Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to risk from changes in interest rates on a significant portion of our outstanding indebtedness. Based on $2.62 billion of total variable interest rate debt, which includes our floor plan notes payable, amounts drawn on our used vehicle floor plan, revolver and certain mortgage liabilities, outstanding as of December 31, 2025, a 100 basis point change in interest rates would result in a change of $26.2 million in annual interest expense.
We periodically receive floor plan assistance from certain automobile manufacturers, which is primarily accounted for as a reduction in our new vehicle inventory cost. Floor plan assistance reduced our cost of sales for the years ended December 31,
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2025, 2024, and 2023, by $113.4 million, $99.7 million and $87.0 million, respectively. We cannot provide assurance as to the future amount of floor plan assistance and these amounts may be negatively impacted due to future changes in interest rates.
As part of our strategy to mitigate our exposure to fluctuations in interest rates, we have various interest rate swap agreements. All of our interest rate swaps qualify for cash flow hedge accounting treatment and do not contain any ineffectiveness.
As of December 31, 2025 we had four interest rate swap agreements. These swaps are designed to provide a hedge against changes in variable rate cash flows regarding fluctuations in SOFR. The following table provides information on the attributes of each swap as of December 31, 2025:
Inception Date Notional Principal at Inception Notional Value as of December 31, 2025 Notional Principal at Maturity Maturity Date
(In millions)
January 2022 $ 300.0 $ 243.8 $ 228.8 December 2026
January 2022 $ 250.0 $ 250.0 $ 250.0 December 2031
May 2021 $ 184.4 $ 151.2 $ 110.6 May 2031
July 2020 $ 93.5 $ 65.8 $ 50.6 December 2028
These interest rate swaps are marked to market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive income and reclassified to other interest expense in the same period or periods during which the hedged transactions affect earnings. For additional information about the effect of our derivative instruments, please refer to Note 15 "Financial Instruments and Fair Value" within the accompanying consolidated financial statements.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.