Interest Rate Swaps

6 Months Ended

Jun. 30, 2013

Interest Rate Swaps

Interest Rate Swaps

8. 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 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.

We used Level 2 inputs to estimate the fair value of the interest rate swap agreements. As of June 30, 2013 and December 31, 2012, the fair value of the swaps designated as hedging instruments was estimated to be a liability of $10,743 and $14,337, respectively. During 2013 and 2012, there was no hedge ineffectiveness recorded in our income statement. During the three and six months ended June 30, 2013, the swaps increased the weighted average interest rate on our floor plan borrowings by approximately 35 and 37 basis points, respectively.