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 total revenue). As a result of the way we manage our business, we had two reportable segments as of December 31, 2020:2021: (1) the Franchised Dealerships Segment and (2) the EchoPark 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, 2020,2021, we operated 84110 stores in the Franchised Dealerships Segment and 1646 stores in the EchoPark Segment. The Franchised Dealerships Segment consists of 96140 new vehicle franchises (representing 2128 different brands of cars and light trucks) and 1417 collision repair centers in 1217 states.

The Franchised Dealerships Segment provides comprehensive 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 extended warranties, service contracts, financing, insurance and other aftermarket products (collectively, “finance and insurance” or “F&I”) for our guests. The EchoPark Segment sells used cars and light trucks and arranges F&I product sales for our guests in pre-owned vehicle specialty retail locations. Our EchoPark business generally operates independently from our franchised dealerships business (except for certain shared back-office functions and corporate overhead costs). We believe that the continued expansion of our EchoPark business will provide long-term benefits to the Company, our stockholders and our guests.

The COVID-19 pandemic began negatively impactedimpacting the global economy beginning in the first quarter of 2020 and continued to affect the global economy and supply chain throughout the remainder of 2020.2021. The impact on the economypandemic has affected both consumer behavior and preferences, including by increasing demand for vehicles, and supply of manufactured goods as many countries around the world and states and municipalities in the U.S. mandated restrictions on citizen movements (i.e., shelter-in-place or stay-at-home orders) or on in-person retail trade or manufacturing activities at physical locations. As a result, many businesses curtailed operations and furloughed or terminated employees.impacted manufacturers ability to meet demand. In the U.S.,2021, the federal government passed severalenacted additional COVID-19 relief and spending measures including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Families First Coronavirus Response Act, in an attempt to provide short-term relief to families and businesseswhich, coinciding with a period of low interest rates, had a significant impact on household purchases of durable goods such as a result of the economic impacts of the COVID-19 pandemic.vehicles.

This broader economic backdrop resulting from the COVID-19 pandemic had a directcontinued to impact on our business and operations in 2020.2021. As a result of the pandemic and related shelter-in-place or stay-at-home orders,restrictions on commercial activity, we transitioned many of our teammates to remote work arrangements. In situations where a teammate’s role did not permit remote work (e.g., service repair technicians), we implemented staggered work hours, social distancing and other safety measures to promote the health and safety of our teammates and guests. As a result of the systems and infrastructure we had in place prior to the pandemic, we were largely able to maintain our back-office operations, financial reporting and internal control processes with minimal disruption or changes in the effectiveness of such processes.

Reportable Segments

As of December 31, 2020,2021, we had two reportable segments: (1) the Franchised Dealerships Segment and (2) the EchoPark Segment. The Franchised Dealerships Segment is comprised of retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle maintenance, warranty and repair services, and arrange finance and insurance products. The EchoPark Segment is comprised of pre-owned vehicle specialty retail locations that provide guests an opportunity to search our nationwide inventory, purchase a pre-owned vehicle, select finance and insurance products and sell their current vehicle to us.

In 2021, EchoPark Segment revenue represented approximately 14.5%18.9% of total revenue, up from 11.1%14.5% in 2019.2020. See Note 14, “Segment Information,” to the accompanying consolidated financial statements for additional financial information regarding our two reportable segments.

Unless otherwise noted, the following discussion of our business is presented on a consolidated basis.

Business Strategy

Human Capital Resources

As of December 31, 2020,2021, we employed approximately 8,10010,200 associates, or teammates, with whom we strive to maintain good relationships, which benefit both our companyCompany 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.

We believe our teammates are key to achieving our business objectives. During the COVID-19 pandemic, we experienced restrictions on permitted occupancy or brief closures at many of our locations. At the onsetbeginning of the COVID-19 pandemic, we implemented and we continue to maintain, protocols designed to protect the health and safety of our teammates and guests. These protocols, which remain in place, meet or exceed the Centers for Disease Control and Prevention guidelines and, where applicable, state mandates. Prior to, or upon returning to work, our teammates were trained on the protocols designed to protect the health and safety of our teammates and guests.

Risks Related to Our Growth Strategy

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. Using cash to complete acquisitions 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 20162021 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, without the written consent of the Required Lenders (as that term is defined in the 2016 Credit Facilities).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 20162021 Credit Facilities and the Silo Floor Plan Facilities (as defined below). These pledges may impede our ability to borrow from other sources. Our pace and scale of growing our EchoPark business 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 20162021 Floor Plan Facilities (as defined below) or the Silo Floor Plan Facilities (each, as defined below) (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.

Risks Related to the Retail Automotive Industry

The automotive manufacturing supply chain spans the globe. As such, supply chain disruptions resulting from widespread public health crises, natural disasters, adverse weather and other events may affect the flow of new vehicle or parts inventory to us or our manufacturing partners. InBeginning in 2020, the worldwide spread of COVID-19 led to widespread reductions in travel and economic activity, including automobile manufacturing and supply chain disruptions and production delays. These supply chain disruptions and production delays continued in 2021 and significantly impacted the supply of new vehicles, parts and accessories that we sell. In addition, these disruption and delays led to low new and used vehicle inventory levels through much of 2021, which led to fluctuations in the sales prices and costs to acquire new and used vehicles. We expect that low levels of inventory due to supply chain disruptions and production delays will improve as early as the first half of 2022. The extent to which these supply chain disruptions and production delays, as well as other effects of the COVID-19 pandemic may continue to adversely impact our business depends on the severity and duration of the outbreakpandemic, including new variants, and the effectiveness of actions taken globally to contain or mitigate its effects, including governmental orders issued in response to any future developments, which are highly uncertain and unpredictable. Any resulting operational or financial impact cannot be reasonably estimated reasonably at this time, but may materially adversely affect our business, financial condition, results of operations and cash flows. Even afterWe also cannot reasonably predict the COVID-19 pandemic has subsided, we may experience materially adversetiming or magnitude of impacts to our business due to any resulting economic recession or depression. Additionally, concerns overdepression that may develop as the COVID-19 pandemic continues or that is attributable to related economic impact of COVID-19 have caused extreme volatilityfactors, including higher inflation or increases in financial and other capital markets which has adversely impacted and may continue to adversely impact our stock price and our ability to access capital markets.

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 bothall of our franchised dealerships and EchoPark locations. Although the supply of desirable, high-quality used vehicle inventory has not historically been a material issue, there can be no assurance that this trend will continuein 2021, we experienced record low used vehicle inventory levels, which led to an increase in the markets in which we operate, particularly those of our EchoPark locations which rely heavily upon the availability of, and accesscost to acquire high-quality used vehicle inventory. We expect that used vehicle inventory levels will remain low until late 2022. To the extent that used vehicle inventory levels remain low and the costs to acquire high-quality inventory remain high, we may experience decreased sales volume and margins on sales of our used vehicle inventory, which may have a material negative impact on our business, results of operations and profitability, particularly in the EchoPark Segment.

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.

Risks Related to Our Relationships with Vehicle Manufacturers

As of December 31, 2020,2021, our total outstanding indebtedness was approximately $2.0$2.8 billion, which includes floor plan notes payable, long-term debt and short-term debt.

The United Kingdom Financial Conduct Authority (the “FCA”) announced in July 2017 that it will no longer persuade or require banks to submit rates for the calculation of LIBOR after 2021 (the “FCA Announcement”). In March 2020, the ICE Benchmark Administration (“IBA”), LIBOR’s administrator, stated it will cease publication of certain LIBOR rates after December 31, 2021. U.S. Dollar LIBOR rates that do not cease on December 31, 2021 will continue to be published through June 30, 2023. The FCA Announcement and IBA statements create uncertainties surrounding the discontinuation or availability of LIBOR and other financial benchmarks beyond June 2023, and future changes in the rules or methodologies used to calculate benchmarks. As of December 31, 2020,2021, approximately $122.7$128.5 million of our outstanding variable-rate mortgage notes payable (excluding the 2019 Mortgage Facility) and none of the notional amounts of our interest rate cap agreements extend beyond 2022. In addition, certain of our dealership operating lease agreements contain LIBOR-based rent adjustments if LIBOR rises above a specified minimum LIBOR floor. The FCA Announcement and uncertainties surrounding LIBOR and other financial benchmarks may have the

Risks Related to the Ownership of Our Common Stock

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 control us. 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 Mr. O. Bruton Smith, Sonic’s Executive Chairman and a director, and SFC, an entity Mr. Smith and his family members 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 will occur could also contribute to a decline in the market price of our Class A Common Stock.

Our charterAmended and bylawsRestated 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, restrictions imposed by our franchise and dealer agreements may impede or prevent any potential takeover bid. 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.

Mr. O. Bruton Smith serves as the Executive Chairman of Speedway Motorsports and is also a director of most of Speedway Motorsports’ operating subsidiaries. Accordingly, we compete with Speedway Motorsports for the management time of Mr. Smith. Further, Mr. Smith, members of his family and certain trusttrusts, the beneficiaries of which are members of the Smith family directly and indirectly control a substantial majority of our voting stock.

We have in the past and will likely in the future enter into transactions with Mr. Smith, entities controlled by Mr. Smith and his 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

General Risk Factors

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

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 sourcessources; 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.

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 servicesales and salesservice 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.

In addition, as we expand, we may needThe U.S. labor market experienced substantial tightening in 2021, leading to hire additional managers. The market forincreased labor costs and, at times, shortages of qualified employees in the industry and in the regions in which we operate, particularly for general managers and sales and service personnel, ispersonnel. 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 during periods, such as was experienced in 2021 and the beginning of low unemployment.2022, of high inflation and tight labor supply. 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.

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, hail storms, 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.

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, significant technology-related business functions of ours are outsourced. The frequency and severity of cyber-security incidents has increased in recent years and adversely impacted organizations of varying sizes. Although we have attempted to mitigate the cyber-security risk of both our internal and outsourced functions by implementing various cyber-security controls despite our considerable investment inand other security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions.

These cyber-security risks include vulnerability to cyber-attack of our internal or externally hosted business applications; interruption of service or access to systems may 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; and damage to our reputation as a result of a breach in security that could affect the financial security of our customers. Any cyber-security breach or other loss of information could result in legal

FourThree 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”) and the International Brotherhood of Teamsters (the “IBT”). The AI Pension Plan is a “multiemployer plan” as defined under the Employee Retirement Income Security Act of 1974, as amended, and our fourthree dealership subsidiaries are among approximately 153140 employers that are obligated to make contributions to the AI Pension Plan pursuant to collective bargaining agreements with the IAM, the IBT and other unions. 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 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 2019,2021, the AI Pension Plan’s actuary certified that the AI Pension Plan remained in critical status for the plan year commencing January 1, 2019 and is projected to become insolvent in 2031. 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.

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.

Goodwill is 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 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 “Use of Estimates and Critical Accounting Policies” in “Item 7.

Item 1B.  Unresolved Staff Comments.

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

Our dealerships are generally located along major U.S. or interstate highways. One of the principal factors we consider in evaluating a potential acquisition is its location. 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 Franchised Dealerships Segment and EchoPark Segment, see the discussion under the heading “Our Operations” 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 20162021 Credit Facilities, the 2019 Mortgage Facility, the 2020 Line of Credit Facility, or other mortgage financing arrangements. We believe that our facilities are adequate for our current needs.

Not applicable.

Our Class A Common Stock is currently traded on the NYSE 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 18, 2021,23, 2022, there were 29,797,72728,186,083 shares of our Class A Common Stock and 12,029,375 12,029,375��shares of our Class B Common Stock outstanding. As of February 18, 2021,23, 2022, there were 1,052719 record holders of the Class A Common Stock and four record holders of the Class B Common Stock. The closing stock price for the Class A Common Stock on February 18, 202123, 2022 was $39.39.$50.65.

Our Board of Directors approvedissued four quarterly cash dividends on all outstanding shares of Class A and Class B Common Stock totaling $0.40$0.46 per share, $0.40 per share and $0.24$0.40 per share during the years ended December 31, 2021, 2020 2019 and 2018,2019, respectively. Subsequent to December 31, 2020,2021, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.10$0.25 per share for stockholders of record on March 15, 20212022 to be paid on April 15, 2021.2022. The declaration and payment of any future dividend is subject to the business judgment of our Board of Directors, taking into consideration our historic and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, share repurchases, 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 future dividend policy. 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 - Liquidity and Capital Resources”Operations” for additional discussion of dividends and for a description of restrictions on the payment of dividends.

The following table sets forth information about the shares of Class A common stockCommon Stock we repurchased during the three months ended December 31, 2020:2021:

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. The financial and statistical data contained in the following discussion for all periods presented reflects our December 31, 20202021 classification of dealerships between continuing and discontinued operations in accordance with “Presentation of Financial Statements” in the Accounting Standards Codification (the “ASC”). For comparison and discussion of our results of operations for the year ended December 31, 20192020 (“2019”2020”) compared to our results of operations for the year ended December 31, 20182019 (“2018”2019”), 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 the year ended December 31, 2019.2020.

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, 20202021 (“2020”2021”) compared to 2019.2020. 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 stores (both our franchised dealerships and EchoPark stores)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. 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.

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 two reportable segments as of December 31, 2020:2021: (1) the Franchised Dealerships Segment and (2) the EchoPark 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, 2020,2021, we operated 84110 stores in the Franchised Dealerships Segment and 1646 stores in the EchoPark Segment. The Franchised Dealerships Segment consists of 96140 new vehicle franchises (representing 2128 different brands of cars and light trucks) and 1417 collision repair centers in 1217 states.

The Franchised Dealerships Segment provides comprehensive 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 extended warranties, service contracts, financing, insurance and other aftermarket products (collectively, “finance and insurance” or “F&I”) for our guests. The EchoPark Segment sells used cars and light trucks and arranges F&I product sales for our guests in pre-owned vehicle specialty retail locations. Our EchoPark business generally operates independently from our franchised dealerships business (except for certain shared back-office functions and corporate overhead costs). Sales operations for EchoPark began in the fourth quarter of 2014, and, as of December 31, 2020,2021, we operated 1646 EchoPark stores in eight states. During 2020, we announced an accelerated16 states, including 11 Northwest Motorsport pre-owned vehicle stores acquired in the RFJ Acquisition (as defined below) in December 2021. Under our current EchoPark growth plan, in which we hopeplan to open 20 to 25 additional EchoPark stores annually from 2021 tothrough 2025 as we build out an expected 140-plus pointa nationwide EchoPark distribution network expected to reach 90% of the U.S. population by 2025.

The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) unit sales volume was approximately 15.0 million vehicles in 2021, an increase of 3.4%, compared to approximately 14.5 million vehicles in 2020, a decrease of 14.7%, compared to 17.0 million vehicles in 2019, according to the Power Information Network (“PIN”) from J.D. Power. For 2021,2022, analysts’ industry expectation for the new vehicle seasonally adjusted annual rate of sales (“SAAR”) ranges from 14.5 million vehicles (flat(a 3.3% decrease compared to 2020)2021) to 16.0 million vehicles (an increase of 10.3%6.7% compared to 2020)2021). We estimate the 20212022 new vehicle SAAR will be between 15.0 million vehicles (flat compared to 2021) and 15.5 million vehicles (an increase of 6.9%3.3% compared to 2020) and 16.0 million vehicles (an increase of 10.3% compared to 2020)2021). The ongoing effects of the COVID-19 pandemic, changes in consumer confidence, availability of consumer financing, interest rates, additional federal relief spending by the U.S. government, manufacturer inventory production levels, incentive levels from automotive manufacturers, or shifts in level or timing of consumer demand as a result of natural disasters or other unforeseen circumstances could cause the actual 20212022 new vehicle SAAR to vary from expectations. For example, a material portion of our revenue is generated from our locations in Texas, nearly all of which have been substantially affected by the extreme winter weather and related power outages experienced in February 2021. 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 retail new vehicle SAAR (which excludes

In addition, the global automotive supply chain has been significantly disrupted during the pandemic, primarily related to the production of semiconductors that are used in many components of modern automobiles, in addition to workforce-related production delays and stoppages. As a result, automobile manufacturing is operating at lower than usual production levels, reducing the amount of new vehicle and certain parts inventory available to our dealerships. These inventory constraints, coupled with strong consumer demand and record levels of consumer savings, have led to a low new vehicle inventory and a high new and used vehicle pricing environment, which drove lower than expected retail new vehicle unit sales volume in 2021. While we believe that new vehicle and parts production levels should begin to improve in the first half of 2022, there is a risk that new vehicle and certain parts inventory levels remain at a low level or worsen, which could cause actual 2022 new vehicle SAAR to vary from 13.5 million vehicles in 2019.our expectations.

As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 20192020 and 2020,2021, including the RFJ Acquisition in December 2021, 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 20202021 compared to 2019.2020. 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.

New vehicle revenue decreased 8.5%increased 16.4% in 2020,2021, primarily driven by a 12.9% decrease7.9% increase in new vehicle unit sales volume asand a result of lower consumer demand beginning7.9% increase in the first quarter of 2020 and continuing through the second quarter of 2020 due to the COVID-19 pandemic.new vehicle sales prices. New vehicle gross profit increased 3.7%93.1% in 2020, primarily driven by an increase in new vehicle gross profit per unit due primarily to2021, as a 5.1% increase in new vehicleresult of higher average selling price.prices. New vehicle gross profit per unit increased $401$1,991 per unit, or 19.0%78.9%, to $2,508$4,513 per unit, due primarily to

Retail used vehicle revenue decreased 1.9%increased 22.6% in 2020,2021, driven by a 4.4% decrease19.0% increase in retail used vehicle average sales price and a 3.0% increase in retail used vehicle unit sales volume. Retail used vehicle gross profit decreased 12.8%increased 42.8% in 2020,2021, due to a decreasean increase in retail used vehicle gross profit per unit of $112$491 per unit, or 8.8%38.6%, to $1,168$1,763 per unit as a result of significant fluctuations in wholesale andhigher retail used vehicle sales prices duringdue primarily to the COVID-19 pandemic.impact of low new vehicle inventory levels on new and used vehicle prices and availability. Wholesale vehicle gross lossprofit (loss) improved by approximately $2.9$8.4 million, or 84.6%, to $0.5gross profit of $7.9 million during 2020,2021, due in part to increased demand in the wholesale auction market as a result of new vehicle inventory shortages, which resulted in higher wholesale vehicle prices for much of 2020. In the past, we have focused2021. We generally focus on maintaining used vehicle inventory days’ supply in the 30- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. Our reported franchised dealershipsOn a trailing quarter cost of sales basis, our Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 3042 days (36 days excluding the effect of the RFJ Acquisition in December 2021, which contributed less than one month of trailing cost of sales to the days’ supply calculation) and 2830 days as of December 31, 20202021 and 2019,2020, respectively.

Fixed Operations revenue decreased 9.5%increased 12.2% and Fixed Operations gross profit decreased 7.7%,increased 12.9% in 2021 as daily vehicle use and vehicle miles driven primarily by lower consumer demand for repairs as a result of shelter-in-place and stay-at-home orders relatedbegan to the COVID-19 pandemic.recover from pandemic-related declines in 2020. Fixed Operations gross margin increased 10040 basis points, to 49.9%50.2%, in 2020,2021, driven primarily by an increase in customer pay revenue contribution and higher customer pay gross margin.

F&I revenue increased 1.2%22.4% in 2020,2021, driven by an increase in F&I gross profit per retail unit. F&I gross profit per retail unit increased $161$285 per unit, or 10.1%16.3%, to $1,748$2,034 per unit, in 2020.2021. We believe that our proprietary software applications, playbook processes and guest-centric selling approach enable us to optimize F&I gross profit and penetration rates (the number of F&I products sold per vehicle) across our F&I product lines. We believe that we will continue to increase revenue in this area as we refine our processes, train our associates and continue to sell a high volume of retail new and used vehicles at our stores.

Unless otherwise noted, all discussion of increases or decreases are for 20202021 compared to 2019. All currently operating 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. Total2020. Reported total EchoPark Segment revenues increased 22.1%65.3% in 2020,2021, driven primarily by new store openings, and increases in retail used vehicle unit sales volume and average selling price. Totalprices. Reported total gross profit increased 1.6%30.3% in 2020,2021, due primarily to higher retail used vehicle unit sales volume, offset partially by lower retail used vehicle gross profit per unit as a result of significant fluctuations in wholesale and retail used vehicle prices during the COVID-19 pandemic.

RetailReported retail used vehicle revenue increased 22.3%61.5% and F&I revenue increased 16.0%46.6% in 2020,2021, driven primarily by a 15.4%36.2% increase in retail used vehicle unit sales volume in 2020.2021. Combined retail used vehicle and F&I gross profit per unit decreased $283$217 per unit, or 12.3%10.9%, to $2,013$1,779 per unit in 2020.2021. The decrease in combined retail used vehicle and F&I gross profit per unit was primarily due to higher cost of inventory acquisition as a result of increased demand in the wholesale auction market for much of 2020,2021, partially offset by an increase in F&I product penetration rates.

Same storeEchoPark same market total revenues increased 3.4%29.9% in 2020,2021, driven primarily by a 6.7% increase in retail used vehicle unit sales volume and an increase in retail used vehicle average selling price.prices. Same storemarket total gross profit decreased 13.3%increased 21.9% in 2020,2021, due primarily to lower retail used vehicle gross profit per unit as a result of significant fluctuationsan increase in wholesale and retail used vehicle unit sales volume, higher average selling prices during the COVID-19 pandemic.and an 8.8% increase in F&I per retail unit.

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

As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 20192020 and 2020,2021, 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 2020 compared to 2019. All currently operating stores (both our franchised dealerships and EchoPark 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.

For 2021,2022, analysts’ industry expectation for the new vehicle SAAR ranges from 14.5 million vehicles (flat(a 3.3% decrease compared to 2020)2021) to 16.0 million vehicles (an increase of 10.3%6.7% compared to 2020)2021). We estimate the 20212022 new vehicle SAAR will be between 15.0 million vehicles (flat compared to 2021) and 15.5 million vehicles (an increase of 6.9%3.3% compared to 2020) and 16.0 million vehicles (an increase of 10.3% compared to 2020)2021). The ongoing effects of the COVID-19 pandemic, changes in consumer confidence, availability of consumer financing, interest rates, additional federal relief spending by the U.S. government, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in level or timing of consumer demand as a result of natural disasters or other unforeseen circumstances could cause the actual 20212022 new vehicle SAAR to vary from expectations.

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

Wholesale vehicle revenues are affected by retail new and used vehicle unit sales volume and the associated trade-in volume, as well as short-term, temporary and seasonal fluctuations in wholesale auction pricing. Since the beginning of the COVID-19 pandemic in March 2020, 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 retail used vehicle revenues and related gross profit. During 2021, wholesale vehicle gross profit increased significantly due in part to increased demand in the wholesale auction market as a result of new vehicle inventory shortages, which resulted in higher wholesale vehicle prices for much of 2021. We believe that the current wholesale vehicle price environment is not sustainable in the long-term and expect that wholesale vehicle pricing and related gross profit (loss) may begin to return toward long-term normalized levels in 2022. 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 minimize inventory carrying risks.

Our consolidated same storereported wholesale vehicle results arewere as follows: