AUTONATION, INC.

Previous wording

The following discussion should be read in conjunction with Part I, including matters set forth in the “Risk Factors” section of this Form 10-K, and our Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this Form 10-K. This section of this Form 10-K includes discussion of year-to-year comparisons between 2024 and 2023. Discussion of year-to-year comparisons between 2023 and 2022 (other than for AutoNation Finance, a new reportable segment, for which discussion is included herein) can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

The following discussion should be read in conjunction with Part I, including matters set forth in the “Risk Factors” section of this Form 10-K, and our Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this Form 10-K. This section of this Form 10-K includes discussion of year-to-year comparisons between 2025 and 2024. Discussion of year-to-year comparisons between 2024 and 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Previous wording

AutoNation, Inc., through its subsidiaries, is one of the largest automotive retailers in the United States. As of December 31, 2024, we owned and operated 325 new vehicle franchises from 243 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 31 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 88% of the new vehicles that we sold in 2024, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, BMW, Mercedes-Benz, Stellantis, and Volkswagen (including Audi and Porsche). As of December 31, 2024, we also owned and operated 52 AutoNation-branded collision centers, 24 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 December 31, 2025, we owned and operated 323 new vehicle franchises from 245 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 89% of the new vehicles that we sold in 2025, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, BMW, Mercedes-Benz, Stellantis, and Volkswagen (including Audi and Porsche). As of December 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.

Previous wording

As of December 31, 2024, we had four reportable segments: Domestic, Import, Premium Luxury, and AutoNation Finance. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, and Stellantis. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, Hyundai, Subaru, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, Lexus, Audi, and Jaguar Land Rover. The franchises in each of our Domestic, Import, and Premium Luxury segments also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products. AutoNation Finance is our captive auto finance company, which provides indirect financing to qualified retail customers on vehicles we sell.

Current wording

As of December 31, 2025, we had four reportable segments: (1) Domestic, (2) Import, (3) Premium Luxury, and (4) AutoNation Finance. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, and Stellantis. Our Import segment is primarily comprised of retail automotive franchises that sell new vehicles manufactured by Toyota, Honda, Hyundai, and Subaru. Our Premium Luxury segment is primarily comprised of retail automotive franchises that sell new vehicles manufactured by Mercedes-Benz, BMW, Lexus, Audi, and Jaguar Land Rover. The franchises in each of our Domestic, Import, and Premium Luxury segments also sell used vehicles, parts and automotive services, and automotive finance and insurance products. AutoNation Finance is our captive auto finance company, which provides indirect financing to qualified retail customers on vehicles we sell.

Previous wording

For the year ended December 31, 2024, new vehicle sales accounted for 49% of our total revenue and 16% of our total gross profit. Used vehicle sales accounted for 29% of our total revenue and 9% of our total gross profit. Our parts and service operations, while comprising 17% of our total revenue, contributed 46% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 28% of our total gross profit.

Current wording

For the year ended December 31, 2025, new vehicle sales accounted for 49% of our total revenue and 13% of our total gross profit. Used vehicle sales accounted for 28% of our total revenue and 9% of our total gross profit. Our parts and service operations, while comprising 17% of our total revenue, contributed 48% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 30% of our total gross profit.

Previous wording

We had net income of $692.2 million and diluted earnings per share of $16.92 in 2024, as compared to net income of $1.0 billion and diluted earnings per share of $22.74 in 2023.

Current wording

We had net income of $649.1 million and diluted earnings per share of $17.04 in 2025, as compared to net income of $692.2 million and diluted earnings per share of $16.92 in 2024.

Previous wording

Our total gross profit decreased 7% during 2024, as compared to 2023, driven by decreases in new vehicle gross profit of 27%, used vehicle gross profit of 14%, and finance and insurance gross profit of 4%, partially offset by an increase in parts and service gross profit of 3%. New vehicle gross profit was adversely impacted by a decrease in gross profit per vehicle retailed (“PVR”) resulting from increasing supply and availability of new vehicle inventory, which has resulted in moderation of margins. Used vehicle gross profit was adversely impacted by a decrease in used vehicle unit volume and a shift in mix towards lower-priced entry-level vehicles, which have relatively lower average gross profit PVR. Finance and insurance gross profit was adversely impacted by an increase in retail vehicle sales financed through our captive auto finance company, which we expect will be offset by greater profitability generated by our AutoNation Finance business over time. Parts and service results benefited primarily from an increase in gross profit from warranty service and customer-pay service.

Current wording

Our total gross profit increased 3% during 2025, as compared to 2024, driven by increases in parts and service gross profit of 7% and finance and insurance gross profit of 8%, partially offset by a decrease in new vehicle gross profit of 14%. Parts and service results benefited primarily from increases in gross profit from customer-pay service and warranty service. Finance and insurance gross profit benefited from higher realized margins on vehicle service contracts and an increase in vehicle unit volume. New vehicle gross profit was adversely impacted by a decrease in gross profit per vehicle retailed (“PVR”) resulting from continued moderation of margins following post-pandemic elevated levels and higher average vehicle costs.

Previous wording

SG&A expenses were impacted by certain one-time costs related to the CDK outage, principally consisting of compensation of approximately $43 million paid to commission-based associates to ensure business continuity. These costs were largely offset by a decrease in performance-driven compensation expense partly resulting from the CDK outage. In addition, floorplan interest expense increased primarily due to higher average vehicle floorplan balances.

Current wording

SG&A expenses increased primarily due to an increase in performance-driven compensation expense, which was 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.

Previous wording

As a result of the CDK outage and its residual effects, we estimate earnings per share in 2024 were negatively impacted by approximately $1.75 per share, without taking into account any potential recoveries related to the incident. The estimated impact is comprised of internal estimates of lost income and the one-time costs incurred related to the incident, described above.

Current wording

Net income and diluted earnings per share during 2025 were favorably impacted by after-tax gains on insurance recoveries of $60.5 million for business interruption and related losses caused by the CDK outage that occurred in June 2024. As a result of the CDK outage, we estimate earnings per share in 2024 was negatively impacted by approximately $2.17 per share, without taking into account any recoveries related to the incident. The estimated impact was comprised of internal estimates for lost income during the outage period and the one-time costs incurred related to the incident, described above.

Previous wording

Net income during 2024 benefited from an after-tax net gain of $35.3 million related to business/property dispositions, net of asset impairments, partially offset by after-tax franchise rights impairments of $9.4 million and after-tax self-insured losses of $8.8 million primarily related to weather-related catastrophes. During 2023, net income was adversely impacted by an after-tax loss of $12.4 million from weather-related catastrophes.

Current wording

Net income during 2024 benefited from an after-tax net gain of $35.3 million related to business/property dispositions, net of asset impairments, partially offset by after-tax franchise rights impairments of $9.4 million and after-tax self-insured losses of $8.8 million primarily related to weather-related catastrophes.

Previous wording

Our new vehicle inventory units at December 31, 2024 and 2023, were approximately 42,600 and 35,300, 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 $2.0 million at December 31, 2024. We had no new vehicle inventory cumulative write-downs at December 31, 2023.

Current wording

Our new vehicle inventory units at December 31, 2025 and 2024, were approximately 43,800 and 42,600, 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 $1.2 million at December 31, 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 $7.8 million at December 31, 2024, and $12.2 million at December 31, 2023.

Current wording

Our used vehicle inventory units at December 31, 2025 and 2024, were approximately 33,100 and 34,000, respectively. 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 $5.8 million at December 31, 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 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 $8.3 million at December 31, 2024, and $7.8 million at December 31, 2023.

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 December 31, 2025, and $8.3 million at December 31, 2024.

Previous wording

We prepare our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis and we base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our Consolidated Financial Statements. Set forth below are the accounting estimates that we have identified as critical to our business operations and an understanding of our results of operations, based on the high degree of judgment or complexity in their application. See Note 1 of the Notes to Consolidated Financial Statements for a discussion of other significant accounting policies.

Current wording

We prepare our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis and we base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our Consolidated Financial Statements. Set forth below are the accounting estimates that we have identified as critical to our business operations and an understanding of our results of operations, based on the high degree of judgment or complexity in their application. See Note 1 of the Notes to Consolidated Financial Statements for a discussion of other significant accounting policies.

Previous wording

Goodwill for our reporting units is tested for impairment annually on April 30 or more frequently when events or changes in circumstances indicate that the carrying value of a reporting unit 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.

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

The fair values of the Domestic, Import, Premium Luxury, AutoNation Finance, and Collision Center reporting units substantially exceeded their carrying values as of April 30, 2024. The fair value of the Mobile Service reporting unit, which relates to the mobile automotive repair and maintenance business we acquired in the first quarter of 2023, exceeded carrying value by approximately 25%. The key assumptions used in our estimate of fair value for our Mobile Service reporting unit included revenue growth rates to calculate projected future cash flows. As a measure of sensitivity, if the revenue growth rates decreased by 20%, the fair value would have still slightly exceeded the carrying value of the Mobile Service reporting unit. This result and discussion is not intended to address all potential outcomes that could have resulted if different assumptions had been used given the number of assumptions used in determining fair value and the degree of sensitivity to changes in such assumptions.

Current wording

The quantitative goodwill impairment test is dependent on many variables used to determine the fair value of each reporting unit. See Note 19 of the Notes to Consolidated Financial Statements for a description of the valuation method and related estimates and assumptions used in our quantitative impairment testing. The key assumptions used in our estimate of fair value for our Mobile Service reporting unit included revenue growth rates to calculate projected future cash flows. As a measure of sensitivity, a 20% decrease in the revenue growth rates would have resulted in an increase to the goodwill impairment charge of approximately $30 million. This result and discussion is not intended to address all potential outcomes that could have resulted if different assumptions had been used in determining our goodwill impairment given the number of assumptions used in determining the impairment and the degree of sensitivity to changes in such assumptions in the determination of the fair value.

Previous wording

As of December 31, 2024, we have $223.4 million of goodwill related to the Domestic reporting unit, $524.3 million related to the Import reporting unit, $481.7 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 December 31, 2025, we have $221.7 million of goodwill related to the Domestic reporting unit, $530.6 million related to the Import reporting unit, $498.8 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

We may first perform a qualitative assessment to determine whether it is more likely than not that a franchise right asset is impaired. We elected to perform quantitative tests for our annual franchise rights impairment testing as of April 30, 2024, and no impairment charges resulted from these quantitative tests. We identified 15 stores that, while they each had franchise rights fair value in excess of or equal to carrying value, had lower relative performance compared to our total store population. We will continue to monitor these stores, as well as all stores, for events or changes in circumstances that may indicate potential impairment. The remainder of our stores had franchise rights with calculated fair values that substantially exceeded their carrying values as of April 30, 2024.

Current wording

We may first perform a qualitative assessment to determine whether it is more likely than not that a franchise right asset is impaired. We elected to perform quantitative tests for our annual franchise rights impairment testing as of April 30, 2025. As a result of the quantitative tests, we determined the franchise rights carrying values for nine stores exceeded their fair values, and we recorded non-cash franchise rights impairment charges of $71.7 million during the three months ended June 30, 2025, to reduce the carrying value of the stores’ franchise agreements to their estimated fair values. We also identified 10 stores that, while they each had franchise rights fair value in excess of carrying value, had lower relative performance compared to our total store population. The remainder of our stores had franchise rights with calculated fair values that substantially exceeded their carrying values.

Previous wording

The quantitative franchise rights impairment test is dependent on many variables used to determine the fair value of each store’s franchise rights. See Note 19 of the Notes to Consolidated Financial Statements for a description of the valuation method and related estimates and assumptions used in our quantitative impairment testing. Based on a sensitivity analysis of these estimates and assumptions, including if the fair value of each of our franchise rights had been determined to be a hypothetical 10% lower as of the valuation date of April 30, 2024, the resulting impairment charge would have been approximately $3 million. The sensitivity analysis performed, including the effect of a hypothetical 10% decrease in fair value estimates, is not intended to provide a sensitivity analysis of every potential outcome.

Current wording

The quantitative franchise rights impairment test is dependent on many variables used to determine the fair value of each store’s franchise rights. See Note 19 of the Notes to Consolidated Financial Statements for a description of the valuation method and related estimates and assumptions used in our quantitative impairment testing. Based on a sensitivity analysis of these estimates and assumptions, including if the fair value of each of our franchise rights had been determined to be a hypothetical 10% lower as of the valuation date of April 30, 2025, the resulting incremental impairment charge would have been approximately $7 million. The sensitivity analysis performed, including the effect of a hypothetical 10% decrease in fair value estimates, is not intended to provide a sensitivity analysis of every potential outcome.

Previous wording

During the fourth quarter of 2024, we concluded that a triggering event had occurred that indicated the fair values of franchise rights for two stores may have been less than their carrying values. Therefore, we performed quantitative franchise rights impairment tests for these stores during the fourth quarter of 2024. As a result of the quantitative tests, we determined the franchise rights for both stores were fully impaired, and we recorded non-cash franchise rights impairment charges of $12.5 million during the fourth quarter of 2024. As of December 31, 2024, we had 79 stores with franchise rights totaling $861.2 million.

Current wording

During the fourth quarter of 2025, we concluded that a triggering event had occurred that indicated the fair values of franchise rights for three stores may have been less than their carrying values. Therefore, we performed quantitative franchise rights impairment tests for these stores during the fourth quarter of 2025. As a result of the quantitative tests, we determined the franchise rights carrying values for these stores exceeded their fair values, and we recorded non-cash franchise rights impairment charges of $22.0 million during the fourth quarter of 2025. As of December 31, 2025, we had 76 stores with franchise rights totaling $1.0 billion.

Previous wording

We have presented below our operating results on a same store basis to reflect our internal performance. The “Same Store” amounts presented below include the results of our stores for the identical months in each period presented in the comparison, commencing with the first full month in which the store was owned by us. Results from divested stores are excluded from both current and prior periods. Therefore, the amounts presented in the year 2023 column that is being compared to the year 2024 column may differ from the amounts presented in the year 2023 column that is being compared to the year 2022 column. We believe the presentation of this information provides a meaningful comparison of period-over-period results of our operations.

Current wording

We have presented below our operating results on a same store basis to reflect our internal performance. The “Same Store” amounts presented below include the results of our stores for the identical months in each period presented in the comparison, commencing with the first full month in which the store was owned by us. Results from divested stores are excluded from both current and prior periods. Therefore, the amounts presented in the year 2024 column that is being compared to the year 2025 column may differ from the same store amounts presented in the year 2024 column that is being compared to the year 2023 column. We believe the presentation of this information provides a meaningful comparison of period-over-period results of our operations.

Previous wording

Same store new vehicle revenue increased during 2024, as compared to 2023, due to an increase in same store unit volume, partially offset by a decrease in same store revenue PVR. Same store unit volume benefited from the increasing supply and availability of new vehicle inventory, particularly for Import manufacturers, and sustained consumer demand. Same store unit volume also benefited from an increase in vehicle affordability, partially due to an increase in manufacturer incentives, including low-interest financing and rebates. The increase in same store unit volume was partially offset by a decrease in productivity as a result of the CDK outage, which disrupted our vehicle sales, inventory, and customer relationship management functions in the latter half of June 2024.

Current wording

Same store new vehicle revenue increased during 2025, as compared to 2024, due to an increase in same store unit volume, particularly in the Domestic segment, and an increase in same store revenue PVR. Same store unit volume benefited from sustained consumer demand and better execution in our sales pipeline. In addition, same store unit volume in the prior year was adversely impacted by a decrease in productivity during the CDK outage.

Previous wording

The following table details net new vehicle inventory carrying benefit (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 U.S. 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. See Note 7 of the Notes to the Consolidated Financial Statements for more information. Floorplan assistance is based on a percentage of the manufacturer’s suggested retail price or a flat rate per vehicle and is

Previous wording

Same store parts and service revenue increased during 2024, as compared to 2023, primarily due to increases in revenue associated with warranty service of $95.3 million and customer-pay service of $40.1 million, partially offset by a decrease in wholesale parts sales of $27.8 million.

Current wording

Same store parts and service revenue increased during 2025, as compared to 2024, primarily due to increases in revenue associated with customer-pay service of $111.4 million and warranty service of $86.6 million.

Previous wording

Same store parts and service gross profit increased during 2024, as compared to 2023, primarily due to an increase in gross profit associated with warranty service of $66.4 million and customer-pay service of $10.9 million.

Current wording

Same store parts and service gross profit increased during 2025, as compared to 2024, primarily due to an increase in gross profit associated with customer-pay service of $68.6 million and warranty service of $57.5 million.

Previous wording

Parts and service revenue and gross profit associated with warranty service benefited from improved parts and labor rates, an increase in repair order volume, and higher value repair orders. Customer-pay revenue and gross profit benefited from higher value repair orders. The increases in parts and service revenue and gross profit were partially offset by the CDK outage, which disrupted our sales and service processes, resulting in a decrease in repair order volume and parts sales.

Current wording

Parts and service revenue and gross profit across all revenue types benefited from an increase in repair order volume due in part to the prior year being adversely impacted by the CDK outage, which disrupted our sales and service processes, and an increase in technician headcount. Parts and service revenue and gross profit associated with customer-pay service also benefited from higher value repair orders and improved margin performance. Parts and service revenue and gross profit associated with warranty service also benefited from an increase in manufacturer recalls, improved parts and labor rates, and higher value repair orders.

Previous wording

Same store finance and insurance revenue and gross profit decreased during 2024, as compared to 2023, due to decreases in finance and insurance gross profit PVR and used vehicle unit volume, partially offset by an increase in new vehicle unit volume. Finance and insurance gross profit PVR was adversely impacted by an increase in retail vehicle sales financed through our captive auto finance company, as well as a decrease in product penetration, driven in part by the CDK outage, which disrupted our finance and insurance sales process including our ability to offer certain products. The decreases in finance and insurance gross profit PVR were partially offset by higher realized margins on certain vehicle protection products.

Current wording

Same store finance and insurance revenue and gross profit increased during 2025, as compared to 2024, due to increases in finance and insurance revenue and gross profit PVR and vehicle unit volume. Finance and insurance revenue and gross profit PVR benefited from higher realized margins on vehicle service contracts, partially offset by an increase in retail vehicle sales financed through AutoNation Finance, which reduced finance commissions received from third-party lenders. In addition, finance and insurance gross profit in the prior year was adversely impacted by the CDK outage.

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, direct expenses, and gains or losses on the sale of auto loans receivable. 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, direct expenses, and gains or losses on the sale of auto loans receivable. 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 loss decreased during 2024, as compared to 2023, primarily due to increased interest income from the growth in managed receivables and a declining expected credit loss rate. Managed receivables increased during the year 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. 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 continues to realize operational efficiencies as the portfolio scales, resulting in reduced direct expenses as a percentage of the managed portfolio.

Previous wording

Our SG&A expenses consist primarily of compensation, including store and corporate salaries, commissions, and incentive-based compensation, as well as advertising (net of reimbursement-based manufacturer advertising rebates), and store and corporate overhead expenses, which include occupancy costs, outside service costs, information technology expenses, service loaner and rental inventory expenses, legal, accounting, and professional services, and general corporate expenses. The following table presents the major components of our SG&A.

Current wording

Our SG&A expenses consist primarily of compensation, including store and corporate salaries, commissions, and incentive-based compensation, as well as advertising (net of reimbursement-based manufacturer advertising rebates), and store and corporate overhead expenses, which include occupancy costs, outside service costs, information technology expenses, service loaner and rental inventory expenses, legal, accounting, and professional services, and general corporate expenses. The following table presents the major components of our SG&A expenses.

Previous wording

SG&A expenses slightly increased in 2024, as compared to 2023, primarily due to certain one-time compensation of approximately $43 million paid to commission-based associates to ensure business continuity as a result of the CDK outage, acquisitions and newly opened stores, an increase in transportation-related costs for parts and service customers, and an increase in advertising expenses to support vehicle sales. The increases in SG&A expenses were partially offset bya decrease in performance-driven compensation expenses partly resulting from the CDK outage, which disrupted our sales and service processes, and divestitures. As a percentage of total gross profit, SG&A expenses increased to 68.2% during 2024, from 63.4% in 2023, primarily due to moderation of gross profit, as well as the decrease in gross profit resulting from the CDK outage and the one-time compensation paid to commission-based associates during the year.

Current wording

SG&A expenses increased in 2025, as compared to 2024, primarily due to an increase in compensation expense, an increase in advertising expenses to support vehicle sales, an increase in acquisition-related expenses of $11.5 million, and acquisitions and newly opened stores. The increase in compensation expense was largely due to an increase in performance-driven compensation, as well as an increase in stock-based compensation of $10.0 million, 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. The increases in SG&A expenses were offset by decreases from the divestitures we completed in 2024 and 2025, as well as a decrease in self-insured losses largely due to the prior year including $11.7 million of losses related to hailstorms and other natural catastrophes. As a percentage of total gross profit, SG&A expenses decreased to 67.9% during 2025, from 68.2% in 2024, due to prior year gross profit and SG&A expenses being adversely impacted by the CDK outage in the prior year and effective cost management.

Previous wording

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

Current wording

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

Previous wording

During 2024, we recognized net gains of $55.1 million related to business/property divestitures, which were partially offset by asset impairments of $9.3 million.

Current wording

During 2025, we recognized $80.0 million in insurance recoveries received under our cybersecurity insurance policies for business interruption and related losses caused by the CDK outage that occurred in the prior year, partially offset by asset impairments of $37.9 million. During 2024, we recognized $55.1 million related to net gains on business/property divestitures, which were partially offset by asset impairments of $9.3 million.

Previous wording

Floorplan interest rates are variable and, therefore, increase and decrease with changes in the underlying benchmark interest rates.

Current wording

Our floorplan facilities utilize Prime-based and SOFR-based interest rates, which are variable and, therefore, our floorplan interest rates increase and decrease with changes in the underlying benchmark interest rates.

Previous wording

Other interest expense includes the interest related to non-vehicle long-term debt, commercial paper, and finance lease obligations. Other interest expense was $179.7 million in 2024 compared to $181.4 million in 2023. The decrease in interest expense of $1.7 million was driven by lower average interest rates, partially offset by higher average debt balances.

Current wording

Other interest expense was $180.0 million in 2025 compared to $179.7 million in 2024. The slight increase in interest expense of $0.3 million was driven by higher average interest rates, partially offset by lower average debt balances.

Previous wording

During 2024 and 2023, we recognized net gains of $14.5 million and $16.4 million, 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

During 2025 and 2024, we recognized net gains of $19.1 million and $14.5 million, 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

During 2024 and 2023, we recorded a net unrealized loss of $7.0 million and a net unrealized gain of $5.2 million, 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 19 of the Notes to Consolidated Financial Statements for more information.

Current wording

During 2025 and 2024, we recorded unrealized losses of $7.9 million and $7.0 million, 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 19 of the Notes to 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 24.5% in 2024 and 24.4% in 2023.

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. Our effective income tax rate was 26.6% in 2025 and 24.5% in 2024. The tax rate for 2025 reflects that the goodwill impairment charge recorded in the second quarter of 2025 was not deductible for tax purposes.

Previous wording

Discontinued operations are related to stores that were sold or terminated prior to January 1, 2014. Results from discontinued operations, net of income taxes, were primarily related to a gain on the sale of real estate in the first quarter of 2023 associated with a store that was closed prior to January 1, 2014.

Current wording

Results of discontinued operations reflected in 2023 are related to stores that were sold or terminated prior to January 1, 2014. Results from discontinued operations, net of income taxes, were primarily related to a gain on the sale of real estate in the first quarter of 2023 associated with a store that was closed prior to January 1, 2014.

Previous wording

We manage our liquidity to ensure access to sufficient funding at acceptable costs to fund our ongoing operating requirements and future capital expenditures while continuing to meet our financial obligations. We believe that our cash and cash equivalents, funds generated through operations, and amounts available under our revolving credit facility, commercial paper program, secured used vehicle floorplan facilities, and non-recourse warehouse facilities will be sufficient to fund our working capital requirements, fund the origination of auto loans receivable, service our debt, pay our tax obligations and commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future. Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to augment our liquidity, to reduce our cost of capital, or for general corporate purposes. In addition, we may seek to securitize auto loans receivable to provide funding for our auto finance company.

Current wording

We manage our liquidity to ensure access to sufficient funding at acceptable costs to fund our ongoing operating requirements and future capital expenditures while continuing to meet our financial obligations. We believe that our cash and cash equivalents, funds generated through operations, and amounts available under our revolving credit facility, commercial paper program, secured used vehicle floorplan facilities, and non-recourse warehouse facilities will be sufficient to fund our working capital requirements, fund the origination of auto loans receivable, service our debt, pay our tax obligations and commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future. Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to augment our liquidity, to reduce our cost of capital, or for general corporate purposes. In addition, we expect to periodically securitize auto loans receivable to provide funding for our auto finance company.