lad-20260930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2026


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

Commission file number: 001-14733

Lithia Motors, Inc.

(Exact name of registrant as specified in its charter)


Oregon			93-0572810
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
150 N. Bartlett Street	Medford,	Oregon	97501
(Address of principal executive offices)			(Zip Code)

(541) 776-6401

Registrant’s telephone number, including area code

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock without par value	LAD	The New York Stock Exchange

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, smaller reporting company,

or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and

“emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	Non-accelerated filer	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 28, 2026, there were21,620,296shares of the registrant’s common stock outstanding.


		GLOSSARY	1

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GLOSSARY OF DEFINITIONS

The following are abbreviations and definitions of terms used within this report:


Terms		Definitions
AFS		Available-for-sale
ASC		Accounting Standards Codification
ASU		Accounting standards update
Board		Board of directors
BNS		The Bank of Nova Scotia
BPS		Basis points
CAD		Canadian Dollar ($)
CORRA		Canadian Overnight Repo Rate Average
CPO		Certified pre-owned
DFC		Driveway Finance Corporation
EBITDA		Earnings before interest, taxes, depreciation, and amortization
EPS		Earnings per share
FASB		Financial Accounting Standards Board
GAAP		Generally accepted accounting principles
LAD		Lithia and Driveway
LMMH		Lithia Marubeni Mobility Holdings
Mizuho		Mizuho Bank, Ltd.
NCI		Non-controlling interest
NM		Not meaningful
NYSE		New York Stock Exchange
PINE.L		Pinewood Technologies Group PLC
PPA		Purchase price allocation
RSU		Restricted stock units
SEC		Securities and Exchange Commission
SG&A		Selling, general, and administrative
SOFR		Secured Overnight Financing Rate
U.K.		United Kingdom
U.S.		United States of America
USB		US Bank National Association
YTD		Year-to-date


		CONSOLIDATED FINANCIAL STATEMENTS	2

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CONSOLIDATED BALANCE SHEETS
(In millions; Unaudited)	September 30, 2026	December 31, 2025
Assets
Current assets:
Cash, restricted cash, and cash equivalents	$374.0	$341.8
Accounts receivable, net of allowance for doubtful accounts of $7.7 and $6.9	1,132.9	1,134.1
Inventories, net	6,624.3	6,119.6
Other current assets	261.8	262.5
Total current assets	8,393.0	7,858.0

Property and equipment, net of accumulated depreciation of $1,136.6 and $1,004.9	5,074.7	4,936.0
Operating lease right-of-use assets	681.3	717.2
Finance receivables, net of allowance for credit losses of $158.6 and $143.7	5,578.6	4,755.1
Goodwill	2,736.1	2,476.7
Franchise value	2,894.6	2,777.4
Other non-current assets	1,477.7	1,586.8
Total assets	$26,836.0	$25,107.2

Liabilities and equity
Current liabilities:
Floor plan notes payable	$2,062.6	$1,992.6
Floor plan notes payable: non-trade	4,504.2	3,016.3
Current maturities of long-term debt	95.6	64.2
Current maturities of non-recourse notes payable	19.4	69.7
Trade payables	434.5	339.5
Accrued liabilities	1,289.0	1,214.4
Total current liabilities	8,405.3	6,696.7

Long-term debt, less current maturities	6,828.2	7,274.9
Non-recourse notes payable, less current maturities	2,746.3	2,404.2
Deferred revenue	499.4	452.7
Deferred income taxes	595.7	516.3
Non-current operating lease liabilities	619.9	662.1
Other long-term liabilities	500.4	471.9
Total liabilities	20,195.2	18,478.8

Equity:
Preferred stock - no par value; authorized 15.0 shares; none outstanding	—	—
Common stock - no par value; authorized 125.0 shares; issued and outstanding 21.7 and 23.5	—	—
Additional paid-in capital	—	18.1
Accumulated other comprehensive income	37.3	67.3
Retained earnings	6,577.3	6,517.8
Total stockholders’ equity - Lithia Motors, Inc.	6,614.6	6,603.2
Non-controlling interest	26.2	25.2
Total equity	6,640.8	6,628.4
Total liabilities and equity	$26,836.0	$25,107.2

See accompanying condensed notes to consolidated financial statements.


		CONSOLIDATED FINANCIAL STATEMENTS	3

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CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions, except per share amounts; Unaudited)	2026	2025	2026	2025
Revenues
New vehicle	$4,868.6	$4,792.4	$14,077.1	$14,076.3
Used vehicle	3,630.1	3,463.3	10,647.8	10,192.3
Finance and insurance	361.4	378.6	1,087.5	1,116.8
Aftersales	1,086.6	1,041.5	3,197.0	3,051.7
Total revenues	9,946.7	9,675.8	29,009.4	28,437.1
Cost of sales
New vehicle retail	4,590.7	4,501.0	13,255.7	13,178.1
Used vehicle retail	3,419.2	3,274.4	10,035.2	9,609.2
Aftersales	441.0	434.4	1,303.6	1,288.3
Total cost of sales	8,450.9	8,209.8	24,594.5	24,075.6
Gross profit	1,495.8	1,466.0	4,414.9	4,361.5

Finance operations income	32.3	19.1	90.0	51.7

Selling, general and administrative	1,036.3	998.0	3,088.4	2,965.3
Depreciation and amortization	71.6	65.5	212.3	194.6
Operating profit	420.2	421.6	1,204.2	1,253.3
Floor plan interest expense	(70.3)	(57.8)	(195.9)	(169.8)
Other interest expense, net	(63.1)	(68.3)	(196.0)	(200.5)
Other income (expense), net	104.2	(13.3)	72.7	35.9
Income before income taxes	391.0	282.2	885.0	918.9
Income tax provision	(98.1)	(63.6)	(228.4)	(230.9)
Net income	292.9	218.6	656.6	688.0
Net income attributable to non-controlling interest	(1.8)	(1.5)	(5.1)	(5.3)
Net income attributable to Lithia Motors, Inc.	$291.1	$217.1	$651.5	$682.7

Basic earnings per share attributable to Lithia Motors, Inc. common stockholders	$13.28	$8.63	$28.83	$26.47
Shares used in basic per share calculations	21.9	25.2	22.6	25.8

Diluted earnings per share attributable to Lithia Motors, Inc. common stockholders	$13.22	$8.61	$28.77	$26.42
Shares used in diluted per share calculations	22.0	25.2	22.6	25.8

Cash dividends paid per share	$0.70	$0.55	$1.82	$1.63

See accompanying condensed notes to consolidated financial statements.


		CONSOLIDATED FINANCIAL STATEMENTS	5

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CONSOLIDATED STATEMENTS OF EQUITY
	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions; Unaudited)	2026	2025	2026	2025
Total equity, beginning balances	$6,427.4	$7,011.0	$6,628.4	$6,674.1

Common stock, beginning balances	—	568.8	—	793.1
Stock-based compensation	1.7	1.6	33.6	29.7
Issuance of stock in connection with employee stock purchase plans	7.2	7.6	21.2	21.0
Repurchase of common stock, including excise tax	(8.9)	(412.6)	(54.8)	(678.4)
Common stock, ending balances	—	165.4	—	165.4

Additional paid-in capital, beginning balances	—	110.2	18.1	107.2
Stock-based compensation	14.2	12.4	6.2	15.4
Repurchase of common stock, including excise tax	(14.2)	—	(24.3)	—
Additional paid-in capital, ending balances	—	122.6	—	122.6

Accumulated other comprehensive income (loss), beginning balances	37.8	116.6	67.3	(3.6)
Foreign currency translation adjustment	0.8	(30.2)	(26.8)	89.1
Unrealized (loss) gain on debt securities, net of tax benefit (provision) of $0.4, $—, $0.6, and $(0.2)	(1.5)	0.2	(2.1)	0.7
Gain (loss) on cash flow hedges, net of tax (provision) benefit of $(0.1), $—, $0.4, and $(0.1)	0.2	—	(1.1)	0.4
Accumulated other comprehensive income, ending balances	37.3	86.6	37.3	86.6

Retained earnings, beginning balances	6,364.3	6,190.9	6,517.8	5,753.5
Net income attributable to Lithia Motors, Inc.	291.1	217.1	651.5	682.7
Dividends paid	(15.4)	(13.9)	(41.1)	(42.1)
Repurchase of common stock, including excise tax	(62.7)	—	(550.9)	—
Retained earnings, ending balances	6,577.3	6,394.1	6,577.3	6,394.1

Non-controlling interest, beginning balances	25.3	24.5	25.2	23.9
Distribution of non-controlling interest	(0.9)	(1.1)	(4.1)	(4.3)
Net income attributable to non-controlling interest	1.8	1.5	5.1	5.3
Non-controlling interest, ending balances	26.2	24.9	26.2	24.9

Total equity, ending balances	$6,640.8	$6,793.6	$6,640.8	$6,793.6

See accompanying condensed notes to consolidated financial statements.


		CONSOLIDATED FINANCIAL STATEMENTS	6

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CONSOLIDATED STATEMENTS OF CASH FLOWS
	Nine Months Ended September 30,
(In millions; Unaudited)	2026	2025
Cash flows from operating activities:
Net income	$656.6	$688.0
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	266.2	239.5
Stock-based compensation	39.8	45.1
Net loss on disposal of other assets	6.3	3.9
Net gain on disposal of stores	(9.2)	(17.7)
Unrealized investment gain, net	(54.5)	(12.1)
Deferred income taxes	68.7	102.6
Amortization of operating lease right-of-use assets	73.8	67.2
Decrease (increase) (net of acquisitions and dispositions):
Accounts receivable, net	2.6	55.5
Inventories	(555.0)	44.8
Finance receivables	(831.4)	(671.3)
Other assets	(136.2)	(263.8)
Increase (decrease) (net of acquisitions and dispositions):
Floor plan notes payable	87.6	(151.0)
Trade payables	93.3	(7.4)
Accrued liabilities	54.9	52.8
Other long-term liabilities and deferred revenue	31.6	56.9
Net cash (used in) provided by operating activities	(204.9)	233.0
Cash flows from investing activities:
Principal payments received on notes receivable	13.8	—
Capital expenditures	(252.3)	(257.7)
Proceeds from sales of assets	24.2	30.5
Net cash used for other investments	(34.0)	(12.7)
Cash paid for acquisitions, net of cash acquired	(264.8)	(417.6)
Net proceeds from sales of stores	31.9	178.1
Net cash used in investing activities	(481.2)	(479.4)
Cash flows from financing activities:
Borrowings on floor plan notes payable, net: non-trade	1,542.2	73.3
Borrowings on lines of credit	9,037.0	11,707.1
Repayments on lines of credit	(9,405.5)	(11,575.1)
Principal payments on long-term debt and finance lease liabilities, scheduled	(36.2)	(29.6)
Principal payments on long-term debt and finance lease liabilities, other	(51.4)	(15.7)
Proceeds from issuance of long-term debt	—	741.0
Principal payments on non-recourse notes payable	(1,228.4)	(959.0)
Proceeds from issuance of non-recourse notes payable	1,520.2	1,095.3
Payment of debt issuance costs	(7.2)	(11.7)
Proceeds from issuance of common stock	21.2	21.0
Repurchase of common stock	(624.5)	(662.3)
Dividends paid	(41.1)	(42.1)
Payment of contingent consideration related to acquisitions	—	(9.4)
Other financing activity	(4.0)	(68.3)
Net cash provided by financing activities	722.3	264.5
Effect of exchange rate changes on cash, restricted cash, and cash equivalents	(3.5)	4.7
Increase in cash, restricted cash, and cash equivalents	32.7	22.8
Cash, restricted cash, and cash equivalents at beginning of year	391.3	445.8
Cash, restricted cash, and cash equivalents at end of period	$424.0	$468.6

See accompanying condensed notes to consolidated financial statements.


		CONSOLIDATED FINANCIAL STATEMENTS	7

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
	Nine Months Ended September 30,
(In millions)	2026	2025
Reconciliation of cash, restricted cash, and cash equivalents to the consolidated balance sheets
Cash and cash equivalents	$108.1	$206.5
Restricted cash from collections on auto loans receivable and customer deposits	265.9	210.6
Cash, restricted cash, and cash equivalents	374.0	417.1
Restricted cash on deposit in reserve accounts, included in other non-current assets	50.0	51.5
Total cash, restricted cash, and cash equivalents reported in the Consolidated Statements of Cash Flows	$424.0	$468.6

Supplemental cash flow information:
Cash paid during the period for interest	$565.7	$524.7
Cash paid during the period for income taxes, net	116.0	137.9
Debt paid in connection with store disposals	27.1	40.8

Non-cash activities:
Debt assumed in connection with acquisitions	$12.2	$—
Acquisition of finance leases in connection with acquisitions	62.0	—
Right-of-use assets obtained in exchange for lease liabilities	65.3	30.8
Unsettled repurchases of common stock and excise taxes	5.5	16.1
Issuance of notes receivable in connection with divestitures	22.2	—

See accompanying condensed notes to consolidated financial statements.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.INTERIM FINANCIAL STATEMENTS

Basis of Presentation

These Consolidated Financial Statements contain unaudited information as of September 30, 2026, and for the

three and nine months ended September 30, 2026 and 2025. The unaudited interim financial statements have been

prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required

by accounting principles generally accepted in the United States of America for annual financial statements are not

included herein. In management’s opinion, these unaudited financial statements reflect all adjustments (which

include only normal recurring adjustments) necessary for a fair presentation of the information when read in

conjunction with our 2025 audited Consolidated Financial Statements and the related notes thereto. The financial

information as of December 31, 2025, is derived from our Annual Report on Form 10-K filed with the SEC on

February 25, 2026. The results of operations for the interim periods presented are not necessarily indicative of the

results to be expected for the full year.

Reclassifications

Certain reclassifications of amounts previously reported have been made to the accompanying Consolidated

Financial Statements to maintain consistency and comparability between periods presented. Within our

Consolidated Statements of Operations, we combined used wholesale revenue with used retail revenue and now

present these revenues collectively as used vehicle revenue. In addition, we combined fleet revenue with new retail

revenue and now present these revenues collectively as new vehicle revenue.

These changes were made to better reflect how management evaluates our revenue performance and to improve

comparability with industry practice. The reclassifications had no impact on total revenue, gross profit, operating

income, net income, or cash flows for any period presented.

NOTE 2.ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:


(In millions)	September 30, 2026	December 31, 2025
Contracts in transit	$411.3	$468.6
Vehicle receivables	212.7	177.6
Manufacturer receivables	356.9	327.9
Trade receivables	127.0	148.6
Other receivables, current	32.7	18.3
	1,140.6	1,141.0
Less: Allowance for doubtful accounts	(7.7)	(6.9)
Total accounts receivable, net	$1,132.9	$1,134.1

The long-term portion of other receivables was included as a component of Other non-current assets in the

Consolidated Balance Sheets.

NOTE 3.INVENTORIES AND FLOOR PLAN NOTES PAYABLE

The components of inventories, net, consisted of the following:


(In millions)	September 30, 2026	December 31, 2025
New vehicles	$3,778.6	$3,586.1
Used vehicles	2,584.5	2,266.7
Parts and accessories	261.2	266.8
Total inventories	$6,624.3	$6,119.6

Vehicle inventory costs are generally reduced by manufacturer holdbacks and incentives, while the related floor plan

notes payable are reflective of the gross cost of the vehicle.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	9

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(In millions)	September 30, 2026	December 31, 2025
Floor plan notes payable	$2,062.6	$1,992.6
Floor plan notes payable: non-trade	4,504.2	3,016.3
Total floor plan debt	$6,566.8	$5,008.9

NOTE 4.FINANCE RECEIVABLES

Interest income on finance receivables is recognized based on the contractual terms of each receivable and is

accrued until repayment, reaching non-accrual status, charge-off, or repossession. Direct costs associated with

originations are capitalized and expensed as an offset to interest income when recognized on the receivables.

The balances of finance receivables are made up of loans and finance leases secured by the related vehicles. More

than 99% of the portfolio is aged less than 60 days past due with less than 1% on non-accrual status.

Finance Receivables, net


(In millions)	September 30, 2026	December 31, 2025
Asset-backed term funding	$3,263.1	$2,954.6
Warehouse facilities	2,048.4	1,514.8
Other managed receivables	396.9	403.4
Total finance receivables	5,708.4	4,872.8
Accrued interest and fees	28.8	26.0
Less: Allowance for credit losses	(158.6)	(143.7)
Finance receivables, net	$5,578.6	$4,755.1

Finance Receivables by FICO Score


	As of September 30, 2026
	Year of Origination
($ in millions)	2026	2025	2024	2023	2022	Prior to 2022	Total
<599	$26.1	$30.6	$23.6	$14.3	$7.0	$2.3	$103.9
600-699	609.5	476.8	260.2	165.6	104.8	23.3	1,640.2
700-774	761.7	591.0	269.1	169.6	102.4	11.0	1,904.8
775+	820.1	580.4	233.9	125.1	60.7	2.6	1,822.8
Total auto loan receivables	$2,217.4	$1,678.8	$786.8	$474.6	$274.9	$39.2	5,471.7
Other finance receivables 1							236.7
Total finance receivables							$5,708.4


		As of December 31, 2025
		Year of Origination
($ in millions)	2025	2024	2023	2022	2021	Prior to 2021	Total
<599	$42.0	$34.4	$22.7	$12.0	$4.7	$0.5	$116.3
600-699	629.9	369.1	250.9	173.0	45.2	3.3	1,471.4
700-774	784.1	382.1	254.7	168.4	20.4	1.3	1,611.0
775+	810.5	338.5	197.3	102.0	4.8	0.4	1,453.5
Total auto loan receivables	$2,266.5	$1,124.1	$725.6	$455.4	$75.1	$5.5	4,652.2
Other finance receivables 1							220.6
Total finance receivables							$4,872.8

1Includes legacy portfolio, loans that are originated with no FICO score available, lease receivables, and deferred origination

fees.

In accordance with FASBASC Topic 326, the allowance for credit losses on finance receivables is estimated based

on our historical write-off experience, current conditions and forecasts, as well as the value of any underlying assets

securing these receivables. Consideration is given to recent delinquency trends and recovery rates. Account

balances are charged against the allowance upon reaching 120 days past due status.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	10

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Rollforward of Allowance for Credit Losses on Finance Receivables

Our allowance for credit losses on finance receivables represents the net credit losses expected over the remaining

contractual life of our managed receivables. The allowance for credit losses on finance receivables consisted of the

following changes during the period:


	Nine Months Ended September 30,		2026 vs. 2025
(In millions)	2026	2025	$ Change	% Change
Allowance for credit losses at beginning of period	$143.7	$123.4	$20.3	16.5%
Charge-offs	(111.5)	(120.1)	8.6	(7.2)
Recoveries	61.9	64.5	(2.6)	(4.0)
Net charge-offs	(49.6)	(55.6)	6.0	(10.8)%
Change in provision due to portfolio size	15.0	16.9	(1.9)	(11.2)
Change in provision due to net charge-offs	49.6	55.6	(6.0)	(10.8)
Currency translation	(0.1)	(0.5)	0.4	(80.0)
Allowance for credit losses at end of period	$158.6	$139.8	$18.8	13.4%

Charge-off Activity by Year of Origination


	Nine Months Ended September 30,
(In millions)	2026	2025
2026	$5.5	$—
2025	34.8	6.0
2024	29.9	37.1
2023	21.9	38.3
2022	13.8	26.7
2021 and prior	2.8	8.0
Other finance receivables 1	2.8	4.0
Total charge-offs	$111.5	$120.1

1Includes legacy portfolio, loans that are originated with no FICO score available, and finance lease receivables.

NOTE 5.GOODWILL AND FRANCHISE VALUE

The changes in the carrying amounts of goodwill are as follows:


(In millions)	Vehicle Operations	Financing Operations	Consolidated
Balance as of December 31, 2024	$2,099.3	$16.2	$2,115.5
Additions through acquisitions 1	383.1	—	383.1
Reductions through disposals	(39.2)	—	(39.2)
Currency translation	16.5	0.8	17.3
Balance as of December 31, 2025	2,459.7	17.0	2,476.7
Additions through acquisitions 2	268.2	—	268.2
Reductions through disposals	(2.9)	—	(2.9)
Currency translation	(5.3)	(0.6)	(5.9)
Balance as of September 30, 2026	$2,719.7	$16.4	$2,736.1

1Our purchase price allocations (PPA) for the 2024 acquisitions were finalized in 2025. As a result, we added $348.2 million

of goodwill. Preliminary PPA for a portion of our 2025 acquisitions resulted in adding $34.9 million of goodwill. Our PPA for

the remaining 2025 acquisitions are preliminary and goodwill is not yet allocated to our segments. These amounts are

included in other non-current assets until we finalize our purchase accounting. See Note 12 – Acquisitions.

2Our PPA for the remainder of the 2025 acquisitions were finalized in 2026. As a result, we added $268.2 million of goodwill.

Our PPA for 2026 acquisitions are preliminary and goodwill is not yet allocated to our segments. These amounts are

included in other non-current assets until we finalize our purchase accounting. See Note 12 – Acquisitions.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	11

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The changes in the carrying amounts of franchise value are as follows:


(In millions)	Franchise Value
Balance as of December 31, 2024	$2,550.3
Additions through acquisitions 1	231.1
Reductions through divestitures	(20.9)
Reductions from impairments 2	(5.8)
Currency translation	22.7
Balance as of December 31, 2025	2,777.4
Additions through acquisitions 3	153.6
Reductions through divestitures	(26.8)
Currency translation	(9.6)
Balance as of September 30, 2026	$2,894.6

1Our PPA for the 2024 acquisitions were finalized in 2025. As a result, we added $218.0 million of franchise value.

Preliminary PPA for a portion of our 2025 acquisitions resulted in adding $13.1 million of franchise value. These amounts

are included in other non-current assets until we finalize our purchase accounting. See Note 12 – Acquisitions.

2In our annual impairment testing in 2025, we determined the franchise value of one underperforming store was not

recoverable, resulting in an impairment of $5.8 million being recorded in the Consolidated Statements of Operations as

Asset impairments. Balance as of September 30, 2026 and December 31, 2025 is net of accumulated impairments of this

amount only.

3Our PPA for the remainder of the 2025 acquisitions were finalized in 2026. As a result, we added $153.6 million of franchise

value. Our PPA for the 2026 acquisitions are preliminary and franchise value is not yet allocated. These amounts are

included in other non-current assets until we finalize our purchase accounting. See Note 12 – Acquisitions.

NOTE 6.INVESTMENTS

Marketable Securities

As of September 30, 2026 and December 31, 2025, marketable equity securities recorded within Other current

assets in the Consolidated Balance Sheets were $8.9 million and $2.4 million, respectively. Net unrealized gains

recognized during the ninemonths ended September 30, 2026 and 2025 on marketable equity securities held at the

reporting date were$0.7 million and $0.2 million, respectively.

Marketable debt securities accounted for as available-for-sale (AFS), and recorded within Other current assets in

the Consolidated Balance Sheets, were as follows:


	As of September 30, 2026
					Fair Value of Securities with Contractual Maturities
(In millions)	Amortized Cost	Total Net Gains1	Total Net Losses1	Fair Value	Within 1 Year	After 1 Year through 5 Years	After 5 Years
U.S. Treasury	$25.8	$—	$(0.8)	$25.0	$4.2	$15.8	$5.0
Municipal securities	10.5	—	(0.2)	10.3	1.5	7.4	1.4
Corporate debt	32.9	—	(1.0)	31.9	2.5	19.9	9.5
Total	$69.2	$—	$(2.0)	$67.2	$8.2	$43.1	$15.9


	As of December 31, 2025
					Fair Value of Securities with Contractual Maturities
(In millions)	Amortized Cost	Total Net Gains1	Total Net Losses1	Fair Value	Within 1 Year	After 1 Year through 5 Years	After 5 Years
U.S. Treasury	$21.4	$0.2	$—	$21.6	$3.7	$14.5	$3.4
Municipal securities	10.4	0.2	—	10.6	0.1	9.0	1.5
Corporate debt	21.5	0.3	—	21.8	4.0	14.3	3.5
Total	$53.3	$0.7	$—	$54.0	$7.8	$37.8	$8.4

1Represents total unrealized gains (losses) for securities with net gains (losses) in Accumulated other comprehensive

income.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	12

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Proceeds from the maturity of AFS debt securities were $7.9 million and $8.2 million for the nine months ended

September 30, 2026 and 2025. There were no gross realized gains or losses on the maturity of AFS debt securities

for the three and nine months ended September 30, 2026 and 2025.

Equity Method Investments

Our investment in Pinewood Technologies, PLC (PINE.L), a U.K.-based automotive dealership management system

provider, consists of 31.95% of the common stock voting interests accounted for herein as an equity method

investment. The investment is measured at fair value based on quoted market prices, and all fair value changes in

the investment are recorded as unrealized gains or losses as a component of Other income (expense), net in the

Consolidated Statements of Operations. The fair value of our investment was $217.5 million and $177.2 million as

of September 30, 2026 and December 31, 2025, respectively. See Note 11 – Fair Value Measurements.

Our investment in Wheels, Inc., an automotive fleet management provider, through Lithia Marubeni Mobility

Holdings (LMMH) consists of 26.5% of the common stock voting interests accounted for herein as an equity method

investment. The investment is measured at cost plus or minus our share of equity method investee income or loss

as a component of Other non-current assets in the Consolidated Balance Sheets. The book value of our investment

was $221.0 million and $222.0 million as of September 30, 2026 and December 31, 2025, respectively. We received

a dividend of $9.8 million during the nine months ended September 30, 2026. Using the cumulative earnings

approach, this dividend is classified within Operating Activities in the Consolidated Statements of Cash Flows, as it

is less than our cumulative equity in the investee's earnings.

NOTE 7.COMMITMENTS AND CONTINGENCIES

Contract Liabilities

We retain the obligation for various contracts sold to our customers and assumed in acquisitions. These amounts

are recorded as a contract liability. At the time of sale, we defer the full sale price and recognize the revenue based

on the rate at which we expect to incur further costs.

The amount of revenue recognized related to aftersales contract liabilities is calculated, net of cancellations, using

an input method, which most closely depicts performance of the contracts. Our contract liability balances associated

with aftersales were $549.7 million and $501.5 million as of September 30, 2026, and December 31, 2025,

respectively; we recognized $31.2 million and $99.5 million of revenue in the three and nine months ended

September 30, 2026, related to our opening contract liability balances associated with aftersales.

The amount of revenue recognized related to operating lease vehicle contract liabilities is recognized evenly over

the life of the related lease contracts. Our contract liability balances associated with operating lease vehicles were

$155.2 million and $136.4 million as of September 30, 2026, and December 31, 2025, respectively; we recognized

$19.3 million and $51.5 million of revenue in the three and nine months ended September 30, 2026, related to our

opening contract liability balances associated with operating lease vehicles.

Our contract liability balances are included in Accrued liabilities and Deferred revenue.

Litigation

We are party to numerous legal proceedings arising in the normal course of our business. Although we do not

anticipate that the resolution of legal proceedings arising in the normal course of business will have a material

adverse effect on our business, results of operations, financial condition, or cash flows, we cannot predict this with

certainty.

NOTE 8.DEBT

Credit Facilities

US Bank Syndicated Credit Facility

On February 27, 2026, we amended our existing syndicated credit facility with US Bank as agent (USB credit

facility), now comprised of 18 financial institutions, including six manufacturer-affiliated finance companies, maturing

February 27, 2031. The amendment extended the maturity date, converted the existing used vehicle floorplan and

service loaner floorplan facilities to VIN-specific facilities, eliminated the credit spread adjustment of 0.10%, and

reduced the margin on used vehicle floor plan financing from 1.40% to 1.20%.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	13

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This USB credit facility provides for a total financing commitment of $6.5 billion, which may be further expanded,

subject to lender approval and the satisfaction of other conditions, up to a total of $7.0 billion. The allocation of the

financing commitment is for up to $2.7 billion in new vehicle inventory floorplan financing, up to $1.3 billion in used

vehicle inventory floorplan financing, up to $150 million in service loaner vehicle floorplan financing, and up to

$2.4 billion in revolving financing for general corporate purposes, including acquisitions and working capital. We

have the option to reallocate the commitments under this USB credit facility, provided that the aggregate revolving

loan commitment may not be more than 50% of the amount of the aggregate commitment. All borrowings from, and

repayments to, our lending group are presented in the Consolidated Statements of Cash Flows as part of Net cash

provided by financing activities.

Our obligations under our USB credit facility are secured by a substantial amount of our assets, including our

inventory (including new and used vehicles, parts and accessories), equipment, accounts receivable (and other

rights to payment), real property, and our equity interests in certain of our subsidiaries.

The interest rate on the USB credit facility varies based on the type of debt, with the rate of Daily Simple SOFR plus

a margin of 1.10% for new vehicle floor plan financing, 1.20% for used vehicle floor plan financing, 1.20% for

service loaner floor plan financing, and an applicable margin on the revolving financing ranging from 1.00% to

2.00% depending on our leverage ratio. The annual interest rates associated with our commitments are as follows:


Commitment	Annual Interest Rate at September 30, 2026
New vehicle floor plan	5.00%
Used vehicle floor plan	5.10%
Service loaner floor plan	5.10%
Revolving line of credit	5.15%

Bank of Nova Scotia Syndicated Credit Facility

On February 27, 2026, we amended our syndicated credit agreement with the Bank of Nova Scotia as agent (BNS

credit facility), which is comprised of six financing institutions, including two manufacturer-affiliated finance

companies. The amendment extended the maturity date, converted the existing used vehicle floorplan facility to a

VIN-specific facility, and reduced the margin on used vehicle floor plan financing from 1.25% to 1.10%.

The BNS credit facility provides for a total financing commitment of approximately $1.1 billionCAD, including a

working capital revolving credit facility of up to $125 millionCAD, a wholesale flooring facility for new vehicles up to

$375 millionCAD, used vehicle flooring facility of up to $100 millionCAD, wholesale leasing facility of up to $500

millionCAD, and daily rental vehicle facility up to $25 millionCAD.

The interest rate on the BNS credit facility varies based on the type of debt, using either the Term or Daily

Compounded rate of the Canadian Overnight Repo Rate Average (CORRA) plus a credit spread adjustment of

0.30% plus a margin of 1.00% for the wholesale flooring facility, 1.10% for the used vehicle flooring facility, 1.20%

for the daily rental facility, 1.30% for the wholesale leasing facility, and an applicable margin on the working capital

revolving facility ranging from 1.25% to 2.25% depending on our leverage ratio. The annual interest rates

associated with our commitments are as follows:


Commitment	Annual Interest Rate at September 30, 2026
Wholesale flooring facility	3.61%
Used vehicle flooring facility	3.71%
Daily rental facility	3.81%
Wholesale leasing facility	3.91%
Working capital revolving facility	3.86%

All BNS facilities other than the wholesale and used flooring facilities, which are demand facilities, mature on

March 18, 2029. The credit agreement includes various financial and other covenants typical of such agreements.

Mizuho Warehouse Facility

On September 30, 2026, we amended our securitization facility for our auto loan portfolio with Mizuho Bank Ltd.

(Mizuho warehouse facility), as administrative agent and account bank, to extend the commitment termination date

to July 31, 2028 and modify certain collateral eligibility, concentration and hedging provisions. The amendment also


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	14

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reduced the interest rate on the facility to the Daily Simple SOFR rate plus 0.825%. The Mizuho warehouse facility

provides for a total financing commitment of up to $1.0 billion.

Non-Recourse Notes Payable

In 2026, we issued a total of $1.5 billion in non-recourse notes payable related to asset-backed term funding

transactions.

Below is a summary of outstanding non-recourse notes payable issued:


($ in millions)	Balance as of September 30, 2026	Initial Principal Amount	Issuance Date	Interest Rate Range	Final Distribution Date
LAD Auto Receivables Trust 2023-1 Class D	7.3	31.3	02/14/23	7.30% to 7.30%	Various dates through Jun 2030
LAD Auto Receivables Trust 2023-2 Class C-D	36.3	79.5	05/24/23	5.58% to 6.30%	Various dates through Feb 2031
LAD Auto Receivables Trust 2023-3 Class C-D	50.5	56.7	08/23/23	6.43% to 6.92%	Various dates through Dec 2030
LAD Auto Receivables Trust 2023-4 Class B-D	66.4	80.5	11/15/23	6.39% to 7.37%	Various dates through Apr 2031
LAD Auto Receivables Trust 2024-1 Class A-D	68.0	100.9	02/14/24	5.17% to 6.15%	Various dates through Jun 2031
LAD Auto Receivables Trust 2024-2 Class A-D	116.3	118.2	06/20/24	5.46% to 6.37%	Various dates through Oct 2031
LAD Auto Receivables Trust 2024-3 Class A-D	221.5	306.3	11/15/24	4.52% to 5.18%	Various dates through Feb 2032
LAD Auto Receivables Trust 2025-1 Class A-D	247.3	311.4	02/12/25	4.69% to 5.52%	Various dates through May 2032
LAD Auto Receivables Trust 2025-2 Class A-D	312.3	443.3	08/13/25	4.25% to 5.01%	Various dates through Dec 2032
LAD Auto Receivables Trust 2025-3 Class A-C	394.6	477.4	11/13/25	4.03% to 4.60%	Various dates through Mar 2033
LAD Auto Receivables Trust 2026-1 Class A-C	401.4	532.1	02/18/26	3.75% to 4.42%	Various dates through Aug 2033
LAD Auto Receivables Trust 2026-2 Class A-C	434.9	525.6	05/13/26	4.17% to 4.94%	Various dates through Oct 2033
LAD Select Auto Receivables Trust 2026-A Class A-E	408.9	462.5	07/29/26	4.05% to 7.45%	Various dates through June 2034
Total non-recourse notes payable	$2,765.7	$3,525.7

NOTE 9.RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

Company-Sponsored Defined Benefit Pension Plan

We maintain two company-sponsored defined benefit plans applicable to a portion of salaried past and present

team members, which are closed to future accrual.

Net Periodic Benefit

Interest cost represents the increase in the projected benefit obligation, which is a discounted amount, due to the

passage of time. The expected return on plan assets reflects the computed amount of current-year earnings from

the investment of plan assets using an estimated long-term rate of return.


	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions)	2026	2025	2026	2025
Interest cost	$8.4	$8.4	$25.1	$25.2
Expected return on plan assets	(9.0)	(10.8)	(27.0)	(32.3)
Amortization of net loss	0.1	—	0.4	—
Net periodic benefit	$(0.5)	$(2.4)	$(1.5)	$(7.1)

During the nine months ended September 30, 2026, funding of pension plans was $6.0 million. For the remainder of

2026, we estimate approximately $2.2 million of cash contributions.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	15

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NOTE 10.EQUITY

Repurchases of Common Stock

Repurchases of our common stock occurred under a repurchase authorization granted by our Board and related to

shares withheld as part of the vesting of RSUs.

In May 2026, our Board approved an additional $500 million repurchase authorization of our common stock. This

authorization, when added to the amounts previously authorized by the Board for repurchase, brings the total

authorizations up to $3.7 billion. Share repurchases under our authorizations were as follows:


	Repurchases Occurring in 2026		Cumulative Repurchases as of September 30, 2026
	Shares	Average Price1	Shares	Average Price
Share Repurchase Authorization	2,041,727	$287.07	13,338,691	$233.50

1Price excludes excise taxes imposed under the Inflation Reduction Act of $5.5 millionfor the nine months ended

September 30, 2026.

As of September 30, 2026, we had $535.4 million available for repurchases pursuant to our share repurchase

authorizations from our Board in 2026 and prior years.

In addition, during 2026, we repurchased 115,367 shares at an average price of $332.32 per share, for a total of

$38.3 million, related to tax withholding associated with the vesting of RSUs. The repurchase of shares related to

tax withholding associated with stock awards does not reduce the number of shares available for repurchase as

approved by our Board.

NOTE 11.FAIR VALUE MEASUREMENTS

Factors used in determining the fair value of our financial assets and liabilities are summarized into three broad

categories:

•Level 1 - quoted prices in active markets for identical securities;

•Level 2 - other significant observable inputs, including quoted prices for similar securities, interest rates,

prepayment spreads, credit risk; and

•Level 3 - significant unobservable inputs, including our own assumptions in determining fair value.

We determined the carrying value of cash, restricted cash, cash equivalents, accounts receivable, trade payables,

accrued liabilities, finance receivables, and short-term borrowings approximate their fair values because of the

nature of their terms and current market rates of these instruments. We believe the carrying value of our variable

rate debt approximates fair value.

We have money market securities, which include restricted cash from collections on finance receivables, recorded

as a component of Cash, restricted cash, and cash equivalents in our Consolidated Balance Sheets, as well as

restricted cash on deposit in reserve accounts, recorded as a component of Other non-current assets in our

Consolidated Balance Sheets. These money market securities consist of highly liquid investments with original

maturities of three months or less and are classified as Level 1.

We have investments consisting of equity securities, available for sale debt securities, and equity method

investments with a fair value election. We calculated the estimated fair value of the equity securities, equity method

investments, and U.S. Treasury debt securities using quoted market prices (Level 1). The fair value of corporate and

municipal debt securities are measured using observable Level 2 market expectations at each measurement date.

See Note 6 – Investments.

We have fixed rate debt primarily consisting of amounts outstanding under our senior notes, non-recourse notes

payable, and real estate mortgages. We calculated the estimated fair value of the senior notes using quoted prices

for the identical liability (Level 1). The fair value of non-recourse notes payable are measured using observable

Level 2 market expectations at each measurement date. The calculated estimated fair values of the fixed rate real

estate mortgages and finance lease liabilities use a discounted cash flow methodology with estimated current


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	16

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interest rates based on a similar risk profile and duration (Level 2). The fixed cash flows are discounted and

summed to compute the fair value of the debt.

Nonfinancial assets such as goodwill, franchise value, or other long-lived assets are measured and recorded at fair

value during a business combination or when there is an indicator of impairment. We evaluate our goodwill and

franchise value using a qualitative assessment process. If the qualitative factors determine that it is more likely than

not that the carrying value exceeds the fair value, we would further evaluate for potential impairment using a

quantitative assessment. The quantitative assessment estimates fair values using unobservable (Level 3) inputs by

discounting expected future cash flows of the store for franchise value, or reporting unit for goodwill. The forecasted

cash flows contain inherent uncertainties, including significant estimates and assumptions related to growth rates,

margins, working capital requirements, and cost of capital, for which we utilize certain market participant-based

assumptions we believe to be reasonable. We estimate the value of other long-lived assets that are recorded at fair

value on a non-recurring basis on a market valuation approach. We use prices and other relevant information

generated primarily by recent market transactions involving similar or comparable assets, as well as our historical

experience in divestitures, acquisitions and real estate transactions. Additionally, we may use a cost valuation

approach to value long-lived assets when a market valuation approach is unavailable. Under this approach, we

determine the cost to replace the service capacity of an asset, adjusted for physical and economic obsolescence.

When available, we use valuation inputs from independent valuation experts, such as real estate appraisers and

brokers, to corroborate our estimates of fair value. Real estate appraisers’ and brokers’ valuations are typically

developed using one or more valuation techniques including market, income and replacement cost approaches.

Because these valuations contain unobservable inputs, we classified the measurement of fair value of long-lived

assets as Level 3.

There were no changes to our valuation techniques during the nine-month period ended September 30, 2026.

Below are our assets and liabilities that are measured at fair value:


	As of September 30, 2026				As of December 31, 2025
(In millions)	Carrying Value	Level 1	Level 2	Level 3	Carrying Value	Level 1	Level 2	Level 3
Recorded at fair value
Marketable securities
Restricted cash - collections	$144.9	$144.9	$—	$—	$131.3	$131.3	$—	$—
Restricted cash - reserve	42.0	42.0	—	—	34.3	34.3	—	—
Total money market funds	$186.9	$186.9	$—	$—	$165.6	$165.6	$—	$—

Equity securities	$8.9	$8.9	$—	$—	$2.4	$2.4	$—	$—

U.S. Treasury	$25.0	$25.0	$—	$—	$21.6	$21.6	$—	$—
Municipal debt	10.3	—	10.3	—	10.6	—	10.6	—
Corporate debt	31.9	—	31.9	—	21.8	—	21.8	—
Total debt securities	$67.2	$25.0	$42.2	$—	$54.0	$21.6	$32.4	$—

Equity Method Investment
PINE.L	$217.5	$217.5	$—	$—	$177.2	$177.2	$—	$—

Recorded at historical value
Fixed rate debt 1
4.625% Senior notes due 2027	$400.0	$394.5	$—	$—	$400.0	$398.0	$—	$—
3.875% Senior notes due 2029	800.0	750.0	—	—	800.0	770.0	—	—
5.500% Senior notes due 2030	600.0	576.0	—	—	600.0	602.3	—	—
4.375% Senior notes due 2031	550.0	503.3	—	—	550.0	526.6	—	—
Non-recourse notes payable	2,765.7	—	2,744.0	—	2,473.9	—	2,489.0	—
Real estate mortgages and other debt	710.1	—	680.6	—	730.0	—	703.8	—

1Excluding unamortized debt issuance costs


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	17

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NOTE 12.ACQUISITIONS

In the first nine months of 2026, we completed the following acquisitions:

•In February 2026, Mercedes-Benz of Medford in Oregon.

•In March 2026, Toyota of Gallatin in Tennessee.

•In March 2026, Read Motor Group in the United Kingdom.

•In April 2026, Newport Citroen and Peugeot in the United Kingdom.

•In April 2026, Agility Fleet in the United Kingdom.

•In May 2026, Kia of North Tucson in Arizona.

•In May 2026, Preston, Chester & Derby Group 1 Jaguar Land Rover in the United Kingdom.

•In July 2026, Northwest CDJR of Beaverton in Oregon.

•In August 2026, Hyundai of Rockwall in Texas.

The acquisitions were accounted for as business combinations under the acquisition method of accounting. The

results of operations of the acquired stores are included in our Consolidated Financial Statements from the date of

acquisition.

Revenue and operating income contributed by the 2026 acquisitions subsequent to the date of acquisition were as

follows (in millions):


Nine Months Ended September 30,	2026
Revenue	$277.9
Operating income	11.2

The following tables summarize the consideration paid for the 2026 acquisitions and the PPA for identified assets

acquired and liabilities assumed as of the acquisition date:


(In millions)	Consideration
Cash paid, net of cash acquired	$264.8
Total consideration transferred	$264.8


(In millions)	Assets Acquired and Liabilities Assumed
Accounts receivables, net	$1.1
Inventories, net	62.3
Property and equipment	127.6
Operating lease right-of-use assets	2.2
Other assets	154.8
Floor plan notes payable assumed	(12.2)
Trade payables	(2.5)
Finance lease obligations assumed	(62.0)
Deferred taxes, net	(0.3)
Other liabilities and deferred revenue	(6.2)
Total net assets acquired and liabilities assumed	$264.8

The PPA for the 2026 acquisitions is preliminary, as we have not obtained and evaluated all of the detailed

information necessary to finalize the opening balance sheet amounts in all respects. We recorded the PPA based

upon information that is currently available and recorded unallocated items as a component of Other non-current

assets in the Consolidated Balance Sheets.

We expect all of the goodwill related to U.S. acquisitions in 2026 to be deductible for U.S. federal income tax

purposes.

For the three months ended September 30, 2026, we recorded no acquisition-related expenses, compared with

$15.9 million in the corresponding period of 2025. For thenine months ended September 30, 2026, we recorded

$0.7 million of acquisition related expenses, compared with $16.1 million in the corresponding period of 2025.

Acquisition related expenses are included as a component of SG&A expense.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	18

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The following unaudited pro forma summary presents consolidated information as if all acquisitions in the three and

nine-month periods ended September 30, 2026 and 2025 had occurred on January 1, 2025:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions, except per share amounts)	2026	2025	2026	2025
Revenue	$9,961.1	$9,869.1	$29,267.8	$29,003.3
Net income attributable to Lithia Motors, Inc.	292.9	220.1	657.4	692.3
Basic EPS attributable to Lithia Motors, Inc. common stockholders	13.36	8.74	29.09	26.84
Diluted EPS attributable to Lithia Motors, Inc. common stockholders	13.31	8.73	29.03	26.79

We calculated these amounts by applying our accounting policies and estimates. The results of the acquired stores

have been adjusted to reflect the following: depreciation on a straight-line basis over the expected lives for property

and equipment, accounting for inventory on a specific identification method, and recognition of interest expense for

real estate financing related to stores where we purchased the facility. No nonrecurring proforma adjustments

directly attributable to the acquisitions are included in the reported proforma revenues and earnings.

NOTE 13.EARNINGS PER SHARE

We calculate basic EPS by dividing net income attributable to Lithia Motors, Inc. by the weighted average number of

common shares outstanding for the period, including vested RSU awards. We calculate diluted EPS by dividing net

income attributable to Lithia Motors, Inc. by the weighted average number of shares outstanding, adjusted for the

dilutive effect of unvested RSU awards and employee stock purchases.

The following is a reconciliation of net income attributable to Lithia Motors, Inc. and weighted average shares used

for our basic EPS and diluted EPS:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions, except per share amounts)	2026	2025	2026	2025
Net income attributable to Lithia Motors, Inc.	$291.1	$217.1	$651.5	$682.7

Weighted average common shares outstanding – basic	21.9	25.2	22.6	25.8
Effect of employee stock purchases and restricted stock units on weighted average common shares outstanding	0.1	—	—	—
Weighted average common shares outstanding – diluted	22.0	25.2	22.6	25.8

Basic EPS attributable to Lithia Motors, Inc. common stockholders	$13.28	$8.63	$28.83	$26.47
Diluted EPS attributable to Lithia Motors, Inc. common stockholders	$13.22	$8.61	$28.77	$26.42

We evaluated the effect of antidilutive securities on common stock for the three and nine-month periods ended

September 30, 2026 and 2025 and determined the effect to be immaterial.

NOTE 14.SEGMENTS

We operate in two reportable segments: Vehicle Operations and Financing Operations. Our Vehicle Operations

consists of all aspects of our auto merchandising and aftersales operations, excluding financing provided by our

Financing Operations. Our Financing Operations provides financing to customers buying and leasing retail vehicles

from our Vehicle Operations, as well as leasing vehicles from our fleet management services provider.

All other remaining unallocated corporate overhead expenses and internal charges are reported under Corporate

and Other. We do not utilize asset information by segment for purposes of assessing performance or allocating

resources and, as a result, we do not present such information.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	19

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The reportable segments identified above represent our business activities for which discrete financial information is

available and for which operating results are regularly provided and reviewed by our CODM to allocate resources

and assess performance. Our CODM is our Chief Executive Officer. The CODM assesses segment performance

using segment income, which is measured as net segment profit before taxes on a U.S. GAAP basis.

We do not regularly provide total asset information by segment to our CODM or utilize the information for purposes

of assessing performance or allocating resources and, as a result, we do not present such information. Certain

financing operations asset information including total managed receivables are used by the financing operations

segment manager to manage operations and are included in various reports regularly provided to our CODM. See

Note 4 – Finance Receivables.

Certain financial information on a segment basis is as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions)	2026	2025	2026	2025
Vehicle operations
Total revenue	$9,946.7	$9,675.8	$29,009.4	$28,437.1

Total gross profit	1,495.8	1,466.0	4,414.9	4,361.5
Floor plan interest expense	(70.3)	(57.8)	(195.9)	(169.8)
Personnel expense	(556.8)	(539.6)	(1,658.0)	(1,600.3)
Rent and facility expense	(205.6)	(191.6)	(608.9)	(555.2)
Advertising expense	(79.5)	(72.7)	(237.8)	(214.9)
Other vehicle operations expenses1	(306.5)	(283.3)	(908.5)	(838.2)
Vehicle operations income	277.1	321.0	805.8	983.1

Financing Operations
Interest and fee income	122.1	104.9	349.0	298.0
Interest expense	(56.3)	(52.1)	(161.4)	(150.0)
Total interest margin	65.8	52.8	187.6	148.0
Lease income	29.2	23.4	79.5	67.7
Lease costs	(25.6)	(18.6)	(68.3)	(54.0)
Lease income, net	3.6	4.8	11.2	13.7
Provision expense	(22.5)	(25.8)	(64.7)	(72.5)
Other financing operations expenses2	(14.6)	(12.7)	(44.1)	(37.5)
Financing operations income	32.3	19.1	90.0	51.7

Total segment income for reportable segments	309.4	340.1	895.8	1,034.8

Corporate and other3	112.1	89.2	324.8	243.3
Depreciation and amortization	(71.6)	(65.5)	(212.3)	(194.6)
Other interest expense	(63.1)	(68.3)	(196.0)	(200.5)
Other income (expense), net	104.2	(13.3)	72.7	35.9
Income before income taxes	$391.0	$282.2	$885.0	$918.9

(1)Other vehicle operations expenses includes management fees, data processing fees, outside services fees, insurance

expense, office and other supplies expense, banking expense, and certain overhead expenses.

(2)Other financing operations expenses includes personnel expense, data processing fees, outside services fees, expenses

attributable to underwriting, funding, and loan servicing, and certain overhead expenses.

(3)Corporate and other includes management fee income.


		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	20

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The following table presents revenue by geographic area:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions)	2026	2025	2026	2025
Revenue from external customers:
United States	$7,552.3	$7,681.7	$22,136.0	$22,242.7
United Kingdom	2,039.1	1,716.0	5,858.8	5,315.5
Canada	355.3	278.1	1,014.6	878.9
Total revenue from external customers	$9,946.7	$9,675.8	$29,009.4	$28,437.1

NOTE 15.RECENT ACCOUNTING PRONOUNCEMENTS

In November 2024, the FASB issued ASU 2024-03 related to the disaggregation of certain income statement

expenses. The amendments in this update require public entities to disclose incremental information related to

purchases of inventory, team member compensation, and depreciation, which will provide investors the ability to

better understand entity expenses and make their own judgments about entity performance. The amendments in

this update are effective for fiscal years beginning after December 15, 2026. We plan to adopt this pronouncement

and make the necessary updates to our disclosures for the year ending December 31, 2027, and, aside from these

disclosure changes, we do not expect the amendments to have a material effect on our financial statements.

In December 2025, the FASB issued ASU 2025-11 that included amendments to improve the organization of

required interim disclosures and clarified the scope of their applicability. The amendments in this update are

effective for fiscal years beginning after December 15, 2027. We plan to adopt this pronouncement and make the

necessary updates to our disclosures for the year ending December 31, 2028, and, aside from these disclosure

changes, we do not expect the amendments to have a material effect on our financial statements.

In December 2025, the FASB issued ASU 2025-12 intended to make financial reporting more straightforward by

addressing 33 specific issues within the FASB ASC. The amendments in this update are effective for fiscal years

beginning after December 15, 2026. We plan to adopt this pronouncement and make the necessary updates to our

disclosures for the year ending December 31, 2027, and, aside from these disclosure changes, we do not expect

the amendments to have a material effect on our financial statements.


		MANAGEMENT’S DISCUSSION AND ANALYSIS	21

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Item 2. Management’s Discussion and Analysis of Financial Condition and

Results of Operations

Forward-Looking Statements and Risk Factors

Certain statements under the sections entitled “Management’s Discussion and Analysis of Financial Condition and

Results of Operations,” and “Risk Factors” and elsewhere in this Form 10-Q constitute forward-looking statements

within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Generally,

you can identify forward-looking statements by terms such as “project,” “outlook,” “target,” “may,” “will,” “would,”

“should,” “seek,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “likely,”

“ensure,” “goal,” “strategy,” “future,” “maintain,” and “continue” or the negative of these terms or other comparable

terms. Examples of forward-looking statements in this Form 10-Q include, among others, statements we make

regarding:

•The profitability of our strategy and growth

•Future market conditions, including anticipated vehicle and other sales, gross profit and inventory supply

•Our business strategy and plans, including our achieving our long-term financial targets

•The growth, expansion, make-up and success of our network, including our finding accretive acquisitions that

meet our target valuations and acquiring additional stores

•Annualized revenues from acquired stores or achieving target returns

•The growth and performance of our Driveway e-commerce home solution and DFC, their synergies and other

impacts on our business and our ability to meet Driveway and DFC-related targets

•The impact of sustainable vehicles and other market and regulatory changes on our business, including

evolving vehicle distribution models

•Our capital allocations and uses and levels of capital expenditures in the future

•Expected operating results, such as improved store performance, continued improvement of SG&A as a

percentage of gross profit and any projections

•Our anticipated financial condition and liquidity, including from our cash and the future availability of our credit

facilities, unfinanced real estate and other financing sources

•Our continuing to purchase shares under our share repurchase program

•Our compliance with financial and restrictive covenants in our credit facilities and other debt agreements

•Our programs and initiatives for team member recruitment, training, and retention

•Our strategies and targets for customer retention, growth, market position, operations, financial results and risk

management

The forward-looking statements contained in this Form 10-Q involve known and unknown risks, uncertainties, and

situations that may cause our actual results to materially differ from the results expressed or implied by these

statements. Certain important factors that could cause actual results to differ from our expectations are discussed in

the Risk Factors section of our 2025 Annual Report on Form 10-K, as supplemented and amended from time to time

in Quarterly Reports on Form 10-Q and our other filings with the SEC.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events that

depend on circumstances that may or may not occur in the future. You should not place undue reliance on these

forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. We

assume no obligation to update or revise any forward-looking statement.

Overview

Lithia and Driveway (NYSE: LAD) is the largest global automotive retailer providing an array of products and

services throughout the vehicle ownership lifecycle. Simple, convenient and transparent experiences are offered

through our comprehensive network of physical locations, e-commerce platforms, captive finance solutions, fleet

management offerings, and other synergistic adjacencies. We have delivered consistent profitable growth in a

massive and unconsolidated industry. Our highly diversified and competitively differentiated design provides us the

flexibility and scale to pursue our vision to modernize personal transportation solutions wherever, whenever and

however consumers desire. As of September 30, 2026, we operated 467 locations representing 59 brands in the

United States, the United Kingdom, and Canada.

We offer a wide array of products and services fulfilling the entire vehicle ownership lifecycle including new and

used vehicles, financing and insurance products, and aftersales automotive repair and maintenance services. We


		MANAGEMENT’S DISCUSSION AND ANALYSIS	22

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strive for diversification in our products, services, brands, and geographic locations to reduce dependence on any

one manufacturer, reduce susceptibility to changing consumer preferences, manage market risk and maintain

profitability. Our diversification, along with our operating structure, provides a resilient and nimble business model.

We seek to provide customers with a seamless, blended online and physical retail experience, broad selection, and

access to specialized expertise and knowledge. Our comprehensive network provides convenient touch points for

customers and provides services throughout the vehicle life cycle. We seek to increase market share and optimize

profitability by focusing on the consumer experience and applying proprietary performance measurement systems

fueled by data science. Our Driveway and GreenCars brands and online customer portal complement our in-store

experiences in the United States and provide convenient, simple, and transparent platforms that serve as our e-

commerce home solutions and allow us to deliver differentiated, proprietary digital experiences. Enhancing our

business, our captive auto financing division allows us to provide financing solutions for customers and diversify our

business model with adjacent products.

Our long-term strategy to create value for our customers, team members and shareholders includes the following

elements:

Driving operational excellence, innovation and diversification

LAD builds magnetic customer loyalty across our 467 stores, our Driveway and GreenCars e-commerce platforms,

and our entire omnichannel ecosystem by focusing on convenient and transparent experiences supported by

proprietary data science. Our entrepreneurial model that emphasizes personal accountability for our team powers

efficient operations and allows dynamic responsiveness to each of our local markets. Our best-in-class performance

management reporting provides the foundation to enable high-performing teams to drive our platform’s full potential.

Investments across our ecosystem built a framework that is responsive to evolving consumer preferences, providing

a foundation that supports our current business and our ongoing expansion. These investments, particularly in our

digital strategies, connect our experienced, knowledgeable team members with our expansive inventory and

physical network of stores to ensure we are agile and adaptable. Additionally, we systematically explore and invest

in transformative adjacencies that are synergistic and complementary to our existing business, such as our captive

auto finance and fleet management offerings.

These investments support the foundational elements of our strategy. We seek to create durable customer loyalty in

our stores and our digital platforms, such as our My Driveway customer portal. These experiences and offerings,

backed by our extensive physical network, broad geographic reach, and customized digital offerings, empower our

people to provide transparent, flexible, and simple retail experiences.

Our performance-based culture is geared toward an incentive-based compensation structure for a majority of our

personnel. We develop pay plans that measure factors such as customer satisfaction, profitability, and individual

performance metrics. These plans reward team members for creating customer loyalty, achieving store potential,

developing high-performing talent, meeting and exceeding manufacturer requirements, and living our core values.

We centralize many administrative functions to drive efficiencies and streamline store-level operations. These

efficiencies allow our local managers to focus on serving customers to increase revenues and gross profit. Our

operations are supported by regional and corporate management, as well as dedicated training and personnel

development programs which allow us to share best practices across our network and develop talent.

Growth through acquisition and network optimization

Our acquisition growth strategy has diversified our business and been financially and culturally successful. Our

disciplined approach focuses on acquiring new vehicle franchises, which operate in markets ranging from mid-sized

regional markets to metropolitan markets. Acquisition of these businesses increases our proximity to consumers

throughout North America and the United Kingdom. While we target annual after tax return of more than 15% for our

acquisitions, we have averaged over a 25% return by the third year of ownership due to a disciplined approach

focusing on accretive, cash flow positive targets at reasonable valuations. In addition to being financially accretive,

acquisitions aim to drive network growth that improves our ability to serve customers through vast selection, greater

density, easy access, and the ability to leverage national branding and advertising.

As we focus on expanding our physical network of stores, one of the criteria we evaluate is a valuation multiple

between 3x to 6x of investment in intangibles to estimated annualized adjusted EBITDA, with various factors


		MANAGEMENT’S DISCUSSION AND ANALYSIS	23

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including location, ability to expand our network and talent considered in determining value. We also target an

investment in intangibles as a percentage of annualized revenues in the range of 15% to 30%.

We regularly optimize and balance our network through strategic divestitures to ensure continued high performance.

We believe our disciplined approach provides us with attractive acquisition opportunities and expanded coast-to-

coast coverage.

Thoughtful capital allocation

We manage our liquidity and available cash to support our long-term plan focused on growth through acquisitions

and investments in our existing business, technology and adjacencies that expand and diversify our business

model. In the current market of elevated acquisition pricing, we have adjusted our free cash flow deployment

strategy. Under current conditions, including recent trends in our stock price, we may consider repurchases as a

more attractive use of funds than acquisitions. Our current free cash flow deployment strategy includes a target

allocation of 25% to 35% investment in acquisitions, 25% investment in capital expenditures, innovation, and

diversification and 40% to 50% in shareholder return in the form of dividends and share repurchases based on

current valuation trends in acquisitions relative to stock price performance. During the first nine months of 2026, we

utilized $252.3 million for capital expenditures investing in our existing business and $264.8 million expanding our

network through acquisitions. We also provided shareholder return in the form of $41.1 million in dividends and

$624.5 million in share repurchases. As of September 30, 2026, we had available liquidity of approximately $1.4

billion, which was comprised of $108.1 million in unrestricted cash, $76.1 million in marketable securities, and $1.3

billion availability on our credit facilities.

Financial Performance

We experienced growth of revenue in 2026 compared to 2025, primarily driven by acquisition growth and supported

by increases in same store aftersales volume and used retail vehicle average selling price per unit. Total gross profit

also grew in 2026 compared to 2025, driven by acquisition growth and supported by increases in same store

aftersales gross margin and used retail vehicle average gross profit per unit. New vehicle gross profit decreased

compared to 2025 due to continued normalization of margins. Net income declined in 2026 compared to 2025,

primarily as a result of our increase in SG&A as a percentage of gross profit.


		MANAGEMENT’S DISCUSSION AND ANALYSIS	24

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Vehicle Operations

Key performance metrics for revenue and gross profit were as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
($ in millions, except per unit values)	2026	2025	Change	2026	2025	Change
Revenues
New vehicle	$4,868.6	$4,792.4	1.6 %	$14,077.1	$14,076.3	— %
Used vehicle	3,630.1	3,463.3	4.8	10,647.8	10,192.3	4.5
Finance and insurance	361.4	378.6	(4.5)	1,087.5	1,116.8	(2.6)
Aftersales	1,086.6	1,041.5	4.3	3,197.0	3,051.7	4.8
Total revenues	9,946.7	9,675.8	2.8	$29,009.4	$28,437.1	2.0

Gross profit
New vehicle	$277.9	$291.4	(4.6) %	$821.4	$898.2	(8.6) %
Used vehicle	210.9	189.2	11.5	612.6	583.1	5.1
Finance and insurance	361.4	378.6	(4.5)	1,087.5	1,116.7	(2.6)
Aftersales	645.6	606.8	6.4	1,893.4	1,763.5	7.4
Total gross profit	1,495.8	1,466.0	2.0	$4,414.9	$4,361.5	1.2

Gross profit margins
New vehicle	5.7%	6.1%	(40) bps	5.8%	6.4%	(60) bps
Used vehicle	5.8	5.5	30	5.8	5.7	10
Finance and insurance	100.0	100.0	—	100.0	100.0	—
Aftersales	59.4	58.3	110	59.2	57.8	140
Total gross profit margin	15.0	15.2	(20)	15.2	15.3	(10)

Units sold
New vehicle	105,471	104,332	1.1 %	304,347	305,151	(0.3) %
Used vehicle retail	109,791	109,097	0.6	326,056	325,476	0.2

Average selling price per unit (excluding agency)
New vehicle	$46,777	$46,804	(0.1) %	$46,938	$47,165	(0.5) %
Used vehicle retail	29,499	28,381	3.9	29,180	27,990	4.3

Average gross profit per unit
New vehicle	$2,635	$2,793	(5.7)%	$2,699	$2,943	(8.3)%
Used vehicle retail	1,970	1,773	11.1	1,889	1,818	3.9
Finance and insurance	1,733	1,818	(4.7)	1,782	1,814	(1.8)
Total vehicle 1	3,949	4,025	(1.9)	4,000	4,120	(2.9)

1Includes the sales and gross profit related to new, used, and finance and insurance and unit sales for new and used retail.


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Same Store Operating Data

We believe that same store comparisons are an important indicator of our financial performance. Same store

measures demonstrate our ability to grow revenues in our existing locations. As a result, same store measures have

been integrated into the discussion below.

Same store measures reflect results for stores that were operating in each comparison period and only include the

months when operations occurred in both periods. For example, a store acquired in August2025 would be included

in same store operating data beginning in September2026, after its first complete comparable month of operation.

The third quarter operating results for the same store comparisons would include results for that store in only the

month of September for both comparable periods.


	Three Months Ended September 30,			Nine Months Ended September 30,
($ in millions, except per unit values)	2026	2025	Change	2026	2025	Change
Revenues
New vehicle	$4,608.3	$4,729.9	(2.6) %	$13,293.7	$13,784.0	(3.6) %
Used vehicle	3,419.4	3,409.5	0.3	10,023.4	9,932.6	0.9
Finance and insurance	345.1	375.6	(8.1)	1,039.6	1,102.0	(5.7)
Aftersales	1,027.9	1,021.0	0.7	3,018.5	2,964.1	1.8
Total revenues	9,400.6	9,536.0	(1.4)	$27,375.2	$27,782.8	(1.5)

Gross profit
New vehicle	$263.9	$288.4	(8.5) %	$778.0	$881.6	(11.8) %
Used vehicle	203.1	185.8	9.3	586.6	575.2	2.0
Finance and insurance	345.1	375.6	(8.1)	1,039.6	1,102.0	(5.7)
Aftersales	611.1	596.9	2.4	1,786.0	1,721.2	3.8
Total gross profit	1,423.2	1,446.7	(1.6)	$4,190.2	$4,280.1	(2.1)

Gross profit margins
New vehicle	5.7%	6.1%	(40) bps	5.9%	6.4%	(50) bps
Used vehicle	5.9	5.4	50	5.9	5.8	10
Finance and insurance	100.0	100.0	—	100.0	100.0	—
Aftersales	59.5	58.5	100	59.2	58.1	110
Total gross profit margin	15.1	15.2	(10)	15.3	15.4	(10)

Units sold
New vehicles	100,559	103,318	(2.7) %	289,351	300,917	(3.8) %
Used vehicle retail	104,612	108,039	(3.2)	311,741	320,566	(2.8)

Average selling price per unit (excluding agency)
New vehicles	$46,470	$46,652	(0.4) %	$46,659	$46,843	(0.4) %
Used vehicle retail	29,197	28,200	3.5	28,770	27,703	3.9

Average gross profit per unit
New vehicles	$2,624	$2,792	(6.0)%	$2,689	$2,930	(8.2)%
Used vehicle retail	1,993	1,759	13.3	1,893	1,818	4.1
Finance and insurance	1,736	1,821	(4.7)	1,784	1,816	(1.8)
Total vehicle 1	3,958	4,021	(1.6)	4,000	4,117	(2.8)

1Includes the sales and gross profit related to new, used, and finance and insurance and unit sales for new and used retail.

New Vehicles

We believe that our new vehicle sales create incremental profit opportunities through certain manufacturer incentive

programs, arranging of third-party financing, vehicle service and insurance contracts, future resale of used vehicles

acquired through trade-in, and aftersales. Our leaders in each market continue to adapt to changing conditions,

respond to customer needs and manage inventory availability and selection.


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Q32026 vs. Q32025

New vehicle revenue for the three months ended September 30, 2026increased1.6% compared to the same

period of 2025, driven by acquisition activity. Same store new vehicle revenue decreased2.6% due to a decrease in

unit volume of 2.7% and a decrease in average selling prices of 0.4%.

Same store new vehicle gross profit per unit decreased6.0%, driven by a decrease in new vehicle gross profit

margins of 40 bps. Total same store new vehicle gross profit per unit, which includes the finance and insurance

revenue generated from the sales of new vehicles, decreased$212 to $4,604.

YTD2026 vs. YTD2025

New vehicle revenue for the nine months endedSeptember 30, 2026 remained flat compared to the same period of

2025, primarily due to acquisition growth being offset by same store performance. Same store new vehicle revenue

decreased3.6% due to a decrease in unit volume of 3.8% and a decrease in average selling prices of 0.4%.

Same store new vehicle gross profit per unit decreased8.2%, driven by a decrease in new vehicle gross profit

margins of 50 bps. Total same store new vehicle gross profit per unit, which includes the finance and insurance

revenue generated from the sales of new vehicles, decreased$234 to $4,758.

Used Retail Vehicles

Used vehicle retail sales are a strategic focus for organic growth. We offer three categories of used vehicles:

manufacturer certified pre-owned (CPO) vehicles; core vehicles, or late-model vehicles with lower mileage; and

value autos, or vehicles with over 80,000 miles. We continue to focus on procuring vehicles across the full spectrum

of the addressable used vehicle market to provide customers with a wide selection meeting all levels of affordability,

driving increased used vehicle unit volumes. Our used vehicle operations provide an opportunity to generate sales

to customers unable or unwilling to purchase a new vehicle, sell brands other than the store’s new vehicle

franchise(s) and increase sales from finance and insurance and aftersales.

Q32026 vs. Q32025

Used vehicle retail revenue for the three months ended September 30, 2026increased4.8% compared to the same

period of 2025 driven by acquisition activity and supported by same store performance. On a same store basis,

used vehicle retail revenue increased0.3% due to an increase in average selling prices of 3.5%, offset by a

decrease in unit volume of 3.2%.

Total same store used vehicle retail gross profit per unit, which includes the finance and insurance revenue

generated from the sales of retail used vehicles, increased$125 to $3,550.

YTD2026 vs. YTD2025

Used vehicle retail revenue for the nine months endedSeptember 30, 2026increased4.5% compared to the same

period of 2025 driven by acquisition activity and supported by same store performance. On a same store basis,

used vehicle retail sales increased0.9% due to an increase in average selling prices of 3.9%, offset by a decrease

in unit volume of 2.8%.

Total same store used vehicle retail gross profit per unit, which includes the finance and insurance revenue

generated from the sales of used retail vehicles, increased$37 to $3,477.

Finance and Insurance

We believe that arranging vehicle financing is an important part of our ability to sell vehicles, and we attempt to

arrange financing for every vehicle we sell. We also offer related products such as extended warranties, insurance

contracts and vehicle and theft protection which promotes continued engagement with the consumer throughout the

ownership lifecycle.

Q32026 vs. Q32025

Total finance and insurance income decreased4.5% in the three months ended September 30, 2026 compared to

the same period of 2025, driven by lower same store sales of finance and insurance products per retail vehicle sold,

offset by acquisition activity. Same store finance and insurance revenues decreased8.1%. On a same store basis,

our finance and insurance revenue per retail unit decreased$85 to $1,736.


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YTD2026 vs. YTD2025

Total finance and insurance income decreased2.6% in the nine months endedSeptember 30, 2026 compared to

the same period of 2025, driven by same store performance, offset by acquisition activity. Same store finance and

insurance revenues decreased5.7%. On a same store basis, our finance and insurance revenue per retail unit

decreased$32 to $1,784.

Aftersales

We provide automotive repair and maintenance services for customers for the new vehicle brands sold by our

stores, as well as service and repairs for most other makes and models. These aftersales services are an integral

part of our customer retention and the largest contributor to our overall profitability. Earnings from aftersales

continue to prove to be more resilient during economic downturns, when owners tend to repair their existing

vehicles rather than buy new vehicles. We believe the increased number of units in operation will continue to benefit

our aftersales revenue in the coming years as more late-model vehicles age, necessitating repairs and

maintenance.

Q32026 vs. Q32025

Our aftersales revenue increased4.3% in the three months ended September 30, 2026 compared to the same

period of 2025, driven by acquisition activity and same store performance.

We focus on retaining customers by offering competitively-priced routine maintenance and through our marketing

efforts. Customer pay revenue accounted for the largest share of our same-store aftersales revenue, representing

56.5% of the total.

Same store aftersales gross profit increased2.4%. This increase was primarily due to increased volume of warranty

transactions. Overall same store aftersales gross margins increased100 bps, primarily as a result of increased

warranty gross margin of 240 bps.

YTD2026 vs. YTD2025

Our aftersales revenue increased4.8% in the nine months endedSeptember 30, 2026 compared to the same

period of 2025, driven by same store performance and supported by acquisition activity. Same store aftersales

revenue increased1.8%, driven by an increase in customer pay revenues of 1.8% and an increase in warranty

revenues of 4.4% compared to the prior year.

Same store aftersales gross profit increased3.8%. This increase was primarily due to increased volume of

customer pay transactions. Overall same store aftersales gross margins increased110 bps, primarily as a result of

increased customer pay margins of 80 bps and increased warranty gross margins of 150 bps.

Financing Operations

In the United States, Financing Operations is a captive lender, originating loans only from our stores and Driveway.

In Canada, Financing Operations originates loans and leases from both our Canadian stores and third-party

dealerships. In the United Kingdom, Financing Operations is related to our fleet funding and management division.

These product offerings add diversity to the business model and provide an opportunity to capture additional profits,

cash flows, and sales while managing our reliance on third-party finance sources.

Financing Operations income reflects the interest and fee income generated by the portfolio of auto loan and

finance lease receivables, plus the lease income generated by our net investment in operating leases, less the

interest expense associated with the debt utilized to fund the lending, including internal capital, a provision for

estimated loan and lease losses, depreciation on vehicles leased via operating leases, and directly-related

expenses.


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Selected Financing Operations Financial Information


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2026	% (1)	2025	% (1)	2026	% 1	2025	% 1
Interest and fee income	$122.1	8.7	$104.9	9.2	$349.0	8.8	$298.0	9.2
Interest expense	(56.3)	(4.0)	(52.1)	(4.6)	(161.4)	(4.1)	(150.0)	(4.6)
Total interest margin	65.8	4.7	52.8	4.6	187.6	4.7	148.0	4.6
Lease income	29.2		23.4		79.5		67.7
Lease costs	(25.6)		(18.6)		(68.3)		(54.0)
Lease income, net	3.6		4.8		11.2		13.7
Provision expense	(22.5)	(1.6)	(25.8)	(2.3)	(64.7)	(1.6)	(72.5)	(2.2)
Other financing operations expenses	(14.6)	(1.0)	(12.7)	(1.1)	(44.1)	(1.1)	(37.5)	(1.2)
Finance operations income	$32.3		$19.1		$90.0		$51.7

Total average managed finance receivables	$5,558.0		$4,541.8		$5,290.6		$4,316.3

1Annualized percentage of total average managed finance receivables.

DFC Portfolio Information1


	Three Months Ended September 30,		Nine Months Ended September 30,
($ in millions)	2026	2025	2026	2025
Loan origination information
Net loans originated	$936.8	$731.6	$2,661.1	$2,085.0
Vehicle units financed	28,622	23,546	82,706	67,971
Total penetration rate 2	18.3%	14.5%	17.9%	14.3%
Weighted average contract rate	7.9%	8.6%	7.9%	8.8%
Weighted average credit score 3	752	746	750	746
Weighted average FE LTV 4	94.6%	95.0%	95.1%	95.0%
Weighted average term (in months)	72	73	72	73

Loan performance information
Allowance for loan losses as a percentage of ending managed receivables	2.8%	3.1%	2.8%	3.1%
Net credit losses on managed receivables	$16.8	$20.6	$47.8	$54.1
Annualized net credit losses as a percentage of total average managed receivables	1.3%	1.9%	1.3%	1.8%
Past due accounts as a percentage of ending managed receivables 5	3.3%	4.1%	3.3%	4.1%
Average recovery rate 6	47.5%	46.5%	48.5%	45.8%

1Excludes Canadian and U.K. portfolios

2Units financed as a percentage of total U.S. new and used vehicle retail units sold.

3The credit scores represent FICO scores and reflect only receivables with obligors that have a FICO score at the time of

application. For receivables with co-borrowers, the FICO score is the primary borrower’s. FICO scores are not a significant

factor in our proprietary credit model, which relies on information from credit bureaus and other application information.

4Front-end loan-to-value represents the ratio of the amount financed to the total collateral value, which is measured as the

vehicle selling price plus applicable taxes, title and fees.

5Past due means loans at least 3 months old that are 30 or more days delinquent.

6The average recovery rate represents the average percentage of the outstanding principal balance we receive when a

vehicle is repossessed and liquidated, generally at wholesale auctions.

Q32026 vs. Q32025

Financing operations recorded higher income in the three months ended September 30, 2026 compared to the

same period of 2025, primarily due to the increased interest income resulting from the growth of the portfolio and a

decreased cost of funds, which collectively expanded total interest margin to 4.7%.

Loan originations increased in the three months ended September 30, 2026 compared to the same period of 2025,

and our penetration rate increased due to increased engagement with our stores. The weighted average contract

rate of loans originated in the three months ended September 30, 2026 decreased to 7.9%, compared with 8.6% in

the same period of 2025, primarily due to our maintaining competitive pricing following the Federal Reserve rate

cuts during the fourth quarter of 2025. The decrease in annualized net charge-offs of past due accounts as a


		MANAGEMENT’S DISCUSSION AND ANALYSIS	29

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percentage of ending managed receivables compared to the prior year reflects the increased credit quality of the

portfolio as well as improved execution of our collateral management team.

YTD2026 vs. YTD2025

Financing operations recorded higher income in the nine months endedSeptember 30, 2026 compared to the same

period of 2025, primarily due to increased interest income resulting from the growth of the portfolio and a decreased

cost of funds, resulting in an expansion of total interest margin to 4.7%.

The weighted average contract rate on loans originated in the nine months endedSeptember 30, 2026 decreased

to 7.9%, compared with 8.8% in the same period of 2025 as we decreased rates to maintain competitiveness

following the Federal Reserve rate cuts during the fourth quarter of 2025. The decrease in provision expense as a

percentage of receivables compared to the prior year reflected lower net charge-offs, attributable to the increased

credit quality of the portfolio and improved servicing, as well as a decrease in the percentage of ending managed

receivables constituted by the allowance for loan losses. Other financing operations expenses as a percentage of

average managed receivables was flat with the same period of 2025 despite significant portfolio growth, reflecting

improved operational performance and economies of scale.

Operating Expenses

Selling, General and Administrative Expense (SG&A)

SG&A includes salaries and related personnel expenses, advertising (net of manufacturer cooperative advertising

credits), rent, facility costs, and other general corporate expenses.

Q32026 vs. Q32025


	Three Months Ended September 30,		Increase	% Increase
($ in millions)	2026	2025	Increase	% Increase
Personnel	$629.2	$619.6	$9.6	1.5%
Rent and facility costs	111.8	107.6	4.2	3.9
Advertising	70.1	64.9	5.2	8.0
Other	225.2	205.9	19.3	9.4
Total SG&A	$1,036.3	$998.0	$38.3	3.8%


	Three Months Ended September 30,		Increase (Decrease)
As a % of gross profit	2026	2025	Increase (Decrease)
Personnel	42.1%	42.3%	(20)bps
Rent and facility costs	7.5	7.3	20
Advertising	4.7	4.4	30
Other	15.0	14.1	90
Total SG&A	69.3%	68.1%	120bps

SG&A as a percentage of gross profit was 69.3% for the three months ended September 30, 2026 compared to

68.1% for the same period of 2025. Total SG&Aincreased in all expense categories as a result of our acquisition

activity.

On a same store basis and excluding non-core charges, SG&A as a percentage of gross profit was 68.5%

compared to 67.0% for the same period of 2025. The increase was primarily driven by a decrease in gross profit of

1.6%compared to the same period of 2025.

YTD2026 vs. YTD2025


	Nine Months Ended September 30,		Increase	% Increase
($ in millions)	2026	2025	Increase	% Increase
Personnel	$1,896.0	$1,868.0	$28.0	1.5%
Rent and facility costs	325.4	306.2	19.2	6.3
Advertising	211.1	190.2	20.9	11.0
Other	655.9	600.9	55.0	9.2
Total SG&A	$3,088.4	$2,965.3	$123.1	4.2%


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	Nine Months Ended September 30,		Increase
As a % of gross profit	2026	2025	Increase
Personnel	42.9%	42.8%	10bps
Rent and facility costs	7.4	7.0	40
Advertising	4.8	4.4	40
Other	14.9	13.8	110
Total SG&A	70.0%	68.0%	200bps

SG&A as a percentage of gross profit was 70.0% for the nine months endedSeptember 30, 2026 compared to

68.0% for the same period of 2025. Total SG&Aincreased in all expense categories as a result of our acquisition

activity.

On a same store basis and excluding non-core charges, SG&A as a percentage of gross profit was 69.5%

compared to 67.1% for the same period of 2025. The increase was primarily driven by a decrease in gross profit of

2.1% compared to the same period of 2025.

SG&A expense adjusted for non-core charges was as follows:

Q32026 vs. Q32025


	Three Months Ended September 30,		Increase	% Increase
($ in millions)	2026	2025	Increase	% Increase
Personnel	$629.2	$619.6	$9.6	1.5%
Rent and facility costs	111.8	107.6	4.2	3.9
Advertising	70.1	64.9	5.2	8.0
Adjusted other	218.6	203.0	15.6	7.7
Adjusted total SG&A	$1,029.7	$995.1	$34.6	3.5%


	Three Months Ended September 30,		Increase (Decrease)
As a % of gross profit	2026	2025	Increase (Decrease)
Personnel	42.1%	42.3%	(20)bps
Rent and facility costs	7.5	7.3	20
Advertising	4.7	4.4	30
Adjusted other	14.5	13.9	60
Adjusted total SG&A	68.8%	67.9%	90bps

Adjusted SG&A for the three months ended September 30, 2026 excludes a $5.8 million net loss on store disposals

and $0.8 million in storm insurance charges.

Adjusted SG&A for the three months ended September 30, 2025 excludes a $15.4 million net gain on store

disposals, $2.5 million in storm insurance charges, and $15.9 million in acquisition-related expenses.

YTD2026 vs. YTD2025


	Nine Months Ended September 30,		Increase	% Increase
($ in millions)	2026	2025	Increase	% Increase
Personnel	$1,896.0	$1,868.0	$28.0	1.5%
Rent and facility costs	325.4	306.2	19.2	6.3%
Advertising	211.1	190.2	20.9	11.0%
Adjusted other	640.9	597.0	43.9	7.4%
Adjusted total SG&A	$3,073.4	$2,961.4	$112.0	3.8%


	Nine Months Ended September 30,		Increase
As a % of gross profit	2026	2025	Increase
Personnel	42.9%	42.8%	10bps
Rent and facility costs	7.4	7.0	40
Advertising	4.8	4.4	40
Adjusted other	14.5	13.7	80
Adjusted total SG&A	69.6%	67.9%	170bps


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Adjusted SG&A for the nine months endedSeptember 30, 2026 excludes $20.3 million in one-time contract

buyouts, $3.2 million in storm insurance charges,$0.7 million in acquisition-related expenses, and a $9.2 million net

gain on store disposals.

Adjusted SG&A for the nine months endedSeptember 30, 2025 excludes $5.4 million in storm insurance charges,

$16.1 million in acquisition-related expenses, and a $17.7 million net gain on store disposals.

Adjusted SG&A is a non-GAAP measure. See Non-GAAP Reconciliations for more details.

Floor Plan Interest Expense

Below are the details for carrying costs for vehicle inventory:

Q32026 vs. Q32025


	Three Months Ended September 30,			%
($ in millions)	2026	2025	Change	Change
Floor plan interest expense	$70.3	$57.8	$12.5	21.6%

Floor plan interest expense increased$12.5 million in the three months ended September 30, 2026 compared to the

same period of 2025 due to an increase in floored inventory levels, as a result of our converting used

inventory‑secured revolvers to floorplan facilities during the year, offset by decreased interest rates.

YTD2026 vs. YTD2025


	Nine Months Ended September 30,			%
($ in millions)	2026	2025	Change	Change
Floor plan interest expense	$195.9	$169.8	$26.1	15.4%

Floor plan interest expense increased$26.1 million in the nine months endedSeptember 30, 2026 compared to the

same period of 2025 due to an increase in floored inventory levels, as a result of our converting used

inventory‑secured revolvers to floorplan facilities during the year, offset by decreased interest rates.

Depreciation and Amortization

Depreciation and amortization is comprised of depreciation expense related to buildings, significant remodels or

improvements, furniture, tools, equipment, signage, and amortization of certain intangible assets.

Q32026 vs. Q32025


	Three Months Ended September 30,		Increase	% Increase
($ in millions)	2026	2025	Increase	% Increase
Depreciation and amortization	$71.6	$65.5	$6.1	9.3%

YTD2026 vs. YTD2025


	Nine Months Ended September 30,		Increase	% Increase
($ in millions)	2026	2025	Increase	% Increase
Depreciation and amortization	$212.3	$194.6	$17.7	9.1%

Acquisition activity contributed to the increases in depreciation and amortization in 2026 compared to 2025. We

acquired $187.1 million of depreciable property as part of our acquisition activity over the trailing twelve months

ended September 30, 2026. For the nine months endedSeptember 30, 2026, we invested $252.3 million in capital

expenditures. These investments increased the amount of depreciation expense in the three and nine months

endedSeptember 30, 2026. See the discussion under Liquidity and Capital Resources for additional information.

Operating Income

Operating income as a percentage of revenue, or operating margin, was as follows:


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Q32026 vs. Q32025


	Three Months Ended September 30,
	2026	2025	Change
Operating margin	4.2%	4.4%	(20) bps
Operating margin adjusted for non-core charges 1	4.3%	4.4%	(10) bps

1See Non-GAAP Reconciliations for more details.

Operating margin decreased20 bps in the three months ended September 30, 2026 compared to the same period

in 2025, primarily due to increased SG&A as a percentage of gross profit, partially offset by improved profitability of

our Financing Operations.

YTD2026 vs. YTD2025


	Nine Months Ended September 30,
	2026	2025	Change
Operating margin	4.2%	4.4%	(20) bps
Operating margin adjusted for non-core charges 1	4.2%	4.4%	(20) bps

1See Non-GAAP Reconciliations for more details.

Operating margin decreased20 bps in the nine months endedSeptember 30, 2026 compared to the same period in

2025, primarily due to increased SG&A as a percentage of gross profit, partially offset by increased profitability of

our Financing Operations.

Non-Operating Expenses

Other Interest Expense

Other interest expense includes interest on senior notes, debt incurred related to acquisitions, real estate

mortgages, service loaner vehicle inventory financing commitments, and revolving lines of credit.

Q32026 vs. Q32025


	Three Months Ended September 30,		Increase (Decrease)	% Increase (Decrease)
($ in millions)	2026	2025	Increase (Decrease)	% Increase (Decrease)
Senior notes interest	$27.6	$21.0	$6.6	31.4%
Mortgage interest	16.0	14.9	1.1	7.4
Other interest	20.5	34.7	(14.2)	(40.9)
Capitalized interest	(1.0)	(2.3)	(1.3)	NM
Total other interest expense	$63.1	$68.3	$(5.2)	(7.6)%

Other interest expense for the three months ended September 30, 2026decreased$5.2 million related to

decreased borrowings on used inventory‑secured revolvers compared to the same period of 2025, partially offset by

an increase from our September 2025 issuance of senior notes due 2030.

YTD2026 vs. YTD2025


	Nine Months Ended September 30,		Increase (Decrease)	% Increase (Decrease)
($ in millions)	2026	2025	Increase (Decrease)	% Increase (Decrease)
Senior notes interest	$82.7	$59.1	$23.6	39.9%
Mortgage interest	47.6	43.4	4.2	9.7
Other interest	69.6	104.6	(35.0)	(33.5)
Capitalized interest	(3.9)	(6.6)	(2.7)	NM
Total other interest expense	$196.0	$200.5	$(4.5)	(2.2)%

Other interest expense for the nine months endedSeptember 30, 2026decreased$4.5 million related to decreased

borrowings on used inventory‑secured revolvers compared to the same period of 2025, partially offset by an

increase from our September 2025 issuance of senior notes due 2030.


		MANAGEMENT’S DISCUSSION AND ANALYSIS	33

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Other Income (Expense), net

Q32026 vs. Q32025


	Three Months Ended September 30,		Increase (Decrease)	% Increase (Decrease)
($ in millions)	2026	2025	Increase (Decrease)	% Increase (Decrease)
Equity method investment	$92.5	$(19.6)	$112.1	NM
Foreign currency remeasurement	0.1	(2.1)	2.2	NM
Net pension benefit	0.5	2.4	(1.9)	(79.2)
Miscellaneous	11.1	6.0	5.1	85.0
Other (expense) income, net	$104.2	$(13.3)	$117.5	NM

Other income, net in the three months ended September 30, 2026increased$117.5 million compared to the same

period of 2025, primarily as a result of fair value changes in our investment in Pinewood Technologies Group PLC.

YTD2026 vs. YTD2025


	Nine Months Ended September 30,		Increase (Decrease)	% Increase (Decrease)
($ in millions)	2026	2025	Increase (Decrease)	% Increase (Decrease)
Equity method investments	$53.6	$11.3	42.3	374.3
Foreign currency remeasurements	(4.9)	3.0	(7.9)	NM
Net pension benefits	1.5	7.1	(5.6)	(78.9)
Miscellaneous	22.5	14.5	8.0	55.2
Other income, net	$72.7	$35.9	$36.8	102.5%

Other income, net in the nine months endedSeptember 30, 2026increased$36.8 million compared to the same

period of 2025, primarily as a result of fair value changes in our investment in Pinewood Technologies Group PLC.

Income Tax Provision

Our effective income tax rate was as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2026	2025	2026	2025
Effective income tax rate	25.1%	22.5%	25.8%	25.1%
Effective income tax rate excluding non-core items 1	25.7%	21.7%	26.4%	24.6%

1See Non-GAAP Reconciliations for more details.

Our effective income tax rate for the nine months endedSeptember 30, 2026 compared to the prior year was

negatively affected by a lower benefit from valuation allowance reductions and a decrease in general business

credits, partially offset by tax basis differences on assets divested in 2025. Excluding non-core charges and

acquired general business credits, we estimate our annual effective income tax rate to be approximately 26.5% to

27.0%.

Non-GAAP Reconciliations

Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to

similarly titled measures used by other companies. We caution you not to place undue reliance on such non-GAAP

measures and to consider them together with the most directly comparable GAAP measures. We believe each of

the non-GAAP financial measures below or otherwise presented herein improves the transparency of our

disclosures, provides a meaningful presentation of our results from the core business operations because they

exclude items not related to our ongoing core business operations and other non-cash items, and improves the

period-to-period comparability of our results from the core business operations. We use these measures in

conjunction with GAAP financial measures to assess our business, including our compliance with covenants in our

credit facility and in communications with our Board concerning financial performance. These measures should not

be considered an alternative to GAAP measures.

The following tables reconcile certain reported non-GAAP measures, which we refer to as “adjusted,” to the most

comparable GAAP measure from our Consolidated Statements of Operations.


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	Three Months Ended September 30, 2026
($ in millions, except per share amounts)	As reported	Net loss on disposal of stores	Investment gain	Insurance reserves	Tax attribute	Adjusted
Selling, general and administrative	$1,036.3	$(5.8)	$—	$(0.8)	$—	$1,029.7
Operating income	420.2	5.8	—	0.8	—	426.8
Other income (expense), net	104.2	—	(88.8)	—	—	15.4

Income (loss) before income taxes	$391.0	$5.8	$(88.8)	$0.8	$—	$308.8
Income tax (provision) benefit	(98.1)	(1.6)	23.7	(0.2)	(3.3)	(79.5)
Net income (loss)	292.9	4.2	(65.1)	0.6	(3.3)	229.3
Net income attributable to NCI	(1.8)	—	—	—	—	(1.8)
Net income (loss) attributable to Lithia Motors, Inc.	$291.1	$4.2	$(65.1)	$0.6	$(3.3)	$227.5

Diluted earnings (loss) per share attributable to Lithia Motors, Inc.	$13.22	$0.19	$(2.95)	$0.03	$(0.15)	$10.34
Diluted share count	22.0


	Three Months Ended September 30, 2025
($ in millions, except per share amounts)	As reported	Net gain on disposal of stores	Investment loss	Insurance reserves	Acquisition expenses	Tax attribute	Adjusted
Selling, general and administrative	$998.0	$15.4	$—	$(2.5)	$(15.9)	$—	$995.0
Operating income (loss)	421.6	(15.4)	—	2.5	15.9	—	424.6
Other (expense) income, net	(13.3)	—	22.7	—	—	—	9.4

Income (loss) before income taxes	$282.2	$(15.4)	$22.7	$2.5	$15.9	$—	$307.9
Income tax (provision) benefit	(63.6)	7.2	(6.0)	(0.5)	(0.6)	(3.5)	(67.0)
Net income (loss)	218.6	(8.2)	16.7	2.0	15.3	(3.5)	240.9
Net income attributable to NCI	(1.5)	—	—	—	—	—	(1.5)
Net income (loss) attributable to Lithia Motors, Inc.	$217.1	$(8.2)	$16.7	$2.0	$15.3	$(3.5)	$239.4

Diluted earnings (loss) per share attributable to Lithia Motors, Inc.	$8.61	$(0.32)	$0.66	$0.08	$0.61	$(0.14)	$9.50
Diluted share count	25.2


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	Nine Months Ended September 30, 2026
($ in millions, except per share amounts)	As reported	Net gain on disposal of stores	Investment gain	Insurance reserves	Acquisition expenses	Contract buyouts	Tax attribute	Adjusted
Selling, general and administrative	$3,088.4	$9.2	$—	$(3.2)	$(0.7)	$(20.3)	$—	$3,073.4
Operating income (loss)	1,204.2	(9.2)	—	3.2	0.7	20.3	—	1,219.2
Other income (expense), net	72.7	—	(43.7)	—	—	—	—	29.0

Income (loss) before income taxes	$885.0	$(9.2)	$(43.7)	$3.2	$0.7	$20.3	$—	$856.3
Income tax (provision) benefit	(228.4)	2.4	11.6	(0.9)	(0.1)	(5.1)	(5.3)	(225.8)
Net income (loss)	656.6	(6.8)	(32.1)	2.3	0.6	15.2	(5.3)	630.5
Net income attributable to NCI	(5.1)	—	—	—	—	—	—	(5.1)
Net income (loss) attributable to Lithia Motors, Inc.	$651.5	$(6.8)	$(32.1)	$2.3	$0.6	$15.2	$(5.3)	$625.4

Diluted earnings (loss) per share attributable to Lithia Motors, Inc.	$28.77	$(0.30)	$(1.42)	$0.10	$0.03	$0.67	$(0.24)	$27.61
Diluted share count	22.6


	Nine Months Ended September 30, 2025
($ in millions, except per share amounts)	As reported	Net gain on disposal of stores	Investment gain	Insurance reserves	Acquisition expenses	Tax attribute	Adjusted
Selling, general and administrative	$2,965.3	$17.7	$—	$(5.4)	$(16.1)	$—	$2,961.5
Operating income (loss)	1,253.3	(17.7)	—	5.4	16.1	—	1,257.1
Other income (expense), net	35.9	—	(4.1)	—	—	—	31.8

Income (loss) before income taxes	$918.9	$(17.7)	$(4.1)	$5.4	$16.1	$—	$918.6
Income tax (provision) benefit	(230.9)	11.6	1.0	(1.4)	(0.6)	(5.7)	(226.0)
Net income (loss)	688.0	(6.1)	(3.1)	4.0	15.5	(5.7)	692.6
Net income attributable to NCI	(5.3)	—	—	—	—	—	(5.3)
Net income (loss) attributable to Lithia Motors, Inc.	$682.7	$(6.1)	$(3.1)	$4.0	$15.5	$(5.7)	$687.3

Diluted earnings (loss) per share attributable to Lithia Motors, Inc.	$26.42	$(0.24)	$(0.12)	$0.16	$0.60	$(0.22)	$26.60
Diluted share count	25.8

Liquidity and Capital Resources

We manage our liquidity and capital resources in the context of our overall business strategy, continually forecasting

and managing our cash, working capital balances and capital structure in a way that we believe will meet the short-

term and long-term obligations of our business while maintaining liquidity and financial flexibility. Our current free

cash flow deployment strategy includes a target allocation of 25% to 35% investment in acquisitions, 25%

investment in capital expenditures, innovation, and diversification and 40% to 50% in shareholder return in the form

of dividends and share repurchases based on current valuation trends in acquisitions relative to stock price

performance.

We believe we have sufficient sources of funding to meet our business requirements for the next 12 months and in

the longer term. Cash flows from operations and borrowings under our credit facilities are our main sources for

liquidity. In addition to the above sources of liquidity, potential sources to fund our business strategy include

financing of real estate and proceeds from debt or equity offerings. We evaluate all of these options and may select


		MANAGEMENT’S DISCUSSION AND ANALYSIS	36

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one or more of them depending on overall capital needs and the availability and cost of capital, although no

assurances can be provided that these capital sources will be available in sufficient amounts or with terms

acceptable to us.

Available Sources

Below is a summary of our immediately available funds:


($ in millions)	September 30, 2026	December 31, 2025	Change	% Change
Cash and cash equivalents	$108.1	$109.2	$(1.1)	(1.0)%
Marketable securities	76.1	56.4	19.7	34.9
Available credit on credit facilities	1,256.5	1,359.2	(102.7)	(7.6)
Total current available funds	$1,440.7	$1,524.8	$(84.1)	(5.5)%

Information about our cash flows, by category, is presented in our Consolidated Statements of Cash Flows. The

following table summarizes our cash flows:


	Nine Months Ended September 30,		Change
(In millions)	2026	2025	in Cash Flow
Net cash (used in) provided by operating activities	$(204.9)	$233.0	$(437.9)
Net cash used in investing activities	(481.2)	(479.4)	(1.8)
Net cash provided by financing activities	722.3	264.5	457.8

Operating Activities

Cash used in operating activities for the nine months endedSeptember 30, 2026 was $204.9 million compared to

cash provided by operating activities for the nine months ended September 30, 2025 of $233.0 million, a decrease

of$437.9 million. The decrease was primarily related to changes in inventories, finance receivables, and trade

receivables, partially offset by changes in floor plan notes payable,other assets, and trade payables compared to

the same period of 2025.

Borrowings from and repayments to our syndicated credit facilities related to our vehicle inventory floor plan

financing are presented as financing activities. To better understand the impact of changes in inventory, other

assets, and the associated financing, we also consider our adjusted net cash provided by operating activities to

include borrowings or repayments associated with our vehicle floor plan commitment and exclude the impact of our

finance receivables activity. Adjusted net cash provided by operating activities, a non-GAAP measure, is presented

below:


	Nine Months Ended September 30,		Change
(In millions)	2026	2025	in Cash Flow
Net cash (used in) provided by operating activities – as reported	$(204.9)	$233.0	$(437.9)
Adjust: Net borrowings on floor plan notes payable, non-trade(1)	1,542.2	73.3	1,468.9
Less: Borrowings on floor plan notes payable, non-trade associated with acquired vehicle inventory	(43.5)	(62.9)	19.4
Adjust: Finance receivables activity	831.4	671.3	160.1
Net cash provided by operating activities – adjusted	$2,125.2	$914.7	$1,210.5

(1) Includes the impact of converting inventory‑secured revolvers to floorplan facilities during 2026, increasing net floorplan

borrowings and adjusted operating cash flows by $1,138.3 million.


		MANAGEMENT’S DISCUSSION AND ANALYSIS	37

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Investing Activities

Net cash used in investing activities totaled $481.2 million and $479.4 million, respectively, for the nine months

endedSeptember 30, 2026 and 2025.

Below are highlights of significant activity related to our cash flows from investing activities:


	Nine Months Ended September 30,		Change
(In millions)	2026	2025	in Cash Flow
Capital expenditures	$(252.3)	$(257.7)	$5.4
Cash paid for acquisitions, net of cash acquired	(264.8)	(417.6)	152.8
Net proceeds from sales of stores	31.9	178.1	(146.2)

Capital Expenditures

Below is a summary of our capital expenditure activities ($ in millions):

Many manufacturers provide assistance in the form of additional incentives or assistance if facilities meet specified

standards and requirements. We expect that certain facility upgrades and remodels will generate additional

manufacturer incentive payments. Also, tax laws allowing accelerated deductions for capital expenditures reduce

the overall investment needed and encourage accelerated project timelines.

We expect to use a portion of our future capital expenditures to upgrade facilities that we recently acquired. Our

initial evaluation of the investment return metrics applied to each acquisition contemplates this additional capital

investment, which is usually associated with manufacturer standards and requirements.

If we undertake a significant capital commitment in the future, we expect to pay for the commitment out of existing

cash balances, construction financing, and borrowings on one of our credit facilities. Upon completion of the

projects, we believe we would have the ability to secure long-term financing and general borrowings from third party

lenders for 70% to 90% of the amounts expended, although no assurances can be provided that these financings

will be available to us in sufficient amounts or on terms acceptable to us.

Acquisitions

We focus on acquiring stores at attractive purchase prices that meet our return thresholds and strategic objectives.

We look for acquisitions that diversify our brand and geographic mix as we continue to evaluate our portfolio to

minimize exposure to any one manufacturer and achieve financial returns.

We are able to subsequently floor new vehicle inventory acquired as part of an acquisition; however, the cash

generated by this transaction is recorded as borrowings on floor plan notes payable, non-trade.


		MANAGEMENT’S DISCUSSION AND ANALYSIS	38

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Adjusted net cash paid for acquisitions, a non-GAAP measure, as well as certain other acquisition-related

information is presented below:


	Nine Months Ended September 30,
($ in millions)	2026	2025
Number of locations acquired	12	6
Number of stores opened	5	2

Cash paid for acquisitions, net of cash acquired	$(264.8)	$(417.6)
Add: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory	43.5	62.9
Cash paid for acquisitions, net of cash acquired – adjusted	$(221.3)	$(354.7)

We evaluate potential capital investments primarily based on targeted rates of return on assets and return on our

net equity investment.

Financing Activities

Adjusted net cash (used in) provided by financing activities, a non-GAAP measure, which is adjusted for borrowings

and repayments on floor plan facilities: non-trade and borrowings and repayments associated with our Financing

Operations segment was as follows:


	Nine Months Ended September 30,		Change
(In millions)	2026	2025	in Cash Flow
Cash provided by financing activities, as reported	$722.3	$264.5	$457.8
Less: Net borrowings on floor plan notes payable: non-trade (1)	(1,542.2)	(73.3)	(1,468.9)
Less: Net borrowings on non-recourse notes payable	(291.8)	(136.3)	(155.5)
Cash (used in) provided by financing activities, as adjusted	$(1,111.7)	$54.9	$(1,166.6)

(1) Includes the impact of converting inventory‑secured revolvers to floorplan facilities during 2026, increasing net floorplan

borrowings and adjusted operating cash flows by $1,138.3 million.

Below are highlights of significant activity related to our cash flows from financing activities, excluding borrowings

and repayments on floor plan notes payable: non-trade, which are discussed above:


	Nine Months Ended September 30,		Change
(In millions)	2026	2025	in Cash Flow
Net (repayments) borrowings on lines of credit	$(368.5)	$132.0	$(500.5)
Proceeds from issuance of long-term debt	—	741.0	(741.0)
Principal payments on non-recourse notes payable	(1,228.4)	(959.0)	(269.4)
Proceeds from the issuance of non-recourse notes payable	1,520.2	1,095.3	424.9
Repurchase of common stock	(624.5)	(662.3)	37.8

Equity Transactions

Our Board has approved share repurchase authorizations totaling up to $3.7 billion of our common stock. We

repurchased a total of 2,157,094 shares of our common stock at an average price of $289.49 in the first nine

months of 2026, consisting of 115,367 related to tax withholding on vesting RSUs, and 2,041,727 related to our

repurchase authorizations. As of September 30, 2026, we had $535.4 million remaining available for repurchases

and the authorizations do not have expiration dates.

In the first nine months of 2026, we declared and paid dividends on our common stock as follows:


Dividend paid:	Dividend amount per share	Total amount of dividend (in millions)
March 2026	$0.55	$12.8
May 2026	$0.57	$12.9
August 2026	$0.70	$15.4

We evaluate performance and make a recommendation to the Board on dividend payments on a quarterly basis.


		MANAGEMENT’S DISCUSSION AND ANALYSIS	39

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Summary of Outstanding Balances on Credit Facilities and Long-Term Debt

Below is a summary of our outstanding balances on credit facilities and long-term debt:


	As of September 30, 2026
(In millions)	Outstanding	Remaining Available
Floor plan notes payable: non-trade	$4,504.2	$—	(1)
Floor plan notes payable	2,062.6	—
Daily rental vehicle inventory financing commitments	3.5	0.4	(2)
Revolving lines of credit	1,736.6	1,226.7	(2), (3)
Warehouse facilities	1,743.5	29.4
Non-recourse notes payable	2,765.7	—
4.625% Senior notes due 2027	400.0	—
5.500% Senior notes due 2030	600.0	—
4.375% Senior notes due 2031	550.0	—
3.875% Senior notes due 2029	800.0	—
Real estate mortgages, finance lease obligations, and other debt	1,114.6	—
Unamortized debt issuance costs	(24.4)	—	(4)
Total debt	16,256.3	$1,256.5

Less: Inventory related debt	(6,570.3)
Less: Financing operations related debt	(4,509.2)
Less: Unrestricted cash and cash equivalents	(108.1)
Less: Marketable securities	(76.1)
Less: Availability on daily rental financing facilities	(0.4)
Net debt(5)	$4,992.2

(1)As of September 30, 2026, we had a $2.7 billion vehicle floor plan commitment as part of our US Bank syndicated credit

facility, and a $375 millionCAD wholesale floorplan commitment as part of our Bank of Nova Scotia syndicated credit facility.

(2)The amount available on this credit facility is limited based on borrowing base calculations and fluctuates monthly.

(3)Available credit is based on the borrowing base amount effective as of August 31, 2026. This amount is reduced by $6.2

million for outstanding letters of credit.

(4)Debt issuance costs are presented on the balance sheet as a reduction from the carrying amount of the related debt liability.

(5)Non-GAAP financial measure.

Financial Covenants

Our credit facilities, non-recourse notes payable, and senior notes contain customary representations and

warranties, conditions and covenants for transactions of these types.

Recent Accounting Pronouncements

See Note 15 – Recent Accounting Pronouncements for discussion.

Critical Accounting Policies and Use of Estimates

There have been no material changes in the critical accounting policies and use of estimates described in our 2025

Annual Report on Form 10-K filed with the SEC on February 25, 2026.

Seasonality and Quarterly Fluctuations

Our North American operations generally experience lower volumes in the first quarter of each year due to

consumer purchasing patterns and inclement weather in certain of our markets. As a result, financial performance is

expected to be lower during the first quarter than during the second, third and fourth quarters of each fiscal year.

Our U.K. operations generally experience higher volumes in the first and third quarters of each year, due primarily to

new vehicle registration practices in the United Kingdom. We believe that interest rates, levels of consumer debt,

consumer confidence and manufacturer sales incentives, as well as general economic conditions, also contribute to

fluctuations in sales and operating results.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or

future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations,

liquidity, capital expenditures or capital resources.


			40

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our reported market risks or risk management policies since the filing of

our 2025 Annual Report on Form 10-K, which was filed with the SEC on February 25, 2026.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We evaluated, with the participation and under the supervision of our Chief Executive Officer and our Chief

Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by

this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial

Officer concluded that our disclosure controls and procedures are effective to ensure that information we are

required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and

communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as

appropriate to allow timely decisions regarding required disclosure and that such information is recorded,

processed, summarized and reported within the time periods specified in SEC rules and forms.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our most recent fiscal

quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial

reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are party to numerous legal proceedings arising in the normal course of our business. Although we do not

anticipate that the resolution of legal proceedings arising in the normal course of business will have a material

adverse effect on our business, results of operations, financial condition, or cash flows, we cannot predict this with

certainty.

Item 1A. Risk Factors

The information in this Form 10-Q should be read in conjunction with the risk factors and information disclosed in

our 2025 Annual Report on Form 10-K, which was filed with the SEC on February 25, 2026. We have described in

our 2025 Annual Report on Form 10-K, under Risk Factors in Item 1A, the primary risks related to our business and

securities.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We repurchased the following shares of our common stock during the third quarter of 2026:


For the full calendar month of	Total number of shares purchased2	Average price paid per share	Total number of shares purchased as part of publicly announced plans1	Maximum dollar value of shares that may yet be purchased under publicly announced plan
July	—	$—	—	$620,491
August	60,564	371.14	60,483	598,044
September	185,753	337.02	185,753	535,442
Total	246,317	345.41	246,236

1On May 26, 2026, our Board approved an additional $500 million repurchase authorization of our common stock. This

authorization is in addition to the amount previously authorized by the Board for repurchase, which brings the total

authorizations to $3.7 billion. There are no expiration dates for the share repurchase authorizations.

2Of the shares repurchased in the third quarter of 2026, 81 shares were related to tax withholding upon the vesting of RSUs.


			41

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Item 5. Other Information

Rule 10b5-1 Trading Plans of Directors and Section 16 Officers

During the fiscal quarter ended September 30, 2026, none of our directors or officers (as defined in Rule 16a-1

under the Exchange Act) adopted, modified or terminated any Rule 10b5-1 plan or any non-Rule 10b5-1 trading

arrangement.

Item 6. Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index.

Incorporated by Reference

Filed or

Furnished

Herewith

Exhibit

Number

Exhibit Description

Form

File

Number

Exhibit

Filing

Date

3.1

Restated Articles of Incorporation of Lithia Motors, Inc.

10-Q

001-14733

3.1

07/28/21

3.2

Bylaws of Lithia Motors, Inc.

8-K

001-14733

3.1

02/20/26

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the

Securities Exchange Act of 1934.

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the

Securities Exchange Act of 1934.

32.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the

Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

32.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the

Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

101

Inline XBRL Document Set for the consolidated financial statements and

accompanying notes to consolidated financial statements.

104

Cover page formatted as Inline XBRL and contained in Exhibit 101.


Item Number	Item	Page
	GLOSSARY	1

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	2
	Consolidated Balance Sheets (Unaudited) - September 30, 2026, and December 31, 2025	2
	Consolidated Statements of Operations (Unaudited) - Three and Nine Months Ended September 30, 2026 and 2025	3
	Consolidated Statements of Comprehensive Income (Unaudited) – Three and Nine Months Ended September 30, 2026 and 2025	4
	Consolidated Statements of Equity (Unaudited) - Three and Nine Months Ended September 30, 2026 and 2025	5
	Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended September 30, 2026 and 2025	6
	Condensed Notes to Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 5.	Other Information	41
Item 6.	Exhibits	41

	SIGNATURE	42


Date: October 28, 2026	LITHIA MOTORS, INC.
	Registrant

	By:	/s/ Tina Miller
		Tina Miller
		Chief Financial Officer, Senior Vice President, and Principal Accounting Officer