Sonic Automotive (SAH) risk factors, FY2025 10-K

Risks Related to the Retail Automotive Industry

1. 01Competition among automotive retailers and the use of the internet in automotive retail may reduce our profit margins on vehicle sales and related businesses
2. 02Challenges to the business model of our franchised dealerships from existing automobile manufacturers and the effect of new companies entering into the automotive space may affect our ability to grow or maintain the business over the long term
3. 03Our dealers depend upon new vehicle sales and, therefore, their success depends in large part upon consumer demand for and manufacturer supply of particular vehicles
4. 04Our business is dependent upon access to quality sources of used vehicle inventory. Our business sales and results of operations could be materially adversely affected by obstacles that prevent the efficient acquisition and liquidation of used vehicle inventory
5. 05Our business is dependent on global economies and supply chains that could be adversely affected by natural and man-made disasters, adverse weather and public health crisesNew
6. 06A decline of available financing or rising financing costs in the consumer automotive lending market may adversely affect our vehicle unit sales volume38% rewritten
7. 07Our business may be adversely affected by tariffs, import product restrictions and foreign trade risks that may impair our ability to sell the products that we offer profitably49% rewritten
8. 08Changes in consumer demand toward fuel-efficient hybrid vehicles, plug-in hybrid electric vehicles and battery electric vehicles, and resulting shifts by manufacturers to meet demand, could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations33% rewritten

Risks Related to Our Growth Strategy

1. 09Our investment in new business strategies, services and technologies is inherently risky and could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations
2. 10Our ability to make acquisitions, execute our growth strategy for each of our business segments and grow organically may be restricted by our ability to obtain capital, the terms of the instruments governing our long-term debt and the need to obtain consent from manufacturers

Risks Related to Our Relationships with Vehicle Manufacturers

1. 11Our operations may be adversely affected if one or more of our manufacturer franchise or dealer agreements is terminated or not renewed
2. 12Our failure to meet a manufacturer’s customer satisfaction, financial and sales performance or facility requirements may adversely affect our profitability and our ability to acquire new dealerships
3. 13If state dealer franchise laws are repealed or weakened, our dealerships may be more susceptible to termination, non-renewal or renegotiation of their franchise and dealer agreements
4. 14Our sales volume and profit margin on each sale may be materially adversely affected if manufacturers reduce or discontinue their incentive programs
5. 15Our sales volume may be materially adversely affected if manufacturer-affiliated captive finance companies change their customer financing programs or are unable to provide floor plan financing
6. 16Our parts and service sales volume and margins are dependent on manufacturer warranty programs
7. 17Adverse conditions affecting one or more key manufacturers or lenders may negatively impact our results of operations
8. 18Manufacturer stock ownership restrictions may impair our ability to maintain or renew franchise or dealer agreements or to issue additional equity

Risks Related to Our Sources of Financing and Liquidity

1. 19As of December 31, 2025, our total outstanding indebtedness was $3.5 billion, which includes floor plan notes payable, long-term debt and short-term debt33% rewritten
2. 20We may not have sufficient funds to meet our obligation to repay all or a substantial portion of the outstanding principal amount of our indebtedness when it becomes due
3. 21Our ability to make interest and principal payments when due to holders of our debt securities depends upon our future performance and our receipt of sufficient funds from our subsidiaries
4. 22Our use of hedging transactions could limit our financial gains or result in financial losses

Risks Related to the Ownership of Our Common Stock

1. 23Potential conflicts of interest between us and our officers or directors could adversely affect our future performance
2. 24Our business will be harmed if overall consumer demand suffers from a severe or sustained downturn
3. 25The outcome of legal and administrative proceedings we are or may become involved in could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects
4. 26Climate change legislation or regulations restricting emission of greenhouse gases could result in increased operating costs and reduced demand for the vehicles we sell
5. 27Employee attrition, the loss of key personnel and limited management and personnel resources could adversely affect our operations and growth
6. 28Natural disasters, adverse weather and other events can disrupt our business
7. 29We may be subject to substantial withdrawal liability assessments in the future related to a multiemployer pension plan to which certain of our dealerships make contributions pursuant to collective bargaining agreements
8. 30Tax positions may exist related to our tax filings that could be challenged by governmental agencies and result in higher income tax expenses and affect our overall liquidity if we are unable to successfully defend these tax positions
9. 31Impairment of our goodwill, other intangible assets or other long-lived assets could have a material adverse impact on our earnings