– Financial Instruments and Fair Value

The Company has various financial instruments that it must measure at fair value on a recurring basis. The Company also applies the provisions of fair value measurement to various nonrecurring measurements for its financial and nonfinancial assets and liabilities.

Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (an exit price). The Company measures its assets and liabilities using inputs from the following

three

levels of the fair value hierarchy:

Level

inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access on the measurement date.

Level

inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are

not

active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level

includes unobservable inputs that reflect the Company’s assumptions about what factors market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

Financial instruments consist primarily of cash, accounts receivable, accounts payable and floor plan notes payable. The carrying values of the Company’s financial instruments approximate fair value due either to their short-term nature or existence of variable interest rates, which approximate market rates. Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments on

September 30, 2018,

and

December 31, 2017.

The carrying value of current assets and current liabilities approximates the fair value due to the short maturity of these items.

The fair value of the Company’s long-term debt is based on secondary market indicators. Because the Company’s debt is

not

quoted, estimates are based on each obligation’s characteristics, including remaining maturities, interest rate, credit rating, collateral and liquidity. Accordingly, the Company concluded that the valuation measurement inputs of its long-term debt represent, at its lowest level, current market interest rates available to the Company for similar debt and its current credit standing and has categorized such debt within Level

of the hierarchy framework. The carrying amount approximates fair value.

If investments are deemed to be impaired, the Company determines whether the impairment is temporary or other than temporary. If the impairment is deemed to be temporary, the Company records an unrealized loss in other comprehensive income. If the impairment is deemed other than temporary, the Company records the impairment in the Company’s Consolidated Statements of Income and Comprehensive Income.

Auction Rate Securities

In prior years, the Company invested in interest-bearing short-term investments primarily consisting of investment-grade auction rate securities classified as available-for-sale and reported at fair value. These types of investments were designed to provide liquidity through an auction process that reset the applicable interest rates at predetermined periods ranging from

days. This reset mechanism was intended to allow existing investors to continue to own their respective interest in the auction rate security or to gain immediate liquidity by selling their interests at par.

As of

September 30, 2018,

the Company did

not

hold any auction rate securities. The issuer redeemed, at par, all of the auction rate securities in the

second

and

third

quarters of

2018.

December 31, 2017,

the Company held auction rate securities with underlying tax-exempt municipal bonds that mature in

2030

and had a fair value and a cost basis of

$6.4

million.

Long-Lived Assets

During the

first

quarter of

2016,

the Company instituted plans to consolidate its dealership network. In

2016,

the Company recorded an impairment charge related to the value of the real estate in the affected locations and a write-down of certain excess real estate in the amount of

$7.5

million.

The fair value measurements for the Company’s long-lived assets are based on Level

inputs. Fair values of the value of the real estate were determined based on evaluations by a

third

-party real estate broker that utilized its knowledge and historical experience in real estate markets and transactions. During

2016

and

2017,

the Company sold

seven

of the properties previously classified as held for sale with a fair value of

$8.3

million. During the

third

quarter of

2017,

the Company made the decision to put

one

of the properties previously classified as “held for sale” with a fair value of

$1.4

million back into service. In

February 2018,

the Company sold

one

of the properties with a fair value of

$1.9

million. In

May 2018,

the Company sold another

one

of the properties with a fair value of

$1.0

million. In

July 2018,

the Company sold

two

properties with a fair value of

$1.8

million. As of

September 30, 2018,

the remaining real estate associated with the restructuring activities is included in assets held for sale on the Consolidated Balance Sheets.

The following table presents long-lived assets measured and recorded at fair value on a nonrecurring basis (in thousands):

Description		Fair Value Measurements Using Significant Unobservable Inputs September 30, 201 8
Long-lived assets held for sale		$	4,827