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Leases | 12 Months Ended
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Dec. 31, 2023
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 generally have terms ranging from 1 to 25 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 1 to 5 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. These service loaner vehicle leases generally have terms ranging from 6 to 18 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 Topic 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 that do not include a purchase option that is reasonably certain to be exercised 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”). P ayments 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 or asset. 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 current market prices of instruments similar to our unsecured borrowings with maturities that align with the relevant lease term, and such rates are then adjusted for our credit spread and the effects of full collateralization. The following tables present information about our ROU assets, lease liabilities, total lease costs, cash flows arising from lease transactions, and other supplemental information for the years ended December 31, 2023 and 2022:
Leases |  | Classification |  | 2023 |  | 2022
Assets |  |  |  |  |  |
Operating |  | Operating Lease Assets |  | $ | 392.1 |  |  | $ | 323.5 |
Finance |  | Property and Equipment, Net and Other Assets |  | 351.1 |  |  | 361.4 |
Total right-of-use assets |  |  |  | $ | 743.2 |  |  | $ | 684.9 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating |  | Other Current Liabilities |  | $ | 41.2 |  |  | $ | 39.5 |
Finance |  | Current Maturities of Long-Term Debt and Vehicle Floorplan Payable - Trade |  | 46.9 |  |  | 39.0 |
Noncurrent |  |  |  |  |  |
Operating |  | Noncurrent Operating Lease Liabilities |  | 363.2 |  |  | 296.9 |
Finance |  | Long-Term Debt, Net of Current Maturities |  | 349.6 |  |  | 363.2 |
Total lease liabilities |  |  |  | $ | 800.9 |  |  | $ | 738.6 |
Lease Term and Discount Rate |  | 2023 |  | 2022
Weighted average remaining lease term |  |  |  |
Operating |  | 12 years |  | 11 years
Finance |  | 13 years |  | 14 years
Weighted-average discount rate |  |  |  |
Operating |  | 5.71 | % |  | 5.25 | %
Finance |  | 4.43 | % |  | 4.47 | %
Lease cost |  | Classification |  | 2023 |  | 2022
Operating lease cost |  | Selling, general, and administrative expenses |  | $ | 62.3 |  |  | $ | 56.0 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets |  | Depreciation and amortization |  | 24.6 |  |  | 20.9 |
Interest on lease liabilities |  | Other interest expense and floorplan interest expense |  | 17.8 |  |  | 13.3 |
Short-term lease cost (1) |  | Selling, general, and administrative expenses |  | 11.3 |  |  | 10.6 |
Variable lease cost |  | Selling, general, and administrative expenses |  | 12.0 |  |  | 10.5 |
Sublease income |  | Selling, general, and administrative expenses |  | (3.6) |  |  | (3.6) |
Net lease cost |  |  |  | $ | 124.4 |  |  | $ | 107.7 |
(1) Includes leases with a term of one month or less.
Other Information |  | 2023 |  | 2022
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 61.4 |  |  | $ | 56.8 |
Operating cash flows from finance leases (1) |  | $ | 63.7 |  |  | $ | 36.2 |
Financing cash flows from finance leases |  | $ | 12.3 |  |  | $ | 11.3 |
Supplemental noncash information on adjustments to right-of-use assets, including right-of-use assets obtained in exchange for new: |  |  |  |
Operating lease liabilities |  | $ | 111.7 |  |  | $ | 78.7 |
Finance lease liabilities |  | $ | 54.7 |  |  | $ | 90.8 |
(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
Year ending December 31, |  |  |  |
2024 |  | $ | 58.1 |  |  | $ | 59.8 |
2025 |  | 58.0 |  |  | 83.0 |
2026 |  | 53.4 |  |  | 24.1 |
2027 |  | 50.6 |  |  | 25.3 |
2028 |  | 47.3 |  |  | 25.0 |
Thereafter |  | 304.5 |  |  | 284.1 |
Total lease payments |  | 571.9 |  |  | 501.3 |
Less: interest |  | (167.5) |  |  | (104.8) |
Present value of lease liabilities |  | $ | 404.4 |  |  | $ | 396.5 |
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 generally have terms ranging from 1 to 25 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 1 to 5 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. These service loaner vehicle leases generally have terms ranging from 6 to 18 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 Topic 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 that do not include a purchase option that is reasonably certain to be exercised 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”). P ayments 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 or asset. 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 current market prices of instruments similar to our unsecured borrowings with maturities that align with the relevant lease term, and such rates are then adjusted for our credit spread and the effects of full collateralization. The following tables present information about our ROU assets, lease liabilities, total lease costs, cash flows arising from lease transactions, and other supplemental information for the years ended December 31, 2023 and 2022:
Leases |  | Classification |  | 2023 |  | 2022
Assets |  |  |  |  |  |
Operating |  | Operating Lease Assets |  | $ | 392.1 |  |  | $ | 323.5 |
Finance |  | Property and Equipment, Net and Other Assets |  | 351.1 |  |  | 361.4 |
Total right-of-use assets |  |  |  | $ | 743.2 |  |  | $ | 684.9 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating |  | Other Current Liabilities |  | $ | 41.2 |  |  | $ | 39.5 |
Finance |  | Current Maturities of Long-Term Debt and Vehicle Floorplan Payable - Trade |  | 46.9 |  |  | 39.0 |
Noncurrent |  |  |  |  |  |
Operating |  | Noncurrent Operating Lease Liabilities |  | 363.2 |  |  | 296.9 |
Finance |  | Long-Term Debt, Net of Current Maturities |  | 349.6 |  |  | 363.2 |
Total lease liabilities |  |  |  | $ | 800.9 |  |  | $ | 738.6 |
Lease Term and Discount Rate |  | 2023 |  | 2022
Weighted average remaining lease term |  |  |  |
Operating |  | 12 years |  | 11 years
Finance |  | 13 years |  | 14 years
Weighted-average discount rate |  |  |  |
Operating |  | 5.71 | % |  | 5.25 | %
Finance |  | 4.43 | % |  | 4.47 | %
Lease cost |  | Classification |  | 2023 |  | 2022
Operating lease cost |  | Selling, general, and administrative expenses |  | $ | 62.3 |  |  | $ | 56.0 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets |  | Depreciation and amortization |  | 24.6 |  |  | 20.9 |
Interest on lease liabilities |  | Other interest expense and floorplan interest expense |  | 17.8 |  |  | 13.3 |
Short-term lease cost (1) |  | Selling, general, and administrative expenses |  | 11.3 |  |  | 10.6 |
Variable lease cost |  | Selling, general, and administrative expenses |  | 12.0 |  |  | 10.5 |
Sublease income |  | Selling, general, and administrative expenses |  | (3.6) |  |  | (3.6) |
Net lease cost |  |  |  | $ | 124.4 |  |  | $ | 107.7 |
(1) Includes leases with a term of one month or less.
Other Information |  | 2023 |  | 2022
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 61.4 |  |  | $ | 56.8 |
Operating cash flows from finance leases (1) |  | $ | 63.7 |  |  | $ | 36.2 |
Financing cash flows from finance leases |  | $ | 12.3 |  |  | $ | 11.3 |
Supplemental noncash information on adjustments to right-of-use assets, including right-of-use assets obtained in exchange for new: |  |  |  |
Operating lease liabilities |  | $ | 111.7 |  |  | $ | 78.7 |
Finance lease liabilities |  | $ | 54.7 |  |  | $ | 90.8 |
(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
Year ending December 31, |  |  |  |
2024 |  | $ | 58.1 |  |  | $ | 59.8 |
2025 |  | 58.0 |  |  | 83.0 |
2026 |  | 53.4 |  |  | 24.1 |
2027 |  | 50.6 |  |  | 25.3 |
2028 |  | 47.3 |  |  | 25.0 |
Thereafter |  | 304.5 |  |  | 284.1 |
Total lease payments |  | 571.9 |  |  | 501.3 |
Less: interest |  | (167.5) |  |  | (104.8) |
Present value of lease liabilities |  | $ | 404.4 |  |  | $ | 396.5 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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