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GOODWILL AND INTANGIBLE FRANCHISE RIGHTS
 3 Months Ended
Mar. 31, 2025
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE FRANCHISE RIGHTS GOODWILL AND INTANGIBLE FRANCHISE RIGHTS
Our acquisitions have resulted in the recording of goodwill and intangible franchise rights. Goodwill is an asset representing operational synergies and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Franchise rights are indefinite-lived intangible assets representing our rights under franchise agreements with vehicle manufacturers. Goodwill and intangible franchise rights are tested annually as of October 1st, or more frequently in the event that facts and circumstances indicate a triggering event has occurred.
Based on the underperformance of certain stores, limited primarily to one brand, we performed quantitative impairment tests of franchise rights for certain stores in our Dealerships segment in the second quarter of 2024. The quantitative impairment tests for franchise rights included a comparison of the estimated fair value to the carrying value of each franchise right asset. The Company estimates fair value by using a discounted cash flow model (income approach) based on market participant assumptions related to the cash flows directly attributable to the franchise. These assumptions include year-over-year and terminal growth rates, weighted average cost of capital, future gross margins, and future selling, general, and administrative expenses.
The results of the quantitative impairment testing for certain franchise rights in the second quarter of 2024 identified that the carrying values of certain of our franchise rights intangible assets exceeded their fair value. As a result, we recognized a $134.1 million pre-tax non-cash impairment charge during the nine months ended March 31, 2025.
The stores with franchise rights impairments in the second quarter of 2024 primarily related to our Arizona and Utah reporting units within our Dealerships segment. Therefore, we performed quantitative impairment assessments of goodwill for these two reporting units in the second quarter of 2024. The results of our quantitative assessments indicated that the carrying value of goodwill related to the Arizona and Utah reporting units did not exceed their fair value.
We also recorded a goodwill impairment charge of $1.3 million during the nine months ended March 31, 2025 related to one dealership that met the assets held for sale criteria in June 2024. The quantitative impairment test of the disposal group included a comparison of the estimated fair value to the carrying value of the disposal group less cost to sell.