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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________

FORM 10-K

___________________________________________________________________

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-13395

___________________________________________________________________

SONIC AUTOMOTIVE, INC.

(Exact name of registrant as specified in its charter)

___________________________________________________________________


Delaware						56-2010790
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)

4401 Colwick Road
Charlotte, North Carolina						28211
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (704) 566-2400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

SAH

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

___________________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

The aggregate market value of the voting common equity held by non-affiliates of the registrant was approximately $1.6 billion based upon the closing sales price of the registrant’s Class A Common Stock on June 30, 2025 of $79.93 per share. The registrant has no non-voting common equity.

As of February 6, 2026, there were 21,546,494 shares of Class A Common Stock, par value $0.01 per share, and 12,029,375 shares of Class B Common Stock, par value $0.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed with the U.S. Securities and Exchange Commission in connection with the registrant’s 2026 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K to the extent described herein.

UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION

This Annual Report on Form 10-K contains, and written or oral statements made from time to time by us or by our authorized officers may contain, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address our future objectives, plans and goals, as well as our intent, beliefs and current expectations regarding future operating performance, results and events, and can generally be identified by words such as “may,” “will,” “should,” “could,” “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “foresee” and other similar words or phrases.

These forward-looking statements are based on our current estimates and assumptions and involve various risks and uncertainties. As a result, you should not place undue reliance on these statements, and you are cautioned that these forward-looking statements are not guarantees of future performance, and that actual results could differ materially from those projected in these forward-looking statements. Factors which may cause actual results to differ materially from our projections include those risks described in “Item 1A. Risk Factors” of this Annual Report on Form 10-K and elsewhere herein, as well as:

•high levels of competition in the retail automotive industry, which not only create pricing pressures on the products and services we offer, but also on businesses we may seek to acquire;

•challenges to the business model of our franchised dealerships from existing manufacturers and new technology-focused companies;

•the inability of vehicle manufacturers and their suppliers to obtain, produce and deliver vehicles or parts and accessories to meet demand at our franchised dealerships for sale and use in our parts, service and collision repair operations;

•general economic conditions in the markets in which we operate, including fluctuations in interest rates, inflation, vehicle valuations, employment levels, the level of consumer spending and consumer credit availability;

•obstacles that prevent the efficient acquisition and liquidation of used vehicle inventory;

•the number of new and used vehicles sold in the United States, including hybrid electric vehicles and battery electric vehicles, as compared to our expectations and the expectations of the market;

•our ability to generate sufficient cash flows or to obtain additional financing to fund our business expansion, capital expenditures, our share repurchase program, dividends on our common stock, acquisitions and general operating activities;

•our business and growth strategies, including, but not limited to, our EchoPark store operations and investment in new technologies;

•the reputation and financial condition of vehicle manufacturers whose brands we represent, the financial incentives vehicle manufacturers offer and their ability to design, manufacture, deliver and market their vehicles successfully;

•our relationships with vehicle manufacturers, which may affect our ability to obtain desirable new vehicle models in inventory or to complete additional acquisitions or dispositions;

•the adverse resolution of one or more significant legal proceedings against us or our subsidiaries;

•changes in laws and regulations governing the operation of automobile franchises, accounting standards, taxation requirements and environmental laws;

•changes in vehicle and parts import quotas, duties, tariffs or other restrictions, including supply shortages that could be caused by global political and economic factors or other supply chain disruptions;

•our ability to make and integrate acquisitions;

•our ability to obtain debt on commercially favorable terms;

•the rate and timing of our recovery from past cybersecurity incidents and the impact of future cybersecurity incidents and other disruptions to our information systems on our business;

•the significant control that our principal stockholders exercise over us and our business matters; and

•the rate and timing of overall economic expansion or contraction.

These forward-looking statements speak only as of the date of this Annual Report on Form 10-K or when made, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances, except as required under the federal securities laws and the rules and regulations of the U.S. Securities and Exchange Commission.

SONIC AUTOMOTIVE, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2025

TABLE OF CONTENTS


		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	25
Item 1C.	Cybersecurity	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	26

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	[Reserved]	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	77
Item 8.	Financial Statements and Supplementary Data	78
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	78
Item 9A.	Controls and Procedures	78
Item 9B.	Other Information	78
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	78

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	79
Item 11.	Executive Compensation	79
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	79
Item 13.	Certain Relationships and Related Transactions, and Director Independence	79
Item 14.	Principal Accountant Fees and Services	79

PART IV
Item 15.	Exhibits and Financial Statement Schedules	80
Item 16.	Form 10-K Summary	85

SIGNATURES		86
CONSOLIDATED FINANCIAL STATEMENTS		F-4

SONIC AUTOMOTIVE, INC.

PART I

Item 1. Business.

Sonic Automotive, Inc. was incorporated in Delaware in 1997. References to “Sonic,” the “Company,” “we,” “us” or “our” used throughout this Annual Report on Form 10-K refer to Sonic Automotive, Inc. and its subsidiaries. We are one of the largest automotive retailers in the United States (the “U.S.”) (as measured by reported total revenue). As a result of the way we manage our business, we had three reportable segments as of December 31, 2025: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment. For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2025, we operated 111 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 14 stores in the Powersports Segment. The Franchised Dealerships Segment consists of 134 new vehicle franchises (representing 24 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment consists of 18 stores and operates in 10 states. The Powersports Segment consists of 41 franchises at 14 locations (11 full-service dealerships and three authorized retail outlets) in three states.

Reportable Segments

The Franchised Dealerships Segment provides comprehensive sales and services, including: (1) sales of both new and used cars and light trucks; (2) sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, “Fixed Operations”); and (3) arrangement of third-party financing, extended warranties, service contracts, insurance and other aftermarket products (collectively, “F&I”) for our guests. The EchoPark Segment sells used cars and light trucks and arranges third-party F&I product sales for our guests in pre-owned vehicle specialty retail locations, and does not offer customer-facing Fixed Operations services. The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) third party F&I services. All three segments generally operate independently of one another, with the exception of certain shared back-office functions and corporate overhead costs.

The majority of our revenue is related to our Franchised Dealerships Segment. In 2025, Franchised Dealerships Segment revenue represented approximately 85.0% of total revenue (compared to 83.9% in 2024). In 2025, EchoPark Segment revenue represented approximately 13.7% of total revenue (compared to 15.0% in 2024). In 2025, Powersports Segment revenue represented approximately 1.3% of total revenue (compared to 1.1% in 2024). See Note 14, “Segment Information,” to the accompanying consolidated financial statements for additional financial information regarding our three reportable segments.

SONIC AUTOMOTIVE, INC.

Our Business

The following charts depict the multiple sources of revenue and gross profit for the year ended December 31, 2025:

As of December 31, 2025, we operated in the following states:


Market	Number of Stores in Franchised Dealerships Segment	Number of Stores in EchoPark Segment	Number of Stores in Powersports Segment	Percent of 2025 Total Revenue
Texas	27	6	7	26.2	%
California	23	1	—	24.6	%
Colorado	7	3	—	7.8	%
Tennessee	9	1	—	7.4	%
Florida	9	—	—	5.9	%
Alabama	7	1	—	4.6	%
North Carolina	3	2	2	4.2	%
Georgia	5	1	—	4.0	%
Idaho	3	—	—	3.3	%
Maryland	4	—	—	1.8	%
Virginia	1	—	—	1.8	%

Nevada	2	1	—	1.8	%
South Carolina	2	—	—	1.4	%
Indiana	3	—	—	1.1	%
Missouri	3	1	—	1.1	%
New Mexico	1	—	—	0.7	%
New York	1	—	—	0.3	%
Arizona	—	1	—	0.5	%
South Dakota	—	—	5	0.4	%
Louisiana	1	—	—	0.4	%
Disposed stores and holding companies	—	—	—	0.7	%
Total	111	18	14	100.0	%

SONIC AUTOMOTIVE, INC.

In the future, we expect to acquire dealerships and open new stores that we believe will strengthen our brand portfolio and divest dealerships or close stores that we believe will not yield acceptable returns over the long term. The retail automotive industry remains highly fragmented, and we believe that further consolidation may occur. We believe that attractive acquisition opportunities continue to exist for dealership groups with the capital and experience to identify, acquire and integrate new dealership acquisitions. Our ability to complete acquisitions and open new stores in the future will depend on many factors, including the availability of financing and the existence of any contractual provisions that may restrict our acquisition activity.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for a discussion of our plans for the use of capital generated from operations.

The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand:


	Percentage of New Vehicle Revenues
	Year Ended December 31,
Brand	2025		2024		2023
Luxury:
BMW	23	%	25	%	25	%
Mercedes	13	%	14	%	14	%
Land Rover	7	%	5	%	4	%
Lexus	6	%	5	%	5	%
Audi	5	%	5	%	6	%
Porsche	4	%	4	%	4	%
Cadillac	4	%	2	%	2	%
Other luxury (1)	1	%	3	%	3	%
Total Luxury	63	%	63	%	63	%
Mid-line Import:
Honda	11	%	11	%	10	%
Toyota	9	%	9	%	9	%
Volkswagen	1	%	2	%	2	%
Other mid-line imports (2)	2	%	1	%	2	%
Total Mid-line Import	23	%	23	%	23	%
Domestic:
General Motors (3)	6	%	6	%	6	%
Chrysler Dodge Jeep RAM	5	%	4	%	4	%
Ford	3	%	4	%	4	%
Total Domestic	14	%	14	%	14	%
Total	100	%	100	%	100	%

(1)Includes Alfa Romeo, Infiniti, Jaguar, Maserati, MINI, Polestar and Volvo.

(2)Includes Hyundai, Mazda, Nissan and Subaru.

(3)Includes Buick, Chevrolet and GMC.

SONIC AUTOMOTIVE, INC.

Business Strategy

Increase Sales of Higher-Margin Products and Services. We continue to pursue opportunities to increase our sales of higher-margin products and services by expanding the following, which we believe allows us to withstand the impact of economic cycles and other factors that may adversely impact automobile sales generally:

Finance, Insurance and Other Aftermarket Products. Each sale of a new or used vehicle gives us an opportunity to provide our guests with third-party financing and insurance options and earn financing fees and insurance and other aftermarket product commissions. We also offer our guests the opportunity to purchase extended warranties, service contracts and other aftermarket products from third-party providers whereby we earn a commission for arranging the contract sale. We work with a single third-party provider for the majority of our extended warranties, service contracts and other aftermarket products. We currently offer a wide range of non-recourse financing, leasing, other aftermarket products, extended warranties, service contracts and insurance products to our guests. We emphasize menu-selling techniques and other best practices to increase our sales of F&I products at all of our stores.

Parts, Service and Collision Repair. Each of our franchised dealerships offers a fully integrated service and parts department. Manufacturers permit warranty repair work to be performed only at franchised dealerships such as ours. As a result, our franchised dealerships are uniquely qualified and positioned to perform work covered by manufacturer warranties on increasingly complex vehicles. We believe we can continue to grow our profitable parts and service business over the long term by increasing service capacity, investing in sophisticated equipment and well-trained technicians, using competitive variable-rate pricing structures, focusing on the guest experience, and efficiently managing our parts inventory. In addition, we believe our emphasis on selling extended service contracts and maintenance contracts associated with retail new and used vehicle sales will drive further service and parts business in our franchised dealerships as we increase the potential to retain current service and parts guests beyond the term of the standard manufacturer warranty period.

Certified Pre-Owned Vehicles. Various manufacturers provide franchised dealers the opportunity to sell certified pre-owned (“CPO”) vehicles. This certification process extends the standard manufacturer warranty on the CPO vehicle, which we believe increases our potential to retain the pre-owned purchaser as a future parts and service customer. As CPO vehicles can only be sold by franchised dealerships and CPO warranty repair work can only be performed at franchised dealerships, we believe CPO vehicles add to our unit sales volume and will increase our Fixed Operations business over the long term.

Maintain Diverse Revenue Streams. We have multiple revenue streams across our three operating segments. In addition to new vehicle sales, our revenue sources include used vehicle sales (including through our EchoPark Segment), which we believe are generally less sensitive to economic cycles, production challenges and other factors that may affect new vehicle sales. Our Powersports Segment further diversifies our vehicle sales offerings to include motorcycles, personal watercraft and all-terrain vehicles. Our Fixed Operations sales carry a higher gross margin than new and used vehicle sales and generally are not as sensitive to economic conditions as new or used vehicle sales. We also offer guests assistance in obtaining third-party financing and a range of automobile-related third-party warranty, insurance and other aftermarket products.

Execute Our EchoPark Segment Strategy. We have developed a diversified business model by augmenting our manufacturer-franchised dealership operations with our EchoPark pre-owned vehicle specialty retail business. Our EchoPark business generally operates independently from our franchised dealerships business (except for certain shared back-office functions and corporate overhead costs) and offers consumers a modern omnichannel guest experience and a wide selection of quality pre-owned vehicle inventory at low prices. Sales operations for EchoPark began in 2014, and, as of December 31, 2025, we operated 18 stores in the EchoPark Segment in 10 states. Under our current EchoPark long-term growth strategy, we plan to continue to enhance our nationwide EchoPark distribution network to reach 90% of the U.S. population at maturity.

Expand Our Omnichannel Capabilities. Automotive consumers have become increasingly comfortable using technology to research their vehicle buying alternatives, communicate with store personnel, and complete a portion or all of a vehicle purchase online. The internet presents a marketing, advertising and sales channel that we will continue to utilize to drive value for our stores and enhance the guest experience. Our existing platforms give us the ability to leverage new technology to integrate systems, customize our dealership websites and use our data to improve the effectiveness of our advertising and interaction with our guests. These platforms also allow us to market all of our products and services to a national audience and, at the same time, support the local market penetration of our individual stores.

SONIC AUTOMOTIVE, INC.

Focus on the Guest Experience. We focus on providing a high-quality guest experience and maintaining high levels of customer satisfaction. Our personalized sales process is designed to appeal to our guests by providing high-quality vehicles and service through a positive, “guest-centric” experience. Several manufacturers offer specific financial incentives on a per vehicle basis if certain Customer Satisfaction Index (“CSI”) levels (which vary by manufacturer) are achieved by a dealership. In addition, all manufacturers consider CSI scores in approving acquisitions or awarding new dealership open points. To keep dealership and executive management focused on customer satisfaction, we include CSI results as a component of our incentive-based compensation programs for certain groups of associates and executive management.

Train, Develop and Retain Our Teammates. We believe our teammates are the cornerstone of our business and crucial to our financial success. Our goal is to develop our teammates and foster an environment where our teammates can contribute and grow with the Company. Teammate satisfaction is very important to us, and we believe a high level of teammate satisfaction reduces turnover and enhances our guests’ experience at our stores by pairing our guests with well-trained support personnel. We believe that our comprehensive training of our teammates provides us with an advantage over other competitors in retaining talent and providing a high-quality guest experience.

Optimize Our Capital Structure. As part of our cash management strategy, we periodically repurchase shares of our Class A Common Stock in open-market or structured transactions to maintain our targeted capital structure. In addition to allowing us to return capital to our stockholders, stock repurchases offset dilution caused by the exercise of stock options and the vesting of equity compensation awards. We regularly review repurchase activity and consider a number of factors in determining when to execute repurchases, including, but not limited to, historical and projected results of operations, the current economic environment and the market price of our Class A Common Stock. During 2025, we repurchased approximately 1.3 million shares of our Class A Common Stock for approximately $82.4 million. As of December 31, 2025, our total remaining share repurchase authorization was approximately $169.9 million.

Maximize Asset Returns Through Process Execution. We have developed standardized operating processes that are documented in operating playbooks for our stores. Through the continued implementation of our operating playbooks, we believe organic growth opportunities exist by offering a more favorable buying experience to our guests and creating efficiencies in our business processes. We believe the development, refinement and implementation of these operating processes will enhance the guest experience, make us more competitive in the markets we serve and drive profit growth across each of our revenue streams.

Optimize Our Brand Portfolio. Our long-term growth and acquisition strategy is primarily focused on acquiring desirable businesses in markets that meet certain strategic criteria for population growth and vehicle registration rates, among other considerations including shifts in consumer preferences. A majority of our franchised dealerships are either luxury or mid-line import brands. For 2025, approximately 86% of our total new vehicle revenue was generated by luxury and mid-line import dealerships, which typically have higher operating margins, more stable Fixed Operations departments, lower associate turnover and lower inventory levels than other brand categories. We actively evaluate acquisition opportunities and other strategic transactions that we believe will strengthen or diversify our brand portfolio.

Relationships with Manufacturers

Each of our Franchised Dealerships Segment and Powersports Segment locations operates under a separate franchise or dealer agreement that governs the relationship between the dealership and the manufacturer. Each franchise or dealer agreement specifies the location of the dealership for the sale of vehicles and for the performance of certain approved services in a specified market area. The designation of such areas generally does not guarantee exclusivity within a specified territory. In addition, most manufacturers allocate vehicles on a “turn and earn” basis that rewards high unit sales volume. A franchise or dealer agreement incentivizes the dealer to meet specified standards regarding showrooms, facilities and equipment for servicing vehicles, inventories, minimum net working capital, personnel training and other aspects of the business. Each franchise or dealer agreement also gives the related manufacturer the right to approve the dealer operator and any material change in management or ownership of the dealership. Each manufacturer may terminate a franchise or dealer agreement under certain circumstances, such as a change in control of the dealership without manufacturer approval, significant damage to the reputation or financial condition of the dealership, the death, removal or withdrawal of the dealer operator, the conviction of the dealership or the dealership’s owner or dealer operator of certain crimes, the failure to adequately operate the dealership or maintain new vehicle inventory or financing arrangements, insolvency or bankruptcy of the dealership or a material breach of other provisions of the applicable franchise or dealer agreement.

SONIC AUTOMOTIVE, INC.

Many automobile manufacturers have developed and implemented policies regarding public ownership of dealerships, which include the ability to force the sale of their respective franchises and deny transfer approval requests:

•upon a change in control of the Company or a material change in the composition of our Board of Directors;

•if an automobile manufacturer or distributor acquires more than 5% of the voting power of our securities; or

•if an individual or entity (other than an automobile manufacturer or distributor) acquires more than 20% of the voting power of our securities, and the manufacturer disapproves of such individual’s or entity’s ownership interest.

To the extent that new or amended manufacturer policies restrict the number of dealerships that may be owned by a dealership group or the transferability of our common stock, such policies could have a material adverse effect on us. We believe that we will continue to be able to renew at expiration all of our existing franchise and dealer agreements.

Many states have placed limitations upon manufacturers’ and distributors’ ability to sell new motor vehicles directly to customers in their respective states in an effort to protect dealers from practices they believe constitute unfair competition. In general, these statutes make it unlawful for a manufacturer or distributor to compete with a new motor vehicle dealer in the same brand operating under an agreement or franchise from the manufacturer or distributor in the relevant market area. Certain states, including Florida, Georgia, North Carolina, South Carolina and Virginia, limit the amount of time that a manufacturer or distributor may temporarily operate a dealership. These statutes have been increasingly challenged by new entrants into the retail automotive industry and, to the extent that these statutes are repealed or weakened, such changes could have a material adverse effect on our business.

In addition, each of the states in which our dealerships currently do business requires manufacturers or distributors to show “good cause” for terminating or failing to renew a dealer’s franchise or dealer agreement. Further, each of these states provides some method for dealers to challenge manufacturer attempts to establish dealerships of the same brand in their relevant market area.

While in any individual period conditions may vary, historically we have acquired a significant percentage of our retail used vehicle inventory directly from consumers through our appraisal process, in addition to third-party vehicle auctions. We also acquire used vehicle inventory from wholesalers, franchised and independent dealers and fleet owners, such as leasing companies and rental car companies. The supply of late-model used vehicles is influenced by a variety of factors, including the total number of vehicles in operation; the volume of new vehicle sales, which in turn generate used car trade-ins; lease return rates; and the number of used vehicles sold or remarketed through retail channels, wholesale transactions and automotive auctions. According to industry sources, there were approximately 298.7 million light vehicles in operation in the U.S. as of December 31, 2025. During calendar year 2025, approximately 16.3 million new cars and 38.4 million used cars were sold in the U.S.

Competition

The retail automotive industry is highly competitive. Depending on the geographic market, we compete both with dealers offering the same brands and product lines as ours and dealers offering other manufacturers’ vehicles. We also compete for vehicle sales with auto brokers, leasing companies and services offered on the internet that provide referrals to other dealerships, broker vehicle sales between customers and other dealerships or sell vehicles directly to customers via online purchase transactions and delivery. We compete with small, local dealerships and with large multi-franchise and pre-owned automotive dealership groups.

We believe that the principal competitive factors in vehicle sales are the location of stores, the ability of stores to offer an attractive selection of the most popular vehicles at competitive market pricing (including the effect of applicable manufacturer rebates, below-market financing from manufacturers or their captive finance subsidiaries, and other special offers), the successful interplay between the digital and physical aspects of car buying, the marketing campaigns conducted by manufacturers and the quality of services and guest experience at our stores. In particular, pricing has become more important as a result of well-informed customers using a variety of sources available on the internet to determine current retail market prices. Other competitive factors include customer preference for makes of automobiles, vehicle brand reputation, and coverage under manufacturer warranties.

SONIC AUTOMOTIVE, INC.

In addition to competition for vehicle sales, we also compete with other auto dealers, service and repair centers, auto parts retailers and independent mechanics in providing vehicle parts and service work. We believe that the principal competitive factors in parts and service sales are price, the use of factory-approved replacement parts, factory-trained technicians, the familiarity with a manufacturer’s makes and models and the quality of the guest experience. A number of regional and national chains offer selected parts and services at prices that may be lower than our prices.

In arranging third-party financing for our guests’ vehicle purchases, we compete with a broad range of financial institutions outside of our preferred lender network. In addition, certain financial institutions are now offering financing and other F&I products directly to consumers through the internet. We believe that the principal competitive factors in arranging third-party financing are convenience, interest rates and contract terms.

Our operating results depend, in part, on national and regional automobile-buying trends, local and regional economic factors and other regional competitive pressures. Conditions and competitive pressures affecting the markets in which we operate, such as price-cutting by dealers in these areas, or in any new markets we enter, could adversely affect our results, even though the retail automotive industry as a whole might not be significantly affected.

Governmental Regulations and Environmental Matters

Numerous federal, state and local regulations govern our business of marketing, selling, financing and servicing automobiles. We are also subject to laws and regulations relating to business corporations.

Under the laws of the states in which we currently operate, as well as the laws of other states into which we may expand, we must obtain a license in order to establish, operate or relocate a franchised dealership, an EchoPark store or a powersports store or to operate an automotive service and repair center. These laws also regulate our conduct of business, including our sales, operating, advertising, financing and employment practices, including federal and state wage-hour, anti-discrimination and other employment practices laws.

Our financing activities with customers are subject to federal truth-in-lending, consumer privacy, consumer leasing and equal credit opportunity regulations as well as state and local motor vehicle finance laws, installment finance laws, usury laws and other installment sales laws. Some states regulate finance fees that may be paid as a result of vehicle sales.

Federal, state and local environmental regulations, including regulations governing air and water quality, the clean-up of contaminated property and the use, storage, handling, recycling and disposal of gasoline, oil and other materials, also apply to us and our franchised dealership, EchoPark and powersports properties.

As with automobile dealerships generally, and service, parts and collision repair operations in particular, our business involves the use, storage, handling and contracting for recycling or disposal of hazardous or toxic substances or wastes and other environmentally sensitive materials. Our business also involves the past and current operation and/or removal of above ground and underground storage tanks containing such substances, wastes or materials. Accordingly, we are subject to regulation by federal, state and local authorities that establish health and environmental quality standards, provide for liability related to those standards and provide penalties for violations of those standards. We are also subject to laws, ordinances and regulations governing remediation of contamination at facilities we own or operate or to which we send hazardous or toxic substances or wastes and other environmentally sensitive materials for treatment, recycling or disposal.

We do not have any known material environmental liabilities, and we believe that compliance with governmental regulations, including environmental laws and regulations will not, individually or in the aggregate, have a material adverse effect on our results of operations, financial condition and cash flows. However, soil and groundwater contamination is known to exist at certain properties owned and used by us. Further, environmental laws and regulations are complex and subject to frequent change. In addition, in connection with our past or future acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material.

SONIC AUTOMOTIVE, INC.

Information About Our Executive Officers

The following is a description of the names and ages of the executive officers of the Company, indicating all positions and offices with the Company held by each such person and each person’s principal occupation or employment during the past five years. Each executive officer of the Company is elected by our Board of Directors and holds office from the date of election until thereafter removed by the Board.

Name

Age

Position(s) and Office(s) with Sonic

David Bruton Smith

Chairman and Chief Executive Officer

Jeff Dyke

President and Director

Heath R. Byrd

Executive Vice President and Chief Financial Officer

David Bruton Smith was elected as Chairman of the Board in July 2022 and as Chief Executive Officer of Sonic in September 2018. Previously, Mr. Smith served as Sonic’s Executive Vice Chairman and Chief Strategic Officer from March 2018 to September 2018, as Sonic’s Vice Chairman from March 2013 to March 2018 and as an Executive Vice President of Sonic from October 2008 to March 2013. He has been a director of Sonic since October 2008 and has served in Sonic’s organization since 1998. Prior to being named an Executive Vice President and a director in October 2008, Mr. Smith had served as Sonic’s Senior Vice President of Corporate Development since March 2007. Mr. Smith served as Sonic’s Vice President of Corporate Strategy from October 2005 to March 2007, and also served prior to that time as Dealer Operator and General Manager of several Sonic dealerships. Mr. Smith is also a director, an officer and a co-owner of Sonic Financial Corporation (“SFC”), the largest stockholder of Sonic, and a director and a co-owner of Speedway Motorsports, LLC (“Speedway Motorsports”). He is the brother of B. Scott Smith and Marcus G. Smith, who are also directors of Sonic.

Jeff Dyke was elected to the office of President of Sonic in September 2018 and is responsible for direct oversight for all of Sonic’s retail operations. In addition, Mr. Dyke has been a director of Sonic since July 2019. Mr. Dyke served as Sonic’s Executive Vice President of Operations from October 2008 to September 2018. From March 2007 to October 2008, Mr. Dyke served as Sonic’s Division Chief Operating Officer - Southeast Division, where he oversaw retail automotive operations for the states of Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas. Mr. Dyke first joined Sonic in October 2005 as Sonic’s Vice President of Retail Strategy, a position that he held until April 2006, when he was promoted to Division Vice President - Eastern Division, a position he held from April 2006 to March 2007. Prior to joining Sonic, Mr. Dyke worked in the retail automotive industry at AutoNation, Inc. from 1996 to 2005, where he held several positions in divisional, regional and dealership management with that company.

Heath R. Byrd has served as Sonic’s Executive Vice President and Chief Financial Officer since April 2013. Mr. Byrd was previously a Vice President and Sonic’s Chief Information Officer from December 2007 to March 2013 and has served our organization since 2007. Prior to joining Sonic, Mr. Byrd served in a variety of management positions at HR America, Inc., a workforce management firm that provided customized human resource and workforce development through co-sourcing arrangements, including as a director, as President and Chief Operating Officer and as Chief Financial Officer and Chief Information Officer. Prior to HR America, Mr. Byrd served as a Manager in the Management Consulting Division of Ernst & Young LLP.

Human Capital Resources

As of December 31, 2025, we had approximately 11,000 employees, which we refer to as associates or teammates, and with whom we strive to maintain good relationships, which benefit both our Company and our teammates. Approximately 200 of our associates, primarily service technicians in northern California, are represented by a labor union. Although only a small percentage of our associates is represented by a labor union, we may be affected by labor strikes, work slowdowns and walkouts at automobile manufacturers’ manufacturing facilities.

As we manage our workforce, we focus on associate satisfaction, turnover and training. We benchmark our compensation practices and benefits programs against those of comparable companies and in the geographic areas where our operations are located. We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled and unskilled labor throughout our organization. Our notable health, welfare, retirement and training benefits include:

•Company-subsidized health insurance;

•401(k) plan with Company matching contributions;

SONIC AUTOMOTIVE, INC.

•paid vacation, sick and bereavement leave;

•paid community service and volunteer leave; and

•tuition assistance programs and Company-paid training opportunities.

We strive to maintain an inclusive environment free from discrimination of any kind, including in our hiring practices and daily operations. Our teammates have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline. Our policies require all reports of inappropriate behavior to be taken seriously and promptly investigated with appropriate action taken to address and prevent such behavior.

Company Information

Our website can be accessed at www.sonicautomotive.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as proxy statements and other information we file with, or furnish to, the U.S. Securities and Exchange Commission (the “SEC”) are available free of charge on our website as well as the website of the SEC, www.sec.gov. We make these documents available as soon as reasonably practicable after we electronically transmit them to the SEC. Except as otherwise stated in these documents, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we transmit to the SEC.

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RISK FACTORS

Item 1A. Risk Factors.

Our business, financial condition, results of operations, cash flows and prospects and the prevailing market price and performance of our Class A Common Stock may be adversely affected by a number of factors, including the material risks noted below. Our stockholders and prospective investors should consider these risks, uncertainties and other factors prior to making an investment decision.

Risks Related to the Retail Automotive Industry

Competition among automotive retailers and the use of the internet in automotive retail may reduce our profit margins on vehicle sales and related businesses.

Automotive retailing is a highly competitive business. Our competitors include publicly and privately owned dealerships, some of which are larger and have greater financial and marketing resources than we do. Many of our competitors sell the same or similar makes and models of new and used vehicles that we offer in our markets at competitive prices. We do not have any cost advantage in purchasing new vehicles from manufacturers due to economies of scale or otherwise. We typically rely on advertising, merchandising, sales expertise, customer service reputation and dealership location to sell new vehicles. In addition, our F&I business and other related businesses, which have higher margins than sales of new and used vehicles, are subject to competition from various financial institutions and other third parties. Our revenues and profitability could be materially adversely affected if certain state dealer franchise laws are relaxed to permit automobile manufacturers to retail vehicles directly to consumers.

Moreover, consumers are using the internet to compare pricing for vehicles and related F&I services and, in some cases, complete a vehicle purchase transaction, which may further reduce margins for new and used vehicles and profits for related F&I services. If internet-based new vehicle sales are allowed to be conducted without the involvement of franchised dealers, our business could be materially adversely affected. In addition, other dealership groups have aligned themselves with services offered on the internet or are investing heavily in the development of their own internet sales capabilities, which could materially adversely affect our business, financial condition and results of operations.

During the COVID-19 pandemic, the gross profit per unit for new and used vehicles increased above historic levels due to shortages in the availability of new and used vehicle inventory. In the years following the pandemic, gross profit per unit normalized and, while remaining higher than historic levels before the COVID-19 pandemic, has trended downwards as inventory, particularly for new vehicles, has become more readily available. If gross profit per unit continues to decline, as we anticipate it may, it could adversely affect our business and results of operation.

Challenges to the business model of our franchised dealerships from existing automobile manufacturers and the effect of new companies entering into the automotive space may affect our ability to grow or maintain the business over the long term.

Large and well-capitalized technology-focused companies have continued to enter into the automotive space in recent years. Companies including, but not limited to, Alphabet Inc., Amazon.com, Inc., Apple Inc., Lucid Group, Inc., Lyft, Inc., Rivian Automotive, Inc., Tesla, Inc. and Uber Technologies, Inc. may challenge the existing automotive manufacturing, retail sales, maintenance and repair, and transportation models. For example, Tesla, Inc. has been challenging state dealer franchise laws in many states with mixed results, but it has achieved success with its direct-to-consumer new vehicle sales business model and its vehicles have been accepted by many consumers, even in states where dealer franchise laws appear to preclude such vehicle sales. In addition, other manufacturers whose new vehicles we sell have recently announced their intentions to implement an “agency” model of direct manufacturer to consumer sales in certain European markets. Although the long-term impact of the participation of vehicle manufacturers in direct sales is undetermined, these other large companies may continue to change consumers’ view on how automobiles should be manufactured, equipped, retailed, maintained and utilized in the future. Because these companies have the ability to connect with individual consumers easily through technology platforms, we may ultimately be at a competitive disadvantage in marketing, selling, financing and servicing vehicles. In addition, certain automobile manufacturers have expressed interest in or begun selling directly to customers. The franchised dealer’s participation in that potential future transaction type is unclear and our operations and financial results may be negatively impacted if the role of franchised dealers diminishes.

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RISK FACTORS

Our dealers depend upon new vehicle sales and, therefore, their success depends in large part upon consumer demand for and manufacturer supply of particular vehicles.

The success of our dealerships depends in large part on the overall success of the vehicle lines they carry. New vehicle sales are the largest component of our total revenue and lead to sales of higher-margin products and services such as finance, insurance, vehicle protection products and other aftermarket products, and parts and service operations. Our new vehicle sales operations are comprised primarily of luxury and mid-line import brands, which exposes us to manufacturer concentration risks. Although our parts and service operations and used vehicle and powersports businesses may serve to offset some of this risk, changes in automobile manufacturers’ vehicle models and consumer demand for particular vehicles may have a material adverse effect on our business.

Our business is highly dependent on consumer demand and preferences, including with respect to new technologies such as alternative fuel vehicles. The inability of manufacturers to produce and supply such vehicles at levels consistent with the overall level of customer demand actually experienced could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations. In addition, events such as stop-sale orders, manufacturer safety recalls and negative publicity or legal proceedings related to these events may have a negative impact on the products we sell. If such events are significant, the profitability of our dealerships related to those manufacturers could be adversely affected and we could experience a material adverse effect on our overall results of operations, financial position and cash flows.

Further, manufacturers typically allocate their vehicles among dealerships based on the sales history of each dealership. Supplies of popular new vehicles may be limited by the applicable manufacturer’s production capabilities. Popular new vehicles that are in limited supply typically produce the highest profit margins. We depend on manufacturers to provide us with a desirable mix of popular new vehicles. Our operating results may be materially adversely affected if we do not obtain a sufficient supply of these vehicles on a timely basis or if our inventory mix does not align with consumer demand.

Our business is dependent upon access to quality sources of used vehicle inventory. Our business sales and results of operations could be materially adversely affected by obstacles that prevent the efficient acquisition and liquidation of used vehicle inventory.

A reduction in the availability of, or access to, sources of desirable, high-quality used vehicle inventory could have a material adverse effect on our business, sales and results of operations at all of our locations. In recent years, we have experienced low used vehicle inventory availability at wholesale auction and from off-lease turn-ins, which led to an increase in the cost to acquire high-quality used vehicle inventory. To the extent that used vehicle inventory levels are low (compared to historical levels) and the costs to acquire high-quality inventory are high, we may experience decreased sales volume and margins on sales of our used vehicle inventory, which may have a material negative impact on our business, results of operations and profitability, particularly in the EchoPark Segment.

We obtain a significant percentage of our used vehicle inventory through our proprietary trade-in appraisal system as this sourcing outlet is generally more profitable and more convenient for our guests and potential guests. A significant portion of our used vehicle inventory is sourced through trade-ins for purchases of new vehicles. Accordingly, if we fail to make appraisal offers in line with broader market trade-in offer trends, or fail to recognize those trends, it could adversely affect our ability to acquire used vehicle inventory and increase the risk of loss of business to our competitors. Loss of sale, involving trades and insufficient levels of inventory, could also force us to purchase a greater percentage of used vehicle inventory from third-party wholesale auctions, which is generally less profitable due to high bidding costs and additional costs associated with transporting the acquired used vehicles to our store locations. Our inability to source high-quality used vehicle inventory from third-party auctions could reduce the demand for our used vehicle inventory offerings. See “Competition among automotive retailers and the use of the internet in automotive retail may reduce our profit margins on vehicle sales and related businesses” above in this “Item 1A. Risk Factors” for further discussion.

Used vehicle inventory is subject to depreciation risk. Accordingly, if we develop excess inventory, the inability to liquidate such inventory at prices that allow us to meet desirable profit margins or to recover our costs could have a material adverse effect on our results of operations.

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RISK FACTORS

Our business is dependent on global economies and supply chains that could be adversely affected by natural and man-made disasters, adverse weather and public health crises.

The automotive manufacturing supply chain spans the globe. As such, supply chain disruptions resulting from widespread public health crises, armed conflict, natural disasters, adverse weather and other events may affect the flow of new vehicle or parts inventory to us or our manufacturing partners. Such events could lead to widespread reductions in travel and economic activity, including automobile manufacturing and supply chain disruptions and production delays. Supply chain disruptions and production delays similar to those experienced in recent years could significantly impact the supply of new vehicles, parts and accessories that we sell. In addition, these disruptions and delays could lead to low new and used vehicle inventory levels which could lead to increases in the sales prices and costs to acquire new and used vehicles. We also cannot reasonably predict the timing or magnitude of impacts to our business due to any economic recession or depression that may develop or related economic challenges, including higher inflation or further increases in interest rates.

A decline of available financing or rising financing costs in the consumer automotive lending market may adversely affect our vehicle unit sales volume.

A significant portion of vehicle buyers finance their purchases of automobiles. Sub-prime lenders have historically provided financing for consumers who, for a variety of reasons including poor credit histories and lack of down payment, do not have access to more traditional finance sources. In the event that interest rates are at elevated levels or rise, lenders tighten their credit standards, or there is a decline in the availability of credit in the consumer lending market, the costs of financing could influence consumer buying decisions and the ability of consumers to purchase vehicles could be limited, which could have a material adverse effect on our business, revenues and profitability.

Our business may be adversely affected by tariffs, import product restrictions and foreign trade risks that may impair our ability to sell the products that we offer profitably.

A significant portion of our business involves the sale of vehicles, parts or vehicles composed of parts that are manufactured outside the U.S. As a result, our operations are subject to risks of importing merchandise, including import duties or tariffs, exchange controls, trade restrictions, fluctuations in the relative values of currencies, work stoppages, supply chain disruptions, production delays, inflation, increases in interest rates, and general political and socioeconomic conditions in other countries. In addition, armed conflict and increased international political or economic instability, including the escalation of trade tensions as a result of economic sanctions imposed in the U.S. or otherwise, may cause disruptions to foreign and domestic supply chains and manufacturing operations or result in price increases that adversely impact automotive manufacturers or our business. In 2025, the U.S. government announced the imposition of various tariffs, including tariffs targeting imported automobiles and automobile parts and other tariffs on goods from specific countries and trading blocs. The U.S. has been targeted with reciprocal tariffs and other retaliatory actions in response. Although the implementation of many of these tariffs and retaliatory measures have been paused or delayed and negotiations and the state of international trade policy and relations continue to evolve, these tariffs, and other quotas, duties, tariffs or other restrictions, or adjustments to presently existing quotas, duties or tariffs in the future, imposed by the U.S. or the countries from which our products are imported, may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices, which may negatively affect affordability to consumers of certain vehicles and reduce demand for certain vehicle makes and models.

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RISK FACTORS

Our facilities and operations are subject to extensive governmental laws and regulations. If we are found to be in violation of, or subject to liabilities under, any of these laws or regulations or if new laws or regulations are enacted that adversely affect our operations, then our business, operating results, financial condition, cash flows and prospects could suffer.

The retail automotive industry, including our facilities and operations, is subject to a wide range of federal, state and local laws and regulations, such as those relating to motor vehicle sales, retail installment sales, leasing, sales of finance, insurance and vehicle protection products, licensing, consumer protection, consumer privacy, employment practices, escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety. With respect to motor vehicle sales, retail installment sales, leasing, and sales of finance, insurance and vehicle protection products at our dealerships and stores, we are subject to various laws and regulations, the violation of which could subject us to consumer class action or other lawsuits or governmental investigations and adverse publicity, in addition to administrative, civil or criminal sanctions. With respect to employment practices, we are subject to various laws and regulations, including complex federal, state and local wage and hour and anti-discrimination laws. We are also subject to lawsuits and governmental investigations alleging violations of these laws and regulations, including purported class action lawsuits, which could result in significant liability, fines and penalties. The violation of other laws and regulations to which we are subject also can result in administrative, civil or criminal sanctions against us, which may include a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business, as well as significant liability, fines and penalties. We devote significant resources to comply with applicable federal, state and local regulation of health, safety, environmental, zoning and land use regulations, and we may need to spend additional time, effort and money to keep our operations and existing or acquired facilities in compliance. In addition, we may be subject to broad liabilities arising out of environmental contamination at our currently and formerly owned or operated facilities, at locations to which hazardous substances were transported from such facilities, and at such locations related to entities formerly affiliated with us. Although for some such liabilities we believe we are entitled to indemnification from other entities, we cannot assure that such entities will view their obligations as we do or will be able to satisfy them. Failure to comply with applicable laws and regulations may have an adverse effect on our business, operating results, financial condition, cash flows and prospects.

Changes in consumer demand toward fuel-efficient hybrid vehicles, plug-in hybrid electric vehicles and battery electric vehicles, and resulting shifts by manufacturers to meet demand, could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations.

Variability in consumer behavior, volatile fuel prices and the availability of manufacturer initiatives and federal and state tax credits and incentives to increase the use of fuel-efficient and electric vehicles have affected and may continue to affect consumer preferences for new and used vehicles. In recent years, manufacturers increased production focus on the manufacture of fuel-efficient hybrid vehicles, plug-in hybrid electric vehicles (“PHEVs”) and battery electric vehicles (“BEVs”). Subsequently, the supply of BEVs exceeded actual demand, which resulted in rising inventory levels and declines in new vehicle margins as dealers attempted to match inventory levels with consumer demand. While the expiration of the federal tax credit on certain electric vehicles on September 30, 2025 resulted in a higher rate of electric vehicle sales during 2025, many manufacturers have significantly curtailed their expansion of PHEV and BEV production. The inability of manufacturers to produce such vehicles at levels consistent with the overall level of customer demand actually experienced, or our inability to tailor our inventory levels and sales practices to meet fluctuations in demand for these vehicles, could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations.

In the future, certain PHEVs and BEVs may require less frequent or less costly maintenance and repairs than traditional internal combustion engine vehicles due to their mechanical design and features. In addition, advances in technology by manufacturers and their suppliers and their continued research and development investments have contributed to a general increase in the overall reliability, longevity and efficiency of automobiles. The long-term effects of increased market share for PHEVs and BEVs are uncertain and may include reduced maintenance and repairs revenues, changes in manufacturer warranties and complimentary maintenance programs from which we realize parts, service and collision repair revenues, and changes in the level of sales or profitability of certain warranty and maintenance products we offer our customers. To the extent that the market share for PHEVs, BEVs and other non-internal combustion engine vehicles increases rapidly or such vehicles comprise a significant percentage of new or used vehicles being sold or operated nationwide, we may experience a disruption in our parts, service and collision repair revenues or revenues from certain warranty and maintenance products that we sell, any of which could have a material adverse effect on our overall business and results of operations.

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RISK FACTORS

Risks Related to Our Growth Strategy

Our investment in new business strategies, services and technologies is inherently risky and could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations.

We have invested and expect to continue to invest in new business strategies, services and technologies, including our EchoPark and powersports businesses. Such endeavors involve significant risks and uncertainties, including allocating management time and resources away from our other operations, insufficient revenues to offset expenses associated with these new investments, inadequate return of capital on our investments and unidentified issues not discovered in our due diligence of such strategies and offerings. Because these ventures are inherently risky, no assurance can be given that such strategies and offerings will be successful and will not have a material adverse effect on our reputation, financial condition and operating results.

Our ability to make acquisitions, execute our growth strategy for each of our business segments and grow organically may be restricted by our ability to obtain capital, the terms of the instruments governing our long-term debt and the need to obtain consent from manufacturers.

We intend to finance future real estate and dealership acquisitions with cash generated from operations, through issuances of our stock or debt securities and through borrowings under credit arrangements. We may not be able to obtain additional financing by issuing stock or debt securities due to the market price of our Class A Common Stock, overall market conditions or certain covenants under the instruments that govern our long-term debt that restrict our ability to issue additional indebtedness, or the need for manufacturer consent to the issuance of equity securities. In recent years, financial markets have experienced elevated interest rates, which may make it more difficult for us to obtain financing on attractive terms. Using cash to complete acquisitions or to invest in our expansion plans could substantially limit our operating and financial flexibility.

The amount of capital presently available to us is limited to the liquidity available under our existing debt agreements and cash flows generated through operating activities. Pursuant to the Credit Facilities (as defined below), we are restricted from making dealership acquisitions without lender consent in any fiscal year if the aggregate cost of all such acquisitions is in excess of certain amounts. Our ability to obtain additional sources of financing may be limited by the fact that substantially all of the assets of our dealerships are pledged to secure the indebtedness under the Credit Facilities and the Silo Floor Plan Facilities (as defined below). These pledges may impede our ability to borrow from other sources. The pace and scale of the growth of our businesses may be limited in the event other sources of capital are unavailable.

In addition, we are dependent to a significant extent on our ability to finance our new and certain of our used vehicle inventory under the Floor Plan Facilities (as defined below) or the Silo Floor Plan Facilities (collectively, “Floor Plan Financing”). Floor Plan Financing arrangements allow us to borrow money to buy a particular new vehicle from the manufacturer or a used vehicle on trade-in or at auction and pay off the loan when we sell that particular vehicle. We must obtain Floor Plan Financing or obtain consents to assume existing floor plan notes payable in connection with our acquisition of dealerships. In the event that we are unable to obtain such financing, our ability to complete dealership acquisitions could be limited.

We are required to obtain the approval of the applicable manufacturer before we can acquire an additional franchise of that manufacturer. Certain manufacturers also limit the number of its dealerships that we may own in total, the number of dealerships we may own in a particular geographic area, or our national market share of that manufacturer’s sales of new vehicles. In addition, under an applicable franchise or dealer agreement or under state law, a manufacturer may have a right of first refusal to acquire a dealership that we seek to acquire. We cannot assure you that manufacturers will approve future acquisitions or do so on a timely basis, which could impair the execution of our acquisition strategy.

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RISK FACTORS

We may not adequately anticipate all of the demands that growth through strategic acquisitions or brand development will impose or be able to determine the actual financial condition of dealerships we acquire until after we complete the acquisition and take control of the dealerships. Failure to effectively integrate acquired businesses with our existing operations could adversely affect our future operating results.

Our future operating results depend on our ability to integrate the operations of acquired businesses with our existing operations. Our growth strategy has focused on the pursuit of strategic acquisitions or brand development that either expand or complement our business. We face risks growing through acquisitions or expansion. These risks include, but are not limited to: incurring significantly higher capital expenditures and operating expenses; failing to integrate the operations and personnel of acquired dealerships; entering new markets with which we are unfamiliar; incurring potential undiscovered liabilities and operational difficulties at acquired dealerships; disrupting our ongoing business; diverting our management resources; failing to maintain uniform standards, controls and policies; impairing relationships with employees, manufacturers and customers as a result of changes in management; failing to retain or attract appropriate dealership management personnel; incurring incremental expenses for standardized accounting and computer systems, as well as integration difficulties; failing to obtain a manufacturer’s consent to the acquisition of one or more of its franchises or to renew the franchise or dealer agreement on terms acceptable to us; and incorrectly valuing entities to be acquired or assessing markets entered.

The operating and financial condition of acquired businesses cannot be determined accurately until we assume control. Although we conduct what we believe to be a prudent level of due diligence regarding the operating and financial condition of the businesses we purchase, in light of the circumstances of each transaction, an unavoidable level of risk remains regarding the actual operating condition of these businesses. Similarly, many of the dealerships we acquire, including some of our largest acquisitions, do not have financial statements audited or prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). We may not have an accurate understanding of the historical financial condition and performance of our acquired entities prior to acquisition. Until we actually assume control of business assets and their operations, we may not be able to ascertain the actual value or understand the potential liabilities of the acquired entities and their operations.

Risks Related to Our Relationships with Vehicle Manufacturers

Our operations may be adversely affected if one or more of our manufacturer franchise or dealer agreements is terminated or not renewed.

Each of our franchised dealerships operates under a separate franchise or dealer agreement with the applicable automobile manufacturer. Without a franchise or dealer agreement, we cannot obtain new vehicles from a manufacturer or advertise as an authorized factory service center. As a result, we are significantly dependent on our relationships with the manufacturers.

Moreover, manufacturers exercise a great degree of control over the operations of our dealerships through the franchise and dealer agreements. The franchise and dealer agreements govern, among other things, our ability to purchase vehicles from the manufacturer and to sell vehicles to customers. Our franchise and dealer agreements do not grant us the exclusive right to sell a manufacturer’s product within a given geographic area. Our revenues or profitability could be materially adversely affected if any of our manufacturers awards franchises to others in the same markets where we operate or if existing franchised dealers increase their market share in our markets. Each of our franchise or dealer agreements provides for termination or non-renewal for a variety of causes, including certain changes in the financial condition of the dealerships and any unapproved change of ownership or management. Manufacturers may also have a right of first refusal if we seek to sell dealerships.

We cannot guarantee that any of our existing franchise and dealer agreements will be renewed or that the terms and conditions of such renewals will be favorable to us. Actions taken by manufacturers to exploit their superior bargaining position in negotiating the terms of franchise and dealer agreements or renewals of these agreements or otherwise could also have a material adverse effect on our business, results of operations, financial condition and cash flows.

In recent years, certain manufacturers whose new vehicles we sell have implemented an “agency” model of selling new vehicles in certain European markets, which is intended to facilitate sales directly by the manufacturer to the customer, using the existing franchised dealership as a logistics and delivery partner. Under current agency models, franchised dealerships receive a fee or similar compensation for facilitating the sale by the manufacturer of a new vehicle, but the purchased new vehicle would not be held in inventory. The timing and extent of further implementation and evaluating the relative success of agency sales models in European markets are uncertain and difficult to predict. Further, it is difficult to predict whether such a model may be adopted by manufacturers or permitted by state laws in the U.S. Adoption of this sales model by manufacturers in the geographic markets in which we operate could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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RISK FACTORS

Our failure to meet a manufacturer’s customer satisfaction, financial and sales performance or facility requirements may adversely affect our profitability and our ability to acquire new dealerships.

A manufacturer may condition its allotment of vehicles, our participation in bonus programs or our acquisition of additional franchises upon our compliance with its brand and facility standards. These standards may require investments in technology and facilities that we otherwise would not make. This may put us in a competitive disadvantage with other competing dealerships and may ultimately result in our decision to sell a franchise when we believe it may be difficult to recover the cost of the required investment to reach the manufacturer’s brand and facility standards.

In addition, many manufacturers attempt to measure customers’ satisfaction with their sales and warranty service experiences through manufacturer-determined CSI scores. The components of CSI vary by manufacturer and are modified periodically. Franchise and dealer agreements may also impose financial and sales performance standards. Under our agreements with certain manufacturers, a dealership’s CSI scores, and financial and sales performance standards may be considered as factors in evaluating applications for additional dealership acquisitions. From time to time, some of our dealerships have had difficulty meeting various manufacturers’ CSI requirements or performance standards. We cannot assure you that our dealerships will be able to comply with these requirements or performance standards in the future. A manufacturer may refuse to consent to our acquisition of one of its franchises if it determines our dealerships do not comply with its CSI requirements or performance standards, which could impair the execution of our acquisition strategy. In addition, we receive incentive payments from the manufacturers based, in part, on CSI scores, which could be materially adversely affected if our CSI scores decline.

If state dealer franchise laws are repealed or weakened, our dealerships may be more susceptible to termination, non-renewal or renegotiation of their franchise and dealer agreements.

State dealer franchise laws generally provide that a manufacturer may not terminate or refuse to renew a franchise or dealer agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal. Some state dealer franchise laws allow dealers to file protests or petitions or to attempt to comply with the manufacturer’s criteria within the notice period to avoid the termination or non-renewal. Certain automobile manufacturers’ lobbying efforts may lead to the repeal or revision of state dealer franchise laws. If dealer franchise laws are repealed or weakened in the states in which we operate, manufacturers may be able to terminate our franchises without providing advance notice, an opportunity to cure or a showing of good cause. Without the protection of state dealer franchise laws, it may also be more difficult for our dealerships to renew their franchise or dealer agreements upon expiration.

The ability of a manufacturer to grant additional franchises is based on several factors which are not within our control. If manufacturers grant new franchises in areas near or within our existing markets, this could negatively impact our revenues and/or profitability. In addition, current state dealer franchise laws generally restrict the ability of automobile manufacturers to enter the retail market and sell directly to consumers. However, if manufacturers obtain the ability to retail vehicles directly to consumers and choose to do so in our markets, such competition could have a material adverse effect on us.

Our sales volume and profit margin on each sale may be materially adversely affected if manufacturers reduce or discontinue their incentive programs.

Our dealerships depend on the manufacturers for certain sales incentives or employee pricing promotions, vehicle warranties, customer rebates, new and used vehicle financing or leasing incentives, dealer incentives on new vehicles, manufacturer floor plan interest and advertising assistance, and sponsorship of CPO vehicle sales by authorized new vehicle dealers that are intended to promote and support dealership new vehicle sales. Manufacturers routinely modify their incentive programs in response to changing market conditions. A reduction or discontinuation of a manufacturer’s incentive programs may materially adversely impact vehicle demand and affect our results of operations.

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RISK FACTORS

Our sales volume may be materially adversely affected if manufacturer-affiliated captive finance companies change their customer financing programs or are unable to provide floor plan financing.

One of the primary finance sources used by consumers in connection with the purchase or lease of a new or used vehicle is the manufacturer-affiliated captive finance companies. These captive finance companies rely, to a certain extent, on the public debt markets to provide the capital necessary to support their financing programs. In addition, the captive finance companies will occasionally change their loan or lease underwriting criteria to alter the risk profile of their loan or lease portfolio or as a result of changes in interest rates or projected vehicle residual values. A limitation or reduction of available consumer financing for these or other reasons could affect consumers’ ability to purchase or lease a vehicle and, thus, could have a material adverse effect on our sales volume. Any deterioration of our relationship with the particular manufacturer-affiliated captive finance source could adversely affect our relationship with the affiliated manufacturer, and vice versa.

Our parts and service sales volume and margins are dependent on manufacturer warranty programs.

Franchised automotive retailers perform factory authorized service work and sell original replacement parts on vehicles covered by warranties issued by the automotive manufacturer. Dealerships which perform work covered by a manufacturer warranty are reimbursed at rates established by the manufacturer. For 2025, approximately 18% of our Fixed Operations revenues was for work covered by manufacturer warranties and complimentary maintenance programs. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty repair work, our Fixed Operations revenues and margins could be adversely affected.

Adverse conditions affecting one or more key manufacturers or lenders may negatively impact our results of operations.

Our results of operations depend on the products, services, and financing and incentive programs offered by major automobile manufacturers and could be negatively impacted by any significant changes to these manufacturers’ financial condition, marketing strategy, vehicle design, production capabilities, management, labor relations or increased labor costs, or negative publicity or reputation impacts concerning a particular manufacturer or vehicle model.

Events such as stop-sale orders, labor strikes or other disruptions in production, including those caused by natural disasters or cybersecurity incidents, which may adversely affect a manufacturer may also adversely affect us. In particular, labor strikes at a manufacturer that continue for a substantial period of time could have a material adverse effect on our business. Similarly, the delivery of vehicles from manufacturers at a time later than scheduled due to supply chain disruptions or other delays, which may occur during critical periods of new product introductions, could limit sales of those vehicles during those periods. Adverse conditions affecting these and other important aspects of manufacturers’ operations and public perception may adversely affect our ability to sell their automobiles and, as a result, significantly and detrimentally affect our business and results of operations.

Moreover, our business could be materially adversely impacted by the bankruptcy of a major vehicle manufacturer or related lender. We may be unable to collect some or all of our significant receivables that are due from such manufacturer or lender, and we may be subject to preference claims relating to payments made by such manufacturer or lender prior to bankruptcy. Consumer demand for such manufacturer’s products could be substantially reduced and such manufacturer may be relieved of its indemnification obligations with respect to product liability claims. In addition, a manufacturer in bankruptcy could attempt to terminate all or certain of our franchises, in which case, we may not receive adequate compensation for our franchises and a manufacturer that acts as a lender could attempt to terminate our floor plan financing and demand repayment of any amounts outstanding. We may be unable to arrange financing for our guests for their vehicle purchases and leases through such lender, in which case, we would be required to seek financing with alternate financing sources, which may be difficult to obtain on similar terms, if at all. Additionally, any such bankruptcy may result in us being required to incur impairment charges with respect to the inventory, fixed assets and intangible assets related to certain dealerships, which could adversely impact our results of operations and financial condition and our ability to remain in compliance with the financial ratios contained in our debt agreements.

SONIC AUTOMOTIVE, INC.

RISK FACTORS

Manufacturer stock ownership restrictions may impair our ability to maintain or renew franchise or dealer agreements or to issue additional equity.

Certain of our franchise and dealer agreements prohibit transfers of any ownership interests of a dealership and, in some cases, its parent, without prior approval of the applicable manufacturer. Our existing franchise and dealer agreements could be terminated if a person or entity acquires a substantial ownership interest in us or acquires voting power above certain levels without the applicable manufacturer’s approval. While the holders of our Class B Common Stock currently maintain voting control of Sonic, their future investment decisions as well as those of holders of our Class A Common Stock are generally outside of our control and could result in the termination or non-renewal of existing franchise or dealer agreements or impair our ability to negotiate new franchise or dealer agreements for dealerships we acquire in the future. In addition, if we cannot obtain any requisite approvals on a timely basis, we may not be able to issue additional equity or otherwise raise capital on terms acceptable to us. These restrictions may also prevent or deter a prospective acquirer from acquiring control of us.

Risks Related to Our Sources of Financing and Liquidity

Our significant indebtedness could materially adversely affect our financial health, limit our ability to finance future acquisitions, expansion plans and capital expenditures and prevent us from fulfilling our financial obligations.

As of December 31, 2025, our total outstanding indebtedness was $3.5 billion, which includes floor plan notes payable, long-term debt and short-term debt.

We have up to $350.0 million of maximum borrowing availability under an amended and restated syndicated revolving credit facility (the “Revolving Credit Facility”) and up to $$2.1 billion of maximum borrowing availability for combined syndicated new and used vehicle inventory floor plan financing (the “Floor Plan Facilities” and, together with the Revolving Credit Facility, the “Credit Facilities”). As of December 31, 2025, we had $300.3 million available for additional borrowings under the Revolving Credit Facility based on the applicable borrowing base calculation, which is affected by numerous factors, including eligible asset balances. We are permitted to borrow under the Revolving Credit Facility only if, at the time of the borrowing, we can provide all representations and warranties and are in compliance with all financial and other covenants contained therein. We have capacity to finance new and used vehicle inventory purchases under floor plan agreements with various manufacturer-affiliated captive finance companies and other lending institutions (the “Silo Floor Plan Facilities”) as well as the Floor Plan Facilities. As of December 31, 2025, we had $95.0 million of total availability for revolving loans under a real estate-based credit agreement entered into in November 2019 (the “Mortgage Facility”). In addition, our 4.625% Senior Notes due 2029 (the “4.625% Notes”), our 4.875% Senior Notes due 2031 (the “4.875% Notes”), our real estate-based credit agreement entered into in December 2024 (the “Sidecar Facility”) and our other debt instruments allow us to incur additional indebtedness, including secured indebtedness, as long as we comply with the terms thereunder.

A significant number of our dealership properties are subject to long-term lease arrangements that commonly have initial terms of 10 to 20 years with renewal options generally ranging from five to 10 years. Many of these leases require compliance with financial and operating covenants similar to those under the Credit Facilities and require monthly payments of rent that may fluctuate based on interest rates and local consumer price indices. The total future minimum lease payments related to these leases and certain equipment leases are significant and are disclosed in Note 12, “Commitments and Contingencies,” to the accompanying consolidated financial statements.

Our failure to comply with certain covenants in these agreements could materially adversely affect our ability to access our borrowing capacity, subject us to acceleration of our outstanding debt, result in a cross default on other indebtedness and have a material adverse effect on our ability to continue our business.

SONIC AUTOMOTIVE, INC.

RISK FACTORS

We may not have sufficient funds to meet our obligation to repay all or a substantial portion of the outstanding principal amount of our indebtedness when it becomes due.

The instruments that govern our long-term indebtedness contain certain provisions that may cause all or a substantial portion of the outstanding principal amount of our indebtedness to become immediately due and payable. The Credit Facilities, the Mortgage Facility and the Sidecar Facility, the indentures governing the 4.625% Notes and the 4.875% Notes, and many of our leases contain numerous financial and operating covenants. A breach of any of these covenants could result in a default under the applicable agreement. In addition, a default under one agreement could result in a cross default and acceleration of our repayment obligations under the other agreements or prevent us from borrowing under such other agreements. If a default or cross default were to occur, we may not be able to pay our debts or to borrow sufficient funds to refinance them. Even if new financing were available, it may not be on terms acceptable to us. If a default were to occur, we may be unable to adequately finance our operations because of acceleration and cross-default provisions and the value of our common stock would be materially adversely affected. As a result of this risk, we could be forced to take actions that we otherwise would not take, or not take actions that we otherwise might take, in order to comply with the covenants in these agreements.

Moreover, many of our mortgage notes’ principal and interest payments are based on an amortization period that extends beyond the maturity dates of the notes. We will be required to repay or refinance the remaining principal balances for certain of our mortgages with balloon payments at the notes’ maturity dates, which range from 2026 to 2031. The amounts to be repaid or refinanced at the maturity dates could be significant. We may not have sufficient liquidity to make such payments at the notes’ maturity dates.

In addition, upon the occurrence of a change of control (as defined in the indentures governing the 4.625% Notes and the 4.875% Notes), holders of such notes will have the right to require us to purchase all or any part of such holders’ notes at an applicable premium. The events that constitute a change of control under the indentures governing the 4.625% Notes and the 4.875% Notes may also constitute a default under the Credit Facilities, the Mortgage Facility and the Sidecar Facility. The agreements or instruments governing any future debt that we may incur may contain similar provisions regarding repurchases in the event of a change of control triggering event.

There can be no assurance that we would have sufficient resources available to satisfy all of our obligations under these debt instruments should all or substantial portions of the principal become immediately due and payable. In the event we do not have sufficient liquidity to repay the principal balances, we may not be able to refinance the debt at interest rates that are acceptable to us or, depending on market conditions, at all. Our inability to repay or refinance these notes could have a material adverse effect on our business, financial condition and results of operations.

Our ability to make interest and principal payments when due to holders of our debt securities depends upon our future performance and our receipt of sufficient funds from our subsidiaries.

Our ability to meet our debt obligations and other expenses will depend on our future performance, which will be affected by financial, business, domestic and foreign economic conditions, the regulatory environment and other factors, many of which we are unable to control. Substantially all of our consolidated assets are held by our subsidiaries and substantially all of our consolidated cash flow and net income are generated by our subsidiaries. Accordingly, our cash flow and ability to service debt depend to a substantial degree on the results of operations of our subsidiaries and upon the ability of our subsidiaries to provide us with cash. We may receive cash from our subsidiaries in the form of dividends, loans or distributions, which we may use to service our debt obligations or for working capital. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to distribute cash to us or to make funds available to service debt.

Our use of hedging transactions could limit our financial gains or result in financial losses.

To reduce our exposure to interest rate fluctuations, we have entered into, and in the future may enter into, certain derivative instruments (or hedging agreements). As of December 31, 2025, we had interest rate cap agreements related to a portion of our Secured Overnight Financing Rate (“SOFR”)-based variable rate debt to limit our exposure to rising interest rates. See the heading “Derivative Instruments and Hedging Activities” under Note 6, “Long-Term Debt,” to the accompanying consolidated financial statements. We intend to hedge as much of our interest rate exposure as management determines is in our best interest based on potential volatility and the cost of such hedging transactions.

Our hedging transactions expose us to certain risks and financial losses, including, among other things: counterparty credit risk; the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value, downward adjustments or “mark-to-market losses,” which would affect our recorded stockholders’ equity amounts; and all of our hedging instruments contain terms and conditions with which we are required to meet. A failure on our part to effectively hedge interest rate exposure may adversely affect our financial condition and results of operations.

SONIC AUTOMOTIVE, INC.

RISK FACTORS

Risks Related to the Ownership of Our Common Stock

Concentration of voting power and anti-takeover provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, Delaware law and our franchise and dealer agreements may reduce the likelihood of a potential change of control from a third party. At the same time, such voting power concentration also could increase the likelihood of a change of control notwithstanding other factors.

Our common stock is divided into two classes with different voting rights. This dual class stock ownership allows the present holders of the Class B Common Stock to exercise voting control of the Company. Holders of Class A Common Stock have one vote per share on all matters. Holders of Class B Common Stock have 10 votes per share on all matters, except that they have only one vote per share on any transaction proposed or approved by our Board of Directors or a Class B common stockholder or otherwise benefiting the Class B common stockholders constituting a: “going private” transaction; disposition of all or substantially all of our assets; transfer resulting in a change in the nature of our business; or merger or consolidation in which current holders of our common stock would own less than 50% of the common stock following such transaction.

The holders of Class B Common Stock (which include SFC and the OBS Family, LLC, entities which David Bruton Smith, Sonic’s Chairman and Chief Executive Officer, and his family members, including B. Scott Smith and Marcus G. Smith, both directors of Sonic, control) currently hold less than a majority of our outstanding common stock, but a majority of our voting power. As a result, the holders of Class B Common Stock may be able to control fundamental corporate matters and transactions, subject to the above limitations. The concentration of voting power may also discourage, delay or prevent a change of control of us from a third party even if the action was favored by holders of Class A Common Stock. In addition, a sale or transfer of shares by one or more of the holders of Class B Common Stock could result in a change of control or put downward pressure on the market price of our Class A Common Stock. The perception among the public that these sales or transfers may occur could also contribute to a decline in the market price of our Class A Common Stock.

Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws make it more difficult for our stockholders to take corporate actions at stockholders’ meetings. In addition, stock options, restricted stock and restricted stock units granted under the Sonic Automotive, Inc. 2012 Stock Incentive Plan or the Sonic Automotive, Inc. 2012 Formula Restricted Stock and Deferral Plan for Non-Employee Directors and other obligations become immediately exercisable or automatically vest upon a change in control. Delaware law also makes it difficult for stockholders who have recently acquired a large interest in a company to consummate a business combination transaction with the company against its directors’ wishes. Finally, our franchise and dealer agreements allow the manufacturers the right to terminate the agreements upon a change of control of the Company and impose restrictions upon the transferability of any significant percentage of our stock to any one person or entity that may be unqualified, as defined by the manufacturer, to own one of its dealerships. The inability of a person or entity to qualify with one or more of our manufacturers may prevent or seriously impede a potential takeover bid. In addition, there may be provisions of our lending arrangements that create an event of default upon a change in control. These agreements, corporate governance documents and laws may have the effect of discouraging, delaying or preventing a change in control or preventing stockholders from realizing a premium on the sale of their shares if we were acquired.

Potential conflicts of interest between us and our officers or directors could adversely affect our future performance.

Our Chairman and Chief Executive Officer, David Bruton Smith, as well as Marcus G. Smith and B. Scott Smith, also serve as directors of Speedway Motorsports. Further, the Smith family and certain trusts, the beneficiaries of which are members of the Smith family, directly and indirectly control a substantial majority of the voting power of our company’s outstanding voting stock.

We will likely in the future enter into transactions with entities controlled by the Smith family or our other affiliates. We believe that all of our existing arrangements with affiliates are as favorable to us as if the arrangements were negotiated between unaffiliated parties, although the majority of these transactions have neither been verified by third parties in that regard nor are likely to be so verified in the future. Potential conflicts of interest could arise in the future between us and our officers or directors in the enforcement, amendment or termination of arrangements existing between them.

SONIC AUTOMOTIVE, INC.

RISK FACTORS

Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws designate the state and federal courts of Delaware as the exclusive forums for certain claims against the Company, which could increase the costs of bringing a claim or limit the ability of a stockholder to bring a claim in a judicial forum viewed by a stockholder as favorable.

Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for claims for (1) any derivative action or proceeding brought on behalf of Sonic (other than derivative actions brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder); (2) any action asserting a claim of a breach of, or based on, a fiduciary duty owed by any current or former director, officer or other employee of Sonic to Sonic or Sonic’s stockholders; (3) any action asserting a claim against Sonic or any current or former director, officer or other employee or stockholder of Sonic arising pursuant to any provision of the General Corporation Law of the State of Delaware, our Amended and Restated Certificate of Incorporation or our Amended and Restated Bylaws; or (4) any action asserting a claim against Sonic governed by the internal affairs doctrine of the State of Delaware. Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws also provide that, unless the Board of Directors otherwise consents in writing, to the extent permitted by applicable law, the United States District Court for the District of Delaware shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act or any ancillary claims related thereto which are subject to the ancillary jurisdiction of the federal courts.

The exclusive forum provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws may increase the costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that he, she or it finds favorable for disputes with the Company or the Company’s directors, officers or other employees. Such provisions may also discourage lawsuits against the Company or the Company’s directors, officers and other employees. The Delaware courts or the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than to our stockholders.

While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions requiring claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether courts in other jurisdictions will enforce provisions such as those contemplated in our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws, including whether a court would enforce the provision requiring claims arising under the Securities Act or the Exchange Act to be brought in the United States District Court for the District of Delaware. If the exclusive forum provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws are found to be unenforceable in a particular action, we or a stockholder may incur additional costs associated with resolving such an action or the validity of the exclusive forum clause on appeal.

General Risk Factors

Our business will be harmed if overall consumer demand suffers from a severe or sustained downturn.

Our business is heavily dependent on consumer demand and preferences. Retail new vehicle sales are cyclical and historically have experienced periodic downturns characterized by oversupply and weak demand. In recent years, we experienced an imbalance between consumer demand for new vehicles and available supply of new vehicle inventory due to supply chain disruptions and manufacturing delays. However, vehicle availability has largely recovered, and as inventory levels build, profit margins may be adversely affected. Retail vehicle sales cycles are often correlated with changes in overall economic conditions, consumer confidence, the level of discretionary personal income and credit availability. Deterioration in any of these conditions from current levels may have a material adverse effect on our retail business, particularly sales of new and used automobiles. Recently, the U.S. economy experienced elevated levels of inflation, tariff pressures, heightened interest rates and volatile gasoline and automobile insurance prices, which, combined with higher vehicle prices, have created affordability challenges for our consumers. In the event that the cost to consumers remains elevated, or increases further, consumers may be less willing to purchase vehicles. In addition, our business may be adversely affected by isolated unfavorable conditions or events in our local markets. Due to the provisions and terms contained in our franchise or dealer agreements or operating lease agreements, we may not be able to relocate a dealership operation to a more favorable location without incurring significant costs or penalties, if permitted at all. In addition, severe or sustained changes in gasoline prices or overall shifts in consumer sentiment toward alternative fuel vehicles may lead to a shift in consumer buying patterns. Availability of preferred models may not exist in sufficient quantities to satisfy consumer demand and allow our stores to meet sales expectations.

SONIC AUTOMOTIVE, INC.

RISK FACTORS

The outcome of legal and administrative proceedings we are or may become involved in could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects.

We are involved, and expect to continue to be involved, in various legal and administrative proceedings arising out of the conduct of our business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified. Although we vigorously defend ourselves in all legal and administrative proceedings, the outcomes of pending and future proceedings arising out of the conduct of our business, including litigation with customers, employment-related lawsuits, contractual disputes, class actions, purported class actions and actions brought by governmental authorities, cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects.

Climate change legislation or regulations restricting emission of greenhouse gases could result in increased operating costs and reduced demand for the vehicles we sell.

The U.S. Environmental Protection Agency has adopted rules under existing provisions of the federal Clean Air Act that require: (1) a reduction in emissions of greenhouse gases from motor vehicles; (2) certain construction and operating permit reviews for greenhouse gas emissions from certain large stationary sources; and (3) monitoring and reporting of greenhouse gas emissions from specified sources on an annual basis. The adoption of any laws or regulations requiring significant increases in fuel economy requirements or new federal or state restrictions on emissions of greenhouse gases from our operations or on vehicles and automotive fuels in the U.S. could adversely affect demand for those vehicles and require us to incur costs to reduce emissions of greenhouse gases associated with our operations.

Employee attrition, the loss of key personnel and limited management and personnel resources could adversely affect our operations and growth.

Our success depends to a significant degree upon the continued contributions of our management team, particularly our Chief Executive Officer, President, other senior management, and sales and service personnel. Additionally, franchise or dealer agreements may require the prior approval of the applicable manufacturer before any change is made in dealership general managers. We do not have employment agreements with most members of our senior management team, our dealership general managers and other key dealership personnel. Consequently, the loss of the services of one or more of these key employees could have a material adverse effect on our results of operations.

The market for qualified employees remains highly competitive, may impact our ability to identify and attract new employees and retain existing employees, and may subject us to increased labor costs. The loss of the services of key employees or the inability to attract additional qualified managers could have a material adverse effect on our results of operations. In addition, the lack of qualified management or employees employed by potential acquisition candidates may limit our ability to consummate future acquisitions.

Natural disasters, adverse weather and other events can disrupt our business.

Our dealerships are concentrated in certain states, including California, Colorado, Florida and Texas, in which actual or threatened natural disasters and severe weather events (such as earthquakes, wildfires, landslides, hailstorms, floods and hurricanes) may disrupt our store operations, which may adversely impact our business, financial condition, results of operations and cash flows. In addition to business interruption, the automotive retailing business is subject to substantial risk of property loss due to the significant concentration of property values at store locations. Although we have substantial insurance, subject to certain deductibles, limitations and exclusions, we may be exposed to uninsured or under insured losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows.

SONIC AUTOMOTIVE, INC.

RISK FACTORS

Security breaches and other disruptions to our information systems could compromise our confidential, competitive or otherwise sensitive information and expose us to liability, disrupt our business operations and otherwise negatively affect our business, including our reputation, results from operations and financial condition.

We have invested in internal and external business applications to execute our strategy of employing technology to benefit our business. In the ordinary course of business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees. Moreover, we utilize third-party software, systems and services to support critical dealership operations. The frequency and severity of cybersecurity incidents has increased in recent years and adversely impacted organizations of varying sizes. Although we have attempted to mitigate the cybersecurity risk of both our internal and outsourced functions by implementing various cybersecurity controls, an internal framework for the oversight of cybersecurity risks and other security measures, specifically as described in “Item 1C. Cybersecurity,” our information technology and infrastructure, including the systems that are provided to us by third-parties, have been, and may in the future be, vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions.

We have experienced, and may again in the future experience, material negative impacts on our business and results of operations as a result of a cybersecurity incident. Specifically, on June 19, 2024, CDK Global (“CDK”), a third-party provider of certain information systems, notified us that CDK had suspended certain systems used by us in response to a cybersecurity incident impacting CDK (the “CDK outage”). As a result, we experienced disruptions to the affected systems, which negatively impacted our ability to conduct sales, track inventory, coordinate business functions and otherwise efficiently execute our business operations. As a result of the CDK outage, our business and results of operations during the second and third fiscal quarters of 2024 were adversely affected.

Although we continue to work with CDK and other information technology vendors to take steps to strengthen our systems infrastructure, there can be no assurance that we will not be affected by another cyberattack or other cybersecurity incident affecting our information systems, including those provided to us by third parties. We remain exposed to the risk of additional interruptions of service or loss of access to systems (including our internal or externally hosted business applications) supporting our critical business functions and processes, which may negatively affect our ability to deliver vehicles or complete transactions with customers; unauthorized access or theft of customer or employee personal confidential information, including financial information, or strategically sensitive data; disruption of communications (both internally and externally) that may affect the quality of information used to make informed business decisions; additional costs and expenses; and damage to our reputation. Any cybersecurity breach or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, lost sales or damage to our reputation, and otherwise cause a loss of confidence in our services, which could materially adversely affect our competitive position, results of operations and financial condition.

We may be subject to substantial withdrawal liability assessments in the future related to a multiemployer pension plan to which certain of our dealerships make contributions pursuant to collective bargaining agreements.

Three of our dealership subsidiaries in northern California currently make fixed-dollar contributions to the Automotive Industries Pension Plan (the “AI Pension Plan”) pursuant to collective bargaining agreements between our subsidiaries and the International Association of Machinists (the “IAM”). The AI Pension Plan is a “multiemployer plan” as defined under the Employee Retirement Income Security Act of 1974, as amended. Three of our dealership subsidiaries actively contribute to the AI Pension Plan under collective bargaining agreements with the IAM. These subsidiaries employ approximately 170 individuals, which constitutes less than 2% of our total workforce. In March 2008, the Board of Trustees of the AI Pension Plan notified participants, participating employers and local unions that the AI Pension Plan’s actuary had issued a certification that the AI Pension Plan was in critical status. In conjunction with the AI Pension Plan’s critical status, all participating employers were required to increase employer contributions to the AI Pension Plan for a seven-year period which commenced in 2013. As of April 2023, the AI Pension Plan’s actuary certified that the AI Pension Plan remained in Critical Status for the plan year commencing January 1, 2023, with the projected pension liability underfunded by approximately $1.0 billion and projected to become insolvent in the 2032 plan year. In July 2023, the Pension Benefit Guaranty Corporation approved an application by the AI Pension Plan for special financial assistance in the amount of approximately $1.1 billion to address the underfunded status of the plan. Under applicable federal law, any employer contributing to a multiemployer pension plan that completely ceases participating in the plan while the plan is underfunded is subject to payment of such employer’s assessed share of the aggregate unfunded vested benefits of the plan. In certain circumstances, an employer can be assessed withdrawal liability for a partial withdrawal from a multiemployer pension plan. If any of these adverse events were to occur in the future, it could result in a substantial withdrawal liability assessment that could have a material adverse effect on our business, financial condition, results of operations or cash flows.

SONIC AUTOMOTIVE, INC.

RISK FACTORS

Tax positions may exist related to our tax filings that could be challenged by governmental agencies and result in higher income tax expenses and affect our overall liquidity if we are unable to successfully defend these tax positions.

We are subject to audits by federal and state governmental income tax agencies on a continual basis. During the course of those audits, the agencies may disagree with or challenge tax positions taken on tax returns filed for Sonic and its subsidiaries. As a result of these audits, the agencies may issue assessments and penalties based on their understanding of the underlying facts and circumstances. In the event we are not able to arrive at an agreeable resolution, we may be forced to litigate these matters. If we are unsuccessful in litigation, our results of operations and financial position may be negatively impacted.

Impairment of our goodwill, other intangible assets or other long-lived assets could have a material adverse impact on our earnings.

Goodwill and other intangible assets are subject to impairment assessments at least annually or more frequently when events or changes in circumstances indicate that an impairment may have occurred. Pursuant to applicable accounting pronouncements, we evaluate goodwill for impairment annually on April 30, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We describe the process for testing goodwill and other intangible assets more thoroughly under the heading “Critical Accounting Estimates” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” A significant amount of our goodwill is related to our franchised dealerships reporting unit, and we have significant other intangible assets associated with acquisitions of franchised dealerships. If we determine that the amount of our goodwill or other intangible assets is impaired at any point in time, we are required to reduce the balances recorded on our balance sheet. If goodwill or other intangible assets are impaired based on a future impairment test, we will be required to record a significant non-cash impairment charge that may also have a material adverse effect on our results of operations for the period in which the impairment of goodwill or other intangible assets occurs. As of December 31, 2025, our balance sheet reflected a carrying amount of approximately $421.8 million in goodwill and approximately $454.1 million in other intangible assets, net.

We are also required to test for impairment of other long-lived assets in the event certain conditions exist that may indicate the recorded value of the assets is not recoverable through future operating cash flows. These conditions include, but are not limited to, a decrease in the market pricing of a long-lived asset group, a significant change in the extent or manner in which a long-lived asset group is being used or its physical condition, a significant adverse change in legal factors or business climate that could affect the value of a long-lived asset group, an accumulation of costs significant in excess of the amount originally expected for the acquisition or construction of a long-lived asset group, a current-period operating cash flow loss combined with a history of operating cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset group, or a current expectation that, more likely than not, a long-lived asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. If we determine that the amount of certain long-lived asset groups are impaired, we are required to reduce the balances recorded on our consolidated balance sheet, which may result in a significant non-cash impairment charge.

SONIC AUTOMOTIVE, INC.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Risk Management and Strategy

Our cybersecurity strategy prioritizes detection, analysis and response to known, anticipated or unexpected threats; effective management of security risks; and resiliency against incidents. Our cybersecurity risk management processes include technical security controls, policy enforcement mechanisms, monitoring systems, employee training, tools and related services from third-party providers, and management oversight to assess, identify and manage material risks from cybersecurity threats. We implement risk-based controls to protect our information, the information of our customers, suppliers and other third parties, our information systems, our business operations, and our products and related services. We have adopted security-control principles based on the National Institute of Standards and Technology (the “NIST”) Cybersecurity Framework.

We leverage technology for our business advantage and have invested in internal and external business applications. Our regular operations involve handling sensitive data, including proprietary business information, intellectual property, and personally identifiable information of our customers, suppliers, and employees. To ensure the safety of this data, the Vice President of Information Security provides oversight and establishes central, standardized frameworks for identifying and tracking cyber-related business and compliance risks across the Company. Any risks from cybersecurity threats to our products and services are communicated to our general counsel and senior management and if deemed material, are further reviewed by the Audit Committee of our Board of Directors. We also periodically engage third-party consultants to help us assess, enhance, implement and monitor our cybersecurity risk management programs and respond to any incidents.

We have experienced cybersecurity incidents in the past and may continue to experience them in the future, whether directly or through our supply chain or other channels. In 2024, CDK, a third-party provider of certain of our information systems, experienced a cybersecurity incident that resulted in temporary suspension of certain of the systems used by us, including our dealer management system (the “DMS”), our customer relationship management system (the “CRM”) and other systems that support sales, inventory and accounting functions (collectively with the DMS and CRM the “Affected Systems”). Access to the Affected Systems was restored by July 31, 2024, and we implemented internal risk assessment and data validation procedures before resuming full operations. This incident adversely affected our business and results of operations during the second and third fiscal quarters of 2024. Since that event, we have been working with CDK and other information technology vendors to take steps to strengthen our systems infrastructure, and our processes are designed to help prevent, detect, respond to, and mitigate the impact of such incidents. However, there is no guarantee that another cyber incident would not materially affect our business strategy, results of operations or financial condition. See “General Risk Factors” in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Governance

Our Board of Directors is responsible for overseeing enterprise risk and has delegated the responsibility for the oversight of cybersecurity and information technology risks, and the Company’s preparedness for these risks, to the Audit Committee. Our Vice President of Information Security provides periodic updates to the Audit Committee in order to assist the Audit Committee in understanding the implications of cybersecurity risks. The Audit Committee meets regularly to ensure a shared understanding of cybersecurity risks, to review new regulations or laws, and to provide guidance on complex risk issues.

Our Information Security team has gained their expertise in information technology (“IT”) and cybersecurity through a combination of education, relevant degrees, certifications and prior work experience. As part of the cybersecurity process, their respective teams inform them about the prevention, detection, mitigation, and remediation of cybersecurity incidents.

The Information Security team has adopted the NIST Cybersecurity Framework as a reference to manage cybersecurity risks. This framework enables the team to implement a comprehensive statement of activities and responsibilities that cover data, information architecture, risk communications, emerging technology, third-party risk, IT operations, and regulation. By following industry best practices, the team has established a recognized baseline for engaging external firms to audit and test the resiliency of the cybersecurity program.

Item 2. Properties.

Our principal executive offices are located at a property owned by us at 4401 Colwick Road, Charlotte, North Carolina 28211, and our telephone number at that location is (704) 566-2400.

SONIC AUTOMOTIVE, INC.

Our dealerships are generally located along major U.S. or interstate highways. One of the principal factors we consider in evaluating a potential acquisition is its location. We prefer to acquire dealerships or build dealership facilities located along major thoroughfares, which can be easily visited by prospective guests. For information regarding the states in which we operate and the breakdown of our stores among our operating segments, see the discussion under the heading “Our Business” in “Item 1. Business.”

We lease a significant number of the properties utilized by our dealership operations from affiliates of Capital Automotive Real Estate Services, Inc. and other individuals and entities. Under the terms of our franchise and dealer agreements, each of our dealerships must maintain an appropriate appearance and design of its dealership facility and is restricted in its ability to relocate. The properties utilized by our dealership operations that are owned by us or one of our subsidiaries are pledged as security for the Credit Facilities, the Mortgage Facility and Sidecar Facility or other mortgage financing arrangements. We believe that our facilities are adequate for our current needs.

Item 3. Legal Proceedings.

For information regarding legal proceedings, see the discussion under the heading “Legal Proceedings” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4. Mine Safety Disclosures.

Not applicable.

SONIC AUTOMOTIVE, INC.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Class A Common Stock is currently traded on the New York Stock Exchange under the symbol “SAH.” Our Class B Common Stock is not traded on a public market and we do not intend to apply to have our Class B Common Stock listed on a national exchange or an automated dealer quotation system.

As of February 6, 2026, there were 21,546,494 shares of our Class A Common Stock and 12,029,375 shares of our Class B Common Stock outstanding. As of February 6, 2026, there were 516 record holders of the Class A Common Stock and two record holders of the Class B Common Stock. The closing stock price for the Class A Common Stock on February 6, 2026 was $62.46.

Our Board of Directors issued four quarterly cash dividends on all outstanding shares of Class A and Class B Common Stock totaling $1.46 per share, $1.25 per share and $1.16 per share for each of the years ended December 31, 2025, 2024 and 2023, respectively. Subsequent to December 31, 2025, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.38 per share for stockholders of record on March 13, 2026 to be paid on April 15, 2026. The declaration and payment of any future dividend is subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements and covenant compliance, share repurchases, the current economic environment and other factors considered by our Board of Directors to be relevant. These factors are considered each quarter and will be scrutinized as our Board of Directors determines our dividend policy in the future. There is no guarantee that additional dividends will be declared and paid at any time in the future. See Note 6, “Long-Term Debt,” to the accompanying consolidated financial statements and the heading “Liquidity and Capital Resources” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion of dividends and for a description of restrictions on the payment of dividends.

Issuer Purchases of Equity Securities

The following table sets forth information about the shares of Class A Common Stock we repurchased during the three months ended December 31, 2025:



	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
	(In millions, except per share data)
October 2025	0.2	$	63.73	0.2	$	196.7
November 2025	0.4	$	62.76	0.4	$	169.9
December 2025	—	$	61.86	—	$	169.9
Total	0.6			0.6

(1) On July 28, 2022, we announced that our Board of Directors had increased the dollar amount authorized for us to repurchase shares of our Class A Common Stock pursuant to our share repurchase program. Our share repurchase program does not have an expiration date and current remaining availability under the program is as follows:


	(In millions)


July 2022 authorization	$	500.0
Total active program repurchases prior to December 31, 2025	(330.1)
Current remaining availability as of December 31, 2025	$	169.9

SONIC AUTOMOTIVE, INC.

Item 6. [Reserved]

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and “Item 1A. Risk Factors” included in this Annual Report on Form 10-K. For comparison and discussion of our results of operations for the year ended December 31, 2024 (“2024”) to our results of operations for the year ended December 31, 2023 (“2023”), please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for 2024.

Unless otherwise noted, we present the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis. To the extent that we believe a discussion of the differences among reportable segments will enhance a reader’s understanding of our financial condition, cash flows and other changes in financial condition and results of operations, the differences are discussed separately.

Unless otherwise noted, all discussion of increases or decreases are for the year ended December 31, 2025 (“2025”) compared to 2024. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition. The following discussion of EchoPark Segment used vehicles, wholesale vehicles, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition. The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating stores in the Powersports Segment are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition.

Overview

We are one of the largest automotive retailers in the U.S. (as measured by reported total revenue). As a result of the way we manage our business, we had three reportable segments as of December 31, 2025: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment. For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2025, we operated 111 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 14 stores in the Powersports Segment. The Franchised Dealerships Segment consists of 134 new vehicle franchises (representing 24 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment consists of 18 stores operating in 10 states. The Powersports Segment consists of 41 franchises at 14 locations (11 full-service dealerships and three authorized retail outlets) in three states.

The Franchised Dealerships Segment provides comprehensive sales and services, including: (1) sales of both new and used cars and light trucks; (2) sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, “Fixed Operations”); and (3) arrangement of third-party financing, extended warranties, service contracts, insurance and other aftermarket products (collectively, “F&I”) for our guests. The EchoPark Segment sells used cars and light trucks and arranges third-party F&I product sales for our guests in pre-owned vehicle specialty retail locations and does not offer customer-facing Fixed Operations services. The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) F&I services. All three segments generally operate independently of one another with the exception of certain shared back-office functions and corporate overhead costs.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Retail Automotive Industry Performance

The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) unit sales volume was approximately 16.3 million vehicles in 2025, an increase of 1%, compared to approximately 16.1 million vehicles in 2024, according to the Power Information Network (“PIN”) from J.D. Power. We currently estimate the 2026 new vehicle industry volume will be between 15.8 million vehicles (a decrease of 3% compared to 2025) and 16.5 million vehicles (an increase of 1% compared to 2025). The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2026 new vehicle industry volume to vary from expectations. Many factors, including brand and geographic concentrations as well as the industry sales mix between retail and fleet new vehicle unit sales volume, have caused our past results to differ from the industry’s overall trend. Our new vehicle sales strategy focuses on our retail new vehicle sales (as opposed to fleet new vehicle sales) and, as a result, we believe it is appropriate to compare our retail new vehicle unit sales volume to the industry retail new vehicle seasonally adjusted annual rate of unit sales volume (the “retail new vehicle SAAR”) (which excludes fleet new vehicle sales). According to PIN from J.D. Power, the retail new vehicle SAAR increased 4%, to approximately 13.6 million vehicles, in 2025, from approximately 13.1 million vehicles in 2024.

CDK Outage

On June 19, 2024, CDK Global (“CDK”), a third-party provider of certain information systems, notified us that CDK had suspended certain systems used by us in response to a cybersecurity incident impacting CDK (the “CDK outage”). This outage adversely affected our business and results of operations during the second and third quarters of 2024. We estimate the disruption from the CDK outage negatively impacted reported income before taxes by approximately $47.2 million during 2024 which includes approximately $13.4 million in additional compensation expenses incurred as a result of the incident. In connection with the CDK outage, we recognized $10.0 million in pre-tax income from cyber insurance proceeds during the three months ended December 31, 2024 and $40.0 million in pre-tax income from cyber insurance proceeds during 2025, which were recorded as a reduction to selling, general and administrative expenses.

Impairment Charges

Impairment charges were approximately $173.8 million and $3.9 million in 2025 and 2024, respectively. Impairment charges for 2025 included approximately $165.9 million in the Franchised Dealerships Segment related to indefinite lived franchise assets, approximately $0.2 million in the EchoPark Segment related to property held for sale, and approximately $7.6 million in the Powersports Segment related to indefinite lived franchise assets. Impairment charges for 2024 included approximately $2.7 million in the EchoPark Segment related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations, and approximately $1.2 million of property and equipment impairment charges related to the Franchised Dealerships Segment.

Franchised Dealerships Segment

As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2024 and 2025, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. Unless otherwise noted, all discussion of increases or decreases are for 2025 compared to 2024. The following discussion is on a same store basis (which excludes results from disposed stores), except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition.

Same store retail new vehicle revenue increased 5% in 2025, primarily driven by a 2% increase in retail new vehicle unit sales volume, driven in part by an increase in consumer demand for electric vehicles ahead of expiration of the federal tax credit in the third quarter of 2025, combined with a 2% increase in retail new vehicle average selling price. Retail new vehicle gross profit decreased 7% in 2025, due primarily to increased price competition resulting from increasing levels of available inventory and higher inventory invoice cost, which combined to drive lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $310 per unit, or 9%, to $3,094 per unit. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 48 days as of December 31, 2025, compared to 46 days as of December 31, 2024.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Same store retail used vehicle revenue increased 3% in 2025, driven by a 3% increase in retail used vehicle average selling price. Retail used vehicle gross profit increased 2% in 2025, primarily due to higher retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit increased $25 per unit, or 2%, to $1,516 per unit in 2025, due primarily to higher retail used vehicle average selling price. Same store wholesale vehicle gross loss worsened by approximately $4.5 million, to a gross loss of $8.8 million during 2025, due primarily to a $188 per unit, or 91%, worsening of wholesale vehicle gross loss per unit as a result of changes in pricing and demand for vehicles at wholesale auction. We generally focus on maintaining used vehicle inventory days’ supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 31 days as of both December 31, 2025 and 2024.

Same store Fixed Operations revenue increased 6%, driven primarily by increased service capacity as a result of additional technician headcount and higher parts and labor costs that were passed along to consumers. Fixed Operations gross profit increased 8% in 2025, driven primarily by higher warranty revenue contribution and higher warranty gross margin. Fixed Operations gross margin increased 60 basis points, to 51.0%, in 2025, driven primarily by an increase in warranty revenue contribution and higher warranty gross margin.

Same store F&I revenue increased 9% in 2025, driven by a 7% increase in F&I gross profit per retail unit and a 1% increase in retail new and used vehicle unit sales volume. F&I gross profit per retail unit increased $174 per unit, or 7%, to $2,551 per unit in 2025, driven by changes in the mix of F&I products sold.

EchoPark Segment

Unless otherwise noted, all discussion of increases or decreases are for 2025 compared to 2024. The following discussion is on a reported basis, except where otherwise noted as being on a same market basis. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition.

Reported total revenues decreased 3% in 2025, driven primarily by a 3% decrease in average retail used vehicle selling price and a 1% decrease in total vehicle unit sales volume (retail used vehicles and wholesale vehicles combined). Reported total gross profit increased 13% in 2025, primarily due to a 15% increase in combined retail used vehicle and F&I gross profit per unit.

Same market total revenues decreased 2% in 2025, attributable to a 2% decrease in retail used vehicle unit sales volume, coupled with a 3% decrease in average selling price per used retail unit. Same market total gross profit increased 12% in 2025, driven primarily by a 14% increase in combined retail used vehicle and F&I gross profit per unit.

Reported retail used vehicle revenue decreased 5%, due to a 3% decrease in average retail used vehicle unit selling prices and a 2% decrease in retail used vehicle unit sales volume. F&I revenue increased 13% in 2025, driven primarily by a 15% increase in F&I gross profit per retail unit, partially offset by a 2% decrease in total retail units in 2025. Reported combined retail used vehicle and F&I gross profit per unit increased $455 per unit, or 15%, to $3,484 per unit in 2025, primarily due to the increase in F&I revenue.

Reported wholesale vehicle gross loss worsened by approximately $0.5 million, to a gross loss of approximately $1.8 million in 2025, primarily due to a worsening in wholesale vehicle gross loss of $30 per unit, or 27%, during 2025. We generally focus on maintaining EchoPark Segment used vehicle inventory days’ supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported used vehicle inventory days’ supply in our EchoPark Segment was approximately 40 days as of December 31, 2025, as compared to 38 days as of December 31, 2024

Powersports Segment

Unless otherwise noted, all discussion of increases or decreases are for 2025 compared to 2024. The following discussion is on a reported basis, except where otherwise noted as being on a same store basis. All currently operating stores in the Powersports Segment are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reported retail new vehicle revenue increased 29% in 2025, primarily driven by a 21% increase in retail new vehicle unit sales volume, coupled with a 6% increase in retail new vehicle average selling price. Reported retail new vehicle gross profit increased 37% in 2025, as a result of higher retail new vehicle unit sales volume and higher retail new vehicle gross profit per unit. Reported retail new vehicle gross profit per unit increased $337 per unit, or 12%, to $3,050 per unit, due primarily to higher retail new vehicle average selling price.

Same store retail new vehicle revenue increased 19% in 2025, primarily driven by a 11% increase in retail new vehicle unit sales volume, coupled with a 7% increase in retail new vehicle average selling price. Retail new vehicle gross profit increased 24% in 2025, as a result of the increase in retail new vehicle unit sales volume and increase in retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit increased $319 per unit, or 12%, to $3,032 per unit, due primarily to the increase in retail new vehicle unit sales volume. On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 140 days as of December 31, 2025, compared to 178 days as of December 31, 2024, varying based on manufacturer production levels and consumer demand.

Reported retail used vehicle revenue increased 70% in 2025, primarily driven by a 54% increase in retail used vehicle unit sales volume, coupled with a 10% increase in retail used vehicle average selling price. Reported retail used vehicle gross profit increased 28% in 2025, as a result of higher retail used vehicle unit sales volume. Reported retail used vehicle gross profit per unit decreased $417 per unit, or 17%, to $1,980 per unit, primarily due to higher inventory costs.

Same store used vehicle revenue increased 61% in 2025, primarily driven by a 49% increase in retail used vehicle unit sales volume, coupled with a 9% increase in retail used vehicle average selling price. Retail used vehicle gross profit increased 22% in 2025, as a result of higher retail used vehicle unit sales volume. Retail used vehicle gross profit per unit decreased $437 per unit, or 18%, to $1,982 per unit, primarily due to higher inventory costs. On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 121 days as of December 31, 2025, compared to 139 days as of December 31, 2024. Going forward, we generally expect to maintain a used vehicle inventory days’ supply in our Powersports Segment in the 75- to 100-day range, depending on seasonality (typically the second and third quarter has more demand and lower days’ supply compared to the first and fourth quarters).

Reported Fixed Operations revenue increased 12% and Fixed Operations gross profit increased 15% in 2025, driven primarily by higher repair order volume as a result of acquisitions. Fixed Operations gross margin increased 150 basis points to 47.5% in 2025, driven primarily by an increase in warranty revenue contribution and customer pay gross margin.

Same store Fixed Operations revenue increased 7% and Fixed Operations gross profit increased 13% in 2025, driven primarily by higher repair order volume. Fixed Operations gross margin increased 240 basis points to 48.0% in 2025, driven primarily by an increase in customer pay gross margin.

Reported F&I revenue increased 15% in 2025, driven primarily by a 33% increase in combined retail new and used vehicle unit sales volume, slightly offset by a 12% decrease in F&I gross profit per retail unit. F&I gross profit per retail unit decreased $133 per unit, or 12%, to $959 per unit in 2025.

Same store F&I revenue increased 16% in 2025, driven primarily by a 24% increase in combined retail new and used vehicle unit sales volume, offset partially by a 5% decrease in F&I gross profit per retail unit. F&I gross profit per retail unit decreased $54 per unit, or 5%, to $1,019 per unit in 2025.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The following table summarizes the percentages of total revenues represented by certain items reflected in our consolidated statements of operations:


	Percentage of Total Revenues
	Year Ended December 31,
	2025		2024		2023
Revenues:
New vehicles	47.2	%	46.4	%	44.5	%
Used vehicles	32.2	%	33.6	%	36.3	%
Wholesale vehicles	2.1	%	2.0	%	2.2	%
Parts, service and collision repair	13.3	%	13.0	%	12.2	%
Finance, insurance and other, net	5.2	%	5.0	%	4.8	%
Total revenues	100.0	%	100.0	%	100.0	%
Cost of sales	84.3	%	84.6	%	84.4	%
Gross profit	15.7	%	15.4	%	15.6	%
Selling, general and administrative expenses	11.1	%	11.1	%	11.1	%
Impairment charges	1.1	%	—	%	0.6	%
Depreciation and amortization	1.1	%	1.1	%	1.0	%
Operating income	2.4	%	3.2	%	2.9	%
Interest expense, floor plan	0.6	%	0.6	%	0.5	%
Interest expense, other, net	0.7	%	0.8	%	0.8	%

Income (loss) before taxes	1.1	%	1.8	%	1.7	%
Provision for income taxes - benefit (expense)	0.4	%	0.3	%	0.4	%
Net income (loss)	0.8	%	1.5	%	1.2	%

Note: Rounding may cause the sum of percentages to differ from the totals shown.

Results of Operations - Consolidated

New Vehicles - Consolidated

New vehicle revenues include the sale of new vehicles, including new powersports vehicles, to retail customers, as well as the sale of fleet vehicles to businesses for use in their operations. New vehicle revenues and gross profit can be influenced by vehicle manufacturer incentives to consumers (which vary from cash-back incentives to low interest rate financing, among other things), the availability of consumer credit and the level and type of manufacturer-to-dealer incentives, as well as manufacturers providing adequate inventory allocations to our dealerships to meet consumer demand. The automobile manufacturing industry is cyclical and historically has experienced periodic downturns characterized by oversupply and weak demand, both within specific brands and in the industry as a whole. As an automotive retailer, we seek to mitigate the effects of this sales cycle by maintaining a diverse brand mix of dealerships. Our brand diversity allows us to offer a broad range of products at a wide range of prices from lower-priced economy automobiles to luxury automobiles and powersports vehicles.

The U.S. retail automotive industry’s new vehicle unit sales volume below reflects all brands marketed or sold in the U.S. This industry sales volume includes brands we do not sell and markets in which we do not operate, therefore changes in our new vehicle unit sales volume may not trend directly in line with changes in the industry new vehicle unit sales volume. We believe that the retail new vehicle industry sales volume is a more meaningful metric for comparing our new vehicle unit sales volume to the industry due to our minimal fleet vehicle business.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

U.S. retail new vehicle industry volume, fleet new vehicle industry volume, and total new vehicle industry volume were as follows:


	Year Ended December 31,		Better / (Worse)
	2025	2024	% Change
	(In millions of vehicles)
U.S. industry volume - Retail new vehicle (1)	13.6	13.1	4	%
U.S. industry volume - Fleet new vehicle	2.7	3.0	(10)	%
U.S. industry volume - Total new vehicle (1)	16.3	16.1	1	%

(1) Source: PIN from J.D. Power

We currently estimate the 2026 new vehicle industry volume will be between 15.8 million vehicles (a decrease of 3% compared to 2025) and 16.5 million vehicles (an increase of 1% compared to 2025). The effects of availability of new and used vehicle inventory, interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2026 new vehicle industry volume to vary from expectations.

Our consolidated reported new vehicle results (combined retail and fleet data) were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue	$	7,047.4		$	6,507.5		$	539.9	8	%
Fleet new vehicle revenue	101.5			95.3			6.2		7	%
Total new vehicle revenue	$	7,148.9		$	6,602.8		$	546.1	8	%

Retail new vehicle gross profit	$	383.3		$	388.4		$	(5.1)	(1)	%
Fleet new vehicle gross profit	1.7			3.0			(1.3)		(43)	%
Total new vehicle gross profit	$	385.0		$	391.4		$	(6.4)	(2)	%

Retail new vehicle unit sales	121,124			115,694			5,430		5	%
Fleet new vehicle unit sales	1,991			1,805			186		10	%
Total new vehicle unit sales	123,115			117,499			5,616		5	%

Revenue per new retail unit	$	58,184		$	56,247		$	1,937	3	%
Revenue per new fleet unit	$	50,971		$	52,786		$	(1,815)	(3)	%
Total revenue per new unit	$	58,067		$	56,194		$	1,873	3	%

Gross profit per new retail unit	$	3,165		$	3,358		$	(193)	(6)	%
Gross profit per new fleet unit	$	869		$	1,636		$	(767)	(47)	%
Total gross profit per new unit	$	3,127		$	3,331		$	(204)	(6)	%

Retail gross profit as a % of revenue	5.4		%	6.0		%	(60)		bps
Fleet gross profit as a % of revenue	1.7		%	3.1		%	(140)		bps
Total new vehicle gross profit as a % of revenue	5.4		%	5.9		%	(50)		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For further analysis of new vehicle results on a segment basis, see the tables and discussion under the headings “New Vehicles - Franchised Dealerships Segment” and “New Vehicles - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.

Used Vehicles - Consolidated

Used vehicle revenues include the sale of used vehicles, including used powersports vehicles, to retail customers and at wholesale. Used vehicle revenues are directly affected by a number of factors, including consumer demand for used vehicles, the pricing and level of manufacturer incentives on new vehicles, the number and quality of trade-ins and lease turn-ins available to our dealerships, the availability and pricing of used vehicles acquired at wholesale auction, and the availability of consumer credit. Depending on the mix of inventory sourcing (trade-ins or purchases from customers versus wholesale auction), the days’ supply of used vehicle inventory, and the pricing strategy employed by the dealership, retail used vehicle gross profit per unit and retail used vehicle gross profit as a percentage of revenue may vary significantly from historical levels given recent trends in the used vehicle environment.

Our consolidated reported retail used vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	4,872.6		$	4,780.1		$	92.5	2	%
Gross profit	$	181.1		$	170.7		$	10.4	6	%
Unit sales	175,280			173,257			2,023		1	%
Revenue per unit	$	27,799		$	27,590		$	209	1	%
Gross profit per unit	$	1,033		$	985		$	48	5	%
Gross profit as a % of revenue	3.7		%	3.6		%	10		bps

For further analysis of used vehicle results on a segment basis, see the tables and discussion under the headings “Used Vehicles - Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “Used Vehicles - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

Wholesale Vehicles - Consolidated

Wholesale vehicle revenues are influenced by several factors, including retail new and used vehicle unit sales volume, associated trade-in volume, and short-term, temporary, and seasonal fluctuations in wholesale auction pricing. In recent years, wholesale vehicle prices and supply at auction have experienced periods of volatility, impacting our wholesale vehicle revenues and related gross profit (loss), as well as our retail used vehicle revenues and related gross profit. We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility into 2026 or beyond. Wholesale vehicle revenues are also significantly affected by our corporate inventory management strategy and policies, which are designed to optimize our total used vehicle inventory and expected gross profit levels and minimize inventory carrying risks.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our consolidated reported wholesale vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	314.1		$	287.1		$	27.0	9	%
Gross profit (loss)	$	(11.2)		$	(6.0)		$	(5.2)	(87)	%
Unit sales	34,982			32,223			2,759		9	%
Revenue per unit	$	8,978		$	8,910		$	68	1	%
Gross profit (loss) per unit	$	(321)		$	(186)		$	(135)	(73)	%
Gross profit (loss) as a % of revenue	(3.6)		%	(2.1)		%	(150)		bps

For further analysis of wholesale vehicle results on a segment basis, see the tables and discussion under the headings “Wholesale Vehicles - Franchised Dealerships Segment,” “Wholesale Vehicles - EchoPark Segment” and “Wholesale Vehicles - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

Fixed Operations - Consolidated

Parts, service and collision repair revenues consist of repairs and maintenance requested and paid by customers (“customer pay”), warranty repairs (manufacturer-paid), wholesale parts (sales of parts and accessories to third-party automotive repair businesses) and internal, sublet and other. Parts and service revenue is driven by the volume and mix of warranty repairs versus customer pay repairs, available service capacity (a combination of service bay count and technician availability), vehicle quality, manufacturer recalls, customer loyalty, and prepaid or manufacturer-paid maintenance programs. Internal, sublet and other primarily relates to preparation and reconditioning work performed on vehicles in inventory that are later sold to a third party and may vary based on used vehicle inventory and sales volume from period to period. When that work is performed by one of our dealerships or stores, the work is classified as internal. In the event the work is performed by a third party on our behalf, it is classified as sublet.

We believe that, over time, vehicle quality will continue to improve, but vehicle complexity and the associated demand for repairs by qualified technicians at manufacturer-affiliated dealerships may result in market share gains that could offset any revenue lost from improvement in vehicle quality. We also believe that, over the long term, we have the ability to continue to optimize service capacity and customer retention at our dealerships and stores to further increase Fixed Operations revenues. Manufacturers continue to extend new vehicle warranty periods (in particular for battery electric vehicles) and have also begun to include regular maintenance items in the warranty or complimentary maintenance program coverage. These factors, over the long term, combined with the extended manufacturer warranties on certified pre-owned vehicles, should facilitate growth in our parts and service business. Barriers to long-term growth may include reductions in the rate paid by manufacturers to dealers for warranty repair work performed, as well as the improved quality and design of vehicles that may affect the level and frequency of future customer pay or warranty-related repair revenues.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our consolidated reported Fixed Operations results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	921.5		$	846.8		$	74.7	9	%
Warranty	356.4			290.1			66.3		23	%
Wholesale parts	193.0			194.0			(1.0)		(1)	%
Internal, sublet and other	548.2			515.6			32.6		6	%
Total revenue	$	2,019.1		$	1,846.5		$	172.6	9	%

Gross profit
Customer pay	$	514.3		$	472.8		$	41.5	9	%
Warranty	223.1			178.0			45.1		25	%
Wholesale parts	33.1			34.5			(1.4)		(4)	%
Internal, sublet and other	258.6			243.6			15.0		6	%
Total gross profit	$	1,029.1		$	928.9		$	100.2	11	%

Gross profit as a % of revenue
Customer pay	55.8		%	55.8		%	—		bps
Warranty	62.6		%	61.4		%	120		bps
Wholesale parts	17.2		%	17.8		%	(60)		bps
Internal, sublet and other	47.2		%	47.2		%	(3)		bps
Total gross profit as a % of revenue	51.0		%	50.3		%	70		bps

For further analysis of Fixed Operations results on a segment basis, see the tables and discussion under the headings “Fixed Operations - Franchised Dealerships Segment” and “Fixed Operations - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.

F&I - Consolidated

Finance, insurance and other, net revenues include commissions for arranging third-party vehicle financing and insurance, sales of third-party extended warranties and service contracts for vehicles, and sales of other aftermarket products. In connection with vehicle financing, extended warranties and service contracts, other aftermarket products and insurance contracts, we receive commissions from the third-party providers for originating these contracts. We do not have direct credit risk for the vehicle financing, extended warranties and service contracts that we sell. F&I revenues are recognized net of actual and estimated future chargebacks and other costs associated with originating contracts (as a result, reported F&I revenues and F&I gross profit are the same amount, resulting in a 100% gross margin for F&I). F&I revenues are affected by the level of new and retail used vehicle unit sales volume, the age and average selling price of vehicles sold, the level of manufacturer financing specials or leasing incentives, and our F&I penetration rates for each type of F&I product. The F&I penetration rate represents the number of finance contracts, extended warranties and service contracts, other aftermarket products or insurance contracts that we are able to originate per vehicle sold, expressed as a percentage.

Yield spread premium is another term for the commission earned by our dealerships for arranging vehicle financing for consumers. The amount of the commission could be zero, a flat fee or an actual spread between the interest rate charged to the consumer and the interest rate provided by the third-party direct financing source (e.g., a commercial bank, credit union or manufacturer captive finance company). We have established caps on the potential yield spread premium our dealerships can earn with all finance sources. We believe the yield spread premium we earn for arranging vehicle financing represents value to the consumer in numerous ways, including the following:

•lower cost, below-market financing is often available only from the manufacturers’ captives and franchised dealers;

•ease of access to multiple high-quality lending sources;

•lease-financing alternatives are largely available only from manufacturers’ captives or other indirect lenders;

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•guests with substandard credit frequently do not have direct access to potential sources of sub-prime financing; and

•guests with significant “negative equity” in their current vehicle (i.e., the guest’s current vehicle is worth less than the balance of their vehicle loan or lease obligation) frequently are unable to pay off the loan on their current vehicle and finance the purchase or lease of a replacement new or used vehicle without the assistance of a franchised dealership’s network of lending sources.

Our consolidated reported F&I results were as follows:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	798.9	$	707.8	$	91.1	13	%
Total combined retail new and used vehicle unit sales	296,404		288,951		7,453		3	%
Gross profit per retail unit (excludes fleet)	$	2,695	$	2,450	$	245	10	%

For further analysis of F&I results on a segment basis, see the tables and discussion under the headings “F&I - Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “F&I - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

Results of Operations - Franchised Dealerships Segment

As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2024 and 2025, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. Please refer to the tables and discussion on the following pages for a comparison and discussion of financial results on a comparable store basis.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

New Vehicles - Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for new vehicles:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit data)
Retail new vehicle revenue:
Same store	$	6,696.7	$	6,397.8	$	298.9	5	%
Acquisitions, open points, dispositions and holding company	245.2		27.7		217.5		NM
Total as reported	$	6,941.9	$	6,425.5	$	516.4	8	%

Fleet new vehicle revenue:
Same store	$	99.5	$	94.9	$	4.6	5	%
Acquisitions, open points, dispositions and holding company	2.0		0.4		1.6		NM
Total as reported	$	101.5	$	95.3	$	6.2	7	%

Total new vehicle revenue:
Same store	$	6,796.2	$	6,492.7	$	303.5	5	%
Acquisitions, open points, dispositions and holding company	247.2		28.1		219.1		NM
Total as reported	$	7,043.4	$	6,520.8	$	522.6	8	%

Retail new vehicle gross profit:
Same store	$	350.2	$	377.0	$	(26.8)	(7)	%
Acquisitions, open points, dispositions and holding company	17.4		(0.1)		17.5		NM
Total as reported	$	367.6	$	376.9	$	(9.3)	(2)	%

Fleet new vehicle gross profit:
Same store	$	1.8	$	3.0	$	(1.2)	(40)	%
Acquisitions, open points, dispositions and holding company	(0.1)		—		(0.1)		NM
Total as reported	$	1.7	$	3.0	$	(1.3)	(43)	%

Total new vehicle gross profit:
Same store	$	352.0	$	380.0	$	(28.0)	(7)	%
Acquisitions, open points, dispositions and holding company	17.3		(0.1)		17.4		NM
Total as reported	$	369.3	$	379.9	$	(10.6)	(3)	%

Retail new vehicle unit sales:
Same store	113,181		110,770		2,411		2	%
Acquisitions, open points, dispositions and holding company	2,800		680		2,120		NM
Total as reported	115,981		111,450		4,531		4	%

Fleet new vehicle unit sales:
Same store	1,972		1,797		175		10	%
Acquisitions, open points, dispositions and holding company	19		8		11		NM
Total as reported	1,991		1,805		186		10	%

Total new vehicle unit sales:
Same store	115,153		112,567		2,586		2	%
Acquisitions, open points, dispositions and holding company	2,819		688		2,131		NM
Total as reported	117,972		113,255		4,717		4	%

NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported new vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue	$	6,941.9		$	6,425.5		$	516.4	8	%
Fleet new vehicle revenue	101.5			95.3			6.2		7	%
Total new vehicle revenue	$	7,043.4		$	6,520.8		$	522.6	8	%

Retail new vehicle gross profit	$	367.6		$	376.9		$	(9.3)	(2)	%
Fleet new vehicle gross profit	1.7			3.0			(1.3)		(43)	%
Total new vehicle gross profit	$	369.3		$	379.9		$	(10.6)	(3)	%

Retail new vehicle unit sales	115,981			111,450			4,531		4	%
Fleet new vehicle unit sales	1,991			1,805			186		10	%
Total new vehicle unit sales	117,972			113,255			4,717		4	%

Revenue per new retail unit	$	59,854		$	57,654		$	2,200	4	%
Revenue per new fleet unit	$	50,971		$	52,786		$	(1,815)	(3)	%
Total revenue per new unit	$	59,704		$	57,576		$	2,128	4	%

Gross profit per new retail unit	$	3,170		$	3,382		$	(212)	(6)	%
Gross profit per new fleet unit	$	869		$	1,636		$	(767)	(47)	%
Total gross profit per new unit	$	3,131		$	3,354		$	(223)	(7)	%

Retail gross profit as a % of revenue	5.3		%	5.9		%	(60)		bps
Fleet gross profit as a % of revenue	1.7		%	3.1		%	(140)		bps
Total new vehicle gross profit as a % of revenue	5.2		%	5.8		%	(60)		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store new vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Same store new vehicle:
Retail new vehicle revenue	$	6,696.7		$	6,397.8		$	298.9	5	%
Fleet new vehicle revenue	99.5			94.9			4.6		5	%
Total new vehicle revenue	$	6,796.2		$	6,492.7		$	303.5	5	%

Retail new vehicle gross profit	$	350.2		$	377.0		$	(26.8)	(7)	%
Fleet new vehicle gross profit	1.8			3.0			(1.2)		(40)	%
Total new vehicle gross profit	$	352.0		$	380.0		$	(28.0)	(7)	%

Retail new vehicle unit sales	113,181			110,770			2,411		2	%
Fleet new vehicle unit sales	1,972			1,797			175		10	%
Total new vehicle unit sales	115,153			112,567			2,586		2	%

Revenue per new retail unit	$	59,168		$	57,758		$	1,410	2	%
Revenue per new fleet unit	$	50,476		$	52,798		$	(2,322)	(4)	%
Total revenue per new unit	$	59,019		$	57,678		$	1,341	2	%

Gross profit per new retail unit	$	3,094		$	3,404		$	(310)	(9)	%
Gross profit per new fleet unit	$	909		$	1,646		$	(737)	(45)	%
Total gross profit per new unit	$	3,057		$	3,376		$	(319)	(9)	%

Retail gross profit as a % of revenue	5.2		%	5.9		%	(70)		bps
Fleet gross profit as a % of revenue	1.8		%	3.1		%	(130)		bps
Total new vehicle gross profit as a % of revenue	5.2		%	5.9		%	(70)		bps

Same store retail new vehicle revenue increased 5%, primarily due to a 2% increase in retail new vehicle unit sales volume and a 2% increase in retail new vehicle average selling price. Retail new vehicle gross profit decreased approximately $26.8 million, or 7%, as a result of lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $310 per unit, or 9%, to $3,094 per unit, primarily due to increased price competition as a result of higher levels of available inventory, particularly electric vehicles, than in the prior year and higher inventory invoice costs. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 48 and 46 days as of December 31, 2025 and 2024, respectively.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Used Vehicles - Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for retail used vehicles:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit data)
Retail used vehicle revenue:
Same store	$	2,995.0	$	2,902.3	$	92.7	3	%
Acquisitions, open points, dispositions and holding company	92.0		17.5		74.5		NM
Total as reported	$	3,087.0	$	2,919.8	$	167.2	6	%

Retail used vehicle gross profit:
Same store	$	154.0	$	150.9	$	3.1	2	%
Acquisitions, open points, dispositions and holding company	3.8		(0.7)		4.5		NM
Total as reported	$	157.8	$	150.2	$	7.6	5	%

Retail used vehicle unit sales:
Same store	101,587		101,220		367		—	%
Acquisitions, open points, dispositions and holding company	2,615		756		1,859		NM
Total as reported	104,202		101,976		2,226		2	%

NM = Not Meaningful

Our Franchised Dealerships Segment reported retail used vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	3,087.0		$	2,919.8		$	167.2	6	%
Gross profit	$	157.8		$	150.2		$	7.6	5	%
Unit sales	104,202			101,976			2,226		2	%
Revenue per unit	$	29,625		$	28,632		$	993	3	%
Gross profit per unit	$	1,514		$	1,473		$	41	3	%
Gross profit as a % of revenue	5.1		%	5.1		%	—		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store retail used vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue	$	2,995.0		$	2,902.3		$	92.7	3	%
Gross profit	$	154.0		$	150.9		$	3.1	2	%
Unit sales	101,587			101,220			367		—	%
Revenue per unit	$	29,482		$	28,674		$	808	3	%
Gross profit per unit	$	1,516		$	1,491		$	25	2	%
Gross profit as a % of revenue	5.1		%	5.2		%	(10)		bps

Same Store Retail used vehicle revenue increased approximately $92.7 million, or 3%, driven primarily by a 3% increase in retail used vehicle average selling price. Retail used vehicle gross profit increased approximately $3.1 million, or 2%, primarily driven by a $25 per unit, or 2% increase in retail used vehicle gross profit per unit.

On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 31 days as of both December 31, 2025 and 2024.

Wholesale Vehicles - Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for wholesale vehicles:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit data)
Total wholesale vehicle revenue:
Same store	$	197.8	$	187.7	$	10.1	5	%
Acquisitions, open points, dispositions, and holding company	9.2		1.2		8.0		NM
Total as reported	$	207.0	$	188.9	$	18.1	10	%

Total wholesale vehicle gross profit (loss):
Same store	$	(8.8)	$	(4.3)	$	(4.5)	(105)	%
Acquisitions, open points, dispositions, and holding company	(0.5)		(0.3)		(0.2)		NM
Total as reported	$	(9.3)	$	(4.6)	$	(4.7)	(102)	%

Total wholesale vehicle unit sales:
Same store	22,233		20,809		1,424		7	%
Acquisitions, open points, dispositions, and holding company	635		209		426		NM
Total as reported	22,868		21,018		1,850		9	%

NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported wholesale vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	207.0		$	188.9		$	18.1	10	%
Gross profit (loss)	$	(9.3)		$	(4.6)		$	(4.7)	(102)	%
Unit sales	22,868			21,018			1,850		9	%
Revenue per unit	$	9,051		$	8,987		$	64	1	%
Gross profit (loss) per unit	$	(409)		$	(214)		$	(195)	(91)	%
Gross profit (loss) as a % of revenue	(4.5)		%	(2.4)		%	(210)		bps

Our Franchised Dealerships Segment same store wholesale vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Same store wholesale vehicle:
Revenue	$	197.8		$	187.7		$	10.1	5	%
Gross profit (loss)	$	(8.8)		$	(4.3)		$	(4.5)	(105)	%
Unit sales	22,233			20,809			1,424		7	%
Revenue per unit	$	8,899		$	9,018		$	(119)	(1)	%
Gross profit (loss) per unit	$	(395)		$	(207)		$	(188)	(91)	%
Gross profit (loss) as a % of revenue	(4.4)		%	(2.3)		%	(210)		bps

Same store wholesale vehicle revenue increased $10.1 million, or 5%, driven primarily by a 7% increase in wholesale vehicle unit sales volume, offset slightly by a 1% decrease in wholesale vehicle revenue per unit in 2025. Wholesale vehicle gross loss worsened by approximately $4.5 million, driven primarily by a $188 per unit worsening in wholesale vehicle gross loss per unit during 2025.

Fixed Operations - Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for Fixed Operations:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions)
Total Fixed Operations revenue:
Same store	$	1,903.9	$	1,794.8	$	109.1	6	%
Acquisitions, open points, dispositions and holding company	66.3		8.1		58.2		NM
Total as reported	$	1,970.2	$	1,802.9	$	167.3	9	%

Total Fixed Operations gross profit:
Same store	$	971.4	$	903.9	$	67.5	7	%
Acquisitions, open points, dispositions and holding company	34.5		5.0		29.5		NM
Total as reported	$	1,005.9	$	908.9	$	97.0	11	%

NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported Fixed Operations results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	912.8		$	839.0		$	73.8	9	%
Warranty	351.1			286.3			64.8		23	%
Wholesale parts	192.4			193.2			(0.8)		—	%
Internal, sublet and other	513.9			484.4			29.5		6	%
Total revenue	$	1,970.2		$	1,802.9		$	167.3	9	%

Gross profit
Customer pay	$	510.7		$	470.0		$	40.7	9	%
Warranty	219.6			175.1			44.5		25	%
Wholesale parts	33.0			34.2			(1.2)		(4)	%
Internal, sublet and other	242.6			229.6			13.0		6	%
Total gross profit	$	1,005.9		$	908.9		$	97.0	11	%

Gross profit as a % of revenue
Customer pay	55.9		%	56.0		%	(10)		bps
Warranty	62.5		%	61.2		%	130		bps
Wholesale parts	17.1		%	17.7		%	(60)		bps
Internal, sublet and other	47.2		%	47.4		%	(19)		bps
Total gross profit as a % of revenue	51.1		%	50.4		%	70		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store Fixed Operations results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions)
Same store Fixed Operations:
Revenue
Customer pay	$	886.0		$	835.9		$	50.1	6	%
Warranty	333.8			284.5			49.3		17	%
Wholesale parts	184.7			192.7			(8.0)		(4)	%
Internal, sublet and other	499.4			481.7			17.7		4	%
Total revenue	$	1,903.9		$	1,794.8		$	109.1	6	%

Gross profit
Customer pay	$	494.5		$	468.4		$	26.1	6	%
Warranty	208.8			174.3			34.5		20	%
Wholesale parts	31.4			34.1			(2.7)		(8)	%
Internal, sublet and other	236.7			227.1			9.6		4	%
Total gross profit	$	971.4		$	903.9		$	67.5	8	%

Gross profit as a % of revenue
Customer pay	55.8		%	56.0		%	(20)		bps
Warranty	62.6		%	61.3		%	130		bps
Wholesale parts	17.0		%	17.7		%	(70)		bps
Internal, sublet and other	47.4		%	47.1		%	25		bps
Total gross profit as a % of revenue	51.0		%	50.4		%	60		bps

Fixed Operations revenue increased approximately $109.1 million, or 6%, and Fixed Operations gross profit increased approximately $67.5 million, or 8%. Customer pay gross profit increased approximately $26.1 million, or 6%, warranty gross profit increased approximately $34.5 million, or 20%, wholesale parts gross profit decreased approximately $2.7 million, or 8%, and internal, sublet and other gross profit increased approximately $9.6 million, or 4%. Results have been positively impacted by increased capacity realized through our efforts to hire and retain additional service technicians. As a result, we expect to continue to see growth in Fixed Operations revenues and gross profit in 2026.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

F&I - Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for F&I:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit and per unit data)
Total F&I revenue:
Same store	$	547.8	$	503.8	$	44.0	9	%
Acquisitions, open points, dispositions and holding company	23.7		3.0		20.7		NM
Total as reported	$	571.5	$	506.8	$	64.7	13	%

Total F&I gross profit per retail unit (excludes fleet):
Same store	$	2,551	$	2,377	$	174	7	%
Reported	$	2,596	$	2,374	$	222	9	%

Total combined retail new and used vehicle unit sales:
Same store	214,768		211,990		2,778		1	%
Acquisitions, open points, dispositions and holding company	5,415		1,436		3,979		NM
Total as reported	220,183		213,426		6,757		3	%

NM = Not Meaningful

Our Franchised Dealerships Segment reported F&I results were as follows:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	571.5	$	506.8	$	64.7	13	%
Total combined retail new and used vehicle unit sales	220,183		213,426		6,757		3	%
Gross profit per retail unit (excludes fleet)	$	2,596	$	2,374	$	222	9	%

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store F&I results were as follows:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit and per unit data)
Same store F&I:
Revenue	$	547.8	$	503.8	$	44.0	9	%
Total combined retail new and used vehicle unit sales	214,768		211,990		2,778		1	%
Gross profit per retail unit (excludes fleet)	$	2,551	$	2,377	$	174	7	%

Same store F&I revenue increased $44.0 million, or 9%, primarily due to a 7% increase in F&I gross profit per retail unit and a 1% increase in combined retail new and used vehicle unit sales volume. F&I gross profit per retail unit increased $174 per unit, or 7%, to $2,551 per unit, primarily due to higher gross profit per finance contract and per service contract and increased penetration rates for finance, service and other aftermarket contracts.

Same store finance contract revenue increased 8%, primarily due to a 6% increase in gross profit per finance contract and a 2% increase in finance contract volume. The increase in finance contract volume is due to a 1% increase in total retail unit sales and a 30 basis point increase in the finance contract penetration rate. Service contract revenue increased 7%, primarily due to a 3% increase in gross profit per service contract and a 4% increase in service contract volume. The increase in service contract volume is due to a 1% increase in total retail unit sales and a 100 basis point increase in the service contract penetration rate. Other aftermarket contract revenue increased 2%, driven primarily by a 2% increase in other aftermarket contract volume. The increase in other aftermarket contract volume is due to a 1% increase in total retail unit sales and a 70 basis point increase in the other aftermarket contract penetration rate.

Results of Operations - EchoPark Segment

All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition. Same market results may vary significantly from reported results due to the closure of stores that are no longer included in same market results.

In January 2024, we closed the remaining seven Northwest Motorsport stores within the EchoPark Segment. In light of these closures, we believe the following discussion of EchoPark Segment results on a same market basis provides a meaningful year-over-year comparison.

Used Vehicles and F&I - EchoPark Segment

Our EchoPark operating strategy focuses on maximizing total used vehicle-related gross profit (based on a combination of retail used vehicle unit sales volume, front-end retail used vehicle gross profit (loss) per unit and F&I gross profit per retail unit sold) rather than realizing traditional levels of front-end retail used vehicle gross profit per unit. As such, we believe the best per unit measure of gross profit performance at our EchoPark stores is a combined total gross profit (loss) per retail unit, which includes both front-end retail used vehicle gross profit (loss) and F&I gross profit per retail unit sold. See the discussion under the heading “Results of Operations - Consolidated” for additional discussion of the macro drivers of used vehicle revenues and F&I revenues.

All Fixed Operations activity at our EchoPark stores supports our used vehicle inventory reconditioning operations and EchoPark stores do not currently perform customer pay repairs or maintenance work and are not permitted to perform manufacturer-paid warranty repairs. As such, reconditioning amounts that are classified as Fixed Operations revenues and cost of sales in our Franchised Dealerships Segment are presented as used vehicle cost of sales for the EchoPark Segment.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for retail used vehicles:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit data)
Total retail used vehicle revenue:
Same market	$	1,747.8	$	1,828.3	$	(80.5)	(4)	%
New markets/closed markets	—		9.7		(9.7)		NM
Total as reported	$	1,747.8	$	1,838.0	$	(90.2)	(5)	%

Total retail used vehicle gross profit (loss):
Same market	$	16.5	$	15.8	$	0.7	4	%
New markets/closed markets	—		(0.6)		0.6		NM
Total as reported	$	16.5	$	15.2	$	1.3	9	%

Total retail used vehicle unit sales:
Same market	67,636		68,690		(1,054)		(2)	%
New markets/closed markets	—		363		(363)		NM
Total as reported	67,636		69,053		(1,417)		(2)	%

NM = Not Meaningful

The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/ closed market basis for F&I:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions)
Total F&I revenue:
Same market	$	220.3	$	195.5	$	24.8	13	%
New markets/closed markets	(1.1)		(1.5)		0.4		27	%
Total as reported	$	219.2	$	194.0	$	25.2	13	%

Our EchoPark Segment reported retail used vehicle and F&I results were as follows:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle and F&I:
Retail used vehicle revenue	$	1,747.8	$	1,838.0	$	(90.2)	(5)	%
Retail used vehicle gross profit (loss)	$	16.5	$	15.2	$	1.3	9	%
Retail used vehicle unit sales	67,636		69,053		(1,417)		(2)	%
Retail used vehicle revenue per unit	$	25,841	$	26,617	$	(776)	(3)	%
F&I revenue	$	219.2	$	194.0	$	25.2	13	%
Combined retail used vehicle gross profit and F&I revenue	$	235.7	$	209.2	$	26.5	13	%
Total retail used vehicle and F&I gross profit per unit	$	3,484	$	3,029	$	455	15	%

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our EchoPark Segment same market retail used vehicle and F&I results were as follows:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit and per unit data)
Same market retail used vehicle and F&I:
Retail used vehicle revenue	$	1,747.8	$	1,828.3	$	(80.5)	(4)	%
Retail used vehicle gross profit (loss)	$	16.5	$	15.8	$	0.7	4	%
Retail used vehicle unit sales	67,636		68,690		(1,054)		(2)	%
Retail used vehicle revenue per unit	$	25,842	$	26,617	$	(775)	(3)	%
F&I revenue	$	220.3	$	195.5	$	24.8	13	%
Combined retail used vehicle gross profit and F&I revenue	$	236.8	$	211.3	$	25.5	12	%
Total retail used vehicle and F&I gross profit per unit	$	3,501	$	3,077	$	424	14	%

Same market retail used vehicle revenue decreased approximately $80.5 million, or 4%, due to a 2% decrease in retail used vehicle unit sales volume, and a 3% decrease in used vehicle revenue per unit. Same market combined used vehicle gross profit and F&I revenue increased approximately $25.5 million, or 12%, due to a $424, or 14%, increase in total used vehicle and F&I gross profit per unit. The increase in combined retail used vehicle and F&I gross profit per unit was due primarily to higher F&I penetration rates, an improvement in inventory acquisition costs as a result of sourcing a higher percentage of inventory from non-auction sources.

Within same market F&I revenue, finance contract gross profit increased approximately $1.5 million, or 3%, due to a 3% increase in gross profit per finance contract. Service contract gross profit increased approximately $6.7 million, or 9%, due to a 10% increase in gross profit per service contract, partially offset by a 1% decrease in total service contracts. Other aftermarket product contract gross profit increased approximately $9.0 million, or 13%, due to an 11% increase in total aftermarket contracts, a 1% increase in gross profit per aftermarket contract, and a 2,390 basis point increase in other aftermarket product contract penetration rate as a result of our efforts to offer a wider range of F&I products to our guests.

On a trailing quarter cost of sales basis, our reported used vehicle inventory days’ supply in our EchoPark Segment was approximately 40 and 38 days as of December 31, 2025 and 2024, respectively. We generally focus on maintaining EchoPark Segment used vehicle inventory days’ supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility.

Wholesale Vehicles - EchoPark Segment

See the discussion under the heading “Results of Operations - Consolidated” for additional discussion of the macro drivers of wholesale vehicle revenues.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for wholesale vehicles:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit data)
Total wholesale vehicle revenue:
Same market	$	104.6	$	92.7	$	11.9	13	%
New markets/closed markets	—		3.1		(3.1)		NM
Total as reported	$	104.6	$	95.8	$	8.8	9	%

Total wholesale vehicle gross profit (loss):
Same market	$	(1.7)	$	(0.6)	$	(1.1)	(183)	%
New markets/closed markets	(0.1)		(0.7)		0.6		NM
Total as reported	$	(1.8)	$	(1.3)	$	(0.5)	(38)	%

Total wholesale vehicle unit sales:
Same market	11,836		10,850		986		9	%
New markets/closed markets	—		209		(209)		NM
Total as reported	11,836		11,059		777		7	%

NM = Not Meaningful

Our EchoPark Segment reported wholesale vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	104.6		$	95.8		$	8.8	9	%
Gross profit (loss)	$	(1.8)		$	(1.3)		$	(0.5)	(38)	%
Unit sales	11,836			11,059			777		7	%
Revenue per unit	$	8,842		$	8,663		$	179	2	%
Gross profit (loss) per unit	$	(143)		$	(113)		$	(30)	(27)	%
Gross profit (loss) as a % of revenue	(1.6)		%	(1.3)		%	(30)		bps

Our EchoPark Segment same market wholesale vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Same market wholesale vehicle:
Revenue	$	104.6		$	92.7		$	11.9	13	%
Gross profit (loss)	$	(1.7)		$	(0.6)		$	(1.1)	(183)	%
Unit sales	11,836			10,850			986		9	%
Revenue per unit	$	8,842		$	8,537		$	305	4	%
Gross profit (loss) per unit	$	(143)		$	(61)		$	(82)	(134)	%
Gross profit (loss) as a % of revenue	(1.6)		%	(0.7)		%	(90)		bps

Same market wholesale vehicle revenue increased 13%, driven primarily by a 9% increase in same market wholesale vehicle unit sales volume, and a $305, or 4%, increase in same market wholesale vehicle revenue per unit. Same market wholesale vehicle gross profit decreased approximately $1.1 million, due primarily to a decrease in same market wholesale vehicle gross profit per unit of $82 per unit. As we adjust the inventory mix of nearly-new versus older model year vehicles sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations - Powersports Segment

As a result of the acquisition and termination of certain powersports stores in 2024 and 2025, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. The following discussion of new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a reported basis, except where otherwise noted. Our Powersports Segment results are subject to seasonal variations, such that the second and third quarters are generally expected to contribute higher revenues and segment income than the first and fourth quarters.

New Vehicles - Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for retail new vehicles:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit data)
Total retail new vehicle revenue:
Same store	$	93.8	$	79.0	$	14.8	19	%
Acquisitions, open points, and terminations	11.7		3.0		8.7		NM
Total as reported	$	105.5	$	82.0	$	23.5	29	%

Total retail new vehicle gross profit:
Same store	$	13.9	$	11.2	$	2.7	24	%
Acquisitions, open points, and terminations	1.8		0.3		1.5		NM
Total as reported	$	15.7	$	11.5	$	4.2	37	%

Total retail new vehicle unit sales:
Same store	4,583		4,115		468		11	%
Acquisitions, open points, and terminations	560		129		431		NM
Total as reported	5,143		4,244		899		21	%

NM = Not Meaningful

Our Powersports Segment reported retail new vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported retail new vehicle:
Revenue	$	105.5		$	82.0		$	23.5	29	%
Gross profit	$	15.7		$	11.5		$	4.2	37	%
Unit sales	5,143			4,244			899		21	%
Revenue per unit	$	20,517		$	19,313		$	1,204	6	%
Gross profit per unit	$	3,050		$	2,713		$	337	12	%
Gross profit as a % of revenue	14.9		%	14.0		%	90		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment same store new vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Same store new vehicle:
Revenue	$	93.8		$	79.0		$	14.8	19	%
Gross profit	$	13.9		$	11.2		$	2.7	24	%
Unit sales	4,583			4,115			468		11	%
Revenue per unit	$	20,473		$	19,202		$	1,271	7	%
Gross profit per unit	$	3,032		$	2,713		$	319	12	%
Gross profit as a % of revenue	14.8		%	14.1		%	70		bps

Same store retail new vehicle revenue increased 19%, due to a 11% increase in retail new vehicle unit sales volume and a 7% increase in retail new vehicle average selling price. Same store retail new vehicle gross profit increased approximately $2.7 million, or 24%, as a result of higher retail new vehicle unit sales volume and higher retail new vehicle gross profit per unit. Same store retail new vehicle gross profit per unit increased $319 per unit, or 12%, to $3,032 per unit.

On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 140 and 178 days as of December 31, 2025 and 2024 respectively. We believe that in a normal production environment, the level of new vehicle inventory days’ supply in our Powersports Segment should be in the 90 to 120-day range, depending on seasonality (typically the second and third quarters have more demand and lower days’ supply compared to the first and fourth quarters).

Used Vehicles - Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for retail used vehicles:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit data)
Retail used vehicle revenue:
Same store	$	33.7	$	20.9	$	12.8	61	%
Acquisitions, open points, and terminations	4.2		1.4		2.8		NM
Total as reported	$	37.9	$	22.3	$	15.6	70	%

Retail used vehicle gross profit:
Same store	$	6.1	$	5.0	$	1.1	22	%
Acquisitions, open points, and terminations	0.7		0.3		0.4		NM
Total as reported	$	6.8	$	5.3	$	1.5	28	%

Retail used vehicle unit sales:
Same store	3,101		2,087		1,014		49	%
Acquisitions, open points, and terminations	341		141		200		NM
Total as reported	3,442		2,228		1,214		54	%

NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment reported retail used vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	37.9		$	22.3		$	15.6	70	%
Gross profit	$	6.8		$	5.3		$	1.5	28	%
Unit sales	3,442			2,228			1,214		54	%
Revenue per unit	$	10,997		$	10,011		$	986	10	%
Gross profit per unit	$	1,980		$	2,397		$	(417)	(17)	%
Gross profit as a % of revenue	18.0		%	23.9		%	(590)		bps

Our Powersports Segment same store retail used vehicle results were as follows:


	Year Ended December 31,						Better / (Worse)
	2025			2024			Change		% Change
	(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue	$	33.7		$	20.9		$	12.8	61	%
Gross profit	$	6.1		$	5.0		$	1.1	22	%
Unit sales	3,101			2,087			1,014		49	%
Revenue per unit	$	10,877		$	9,996		$	881	9	%
Gross profit per unit	$	1,982		$	2,419		$	(437)	(18)	%
Gross profit as a % of revenue	18.2		%	24.2		%	(600)		bps

Same store retail used vehicle revenue increased 61%, due primarily to a 49% increase in retail used vehicle unit sales volume and a 9% increase in retail used vehicle average selling price. Same store retail used vehicle gross profit increased approximately $1.1 million, or 22%, due primarily to higher retail used vehicle unit sales volume, offset partially by lower retail used vehicle gross profit per unit. Same store retail used vehicle gross profit per unit decreased $437 per unit, or 18%, to $1,982 per unit, due primarily to changes in inventory mix and variations between wholesale and retail market pricing.

On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 121 days as of December 31, 2025. Going forward, we generally expect to maintain a used vehicle inventory days’ supply in our Powersports Segment in the 75 to 100-day range, depending on seasonality (typically the second and third quarters have more demand and lower days’ supply compared to the first and fourth quarters).

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Wholesale Vehicles - Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for wholesale vehicles:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit data)
Total wholesale vehicle revenue:
Same store	$	2.5	$	2.1	$	0.4	19	%
Acquisitions, open points, and terminations	(0.1)		0.2		(0.3)		NM
Total as reported	$	2.4	$	2.3	$	0.1	4	%

Total wholesale vehicle gross profit (loss):
Same store	$	(0.1)	$	(0.3)	$	0.2	66.7	%
Acquisitions, open points, and terminations	—		—		—		NM
Total as reported	$	(0.1)	$	(0.3)	$	0.2	67	%

Total wholesale vehicle unit sales:
Same store	275		146		129		88	%
Acquisitions, open points, and terminations	3		—		3		NM
Total as reported	278		146		132		90	%

NM = Not Meaningful

Our Powersports Segment reported wholesale vehicle results were as follows:


	Year Ended December 31,				Better / (Worse)
	2025		2024		Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	2.4	$	2.3	$	0.1

SONIC AUTOMOTIVE INC 10-K