Interest Rate Swaps

3 Months Ended

Mar. 31, 2012

Interest Rate Swaps [Abstract]

Interest Rate Swaps

8. 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. The Company is party to interest rate swap agreements through December 2014 pursuant to which the LIBOR portion of $300,000 of the Company’s floating rate floor plan debt is fixed at 2.135% and $100,000 of the Company’s floating rate floor plan debt is fixed at a rate of 1.55%. The Company may terminate these agreements at any time, subject to the settlement of the then current fair value of the swap arrangements.

Through January 2011, the Company was party to interest rate swap agreements pursuant to which the LIBOR portion of $300,000 of the Company’s floating rate floor plan debt was fixed at 3.67%.

The Company used Level 2 inputs to estimate the fair value of the interest rate swap agreements. As of March 31, 2012 and 2011, the fair value of the swaps designated as hedging instruments was estimated to be a liability of $16,322 and an asset of $351, respectively.

During the three months ended March 31, 2012 and 2011, there was no hedge ineffectiveness recorded on the Company’s income statement. During the three months ended March 31, 2012, the swaps increased the weighted average interest rate on the Company’s floor plan borrowings by approximately 40 basis points. The impact of the swaps on the weighted average interest rate of the Company’s floor plan borrowings during the three months ended March 31, 2011 was insignificant.