AUTONATION, INC.

Previous wording

AutoNation, Inc., through its subsidiaries, is one of the largest automotive retailers in the United States. As of March 31, 2025, we owned and operated 322 new vehicle franchises from 244 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 30 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 88% of the new vehicles that we sold during the three months ended March 31, 2025, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Mercedes-Benz, BMW, Stellantis, and Volkswagen (including Audi and Porsche). As of March 31, 2025, we also owned and operated 52 AutoNation-branded collision centers, 26 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, 3 parts distribution centers, a mobile automotive repair and maintenance business, and an auto finance company.

Current wording

AutoNation, Inc., through its subsidiaries, is one of the largest automotive retailers in the United States. As of June 30, 2025, we owned and operated 322 new vehicle franchises from 244 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 30 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 88% of the new vehicles that we sold during the six months ended June 30, 2025, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, BMW, Mercedes-Benz, Stellantis, and Volkswagen (including Audi and Porsche). As of June 30, 2025, we also owned and operated 52 AutoNation-branded collision centers, 26 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, 3 parts distribution centers, a mobile automotive repair and maintenance business, and an auto finance company.

Previous wording

For the three months ended March 31, 2025, new vehicle sales accounted for 49% of our total revenue and 14% of our total gross profit. Used vehicle sales accounted for 29% of our total revenue and 10% of our total gross profit. Our parts and service operations, while comprising 17% of our total revenue, contributed 47% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 29% of our total gross profit.

Current wording

For the six months ended June 30, 2025, new vehicle sales accounted for 49% of our total revenue and 14% of our total gross profit. Used vehicle sales accounted for 29% of our total revenue and 10% of our total gross profit. Our parts and service operations, while comprising 17% of our total revenue, contributed 47% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 29% of our total gross profit.

Previous wording

In the first quarter of 2025, U.S. industry retail new vehicle unit sales, which includes sales in markets in which we do not compete, increased approximately 8%, as compared to the first quarter of 2024, partly due to higher levels of manufacturer vehicle production compared to the prior year, as well as an increase in consumer demand, which further accelerated in the later part of March 2025 following U.S. government tariff-related announcements. The higher levels of manufacturer vehicle production over the past several years have led to an increasing supply of new vehicle inventory, which has varied by make and model and has resulted in moderation of new vehicle unit profitability over the past several years. While new vehicle unit profitability has recently started to stabilize, we expect that it may continue to moderate throughout 2025 and may be further impacted by the recently announced tariffs. Additionally, the increased availability of new vehicles and an increase in manufacturer new vehicle incentives to customers, including low-interest financing and customer rebates, have resulted in a shift in mix from used vehicles to new vehicles. Lower new vehicle sales in recent years have also resulted in lower availability of used vehicle inventory, particularly for late model vehicles.

Current wording

The higher levels of manufacturer vehicle production over the past several years have led to an increasing supply of new vehicle inventory, which has varied by make and model and has resulted in moderation of new vehicle unit profitability over the past several years. While new vehicle unit profitability has recently started to stabilize, we expect that it may continue to moderate throughout 2025 and may be further impacted by the recently announced tariffs. Additionally, the increased supply of new vehicles and an increase in manufacturer new vehicle incentives to customers, including low-interest financing and customer rebates, have resulted in a shift in mix from used vehicles to new vehicles. Lower new vehicle sales in recent years have also resulted in lower availability of used vehicle inventory.

Previous wording

The tariffs announced by the U.S. government beginning in the first quarter of 2025 on vehicles and parts imported from other countries could increase our costs or consumer prices and limit the availability of inventory and/or reduce demand for the products and services we offer, which in turn could have a material adverse effect on our business and results of operations. The policies and announcements regarding tariffs on imported goods have been evolving rapidly and remain highly fluid. The ultimate impact of any tariffs is uncertain and will depend on various factors, including whether the tariffs are maintained and/or implemented, the duration of the tariffs and the timing of their implementation, the amount, scope, and nature of the tariffs, and the related responses from other countries, manufactures, and/or consumers.

Current wording

The tariffs announced by the U.S. government beginning in the first quarter of 2025 on vehicles and parts imported from other countries could increase our costs or consumer prices and limit the availability of inventory and/or reduce demand for the products and services we offer, which in turn could have a material adverse effect on our business and results of operations. The policies and announcements regarding tariffs on imported goods have been evolving and remain highly fluid. The ultimate impact of any tariffs is uncertain and will depend on various factors, including whether the tariffs are maintained and/or implemented, the duration of the tariffs and the timing of their implementation, the amount, scope, and nature of the tariffs, and the related responses from other countries, manufacturers, and/or consumers.

Previous wording

During the three months ended March 31, 2025, we had net income of $175.5 million and diluted earnings per share of $4.45, as compared to net income of $190.1 million and diluted earnings per share of $4.49 during the same period in 2024.

Current wording

During the three months ended June 30, 2025, we had net income of $86.4 million and diluted earnings per share of $2.26, as compared to net income of $130.2 million and diluted earnings per share of $3.20 during the same period in 2024.

Previous wording

Our total gross profit increased 2% during the first quarter of 2025 compared to the first quarter of 2024, driven by increases in finance and insurance gross profit of 5%, used vehicle gross profit of 12%, and parts and service gross profit of 2%, partially offset by a decrease in new vehicle gross profit of 11%, each as compared to the first quarter of 2024. Finance and insurance gross profit benefited from higher realized margins on certain vehicle protection products and an increase in vehicle unit volume. Used vehicle gross profit benefited from better alignment of used vehicle inventory with market demand. Parts and service results benefited primarily from an increase in gross profit from warranty service. New vehicle gross profit was adversely impacted by a decrease in gross profit per vehicle retailed (“PVR”) resulting from an increase in supply and availability of new vehicle inventory, which has resulted in moderation of margins following post-pandemic elevated levels. In addition, SG&A expenses increased primarily due to an increase in performance-driven compensation expense.

Current wording

Our total gross profit increased 10% during the second quarter of 2025 compared to the same period in the prior year, driven by increases in parts and service gross profit of 12%, finance and insurance gross profit of 13%, and used vehicle gross profit of 13%, partially offset by a decrease in new vehicle gross profit of 4%, each as compared to the second quarter of 2024. Parts and service results benefited primarily from an increase in gross profit from customer-pay service, warranty service, and the preparation of vehicles for sale. Finance and insurance gross profit benefited from an increase in vehicle unit volume and higher realized margins on service contracts. Used vehicle gross profit benefited from an increase in used vehicle unit volume. New vehicle gross profit was adversely impacted by a decrease in gross profit per vehicle retailed (“PVR”) resulting from an increase in supply of new vehicle inventory, which has resulted in moderation of margins following post-pandemic elevated levels. Additionally, gross profit in the prior year period was adversely impacted by the CDK system outage that occurred in June 2024 and caused disruption and adverse impacts to our business, including our productivity.

Previous wording

Our new vehicle inventory units at March 31, 2025 and 2024, were 39,300 and 38,200, respectively. We have typically not experienced significant losses on the sale of new vehicle inventory, in part due to incentives provided by manufacturers to promote sales of new vehicles and our inventory management practices. We monitor our new vehicle inventory values as compared to net realizable values. Our new vehicle inventory was net of cumulative write-downs of $1.3 million at March 31, 2025, and $2.0 million at December 31, 2024.

Current wording

Our new vehicle inventory units at June 30, 2025 and 2024, were 42,600 and 47,000, respectively. We have typically not experienced significant losses on the sale of new vehicle inventory, in part due to incentives provided by manufacturers to promote sales of new vehicles and our inventory management practices. We monitor our new vehicle inventory values as compared to net realizable values. Our new vehicle inventory was net of cumulative write-downs of $1.0 million at June 30, 2025, and $2.0 million at December 31, 2024.

Previous wording

We recondition the majority of used vehicles acquired for retail sale in our parts and service departments and capitalize the related costs to the used vehicle inventory. We monitor our used vehicle inventory values as compared to net realizable values. Typically, used vehicles that are not sold on a retail basis are sold at wholesale auctions. Our used vehicle inventory balance was net of cumulative write-downs of $7.4 million at March 31, 2025, and $7.8 million at December 31, 2024.

Current wording

We recondition the majority of used vehicles acquired for retail sale in our parts and service departments and capitalize the related costs to the used vehicle inventory. We monitor our used vehicle inventory values as compared to net realizable values. Typically, used vehicles that are not sold on a retail basis are sold at wholesale auctions. Our used vehicle inventory balance was net of cumulative write-downs of $7.1 million at June 30, 2025, and $7.8 million at December 31, 2024.

Previous wording

Parts, accessories, and other inventory are carried at the lower of cost or net realizable value. We estimate the amount of potentially damaged and/or excess and obsolete inventory based upon historical experience, manufacturer return policies, and industry trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of $9.9 million at March 31, 2025, and $8.3 million at December 31, 2024.

Current wording

Parts, accessories, and other inventory are carried at the lower of cost or net realizable value. We estimate the amount of potentially damaged and/or excess and obsolete inventory based upon historical experience, manufacturer return policies, and industry trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of $9.5 million at June 30, 2025, and $8.3 million at December 31, 2024.

Previous wording

We may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. When assessing goodwill for impairment, our decision to perform a qualitative assessment for an individual reporting unit is influenced by a number of factors, including the carrying value of the reporting unit’s goodwill, the significance of the excess of the reporting unit’s estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, macroeconomic conditions, automotive industry and market conditions, and our operating performance.

Current wording

Goodwill for our reporting units is tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. We may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. When assessing goodwill for impairment, our decision to perform a qualitative assessment for an individual reporting unit is influenced by a number of factors, including the carrying value of the reporting unit’s goodwill, the significance of the excess of the reporting unit’s estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, macroeconomic conditions, automotive industry and market conditions, and our operating performance.

Previous wording

As of March 31, 2025, we have $223.0 million of goodwill related to the Domestic reporting unit, $524.3 million related to the Import reporting unit, $482.1 million related to the Premium Luxury reporting unit, $140.5 million related to the Mobile Service reporting unit, $78.4 million related to the AutoNation Finance reporting unit, and $4.6 million related to the Collision Centers reporting unit.

Current wording

As of June 30, 2025, we have $222.0 million of goodwill related to the Domestic reporting unit, $523.2 million related to the Import reporting unit, $482.1 million related to the Premium Luxury reporting unit, $75.2 million related to the Mobile Service reporting unit, $78.4 million related to the AutoNation Finance reporting unit, and $4.6 million related to the Collision Center reporting unit.

Previous wording

Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred. We are scheduled to complete our annual impairment test of our franchise rights as of April 30, 2025.

Current wording

Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred.

Previous wording

Same store new vehicle revenue PVR increased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to a 2% shift in mix towards Premium Luxury vehicles, which have relatively higher average selling prices. New vehicle revenue PVR also benefited from an increase in the average selling price for Import vehicles, partially due to an increase in average manufacturers’ suggested retail prices.

Current wording

Same store new vehicle revenue PVR increased during the six months ended June 30, 2025, as compared to the same period in 2024, largely due to increases in the average selling price for vehicles across all three segments and a 2% shift in mix away from Import vehicles, which have relatively lower average selling prices.

Previous wording

Same store new vehicle gross profit PVR decreased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in supply and availability of new vehicle inventory as compared to the prior year, which has resulted in moderation of margins following post-pandemic elevated levels.

Current wording

Same store new vehicle gross profit PVR decreased during the six months ended June 30, 2025, as compared to the same period in 2024, primarily due to an increase in supply of new vehicle inventory as compared to the prior year, which has resulted in moderation of margins following post-pandemic elevated levels.

Previous wording

The following table details net new vehicle inventory carrying expense, consisting of new vehicle floorplan interest expense, net of floorplan assistance earned (amounts received from manufacturers specifically to support store financing of new vehicle inventory). Floorplan assistance is accounted for as a component of new vehicle gross profit in accordance with GAAP.

Current wording

The following table details net new vehicle inventory carrying expense, consisting of new vehicle floorplan interest expense, net of floorplan assistance earned (amounts received from manufacturers specifically to support store financing of new vehicle inventory). Floorplan interest rates are variable and, therefore, increase and decrease with changes in the underlying benchmark rates. Floorplan assistance is accounted for as a component of new vehicle gross profit in accordance with GAAP.

Previous wording

The net new vehicle inventory carrying expense decreased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to a decrease in floorplan interest expense due to lower average interest rates, partially offset by higher average vehicle floorplan balances.

Current wording

The net new vehicle inventory carrying expense decreased during the three months ended June 30, 2025, as compared to the same period in 2024, due to a decrease in floorplan interest expense and an increase in floorplan assistance. Floorplan interest expense decreased due to lower average interest rates and lower average vehicle floorplan balances. Floorplan assistance increased primarily due to higher new vehicle sales.

Previous wording

Same store retail used vehicle revenue decreased during the three months ended March 31, 2025, as compared to the same period in 2024, due to a decrease in unit volume, particularly for mid- to higher-priced used vehicles, resulting from a 2% shift in mix from used vehicles to new vehicles. The shift in mix from used vehicles to new vehicles was due in part to lower availability and levels of late model used vehicles, as well an increase in supply of new vehicle inventory and an increase in manufacturer new vehicle incentives to customers, including low-interest financing and customer rebates. Wholesale used vehicle revenue decreased during the three months ended March 31, 2025, as compared to the same period in 2024, due to a decrease in revenue per unit wholesaled resulting from a shift in mix to lower-value used vehicles.

Current wording

Same store retail used vehicle revenue increased during the six months ended June 30, 2025, as compared to the same period in 2024, primarily due to an increase in same store unit volume as the prior year was adversely impacted by a decrease in productivity during the CDK outage. The increase in same store unit volume was partially offset by a 1% shift in mix from used vehicles to new vehicles due in part to increases in supply of new vehicle inventory and manufacturer new vehicle incentives to customers, including low-interest financing and customer rebates. Wholesale used vehicle revenue decreased during the six months ended June 30, 2025, as compared to the same period in 2024, due to a shift in mix to lower-value used vehicles.

Previous wording

Same store finance and insurance revenue and gross profit increased during the three months ended March 31, 2025, as compared to the same period in 2024, due to increases in finance and insurance gross profit PVR and new vehicle unit volume, partially offset by a decrease in used vehicle unit volume. Finance and insurance gross profit PVR benefited from higher realized margins on certain vehicle protection products, partially offset by an increase in retail vehicle sales financed through AutoNation Finance.

Current wording

Same store finance and insurance revenue and gross profit increased during the three months ended June 30, 2025, as compared to the same period in 2024, due to increases in vehicle unit volume and finance and insurance gross profit PVR. Finance and insurance gross profit PVR benefited from higher realized margins on vehicle service contracts and higher product penetration, partially offset by an increase in retail vehicle sales financed through AutoNation Finance. In addition, finance and insurance gross profit in the prior year was adversely impacted by the CDK outage.

Previous wording

Premium Luxury revenue increased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in new vehicle revenue, over 95% of which was due to an increase in new vehicle unit volume as a result of an increase in supply and availability of new vehicle inventory and sustained consumer demand, which accelerated in the later part of March 2025 following tariff-related announcements. The increase in Premium Luxury new vehicle revenue was partially offset by a decrease in used vehicle revenue driven by a decrease in wholesale used vehicle revenue of $12.9 million due to a decrease in revenue per unit wholesaled resulting in a shift in mix to lower-value used vehicles, and a decrease in retail used vehicle revenue of $11.2 million driven by a $693 decrease in used vehicle revenue PVR due to the shift in mix towards lower-priced entry-level used vehicles.

Current wording

Domestic revenue increased during the three months ended June 30, 2025, as compared to the same period in 2024, primarily due to an increase in new vehicle revenue, over 95% of which was due to an increase in new vehicle unit volume, which contributed to growth in our market share. New vehicle unit volume benefited from better execution in our marketing and sales activities, increases in supply of new vehicle inventory and manufacturer incentives to customers, and sustained consumer demand, which accelerated in the later part of March 2025 into April 2025 following tariff-related announcements. The increase in new vehicle revenue was partially offset by a decrease in new vehicle revenue of approximately $30 million related to the divestitures we completed in the third quarter of 2024. In addition, Domestic revenue in the prior year was adversely impacted by a decrease in productivity as a result of the CDK outage.

Previous wording

Domestic revenue decreased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to a decrease in used vehicle revenue, approximately 80% of which was due to lower used vehicle unit volume and 20% was driven by a decrease in average selling prices, with used vehicle revenue PVR down $480 compared to the prior year. Approximately $36 million of the decrease in used vehicle revenue was related to the divestitures we completed in the third quarter of 2024. The decrease in used vehicle unit volume was due in part to a 3% shift in mix from used vehicles to new vehicles. The decrease in used vehicle revenue PVR was primarily due to a shift in mix towards lower-priced entry-level used vehicles. Domestic revenue was also adversely impacted by decreases in parts and service revenue associated with wholesale parts sales of $21.9 million and customer-pay service of $5.2 million. The decreases in Domestic revenue were partially offset by an increase in new vehicle unit volume as a result of an increase in supply and availability of new vehicle inventory, an increase in manufacturer incentives to customers, including low-interest financing and customer rebates, and sustained consumer demand, which accelerated in the later part of March 2025 following tariff-related announcements.

Current wording

Domestic revenue increased during the six months ended June 30, 2025, as compared to the same period in 2024, primarily due to an increase in new vehicle revenue, over 95% of which was due to an increase in new vehicle unit volume, which contributed to growth in our market share. New vehicle unit volume benefited from better execution in our marketing and sales activities, increases in supply of new vehicle inventory and manufacturer incentives to customers, and sustained consumer demand, which accelerated in the later part of March 2025 into April 2025 following tariff-related announcements. The increase in new vehicle revenue was partially offset by a decrease in used vehicle revenue, approximately 65% of which was due to lower used vehicle unit volume and 35% was driven by a decrease in average selling prices, with used vehicle revenue PVR down $323 compared to the prior year. Additionally, Domestic revenue was adversely impacted by a decrease in new vehicle revenue of approximately $55 million and a decrease in used vehicle revenue of approximately $70 million related to the divestitures we completed in the third quarter of 2024. In addition, Domestic revenue in the prior year was adversely impacted by a decrease in productivity as a result of the CDK outage.

Previous wording

Import revenue increased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in new vehicle revenue, approximately 70% of which was due to an increase in average selling prices, with new vehicle revenue PVR up $1,404, due in part to a 5% increase in average manufacturers’ suggested retail prices. New vehicle revenue also benefited from an increase in new vehicle unit volume as a result of an increase in supply and availability of new vehicle inventory, an increase in manufacturer incentives to customers, including low-interest financing and customer rebates, and sustained consumer demand, which accelerated in the later part of March 2025 following tariff-related announcements. Import revenue also benefited, to a lesser extent, from an increase in parts and service revenue, largely due to an increase in revenue associated with warranty service of $24.9 million. The increases in Import revenue were partially offset by a decrease in used vehicle revenue driven by a $7.6 million decrease in used vehicle wholesale revenue due to a decrease in revenue per unit wholesaled as we retained more higher-value used vehicles for retail used vehicle sales.

Current wording

Import revenue increased during the three months ended June 30, 2025, as compared to the same period in 2024, primarily due to an increase in new vehicle revenue, approximately 60% of which was due to an increase in average selling prices, with new vehicle revenue PVR up $821. New vehicle revenue also benefited from an increase in new vehicle unit volume as a result of better execution in our marketing and sales activities, increases in supply of new vehicle inventory and manufacturer incentives to customers, and sustained consumer demand, which accelerated in the later part of March 2025 into April 2025 following tariff-related announcements. Import revenue also benefited from an increase in parts and service revenue, largely due to increases in revenue associated with warranty service of $24.2 million and the preparation of vehicles for sale of $13.8 million. In addition, Import revenue in the prior year was adversely impacted by a decrease in productivity as a result of the CDK outage.

Previous wording

Import segment income decreased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to a decrease in new vehicle gross profit PVR of $304 due to continued moderation of margins, which decreased 100 basis points, resulting from an increase in supply and availability of new vehicle inventory. In addition, Import segment income was adversely impacted by an increase in SG&A expenses of $11.3 million, largely due to an increase in performance-driven compensation expense. The decreases in Import segment income were partially offset by an increase in parts and service gross profit associated with warranty service of $16.0 million.

Current wording

Import segment income increased during the six months ended June 30, 2025, as compared to the same period in 2024, primarily due to an increase in parts and service gross profit, largely resulting from increases in gross profit associated with warranty service of $30.2 million and the preparation of vehicles for sale of $8.0 million. In addition, Import segment income in the prior year was adversely impacted by a decrease in productivity as a result of the CDK outage. The increases in Import segment income were partially offset by an increase in SG&A expenses of $20.5 million, largely due to an increase in performance-driven compensation expense.

Previous wording

Premium Luxury segment income increased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in finance and insurance gross profit, approximately 60% of which was due to an increase in vehicle unit volume and 40% of which was driven by an increase in finance and insurance gross profit PVR largely due to higher realized margins on certain vehicle protection products. Premium luxury segment income also benefited, to a lesser extent, from an increase in parts and service gross profit associated with warranty service of $5.8 million and an increase in used vehicle gross profit largely due to a $104 increase in used vehicle gross profit PVR. The increases in Premium Luxury segment income were partially offset by an increase in SG&A expenses of $13.4 million, largely due to an increase in performance-driven compensation expense.

Current wording

Premium Luxury segment income increased during the six months ended June 30, 2025, as compared to the same period in 2024, primarily due to an increase in parts and service gross profit, largely due to increases in gross profit associated with warranty service of $12.2 million and customer-pay service of $9.1 million. Premium Luxury segment income also benefited from an increase in finance and insurance gross profit, approximately half of which was due to an increase in vehicle unit volume and half of which was due to a $170 increase in finance and insurance gross profit PVR driven by higher realized margins on vehicle service contracts and higher product penetration. In addition, Premium Luxury segment income in the prior year was adversely impacted by a decrease in productivity as a result of the CDK outage. The increases in Premium Luxury segment income were partially offset by an increase in SG&A expenses of $17.2 million, largely due to an increase in performance-driven compensation expense.

Previous wording

AutoNation Finance (“ANF”), our captive auto finance company, provides indirect financing to qualified retail customers on vehicles we sell. This business provides us an opportunity to extend our relationship with the customer beyond the vehicle sale and participate in the customer’s entire vehicle ownership cycle. As a result, we are able to diversify our sources of income, generate additional profits, cash flows, and sales, and increase customer retention. Prior to October 2023, ANF also purchased retail vehicle installment sales contracts through third-party dealers.

Current wording

AutoNation Finance (“ANF”), our captive auto finance company, provides indirect financing to qualified retail customers on vehicles we sell. This business provides us an opportunity to extend our relationship with the customer beyond the vehicle sale and participate in the customer’s entire vehicle ownership cycle. As a result, we are able to diversify our sources of income, generate additional profits, cash flows, and sales, and increase customer retention.

Previous wording

ANF income (loss) includes the interest and fee income generated by auto loans receivable less the interest expense associated with the debt issued or used to fund these receivables, a provision for estimated credit losses on the auto loans receivable originated or acquired, and direct expenses. Interest income on auto loans receivable is recognized over the contractual term of the related loans. ANF income (loss) does not include amortization of intercompany discounts or intercompany dealer participation fees. The following table presents the components of ANF income (loss):

Current wording

ANF income (loss) includes the interest and fee income generated by auto loans receivable less the interest expense associated with the debt issued or used to fund these receivables, a provision for estimated credit losses on the auto loans receivable originated or acquired, and direct expenses. Interest income on auto loans receivable is recognized over the contractual term of the related loans. ANF income (loss) does not include amortization of intercompany discounts or intercompany dealer participation fees.

Previous wording

ANF recognized income of $0.1 million during the three months ended March 31, 2025, and a loss of $5.0 million during the three months ended March 31, 2024. The current year period benefited from an increase in interest income from the growth in managed receivables and a declining expected credit loss rate. Managed receivables increased as we continue to grow our ANF business and increase our finance penetration rates associated with vehicles sold through our stores. The declining expected credit loss rate reflects the improved credit quality of new loan originations and the sale of third-party receivables originated through third-party dealers that we completed in the fourth quarter of 2024. In addition, ANF continues to realize operational efficiencies as the portfolio scales, resulting in reduced direct expenses as a percentage of the managed portfolio.

Current wording

ANF recognized income of $2.1 million during the six months ended June 30, 2025, and a loss of $4.3 million during the six months ended June 30, 2024. The current year period benefited from an increase in interest and fee income from the growth in average managed receivables of $876.5 million as we continue to grow our ANF business and increase our finance penetration rates associated with vehicles sold through our stores.

Previous wording

SG&A expenses increased during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in performance-driven compensation expense, an increase in advertising expenses to support vehicle sales, an increase in insurance-related expenses of $4.7 million, and newly opened stores. The increases in SG&A expenses were partially offset by divestituresand a decrease in deferred compensation obligations of $8.7 million as a result of changes in market performance of the underlying investments. As a percentage of total gross profit, SG&A expenses increased to 67.4% during the three months ended March 31, 2025, from 66.2% in the same period in 2024, primarily due to the moderation of gross profit and increases in SG&A expenses as described above.

Current wording

SG&A expenses increased during the three months ended June 30, 2025, as compared to the same period in 2024, primarily due to an increase in compensation expense, an increase in insurance-related expenses, and acquisitions and newly opened stores. The increase in compensation expense was largely due to an increase in performance-driven compensation and an increase indeferred compensation obligations of $9.7 million as a result of changes in market performance of the underlying investments, partially offset by certain one-time compensation of approximately $43 million paid to commission-based associates in the prior year to ensure business continuity as a result of the CDK outage. In addition, SG&A expenses benefited from the divestitures we completed in the third quarter of 2024. As a percentage of total gross profit, SG&A expenses decreased to 67.0% during the three months ended June 30, 2025, from 71.0% in the same period in 2024, primarily due to prior year gross profit and SG&A expenses being adversely impacted by the CDK outage in the prior year.

Previous wording

Other Income, Net includes gains or losses associated with property divestitures and asset impairments, among other items.

Current wording

Other Income, Net includes asset impairments and gains or losses associated with business/property divestitures, among other items.

Previous wording

Other interest expense was $42.3 million for the three months ended March 31, 2025, compared to $44.6 million for the same period in 2024. The decrease in interest expense of $2.3 million was driven by lower average debt balances.

Current wording

Other interest expense was $88.5 million for the six months ended June 30, 2025, compared to $91.4 million for the same period in 2024. The decrease in interest expense of $2.9 million was driven by lower average debt balances, partially offset by higher interest rates.

Previous wording

We recognized a net loss of $1.9 million and net gain of $7.3 million for the three months ended March 31, 2025 and 2024, respectively, related to changes in the cash surrender value of corporate-owned life insurance (“COLI”) for deferred compensation plan participants as a result of changes in market performance of the underlying investments. Gains and losses related to the COLI are substantially offset by corresponding increases and decreases, respectively, in the deferred compensation obligations, which are reflected in SG&A expenses.

Current wording

We recognized net gains of $10.4 million and $0.4 million for the three months ended June 30, 2025 and 2024, respectively, and net gains of $8.5 million and $7.7 million for the six months ended June 30, 2025 and 2024, respectively, related to changes in the cash surrender value of corporate-owned life insurance (“COLI”) for deferred compensation plan participants as a result of changes in market performance of the underlying investments. Gains and losses related to the COLI are substantially offset by corresponding increases and decreases, respectively, in the deferred compensation obligations, which are reflected in SG&A expenses.

Previous wording

We recorded unrealized losses of $11.5 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively, related to the change in fair value of the underlying securities of our minority equity investments. During the period that we hold our minority equity investments, unrealized gains and losses will be recorded as the fair market values of securities with readily determinable fair values change over time, or as observable price changes are identified for securities without readily determinable fair values. See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Current wording

We recorded unrealized gains of $1.7 million and unrealized losses of $1.4 million for the three months ended June 30, 2025 and 2024, respectively, and unrealized losses of $9.8 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively, related to the change in fair value of the underlying securities of our minority equity investments. During the period that we hold our minority equity investments, unrealized gains and losses will be recorded as the fair market values of securities with readily determinable fair values change over time, or as observable price changes are identified for securities without readily determinable fair values. See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Previous wording

Income taxes are provided based upon our anticipated underlying annual blended federal and state income tax rates adjusted, as necessary, for any discrete tax matters occurring during the period. As we operate in various states, our effective tax rate is also dependent upon our geographic revenue mix. Our effective income tax rate was 25.0% for the three months ended March 31, 2025, and 2024.

Current wording

Income taxes are provided based upon our anticipated underlying annual blended federal and state income tax rates adjusted, as necessary, for any discrete tax matters occurring during the period. As we operate in various states, our effective tax rate is also dependent upon our geographic revenue mix.

Previous wording

(1) At March 31, 2025, we had $0.8 million of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under our commercial paper program. We had $340.0 million of commercial paper notes outstanding at March 31, 2025. See Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Current wording

(1) At June 30, 2025, we had $0.8 million of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under our commercial paper program. We had $130.0 million of commercial paper notes outstanding at June 30, 2025. See Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Previous wording

In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance primarily relating to insurance matters. At March 31, 2025, surety bonds, letters of credit, and cash deposits totaled $129.4 million, of which $0.8 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit.

Current wording

In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance primarily relating to insurance matters. At June 30, 2025, surety bonds, letters of credit, and cash deposits totaled $111.7 million, of which $0.8 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit.

Previous wording

Our capital allocation strategy is focused on growing long-term value per share. We invest capital in our business to maintain and upgrade our existing facilities and to build new facilities for existing franchises and new AutoNation USA used vehicle stores, as well as for other strategic and technology initiatives. We also deploy capital opportunistically to complete acquisitions or investments, build facilities for newly awarded franchises, and/or repurchase our common stock and/or debt. Our capital allocation decisions are based on factors such as the expected rate of return on our investment, the market price of our common stock versus our view of its intrinsic value, the market price of our debt, the potential impact on our capital structure, our ability to complete acquisitions that meet our strategic objectives, market and vehicle brand criteria, and/or return on investment threshold, and limitations set forth in our debt agreements.

Current wording

Our capital allocation strategy is focused on growing long-term value per share. We invest capital in our business to maintain and upgrade our existing facilities and to build new facilities for existing franchises, as well as for other strategic and technology initiatives. We also deploy capital opportunistically to complete acquisitions or investments, build facilities for newly awarded franchises, and/or repurchase our common stock and/or debt. Our capital allocation decisions are based on factors such as the expected rate of return on our investment, the market price of our common stock versus our view of its intrinsic value, the market price of our debt, the potential impact on our capital structure, our ability to complete acquisitions that meet our strategic objectives, market and vehicle brand criteria, and/or return on investment threshold, and limitations set forth in our debt agreements.

Previous wording

From April 1, 2025, through April 23, 2025, we repurchased 0.2 million shares of common stock for an aggregate purchase price of $28.9 million (average purchase price per share of $157.57). As of April 23, 2025, $607.0 million remained available under our stock repurchase limit authorized by our Board of Directors.

Current wording

As of June 30, 2025, $607.0 million remained available under our stock repurchase limit authorized by our Board of Directors.

Previous wording

We purchased one Domestic store and one Import store during the three months ended March 31, 2025. We did not purchase any stores during the three months ended March 31, 2024. We did not divest any stores during the three months ended March 31, 2025 and March 31, 2024.

Current wording

We purchased one Domestic store and one Import store during the six months ended June 30, 2025. We did not purchase any stores during the six months ended June 30, 2024. We did not divest any stores during the six months ended June 30, 2025 or June 30, 2024.

Previous wording

We had commercial paper notes outstanding of $340.0 million at March 31, 2025, and $630.0 million at December 31, 2024.

Current wording

In addition, we had commercial paper notes outstanding of $130.0 million at June 30, 2025, and $630.0 million at December 31, 2024.

Previous wording

A downgrade in our credit ratings could negatively impact the interest rate payable on our 4.5% Senior Notes, 3.8% Senior Notes, and 4.75% Senior Notes and could negatively impact our ability to issue, or the interest rates for, commercial paper notes. Additionally, an increase in our leverage ratio could negatively impact the interest rates charged for borrowings under our revolving credit facility.

Current wording

A downgrade in our credit ratings could negatively impact the interest rate payable on our 4.5% Senior Notes, 3.8% Senior Notes, and 4.75% Senior Notes, and could also negatively impact our ability to issue, or the interest rates for, commercial paper notes or other debt. Additionally, an increase in our leverage ratio could negatively impact the interest rates charged for borrowings under our revolving credit facility.

Previous wording

We had net cash used in operating activities of $52.6 million for the three months ended March 31, 2025, and net cash provided by operating activities of $294.5 million during the three months ended March 31, 2024. This change was primarily due to a $215.9 million increase in auto loans receivable for vehicles sold through our stores as we continued to grow our AutoNation Finance business. In addition, net cash provided by operating activities was adversely impacted by a build up in accounts receivable at the end of March 2025 due to an acceleration in the pace of vehicle sales in the later part of March 2025 resulting from an increase in consumer demand following tariff-related announcements.

Current wording

We had net cash used in operating activities of $230.3 million for the six months ended June 30, 2025, and net cash provided by operating activities of $234.9 million during the six months ended June 30, 2024. This change was primarily due to a $324.4 million increase in auto loans receivable for vehicles sold through our stores as we continued to grow our AutoNation Finance business, as well as an increase in working capital requirements of approximately $225 million, primarily due to the timing of working capital related payments in the prior year period as a result of the CDK outage. These impacts were partially offset by an increase in earnings excluding non-cash adjustments.