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Leases
 3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases     LEASES
General description
The significant majority of leases that we enter into are for real estate. We lease numerous facilities relating to our operations, including primarily for automobile showrooms, display lots, service facilities, collision repair centers, supply facilities, automobile storage lots, parking lots, offices, and our corporate headquarters. Leases for real property have terms ranging from one to twenty-five years. We also lease various types of equipment, including security cameras, diagnostic equipment, copiers, key-cutting machines, and postage machines, among others. Equipment leases generally have terms ranging from one to five years. In addition, we lease certain vehicles from vehicle manufacturers to provide our service customers with the use of a vehicle while their vehicles are being serviced at our dealerships. Service loaner vehicle leases generally have terms ranging from six to eighteen months, and we typically purchase the service loaner vehicles at the end of the lease.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us. We have elected the practical expedient under ASC 842 to not separate lease and nonlease components for the following classes of underlying assets: real estate, office equipment, service loaner vehicles, and marketing-related assets (e.g., billboards).

Our real estate and equipment leases often require that we pay maintenance in addition to rent. Additionally, our real estate leases generally require payment of real estate taxes and insurance. Maintenance, real estate taxes, and insurance payments are generally variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the right-of-use (“ROU”) asset and lease liability, but are reflected as variable lease expenses for those classes of underlying assets for which we have elected the practical expedient to not separate lease and nonlease components.
Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We rent or sublease certain real estate to third parties, which are primarily operating leases.
Variable lease payments
A majority of our lease agreements include fixed rental payments. Certain of our lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on a change in an index or a rate are not considered in the determination of lease payments for purposes of measuring the related lease liability. While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments are incurred.
Options to extend or terminate leases
Most of our real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at our sole discretion. If it is reasonably certain that we
will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our ROU assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Discount rate
For our incremental borrowing rate, we generally use a portfolio approach to determine the discount rate for leases with similar characteristics. We determine discount rates based on the rates of our unsecured borrowings, which are then adjusted for the appropriate lease term and the effects of full collateralization.

Leases
 
Classification
 
March 31, 2019
Assets
 
 
 
 
Operating
 
Operating Lease Assets
 
$
343.4

Finance
 
Property and Equipment, Net and Other Assets
 
101.4

Total right-of-use assets
 
 
 
$
444.8

 
 
 
 
 
Liabilities
 
 
 
 
Current
 
 
 
 
Operating
 
Other Current Liabilities
 
$
41.1

Finance
 
Current Maturities of Long-Term Debt and Vehicle Floorplan Payable - Trade
 
66.4

Noncurrent
 
 
 
 
Operating
 
Noncurrent Operating Lease Liabilities
 
315.0

Finance
 
Long-Term Debt, Net of Current Maturities
 
86.6

Total lease liabilities
 
 
 
$
509.1


 
 
 
 
Three Months Ended
Lease cost
 
Classification
 
March 31, 2019
Operating lease cost
 
Selling, general, and administrative expenses
 
$
15.2

Finance lease cost:
 
 
 
 
Amortization of ROU assets
 
Depreciation and amortization
 
2.7

Interest on lease liabilities
 
Other interest expense and floorplan interest expense
 
2.2

Short-term lease cost (1)
 
Selling, general, and administrative expenses
 
3.3

Variable lease cost
 
Selling, general, and administrative expenses
 
1.3

Sublease income
 
Selling, general, and administrative expenses
 
(0.4
)
Net lease cost
 
 
 
$
24.3

 
 
 
 
 
(1) Includes leases with a term of one month or less.
Lease Term and Discount Rate
 
March 31, 2019
Weighted average remaining lease term
 
 
Operating
 
11 years

Finance
 
10 years

Weighted-average discount rate
 
 
Operating
 
5.29
%
Finance
 
8.27
%

 
 
Three Months Ended
Other Information
 
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash flows from operating leases
 
$
15.7

Operating cash flows from finance leases (1)
 
$
13.7

Financing cash flows from finance leases
 
$
2.1

Right-of-use assets obtained in exchange for new:
 
 
Operating lease liabilities
 
$
9.1

Finance lease liabilities
 
$
11.8

 
 
 
(1) Includes the interest component of payments made on finance leases as well as principal payments on vehicle floorplan payables with trade lenders for certain service loaner vehicle leases.

Maturity of Lease Liabilities
 
Operating Leases
 
Finance Leases
Twelve months ending March 31,
 
 
 
 
2020
 
$
57.8

 
$
74.4

2021
 
51.8

 
10.6

2022
 
47.5

 
10.5

2023
 
42.0

 
10.4

2024
 
36.3

 
10.5

Thereafter
 
250.1

 
105.2

Total lease payments
 
485.5

 
221.6

Less: interest
 
(129.4
)
 
(68.6
)
Present value of lease liabilities
 
$
356.1

 
$
153.0
Leases     LEASES
General description
The significant majority of leases that we enter into are for real estate. We lease numerous facilities relating to our operations, including primarily for automobile showrooms, display lots, service facilities, collision repair centers, supply facilities, automobile storage lots, parking lots, offices, and our corporate headquarters. Leases for real property have terms ranging from one to twenty-five years. We also lease various types of equipment, including security cameras, diagnostic equipment, copiers, key-cutting machines, and postage machines, among others. Equipment leases generally have terms ranging from one to five years. In addition, we lease certain vehicles from vehicle manufacturers to provide our service customers with the use of a vehicle while their vehicles are being serviced at our dealerships. Service loaner vehicle leases generally have terms ranging from six to eighteen months, and we typically purchase the service loaner vehicles at the end of the lease.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us. We have elected the practical expedient under ASC 842 to not separate lease and nonlease components for the following classes of underlying assets: real estate, office equipment, service loaner vehicles, and marketing-related assets (e.g., billboards).

Our real estate and equipment leases often require that we pay maintenance in addition to rent. Additionally, our real estate leases generally require payment of real estate taxes and insurance. Maintenance, real estate taxes, and insurance payments are generally variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the right-of-use (“ROU”) asset and lease liability, but are reflected as variable lease expenses for those classes of underlying assets for which we have elected the practical expedient to not separate lease and nonlease components.
Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We rent or sublease certain real estate to third parties, which are primarily operating leases.
Variable lease payments
A majority of our lease agreements include fixed rental payments. Certain of our lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on a change in an index or a rate are not considered in the determination of lease payments for purposes of measuring the related lease liability. While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments are incurred.
Options to extend or terminate leases
Most of our real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at our sole discretion. If it is reasonably certain that we
will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our ROU assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Discount rate
For our incremental borrowing rate, we generally use a portfolio approach to determine the discount rate for leases with similar characteristics. We determine discount rates based on the rates of our unsecured borrowings, which are then adjusted for the appropriate lease term and the effects of full collateralization.

Leases
 
Classification
 
March 31, 2019
Assets
 
 
 
 
Operating
 
Operating Lease Assets
 
$
343.4

Finance
 
Property and Equipment, Net and Other Assets
 
101.4

Total right-of-use assets
 
 
 
$
444.8

 
 
 
 
 
Liabilities
 
 
 
 
Current
 
 
 
 
Operating
 
Other Current Liabilities
 
$
41.1

Finance
 
Current Maturities of Long-Term Debt and Vehicle Floorplan Payable - Trade
 
66.4

Noncurrent
 
 
 
 
Operating
 
Noncurrent Operating Lease Liabilities
 
315.0

Finance
 
Long-Term Debt, Net of Current Maturities
 
86.6

Total lease liabilities
 
 
 
$
509.1


 
 
 
 
Three Months Ended
Lease cost
 
Classification
 
March 31, 2019
Operating lease cost
 
Selling, general, and administrative expenses
 
$
15.2

Finance lease cost:
 
 
 
 
Amortization of ROU assets
 
Depreciation and amortization
 
2.7

Interest on lease liabilities
 
Other interest expense and floorplan interest expense
 
2.2

Short-term lease cost (1)
 
Selling, general, and administrative expenses
 
3.3

Variable lease cost
 
Selling, general, and administrative expenses
 
1.3

Sublease income
 
Selling, general, and administrative expenses
 
(0.4
)
Net lease cost
 
 
 
$
24.3

 
 
 
 
 
(1) Includes leases with a term of one month or less.
Lease Term and Discount Rate
 
March 31, 2019
Weighted average remaining lease term
 
 
Operating
 
11 years

Finance
 
10 years

Weighted-average discount rate
 
 
Operating
 
5.29
%
Finance
 
8.27
%

 
 
Three Months Ended
Other Information
 
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash flows from operating leases
 
$
15.7

Operating cash flows from finance leases (1)
 
$
13.7

Financing cash flows from finance leases
 
$
2.1

Right-of-use assets obtained in exchange for new:
 
 
Operating lease liabilities
 
$
9.1

Finance lease liabilities
 
$
11.8

 
 
 
(1) Includes the interest component of payments made on finance leases as well as principal payments on vehicle floorplan payables with trade lenders for certain service loaner vehicle leases.

Maturity of Lease Liabilities
 
Operating Leases
 
Finance Leases
Twelve months ending March 31,
 
 
 
 
2020
 
$
57.8

 
$
74.4

2021
 
51.8

 
10.6

2022
 
47.5

 
10.5

2023
 
42.0

 
10.4

2024
 
36.3

 
10.5

Thereafter
 
250.1

 
105.2

Total lease payments
 
485.5

 
221.6

Less: interest
 
(129.4
)
 
(68.6
)
Present value of lease liabilities
 
$
356.1

 
$
153.0