (which excludes results from disposed stores), except where otherwise noted.
We believe that the retail new vehicle industry sales volume is a more meaningful metric for comparing our new vehicle unit sales volume to the industry due to our minimal fleet vehicle business. 32 SONIC AUTOMOTIVE, INC.
We believe that the retail new vehicle industry sales volume is a more meaningful metric for comparing our new vehicle unit sales volume to the industry due to our minimal fleet vehicle business. 33 SONIC AUTOMOTIVE, INC.
For the EchoPark Segment, SG&A expenses for 2024 included approximately $3.0 million of pre-tax gain on exit of leased properties, approximately $2.9 million of pre-tax charges for severance and long-term compensation expense, approximately $2.1 million of pre-tax gain on real estate dispositions, approximately $2.1 million of pre-tax charges related to closed store accrued expenses related to the indefinite suspension of operations at certain EchoPark locations, and approximately $0.4 million of pre-tax charges related to excess compensation as a result of the CDK outage.
For the EchoPark Segment, SG&A expenses for 2024 included approximately $3.0 million of pre-tax gain on exit of leased properties, approximately $2.9 million of pre-tax charges for severance and long-term compensation expense, approximately $2.1 million of pre-tax charges related to closed store accrued expenses related to the indefinite suspension of operations at certain EchoPark locations, approximately $2.1 million of pre-tax gain on real estate dispositions, and approximately $0.4 million of pre-tax charges related to excess compensation as a result of the CDK outage. 65 SONIC AUTOMOTIVE, INC.
As a result of the way we manage our business, we had three reportable segments as of December 31, 2024: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment.
As a result of the way we manage our business, we had three reportable segments as of December 31, 2025: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment.
The effects on our consolidated financial statements of income tax uncertainties are discussed in Note 7, “Income Taxes,” to the accompanying consolidated financial statements. 65 SONIC AUTOMOTIVE, INC.
The effects on our consolidated financial statements of income tax uncertainties are discussed in Note 7, “Income Taxes,” to the accompanying consolidated financial statements. 69 SONIC AUTOMOTIVE, INC.
As of December 31, 2024 and 2023, we had recorded a valuation allowance amount of approximately $6.2 million and $6.3 million, respectively, related to certain state net operating loss carryforward deferred tax assets as we determined that we would not be able to generate sufficient state taxable income in the related entities to realize the accumulated net operating loss carryforward balances.
As of December 31, 2025 and 2024, we had recorded a valuation allowance amount of approximately $6.5 million and $6.2 million, respectively, related to certain state net operating loss carryforward deferred tax assets as we determined that we would not be able to generate sufficient state taxable income in the related entities to realize the accumulated net operating loss carryforward balances.
Unless otherwise noted, all discussion of increases or decreases are for the year ended December 31, 2024 (“2024”) compared to 2023. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted.
Unless otherwise noted, all discussion of increases or decreases are for the year ended December 31, 2025 (“2025”) compared to 2024. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted.
Please refer to the tables and discussion on the following pages for a comparison and discussion of financial results on a comparable store basis. 37 SONIC AUTOMOTIVE, INC.
Please refer to the tables and discussion on the following pages for a comparison and discussion of financial results on a comparable store basis. 38 SONIC AUTOMOTIVE, INC.
We believe that in a normal production environment, the level of new vehicle inventory days’ supply in our Powersports Segment should be in the 90- to 120-day range, depending on seasonality (typically the second and third quarters have more demand and lower days’ supply compared to the first and fourth quarters). 51 SONIC AUTOMOTIVE, INC.
We believe that in a normal production environment, the level of new vehicle inventory days’ supply in our Powersports Segment should be in the 90 to 120-day range, depending on seasonality (typically the second and third quarters have more demand and lower days’ supply compared to the first and fourth quarters).
In the event we are unable to sublease the properties to the buyer with terms at least equal to our leases, we may be required to record lease exit accruals. As of December 31, 2024, our future gross minimum lease payments related to properties subleased to buyers of sold dealerships totaled approximately $3.7 million.
In the event we are unable to sublease the properties to the buyer with terms at least equal to our leases, we may be required to record lease exit accruals. As of December 31, 2025, our future gross minimum lease payments related to properties subleased to buyers of sold dealerships totaled approximately $2.3 million.
We believe our best sources of liquidity for operations and debt service remain cash flows generated from operations combined with the availability of borrowings under our floor plan facilities (or any replacements thereof), the Credit Facilities (or any replacements thereof), the Mortgage Facilities (or any replacements thereof) and real estate mortgage financing, selected dealership and other asset sales and our ability to raise funds in the capital markets through offerings of debt or equity securities.
We believe our best sources of liquidity for operations and debt service remain cash flows generated from operations combined with availability under our Credit Facilities (including the Floor Plan Facilities), Mortgage Facility and Sidecar Facility (or any replacements thereof), real estate mortgage financing, selected dealership and other asset sales, along with our ability to raise funds in the capital markets through offerings of debt or equity securities.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For further analysis of new vehicle results, see the tables and discussion under the headings “New Vehicles - Franchised Dealerships Segment” and “New Vehicles - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For further analysis of new vehicle results on a segment basis, see the tables and discussion under the headings “New Vehicles - Franchised Dealerships Segment” and “New Vehicles - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.
For the Franchised Dealerships Segment, SG&A expenses for 2024 included approximately $11.0 million of pre-tax charges related to excess compensation as a result of the CDK outage, approximately $8.3 million of pre-tax charges related to storm damage, approximately $3.5 million of pre-tax gain related to the acquisition of equity interest in a joint venture, $10.0 million of pre-tax gain related to the CDK outage cyber claim payment, and approximately $2.2 million of pre-tax charges related to severance and long-term compensation expense.
For the Franchised Dealerships Segment, SG&A expenses for 2024 included approximately $11.0 million of pre-tax charges related to excess compensation as a result of the CDK outage, approximately $8.3 million of pre-tax charges related to storm damage, approximately $3.5 million of pre-tax gain related to the acquisition of the remaining equity interest in a joint venture, $10.0 million of pre-tax gain related to the CDK outage cyber claim payment, and approximately $2.2 million of pre-tax charges related to severance and long-term compensation expense. 64 SONIC AUTOMOTIVE, INC.
For comparison and discussion of our results of operations for the year ended December 31, 2023 (“2023”) to our results of operations for the year ended December 31, 2022 (“2022”), please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for 2023.
For comparison and discussion of our results of operations for the year ended December 31, 2024 (“2024”) to our results of operations for the year ended December 31, 2023 (“2023”), please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for 2024.
(2) Includes the following line items from the accompanying consolidated statements of cash flows: depreciation and amortization of property and equipment; debt issuance cost amortization; and debt discount amortization, net of premium amortization. (3) Adjusted EBITDA is a non-GAAP financial measure.
(2) Includes the following line items from the accompanying consolidated statements of cash flows: depreciation and amortization of property and equipment; debt issuance cost amortization; and debt discount amortization, net of premium amortization. (3) Adjusted EBITDA is a non-GAAP financial measure. 74 SONIC AUTOMOTIVE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary Retail Automotive Industry Performance The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) unit sales volume was approximately 16.1 million vehicles in 2024, an increase of 4%, compared to approximately 15.5 million vehicles in 2023, according to the Power Information Network (“PIN”) from J.D.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary Retail Automotive Industry Performance The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) unit sales volume was approximately 16.3 million vehicles in 2025, an increase of 1%, compared to approximately 16.1 million vehicles in 2024, according to the Power Information Network (“PIN”) from J.D.
Receivables, net in the accompanying consolidated balance sheets as of December 31, 2024 and 2023 include approximately $8.0 million and $12.0 million, respectively, related to contract assets from F&I retro revenue recognition.
Receivables, net in the accompanying consolidated balance sheets as of December 31, 2025 and 2024 include approximately $7.0 million and $8.0 million, respectively, related to contract assets from F&I retro revenue recognition.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources We require cash to fund debt service, lease obligations, working capital requirements, facility improvements and other capital improvements, and dividends on our common stock and to finance acquisitions and otherwise invest in our business.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources We require cash to service debt, meet lease obligations, manage working capital requirements, make facility and other capital improvements, pay dividends on our common stock, finance acquisitions and otherwise invest in our business.
Accordingly, if all changes in floor plan notes payable were classified as an operating activity (to align changes in floor plan liability balances with the associated changes in inventory balances for cash flow classification), the result would have been net cash provided by operating activities of approximately $367.3 million and $319.2 million for 2024 and 2023, respectively.
Accordingly, if all changes in floor plan notes payable were classified as an operating activity (to align changes in floor plan liability balances with the associated changes in inventory balances for cash flow classification), the result would have been net cash provided by operating activities of approximately $581.8 million and $367.3 million for 2025 and 2024, respectively.
On a trailing quarter cost of sales basis, our reported used vehicle inventory days’ supply in our EchoPark Segment was approximately 38 and 36 days as of December 31, 2024 and 2023, respectively.
On a trailing quarter cost of sales basis, our reported used vehicle inventory days’ supply in our EchoPark Segment was approximately 40 and 38 days as of December 31, 2025 and 2024, respectively.
The total notes payable - floor plan balance of approximately $1.9 billion as of December 31, 2024 is classified as current liabilities in the accompanying consolidated balance sheet as of such date. 70 SONIC AUTOMOTIVE, INC.
The total notes payable - floor plan balance of approximately $1.9 billion as of December 31, 2025 is classified as current liabilities in the accompanying consolidated balance sheet as of such date. 71 SONIC AUTOMOTIVE, INC.
Estimated interest payments were calculated using the December 31, 2024 floor plan facility balance, the weighted-average interest rate for the three months ended December 31, 2024 of 6.09% and the assumption that floor plan balances at December 31, 2024 would be relieved within 60 days in connection with the sale of the associated vehicle inventory.
Estimated interest payments were calculated using the December 31, 2025 floor plan facility balance, the weighted-average interest rate for the three months ended December 31, 2025 of 5.33% and the assumption that floor plan balances at December 31, 2025 would be relieved within 60 days in connection with the sale of the associated vehicle inventory.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (2) For 2024, amount includes approximately $13.0 million of pre-tax charges related to excess compensation as a result of the CDK outage, approximately $8.3 million of pre-tax charges related to storm damage, approximately $3.5 million of pre-tax gain related to the acquisition of the remaining equity interest in a joint venture, $10.0 million of pre-tax gain related to the CDK outage cyber claim payment, and approximately $2.2 million of pre-tax charges related to severance and long-term compensation expense.
For 2024, amount includes approximately $13.0 million of pre-tax charges related to excess compensation as a result of the CDK outage, approximately $8.3 million of pre-tax charges related to storm damage, approximately $3.5 million of pre-tax gain related to the acquisition of the remaining equity interest in a joint venture, $10.0 million of pre-tax gain related to the CDK outage cyber claim payment, and approximately $2.2 million of pre-tax charges related to severance and long-term compensation expense.
As such, reconditioning amounts that are classified as Fixed Operations revenues and cost of sales in our Franchised Dealerships Segment are presented as used vehicle cost of sales for the EchoPark Segment.
As such, reconditioning amounts that are classified as Fixed Operations revenues and cost of sales in our Franchised Dealerships Segment are presented as used vehicle cost of sales for the EchoPark Segment. 48 SONIC AUTOMOTIVE, INC.
Our effective tax rate varies from year to year based on the level of taxable income, the distribution of taxable income between states in which the Company operates and other tax adjustments. 63 SONIC AUTOMOTIVE, INC.
Our effective tax rate varies from year to year based on the level of taxable income, the distribution of taxable income between states in which the Company operates and other tax adjustments.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires Sonic’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the accompanying consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires Sonic’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the accompanying consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
While expected chargeback rates vary depending on the type of contract sold, a 100-basis point change in the estimated chargeback rates used in determining our estimates of future chargebacks would have changed our estimated reserve for chargebacks at December 31, 2024 by approximately $4.2 million.
While expected chargeback rates vary depending on the type of contract sold, a 100 basis point change in the estimated chargeback rates used in determining our estimates of future chargebacks would have changed our estimated reserve for chargebacks at December 31, 2025 by approximately $5.0 million.
Impairment charges for 2024 primarily related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores during 2023 and 2024. 62 SONIC AUTOMOTIVE, INC.
Impairment charges for 2024 primarily related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Legal Proceedings We are involved, and expect to continue to be involved, in various legal and administrative proceedings arising out of the conduct of our business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified.
Legal Proceedings We are involved, and expect to continue to be involved, in various legal and administrative proceedings arising out of the conduct of our business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified.
For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2024, we operated 108 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 15 stores in the Powersports Segment.
For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2025, we operated 111 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 14 stores in the Powersports Segment.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS U.S. retail new vehicle industry volume, fleet new vehicle industry volume, and total new vehicle industry volume were as follows: Year Ended December 31, Better / (Worse) 2024 2023 % Change (In millions of vehicles) U.S. industry volume - Retail new vehicle (1) 13.1 12.7 3 % U.S. industry volume - Fleet new vehicle 3.0 2.8 7 % U.S. industry volume - Total new vehicle (1) 16.1 15.5 4 % (1) Source: PIN from J.D.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS U.S. retail new vehicle industry volume, fleet new vehicle industry volume, and total new vehicle industry volume were as follows: Year Ended December 31, Better / (Worse) 2025 2024 % Change (In millions of vehicles) U.S. industry volume - Retail new vehicle (1) 13.6 13.1 4 % U.S. industry volume - Fleet new vehicle 2.7 3.0 (10) % U.S. industry volume - Total new vehicle (1) 16.3 16.1 1 % (1) Source: PIN from J.D.
Subsequent to December 31, 2024, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.35 per share for stockholders of record on March 14, 2025 to be paid on April 15, 2025.
Subsequent to December 31, 2025, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.38 per share for stockholders of record on March 13, 2026 to be paid on April 15, 2026.
After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of December 31, 2024, we had approximately $340.9 million of net income and retained earnings free of such restrictions.
After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of December 31, 2025, we had approximately $391.1 million of net income and retained earnings free of such restrictions.
After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of December 31, 2024, we had approximately $340.9 million of net income and retained earnings free of such restrictions.
After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of December 31, 2025, we had approximately $391.1 million of net income and retained earnings free of such restrictions.
See Note 6, “Long-Term Debt,” to the accompanying consolidated financial statements for a description of restrictions on the payment of dividends. Cash Flows Cash Flows from Operating Activities - Net cash provided by operating activities was approximately $109.2 million for 2024.
See Note 6, “Long-Term Debt,” to the accompanying consolidated financial statements for a description of restrictions on the payment of dividends. Cash Flows Cash Flows from Operating Activities - Net cash provided by operating activities was approximately $567.4 million for 2025.
See Note 12, “Commitments and Contingencies,” to the accompanying consolidated financial statements for further discussion regarding these guarantees and indemnification obligations. 75 SONIC AUTOMOTIVE, INC.
See Note 12, “Commitments and Contingencies,” to the accompanying consolidated financial statements for further discussion regarding these guarantees and indemnification obligations.
On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 46 and 37 days as of December 31, 2024 and 2023, respectively. 40 SONIC AUTOMOTIVE, INC.
On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 48 and 46 days as of December 31, 2025 and 2024, respectively. 41 SONIC AUTOMOTIVE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - EchoPark Segment All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition.
Results of Operations - EchoPark Segment All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition.
Our estimate of chargebacks was approximately $62.9 million as of December 31, 2024, compared to approximately $57.5 million as of December 31, 2023, with the increase primarily driven by higher F&I revenues and higher projected cancellation rates.
Our estimate of chargebacks was approximately $67.1 million as of December 31, 2025, compared to approximately $62.9 million as of December 31, 2024, with the increase primarily driven by higher F&I revenues and higher projected cancellation rates.
The carrying value of our franchise assets totaled approximately $430.3 million at December 31, 2024, and is included in other intangible assets, net in the accompanying consolidated balance sheet as of such date. See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the accompanying consolidated financial statements for further discussion.
After the effect of impairment charges, the carrying value of our franchise assets totaled approximately $454.1 million at December 31, 2025, and is included in other intangible assets, net, in the accompanying consolidated balance sheet as of such date. See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the accompanying consolidated financial statements for further discussion.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2023 and 2024, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2024 and 2025, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
The increase in combined retail used vehicle and F&I gross profit per unit was due primarily to higher F&I penetration rates, an improvement in inventory acquisition costs as a result of paying lower wholesale auction prices, and sourcing a higher percentage of inventory from non-auction sources. 48 SONIC AUTOMOTIVE, INC.
The increase in combined retail used vehicle and F&I gross profit per unit was due primarily to higher F&I penetration rates, an improvement in inventory acquisition costs as a result of sourcing a higher percentage of inventory from non-auction sources.
The deposit balances of approximately $340.0 million as of December 31, 2024 and approximately $345.0 million as of December 31, 2023 are classified as other current assets in the accompanying consolidated balance sheets as of December 31, 2024 and 2023.
The deposit balances of $300.0 million as of December 31, 2025 and $340.0 million as of December 31, 2024 are classified as other current assets in the accompanying consolidated balance sheets as of December 31, 2025 and 2024.
We generally focus on maintaining used vehicle inventory days’ supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility.
We generally focus on maintaining EchoPark Segment used vehicle inventory days’ supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility.
On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 115 days as of December 31, 2024, compared to 118 days as of December 31, 2023.
On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 121 days as of December 31, 2025, compared to 139 days as of December 31, 2024.
One metric that management uses to measure operating performance is Adjusted EBITDA (a non-GAAP financial measure) for each of our reportable segments and on a consolidated basis.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS One metric that management uses to measure operating performance is Adjusted EBITDA (a non-GAAP financial measure) for each of our reportable segments and on a consolidated basis.
Provision for Income Taxes - Consolidated The overall effective tax rate was 15.7% and 26.3% for 2024 and 2023, respectively.
Provision for Income Taxes - Consolidated The overall effective tax rate was 31.3% and 15.7% for 2025 and 2024, respectively.
At December 31, 2024, there were approximately $5.5 million in reserves that we had provided for these matters (including estimates related to possible interest and penalties) with approximately $0.5 million included in other accrued liabilities and approximately $5.0 million recorded in other long-term liabilities in the accompanying consolidated balance sheet as of such date.
At December 31, 2025, there were approximately $6.1 million in reserves that we had provided for these matters (including estimates related to possible interest and penalties) recorded in other long-term liabilities in the accompanying consolidated balance sheet as of such date.
These floor plan facilities are due on demand and currently bear interest at variable rates based on either one-month Term SOFR or prime plus an additional spread, as applicable. The weighted-average interest rate for our new and used vehicle floor plan facilities was 6.51% and 6.49% for 2024 and 2023, respectively.
These floor plan facilities are due on demand and bear interest at variable rates based on either one-month Term SOFR or prime plus an additional spread, specified in the applicable agreements. The weighted-average interest rate for our new and used vehicle floor plan facilities was 5.57% and 6.51% for 2025 and 2024, respectively.
During 2024, we repurchased approximately 0.6 million shares of our Class A Common Stock for approximately $34.4 million in open-market transactions at prevailing market prices and in connection with tax withholding on the vesting of equity compensation awards. As of December 31, 2024, our total remaining repurchase authorization was approximately $252.3 million.
During 2025, we repurchased approximately 1.3 million shares of our Class A Common Stock for approximately $82.4 million in open-market transactions at prevailing market prices and in connection with tax withholding on the vesting of equity compensation awards. As of December 31, 2025, our total remaining repurchase authorization was approximately $169.9 million.
For 2023, cash provided by financing activities was comprised primarily of net borrowings on notes payable - floor plan - non-trade, offset partially by the repurchases of treasury stock and scheduled principal payments of long-term debt.
For 2024, cash provided by financing activities was comprised primarily of net borrowings on notes payable - floor plan - non-trade, offset partially by scheduled principal payments of long-term debt.
We estimate the disruption from the CDK outage negatively impacted reported income before taxes by approximately $47.2 million during 2024 which includes approximately $13.4 million in additional compensation expenses incurred as a result of the incident. Impairment Charges Impairment charges were approximately $3.9 million and $79.3 million in 2024 and 2023, respectively.
We estimate the disruption from the CDK outage negatively impacted reported income before taxes by approximately $47.2 million during 2024 which includes approximately $13.4 million in additional compensation expenses incurred as a result of the incident.
The standard will be effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the impact that the adoption of the provisions of the ASU will have on our consolidated financial statements. 66 SONIC AUTOMOTIVE, INC.
The standard, as clarified by ASU 2025-01, will be effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the impact that the adoption of the provisions of the ASU will have on our consolidated financial statements.
We had the following liquidity resources available as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 (In millions) Cash and cash equivalents $ 44.0 $ 28.9 Floor plan deposit balance 340.0 345.0 Availability under the Revolving Credit Facility 338.5 298.6 Availability under the Mortgage Facility 139.1 173.0 Total available liquidity resources $ 861.6 $ 845.5 We maintain a floor plan deposit balance (as shown in the table above) that offsets interest based on the agreed upon floor plan interest rate, effectively reducing the net used vehicle floor plan interest expense with the lender.
We had the following liquidity resources available as of December 31, 2025 and 2024: December 31, 2025 December 31, 2024 (In millions) Cash and cash equivalents $ 6.3 $ 44.0 Floor plan deposit balance 300.0 340.0 Availability under the Revolving Credit Facility 300.3 338.5 Availability under the Mortgage Facility and Sidecar Facility 95.0 139.1 Total available liquidity resources $ 701.6 $ 861.6 We maintain a floor plan deposit balance (as shown in the table above) that offsets interest based on the agreed upon floor plan interest rate, effectively reducing the net used vehicle floor plan interest expense.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Same store F&I revenue decreased approximately $0.2 million, or 3%, primarily due to a 11% decrease in total combined retail new and used vehicle unit sales volume, offset partially by a 9% increase in F&I gross profit per retail unit.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Same store F&I revenue increased approximately $1.1 million, or 16%, primarily due to a 24% increase in total combined retail new and used vehicle unit sales volume, offset partially by a 5% decrease in F&I gross profit per retail unit.
Net cash provided by combined trade and non-trade floor plan financing was approximately $269.6 million for 2024. Net cash used in combined trade and non-trade floor plan financing was approximately $372.1 million for 2023.
Net cash provided by combined trade and non-trade floor plan financing was approximately $33.4 million for 2025. Net cash used in combined trade and non-trade floor plan financing was approximately $269.6 million for 2024.
Reported total revenues decreased 13% in 2024, driven primarily by a 9% decrease in average retail used vehicle selling price and a 6% decrease in total vehicle unit sales volume (retail used vehicles and wholesale vehicles combined).
Reported total revenues decreased 3% in 2025, driven primarily by a 3% decrease in average retail used vehicle selling price and a 1% decrease in total vehicle unit sales volume (retail used vehicles and wholesale vehicles combined).
F&I gross profit per retail unit decreased $36 per unit, or 1%, to $2,377 per unit, in 2024, driven by changes in the mix of F&I products sold. EchoPark Segment Unless otherwise noted, all discussion of increases or decreases are for 2024 compared to 2023.
F&I gross profit per retail unit increased $174 per unit, or 7%, to $2,551 per unit in 2025, driven by changes in the mix of F&I products sold. EchoPark Segment Unless otherwise noted, all discussion of increases or decreases are for 2025 compared to 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+1 added−7 removed1 unchanged
Biggest changeAbsent the acceleration of payments of principal that may result from non-compliance with financial and operational covenants under our various indebtedness, future principal maturities of variable and fixed rate debt and related interest rate caps are as follows: 2025 2026 2027 2028 2029 Thereafter Total Asset (Liability) Fair Value (In millions) Long-term debt: Fixed rate maturities $ 55.9 $ 21.8 $ 1.9 $ 14.2 $ 651.0 $ 501.4 $ 1,246.2 Fixed rate outstanding (1) $ 1,246.1 $ 1,190.2 $ 1,168.5 $ 1,166.6 $ 1,152.4 $ 501.4 $ 1,135.6 Average rate on fixed outstanding debt (1) 4.66 % 4.70 % 4.73 % 4.73 % 4.73 % 4.87 % Variable rate maturities $ 20.2 $ 30.4 $ 316.2 $ — $ — $ — $ 366.8 Variable rate outstanding (1) $ 366.8 $ 346.5 $ 316.2 $ — $ — $ — $ 366.8 Average rate on variable outstanding debt (1) 5.83 % 5.83 % 5.83 % — % — % N/A Cash flow hedge instruments: Interest rate cap notional maturities $ 500.0 $ — $ — $ — $ — $ — Interest rate cap notional outstanding (1) $ 500.0 $ — $ — $ — $ — $ — $ — Average interest income rate on interest rate cap notional outstanding (1) — % — % — % — % — % N/A (1) Based on amounts outstanding at January 1 of each respective period. 78 SONIC AUTOMOTIVE, INC.
Biggest changeAbsent the acceleration of payments of principal that may result from non-compliance with financial and operational covenants under our various indebtedness, future principal maturities of variable and fixed rate debt and related interest rate caps are as follows: 2026 2027 2028 2029 2030 Thereafter Total Asset (Liability) Fair Value (In millions) Long-term debt: Fixed rate maturities $ 10.9 $ 1.9 $ 14.2 $ 651.0 $ 1.1 $ 500.3 $ 1,179.4 Fixed rate outstanding (1) $ 1,179.4 $ 1,168.5 $ 1,166.6 $ 1,152.4 $ 501.3 $ 500.3 $ 1,138.0 Average rate on fixed outstanding debt (1) 4.72 % 4.72 % 4.73 % 4.73 % 4.87 % 4.87 % Variable rate maturities $ 41.6 $ 414.2 $ — $ — $ — $ — $ 455.8 Variable rate outstanding (1) $ 455.8 $ 414.2 $ — $ — $ — $ — $ 455.8 Average rate on variable outstanding debt (1) 5.19 % 5.19 % — % — % — % N/A Cash flow hedge instruments: Interest rate cap notional maturities $ 400.0 $ 200.0 $ 400.0 $ — $ — $ — Interest rate cap notional outstanding (1) $ 1,000.0 $ 600.0 $ 400.0 $ — $ — $ — $ 1,000.0 Average interest income rate on interest rate cap notional outstanding (1) — % — % — % — % — % N/A (1) Based on amounts outstanding at January 1 of each respective period. 77 SONIC AUTOMOTIVE, INC.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk Our variable rate floor plan facilities, Revolving Credit Facility, and Mortgage Facilities expose us to risks caused by fluctuations in the applicable interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk Our variable rate debt, which includes our Floor Plan Facilities, Revolving Credit Facility, Mortgage Facility and Sidecar Facility, exposes us to risks caused by fluctuations in interest rates. The total outstanding balance of our variable rate debt was $2.1 billion at December 31, 2025.
Removed
The total outstanding balance of such variable instruments, after considering the effect of outstanding cash flow hedge instruments, was approximately $2.0 billion at December 31, 2024.
Added
Based on that amount, a 1.0% change in the underlying interest rates would affect interest expense by $21.3 million over a twelve month period. Of that amount, $16.7 million would have resulted from the floor plan, net of offset.
Removed
Based on that amount along with the notional value of interest rate caps in place on that date, a decrease of 100 basis points in the underlying interest rates would have reduced interest expense by approximately $19.9 million while a 100 basis point increase in rates would have resulted in approximately $18.2 million of additional interest expense for the 12 months ended December 31, 2024.
Removed
Of those changes, approximately $16.2 million of the decrease and approximately $14.5 million of the increase would have resulted from the floor plan, net of offset. The difference between the increases and decreases results from the mitigating effect of the interest rate caps discussed below.
Removed
As of both December 31, 2024 and 2023, we had interest rate cap agreements designated as hedging instruments to limit our exposure to increases in one-month Term SOFR above certain levels. Under the terms of the interest rate cap agreements, interest rates reset monthly.
Removed
The fair value of the outstanding interest rate cap position was $0.0 million at December 31, 2024 and a net asset of approximately $1.0 million at December 31, 2023, included in other assets in the accompanying consolidated balance sheet as of such date.
Removed
Under the terms of these agreements, we will receive and pay interest based on the following: Notional Amount Cap Rate (1) Receive Rate (1) (2) Start Date Maturing Date (In millions) $ 500.0 5.000% one-month Term SOFR February 26, 2024 February 26, 2025 (1) Under these interest rate caps, no payment from the counterparty will occur unless the stated receive rate exceeds the stated cap rate, in which case a net payment to us from the counterparty, based on the spread between the receive rate and the cap rate, will be recognized as a reduction of interest expense, other, net in the accompanying consolidated statements of operations.
Removed
(2) One-month Term SOFR was approximately 4.332% at December 31, 2024. The interest rate caps have been designated and qualify as cash flow hedges and, as a result, changes in the fair value of these instruments are recorded in total other comprehensive income (loss) before taxes in the accompanying consolidated statements of comprehensive operations. 77 SONIC AUTOMOTIVE, INC.

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