PENSKE AUTOMOTIVE GROUP INC

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, along with our other periodic reports filed with the Securities and Exchange Commission, which could materially affect our business, financial condition, or future results. The following disclosure further updates the risk factors included in our 2024 Annual Report on Form 10-K:

Legal and Compliance Risks

Other Regulatory Issues. We are subject to a wide variety of regulatory activities and oversight, including:

Governmental regulations, claims, and legal proceedings. Governmental regulations affect almost every aspect of our business, including the fair treatment of our employees, wage and hour issues, and our financing activities with customers. In California, previous judicial decisions have called into question whether long-standing methods for compensating dealership employees comply with the local wage and hour rules and may do so again. We could be susceptible to claims or related actions if we fail to operate our business in accordance with applicable laws or it is determined that long-standing compensation methods did not comply with local laws. Many laws and regulations applicable to our business were adopted prior to the introduction of online vehicle sales, the Internet and certain digital technology, generally. As a result, we are tasked with maintaining compliance in an uncertain regulatory environment. Claims arising out of actual or alleged violations of law which may be asserted against us or any of our dealers by individuals, through class actions, or by governmental entities in civil or criminal investigations and proceedings, may expose us to substantial monetary damages which may adversely affect us.

Our financing activities with customers are subject to truth-in-lending, consumer leasing, equal credit opportunity, and similar regulations as well as motor vehicle finance laws, installment finance laws, insurance laws, usury laws, and other installment sales laws. In the U.K., the Financial Conduct Authority (the "FCA") regulates financial services firms and financial markets, including our activities in acting as broker for the financing of vehicle sales. The FCA is investigating the historic use of discretionary commission arrangements ("DCAs") amid concerns that this practice may have been unfair to customers. The purpose of the investigation is to consider whether the historic use of DCAs caused customers to pay too much for their car loans and, if so, to consider potential remediation measures, including the possible implementation of an industry-wide redress scheme. The investigation is being undertaken after the Financial Ombudsman Service (a public body, which resolves financial complaints) determined that DCAs, in two separate cases which do not involve us, had caused financial losses to customers. The FCA previously announced that it would disclose the results of its investigation in May 2025, but recently stated it will delay any announcement until after a ruling by the U.K. Supreme Court in the matter discussed below.

On October 25, 2024, the U.K. Court of Appeal (the second highest court in the U.K.) issued a judgment in the case Johnson v Firstrand Bank Ltd, Wrench v Firstrand Bank Ltd and Hopcraft v Close Brothers Ltd, which required those lenders to repay those customers the commissions paid to the dealers for their vehicle finance agreements, determining that, in those cases, there was a fiduciary duty to the customers to disclose the amount of the commissions paid to those dealers. In response to this judgment, U.K. consumer lenders now require dealerships (including us) to disclose to customers the commissions dealers receive from financing the purchase of their vehicle. We believe this judgment is contrary to existing guidance issued by the FCA, and in early April, the U.K. Supreme Court (the highest court in the U.K.) heard an appeal of this litigation as part of an expedited review. The outcome of the litigation, the FCA’s response to any judgment, and the ultimate outcome of the FCA’s investigation, remains uncertain.

The FCA has indicated that, subject to the U.K. Supreme Court decision, the FCA may consider an industry-wide redress scheme involving the payment of compensation to customers that are deemed to have suffered harm as a result of the sale of DCAs. While the focus of the FCA’s potential redress to customers, and the Judgment above, has been on the lenders and not automotive dealers, that outcome is uncertain and we may experience changes to our processes that may affect our business. Further, any regulatory or judicial outcome that ultimately results in the refund of historical commissions paid to us, reduces the commissions paid to us, or that directly or indirectly results in our participation in any FCA-mandated redress scheme or other compensation owed to customers, could materially and adversely affect our business and results of operations.

Tariffs and Trade Risk. On March 26, 2025, U.S. President Trump announced the imposition of a 25% tariff on imports of automobiles and certain automobile parts (the “Automotive Tariffs”). The 25% tariff applies to imported fully-assembled passenger vehicles including sedans, SUVs, crossovers, minivans, and cargo vans as well as light trucks, and became effective on April 3, 2025. The 25% tariff also applies to many imported automotive parts, with tariffs on certain imported parts beginning no later than May 3, 2025. In addition to the Automotive Tariffs, on April 2, 2025, U.S. President Trump announced a minimum 10% tariff applied to imports from most countries, with limited country and product exceptions, and elevated tariff rates imposed on more than 60 specific countries (the “Reciprocal Tariffs”), although, on April 9, 2025, the elevated Reciprocal Tariffs on certain countries were temporarily paused, notably excluding significant Reciprocal Tariffs on China. The vehicles and parts subject to the Automotive Tariffs are not subject to the Reciprocal Tariffs, and on April 29, 2025, U.S. President Trump announced further actions to reduce the compounding effects of other tariffs on vehicles and parts subject to the Automotive Tariffs and provide a partial reimbursement for tariffs imposed on foreign parts included in certain domestically assembled vehicles. The Automotive Tariffs and Reciprocal Tariffs represent a significant change to recent U.S. trade policies and tariff regimes and were announced following a series of previously implemented tariffs, including a 25% tariff on imported steel and aluminum and additional tariffs on products imported from Mexico, Canada, and China. In response to these tariffs, certain trade partners of the U.S. have announced or implemented responsive or retaliatory tariffs on U.S. goods or otherwise implemented non-tariff trade barriers, while various countries and individual companies, including certain of our manufacturing partners, have engaged in bilateral discussions with the U.S. regarding new trade agreements. The nature and scope of any new trade agreements remains uncertain.

It is difficult to assess the impact of the Automotive Tariffs, Reciprocal Tariffs, other recently announced tariffs, and non-tariff trade barriers on our business and results of operations, although these tariffs and retaliatory actions, if sustained in their current or similar forms, are expected to broadly impact the automotive industry and supply chain and will affect a substantial portion of the retail automotive and commercial truck vehicles and parts we sell, particularly as many of our key manufacturing partners produce and assemble certain vehicles and parts outside of the U.S. Additionally, certain manufacturers and suppliers are evaluating the impact of tariffs on their production capabilities and commitments, which may result in temporary or prolonged vehicle and parts supply shortages, and in certain cases our manufacturer partners have publicly announced plans to limit or temporarily suspend selling certain automobiles into the U.S. while they evaluate the impact of tariffs. Although tariffs will affect each manufacturer and vehicle model differently, widely reported estimates suggest that these tariffs are expected to increase the production costs of certain vehicles and parts. Certain of our manufacturing partners have suggested that, in the short term, they will refrain from passing on to consumers the additional costs resulting from these tariffs, but there is no guarantee these commitments will be sustained over time, which may lead to affordability challenges. As a result, the Automotive Tariffs and other tariffs are likely to increase our cost of acquiring vehicles and parts, as well as our inventory carrying costs. While it is difficult to predict the effects of these tariffs on our business, we believe increased prices could lead to lower consumer demand for new vehicles and related finance and insurance products, while potentially increasing demand for used vehicles and our service and parts operations. These tariffs and related non-tariff trade barriers, including an announcement by China to limit the exportation of certain rare earth elements, may also limit the availability of certain new vehicles and parts we sell and negatively impact our gross profit with respect to affected vehicles and parts.

The new trucks sold by Premier Truck Group (“PTG”), while not subject to the Automotive Tariffs, are subject to the Reciprocal Tariffs and other tariffs which have been or may be announced. We believe that, like our retail automotive business discussed above, PTG may experience increased demand for its service and parts operations and used trucks as a result of the tariffs, depending on the general freight environment (which also could be impacted by increased cross border tariffs).

Changes or increases in tariffs, trade restrictions, the negotiation of new trade agreements, non-tariff trade barriers, local content requirements, uncertainty surrounding global trade policies, and the imposition of retaliatory tariffs or trade barriers against certain countries or covering certain products, including vehicles and parts, may affect our competitive position and negatively impact our gross profit with respect to affected vehicles and parts. The extent of the tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the duration of such tariffs, the responses of other countries or regions to such tariffs, the impact to the global supply chain regarding the availability of critical parts and components, the actual increases in the costs of imported vehicles, parts and raw materials, and exemptions or exclusions that may be granted, including in connection with multilateral and bilateral trade agreements.