PAG US Equity☆

Item 1A. Risk Factors

Our business, financial condition, results of operations, cash flows, prospects, and the prevailing market price and performance of our common stock may be affected by a number of factors, including the matters discussed below. Certain statements and information set forth herein as well, as other written or oral statements made from time to time by us or by our authorized officers on our behalf, constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “goal,” “plan,” “seek,” “project,” “continue,” “will,” “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this Annual Report on Form 10-K or when made, and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events, or otherwise.

Although we believe that the expectations, plans, intentions, and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

The material risks, uncertainties, and other factors that our stockholders and prospective investors should consider include the following:

Operational Risks

The COVID-19 pandemic has disrupted, and may continue to disrupt, our business, which could adversely affect our financial performance. The outbreak of the COVID-19 pandemic across the globe has adversely impacted each of our markets and the global economy, leading to disruptions to our business. The COVID-19 pandemic continues in all of our markets. Governmental authorities have periodically taken countermeasures to slow the outbreak, including shelter-in-place orders, restrictions on travel, and government-funded assistance programs to individuals and businesses. In response to the COVID-19 pandemic, the U.K. reinstated shelter-in-place orders which required our dealership showrooms to close during the first quarter of 2021. These shelter-in-place orders largely expired on April 12, 2021, and most of the remaining restrictions expired on July 19, 2021. If shelter-in-place orders are re-enacted or other restrictions are placed on our business, we may be adversely impacted. The COVID-19 pandemic is a highly fluid and rapidly evolving situation due to numerous uncertainties, including the duration of the outbreak, travel restrictions, business closures, the effectiveness of actions taken to contain the disease, the distribution rate and acceptance rate of a vaccine, the effect of government assistance programs, production levels from our manufacturing partners, and other unintended consequences, and while we continue to adjust our operations to conform to regulatory changes and consumer preferences in the evolving environment, we cannot anticipate with any certainty the length, scope, or severity of the business impact from the COVID-19 pandemic in each of the jurisdictions that we operate.

This impact could include changes in customer demand, our relationship with, and the financial and operational capacities of, vehicle manufacturers, captive finance companies and other suppliers, workforce availability, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), the adequacy of our cash flow and earnings and other conditions which may affect our liquidity, and disruptions to our technology network and other critical systems, including our dealer management systems and software or other facilities or equipment. We believe that business disruption relating to the COVID-19 pandemic may continue to negatively impact the global economy and may materially affect our businesses as outlined above, or in other manners including global supply chain disruptions resulting in lower levels of vehicles and parts available for sale, all of which would adversely impact our business and results of operations.

20

Table of Contents

Macro-economic and geo-political conditions. Our performance is impacted by geo-political conditions and by general economic conditions overall and in particular by economic conditions in the markets in which we operate. These economic conditions include levels of new and used vehicle sales, availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, personal discretionary spending levels, interest rates, and unemployment rates. When the worldwide economy faltered early in 2020, we were adversely affected, and we expect a similar relationship between general economic and industry conditions and our performance in the future. Any geo-political developments that adversely affect the economies of our markets will also likely affect us.

Adverse conditions affecting one or more significant automotive manufacturers or suppliers will affect us. Our success depends on the overall success of the automotive industry generally and in particular, on the success of the brands of vehicles that each of our dealerships sell. In 2021, revenue generated at our Audi/Volkswagen/Porsche/Bentley, BMW/MINI, Toyota/Lexus, and Mercedes-Benz/Sprinter/smart dealerships represented 22%, 24%, 14%, and 10%, respectively, of our total automotive dealership revenues. In addition, our retail commercial truck operations rely principally on Freightliner and Western Star trucks (both Daimler brands).

Significant adverse weather-related events, supply chain issues, or other events that interrupt vehicle or parts supply to our dealerships would likely have a significant and adverse impact on the industry as a whole, including us, particularly if the events impact any of the manufacturers whose franchises generate a significant percentage of our revenue.

COVID-19 has impacted and may continue to impact the supply of vehicles or parts to the U.S. or U.K markets, and our business could be materially adversely affected. The supply chain required to manufacture and supply the parts for the vehicles we sell is highly complex and integrated. Any failure of that supply chain could materially and adversely affect us. Recently, many of our principal vehicle manufacturers have announced production disruptions caused by a shortage of microchips and other components. The microchip shortage is reported to be due to the overall demand for microchips in the global economy as well as production disruptions caused by staffing and other COVID-19 related issues. IHS Markit has predicted that automotive production globally was reduced by approximately 11.3 million units during 2021 due to the shortage and that production levels will continue to be negatively impacted into 2022. Our new vehicle days’ supply is 17 as of December 31, 2021, compared to 50 as of December 31, 2020. While we expect to continue to have normal levels of used vehicles for sale (our used vehicle days’ supply is 60 as of December 31, 2021, compared to 48 as of December 31, 2020), prolonged shortages could result in lower new vehicle sales volumes which could impact the availability and affordability of used vehicles and adversely affect us. The lower supply of new vehicles contributed to higher vehicle gross profit on both new and used vehicles sold, which contributed to our higher overall profitability. We expect lower inventories of new vehicles and parts disruptions to continue into 2022 until the supply of certain components used to manufacture vehicles improves. When the supply of vehicles improves, we may experience reduced new and used vehicle gross profit together with higher sales volumes. Moreover, due to remote working and lack of mobility associated with the pandemic in some of our markets, we believe our customers may be driving less, which may affect our service revenues should this trend continue.

The success of our commercial vehicle distribution businesses is directly impacted by availability and demand for the vehicles and other products we distribute. We are the exclusive distributor of Western Star commercial trucks, MAN commercial trucks and buses, and Dennis Eagle refuse collection vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific. We are also the distributor of diesel and gas engines and power systems in these same markets. The profitability of these businesses depends upon the number of vehicles, engines, power systems, and parts we distribute, which in turn is impacted by demand for these products. We believe demand is subject to general economic conditions, exchange rate fluctuations, regulatory changes, competitiveness of the products, and other factors over which we have limited control. In the event sales of these products are less than we expect, our related results of operations and cash flows for this aspect of our business may be materially adversely affected. The products we distribute are principally manufactured at a limited number of locations. In the event of a supply disruption, sufficient quantities of the vehicles, engines, power systems, and parts are not made available to us, or if we accept these products and are unable to economically distribute them, our cash flows or results of operations may be materially adversely affected.

Australian economic conditions. Our commercial vehicle distribution operations in Australia and New Zealand may be impacted by local economic conditions and in particular, the price of commodities such as copper and iron ore, which may impact the desire of our customers to operate their mining operations and replace their vehicle fleets. Adverse pricing concerns of those, and other commodities, may have a material adverse effect on our ability to distribute, and/or retail, commercial vehicles and other products profitably. These same conditions may also negatively impact the value of the Australian Dollar versus the U.S. Dollar, which negatively impacts our U.S. Dollar reported financial results and the pricing of products sold by Penske Australia, which are manufactured in the U.S., U.K., and Germany.

21

Table of Contents

Additional risks relating to PTS. PTS’ business has additional risks to those in the retail business.

Customers. PTS has a more concentrated customer base than we do and is subject to changes in the financial health of its customers, changes in their asset utilization rates, and increased competition for those customers.

Workforce. PTS requires a significant number of qualified drivers and technicians, which may be difficult to hire, and is subject to increased compliance costs or work stoppages relating to those employees, particularly in regard to changes in labor laws and time of work rules regarding those employees. PTS contributes to nine U.S. multi-employer pension plans that provide defined benefits to approximately 2,820 associates covered by collective bargaining agreements. If they withdraw or are deemed to withdraw from participation in any of these plans, then applicable law could require them to make withdrawal liability payments to the plan. If any of those plans were deemed to be underfunded, PTS could be subject to additional assessments, which could be substantial.

Fleet risk. As one of the largest purchasers of commercial trucks in North America, PTS requires continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, which may be uncertain, in particular if a significant recall were to occur. PTS is affected by the same pandemic related supply issues noted above and any failure of the supply chain resulting in limited availability of new trucks or parts may have a material adverse impact on PTS. In addition, because PTS sells a large number of trucks each year and is subject to residual risk for the vehicles it leases to customers, changes in values of used trucks affects PTS’ profitability.

Capital markets risk. PTS relies on banks and the capital markets to fund its operations and capital commitments. PTS had a significant amount of total indebtedness at December 31, 2021, which it uses in part to purchase its vehicle fleet and therefore, is subject to changes in, and continued access to, capital markets.

Strategic Risks

Brand reputation. Our businesses and our commercial vehicle operations, in particular, as those are more concentrated with a particular manufacturer, are impacted by consumer demand and brand preference, including consumers’ perception of the quality of those brands. A decline in the quality and brand reputation of the vehicles or other products we sell or distribute, as a result of events such as manufacturer recalls or legal proceedings, may adversely affect our business. If such events were to occur, the profitability of our business related to those manufacturers could be adversely affected.

Our business is very competitive. We generally compete with other franchised dealerships in our markets, used vehicle dealerships, private market buyers and sellers of used vehicles, an increasing number of internet-based vehicle sellers, recently, electric vehicle manufacturers that sell direct to consumers, national and local service and repair shops and parts retailers with respect to commercial vehicles, distributors of similar products, and manufacturers in certain markets. Purchase decisions by consumers when shopping for a vehicle are extremely price sensitive. The level of competition in the market can lead to lower selling prices and related profits. If there is a prolonged drop in retail prices or if new vehicle sales are allowed to be made over the internet without the involvement of franchised dealers, our business could be materially adversely affected.

Changes to the retail delivery model, including increased digital retailer competition, efforts to sell vehicles direct outside the franchise system, and transition to an “agency model” of distribution each could adversely affect our business, results of operations, financial condition and cash flows. The retail automotive industry is experiencing a period of unprecedented change and disruption in several respects:

Competition from online retailers. The automotive retail industry is experiencing growing competition in the used vehicle market from companies with a primarily online business model, including companies such as Carvana, Vroom, Shift, Cazoo, and others. We and the other traditional automotive retailers are implementing digital retail strategies, providing consumers with online vehicle purchasing experiences, including at-home delivery. We also continue to develop technology solutions to improve the online buying experience. We may face increased competition for market share with these non-traditional delivery models and digital retailers over time which could materially and adversely affect our results of operations. We cannot be sure that our initiatives will be successful or that the amount we invest in these initiatives will result in our maintaining or enhancing market share and continued or improved financial performance.

Sales outside the franchise system. In recent years, new electric vehicle manufacturers have been able to conduct new vehicle sales outside of the franchised automotive system as new entrants. While the sales levels of these new entrants in the U.S. was approximately 4% of new vehicles and approximately 7% of new vehicles in the U.K., continued market share gains by manufacturers operating outside the franchise system may materially and adversely affect us. Moreover, while we expect continued good relations with our manufacturer partners, should U.S. franchise laws be repealed or

22

Table of Contents

amended to allow our existing manufacturer partners to effectively operate outside the franchised system, our results of operations may be materially and adversely impacted. Our franchised automotive dealers in the U.K., European Union, and Japan operate effectively without U.S. franchise law protections.

Agency. Recently, some of our key automotive manufacturer partners have announced plans to explore an agency model of selling new vehicles in the U.K and Europe. Under an agency model, our franchised dealerships would receive a fee for facilitating the sale by the manufacturer of a new vehicle but would not hold the vehicle in inventory as has been historical practice. This model, if eventually adopted, would negatively impact revenues, although the other impacts to our results of operations remain uncertain. While we are uncertain if agency models will be widely adopted in the U.K. and Europe (though we believe any such adoption would not occur until 2023 at the earliest), Mercedes-Benz U.K. has asked each of its U.K. dealers to voluntarily terminate their existing sales franchise agreements and enter into an agency agreement for a similar model described above. We have 14 Mercedes-Benz franchises in the U.K., and we are currently reviewing Mercedes-Benz U.K.’s request.

New mobility models and vehicle electrification will continue to result in rapid changes to the automotive and trucking industries. Shared vehicle services such as Uber and Lyft provide consumers with increased choice in their personal mobility options. The effect of these and similar mobility options on the retail automotive industry is uncertain and may include lower levels of new vehicles sales but with increasing miles driven, which could require additional demand for vehicle maintenance. Most major vehicle manufacturers have announced plans to electrify some or all of their new vehicle fleets in response to concerns about the environment and due to regulatory requirements to limit vehicle emissions. We expect to continue to sell electric and hybrid gas/electric vehicles through our franchised dealerships; however, our service revenues may decline over time as these vehicles may require less physical maintenance than gas and hybrid vehicles due to the absence of certain parts systems. See the risk captioned “Sales outside the franchise system” above.

The effects of the eventual adoption of driverless vehicles are uncertain. Technological advances are facilitating the evolution of driverless vehicles. While many manufacturers offer varying degrees of driver assistance technology, the timing of adoption of true driverless vehicles remains uncertain due to regulatory requirements, additional technological requirements, and uncertain consumer acceptance of these vehicles. The effect of driverless vehicles on the automotive retail and trucking industries is uncertain and could include changes in the level of new and used vehicles sales, the price of new and used vehicles, the levels of service required by driverless vehicles and the role of franchised dealers, any of which could materially and adversely affect our business.

Key personnel. We believe that our success depends to a significant extent upon the efforts and abilities of our senior management and in particular, upon Roger Penske who is our Chair and Chief Executive Officer. To the extent Mr. Penske, or other key personnel, were to depart from our Company unexpectedly, our business could be significantly disrupted.

Financial Risks

Leverage. Our significant debt and other commitments expose us to a number of risks, including:

Cash requirements for debt and lease obligations.A significant portion of the cash flow we generate must be used to service the interest and principal payments relating to our various financial commitments, including $2.6 billion of floor plan notes payable, $1.5 billion of non-vehicle long-term debt, and $5.5 billion of future lease commitments(including extension periods that are reasonably assured of being exercised and assuming constant consumer price indices). A sustained or significant decrease in our operating cash flows could lead to an inability to meet our debt service or lease requirements or to a failure to meet specified financial and operating covenants included in certain of our agreements. If this were to occur, it may lead to a default under one or more of our commitments and potentially the acceleration of amounts due, which could have a significant and adverse effect on us.

Availability. Because we finance the majority of our operating and strategic initiatives using a variety of commitments, including floor plan notes payable and revolving credit facilities, we are dependent on continued availability of these sources of funds. If these agreements are terminated or we are unable to access them because of a breach of financial or operating covenants or otherwise, we will likely be materially affected.

Interest rate variability. The interest rates we are charged on a substantial portion of our debt, including the floor plan notes payable we issue to purchase the majority of our inventory, are variable, increasing or decreasing based on changes in certain published interest rates. Increases to such interest rates has resulted and may continue to result in higher interest expense for us, which negatively affects our operating results. Because many of our customers finance their vehicle purchases, increased interest rates may also decrease vehicle sales, which would negatively affect our operating results.

23

Table of Contents

We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined. Regulatory authorities in the U.S. have announced their intention to stop compelling banks to submit rates for the calculation of LIBOR ending after June 30, 2023, for the LIBOR tenors that are relevant to our business. Our senior secured revolving credit facility in the U.S. and many of our floorplan arrangements utilize LIBOR as a benchmark for calculating the applicable interest rate, although some of our floorplan arrangements have already transitioned to utilizing an alternative benchmark rate. Our U.K. credit agreement transitioned from LIBOR to the Sterling Overnight Index Average as of December 31, 2021. Changes in the method of calculating LIBOR, the elimination of LIBOR, or the replacement of LIBOR with an alternative rate or benchmark may require us to renegotiate or amend these facilities, loans, and programs, which may adversely affect interest rates and result in higher borrowing costs. This could materially and adversely affect our results of operations, cash flows, and liquidity. We cannot predict the effect of the potential changes to or elimination of LIBOR, the establishment and use of alternative rates or benchmarks, and the corresponding effects on our cost of capital may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.

Impairment of our goodwill or other indefinite-lived intangible assets has in the past had, and in the future could have, a material adverse impact on our earnings. We evaluate goodwill and other indefinite-lived intangible assets for impairment annually and upon the occurrence of an indicator of impairment. Our process for impairment testing of these assets is described further under “Impairment Testing” in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates. If we determine that the amount of our goodwill or other indefinite-lived intangible assets are impaired at any point in time, we would be required to reduce the value of these assets on our balance sheet, which would also result in a material non-cash impairment charge that could also have a material adverse effect on our results of operations for the period in which the impairment occurs.

Performance of sublessees. In connection with the sale, relocation, and closure of certain of our franchises, we have entered into a number of third-party sublease agreements. The rent paid by our sub-tenants on such properties in 2021 totaled approximately $22.4 million. In the aggregate, we remain ultimately liable for approximately $150.6 million of such lease payments including payments relating to all available renewal periods. We rely on our sub-tenants to pay the rent and maintain the properties covered by these leases. In the event a subtenant does not perform under the terms of their lease with us, we could be required to fulfill such obligations, which could have a significant and adverse effect on us.

International and foreign currency risk. We have significant operations outside the U.S. that expose us to changes in foreign exchange rates and to the impact of economic and political conditions in the markets where we operate. As exchange rates fluctuate, our results of operations as reported in U.S. Dollars fluctuate. For example, if the U.S. Dollar were to continue to strengthen against the British Pound, our U.K. results of operations would translate into less U.S. Dollar reported results. Sustained levels or an increase in the value of the U.S. Dollar, particularly as compared to the British Pound, could result in a significant and adverse effect on our reported results.

Joint ventures. We have significant investments in a variety of joint ventures, including retail automotive operations in Germany, Italy, and Spain. We have a 28.9% interest in PTS. We expect to receive annual operating distributions from PTS and the other ventures and in the case of PTS, realize significant tax savings. These benefits may not be realized if the joint ventures do not perform as expected, or if changes in tax, financial, or regulatory requirements negatively impact the results of the joint venture operations. Our ability to dispose of these investments may be limited. In addition, the relevant joint venture agreement and other contractual restrictions may limit our access to the cash flows of these joint ventures. For example, PTS’ partnership agreement and certain principal debt agreements allow partner distributions only as long as it is not in default under those agreements and the amount it pays does not exceed 50% of its consolidated net income, unless its debt-to-equity ratio is less than 3.0 to 1, in which case its distributions may not exceed 80% of its consolidated net income.

Legal and Compliance Risks

Vehicle manufacturers exercise significant control over us. Each of our new vehicle dealerships and distributor operations operate under franchise and other agreements with automotive manufacturers, commercial vehicle manufacturers, or related distributors. These agreements govern almost every aspect of the operation of our dealerships and give manufacturers the discretion to terminate or not renew our franchise agreements for a variety of reasons, including certain events outside our control such as accumulation of our stock by third parties. They also limit our ability to acquire dealerships on a national, regional, and local basis. Without franchise or distributor agreements, we would be unable to sell or distribute new vehicles or perform manufacturer authorized warranty service. If a significant number of our franchise agreements are terminated, not renewed, or, with respect to our distributor operations, a competing distributor were introduced, we would be materially affected.

24

Table of Contents

Regulatory issues. We are subject to a wide variety of regulatory activities, including:

Governmental regulations, claims, and legal proceedings. Governmental regulations affect almost every aspect of our business, including the fair treatment of our employees, wage and hour issues, and our financing activities with customers. In California, previous judicial decisions have called into question whether long-standing methods for compensating dealership employees comply with the local wage and hour rules and may do so again. We could be susceptible to claims or related actions if we fail to operate our business in accordance with applicable laws or it is determined that long-standing compensation methods did not comply with local laws. Many laws and regulations applicable to our business were adopted prior to the introduction of online vehicle sales, the Internet and certain digital technology, generally. As a result, we are tasked with maintaining compliance in an uncertain regulatory environment. Claims arising out of actual or alleged violations of law which may be asserted against us or any of our dealers by individuals, through class actions, or by governmental entities in civil or criminal investigations and proceedings, may expose us to substantial monetary damages which may adversely affect us.

Privacy Regulation. We are subject to numerous laws and regulations in the U.S. and internationally designed to protect the information of clients, customers, employees and other third parties that we collect and maintain, including the European Union General Data Protection Regulation (the “EUGDPR”) and the United Kingdom General Data Protection Regulation (the "UKGDPR"). Both the EUGDPR and UKGDPR, among other things, mandate new requirements regarding the handling of personal data of employees and customers, including its use, protection and the ability of persons whose data is stored to correct or delete such data about themselves. The state of California has a similar law called the California Consumer Privacy Act (the “CCPA”). The CCPA was amended in 2020 to create the “California Privacy Protection Agency” which will have the authority to audit and enforce privacy rules, among other responsibilities. If we fail to comply with these laws or other similar regulations applicable to our business, we could be subject to significant litigation, monetary damages, regulatory enforcement actions or fines in one or more jurisdictions. For example, a failure to comply with the UKGDPR could result in finds up to the greater of £17.5 million or 4% of annual global revenues.

Recalls. Legislative and regulatory bodies from time to time have considered laws or regulations that would prohibit companies from renting or selling any vehicle that is subject to a recall until the recall service is performed. Whether any such prohibition may be enacted, and its ultimate scope, cannot be determined at this time. If a law or regulation is enacted that prevents the sale of vehicles until recall service has been performed, we could be required to reserve a significant portion of our vehicles from being available for sale for even a minor recall unrelated to vehicle safety. In addition, various manufacturers have issued stop sale notices in relation to certain recalls that require that we retain vehicles until the recall can be performed, whether or not parts are then available. While servicing recall vehicles yields parts and service revenue to us, the inability to sell a significant portion of our vehicles could increase our costs and have an adverse effect on our results of operations if a large number of our vehicles are the subject of simultaneous recalls or if needed replacement parts are not in adequate supply.

Vehicle requirements. Federal and state governments in our markets have increasingly placed restrictions and limitations on the vehicles sold in the market in an effort to combat perceived negative environmental effects. For example, in the U.S., automotive manufacturers are subject to federally mandated corporate average fuel economy standards, which will increase substantially through 2026. Certain representatives of the U.K. government suggested a ban on the sale of gasoline engines in cars and vans as early as 2030 and a ban on the sale of gasoline hybrid engines in cars and vans as early as 2035. Similar bans have been announced in California, Massachusetts, and New York which would ban the sale of new vehicle with gasoline engines in cars in 2035. Furthermore, numerous states and other jurisdictions, including California, have adopted or are considering regulations requiring the sale of specified numbers of zero-emission vehicles. Significant increases in fuel economy requirements and new restrictions on emissions on vehicles and fuels could adversely affect prices of and demand for the new vehicles that we sell, which could materially adversely affect us.

Tariff and trade risk. Increased tariffs, import product restrictions, and foreign trade risks may impair our ability to sell foreign vehicles profitably. The United States Mexico Canada Agreement allows tariff-free importing of automobiles among the countries only if (i) the vehicles have 75% of their components manufactured in the US, Mexico, or Canada, (ii) workers with an hourly wage of at least $16, manufacture at least 30% of the vehicle, which graduates up to 40% of the vehicle in 2023, or in the case of trucks, 45% and (iii) 70% of the steel and aluminum used in the production of the vehicle is sourced within North America. Should tariffs increase, we expect the price of many new vehicles we sell to increase which may adversely affect our new vehicle sales and related finance and insurance sales. Moreover, new rules in place after the recent Brexit accord between the European Union and the U.K. require varying levels of content in vehicles to originate in either the U.K. or the European Union to remain tariff free. If

25

Table of Contents

automotive manufacturers cannot meet these content rules, there may be import tariffs on any affected vehicles, which could adversely affect our U.K. results.

Franchise laws in the U.S. In the U.S., state law generally provides protections to franchised vehicle dealers from discriminatory practices by manufacturers and from unreasonable termination or non-renewal of their franchise agreements. In many states, the laws require that new vehicle sales be conducted exclusively by automotive retailers (not manufacturers). Should U.S. franchise laws be repealed or amended to allow our existing manufacturer partners to effectively operate outside the franchised system, our results of operations may be materially and adversely impacted. See the risk factor captioned “Sales outside the franchise system” above.

Changes in law. New laws and regulations at the state and federal level may be enacted which could materially adversely impact our business. For example, in 2013, a ballot initiative in California titled the California Car Buyers Protection Act was proposed that would have eliminated our ability to be compensated for assisting in financing customer vehicle purchases, among other matters. If these initiatives or other adverse changes in law were to be enacted, it could have a significant and adverse effect on us.

Climate change and environmental regulations. Scientific evidence suggests that the globe is warming potentially resulting in an environment more prone to natural disasters, such as flooding. To date, we have seen increases in our cost to insure against such risks, which costs could continue to increase should this trend continue.We are subject to a wide range of environmental laws and regulations, including those governing discharges into the air and water; the operation and removal of storage tanks; and the use, storage, and disposal of hazardous substances. In the normal course of our operations we use, generate, and dispose of materials covered by these laws and regulations. In the face of climate change, these laws could become more stringent. We face potentially significant costs relating to claims, penalties, and remediation efforts in the event of non-compliance with existing and future laws and regulations. Furthermore, should climate change continue, we expect further regulation of gas engines and vehicle emissions which may affect the types of vehicles we sell and service. We cannot predict the future costs to our businesses for these developments.

Accounting rules and regulations. Significant changes to GAAP in the U.S. could significantly affect our reported financial position, earnings, and cash flows upon adoption and effectiveness. In addition, any changes to lease accounting could affect PTS customers’ decisions to purchase or lease trucks, which could adversely affect their business if leasing becomes a less favorable option. See the disclosure provided under “Recent Accounting Pronouncements” in Part II, Item 8, Note 1 of the Notes to our Consolidated Financial Statements for additional detail on accounting standard updates that could have an impact on us.

Related parties. Our two largest stockholders, Penske Corporation and its affiliates (“Penske Corporation”) and Mitsui & Co., Ltd. and its affiliates (“Mitsui”), together beneficially own approximately 63% of our outstanding common stock. The presence of such significant stockholders results in several risks, including:

Our principal stockholders have substantial influence. Penske Corporation and Mitsui have entered into a stockholders agreement pursuant to which they have agreed to vote together as to the election of our directors. As a result, Penske Corporation has the ability to control the composition of our Board of Directors, which may allow it to control our affairs and business. This concentration of ownership coupled with certain provisions contained in our agreements with manufacturers, our certificate of incorporation, and our bylaws could discourage, delay, or prevent a change in control of us.

Some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests. Roger Penske, our Chair and Chief Executive Officer and a director, holds the same offices at Penske Corporation. Robert Kurnick, Jr., our President and a director, is also the Vice Chair and a director of Penske Corporation. Bud Denker, our Executive Vice President, Human Resources, is also the President of Penske Corporation. Each of these officers is paid much of their compensation by Penske Corporation. The compensation they receive from us is based on their efforts on our behalf; however, they are not required to spend any specific amount of time on our matters. One of our directors, Greg Penske, is the son of our Chair and also serves as a director of Penske Corporation. Michael Eisenson, one of our directors, is also a director of Penske Corporation. Kota Odagiri, one of our directors, is also an employee of Mitsui & Co. Roger Penske also serves as Chairman of Penske Transportation Solutions, for which he is compensated by PTS.

Penske Corporation ownership levels. Certain of our agreements have clauses that are triggered in the event of a material change in the level of ownership of our common stock by Penske Corporation, such as our trademark agreement between us and Penske Corporation that governs our use of the “Penske” name which can be terminated 24

26

Table of Contents

months after the date that Penske Corporation no longer owns at least 20% of our voting stock. We may not be able to renegotiate such agreements on terms that are acceptable to us, if at all, in the event of a significant change in Penske Corporation’s ownership.

We have a significant number of shares of common stock eligible for future sale.Penske Corporation and Mitsui own approximately 63% of our common stock, and each has two demand registration rights that could result in a substantial number of shares being introduced for sale in the market. We also have a significant amount of authorized but unissued shares. Penske Corporation has pledged a substantial portion of its shares of our common stock as collateral to secure a loan facility. A default by Penske Corporation could result in the foreclosure on those shares by the lenders, after which the lenders could attempt to sell those shares on the open market or to a third party. The introduction of any of these shares into the market could have a material adverse effect on our stock price.

General Risks

Property loss, business interruption, or other liabilities. Our business is subject to substantial risk of loss due to the significant concentration of property values, including vehicle and parts inventories at our operating locations; claims by employees, customers, and third parties for personal injury or property damage; and fines and penalties in connection with alleged violations of regulatory requirements. While we have insurance for many of these risks, we retain risk relating to certain of these perils and certain perils are not covered by our insurance. Certain insurers have limited available property coverage in response to the natural catastrophes experienced in recent years. If we experience significant losses that are not covered by our insurance, whether due to adverse weather conditions or otherwise, or we are required to retain a significant portion of a loss, it could have a significant and adverse effect on us.

Information technology. Our information systems are fully integrated into our operations, and we rely on them to operate effectively, including with respect to electronic interfaces with manufacturers and other vendors, customer relationship management, sales and service scheduling, data storage, and financial and operational reporting. The majority of our systems are licensed from third parties; the most significant of which are provided by a limited number of suppliers in the U.S., U.K., and Australia. The failure of our information systems to perform as designed, the failure to protect the integrity of these systems, or the interruption of these systems due to natural disasters, power loss, unexpected termination of our agreements, or other reasons could significantly and adversely disrupt our business operations, impact sales and results of operations, expose us to customer or third-party claims, or result in adverse publicity.

Cyber-security. As part of our business model, we receive sensitive information regarding customers, associates, and vendors from various online and offline channels. We collect, process, and retain this information in the normal course of our business. Our internal and third-party systems are under a moderate level of risk from cyber criminals or other individuals with malicious intent to gain unauthorized access to our systems. Cyber-attacks continue to grow in number and sophistication thus presenting an ongoing threat to our systems, whether internal or external, used to operate the business on a day-to-day basis. Despite the security measures we have in place, our facilities, systems, associates, and those of our third-party service providers, could be vulnerable to cyber-attacks, ransomware attacks, security breaches, social engineering, malicious software, lost or misplaced data, programming errors, human errors, acts of vandalism, or other events. Many companies have disclosed security breaches involving sophisticated cyber-attacks and ransomware attacks that were not recognized or detected until after such companies had been affected, notwithstanding the preventive measures they had in place. Any security breach or event resulting in the misappropriation, loss, or other unauthorized disclosure of confidential information or degradation of services provided by critical business systems, whether by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and potential customers, associates or vendors as well as other operational and financial impacts derived from investigations, litigation, the imposition of penalties, or other means. In addition, our failure to respond quickly and appropriately to such a security breach could exacerbate the consequences of the breach.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We own our headquarters building in Bloomfield Hills, Michigan. We lease or sublease many of our dealership properties and other facilities. These leases are generally for a period of between 5 and 20 years and are typically structured to include renewal options at our election. We lease office space in Leicester, England and Brisbane, Australia for our other principal administrative headquarters and other corporate related activities. We believe that our facilities are sufficient for our needs and are in good repair.

27

Table of Contents

Item 3. Legal Proceedings

We are involved in litigation which may relate to claims brought by governmental authorities, customers, vendors, or employees, including class action claims and purported class action claims. We are not a party to any legal proceedings, including class action lawsuits, that individually or in the aggregate are reasonably expected to have a material effect on us. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange under the symbol “PAG.” As of February 17, 2022, there were 219 holders of record of our common stock.

Dividends

We have announced a cash dividend of $0.47 per share payable on March 1, 2022, to stockholders of record as of February 10, 2022. While future quarterly or other cash dividends will depend upon a variety of factors considered relevant by our Board of Directors, which may include our expectations regarding the severity and duration of the COVID-19 pandemic, earnings, cash flow, capital requirements, restrictions relating to any then-existing indebtedness, financial condition, alternative uses of capital, and other factors, we currently expect to continue to pay comparable dividends in the future.

Securities Repurchases

On December 16, 2021, our Board of Directors authorized the repurchase of $250 million worth of our securities. Prior to the increase, we had $17.0 million in remaining authorization. As of February 8, 2022, we had $194.3 million in repurchase authorization remaining under the securities repurchase program. For further information with respect to repurchases of our shares by us, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Securities Repurchases and Part II, Item 8, Note 15 of the Notes to our Consolidated Financial Statements.

October 1 to October 31, 2021 — $ — — $ —

SHARE INVESTMENT PERFORMANCE

The following graph compares the cumulative total stockholder returns on our common stock based on an investment of $100 on December 31, 2016, and the close of the market on December 31 of each year thereafter against (i) the Standard & Poor’s 500 Index and (ii) an industry/peer group consisting of Asbury Automotive Group, Inc., AutoNation, Inc., Group 1 Automotive, Inc., Lithia Motors, Inc., and Sonic Automotive, Inc (the "Peer Group"). The graph assumes the reinvestment of all dividends.

28

Table of Contents

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Penske Automotive Group, Inc., the S&P 500 Index, and a Peer Group

________________________

* $100 invested on 12/31/16 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

Cumulative Total Return

Item 6. Selected Financial Data

Not Applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition andResults of Operations

This Management’s Discussion and Analysis of Financial Condition and Results ofOperations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-lookingstatements as a result of various factors, including those discussed in “Item 1A.Risk Factors” and “Forward-Looking Statements.” We have acquired and initiated a number of businesses during the periods presented and addressed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Ourfinancial statements include the results of operations of those businesses fromthe date acquired or when they commenced operations. Our period to period results of operations may vary depending on the dates of acquisitions or disposals.

Overview

We are a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers. We operate dealerships principally in the United States, the United Kingdom, Canada, Germany, Italy, and Japan, and we are one of the largest retailers of commercial trucks in North America for Freightliner. We also distribute and retail commercial vehicles, diesel and gas engines, power systems, and related parts and services principally in Australia and New Zealand. Additionally, we own 28.9% of Penske Transportation Solutions, a business that manages a fleet of over 360,000 vehicles providing innovative transportation, supply chain, and technology solutions to North American fleets. We employ nearly 25,000 people worldwide.

29

Table of Contents

COVID-19 Disclosure – The outbreak of the COVID-19 pandemic across the globe adversely impacted each of our markets and the global economy, leading to disruptions in our business. While the COVID-19 pandemic continued in all of our markets, we have experienced improved business conditions and improved financial results primarily driven by our cost cutting measures and increased gross profit on vehicles sold due in part to increased demand, coupled with lower inventory due to production shortages experienced by our vehicle manufacturers.

In response to the COVID-19 pandemic, the U.K. reinstated shelter-in-place orders which required our dealership showrooms to remain closed during the first quarter of 2021. These shelter-in-place orders largely expired on April 12, 2021, and most of the remaining restrictions expired on July 19, 2021. We continued to conduct sales through our online tools, which allowed vehicle sales without showroom access. If shelter-in-place orders are re-enacted or other restrictions are placed on our business, we may be adversely impacted.

The full impact that the COVID-19 pandemic will have on our business cannot be predicted at this time due to numerous uncertainties, including the duration of the outbreak, travel restrictions, business closures, the effectiveness of actions taken to contain the disease, the distribution rate and acceptance rate of a vaccine, the effect of government assistance programs, production levels from our manufacturing partners, and other unintended consequences. This impact could include changes in customer demand, our relationship with, and the financial and operational capacities of, vehicle manufacturers, captive finance companies and other suppliers, workforce availability, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), the adequacy of our cash flow and earnings and other conditions which may affect our liquidity, and disruptions to our technology network and other critical systems, including our dealer management systems and software or other facilities or equipment. We believe that business disruption relating to the COVID-19 pandemic may continue to negatively impact the global economy and may affect our businesses as outlined above, or in other manners including global supply chain disruptions resulting in lower levels of vehicles and parts available for sale, all of which would adversely impact our business and results of operations.

Business Overview

In 2021, our business generated $25.6 billion in total revenue, which is comprised of approximately $22.5 billion from retail automotive dealerships, $2.5 billion from retail commercial truck dealerships, and $575.7 million from commercial vehicle distribution operations. We generated $4.4 billion in gross profit, which is comprised of $3.9 billion from retail automotive dealerships, $416.9 million from retail commercial truck dealerships, and $153.7 million from commercial vehicle distribution operations.

Retail Automotive. We are one of the largest global automotive retailers as measured by the $22.5 billion in total retail automotive dealership revenue we generated in 2021. As of December 31, 2021, we operated 320 retail automotive franchised dealerships, of which 146 are located in the U.S. and 174 are located outside of the U.S. The franchised dealerships outside the U.S. are located primarily in the U.K. As described below, we also operate 23 used vehicle dealerships in the U.S. and U.K. under the CarShop brand. Through these franchised and used vehicle dealerships, we retailed and wholesaled more than 553,000 vehicles in 2021. We are diversified geographically with 58% of our total retail automotive dealership revenues in 2021 generated in the U.S. and Puerto Rico and 42% generated outside the U.S. We offer over 35 vehicle brands with 71% of our retail automotive franchised dealership revenue in 2021 generated from premium brands, such as Audi, BMW, Land Rover, Mercedes-Benz, and Porsche. Each of our franchised dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services, the sale and placement of third-party finance and insurance products, third-party extended service and maintenance contracts, and replacement and aftermarket automotive products. We operate our franchised dealerships under franchise agreements with a number of automotive manufacturers and distributors that are subject to certain rights and restrictions typical of the industry.

As of December 31, 2021, we operated 23 used vehicle dealerships in the U.S. and the U.K. which retail and wholesale used vehicles under a one price, “no-haggle” methodology under the CarShop brand. Our operations consist of eight retail dealerships in the U.S. and 15 retail dealerships and a vehicle preparation center in the U.K. During 2021, we opened four CarShop dealerships in the U.K. and two CarShop dealerships in the U.S., representing a 35% increase in locations compared to 2020. For the year ended December 31, 2021, our used vehicle dealerships retailed 63,403 units and generated $1.5 billion in revenue. Retail automotive dealerships represented 88.1% of our total revenues and 87.2% of our total gross profit in 2021.

Retail Commercial Truck Dealership. We operate Premier Truck Group (“PTG”), a heavy- and medium-duty truck dealership group offering primarily Freightliner and Western Star trucks (both Daimler brands) with locations in Texas, Oklahoma, Tennessee, Georgia, Utah, Idaho, Kansas, Missouri, Oregon, and Canada. In 2021, we acquired Kansas City

30

Table of Contents

Freightliner (“KCFL”), a retailer of heavy- and medium-duty commercial trucks in Kansas and Missouri. KCFL added four full-service dealerships, four parts and service centers, and two collision centers to PTG’s operations. We also acquired McCoy Freightliner ("McCoy"), a retailer of heavy- and medium-duty commercial trucks in Oregon. McCoy adds two full-service dealerships and a remarketing center to PTG's existing operations. As of December 31, 2021, PTG operated 37 locations which sell new and used trucks, parts and service, and collision repair services. This business represented 9.6% of our total revenues and 9.4% of our total gross profit in 2021.

Penske Australia. Penske Australia is the exclusive importer and distributor of Western Star heavy-duty trucks (a Daimler Truck brand), MAN heavy- and medium-duty trucks and buses (a VW Group brand), and Dennis Eagle refuse collection vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific. In most of these same markets, we are also a leading distributor of diesel and gas engines and power systems, principally representing MTU (a Rolls-Royce solution), Detroit Diesel, Allison Transmission, and Bergen Engines. Penske Australia offers products across the on- and off-highway markets, including in the mining, power generation, defense, marine, rail, and construction sectors and supports full parts and aftersales service through a network of branches, field service locations, and dealers across the region. These businesses represented 2.3% of our total revenues and 3.4% of our total gross profit in 2021.

Penske Transportation Solutions. We hold a 28.9% ownership interest in Penske Truck Leasing Co., L.P (“PTL”). PTL is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui & Co., Ltd. (“Mitsui”). We account for our investment in PTL under the equity method, and we therefore record our share of PTL’s earnings on our statements of income under the caption “Equity in earnings of affiliates,” which also includes the results of our other equity method investments. Penske Transportation Solutions (“PTS”) is the universal brand name for PTL’s various business lines through which it is capable of meeting customers’ needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistic services, such as dedicated contract carriage, distribution center management, transportation management, lead logistics provider services, and dry van truckload carrier services. We recorded $365.8 million in equity earnings from this investment in 2021.

Outlook

Please see “Outlook” in Part I, Item 1 for a discussion of our outlook in our markets.

Operating Overview

Automotive and commercial truck dealerships represent over 95% and 75% of our revenue and our earnings before taxes, respectively. Income from our PTS investment represents over 20% of our earnings before taxes. New and used vehicle revenues typically include sales to retail customers, fleet customers, and leasing companies providing consumer leasing. We generate finance and insurance revenues from sales of third-party extended service contracts, sales of third-party insurance policies, commissions relating to the sale of finance and lease contracts to third parties, and the sales of certain other products. Service and parts revenues include fees paid by customers for repair, maintenance and collision services, and the sale of replacement parts and other aftermarket accessories as well as warranty repairs that are reimbursed directly by various vehicle manufacturers.

Our gross profit tends to vary with the mix of revenues we derive from the sale of new vehicles, used vehicles, finance and insurance products, and service and parts transactions. Our gross profit varies across product lines with vehicle sales usually resulting in lower gross profit margins and our other revenues resulting in higher gross profit margins. Factors such as inventory and vehicle availability, customer demand, consumer confidence, unemployment, general economic conditions, seasonality, weather, credit availability, fuel prices, and manufacturers’ advertising and incentives also impact the mix of our revenues and therefore, influence our gross profit margin.

The results of our commercial vehicle distribution business in Australia and New Zealand are principally driven by the number and types of products and vehicles ordered by our customers.

Aggregate revenue and gross profit increased $5,110.8 million, or 25.0%, and $1,256.3 million, or 39.5%, respectively, during 2021 compared to 2020.

As exchange rates fluctuate, our revenue and results of operations as reported in U.S. Dollars fluctuate. For example, if the British Pound were to weaken against the U.S. Dollar, our U.K. results of operations would translate into less U.S. Dollar reported results. Foreign currency average rate fluctuations increased revenue and gross profit by $754.2 million and $118.5 million, respectively, in 2021. Foreign currency average rate fluctuations increased earnings per share from

31

Table of Contents

continuing operations by approximately $0.24 per share in 2021. Excluding the impact of foreign currency average rate fluctuations, revenue and gross profit increased 21.3% and 35.7%, respectively, in 2021.

Our selling expenses consist of advertising and compensation for sales personnel, including commissions and related bonuses. General and administrative expenses include compensation for administration, finance, legal and general management personnel, rent, insurance, utilities, and other expenses. As the majority of our selling expenses are variable and a significant portion of our general and administrative expenses are subject to our control, we believe our expenses can be adjusted over time to reflect economic trends.

Equity in earnings of affiliates principally represents our share of the earnings from PTS, along with our investments in joint ventures and other non-consolidated investments.

Floor plan interest expense relates to financing incurred in connection with the acquisition of new and used vehicle inventories that are secured by those vehicles. Other interest expense consists of interest charges on all of our interest-bearing debt, other than interest relating to floor plan financing, and includes interest relating to our retail commercial truck dealership and commercial vehicle distribution operations. The cost of our variable rate indebtedness is based on the prime rate, defined London Interbank Offered Rate (“LIBOR”), the Bank of England Base Rate, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Tokyo Interbank Offered Rate, the Australian Bank Bill Swap Rate, or the New Zealand Bank Bill Benchmark Rate.

Regulatory authorities in the U.S. have announced their intention to stop compelling banks to submit rates for the calculation of LIBOR, ending after June 30, 2023 for the LIBOR tenors that are relevant to our business. Our senior secured revolving credit facility in the U.S. and many of our floorplan arrangements, utilize LIBOR as a benchmark for calculating the applicable interest rate, although some of our floorplan arrangements have already transitioned to utilizing an alternative benchmark rate. Our U.K. credit agreement transitioned from LIBOR to the Sterling Overnight Index Average as of December 31, 2021. We cannot predict the effect of the potential changes to or elimination of LIBOR or the establishment and use of alternative rates or benchmarks and the corresponding effects on our cost of capital.

The future success of our business is dependent upon, among other things, general economic and industry conditions, including the effect of COVID-19 on the global economy; the distribution rate and acceptance of vaccines for COVID-19; our ability to react effectively to changing business conditions in light of the COVID-19 pandemic; our ability to consummate and integrate acquisitions; the level of vehicle sales in the markets where we operate; our ability to obtain vehicles and parts from our manufacturers, especially in light of the COVID-19 pandemic and global shortages in microchip availability or other vehicle components; changes in the retail model either from direct sales by manufacturers, sales by online competitors, or from the expansion of electric vehicles; our ability to realize returns on our significant capital investment in new and upgraded dealership facilities; our ability to navigate a rapidly changing automotive and truck landscape; the success of our distribution of commercial vehicles, engines, and power systems; and the return realized from our investments in various joint ventures and other non-consolidated investments. See Item 1A. Risk Factors above and Forward-Looking Statements below.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the application of accounting policies that often involve making estimates and employing judgments. Such judgments influence the assets, liabilities, revenues, and expenses recognized in our financial statements. Management, on an ongoing basis, reviews these estimates and assumptions. Management may determine that modifications in assumptions and estimates are required, which may result in a material change in our results of operations or financial position.

The following are the accounting policies applied in the preparation of our financial statements that management believes are most dependent upon the use of estimates and assumptions.

Revenue Recognition

Dealership Vehicle, Parts, and Service Sales. We record revenue for vehicle sales at a point in time when vehicles are delivered, which is when the transfer of title, risks and rewards of ownership, and control are considered passed to the customer. We record revenue for vehicle service and collision work over time as work is completed and when parts are delivered to our customers. Sales promotions that we offer to customers are accounted for as a reduction of revenues at the time of sale. Rebates and other incentives offered directly to us by manufacturers are recognized as a reduction of cost of sales. Reimbursements of qualified advertising expenses are treated as a reduction of selling, general, and administrative

32

Table of Contents

expenses. The amounts received under certain manufacturer rebate and incentive programs are based on the attainment of program objectives, and such earnings are recognized either upon the sale of the vehicle for which the award was received or upon attainment of the particular program goals if not associated with individual vehicles. Taxes collected from customers and remitted to governmental authorities are recorded on a net basis (excluded from revenue). During 2021, 2020, and 2019, we earned $635.7 million, $588.7 million, and $698.4 million, respectively, of rebates, incentives, and reimbursements from manufacturers, of which $620.3 million, $575.4 million, and $679.2 million, respectively, was recorded as a reduction of cost of sales. The remaining $15.4 million, $13.3 million, and $19.2 million was recorded as a reduction of selling, general, and administrative expenses during 2021, 2020, and 2019, respectively.

Dealership Finance and Insurance Sales. Subsequent to the sale of a vehicle to a customer, we sell installment sale contracts to various financial institutions on a non-recourse basis (with specified exceptions) to mitigate the risk of default. We receive a commission from the lender equal to either the difference between the interest rate charged to the customer and the interest rate set by the financing institution or a flat fee. We also receive commissions for facilitating the sale of various products to customers, including guaranteed vehicle protection insurance, vehicle theft protection, and extended service contracts. These commissions are recorded as revenue at a point in time when the customer enters into the contract. Payment is typically due and collected within 30 days subsequent to the execution of the contract with the customer. In the case of finance contracts, a customer may prepay or fail to pay their contract, thereby terminating the contract. Customers may also terminate extended service contracts and other insurance products, which are fully paid at purchase, and become eligible for refunds of unused premiums. In these circumstances, a portion of the commissions we received may be charged back based on the terms of the contracts. The revenue we record relating to these transactions is net of an estimate of the amount of chargebacks we will be required to pay. Our estimate is based upon our historical experience with similar contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on extended service contracts and other insurance products. Aggregate reserves relating to chargeback activity were $33.7 million and $28.7 million as of December 31, 2021, and December 31, 2020, respectively.

Commercial Vehicle Distribution. We record revenue from the distribution of vehicles, engines, and other products at a point in time when delivered, which is when the transfer of title, risks and rewards of ownership, and control are considered passed to the customer. We record revenue for service or repair work over time as work is completed and when parts are delivered to our customers. For our long-term power generation contracts, we record revenue over time as services are provided in accordance with contract milestones.

Refer to the disclosures provided in Part II, Item 8, Note 2 of the Notes to our Consolidated Financial Statements for additional detail on revenue recognition.

Impairment Testing

Other indefinite-lived intangible assets are assessed for impairment annually on October 1 and upon the occurrence of an indicator of impairment through a comparison of its carrying amount and estimated fair value. These indefinite-lived intangible assets relate to franchise agreements with vehicle manufacturers and distributors, which represent the estimated value of franchises acquired in business combinations, and distribution agreements with commercial vehicle manufacturers and other manufacturers, which represent the estimated value for distribution rights acquired in business combinations. An indicator of impairment exists if the carrying value exceeds its estimated fair value, and an impairment loss may be recognized up to that excess. The fair value is determined using a discounted cash flow approach, which includes assumptions about revenue and profitability growth, profit margins, and the cost of capital. We also evaluate in connection with the annual impairment testing whether events and circumstances continue to support our assessment that the other indefinite-lived intangible assets continue to have an indefinite life.

Goodwill impairment is assessed at the reporting unit level annually on October 1 and upon the occurrence of an indicator of impairment. Our operations are organized by management into operating segments by line of business and geography. We have determined that we have four reportable segments as defined in generally accepted accounting principles for segment reporting: (i) Retail Automotive, consisting of our retail automotive dealership operations; (ii) Retail Commercial Truck, consisting of our retail commercial truck dealership operations in the U.S. and Canada; (iii) Other, consisting of our commercial vehicle and power systems distribution operations; and (iv) Non-Automotive Investments, consisting of our equity method investments in non-automotive operations which includes our investment in PTS and other various investments. We have determined that the dealerships in each of our operating segments within the Retail Automotive reportable segment are components that are aggregated into six reporting units for the purpose of goodwill impairment testing as they (A) have similar economic characteristics (all are automotive dealerships having similar margins), (B) offer similar products and services (all sell new and/or used vehicles, service, parts, and third-party finance and insurance products), (C) have similar target markets and customers (generally individuals), and (D) have similar

33

Table of Contents

distribution and marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions). The reporting units are Eastern, Central, and Western United States, Used Vehicle Dealerships United States, International, and Used Vehicle Dealerships International. Our Retail Commercial Truck reportable segment has been determined to represent one operating segment and reporting unit. The goodwill included in our Other reportable segment relates primarily to our commercial vehicle distribution operating segment. There is no goodwill recorded in our Non-Automotive Investments reportable segment.

For our Retail Automotive, Retail Commercial Truck, and Other reporting units, we prepared a qualitative assessment of the carrying value of goodwill using the criteria in ASC 350-20-35-3 to determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying value. If it were determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, additional analysis would be unnecessary. During 2021, we concluded that for each of our reporting units their fair values were more likely than not greater than their carrying values. If additional impairment testing was necessary, we would have estimated the fair value of our reporting units using an “income” valuation approach. The “income” valuation approach estimates our enterprise value using a net present value model, which discounts projected free cash flows of our business using the weighted average cost of capital as the discount rate. We would also have validated the fair value for each reporting unit using the income approach by calculating a cash earnings multiple and determining whether the multiple was reasonable compared to recent market transactions completed by the Company or in the industry. As part of that assessment, we would also have reconciled the estimated aggregate fair values of our reporting units to our market capitalization. We believe this reconciliation process is consistent with a market participant perspective. This consideration would also include a control premium that represents the estimated amount an investor would pay for our equity securities to obtain a controlling interest and other significant assumptions, including revenue and profitability growth, franchise profit margins, residual values, and the cost of capital.

Investments

We account for each of our investments under the equity method, pursuant to which we record our proportionate share of the investee’s income each period. The net book value of our investments was $1,688.1 million and $1,500.3 million as of December 31, 2021, and 2020, respectively, including $1,643.1 million and $1,419.2 million relating to PTS as of December 31, 2021, and 2020, respectively. We currently hold a 28.9% ownership interest in PTS.

Investments for which there is not a liquid, actively traded market are reviewed periodically by management for indicators of impairment. If an indicator of impairment is identified, management estimates the fair value of the investment using a discounted cash flow approach, which includes assumptions relating to revenue and profitability growth, profit margins, residual values, and our cost of capital. Declines in investment values that are deemed to be other than temporary may result in an impairment charge reducing the investments’ carrying value to fair value.

Self-Insurance

We retain risk relating to certain of our general liability insurance, workers’ compensation insurance, vehicle physical damage insurance, property insurance, employment practices liability insurance, information security risk insurance, directors and officers’ insurance, and employee medical benefits in the U.S. As a result, we are likely to be responsible for a significant portion of the claims and losses incurred under these programs. The amount of risk we retain varies by program, and for certain exposures, we either have no insurance or we have pre-determined maximum loss limits for certain individual claims and/or insurance periods. Losses, if any, above the pre-determined loss limits are paid by third-party insurance carriers. Certain insurers have limited available property coverage in response to the natural catastrophes experienced in recent years. Our estimate of future losses is prepared by management using our historical loss experience and industry-based development factors. Aggregate reserves relating to retained risk were $33.5 million and $29.7 million as of December 31, 2021, and 2020, respectively.

Income Taxes

Tax regulations may require items to be included in our tax return at different times than when those items are reflected in our financial statements. Some of the differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as the timing of depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that will be used as a tax deduction or credit in our tax return in future years which we have already recorded in our financial statements. Deferred tax liabilities generally represent deductions taken on our tax return that have not yet been recognized as an expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not more likely than not to allow for the use of the deduction or credit.

34

Table of Contents

Refer to the disclosures provided in Part II, Item 8, Note 17 of the Notes to our Consolidated Financial Statements for additional detail on our accounting for income taxes, including additional discussion on the enactment of the Act and the resulting impact on our financial statements.

Leases

We determine if an arrangement is a lease at inception. Our operating leases primarily consist of land and facilities, including certain dealerships and office space. We also have equipment leases that primarily relate to office and computer equipment, service and shop equipment, company vehicles, and other miscellaneous items. We do not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.

Operating leases are included in “operating lease right-of-use assets,” “accrued expenses and other current liabilities,” and “long-term operating lease liabilities” on our Consolidated Balance Sheet. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Our property leases are generally for an initial period between 5 and 20 years and are typically structured to include renewal options at our election. We include renewal options that we are reasonably certain to exercise in the measurement our lease liabilities and right-of-use assets. As the rate implicit in the lease is generally not readily determinable for our operating leases, the discount rates used to determine the present value of our lease liability are based on our incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. Our incremental borrowing rate for a lease is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. Lease expense is recognized on a straight-line basis over the lease term.

Refer to the disclosures provided in Part II, Item 8, Note 3 and Note 12 of the Notes to our Consolidated Financial Statements for a description of our operating leases.

Recent Accounting Pronouncements

Please see the disclosures provided under “Recent Accounting Pronouncements” in Part II, Item 8, Note 1 of the Notes to our Consolidated Financial Statements set forth below which are incorporated by reference herein.

Results of Operations

The following tables present comparative financial data relating to our operating performance in the aggregate and on a “same-store” basis. Dealership results are included in same-store comparisons when we have consolidated the acquired entity during the entirety of both periods being compared. As an example, if a dealership were acquired on January 15, 2019, the results of the acquired entity would be included in annual same-store comparisons beginning with the year ended December 31, 2021, and in quarterly same-store comparisons beginning with the quarter ended June 30, 2020.

The results for 2021 include a tax expense of $10.8 million, or $0.13 per share, related to revaluation of our U.K. deferred tax assets and liabilities due to an increase in the U.K. corporate tax rate from 19% currently to 25%, beginning on April 1, 2023. We also incurred a $17.0 million expense in connection with the redemption of our 5.50% senior subordinated notes due in 2026 during the second quarter of 2021, consisting of a $13.8 million redemption premium and the write-off of $3.2 million of unamortized debt issuance costs, resulting in an after-tax charge of $12.6 million, or $0.16 per share. In addition, we had a loss on investment for the revaluation of the Nicole Group of $9.1 million, or $0.11 per share.

The results for 2020 include a net income tax benefit of $11.4 million, or $0.14 per share, related to the CARES Act and various other U.S. and foreign tax legislation changes. The results for 2020 also include a loss on debt extinguishment of $6.4 million, or $0.08 per share and a gain on the sale of retail automotive dealerships of $3.3 million, or $0.04 per share.

The results for 2021 and 2020 have been impacted by the COVID-19 pandemic, and each of the items mentioned below should be reviewed in light of our discussion under “COVID-19 Disclosure.”

For the discussion and analysis comparing the results of operations for 2019 to 2020, we refer you to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2020 Form 10-K filed on February 19, 2021.

35

Table of Contents

Retail Automotive Dealership New Vehicle Data

(In millions, except unit and perunit amounts)

Units

Retail unit sales of new vehicles increased from 2020 to 2021 primarily due to an 18,073 unit, or 10.3%, increase in same-store new retail unit sales. Same-store units increased 15.2% in the U.S. and 1.2% internationally. Overall, new units increased 14.0% in the U.S. and 1.2% internationally. We believe the increase in same-store unit sales is due to a stronger economic outlook, the lifting of lockdown restrictions implemented due to COVID-19, favorable interest rates, and improved levels of consumer confidence when compared to the same period last year at the onset of the COVID-19 pandemic.

Revenues

New vehicle retail sales revenue increased from 2020 to 2021 due to a $1,730.3 million, or 21.6%, increase in same-store revenues, coupled with a $32.4 million increase from net dealership acquisitions. Excluding $220.2 million of favorable foreign currency fluctuations, same-store new retail revenue increased 18.9%. The same-store revenue increase is due to the increase in same-store new retail unit sales, which increased revenue by $906.2 million, coupled with a $4,686 per unit increase in comparative average selling prices (including a $1,135 per unit increase attributable to favorable foreign currency fluctuations), which increased revenue by $824.1 million. We believe the increase in same-store comparative average selling price is due to increased customer demand and a lower supply of new vehicles available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Gross Profit

Retail gross profit from new vehicle sales increased from 2020 to 2021 due to a $378.4 million, or 58.4%, increase in same-store gross profit, coupled with a $14.3 million increase from net dealership acquisitions. Excluding $19.5 million of favorable foreign currency fluctuations, same-store gross profit increased 55.4%. The increase in same-store gross profit is

36

Table of Contents

due to a $1,608 per unit increase in the average gross profit per new vehicle retailed (including a $100 per unit increase attributable to favorable foreign currency fluctuations), which increased gross profit by $282.8 million, coupled with the increase in same-store new retail unit sales, which increased gross profit by $95.6 million. We believe the increase in same-store comparative average gross profit per unit is attributed to increased customer demand and a lower supply of new vehicles available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Retail Automotive Dealership Used Vehicle Data

(In millions, except unit and per unit amounts)

Units

Retail unit sales of used vehicles increased from 2020 to 2021 due to a 26,918 unit, or 11.7%, increase in same-store used retail unit sales, coupled with a 4,133 unit increase from net dealership acquisitions. Same-store units increased 17.1% in the U.S. and 6.8% internationally. Same-store retail units for our U.S. and U.K. CarShop used vehicle dealerships increased 29.0% and 3.0%, respectively. Overall, used units increased 17.4% in the U.S. and 9.6% internationally. We believe the increase in same-store unit sales is due to a stronger economic outlook, the lifting of lockdown restrictions implemented due to COVID-19, favorable interest rates, and improved levels of consumer confidence when compared to the same period last year at the onset of the COVID-19 pandemic. We believe this increase is also related to consumers looking to acquire used vehicles to compensate for the lower supply of new vehicles available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Revenues

Used vehicle retail sales revenue increased from 2020 to 2021 due to a $2,017.6 million, or 31.8%, increase in same-store revenues, coupled with a $116.7 million increase from net dealership acquisitions. Excluding $298.1 million of

37

Table of Contents

favorable foreign currency fluctuations, same-store used retail revenue increased 27.1%. The same-store revenue increase is primarily due to a $4,961 per unit increase in comparative average selling prices (including a $1,158 per unit increase attributable to favorable foreign currency fluctuations), which increased revenue by $1,143.4 million, coupled with the increase in same-store used retail unit sales, which increased revenue by $874.2 million. The average sales price per unit for our CarShop dealerships increased 22.9% to $19,549. We believe the increase in same-store comparative average selling price is primarily due to consumers looking to acquire used vehicles to compensate for the lower supply of new vehicles available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Gross Profit

Retail gross profit from used vehicle sales increased from 2020 to 2021 due to $266.5 million, or 69.0%, increase in same-store gross profit, coupled with an $11.2 million increase from net dealership acquisitions. Excluding $21.5 million of favorable foreign currency fluctuations, same-store gross profit increased 63.5%. The increase in same-store gross profit is due to an $860 per unit increase in average gross profit per used vehicle retailed (including an $83 per unit increase attributable to favorable foreign currency fluctuations), which increased gross profit by $198.2 million, coupled with the increase in same-store used retail unit sales, which increased gross profit by $68.3 million. The average gross profit per unit for our CarShop used vehicle dealerships increased 29.4% to $1,195. We believe the increase in same-store comparative average gross profit per unit is primarily due to consumers looking to acquire used vehicles to compensate for the lower supply of new vehicles available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Retail Automotive Dealership Finance and Insurance Data

(In millions, except unit and perunit amounts)

Finance and insurance revenue increased from 2020 to 2021 due to a $198.4 million, or 34.8%, increase in same-store revenues, coupled with a $5.8 million increase from net dealership acquisitions. Excluding $19.5 million of favorable foreign currency fluctuations, same-store finance and insurance revenue increased 31.4%. The same-store revenue increase is due to a $300 per unit increase in comparative average finance and insurance revenue per unit (including a $44 per unit increase attributable to favorable foreign currency fluctuations), which increased revenue by $121.9 million, coupled with the increase in same-store retail unit sales, which increased revenue by $76.5 million. Finance and insurance revenue per unit increased 22.1% in the U.S. and 17.3% in the U.K. We believe the increase in same-store finance and insurance revenue per unit is primarily due to our efforts to increase finance and insurance penetration, which include implementing interactive digital customer sales platforms, additional training, and targeting underperforming locations, coupled with the increase in average selling price per unit of new and used vehicles.

38

Table of Contents

Retail Automotive Dealership Service and Parts Data

(In millions)

Revenues

Service and parts revenue increased from 2020 to 2021 with an increase of 13.8% in the U.S. and 17.3% internationally. The increase in service and parts revenue is primarily due to a $283.8 million, or 15.3%, increase in same-store revenues. Excluding $43.5 million of favorable foreign currency fluctuations, same-store revenue increased 12.9%. The increase in same-store revenue is due to a $277.2 million, or 21.8%, increase in customer pay revenue and an $8.8 million, or 7.4%, increase in vehicle preparation and body shop revenue, partially offset by a $2.2 million, or 0.5%, decrease in warranty revenue. We believe the increase in same-store service and parts revenue is related to a stronger economic outlook, improved levels of consumer confidence, and the lifting of many COVID-19 restrictions resulting in increases in vehicle miles traveled compared to the same period last year.

Gross Profit

Service and parts gross profit increased from 2020 to 2021 due to a $178.7 million, or 16.1%, increase in same-store gross profit, coupled with a $1.2 million increase from net acquisitions. Excluding $26.8 million of favorable foreign currency fluctuations, same-store gross profit increased 13.6%. The same-store gross profit increase is due to the increase in same-store revenues, which increased gross profit by $171.2 million, coupled with a 0.4% increase in same-store gross margin, which increased gross profit by $7.5 million. The same-store gross profit increase is due to a $139.0 million, or 22.6%, increase in customer pay gross profit and a $40.4 million, or 16.6%, increase in vehicle preparation and body shop gross profit, partially offset by a $0.7 million, or 0.3%, decrease in warranty gross profit.

39

Table of Contents

Retail Commercial Truck Dealership Data

(In millions, except unit and per unit amounts)

Units

Retail unit sales of new trucks increased from 2020 to 2021 due to a 2,017 unit increase from net dealership acquisitions, partially offset by a 341 unit, or 3.0%, decrease in same-store retail unit sales. We believe the decrease in same-store unit sales is due to a lower supply of new trucks available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Revenues

New commercial truck retail sales revenue increased from 2020 to 2021 due to a $217.8 million increase from net dealership acquisitions, coupled with a $6.4 million, or 0.5%, increase in same-store revenues. The same-store revenue increase is due to a $4,198 per unit increase in comparative average selling prices, which increased revenue by $46.1 million, partially offset by the decrease in same-store new retail unit sales, which decreased revenue by $39.7 million. We believe the increase in same-store comparative average selling price is due to increased customer demand, stronger economic outlook, and a lower supply of new trucks available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

40

Table of Contents

Gross Profit

New commercial truck retail gross profit increased from 2020 to 2021 due to a $22.4 million, or 44.4%, increase in same-store gross profit, coupled with a $7.4 million increase from net dealership acquisitions. The increase in same-store gross profit is due to a $2,177 per unit increase in comparative average gross profit, which increased gross profit by $23.9 million, partially offset by the decrease in same-store new retail unit sales, which decreased gross profit by $1.5 million. We believe the increase in same-store comparative average gross profit per unit is attributed to increased customer demand, stronger economic outlook, and a lower supply of new trucks available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Units

Retail unit sales of used trucks decreased from 2020 to 2021 due to a 635 unit, or 16.6%, decrease in same-store retail unit sales, partially offset by a 240 unit increase from net dealership acquisitions. We believe the decrease in same-store unit sales is due to a lower supply of used trucks available for sale, which has been caused by a stronger economy which increased demand for trucks, coupled with limited availability of new trucks resulting from production disruptions from a shortage of microchips or other components.

Revenues

Used commercial truck retail sales revenue increased from 2020 to 2021 due to a $57.1 million, or 29.4%, increase in same-store revenues, coupled with a $19.3 million increase from net dealership acquisitions. The same-store revenue increase is due to a $28,019 per unit increase in comparative average selling prices, which increased revenue by $89.4 million, partially offset by the decrease in same-store used retail unit sales, which decreased revenue by $32.3 million. We believe the increase in same-store comparative average selling price is primarily due to consumers looking to acquire used trucks to compensate for the lower supply of new trucks available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

41

Table of Contents

Gross Profit

Used commercial truck retail gross profit increased from 2020 to 2021 due to a $43.9 million increase in same-store gross profit, coupled with a $3.8 million increase from net dealership acquisitions. The increase in same-store gross profit is due to a $13,775 per unit increase in average gross profit per used truck retailed, which increased gross profit by $43.9 million. We believe the increase in same-store comparative average gross profit per unit is primarily due to consumers looking to acquire used trucks to compensate for the lower supply of new trucks available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Revenues

Service and parts revenue increased from 2020 to 2021 due to a $71.4 million increase from net dealership acquisitions, coupled with a $59.5 million, or 12.4%, increase in same-store revenues. Customer pay work represents approximately 79.8% of PTG’s service and parts revenue, largely due to the significant amount of retail sales of parts and accessories. The increase in same-store revenue is due to a $57.8 million, or 15.6%, increase in customer pay revenue and a $2.2 million, or 2.6%, increase in warranty revenue, partially offset by a $0.5 million, or 2.2%, decrease in body shop revenue. We believe the increase in same-store service and parts revenue is primarily due to higher freight rates which increase utilization and coupled with the prolonged reliance on older trucks resulting from the decreased supply of new trucks, which generates additional service and parts revenues.

Gross Profit

Service and parts gross profit increased from 2020 to 2021 due to a $28.7 million increase from net dealership acquisitions, coupled with a $21.0 million, or 10.1%, increase in same-store gross profit. The same-store gross profit increase is due to the increase in same-store revenues, which increased gross profit by $25.3 million, partially offset by a 0.9% decrease in gross margin, which decreased gross profit by $4.3 million. The same-store gross profit increase is due to a $21.9 million, or 16.1%, increase in customer pay gross profit and a $1.2 million, or 2.5%, increase in warranty gross profit, partially offset by a $2.1 million, or 8.9%, decrease in body shop gross profit.

Commercial Vehicle Distribution Data

(In millions, except unit amounts)

42

Table of Contents

Penske Australia primarily distributes and services commercial vehicles, engines, and power systems. This business generated $575.7 million of revenue during 2021 compared to $454.2 million of revenue during 2020, an increase of 26.8%. This business generated $153.7 million of gross profit during 2021 compared to $122.3 million of gross profit during 2020, an increase of 25.7%.

These improved results from 2020 to 2021 are primarily due to an increase in commercial demand for trucks in Australia, an increase in service and parts, and increased sales to our defense and power generation product lines. Excluding $47.7 million of revenue attributable to favorable foreign currency fluctuations, revenues increased 16.2%. Excluding $11.8 million of gross profit attributable to favorable foreign currency fluctuations, gross profit increased 16.0%.

Selling, General and Administrative Data

(In millions)

Selling, general, and administrative expenses (“SG&A”) increased from 2020 to 2021 due to a $559.0 million, or 23.9% increase in same-store SG&A, coupled with a $39.4 million increase from net acquisitions. Excluding $71.3 million of favorable foreign currency fluctuations, same-store SG&A increased 20.9%. The decrease in SG&A as a percentage of gross profit is primarily due to increased gross profit across our various business lines, coupled with expense reductions.

SG&A expenses as a percentage of total revenue were 11.6%, 11.6%, and 11.6% in 2021, 2020, and 2019, respectively, and as a percentage of gross profit were 66.7%, 74.3%, and 77.9%, in 2021, 2020, and 2019, respectively.

Depreciation

(In millions)

Depreciation increased from 2020 to 2021 due to a $3.3 million, or 2.9%, increase in same-store depreciation, coupled with a $2.7 million increase from net acquisitions. We believe the overall increase is primarily related to our ongoing facility improvements and expansion programs.

43

Table of Contents

Floor Plan Interest Expense

(In millions)

Floor plan interest expense, including the impact of swap transactions, decreased from 2020 to 2021 primarily due to a $19.9 million, or 43.5%, decrease in same-store floor plan interest expense. We believe the overall decrease is primarily due to decreases in applicable rates and decreases in amounts outstanding under floor plan arrangements as new vehicle inventory declined. This inventory decline was due to a lower supply of new vehicles available for sale, which has been caused by production disruptions resulting from a shortage of microchips or other components.

Other Interest Expense

(In millions)

Other interest expense decreased from 2020 to 2021 primarily due to the decrease in outstanding revolver borrowings under the U.S. and U.K. credit agreements, decreases in applicable rates, and the redemption and refinancing of certain senior subordinated notes.

Equity in Earnings of Affiliates

(In millions)

Equity in earnings of affiliates increased from 2020 to 2021 due primarily to a $201.3 million, or 122.4%, increase in earnings from our investment in PTS, coupled with the increase in earnings from our retail automotive joint ventures. The increase in our PTS equity earnings is attributed to strong economic conditions in North America, which is driving higher demand for PTS full-service leasing and logistics services, increased utilization of the rental fleet, and higher gains on sale from remarketing activities on used trucks.

Income Taxes

(In millions)

Income taxes increased from 2020 to 2021 primarily due to a $900.1 million increase in our pre-tax income compared to the prior year. Our effective tax rate was 25.9% during 2021 compared to 23.0% during 2020 primarily due to fluctuations in our geographic pre-tax income mix, partially offset by the increase in net income tax expense of $10.8 million related to U.K. tax legislation changes, and a net income tax benefit of $11.4 million from various U.S. and foreign tax legislation changes during 2020.

Liquidity and Capital Resources

Our cash requirements are primarily for working capital, inventory financing, the acquisition of new businesses, the improvement and expansion of existing facilities, the purchase or construction of new facilities, building additional CarShop used vehicle dealerships, debt service and repayments, dividends, and potential repurchases of our outstanding securities under the program discussed below. Historically, these cash requirements have been met through cash flow from operations, borrowings under our credit agreements and floor plan arrangements, the issuance of debt securities, sale-leaseback transactions, mortgages, and dividends and distributions from joint venture investments.

44

Table of Contents

We have historically expanded our operations through organic growth and the acquisition of dealerships and other businesses. We believe that cash flow from operations, dividends and distributions from PTS and our joint venture investments, and our existing capital resources, including the liquidity provided by our credit agreements and floor plan financing arrangements, will be sufficient to fund our existing operations and current commitments for at least the next twelve months. In the event that economic conditions remain impacted for longer than we expect due to the COVID-19 pandemic or vehicle shortages resulting from supply chain difficulties, we pursue significant acquisitions or other expansion opportunities, pursue significant repurchases of our outstanding securities, or refinance or repay existing debt, we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional borrowings, which sources of funds may not necessarily be available on terms acceptable to us, if at all. In addition, our liquidity could be negatively impacted in the event we fail to comply with the covenants under our various financing and operating agreements or in the event our floor plan financing is withdrawn. Future events, including acquisitions, divestitures, new or revised operating lease agreements, borrowings or repayments under our credit agreements and our floor plan arrangements, raising capital, and purchases or refinancing of our securities, may also impact our liquidity.

We expect that scheduled payments of our debt instruments will be funded through cash flows from operations or borrowings under our credit agreements. In the case of payments upon the maturity or termination dates of our debt instruments, we currently expect to be able to refinance such instruments in the normal course of business or otherwise fund them from cash flows from operations or borrowings under our credit agreements. Refer to the disclosures provided in Part II, Item 8, Note 10 of the Notes to our Consolidated Financial Statements set forth below for a detailed description of our long-term debt obligations and scheduled interest payments.

Floor plan notes payable are revolving financing arrangements. Payments are generally made as required pursuant to the floor plan borrowing agreements. Refer to the disclosures provided in Part II, Item 8, Note 9 of the Notes to our Consolidated Financial Statements for a detailed description of financing for the vehicles we purchase, including discussion of our floor plan and other revolving arrangements.

Refer to the disclosures provided in Part II, Item 8, Note 12 of the Notes to our Consolidated Financial Statements for a description of our off-balance sheet arrangements which includes a repurchase commitment related to our floor plan credit agreement with Mercedes Benz Financial Services Australia.

As of December 31, 2021, we had $100.7 million of cash available to fund our operations and capital commitments. In addition, we had $800.0 million, £162.0 million ($219.2 million), and AU $50.0 ($36.3) available for borrowing under our U.S. credit agreement, U.K. credit agreement, and Australian working capital loan agreement, respectively.

Securities Repurchases

From time to time, our Board of Directors has authorized securities repurchase programs pursuant to which we may, as market conditions warrant, purchase our outstanding common stock or debt on the open market, in privately negotiated transactions, via a tender offer, through a pre-arranged trading plan, pursuant to the terms of an accelerated share repurchase program, or by other means. We have historically funded any such repurchases using cash flow from operations, borrowings under our U.S. credit agreement, and borrowings under our U.S. floor plan arrangements. The decision to make repurchases will be based on factors such as the market price of the relevant security versus our view of its intrinsic value, the potential impact of such repurchases on our capital structure, and our consideration of any alternative uses of our capital, such as for acquisitions and strategic investments in our current businesses, in addition to any then-existing limits imposed by our finance agreements and securities trading policy. On December 16, 2021, our Board of Directors approved a new $250 million securities repurchase authorization. We had $230.4 million and $194.3 million in repurchase authorization remaining under the securities repurchase program as of December 31, 2021, and February 8, 2022, respectively. Refer to the disclosures provided in Part II, Item 8, Note 15 of the Notes to our Consolidated Financial Statements for a summary of shares repurchased during 2021.

Dividends

We paid the following cash dividends on our common stock in 2020 and 2021:

45

Table of Contents

Per Share Dividends

First Quarter $ 0.42

Second Quarter —

Third Quarter —

Fourth Quarter $ 0.42

First Quarter $ 0.43

Second Quarter $ 0.44

Third Quarter $ 0.45

Fourth Quarter $ 0.46

We also announced a cash dividend of $0.47 per share payable on March 1, 2022, to stockholders of record as of February 10, 2022, which represents a dividend yield of 1.8% using our January 31, 2022, closing stock price. While future quarterly or other cash dividends will depend upon a variety of factors considered relevant by our Board of Directors, which may include our expectations regarding the severity and duration of the COVID-19 pandemic, earnings, cash flow, capital requirements, restrictions relating to any then-existing indebtedness, financial condition, alternative uses of capital, and other factors, we currently expect to continue to pay comparable dividends in the future.

Vehicle Financing

Refer to the disclosures provided in Part II, Item 8, Note 9 of the Notes to our Consolidated Financial Statements for a detailed description of financing for the vehicles we purchase, including discussion of our floor plan and other revolving arrangements.

Long-Term Debt Obligations

As of December 31, 2021, we had the following long-term debt obligations outstanding:

U.S. credit agreement — revolving credit line $ —

U.K. credit agreement — revolving credit line —

U.K. credit agreement — overdraft line of credit —

Australia capital loan agreement 26.6

Australia working capital loan agreement —

Mortgage facilities 353.8

Total long-term debt $ 1,474.0

As of December 31, 2021, we were in compliance with all covenants under our credit agreements, and we believe we will remain in compliance with such covenants for the next twelve months. Refer to the disclosures provided in Part II, Item 8, Note 10 of the Notes to our Consolidated Financial Statements set forth below for a detailed description of our long-term debt obligations.

46

Table of Contents

Short-Term Borrowings

We have four principal sources of short-term borrowings: the revolving portion of the U.S. credit agreement, the revolving portion of the U.K. credit agreement, our Australian working capital loan agreement, and the floor plan agreements that we utilize to finance our vehicle inventories. We are also able to access availability under the floor plan agreements to fund our cash needs, including payments made relating to our higher interest rate revolving credit agreements.

During 2021, outstanding revolving commitments varied between $0.0 million and $250.0 million under the U.S. credit agreement, between £0.0 million and £71.0 million ($0.0 million and $96.0 million) under the U.K. credit agreement’s revolving credit line (excluding the overdraft facility), and between AU $0.0 million and AU $26.0 million ($0.0 million and $18.9 million) under the Australia working capital loan agreement. The amounts outstanding under our floor plan agreements varied based on the timing of the receipt and expenditure of cash in our operations, driven principally by the levels of our vehicle inventories.

Interest Rate Swaps

The Company periodically uses interest rate swaps to manage interest rate risk associated with the Company’s variable rate floor plan debt. In April 2020, we entered into a five-year interest rate swap agreement pursuant to which the LIBOR portion of $300.0 million of our U.S. floating rate floor plan debt was fixed at 0.5875% This arrangement was in effect through April 2025. However, we terminated this arrangement in November 2021 resulting in a realized gain of $3.0 million. The fair value of the swap designated as a hedging instrument was estimated to be a net liability of $4.3 million as of December 31, 2020.

PTS Dividends

We hold a 28.9% ownership interest in PTS as noted above. Their partnership agreement requires PTS, subject to applicable law and the terms of its credit agreements, to make quarterly distributions to the partners with respect to each fiscal year by no later than 45 days after the end of each of the first three quarters of the year and by April 15 of the following year. PTS’ partnership agreement and certain of its debt agreements allow partner distributions only as long as it is not in default under those agreements and the amount it pays does not exceed 50% of its consolidated net income, unless its debt-to-equity ratio is less than 3.0 to 1, in which case its distributions may not exceed 80% of its consolidated net income. We receive pro rata cash distributions relating to this investment, typically in April, May, August, and November of each year. During 2021, 2020, and 2019, we received $165.5 million, $72.2 million, and $71.9 million, respectively, of pro rata cash distributions relating to this investment. We currently expect to continue to receive future distributions from PTS quarterly, subject to its financial performance.

Sale/Leaseback Arrangements

We have in the past and may in the future enter into sale-leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which we sell property and/or leasehold improvements to third parties and agree to lease those assets back for a certain period of time. Such sales generate proceeds that vary from period to period.

Operating Leases

We estimate the total rent obligations under our operating leases, including any extension periods that we are reasonably certain to exercise at our discretion and assuming constant consumer price indices, to be $5.5 billion. As of December 31, 2021, we were in compliance with all financial covenants under these leases consisting principally of leases for dealership and other properties, and we believe we will remain in compliance with such covenants for the next twelve months. Refer to the disclosures provided in Part II, Item 8, Note 3 and Note 12 of the Notes to our Consolidated Financial Statements for a description of our operating leases.

Discontinued Operations

We had no entities newly classified as held for sale in 2021, 2020, or 2019 that met the criteria to be classified as discontinued operations. As such, results from discontinued operations represent only retail automotive dealerships and our car rental business that were classified as discontinued operations prior to the adoption of ASU No. 2014-08 on January 1, 2015.

47

Table of Contents

Supplemental Guarantor Financial Information

The following is a description of the terms and conditions of the guarantees with respect to senior subordinated notes of Penske Automotive Group, Inc. (“PAG”) as the issuer of the 3.50% Notes and the 3.75% Notes (collectively the “Senior Subordinated Notes”).

Each of the Senior Subordinated Notes are unsecured, senior subordinated obligations and are guaranteed on an unsecured senior subordinated basis by our 100% owned U.S. subsidiaries. Each of the Senior Subordinated Notes also contain customary negative covenants and events of default. If we experience certain “change of control” events specified in their respective indentures, holders of these Senior Subordinated Notes will have the option to require us to purchase for cash all or a portion of their Senior Subordinated Notes at a price equal to 101% of the principal amount of the Senior Subordinated Notes, plus accrued and unpaid interest. In addition, if we make certain asset sales and do not reinvest the proceeds thereof or use such proceeds to repay certain debt, we will be required to use the proceeds of such asset sales to make an offer to purchase the Senior Subordinated Notes at a price equal to 100% of the principal amount of the Senior Subordinated Notes, plus accrued and unpaid interest.

Guarantor subsidiaries are directly or indirectly 100% owned by PAG, and the guarantees are full and unconditional and joint and several. The guarantees may be released under certain circumstances upon resale or transfer by us of the stock of the related guarantor or all or substantially all of the assets of the guarantor to a non-affiliate. Non-wholly owned and foreign subsidiaries of PAG do not guarantee the Senior Subordinated Notes (“Non-Guarantor Subsidiaries”). The following tables present summarized financial information for PAG and the Guarantor Subsidiaries on a combined basis. The financial information of PAG and Guarantor Subsidiaries is presented on a combined basis; intercompany balances and transactions between PAG and Guarantor Subsidiaries have been eliminated; PAG’s or Guarantor Subsidiaries’ amounts due from, amounts due to, and transactions with non-issuer and Non-Guarantor Subsidiaries and related parties are disclosed separately.

Condensed income statement information:

PAG and Guarantor Subsidiaries

Equity in earnings of affiliates 366.2 164.5

Income from continuing operations 908.2 400.1

Net income attributable to Penske Automotive Group 909.5 400.4

Condensed balance sheet information:

PAG and Guarantor Subsidiaries

_______________

(1)Includes $529.9 million and $509.9 million as of December 31, 2021, and 2020, respectively, due from Non-Guarantors.

During the years ended December 31, 2021, and 2020, PAG received $93.5 million and $77.1 million, respectively, from Non-Guarantor Subsidiaries.

48

Table of Contents

Cash Flows

The following table summarizes the changes in our cash provided by (used in) operating, investing, and financing activities. The major components of these changes are discussed below.

Year Ended December 31,

Net cash provided by continuing operating activities $ 1,292.0 $ 1,201.5 $ 518.3

Net cash used in continuing investing activities (623.1) (136.5) (532.7)

Net cash provided by discontinued operations 1.3 0.3 0.3

Effect of exchange rate changes on cash and cash equivalents (3.5) 10.0 0.2

Net change in cash and cash equivalents $ 51.2 $ 21.4 $ (11.3)

Cash Flows from Continuing Operating Activities

Cash flows from continuing operating activities includes net income, as adjusted for non-cash items and the effects of changes in working capital.

We finance substantially all of the commercial vehicles we purchase for distribution, new vehicles for retail sale, and a portion of our used vehicle inventories for retail sale under floor plan and other revolving arrangements with various lenders, including the captive finance companies associated with automotive manufacturers. We retain the right to select which, if any, financing source to utilize in connection with the procurement of vehicle inventories. Many vehicle manufacturers provide vehicle financing for the dealers representing their brands; however, it is not a requirement that we utilize this financing. Historically, our floor plan finance source has been based on aggregate pricing considerations.

In accordance with generally accepted accounting principles relating to the statement of cash flows, we report all cash flows arising in connection with floor plan notes payable with the manufacturer of a particular new vehicle as an operating activity in our statement of cash flows, and we report all cash flows arising in connection with floor plan notes payable to a party other than the manufacturer of a particular new vehicle, all floor plan notes payable relating to pre-owned vehicles, and all floor plan notes payable related to our commercial vehicles in Australia and New Zealand as a financing activity in our statement of cash flows. Currently, the majority of our non-trade vehicle financing is with other manufacturer captive lenders. To date, we have not experienced any material limitation with respect to the amount or availability of financing from any institution providing us vehicle financing.

We believe that changes in aggregate floor plan liabilities are typically linked to changes in vehicle inventory and therefore, are an integral part of understanding changes in our working capital and operating cash flow. As a result, we prepare the following reconciliation to highlight our operating cash flows with all changes in vehicle floor plan being classified as an operating activity for informational purposes:

Year Ended December 31,

Floor plan notes payable — non-trade as reported 38.9 (230.2) 177.5

Cash Flows from Continuing Investing Activities

Cash flows from continuing investing activities consist primarily of cash used for capital expenditures, proceeds from the sale of dealerships, proceeds from the sale of equipment and improvements, net expenditures for acquisitions and other investments, and proceeds from sale-leaseback transactions. Capital expenditures were $248.9 million, $185.9 million, and $245.3 million during 2021, 2020, and 2019, respectively. Capital expenditures relate primarily to improvements to our existing dealership facilities, the construction of new facilities, the acquisition of the property or buildings associated with existing leased facilities, and the acquisition of land for future development. We currently expect to finance our retail automotive segment and retail commercial truck segment capital expenditures with operating cash flows or borrowings under our U.S. or U.K. credit agreements. Proceeds from the sale of dealerships were $4.3 million, $40.6 million, and

49

Table of Contents

$22.8 million during 2021, 2020, and 2019, respectively. Proceeds from the sale of equipment and improvements were $54.9 million, $19.8 million, and $8.6 million during 2021, 2020, and 2019, respectively. We had $431.8 million and $326.9 million of cash used in acquisitions and other investments, net of cash acquired, during 2021 and 2019, respectively, and included cash used to repay sellers’ floor plan liabilities in such business acquisitions of $43.0 million and $138.5 million, respectively, compared to no cash used in acquisitions and other investments, net of cash acquired, during 2020. We had no proceeds from sale-leaseback transactions during 2021 and 2020 compared to $18.9 million during 2019.

Cash Flows from Continuing Financing Activities

Cash flows from continuing financing activities include issuance and net repayments or borrowings of long-term debt, net borrowings or repayments of floor plan notes payable non-trade, repurchases of common stock, dividends, payments for contingent consideration, and payments for debt issuance costs.

We issued $500.0 million of senior subordinated notes due 2029 in June 2021 and subsequently repaid $500.0 million of senior subordinated notes due 2026. We had net repayments of other long-term debt of $212.2 million and $81.4 million during 2021 and 2020, respectively, and net borrowings of other long-term debt of $130.4 million during 2019. We had net borrowings of floor plan notes payable non-trade of $38.9 million and $177.5 million during 2021 and 2019, respectively, and net repayments of floor plan notes payable non-trade of $230.2 million during 2020. In 2021, 2020, and 2019, we repurchased 3.1 million, 0.9 million, and 3.9 million shares of common stock under our securities repurchase program for $280.6 million, $29.4 million, and $169.2 million, respectively. In 2021, 2020, and 2019, we repurchased 0.1 million, 0.1 million, and 0.1 million shares from employees in connection with a net share settlement feature of employee equity awards for $12.9 million, $5.0 million, and $4.9 million, respectively. We also paid $142.5 million, $68.1 million, and $130.8 million of cash dividends to our stockholders during 2021, 2020, and 2019, respectively. We made no payments to settle contingent consideration to sellers related to previous acquisitions during 2021 and 2019 compared to $31.6 million during 2020. We made payments of $6.3 million, $8.1 million, and $0.4 million for debt issuance costs during 2021, 2020, and 2019, respectively.

Related Party Transactions

Stockholders Agreement

Several of our directors and officers are affiliated with Penske Corporation or related entities. Roger Penske, our Chair of the Board and Chief Executive Officer, is also Chair of the Board and Chief Executive Officer of Penske Corporation and through entities affiliated with Penske Corporation is our largest stockholder owning approximately 45% of our outstanding common stock. Mitsui & Co., Ltd. and Mitsui & Co. (USA), Inc. (collectively, “Mitsui”) own approximately 17% of our outstanding common stock. Mitsui, Penske Corporation, and certain other affiliates of Penske Corporation are parties to a stockholders agreement pursuant to which the Penske affiliated companies agreed to vote their shares for up to two directors who are representatives of Mitsui. In turn, Mitsui agreed to vote their shares for up to fourteen directors voted for by the Penske affiliated companies. This agreement terminates in March 2030, upon the mutual consent of the parties, or when either party no longer owns any of our common stock.

Other Related Party Interests and Transactions

Robert Kurnick, Jr., our President and a director, is also the Vice Chair and a director of Penske Corporation. Bud Denker, our Executive Vice President, Human Resources, is also the President of Penske Corporation. Greg Penske, one of our directors, is the son of our chair and is also a director of Penske Corporation. Michael Eisenson, one of our directors, is also a director of Penske Corporation. Kota Odagiri, one of our directors, is also an employee of Mitsui & Co.

We sometimes pay to and/or receive fees from Penske Corporation, its subsidiaries, and its affiliates for services rendered in the ordinary course of business or to reimburse payments made to third parties on each other’s behalf. These transactions are reviewed periodically by our Audit Committee and reflect the provider’s cost or an amount mutually agreed upon by both parties.

We own a 28.9% interest in PTS. PTS, discussed previously, is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui. We have also entered into other joint ventures with certain related parties as more fully discussed in Part II, Item 8, Note 13 of the Notes to our Consolidated Financial Statements.

50

Table of Contents

Cyclicality

Unit sales of motor vehicles, particularly new vehicles, have been cyclical historically, fluctuating with general economic cycles. During economic downturns, the automotive and truck retailing industries tend to experience periods of decline and recession similar to those experienced by the general economy. We believe that these industries are influenced by general economic conditions and particularly, by consumer confidence, the level of personal discretionary spending, fuel prices, interest rates, and credit availability.

Our business is dependent on a number of factors, including general economic conditions, fuel prices, interest rate fluctuations, credit availability, labor availability, environmental and other government regulations, and customer business cycles. U.S. light vehicle sales have ranged from a low of 10.4 million units in 2009 to a high of 17.5 million units in 2016. Unit sales of new commercial vehicles have historically been subject to substantial cyclical variation based on these general economic conditions. According to data published by ACT Research, in recent years, total U.S. retail sales of new Class 8 commercial vehicles have ranged from a low of approximately 97,000 in 2009, to high of approximately 334,000 in 2019. Through geographic expansion, concentration on higher margin regular service and parts revenues, and diversification of our customer base, we have attempted to reduce the negative impact of adverse general economic conditions or cyclical trends affecting any one industry or geographic area on our earnings.

Seasonality

Dealership. Our business is modestly seasonal overall. Our U.S. operations generally experience higher volumes of vehicle sales in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. Also, vehicle demand, and to a lesser extent demand for service and parts, is generally lower during the winter months than in other seasons, particularly in regions of the U.S. where dealerships may be subject to severe winters. Our U.K. operations generally experience higher volumes of new vehicle sales in the first and third quarters of each year, due primarily to new vehicle registration practices in the U.K.

Forward-Looking Statements

Certain statements and information set forth herein, as well as other written or oral statements made from time to time by us or by our authorized officers on our behalf, constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “goal,” “plan,” “seek,” “project,” “continue,” “will,” “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this report or when made, and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements include, without limitation, statements with respect to:

•our expectations regarding the COVID-19 pandemic;

•our future financial and operating performance;

•future dealership openings, acquisitions, and dispositions;

•future potential capital expenditures and securities repurchases;

•our ability to realize cost savings and synergies;

•our ability to respond to economic cycles;

•trends and sales levels in the automotive retail industry, commercial vehicles industries, and in the general economy in the various countries in which we operate;

•our ability to access the remaining availability under our credit agreements;

•our liquidity;

•performance of joint ventures, including PTS;

51

Table of Contents

•future foreign exchange rates and geopolitical events;

•the outcome of various legal proceedings;

•results of self-insurance plans;

•trends affecting the automotive or trucking industries generally and our future financial condition or results of operations; and

•our business strategy.

Forward-looking statements involve known and unknown risks and uncertainties and are not assurances of future performance. Actual results may differ materially from anticipated results due to a variety of factors, including the factors identified under Part I, Item 1A. Risk Factors. Important factors that could cause actual results to differ materially from our expectations include those mentioned in Part I, Item 1A. Risk Factors and the following:

•we depend on the success, popularity and availability of the brands we sell, and adverse conditions affecting one or more of these vehicle manufacturers, including the adverse impact on the vehicle and parts supply chain due to natural disasters or other disruptions that interrupt the supply of vehicles and parts to us (including any disruptions resulting from the shortage of microchips or other components or the COVID-19 pandemic discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part II, Item 1A. Risk Factors), may negatively impact our revenues and profitability;

•our business and the automotive retail and commercial vehicles industries in general are susceptible to adverse economic and geo-political conditions, including changes in interest rates, foreign exchange rates, customer demand, customer confidence, fuel prices, unemployment rates and credit availability (including any adverse impact from the COVID-19 pandemic discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part I, Item 1A. Risk Factors);

•increased tariffs, import product restrictions, and foreign trade risks that may impair our ability to sell foreign vehicles profitably;

•the number of new and used vehicles sold in our markets, which impacts our ability to generate new and used vehicle gross profit;

•the effect on our businesses of the changing retail environment due to certain manufacturers selling direct to consumers outside the franchise system, the potential change to an agency model of distribution in the U.K and Europe which would negatively impact revenues (although other impacts to our results of operations remain uncertain), and the growing number of electric vehicles;

•the effect on our business of new mobility technologies such as shared vehicle services, such as Uber and Lyft, and the eventual availability of driverless vehicles

•vehicle manufacturers exercise significant control over our operations, and we depend on them and the continuation of our franchise and distribution agreements in order to operate our business;

•we are subject to the risk that a substantial number of our new or used inventory may be unavailable due to recall or other reasons;

•the success of our commercial vehicle distribution operations and engine and power systems distribution operations depends upon continued availability of the vehicles, engines, power systems, and other parts we distribute, demand for those vehicles, engines, power systems, and parts and general economic conditions in those markets;

•a restructuring of any significant vehicle manufacturer or supplier;

•our operations may be affected by severe weather, or other periodic business interruptions;

•we have substantial risk of loss not covered by insurance;

52

Table of Contents

•we may not be able to satisfy our capital requirements for acquisitions, facility renovation projects, financing the purchase of our inventory, or refinancing of our debt when it becomes due;

•our level of indebtedness may limit our ability to obtain financing generally and may require that a significant portion of our cash flow be used for debt service;

•non-compliance with the financial ratios and other covenants under our credit agreements and operating leases;

•higher interest rates may significantly increase our variable rate interest costs and because many customers finance their vehicle purchases, decrease vehicle sales;

•our operations outside of the U.S. subject our profitability to fluctuations relating to changes in foreign currency values;

•with respect to PTS, changes in the financial health of its customers, labor strikes or work stoppages by its employees, a reduction in PTS’ asset utilization rates, continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, changes in values of used trucks which affects PTS’ profitability on truck sales, compliance costs in regard to its trucking fleet and truck drivers, its ability to retain qualified drivers and technicians, risks associated with its participation in multi-employer pension plans, conditions in the capital markets to assure PTS’ continued availability of capital to purchase trucks, the effect of changes in lease accounting rules on PTS customers’ purchase/lease decisions, and industry competition, each of which could impact distributions to us;

•we are dependent on continued security and availability of our information technology systems, which systems are increasingly threatened by ransomware and other cyberattacks, and we may be subject to fines, penalties, and other costs under applicable privacy laws if we do not maintain our confidential customer and employee information properly;

•if we lose key personnel, especially our Chief Executive Officer, or are unable to attract additional qualified personnel;

•new or enhanced regulations relating to automobile dealerships including those enacted in certain European countries, California, Massachusetts, and New York banning the sale of new vehicles with gasoline engines (with regulation in Europe starting as early as 2030);

•changes in tax, financial or regulatory rules, or requirements;

•we could be subject to legal and administrative proceedings which, if the outcomes are adverse to us, could have a material adverse effect on our business;

•if state dealer laws in the U.S. are repealed or weakened or new manufacturers such as those selling electric vehicles are able to conduct significant vehicle sales outside of the franchised automotive system, our automotive dealerships may be subject to increased competition and may be more susceptible to termination, non-renewal, or renegotiation of their franchise agreements;

•some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests; and

•shares of our common stock eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well.

We urge you to carefully consider these risk factors and further information under Part I, Item 1A. Risk Factors in evaluating all forward-looking statements regarding our business. Readers of this report are cautioned not to place undue reliance on the forward-looking statements contained in this report. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Except to the extent required by the federal securities laws and the Securities and Exchange Commission’s rules and regulations, we have no intention or obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise.

53

Table of Contents

Additional Information

Investors and others should note that we may announce material financial information using our company website (www.penskeautomotive.com), our investor relations website (investors.penskeautomotive.com), SEC filings, press releases, public conference calls, and webcasts. Information about Penske Automotive Group, its business, and its results of operations may also be announced by posts on the following social media channels from time to time:

•Penske Automotive Group’s Twitter feed (www.twitter.com/penskecars)

•Penske Automotive Group’s Facebook page (www.facebook.com/penskecars)

•Penske Automotive Group’s Instagram page (www.instagram.com/penskecars)

•Penske Automotive Group’s Social website (www.penskesocial.com)

The information that we post on these social media channels could be deemed to be material information. As a result, we encourage investors, the media, and others interested in Penske Automotive Group to review the information that we post on these social media channels. These channels may be updated from time to time on Penske Automotive Group’s investor relations website. The information on or accessible through our websites and social media channels is not incorporated by reference in this Annual Report on Form 10-K, and our references to such content are intended to be inactive textual or oral references only.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rates. We are exposed to market risk from changes in the interest rates on a significant portion of our outstanding debt. Outstanding revolving balances under our credit agreements bear interest at variable rates based on a margin over defined LIBOR, Sterling Overnight Index Average ("SONIA"), the Bank of England Base Rate, or the Australian Bank Bill Swap Rate. Based on an average of the aggregate amounts outstanding under these facilities during the year ended December 31, 2021, a 100-basis-point change in interest rates would result in an approximate $0.9 million change to our annual other interest expense.

Similarly, amounts outstanding under floor plan financing arrangements bear interest at a variable rate based on a margin over the prime rate, defined LIBOR, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Tokyo Interbank Offered Rate, the Australian Bank Bill Swap Rate, or the New Zealand Bank Bill Benchmark Rate. Based on an average of the aggregate amounts outstanding under our floor plan financing arrangements subject to variable interest payments during the year ended December 31, 2021, a 100 basis point change in interest rates would result in an approximate $21.7 million change to our annual floor plan interest expense.

We evaluate our exposure to interest rate fluctuations and follow established policies and procedures to implement strategies designed to manage the amount of variable rate indebtedness outstanding at any point in time in an effort to mitigate the effect of interest rate fluctuations on our earnings and cash flows. These policies include:

•the maintenance of our overall debt portfolio with fixed and variable rate components;

•the use of authorized derivative instruments;

•the prohibition of using derivatives for trading or other speculative purposes; and

•the prohibition of highly leveraged derivatives, derivatives which we are unable to reliably value, or derivatives which we are unable to obtain a market quotation.

Interest rate fluctuations affect the fair market value of our fixed rate debt, including our swaps, mortgages, and certain seller financed promissory notes but with respect to such fixed rate debt instruments, do not impact our earnings or cash flows.

Foreign Currency Exchange Rates. As of December 31, 2021, we had consolidated operations in the U.K., Germany, Italy, Japan, Canada, Australia, and New Zealand. In each of these markets, the local currency is the functional currency. In the event we change our intent with respect to the investment in any of our international operations, we would expect to implement strategies designed to manage those risks in an effort to mitigate the effect of foreign currency fluctuations on our earnings and cash flows. A ten percent change in average exchange rates versus the U.S. Dollar would have resulted in an approximate $1.02 billion change to our revenues for the year ended December 31, 2021.

We purchase certain of our new vehicles, parts, and other products from non-U.S. manufacturers. Although we purchase the majority of our inventories in the local functional currency, our business is subject to certain risks, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, changes in tax and tariff rates, other regulations and restrictions, and foreign exchange rate volatility, which may influence such

54

Table of Contents

manufacturers’ ability to provide their products at competitive prices in the local jurisdictions. Our future results could be materially and adversely impacted by changes in these or other factors.

For a discussion of the risks associated with recent changes in LIBOR reporting practices, refer to Part I, Item 1A. Risk Factors.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are incorporated by reference into this Item 8.

Item 9. Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Under the supervision and with the participation of our management, including the principal executive and financial officers, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our principal executive and financial officers, to allow timely discussions regarding required disclosure.

Based upon this evaluation, our principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, we maintain internal controls designed to provide us with the information required for accounting and financial reporting purposes.

Management’s and our auditor’s reports on our internal control over financial reporting are included with our financial statements filed as part of this Annual Report on Form 10-K.

Item 9B. Other Information

Not applicable.

Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

55

Table of Contents

PART III

The information required by Items 10 through 14 is included in our definitive proxy statement under the captions “Election of Directors,” “Our Corporate Governance,” “Ratification of the Selection of our Independent Auditor,” “Executive Officers,” “Compensation Committee Report,” “Compensation Discussion and Analysis,” “Executive Compensation,” “Director Compensation,” “Security Ownership of Certain Beneficial Owners and Management,” and “Related Party Transactions.” Such information is incorporated herein by reference.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides details regarding the shares of common stock issuable upon the exercise of outstanding options, warrants, and rights granted under our equity compensation plans (including individual equity compensation arrangements) as of December 31, 2021. Our equity plan is described in more detail in Part II, Item 8, Note 14 of the Notes to our Consolidated Financial Statements appearing below in this report.

Equity compensation plans approved by security holders — $ — 4,496,793

Equity compensation plans not approved by security holders — — —

56

Table of Contents

PART IV

Item 15. Exhibits, Financial Statement Schedules

(1)Financial Statements

The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report on Form 10-K.

(2)Financial Statement Schedule

The Schedule II — Valuation and Qualifying Accounts following the Consolidated Financial Statements is filed as part of this Annual Report on Form 10-K.

(3)Exhibits

The Exhibits listed below are filed as part of this Annual Report on Form 10-K.

Item 16. Form 10-K Summary

None.

57

Table of Contents

INDEX OF EXHIBITS

Each management contract or compensatory plan or arrangement is identified with an asterisk.

58

Table of Contents

59

Table of Contents

21 Subsidiary List.

22 List of Guarantor Subsidiaries under our Senior Subordinated Notes.

23.1 Consent of Deloitte & Touche LLP.

101.SCH XBRL Taxonomy Extension Schema.

101.CAL XBRL Taxonomy Extension Calculation Linkbase.

101.DEF XBRL Taxonomy Extension Definition Linkbase.

101.LAB XBRL Taxonomy Extension Label Linkbase.

101.PRE XBRL Taxonomy Extension Presentation Linkbase.

________________________

*Compensatory plans or contracts

In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of the Company or its subsidiaries are not filed herewith. We hereby agree to furnish a copy of any such instrument to the Commission upon request.

60

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 18, 2022.

PENSKE AUTOMOTIVE GROUP, INC.

By: /s/ Roger S. Penske

Roger S. PenskeChair of the Board andChief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Roger S. Penske Chair of the Board and February 18, 2022

Roger S. Penske Chief Executive Officer (Principal Executive Officer)

Michelle Hulgrave (Principal Financial Officer and Principal Accounting Officer)

/s/ John D. Barr Director February 18, 2022

John D. Barr

/s/ Lisa Davis Director February 18, 2022

Lisa Davis

/s/ Michael R. Eisenson Director February 18, 2022

Michael R. Eisenson

/s/ Robert H. Kurnick, Jr. Director February 18, 2022

Robert H. Kurnick, Jr.

/s/ Wolfgang Dürheimer Director February 18, 2022

Wolfgang Dürheimer

/s/ Kimberly J. McWaters Director February 18, 2022

Kimberly J. McWaters

/s/ Greg Penske Director February 18, 2022

Greg Penske

/s/ Sandra E. Pierce Director February 18, 2022

Sandra E. Pierce

/s/ Kota Odagiri Director February 18, 2022

Kota Odagiri

/s/ Greg C. Smith Director February 18, 2022

Greg C. Smith

/s/ Ronald G. Steinhart Director February 18, 2022

Ronald G. Steinhart

/s/ H. Brian Thompson Director February 18, 2022

H. Brian Thompson

61

Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PENSKE AUTOMOTIVE GROUP, INC.

As of December 31, 2021, and 2020 and For the Years Ended

December 31, 2021, 2020, and 2019

Management Report on Internal Control Over Financial Reporting F - 2

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) F - 3

Consolidated Balance Sheets F - 5

Consolidated Statements of Income F - 6

Consolidated Statements of Comprehensive Income (Loss) F - 7

Consolidated Statements of Cash Flows F - 8

Consolidated Statements of Equity F - 9

Notes to Consolidated Financial Statements F - 10

F - 1

Table of Contents

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Penske Automotive Group, Inc. and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors that the Company’s internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation and presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on our assessment, we believe that as of December 31, 2021, the Company’s internal control over financial reporting is effective based on those criteria.