Interest Rate Swaps

12 Months Ended

Dec. 31, 2012

Interest Rate Swaps

Interest Rate Swaps

10.  Interest Rate Swaps

We periodically use interest rate swaps to manage interest rate risk associated with our variable rate floor plan debt. We are party to interest rate swap agreements through December 2014 pursuant to which the LIBOR portion of $300,000 of our floating rate floor plan debt is fixed at a rate of 2.135% and $100,000 of our floating rate floor plan debt is fixed at a rate of 1.55%. We may terminate these agreements at any time, subject to the settlement of the then current fair value of the swap arrangements. During 2010 and early January 2011, we were party to interest rate swap agreements pursuant to which the LIBOR portion of $300,000 of our floating rate floor plan debt was fixed at 3.67%.

We used Level 2 inputs to estimate the fair value of the interest rate swap agreements. As of December 31, 2012 and 2011, the fair value of the swaps designated as hedging instruments was estimated to be a liability of $14,337 and $15,952, respectively. During 2012 and 2011, there was no hedge ineffectiveness recorded in our income statement. During the year ended December 31, 2012, the swaps increased the weighted average interest rate on our floor plan borrowings by approximately 38 basis points.