DEF 14A of Lithia Motors Inc, Mar 12, 2024

DEF 14A of Lithia Motors Inc

Filed Mar 12, 2024 · FY20230001140361-24-012693

Open on EDGAR

  1. Director Nominees

    Director Nominees

  2. Director Nominees

    | Lithia Motors, Inc. 2024 Proxy Statement | 02: Directors and Nominees 10 |

  3. Director Nominee Biographies

    Director Nominee Biographies

  4. Director Nominee Biographies

    | | Sidney B. DeBoer | | | Biography | | Why Nominated | | Sidney B. DeBoer took Lithia Motors public in 1996 and is the Chairman of the Board. Mr. DeBoer served as Chief Executive Officer and Secretary from 1968 through 2011, and then as Executive Chairman through the end of 2015. His charitable work on the Southern Oregon University Foundation Board, Oregon Community Foundation and the Oregon Shakespeare Festival has created a vibrant community for our Company’s headquarters. Mr. DeBoer attended Stanford University and the University of Oregon. | | Mr. DeBoer’s founder’s spirit and pioneering work in the public auto retail sector and as an automotive dealer has earned him numerous awards and recognition. His familiarity with our business, executive leadership knowledge and industry experience make him uniquely qualified to serve as our Chair. |

  5. Director Nominee Biographies

    | | Bryan B. DeBoer | | | Biography | | Why Nominated | | Prior to becoming CEO, Bryan B. DeBoer was Senior Vice President of Mergers & Acquisitions/Operations and then Chief Operating Officer driving the growth of Lithia and transforming the Company culture to an entrepreneurial and high-performance model. Upon joining Lithia in 1989, Mr. DeBoer grew through the store positions of Finance Manager, Used Vehicle Manager, General Sales Manager, General Manager and multi-store General Manager. Mr. DeBoer has a B.S. degree, summa cum laude, from Southern Oregon University in Business Administration. He also graduated from the National Automobile Dealers Association Dealer Academy. | | Mr. DeBoer has been our CEO and President since 2012 and first became a director in 2008. Mr. DeBoer’s store experience, passion for mergers and acquisitions and demonstrated ability to develop strong manufacturer relationships drive our growth. His enthusiasm for the car business combined with a visionary spirit set the tone for our innovative and entrepreneurial culture. |

  6. Director Nominee Biographies

    | | James E. Lentz | | | Biography | | Why Nominated | | James E. Lentz spent the majority of his more than 40 years in the auto industry at Toyota, where he served as its chief executive officer from 2013 until his retirement in 2020. During his 38 years with Toyota, Mr. Lentz oversaw all business for Toyota’s North American region, including manufacturing, research and development, sales, marketing, product support, and corporate resources. Mr. Lentz led and contributed to several key milestones in Toyota’s history, including the Scion brand launch and the recognition of Toyota and Lexus brands as leaders in customer experience. He has been named “Marketer of the Year” by Advertising Age, an “All-Star” by Automotive News, and “Industry Leader of the Year” by the Automotive Hall of Fame. Mr. Lentz also serves as an advisor to several private companies. Mr. Lentz earned both his undergraduate degree and M.B.A. in Finance from the University of Denver. | | Mr. Lentz joined our Board in October of 2022. With his tenured career in the automotive industry, and extensive experience in corporate resources, Mr. Lentz is lending his expertise while serving on our compensation and audit committees. |

  7. Director Nominee Biographies

    | Lithia Motors, Inc. 2024 Proxy Statement | 02: Directors and Nominees 13 |

  8. Director Nominee Biographies

    | | Stacy C. Loretz-Congdon | | | Biography | | Why Nominated | | Stacy C. Loretz-Congdon, in 2016 and after 26 years of service, retired from Core-Mark Holding Company, Inc., one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry and a Fortune 500 company which merged with Performance Food Group Company (NYSE: PFGC) in 2021. Ms. Congdon served in various capacities at Core-Mark, including as Senior Vice President, Chief Financial Officer and Assistant Secretary from December 2006 to May 2016, during which time she also served on Core-Mark’s Information Technology Steering Committee and the Investment Committee, as well as a board member of all Core-Mark subsidiaries. Ms. Loretz-Congdon has served on the board of Farmer Bros. Co (Nasdaq: FARM) since 2018, where she currently serves as Audit Committee Chair. In 2015, Business Insider named Ms. Loretz-Congdon as one of the Top 50 female CFOs in the Fortune 500 and Convenience Store News named her Woman of the Year. Prior to joining Core- Mark, Ms. Loretz-Congdon was an auditor for Coopers & Lybrand. Ms. Loretz-Congdon received her Bachelor of Science degree in Accounting from California State University, San Francisco. | | Ms. Loretz-Congdon joined our Board in April 2023. She brings to our Board her deep experience in accounting and the oversight of Fortune 500 public company finance functions, including all corporate finance disciplines, strategy execution, risk mitigation, investor relations, as well as involvement with human capital management and technology initiatives. She is also an audit committee financial expert as defined under SEC rules. |

  9. Director Nominee Biographies

    | | Shauna F. Mcintyre | | | Biography | | Why Nominated | | Shauna F. McIntyre has served as CEO of Cuberg since February 2024. She previously served as CEO of automotive technology company, Sense Photonics, from April 2020 until October 2021, and previously in various roles at Google. She has held integral roles at Ouster, Electric Last Mile Solutions, Egon Zehnder International, Achates Power, Inc., Honeywell International, Inc., McKinsey & Company, and Ford Motor Company. Ms. McIntyre served on the board of directors for the Los Altos Educational Foundation and was also a co-founding board member for the North American Council for Freight Efficiency. Ms. McIntyre holds a B.S. degree from the University of California, Los Angeles, a M.S. degree from the University of California, Berkeley, and an M.B.A. degree from Harvard. | | Ms. McIntyre joined our Board in April 2019. Ms. McIntyre brings a wealth of knowledge and expertise to our Board in a wide variety of subjects within the automotive industry, including manufacturing, cyber security, technology, innovation, E-commerce, finance and operations. Ms. McIntyre was selected to serve on our Board of Directors because of her valuable strategic, industry and leadership experience. |

  10. Director Nominee Biographies

    | Lithia Motors, Inc. 2024 Proxy Statement | 02: Directors and Nominees 14 |

  11. Director Nominee Biographies

    | | Louis P. Miramontes | | | Biography | | Why Nominated | | Louis P. Miramontes has been an independent financial advisor since 2014. Mr. Miramontes serves on the board of directors of Oportun Financial Corporation, where he is a member of the Audit and Nominating and Governance committees, and previously served on the board of directors of Rite Aid Corporation until August 2023. He also provides advisory services to a real estate development company. Previously, Mr. Miramontes had a distinguished 38-year career at KPMG, where he served in many leadership roles, including managing partner of the San Francisco office and Senior Partner for the Latin America region. He provided audit services to public and private clients in the retail, financial services, and real estate sectors. Mr. Miramontes holds a B.S. degree in Business Administration from California State University, East Bay. | | Mr. Miramontes joined our Board in 2018 and chairs our Compensation Committee. Mr. Miramontes has extensive experience in accounting, financial reporting and corporate governance. He is also an audit committee financial expert as defined under SEC rules. |

  12. Director Nominee Biographies

    | | David J. Robino | | | Biography | | Why Nominated | | David J. Robino began his management career at The Maytag Corporation and Pepsi-Cola. He joined AC Nielsen in 1989, culminating as Senior Vice President of Nielsen International, based in Brussels, Belgium. After a successful Vice Presidency at AT&T’s Business Markets Division, Mr. Robino left to lead Gateway, Inc. as Executive Vice President and Chief Administrative Officer and later Vice Chairman. Upon retiring from Gateway, Mr. Robino served as a member of the board of directors of Memec, Inc., then the world’s leading distributor of specialty semiconductors, and Insight Enterprises, Inc., a global provider of information technology capabilities to enterprises. He served on the faculty of Southern Oregon University’s School of Business from 2012 to 2016. Mr. Robino has an M.S. degree in Industrial Relations from Iowa State University and B.A. degree in Social Studies from Graceland College. | | Mr. Robino joined our Board in 2016. Mr. Robino’s human capital, business, executive management and board experience over the course of his career at many large firms internationally provides us with expertise across a broad range of subjects. Mr. Robino chairs our Nominating and Governance Committee and is our Lead Independent Director. |

  13. Director Nominee Biographies

    | Lithia Motors, Inc. 2024 Proxy Statement | 02: Directors and Nominees 15 |

  14. Board of Directors

    Board of Directors Our Bylaws provide for not fewer than five and not more than nine directors. Our Board of Directors has the discretion to set the size of our board from time to time. Our Board of Directors has set the number of directors at seven as of our 2024 Annual Meeting of Shareholders. There is no requirement that directors attend our Annual Meeting of Shareholders, but directors are encouraged to do so. Our Board of Directors held fifteen meetings in 2023. Each incumbent director attended at least 80% of all meetings of the Board and of the Board committees on which the director served. All of our incumbent directors attended our 2023 Annual Meeting of Shareholders.

  15. Compensation of Directors

    Compensation of Directors

  16. Non-Employee Director Compensation

    Non-Employee Director Compensation Our directors serve from election at each Annual Meeting of Shareholders until the following annual meeting or until the director’s successor is elected and qualified. The Compensation Committee annually reviews non-employee director compensation and recommends any applicable changes to our Board of Directors. The Compensation Committee engages independent consultants to review the market competitiveness of the compensation paid to the non-employee directors compared to Company peers. The Compensation Committee engaged Pay Governance in 2023 to help review and assess non-employee director compensation for the 2023–2024 Board service year. Pay Governance recommended, and the Board of Directors approved, changes to the director compensation program to retain competitive positioning for the 2023–2024 Board service year. The changes include an increase to the cash retainer amounts and equity grants, as set forth below, and places the compensation at the median compared to Company peers, which are the same companies in the peer group used for executive compensation comparisons. The changes in the director compensation program are effective for the 2023–2024 service year. Accordingly, the actual compensation paid to a non-employee director in the 2023 calendar year is earned under two separate compensation programs. Except for Sidney B. DeBoer, directors who are employees of the Company are not compensated separately for their service as directors. As noted in the Non-Employee Director Compensation Table, for his services as a director, Sidney B. DeBoer receives the same compensation, in the same form, as the Company pays to its non-employee directors. Separately, Sidney B. DeBoer receives payments for his prior services rendered as an employee that are described below under “Certain Relationships and Related Transactions and Director Independence” on page 77. Executive officers of the Company do not recommend or determine non-employee director compensation. Our non-employee directors for the 2023-2024 Board service year were Mses. Cain, Loretz-Congdon and McIntyre and Messrs. Lentz, Miramontes, Roberts and Robino.

  17. Non-Employee Director Compensation

    | Lithia Motors, Inc. 2024 Proxy Statement | 03: Corporate Governance - Board Leadership and Structure 26 |

  18. Non-Employee Director Compensation

    We pay a majority of our non-employee directors’ compensation as equity awards. The Compensation Committee believes that paying a majority of the annual compensation in equity provides non-employee directors with a vested interest in our long-term financial success and aligns their interests with those of our shareholders. The compensation structure for our non-employee directors for the 2023–2024 Board service year was as follows:

  19. Non-Employee Director Compensation

    | • | $100,000 cash (no increase from the 2022–2023 Board service year) plus an additional $25,000 cash to each committee chair, and $35,000 cash ($5,000 increase from the 2022–2023 Board service year) to the Lead Independent Director. In each case, cash amounts are paid in 12 monthly installments over the service period. |

  20. Non-Employee Director Compensation

    | • | An award for a number of restricted stock units (“RSUs”), which are settled in shares of our common stock, with a value of $180,000 ($10,000 increase from the 2022–2023 Board service year). The number of RSUs awarded is based on the average closing share price for the 40 trading days prior to the award grant date. |

  21. Non-Employee Director Compensation

    | • | RSU awards to our non-employee directors are granted immediately after our annual shareholder meeting and vest over one year, with 25% vesting on the first business day of the month after each regularly scheduled quarterly meeting of our Board of Directors if the director continues to serve on that day. All equity grants to non-employee directors are subject to our stock ownership policy. See “Non-Employee Director Stock Ownership Policy; Hedging and Pledging Restrictions” below. |

  22. 2023 Director Compensation

    2023 Director Compensation

  23. Non-Employee Director Compensation Table

    Non-Employee Director Compensation Table The following table summarizes compensation paid to non-employee directors and to our Chairman during calendar year 2023, which amounts represent the 2023 portion of both the 2022–2023 Board term and the 2023–2024 Board term:

  24. Non-Employee Director Compensation Table

    | Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total Compensation | | Sidney B. DeBoer(4) | $158,333 | $171,971 | $— | $330,304 | | Susan O. Cain | $125,000 | $171,971 | $— | $296,971 | | James E. Lentz | $100,000 | $171,971 | $— | $271,971 | | Stacy C. Loretz-Congdon | $66,667 | $171,971 | $— | $238,638 | | Shauna F. McIntyre | $100,000 | $171,971 | $— | $271,971 | | Louis P. Miramontes | $125,000 | $171,971 | $— | $296,971 | | Kenneth E. Roberts | $100,000 | $171,971 | $— | $271,971 | | David J. Robino | $158,333 | $171,971 | $— | $330,304 |

  25. Non-Employee Director Compensation Table

    | (1) The fees reflected in the column “Fees Earned or Paid in Cash” in the above table are the actual fees earned in calendar year 2023. |

  26. Non-Employee Director Compensation Table

    | (2) The amounts set forth in this column reflect the grant date fair value of all awards granted in 2023 calculated in accordance with FASB ASC Topic 718 and excluding the effects of any forfeitures. (See Note 13 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for the valuation and assumptions and other information related to our stock awards). |

  27. Non-Employee Director Compensation Table

    | (3) Amounts paid by us on behalf of our Board members for long-term care insurance premiums. |

  28. Non-Employee Director Compensation Table

    | (4) This amount reflects the fees the Board has agreed to pay Mr. DeBoer for his service as a director under his Director Service Agreement, and does not include the amounts paid to Mr. DeBoer under his September 14, 2015 Transition Agreement, which are described under “Certain Relationships and Related Transactions and Director Independence” on page 77. |

  29. Non-Employee Director Compensation Table

    | Lithia Motors, Inc. 2024 Proxy Statement | 03: Corporate Governance - Board Leadership and Structure 27 |

  30. Non-Employee Director Compensation Table

    The following table sets forth all unvested restricted stock units held by each non-employee director as of December 31, 2023:

  31. Non-Employee Director Compensation Table

    | Name | Unvested Stock Awards (#) | | Sidney B. DeBoer | 194 | | Susan O. Cain | 194 | | James E. Lentz | 194 | | Stacy C. Loretz-Congdon | 194 | | Shauna F. McIntyre | 194 | | Louis P. Miramontes | 194 | | Kenneth E. Roberts | 194 | | David J. Robino | 194 |

  32. Compensation Discussion and Analysis (CD&A)

    | Table of Contents | | | 05 Compensation Discussion and Analysis (CD&A) | | | Introduction | 32 | | Executive Summary | 33 | | Performance Highlights | 36 | | Compensation Components | 40 | | 2023 Compensation Program Design & Results | 41 | | Base Salary | 41 | | Short-Term Incentive Plan | 42 | | Long-Term Incentive Plan | 46 | | Compensation Decision Making Process | 48 | | Executive Compensation Governance Components | 50 | | Compensation Committee Report | 52 | | 06 Compensation Tables | | | Summary Compensation Table | 53 | | Grants of Plan-Based Awards Table for 2023 | 54 | | Outstanding Equity Awards at 2023 Fiscal Year-End | 55 | | Stock Vested for 2023 | 56 | | Non-Qualified Deferred Compensation | 56 | | Potential Payments Upon Termination or Change in Control | 56 | | CEO Pay Ratio | 60 | | Pay Versus Performance | 61 |

  33. 2023 Compensation Program Design Restructure

    | • | We no longer use earnings per share (EPS) in both our cash-based short-term incentive plan and equity-based long-term incentive plan. We substituted profit growth for EPS in our short term incentive plan to provided a more predictable line of sight incentive to executives and we removed EPS from our long term incentive plan. |

  34. 2023 Compensation Program Design Restructure

    | • | We incorporated relative metrics into both of our plans, including a relative total shareholder return (TSR) modifier in our long-term incentive plan (LTIP). |

  35. 2023 Compensation Program Design Restructure

    | • | We updated our long-term incentive plan from last year’s structure, which consisted entirely of performance share units (PSUs) with a 1-year performance period followed by 3-year service-based vesting, to a more long-term and performance focused structure, 75% of which consists of PSUs which vest after a 3-year performance period and 25% of which consists of RSUs which service-vest annually over three-years. |

  36. 2023 Compensation Program Design Restructure

    The particulars of these changes are outlined below: Short-Term Incentive Plan: Our new short-term incentive plan utilizes relative operating profit growth measured against our six automotive peers within our expanded retail peer group.

  37. 2023 Compensation Program Design Restructure

    | Short-Term Incentive Plan YOY Changes | | | 2022 Design | 2023 Design | | Absolute Metrics • Adjusted EPS (50%) • Absolute Revenue (30%) • Strategic (20%) | Absolute and Relative Metrics • Relative Quarterly Operating Profit Growth (compared to Auto Peers) (40%) • Absolute Revenue (40%) • Strategic (20%) | | Performance Period • 1-year | Performance Period • 1-year |

  38. 2023 Compensation Program Design Restructure

    Long-Term Incentive Plan: Compared to our 2022 long-term incentive plan, which used absolute metrics and a 1-year performance period followed by 3 years of service-based vesting, the 2023 long-term incentive plan uses a PSU/RSU mix, with PSUs incorporating a 3-year performance period based on our revenue growth relative to our expanded retail peers, a relative TSR modifier, and an operating margin governor which sets the upper and lower bounds of any payout.

  39. 2023 Compensation Program Design Restructure

    | Long-Term Incentive Plan YOY Changes | | | 2022 Design | 2023 Design | | Absolute Metrics • Adjusted EPS (75%) • Revenue (25%) | Relative Metrics (compared to full peer group) • Relative Revenue Growth Ranking with 2 modifiers: i. Relative TSR Modifier (+/- up to 25% on base attainment) ii. Operating Margin Governor (sets upper and lower bounds of payout) | | 100% PSUs with Performance and Service-Based Vesting • 100% PSUs w/ 1-year performance period followed by 3 years of service-based vesting. | 75% PSUs with Performance Vesting • 3-year performance period and no subsequent service-based vesting. 25% RSUs with Service-Based Vesting • 3-year service-based vesting. |

  40. CEO Target Total Direct Compensation Increase

    | • | the appropriate level of compensation in our expanded retail peer group, which reflects our new growth, scale and scope; |

  41. CEO Target Total Direct Compensation Increase

    | • | the structural changes to our compensation program described above which make our long-term incentive program more challenging to achieve, including the expansion of our performance period from one to three years and the addition of a TSR modifier. |

  42. CEO Target Total Direct Compensation Increase

    | Category | Changes | 2022 | 2023 | Δ | | Salary | • Increase of 4% | $1.25M | $1.30M | $0.05M | | Short-Term Incentive Plan | • Increase from 128% of salary to 150% + design changes described above | $1.60M | $1.95M | $0.35M | | Long-Term Incentive Plan | • Increase of 35% + design changes described above | $7.95M | $10.75M | $2.8M | | | Total: | $10.8M | $14.0M | $3.2M |

  43. CEO Target Total Direct Compensation Increase

    The PSUs and RSUs granted to our CEO in 2023 had a target value of $10.75M. However, the value reported in the summary compensation table, as dictated by the applicable accounting and SEC rules, is $15.3M, principally due to a value premium attached to the TSR- linked PSUs, a 1-month delay in grant as we implemented our new design (during which time we saw an outperforming 46% increase in stock price), and our using a 40-day average to determine the number of shares and to measure relative TSR. Our CEO’s PSUs, which make up most of the 2023 long-term incentive plan awards, vest only after positive performance over 3 years and include a relative TSR modifier. As a result, real pay delivery is dependent on generating positive shareholder outcomes over 3 years, and is not tied to the point-in-time value assessed by the accounting rules.

  44. 2024 and Future Compensation

    | • | Incentive Plan Designs: |

  45. 2024 and Future Compensation

    | ○ | As we enter the execution phase of our growth strategy, we also increased the weighting of financial metrics in our short-term incentive plan from 80% to 90%, with the last 10% contingent on achieving progress toward corporate responsibility instead of broader strategic initiatives. In addition, we removed the operating margin governor from our long-term incentive plan and added a relative net income multiplier alongside the existing relative revenue multiplier and relative TSR modifier, which more directly incentivizes peer leading long-term profitable growth. |

  46. 2024 and Future Compensation

    | ○ | In order to manage the variance between reportable grant-date accounting values and target grant date values in our long-term incentive plan, we returned to our historical practice of granting executive equity in early January. Notwithstanding this change, due to an unexpected substantial increase in the Company’s stock price in December 2023, the expected grant date accounting value of our CEO’s 2024 equity was estimated to be materially in excess of target. In advance of the grant date of our CEO’s equity, our Compensation Committee, in conjunction with its advisors, discussed various updated designs and modeled several alternatives to manage that variance. Taking that feedback into account, the Compensation Committee decided to shorten the averaging period used for measuring relative TSR, and for determining the number of shares granted, from 40 days to 20 days. As a result, the accounting value of the 2024 grants is more in-line with the target value. The Compensation Committee’s advisors highlighted that this change could also be beneficial for future grants. |

  47. 2023 Short-Term Incentive

    2023 Short-Term Incentive Management’s strong operational and strategic performance, which drove the growth of operating profit relative to our automotive peers and absolute revenue, resulted in our short-term incentive plan paying out at 136.7% for Bryan B.DeBoer, Christopher S. Holzshu, Tina H. Miller, and George N. Hines. Our short-term incentive plan for Scott A. Hillier also depends on achieving store profits, manufacturer approvability, and strategic goals and paid out at 155% following strong profitability.

  48. 2023 Long-Term Incentive

    2023 Long-Term Incentive Our executives received 25% of their compensation under our 2023 long-term incentive plan in the form of RSUs that vest in annual installment over 3 years and 75% in the form of PSUs that vest only after a 3-year performance period based on our revenue growth relative to our expanded retail Peer Group, a relative TSR modifier, and an operating margin governor, which sets the upper and lower bounds of any payout. The 2023 PSUs will vest and pay out, subject to performance, after the end of their performance period on December 31, 2025.

  49. 2023 Long-Term Incentive

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 37 |

  50. Short-Term Incentive Plan

    Short-Term Incentive Plan We refreshed our short-term incentive plan to incorporate relative metrics that differ from our long-term incentive plan. Specifically, the 2023 short-term incentive plan rewards executives based on our operating profit growth relative to our automotive peers; our revenue growth, which is a useful measurement of our overall company health; and execution of our strategic development plan, which incorporates our focus on acquisitions, multi-channel innovation, corporate social responsibility and other initiatives; and store profits, as applicable.

  51. How our 2023 Short-Term Incentive Plan Works

    How our 2023 Short-Term Incentive Plan Works In 2023, our short-term incentive plan compensated executives for achieving annual performance goals in each of the above criteria. Each NEO had a target cash bonus potential based on a market competitive percentage of base salary ranging from approximately 67% to 150%, which was paid out according to the attainment of the above referenced performance goals. Each executive’s target bonus, expressed as a percentage of salary, and their weighted performance goals, were as follows:

  52. How our 2023 Short-Term Incentive Plan Works

    | | | | Weighting of Performance Factors | | | | | Named Executive Officer | Target Short-Term Incentive as % of Base Salary | Relative Operating Profit Growth | Revenue | Strategic Objective (Including CSR) | Store Profits | Approvability | | Bryan B. DeBoer | 150% | | | | — | — | | Tina H. Miller | 85% | | | | | | | Christopher S. Holzshu | 120% | | | | | | | George N. Hines | 67% | | | | | | | Scott A. Hillier | 80% | — | — | | | |

  53. Establishment of 2023 Targets and Actual Cash Payouts

    Establishment of 2023 Targets and Actual Cash Payouts We believe using metrics that promote high performance and profitable growth are critical. These performance criteria are approved annually by the Compensation Committee and are designed to reward both short-term and long-term value creation, support growth in profitability, maximize our capital deployment strategies and increase share value. Management provides the Compensation Committee with a quarterly review of the short-term incentive plan attainment pacing. Short- term incentive plan payouts are calculated based on straight-line interpolation between the threshold, target, and maximum payout percentages. If we do not achieve threshold performance, then no short-term incentive plan is earned or paid. The Compensation Committee has discretion to reduce awards under the short-term incentive plan.

  54. Establishment of 2023 Targets and Actual Cash Payouts

    | • | Relative Operating Profit Growth: Bryan B. DeBoer, Christopher S. Holzshu, Tina H. Miller, and George N. Hines’s short-term incentive plan payouts depended on our quarterly operating profit growth relative to the average quarterly operating profit growth amongst certain of our automotive peers for the four consecutive quarters ending before December 15, 2023. Quarterly operating profit growth is calculated by determining the percentage growth of a company’s operating income in each quarter over the corresponding quarter from the prior year, and summing that quarterly operating profit growth percentage for each of the four quarters in the performance period, with payouts as shown below. |

  55. Establishment of 2023 Targets and Actual Cash Payouts

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 42 |

  56. Establishment of 2023 Targets and Actual Cash Payouts

    | Relative Operating Profit Growth | % Point Delta to Peer Average | % of Payout | | Maximum | 15% | 200% | | Target | (5%)–5% | 100% | | Threshold | (15)% | 50% |

  57. Establishment of 2023 Targets and Actual Cash Payouts

    | Symbol | Company Name | | ABG | Asbury Automotive Group, Inc. | | AN | AutoNation, Inc. | | KMX | CarMax, Inc. | | GPI | Group 1 Automotive, Inc. | | PAG | Penske Automotive Group, Inc. | | SAH | Sonic Automotive, Inc. |

  58. Establishment of 2023 Targets and Actual Cash Payouts

    Our operating profit growth for the year was 0.06 percentage points over the average for our automotive peers. Accordingly, this portion of each executive’s 2023 short-term incentive plan award paid out at 100%.

  59. Establishment of 2023 Targets and Actual Cash Payouts

    | • | Revenue Growth: Bryan B. DeBoer, Christopher S. Holzshu, Tina H. Miller, and George N. Hines’s short-term incentive plan payouts also depend on attainment of specific revenue goals. The revenue growth goals for 2023 were set based upon the Company’s Board approved business plan. For 2023, the target range of $29 billion to $30 billion was higher than our 2022 results of $28.2 billion and in line with our strategic plan. |

  60. Establishment of 2023 Targets and Actual Cash Payouts

    | Revenue Goal | Objectives ($) | YOY Objective Growth % | % of Payout | | Maximum | 31.5B | 7% | 200% | | Target | 29B–30B | 11%–10% | 100% | | Threshold | 26.5B | 17% | 50% |

  61. Establishment of 2023 Targets and Actual Cash Payouts

    We achieved $31.0 billion in revenue this year, exceeding our target goal of $30 billion by $1 billion. Accordingly, this portion of each executive’s 2023 short-term incentive plan award paid out at 166.8%.

  62. Establishment of 2023 Targets and Actual Cash Payouts

    | • | Strategic Objectives: Bryan B. DeBoer, Christopher S. Holzshu, Tina H. Miller, George N. Hines’ and Scott Hillier’s short-term incentive plan payouts also depend on attainment of specific strategic objectives. Our 2023 strategic objectives focused on progress toward our overall strategic plan through key acquisitions, including global expansion, innovation in and diversification of our revenue streams and Corporate Sustainability & Responsibility (CSR) goals. These goals are rigorous and intended to focus management on integration of new and past acquisitions, exploration of new products and services, strategic leadership hires and development, capital market progress, relative price-to-earnings ratio, and progress toward our CSR initiatives. Each year, management determines the extent to which strategic objectives are accomplished, which is then presented to the Compensation Committee for approval. Payout percentages are as follows: |

  63. Establishment of 2023 Targets and Actual Cash Payouts

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 43 |

  64. Establishment of 2023 Targets and Actual Cash Payouts

    | Objectives | % of Payout | | Significantly Above Target | 200% | | Above Target | 150% | | Target | 100% | | Below Target | 50% |

  65. Establishment of 2023 Targets and Actual Cash Payouts

    We successfully executed on our strategic objectives this year, as shown below. Accordingly, these results, as approved, warranted a payout of this portion of each executive’s 2023 short-term incentive plan award schedule at 150% based on achievement of our goals, including:

  66. Establishment of 2023 Targets and Actual Cash Payouts

    | Network Development (190% attainment) | Driveway Finance Corporation (165% attainment) | | • Acquired $3.8 billion in expected annualized revenues; 55 stores and 2 new franchises across 7 transactions • Strategically divested 7 stores, recovering $90mm+ creating more capital for acquisitions • Expanded internationally with Jardine Motors UK Limited (Q1) and further with Arden BMW Mini Motorrad (Q3), adding combined 40 dealerships and 15 franchises in the United Kingdom • Extended our US presence into 3 new markets: Honda in San Antonio, TX (Q3), Virginia Beach and Roanoke, VA as part of the Priority Acquisition (Q2) | • Grew portfolio from $2.1 billion to nearly $3.2 billion as of December 31, 2023 • Originated 70,000 loans totaling, $2.1 billion in 2023 and finished as our #1 lender with 11% penetration rate • Completed four ABS offerings during the year with combined proceeds of $1.9 billion • Achieved average FICO of 732 and APR of 9.64% on loans originated in 2023 | | Driveway (50% attainment) | Corporate Sustainability & Responsibility (100% attainment) | | • Over 33 million MUVs in 2023; +62% from 2022 • Incremental Driveway transactions -35% YTD from 2022 to 2023 (DW SHOP transactions +18% YoY) • Total Driveway revenue over $627 million YTD in 2023, which is down 16% overall from 2022 (DW Shop revenue +16% YoY). | • 7.4 million unique visitors to GreenCars.com in 2023, 91% increase YoY • 12,833 GreenCars influenced sales in 2023. 20% increase in Q4 • 364,000 organic unique visitors in 2023; 14% increase in Q4 • 15 GreenCars brand activations led by stores in 2023 • 13,500 GreenCars newsletter subscribers, 60% increase in Q4 • 1,700 YouTube subscribers, up 8,400% in 2023 from 20 subscribers • # of EV Charging Ports up 14.96% YoY • # of AMP promotions increased 68.42% YoY • Corporate Responsibility Website Unique visitors up 14.2% YoY |

  67. Establishment of 2023 Targets and Actual Cash Payouts

    | • | Store Profit Goals: Scott A. Hillier’s short-term incentive plan payouts also depended on attainment of specific store profits goals in key markets, which, for competitive reasons, we do not disclose on a separate basis, as we consider it competitively harmful to make that information public. Our objective is to set challenging performance goals for our executives throughout the Company, and we believe that achieving these challenging performance goals in our markets is demanding. This portion of an executive’s short-term incentive plan award is calculated based on a percentage of goals attainment, with a maximum possible attainment of 200%. Store profit goals were achieved at 179% in 2023. |

  68. Establishment of 2023 Targets and Actual Cash Payouts

    | • | Manufacturer Approvability Goals: Scott A. Hillier’s short-term incentive plan payouts also depended on the aggregate year-end manufacturer approvability points achieved. This component is critical to our ability to grow through acquisition |

  69. Establishment of 2023 Targets and Actual Cash Payouts

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 44 |

  70. Establishment of 2023 Targets and Actual Cash Payouts

    of new vehicle franchises. Manufacturer approvability points are based on two considerations: (1) Meeting the metrics outlined in our manufacturer framework agreements and (2) the relationship status with the manufacturer and ability to purchase additional stores. Payout percentages are as follows:

  71. Establishment of 2023 Targets and Actual Cash Payouts

    | Manufacturer Approvability Goals | Points | % of Payout | | Maximum | 19 | 200% | | Target | 14 | 100% | | Threshold | 10 | 25% |

  72. Establishment of 2023 Targets and Actual Cash Payouts

    Manufacturer approvability goals were achieved at 120% in 2023.

  73. 2023 Actual Bonus

    2023 Actual Bonus Based on 2023 attainment of the goals described above, the 2023 short-term incentive plan payouts were as follows:

  74. 2023 Actual Bonus

    | Named Executive Officers | Target Short-Term Incentive Plan as % of Base Salary | Actual 2023 Payout as % of Target | Actual 2023 Payout ($) | | Bryan B. DeBoer | 150% | 136.7% | 2,666,040 | | Tina H. Miller | 85% | 136.7% | 875,008 | | Christopher S. Holzshu | 120% | 136.7% | 1,476,576 | | Scott A. Hillier | 80% | 155.0% | 681,997 | | George N. Hines | 67% | 136.7% | 546,880 |

  75. 2023 Actual Bonus

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 45 |

  76. Long-Term Incentive Plan

    Long-Term Incentive Plan In 2023, we adopted a new structure for our long-term incentive plan under which we issue awards primarily in the form of PSUs, with a service-based RSU component. We believe this PSU and RSU mix better aligns our executive team with our shareholders compared to a stock option-based plan because PSUs are directly tied to performance outcomes and both PSUs and RSUs experience the upside as well as the downside of stock price changes. This structure leverages Lithia’s public company status to reward employees for achieving financial performance that exceeds our peers, drives our stock price upward, and remains tied to the fundamental profitability of our business. In addition, relative metrics informed by our operational goals and financials objectives link pay outcomes to the attainment of market leading results.

  77. Long-Term Incentive Plan

    | The amounts of unvested equity for each of our executive officers, as seen in in our Pay Versus Performance table, are designed to create strong shareholder alignment and appropriate holding power to support our employee retention and stock ownership goals. |

  78. How Our 2023 Long-Term Incentive Plan Works

    How Our 2023 Long-Term Incentive Plan Works

  79. How Our 2023 Long-Term Incentive Plan Works

    | | In 2023, the Compensation Committee approved long-term incentive awards for our executives consisting of PSUs and RSUs, as set forth in the table below. The Compensation Committee approved the PSUs and RSUs awarded to NEOs and other key employees after considering, among other things, peer comparisons, Company financial performance and absolute and relative total shareholder return, awards granted in prior years, the percentage of total compensation and targets determined based upon the Company’s Board approved business plan, and the recommendation of our independent compensation consultant. |

  80. How Our 2023 Long-Term Incentive Plan Works

    | Named Executive Officer | 2023 Target PSU Value ($) | 2023 Target RSU Value ($) | 2023 Target Total LTI Value ($) | | Bryan B. DeBoer | 8,062,500 | 2,687,500 | 10,750,000 | | Tina H. Miller | 1,350,000 | 450,000 | 1,800,000 | | Christopher S. Holzshu | 3,712,500 | 1,237,500 | 4,950,000 | | Scott A. Hillier | 637,500 | 212,500 | 850,000 | | George N. Hines | 712,500 | 237,500 | 950,000 |

  81. How Our 2023 Long-Term Incentive Plan Works

    | * As described in more detail in “Executive Summary – CEO Target Total Direct Compensation Increase”, the accounting grant date values of our executives’ awards, as shown in the Summary Compensation Table, exceed the target amounts due to the timing of our grant, our normal practice of determining the number of shares underlying each award using the 40-day average closing stock price on the date of grant, and the introduction of a Monte Carlo simulation into the valuating of our PSUs, which takes into account outperforming pre-grant stock price growth. |

  82. How Our 2023 Long-Term Incentive Plan Works

    In addition, in the event of the retirement of an NEO or, in certain cases, termination of employment other than for cause, and to the extent the NEO (i) meets certain retirement eligibility criteria described in the award agreement (which criteria differ for individual executives and award years but require, at a minimum, that an individual’s combined age and service must equal at least 65) and (ii) complies with certain post-retirement assistance requirements and covenants, all PSUs and RSUs will continue to vest as if the executive continue their employment with the Company (i.e., subject to any performance requirements and in accord with any service-based vesting schedule). Lithia believes that the retirement vesting feature is appropriate and motivating because it provides protection to long-tenured NEOs considering the vesting and performance period and is a prevalent practice among other companies within the Peer Group. Further, PSUs will be forfeited and provide no value to its holder to the extent a NEO violates specific post-retirement covenants.

  83. How Our 2023 Long-Term Incentive Plan Works

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 46 |

  84. 2023 PSUs

    2023 PSUs Due to our refreshed long-term incentive plan design, the 2023 PSUs pay out formulaically after the completion of a 3-year performance period based on the ranking of our revenue growth relative to our Peer Group, with a relative TSR modifier that can increase or decrease payouts by up to 25%, and an operating margin governor which sets the upper and lower bounds of any payout. This structure leverages Lithia’s public company status to reward employees for generating high-quality and profitable revenue that exceeds our peers and links executive pay outcomes to stock price performance.

  85. 2023 PSUs

    | 2023 PSU Design Overview | | • Performance Period: 2023–2025 | | • Metric: relative revenue growth, subject to 2 modifiers: | | ° Relative TSR modifier (up to +/- 25%) | | ° Operating Margin Governor which sets the upper and lower payout limits | | • Incentive: drive high-quality and profitable revenue that outperforms our peers; link pay outcomes to stock price performance. |

  86. 2023 PSU Payout Formula

    2023 PSU Payout Formula The 2023 PSUs use a performance period that ends on December 31, 2025, after which the Compensation Committee will certify performance and any appropriate payout based on the following formula:

  87. 2023 PSU Payout Formula

    | (Relative Revenue Growth * Relative TSR Modifier) adjusted by an Operating Margin Governor |

  88. 2023 PSU Payout Formula

    Relative Revenue Growth: Our revenue growth(1) rank relative to our full Peer Group is the core metric of the 2023 PSUS, with attainment measured as follow.

  89. 2023 PSU Payout Formula

    | Revenue Growth Rank | Attainment Percentage | | 1st to 5th | 175% | | 6th | 160% | | 7th | 145% | | 8th | 130% | | 9th | 115% | | 10th | 100% | | 11th | 100% | | 12th | 80% | | 13th | 70% | | 14th | 60% | | 15th | 50% | | 16th to 20th | 0% |

  90. 2023 PSU Payout Formula

    Relative TSR Modifier: The attainment percentage determined by our relative revenue growth is then multiplied by an adjustment factor determined by our TSR ranking relative to our full Peer Group, as follows:

  91. 2023 PSU Payout Formula

    | TSR Rank | Adjustment Factor | | 1st to 5th | 1.25 | | 6th | 1.20 | | 7th | 1.15 | | 8th | 1.10 | | 9th | 1.05 | | 10th | 1.0 | | 11th | 1.0 | | 12th | 0.95 | | 13th | 0.90 | | 14th | 0.85 | | 15th | 0.8 | | 16th to 20th | 0.75 |

  92. 2023 PSU Payout Formula

    Operating Margin Governor: Finally, the payout determined via multiplying our revenue growth attainment by our TSR adjustment factor is subject to a maximum and minimum set by our operating margin, as shown below:

  93. 2023 PSU Payout Formula

    | Operating Margin | Attainment Range (max to min) | | >4.5% | 219% to 60% | | 4.0% to 4.5% | 200% to 50% | | 3.5% to <4.0% | 175% to 40% | | 3.0% to <3.5% | 150% to 30% | | 2.0% to <3.0% | 125% to 20% | | <2.0% | 125% to 0% |

  94. 2023 PSU Payout Formula

    | (1) This relative revenue growth rank is determined by averaging quarterly growth in revenue for each of the most recent 12 consecutive quarters ending before December 15, 2025,and ranking that revenue growth against the revenue growth figures for each company in our full retail Peer Group. Quarterly revenue growth is measured as the percentage change in reported revenue between a given quarter, and the corresponding quarter from the prior year. |

  95. 2023 PSU Payout Formula

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 47 |

  96. 2022 Driveway-Based PSUs

    2022 Driveway-Based PSUs In 2022, we awarded PSUs which vest (if at all) in three tranches based upon the attainment of Driveway vehicle sales goals. Each tranche of these Driveway PSUs vest on a specific vesting date, subject to the attainment of that tranche’s sales goal, as indicated below. If the performance goals for a given tranche are not satisfied by the applicable date, then the portions of PSUs associated with such tranche shall be forfeited without consideration.

  97. 2022 Driveway-Based PSUs

    | Tranche | Driveway Performance Goals | Percentage of Driveway RSU | Vesting Date | | 1 | Driveway Shop to sell 1,000 units by 6/30/2022 and maintain an average of 1,000 units for the 3 months after the month of attainment | 33% | 1/1/2023 | | 2 | Driveway Shop to sell 5,000 units by 6/30/2023 and maintain an average of 5,000 units for the 3 months after the month of attainment | 33% | 1/1/2024 | | 3 | Driveway Shop to sell 10,000 units by 6/30/2024 and maintain an average of 10,000 units for the 3 months after the month of attainment | 34% | 1/1/2025 |

  98. 2022 Driveway-Based PSUs

    The target for the first tranche was achieved and vested on January 1, 2023. The target for the second tranche was not achieved by June 30, 2023 and was forfeited. The final tranche remains outstanding.

  99. Peer Group and Benchmarking

    Peer Group and Benchmarking In 2022, the Compensation Committee asked Pay Governance to review the Peer Group for appropriateness, with the objective of including 15 to 20 companies that fit the following criteria:

  100. Peer Group and Benchmarking

    | • | Broadly representative of Lithia’s key characteristics (e.g., size, profitability, retail, and direct-to-consumer models) |

  101. Peer Group and Benchmarking

    | • | Potential to operate in Lithia’s labor market for executive and director talent |

  102. Peer Group and Benchmarking

    | • | Create a Peer Group median revenue, market capitalization, and pre-tax profit that is close to Lithia’s size scope |

  103. Peer Group and Benchmarking

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 48 |

  104. Peer Group and Benchmarking

    Given the limited number of direct auto retail competitors and that fact that we sell automotive related products and services, Pay Governance determined that the peer selection field should be expanded to include broader retail companies that are included as peers by some of Lithia’s larger peers. After reviewing Pay Governance’s analysis, and given the multifaceted nature of our customers' retail experience which is akin to other retail industries, the Compensation Committee approved the following eighteen companies for purposes of the non-employee director compensation for the 2022–2023 Board service year and executive officer compensation for 2023:

  105. Peer Group and Benchmarking

    | Symbol | Company Name | | AAP | Advance Auto Parts, Inc. | | AN | AutoNation, Inc. | | AZO | AutoZone, Inc. | | BBY | Best Buy Co., Inc. | | KMX | CarMax, Inc. | | DKS | Dick’s Sporting Goods, Inc. | | DG | Dollar General Corporation | | DLTR | Dollar Tree, Inc. | | GPS | The Gap, Inc. |

  106. Peer Group and Benchmarking

    | Symbol | Company Name | | GPC | Genuine Parts Company | | GPI | Group 1 Automotive, Inc. | | LKQ | LKQ Corporation | | LOW | Lowes Companies, Inc. | | ORLY | O’Reilly Automotive, Inc. | | PAG | Penske Automotive Group, Inc. | | SYY | Sysco Corporation | | TJX | The TJX Companies, Inc. | | TSCO | Tractor Supply Company |

  107. Peer Group and Benchmarking

    In January 2023, in connection with establishing our new compensation design (including 3-year performance periods and a relative TSR modifier on our LTIP and relative metrics throughout), the Compensation Committee updated the peer group to remove Dick’s Sporting Goods and include more directly aligned auto retailers, i.e., Asbury Automotive Group, Inc. and Sonic Automotive, Inc., as follows:

  108. Peer Group and Benchmarking

    | Symbol | Company Name | | AAP | Advance Auto Parts, Inc. | | ABG | Asbury Automotive Group, Inc. | | AN | Autonation, Inc. | | AZO | Autozone, Inc. | | BBY | Best Buy Co., Inc. | | KMX | Carmax, Inc. | | DG | Dollar General Corporation | | DLTR | Dollar Tree, Inc. | | GPC | Genuine Parts Company | | GPI | Group 1 Automotive, Inc. |

  109. Peer Group and Benchmarking

    | Symbol | Company Name | | LKQ | LKQ Corporation | | LOW | Lowe's Companies, Inc. | | ORLY | O'Reilly Automotive, Inc. | | PAG | Penske Automotive Group, Inc. (PAG) | | SAH | Sonic Automotive, Inc. | | SYY | Sysco Corporation | | GPS | The Gap, Inc. | | TJX | The TJX Companies, Inc. | | TSCO | Tractor Supply Company |

  110. Peer Group and Benchmarking

    In September of 2023, the Compensation Committee again asked Pay Governance to review the Company’s peer group used for setting compensation outcomes. As part of that review, the Compensation Committee approved the continued use of the 2023 peer group for 2024 compensation decisions.

  111. How We Use the Peer Group

    How We Use the Peer Group The positions of our named executive officers were compared to their counterpart positions in our Peer Group, and the compensation levels for comparable positions in the Peer Group were examined for guidance in determining:

  112. How We Use the Peer Group

    | • | base salaries; |

  113. How We Use the Peer Group

    | • | cash awards under our short-term incentive plan; and |

  114. How We Use the Peer Group

    | • | the amount and mix of equity awards under our long-term incentive plan. |

  115. How We Use the Peer Group

    | Lithia Motors, Inc. 2024 Proxy Statement | 05: Compensation Discussion and Analysis (CD&A) 49 |

  116. How We Use the Peer Group

    The Compensation Committee approves base salaries, short-term incentive plan awards and long-term incentive awards on a case-by-case basis for each named executive officer, taking into account, among other things, individual and company performance, role expertise and experience and the competitive market, advancement potential, recruiting needs, internal equity, retention requirements, unrealized equity gains, succession planning, and best compensation governance practices. The Compensation Committee does not tie individual compensation to specific target percentiles.

  117. How the Compensation Committee Makes Decisions and Policies

    How the Compensation Committee Makes Decisions and Policies The Compensation Committee has the final responsibility to approve all matters of compensation and benefits for executive officers, and from time to time it seeks input and recommendations from the CEO and the Human Resources department. The Compensation Committee also meets privately with its independent compensation consultant, and considers the Board’s input and advice, when establishing the CEO’s compensation. Our independent compensation consultant has worked directly with and on behalf of the Compensation Committee to assist the Compensation Committee in satisfying its responsibilities; and does not undertake projects for management, except with the approval of the Compensation Committee chair. The Compensation Committee reports to the Board of Directors on the major items covered at each Compensation Committee meeting. The Compensation Committee assessed the independence of its compensation consultant during 2023 and believes that there are no conflicts of interest. In reaching this conclusion, the Compensation Committee considered applicable SEC rules and regulations and the corresponding New York Stock Exchange independence factors regarding compensation advisor independence. In determining executive compensation, the Compensation Committee also considers, among other factors, the possible tax consequences to Lithia and to its executives. The Compensation Committee may consider the accounting consequences to Lithia of different compensation decisions and the impact on shareholder dilution. However, neither of these factors by themselves will compel particular compensation decisions. The Compensation Committee annually grants equity-based long-term incentive awards to executive officers after the close of the prior year and the review and evaluation of each executive officer’s performance. The Compensation Committee’s policy is to generally grant long-term incentive awards only during open trading windows and to establish grant dates in advance, generally establishing those dates near the beginning of each fiscal year.

  118. Recoupment (or “Clawback”) Policies

    | 1. | Cash paid to executive officers under our short-term incentive plan to the degree overpaid based on the restated financial results; and |

  119. Recoupment (or “Clawback”) Policies

    | 2. | The incremental shares of Lithia common stock settled for any RSUs in excess of the shares of Lithia common stock that would have been settled for such RSUs based on the restated financial results, or the value of such incremental shares to the extent an executive officer sells any incremental shares. |

  120. Recoupment (or “Clawback”) Policies

    | 1. | All or a portion of cash paid to executive officers under our short-term incentive plan; and |

  121. Compensation Risk Management

    | • | cash payments are capped under our short-term incentive plan; |

  122. Compensation Risk Management

    | • | the incentive plans for executive management have the flexibility to put weight on Company-wide or line-of-business performance measures; |

  123. Compensation Risk Management

    | • | our short-term incentive plan preserves discretion to permit the Compensation Committee to elect not to pay otherwise achieved amounts for any reason; |

  124. Compensation Risk Management

    | • | a meaningful component of compensation is long-term incentive plan equity grants with extended vesting periods designed to ensure that our executives value and focus on the Company’s long-term performance; and |

  125. Compensation Risk Management

    | • | NEOs have equity positions in Lithia and are subject to stock ownership policies, which we believe increases their focus on long-term shareholder value. |

  126. Summary Compensation Table

    Summary Compensation Table The following table provides certain information concerning compensation for each of our 2023 NEOs.

  127. Summary Compensation Table

    | Name and Principal Position | Year | Salary | Stock Awards(1) | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings(2) | All Other Compensation(3) | Total | | Bryan B. DeBoer President and Chief Executive Officer | 2023 | $1,300,000 | $15,312,692 | $2,666,040 | $— | $7,258 | $19,285,990 | | | 2022 | $1,250,000 | $7,822,865 | $2,045,920 | $— | $6,932 | $11,125,717 | | | 2021 | $1,106,000 | $6,146,047 | $2,996,000 | $77,320 | $206,992 | $10,532,359 | | Tina H. Miller Chief Financial Officer | 2023 | $750,000 | $2,564,125 | $875,008 | $— | $56,714 | $4,245,847 | | | 2022 | $525,000 | $1,082,879 | $543,448 | $— | $56,387 | $2,207,715 | | | 2021 | $420,000 | $594,378 | $600,000 | $5,425 | $56,448 | $1,676,251 | | Christopher S. Holzshu Chief Operating Officer | 2023 | $900,000 | $7,051,236 | $1,476,576 | $— | $106,305 | $9,534,117 | | | 2022 | $800,000 | $3,003,340 | $959,025 | $— | $105,979 | $4,868,343 | | | 2021 | $720,000 | $1,843,814 | $1,440,000 | $32,359 | $106,039 | $4,142,212 | | Scott A. Hillier Senior Vice President of Operations | 2023 | $550,000 | $1,211,100 | $681,997 | $— | $82,703 | $2,525,800 | | | 2022 | $525,000 | $1,232,572 | $596,620 | $— | $82,377 | $2,436,568 | | | 2021 | $500,000 | $666,039 | $800,000 | $30,774 | $82,437 | $2,079,250 | | George N. Hines Senior Vice President, Chief Information Officer | 2023 | $600,000 | $1,353,357 | $546,880 | $— | $57,915 | $2,558,152 | | | 2022 | $480,000 | $788,463 | $383,610 | $— | $57,589 | $1,709,662 | | | 2021 | $450,000 | $384,309 | $500,000 | $3,016 | $57,649 | $1,394,974 |

  128. Summary Compensation Table

    | (1) These amounts reflect the grant date fair value for performance and time-vesting RSUs granted in the year, computed in accordance with FASB ASC Topic 718 and excluding any estimated forfeitures. These amounts are not paid to or realized by the executive. If the maximum level of performance were to be achieved for the awards granted in 2023, the grant date value for those awards would be $29,568,021 for Mr. DeBoer, $4,396,918 for Ms. Miller, $12,091,888 for Mr. Holzshu, $2,076,765 for Mr. Hillier, and $2,320,877 for Mr. Hines. The fair value of the PSUs was calculated using a Monte Carlo simulation model, assuming (i) a volatility of 53.24%, (ii) an expected life, in years, of 2.91, (iii) a risk-free interest rate of 3.75%, and (iv) a dividend yield of 0.57%. For the PSUs, the attainment levels used in the calculation of the grant date fair value was based on the probable outcomes at the time of grant. For a more detailed discussion of the assumptions used to determine the grant date fair values and other related information, see Notes 1 and 13 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. |

  129. Summary Compensation Table

    | (2) For 2021, these amounts are the above-market interest earned in the applicable year on contributions to our Executive Management Non-Qualified Deferred Compensation and SERP. For 2022 and 2023, earnings were below market interest. |

  130. Summary Compensation Table

    | (3) All Other Compensation in 2023 consisted of the following: |

  131. Summary Compensation Table

    | Name | 401(k) Match | Insurance Premiums(a) | Contributions to Nonqualified Deferred Compensation Plan | Total | | Bryan B. DeBoer | $2,500 | $4,758 | $— | $7,258 | | Tina H. Miller | $2,500 | $4,214 | $50,000 | $56,714 | | Christopher S. Holzshu | $2,500 | $3,805 | $100,000 | $106,305 | | Scott A. Hillier | $2,500 | $5,203 | $75,000 | $82,703 | | George N. Hines | $2,500 | $5,415 | $50,000 | $57,915 |

  132. Summary Compensation Table

    | (a) Insurance premiums include amounts paid by us on behalf of the executive for short-term disability insurance, long-term disability insurance, long term care insurance and life insurance policies. |

  133. Summary Compensation Table

    | Lithia Motors, Inc. 2024 Proxy Statement | 06: Compensation Tables 53 |

  134. Grants of Plan-Based Awards Table for 2023

    Grants of Plan-Based Awards Table for 2023

  135. Grants of Plan-Based Awards Table for 2023

    | Name | | Grant Date(1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(3) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (# of shares) | | | Grant Date Fair Value of Stock and Option Awards ($)(4) | | | | | Threshold (#) | Target (#) | Maximum (#) | Threshold (#) | Target (#) | Maximum (#) | | | Bryan B. DeBoer | 2023 STIP | 02/02/2023 | 975,000 | 1,950,000 | 3,900,000 | — | — | — | — | | | 2023 PSU | 02/02/2023(1) | — | — | — | 13,595 | 36,252 | 79,301 | 12,004,487 | | | 2023 RSU | 02/02/2023(2) | — | — | — | — | 12,084 | — | 3,308,205 | | Tina H. Miller | 2023 STIP | 02/02/2023 | 320,000 | 640,000 | 1,280,000 | — | — | — | — | | | 2023 PSU | 02/02/2023(1) | — | — | — | 2,276 | 6,070 | 13,278 | 2,010,020 | | | 2023 RSU | 02/02/2023(2) | — | — | — | — | 2,024 | — | 554,105 | | Christopher S. Holzshu | 2023 STIP | 02/02/2023 | 540,000 | 1,080,000 | 2,160,000 | — | — | — | — | | | 2023 PSU | 02/02/2023(1) | — | — | — | 6,260 | 16,693 | 36,516 | 5,527,720 | | | 2023 RSU | 02/02/2023(2) | — | — | — | — | 5,565 | — | 1,523,516 | | Scott A. Hillier | 2023 STIP | 02/02/2023 | 220,000 | 440,000 | 880,000 | — | — | — | — | | | 2023 PSU | 02/02/2023(1) | — | — | — | 1,075 | 2,867 | 6,272 | 949,378 | | | 2023 RSU | 02/02/2023(2) | — | — | — | — | 956 | — | 261,722 | | George N. Hines | 2023 STIP | 02/02/2023 | 200,000 | 400,000 | 800,000 | — | — | — | — | | | 2023 PSU | 02/02/2023(1) | — | — | — | 1,202 | 3,204 | 7,009 | 1,060,973 | | | 2023 RSU | 02/02/2023(2) | — | — | — | — | 1,068 | — | 292,384 |

  136. Grants of Plan-Based Awards Table for 2023

    | (1) These amounts reflect PSUs which are earned based on our relative revenue growth, with a TSR modifier and an operating margin governor, the material terms of which are further described under “Compensation Discussion and Analysis – 2023 Compensation Program Design & Result - Long-Term Incentive Plan” above. |

  137. Grants of Plan-Based Awards Table for 2023

    | (2) These amounts reflect time-based RSUs which vest in three equal annual installments over three years. |

  138. Grants of Plan-Based Awards Table for 2023

    | (3) These amounts reflect the threshold, target, and maximum amounts payable under our Short-Term Incentive Plan, referenced above as the “2023 STIP”, for the 2023 performance year, as further described in the discussion under “Compensation Discussion and Analysis – 2023 Compensation Program Design & Result - Short-Term Incentive Plan”. The actual amount paid for 2023 is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. |

  139. Grants of Plan-Based Awards Table for 2023

    | (4) These amounts reflect the grant date fair value for awards granted under the 2013 Amended and Restated Stock Incentive Plan. The grant date fair value is computed in accordance with FASB ASC Topic 718 for PSUs and RSUs granted during the applicable year. The attainment level used to calculate the grant date fair value for the performance and time-vesting grants was 100% based on the probable outcome at the time of grant. For a more detailed discussion of the assumptions used to determine the grant date fair value and other related information, see footnote 1 to the Summary Compensation Table, above, and Notes 1 and 13 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. |

  140. Grants of Plan-Based Awards Table for 2023

    | Lithia Motors, Inc. 2024 Proxy Statement | 06: Compensation Tables 54 |

  141. Outstanding Equity Awards at 2023 Fiscal Year-End

    Outstanding Equity Awards at 2023 Fiscal Year-End The following table sets forth the outstanding equity awards held by our NEOs as of December 31, 2023:

  142. Outstanding Equity Awards at 2023 Fiscal Year-End

    | Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | | Bryan B. DeBoer | 1/1/2020 | 13,707(4) | 4,513,441 | — | — | | | 1/1/2021 | 21,375(5) | 7,038,360 | — | — | | | 1/3/2022 | 24,774(6) | 8,157,583 | — | — | | | 1/3/2022 | — | — | 1,083(7) | 356,610 | | | 2/2/2023 | 12,084(6) | 3,979,020 | — | — | | | 2/2/2023 | — | — | 79,301(8) | 26,112,233 | | Tina H. Miller | 1/1/2020 | 1,062(4) | 349,695 | — | — | | | 1/1/2021 | 2,068(5) | 680,951 | — | — | | | 1/3/2022 | 3,186(6) | 1,049,086 | — | — | | | 1/3/2022 | — | — | 228(7) | 75,076 | | | 2/2/2023 | 2,024(6) | 666,463 | — | — | | | 2/2/2023 | — | — | 13,278(8) | 4,372,180 | | Christopher S. Holzshu | 1/1/2020 | 4,191(4) | 1,380,012 | — | — | | | 1/1/2021 | 6,413(5) | 2,111,673 | — | — | | | 1/3/2022 | 8,141(6) | 2,680,668 | — | — | | | 1/3/2022 | — | — | 855(7) | 281,534 | | | 2/2/2023 | 5,565(6) | 1,832,443 | — | — | | | 2/2/2023 | — | — | 36,516(8) | 12,023,988 | | Scott A. Hillier | 1/1/2020 | 2,096(4) | 690,171 | — | — | | | 1/1/2021 | 2,317(5) | 762,942 | — | — | | | 1/3/2022 | 2,302(6) | 758,003 | — | — | | | 1/3/2022 | — | — | 684(7) | 225,228 | | | 2/2/2023 | 956(6) | 314,792 | — | — | | | 2/2/2023 | — | — | 6,272(8) | 2,065,244 | | George N. Hines | 1/1/2020 | 966(4) | 318,084 | — | — | | | 1/1/2021 | 1,337(5) | 440,247 | — | — | | | 1/3/2022 | 1,771(6) | 583,155 | — | — | | | 1/3/2022 | — | — | 342(7) | 112,614 | | | 2/2/2023 | 1,068(6) | 351,671 | — | — | | | 2/2/2023 | — | — | 7,009(8) | 2,307,924 |

  143. Outstanding Equity Awards at 2023 Fiscal Year-End

    | (1) All shares are related to RSUs subject to time-vesting restrictions. |

  144. Outstanding Equity Awards at 2023 Fiscal Year-End

    | (2) Assumes a stock price of $329.28, the closing price of our common stock on December 29, 2023. |

  145. Outstanding Equity Awards at 2023 Fiscal Year-End

    | (3) All shares are related to RSUs subject to performance conditions. |

  146. Outstanding Equity Awards at 2023 Fiscal Year-End

    | (4) Vests 100% on January 1, 2024. |

  147. Outstanding Equity Awards at 2023 Fiscal Year-End

    | (5) Vests 50% on January 1, 2024 and 50% on January 1, 2025. |

  148. Outstanding Equity Awards at 2023 Fiscal Year-End

    | (6) Vests 33% on January 1, 2024 and 2025 and 34% on January 1, 2026 |

  149. Outstanding Equity Awards at 2023 Fiscal Year-End

    | (7) Driveway/GreenCars awards which, if 10,000 units are sold by 06/30/2024, then 100% vest on January 1, 2025. |

  150. Outstanding Equity Awards at 2023 Fiscal Year-End

    | (8) PSUs are earned following the completion of their performance period on December 31, 2025, subject to (i) our relative revenue growth performance (ii) an operating margin governor and (iii) a relative TSR modifier. The number of shares and the value for the PSUs reflects payout at maximum because our performance under the metrics mentioned in the prior sentence for the first year of the three-year performance period exceeded target levels. |

  151. Outstanding Equity Awards at 2023 Fiscal Year-End

    | Lithia Motors, Inc. 2024 Proxy Statement | 06: Compensation Tables 55 |

  152. Stock Vested for 2023

    Stock Vested for 2023 The following table summarizes shares acquired on vesting of RSUs during 2023 for each NEO:

  153. Stock Vested for 2023

    | | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting($)(1) | | Bryan B. DeBoer | 47,919 | 9,810,936 | | Tina H. Miller | 4,076 | 834,520 | | Christopher S. Holzshu | 15,198 | 3,111,639 | | Scott A. Hillier | 8,062 | 1,650,614 | | George N. Hines | 3,015 | 617,291 |

  154. Stock Vested for 2023

    | (1) Equals the value of the shares acquired based on the closing price of our common stock on the vesting date. |

  155. Non-Qualified Deferred Compensation

    Non-Qualified Deferred Compensation The table below reflects the contributions, earnings, withdrawals and distributions during 2023 and the account balances as of December 31, 2023 for each NEO under our Non-Qualified Deferred Compensation and SERP.

  156. Non-Qualified Deferred Compensation

    | Name | Executive Contributions in Last FY(1) | Registrant Contributions in Last FY(2) | Aggregate Earnings in Last FY(3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE | | Bryan B. DeBoer | $512,105 | $— | $406,057 | $— | $8,426,548 | | Tina H. Miller | $108,690 | $50,000 | $26,502 | $— | $566,747 | | Christopher S. Holzshu | $— | $100,000 | $72,105 | $— | $1,489,993 | | Scott A. Hillier | $— | $75,000 | $66,558 | $— | $1,373,866 | | George N. Hines | $— | $50,000 | $10,800 | $— | $226,224 |

  157. Non-Qualified Deferred Compensation

    | (1) The executive contributions amount in this column is included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table above. |

  158. Non-Qualified Deferred Compensation

    | (2) The registrant contribution amounts in this column are included in the All Other Compensation columns of the Summary Compensation Table above. |

  159. Non-Qualified Deferred Compensation

    | (3) A portion of these amounts are related to above-market earnings on compensation that is deferred and is reported in Change in Pension Value and Non-Qualified Deferred Compensation Earnings in the Summary Compensation Table above. |

  160. Non-Qualified Deferred Compensation

    Our Non-Qualified Deferred Compensation and SERP permits us to contribute awards for participants that will have deferred payout. Under this plan, senior executives may defer receipt of portions of their compensation (up to 50% of base salary, and 100% of variable compensation) in any given year, with all deferred amounts earning interest at an annual rate set by the Compensation Committee.

  161. Potential Payments Upon Termination or Change in Control

    Potential Payments Upon Termination or Change in Control

  162. Potential Payments Upon Termination of Employment

    Potential Payments Upon Termination of Employment In certain circumstances, such as in connection with succession planning or the death or disability of our senior executive officers, it is appropriate to provide severance payments, accelerated vesting of RSUs and certain other limited payments to those executives.

  163. Potential Payments Upon Termination of Employment

    | Lithia Motors, Inc. 2024 Proxy Statement | 06: Compensation Tables 56 |

  164. Potential Payments Upon Change in Control

    Potential Payments Upon Change in Control

  165. Non-Qualified Deferred Compensation and SERP Plan

    Non-Qualified Deferred Compensation and SERP Plan Under our Non-Qualified Deferred Compensation and SERP Plan, discretionary benefits contributed to a participant’s account by us fully vest upon a change in control, as defined under Code Section 409A or Treasury Regulations issued thereunder, even if the NEO’s employment is not terminated. Vested discretionary benefits are paid to a participant in an annual installment method over ten years.

  166. Non-Qualified Deferred Compensation and SERP Plan

    | Lithia Motors, Inc. 2024 Proxy Statement | 06: Compensation Tables 59 |

  167. Quantitative Disclosure of Payments Upon Termination or Change in Control

    Quantitative Disclosure of Payments Upon Termination or Change in Control The following table provides quantitative disclosure of estimated payouts to our continuing NEOs assuming a change in control and associated triggering events occurred under the Change in Control Agreements and provisions that existed on December 31, 2023, and the price per share of our common stock is the closing market price of $329.28 on December 29, 2023. The amounts listed in the table below are in addition to benefits generally available to our employees upon termination of employment, such as distributions from the 401(k) plan and accrued vacation.

  168. Quantitative Disclosure of Payments Upon Termination or Change in Control

    | Name | Current Annual Salary | Severance Payments(1) | Severance Related Benefits(2) | Value of Stock Awards That Would Vest(3) | Value of Long-Term Incentive Benefits that Would Vest(4) | Additional Payment under Cash Incentive Plan for 2023(5) | Total | | Bryan B. DeBoer | $1,300,000 | $2,600,000 | $25,795 | $45,405,078 | $141,363 | $5,183,100 | $53,355,336 | | Tina H. Miller | $750,000 | $1,500,000 | $15,887 | $6,263,070 | $100,258 | $1,701,120 | $9,580,335 | | Christopher S. Holzshu | $900,000 | $1,800,000 | $27,761 | $17,666,531 | $206,116 | $2,870,640 | $22,571,048 | | Scott A. Hillier | $550,000 | $1,100,000 | $20,820 | $4,487,428 | $161,424 | $1,169,520 | $6,939,192 | | George N. Hines | $600,000 | $1,200,000 | $43,373 | $3,634,757 | $103,058 | $1,063,200 | $6,044,388 |

  169. Quantitative Disclosure of Payments Upon Termination or Change in Control

    | (1) Payable in 24 monthly installments. |

  170. Quantitative Disclosure of Payments Upon Termination or Change in Control

    | (2) Based on current cost of providing 18 months (the full COBRA period) of COBRA benefits for our NEOs. |

  171. Quantitative Disclosure of Payments Upon Termination or Change in Control

    | (3) Payable by delivery of shares of Lithia stock immediately following a change in control. |

  172. Quantitative Disclosure of Payments Upon Termination or Change in Control

    | (4) Payable in equal annual installments over 10 years. The value of the long-term incentive is based on the unvested value of those benefits, calculated as of December 31, 2023 and would be payable even if the NEO’s employment was not terminated. |

  173. Quantitative Disclosure of Payments Upon Termination or Change in Control

    | (5) Payable in a lump sum immediately following a change in control. Amounts are in addition to amounts reported in the Summary Compensation Table under “Non-equity Incentive Plan.” |

  174. CEO Pay Ratio

    CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, Lithia provides information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chief Executive Officer (the “CEO”): We identified the median of the annual total compensation of all our employees using the annualized base salary and expected bonus, as of December 31, 2023, plus any equity awards and long-term incentives granted in 2023 for all individuals, excluding the CEO, who were employed by us during 2023 (total compensation was annualized for employees not employed for the full year). After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our CEO compensation. For 2023:

  175. CEO Pay Ratio

    | • | the annual total compensation of the employee identified at median of our company (other than the CEO), was $59,041; |

  176. CEO Pay Ratio

    | • | the annual total compensation of the CEO was $19,285,990; |

  177. CEO Pay Ratio

    | • | for this ratio, both employee compensation (other than our CEO) and CEO compensation were calculated using 2023 paid wages, annualized for full-time and part-time employees who did not work a full year; and |

  178. CEO Pay Ratio

    | • | in determining the identity of our median employee, we excluded approximately 4,700 employees from 6 acquisitions (Priority Group, Jardine Motors UK Limited, Thornhill Acura, Ducati Toronto, Wade Ford, Hill Country Honda) completed in 2023. |

  179. CEO Pay Ratio

    Based on this information, for 2023, the ratio of the annual total compensation of Bryan DeBoer, our Chief Executive Officer, to the median of the annual total compensation of all employees was estimated to be 327 to 1.

  180. CEO Pay Ratio

    | Lithia Motors, Inc. 2024 Proxy Statement | 06: Compensation Tables 60 |

  181. Pay Versus Performance

    Pay Versus Performance As discussed in our Compensation Discussion and Analysis section, our executive compensation program is designed to reflect a strong focus on pay-for-performance to drive superior financial results and value creation and strongly align our executives’ interests with those of our shareholders. The following table sets forth compensation information of our Principal Executive Officer (PEO) and our non-PEO named executive officers (NEOs) along with total shareholder return, net income and revenue performance results, for our fiscal years ending in 2020, 2021, 2022, and 2023, in accordance with Item 402(v) of Regulation S-K.

  182. Pay Versus Performance Table

    Pay Versus Performance Table

  183. Pay Versus Performance Table

    | | | | | | Value of Initial Fixed $100 Investment on 12/31/2019 based on: | | | | | | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO(1) | Average Summary Compensation Table Total for Non-PEO NEOs(2) | Average Compensation Actually Paid to Non-PEO NEOs(1)(2) | Company Total Shareholder Return | Peer Group Total Shareholder Return(3) | Net Income (millions) | Revenue (millions) | | 2023 | $19,285,990 | $29,392,849 | $4,715,979 | $6,355,137 | $229.78 | $183.20 | $1,000 | $31,042 | | 2022 | $11,125,717 | $3,939,506 | $2,805,572 | $1,740,328 | $141.84 | $134.65 | $1,251 | $28,188 | | 2021 | $10,532,359 | $14,008,918 | $2,323,172 | $2,821,850 | $204.49 | $177.33 | $1,060 | $22,832 | | 2020 | $8,250,411 | $23,884,186 | $2,002,293 | $4,731,197 | $200.80 | $119.26 | $470 | $13,124 |

  184. Pay Versus Performance Table

    | (1) In accordance with the requirements of Item 402(v) of Regulation S-K, 2023 “compensation actually paid” (CAP) to our PEO and average CAP for our non-PEO NEOs was calculated by making the following adjustments to the total compensation reported in the Summary Compensation Table, above. The equity award related adjustments described below reflect the fair value (or change in fair value) for performance- and time-vesting RSUs, computed in accordance with FASB ASC Topic 718 on the relevant dates. No equity awards were modified in the indicated year. |

  185. PEO Compensation Actually Paid Reconciliation

    PEO Compensation Actually Paid Reconciliation

  186. PEO Compensation Actually Paid Reconciliation

    | | 2023 | | Summary Compensation Table (SCT) Total | $19,285,990 | | Amounts reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column of the SCT | $0 | | Amounts Reported under the “Stock Awards” Column of the SCT | ($15,312,692) | | Amounts Reported under the “Option Awards” Column of the SCT | $0 | | Total Deductions from SCT | ($15,312,692) | | “Service Cost” for Pension Plans | $0 | | “Prior Service Cost” for Pension Plans | $0 | | Year End Fair Value of Equity Awards Granted in the Year and Unvested at Year End | $17,877,487 | | Year over Year Change in Fair Value of Awards Granted in a Prior Year through the Year End | $7,541,845 | | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | $0 | | Change in Fair Value of Equity Awards granted in a Prior Year from the Prior Year End to the Vesting Date | $220 | | Deduction of the Prior Year End Fair Value of Equity Awards Granted in a Prior Year that Failed to Meet Vesting Conditions in the Year | $0 | | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | $0 | | All Other Adjustments | $25,419,551 | | Compensation Actually Paid SCT Total less Total Deduction from SCT plus (minus) All Other Adjustments | $29,392,849 |

  187. PEO Compensation Actually Paid Reconciliation

    | Lithia Motors, Inc. 2024 Proxy Statement | 06: Compensation Tables 61 |

  188. Average Non-PEO NEO Compensation Actually Paid Reconciliation

    Average Non-PEO NEO Compensation Actually Paid Reconciliation All the following amount represents averages of the indicated amounts for our non-PEO named executive officers in the indicated year.

  189. Average Non-PEO NEO Compensation Actually Paid Reconciliation

    | | 2023 | | Summary Compensation Table (SCT) Total | $4,715,979 | | Amounts reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column of the SCT | $0 | | Amounts Reported under the “Stock Awards” Column of the SCT | ($3,044,955) | | Amounts Reported under the “Option Awards” Column of the SCT | $0 | | Total Deductions from SCT | ($3,044,955) | | “Service Cost” for Pension Plans | $0 | | “Prior Service Cost” for Pension Plans | $0 | | Year End Fair Value of Equity Awards Granted in the Year and Unvested at Year End | $3,554,973 | | Year over Year Change in Fair Value of Awards Granted in a Prior Year through the Year End | $1,129,105 | | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | $0 | | Change in Fair Value of Equity Awards granted in a Prior Year from the Prior Year End to the Vesting Date | $33 | | Deduction of the Prior Year End Fair Value of Equity Awards Granted in a Prior Year that Failed to Meet Vesting Conditions in the Year | $0 | | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | $0 | | All Other Adjustments | $4,684,112 | | Avg. Compensation Actually Paid SCT Total less Total Deduction from SCT plus (minus) All Other Adjustments | $6,355,137 |

  190. Average Non-PEO NEO Compensation Actually Paid Reconciliation

    | (2) The non-PEO named executive officers included for purposes of determining the average compensation for our named executive officers each year, is as follows: |

  191. Average Non-PEO NEO Compensation Actually Paid Reconciliation

    | | NEOs: | | 2021–2023 | Tina H. Miller, Christopher S. Holzshu, Scott A. Hillier, George N. Hines | | 2020 | Tina H. Miller, Christopher S. Holzshu, Scott A. Hillier, Thomas M. Dobry |

  192. Average Non-PEO NEO Compensation Actually Paid Reconciliation

    | (3) Peer group TSR is calculated using the Auto Peers reflected in our Stock Performance Graph in the 2023 Annual Report on Form 10-K, which is the same peer group used for calculating peer group TSR in our last-filed pay versus performance table. For each year indicated, those Auto Peers consisted of Penske Automotive Group, AutoNation, Sonic Automotive, Group 1 Automotive, Asbury Automotive Group, and CarMax. |

  193. Average Non-PEO NEO Compensation Actually Paid Reconciliation

    | Performance Measures | | Revenue (financial) | | Operating Profit (financial) | | Driveway Online Sales (financial) | | Store Profit Goals (financial) | | Strategic Initiatives (non-financial) |

  194. Description of Relationships Between Company and Peer Group TSR, and Between Compensation Actually Paid and Specified Performance Measures

    Description of Relationships Between Company and Peer Group TSR, and Between Compensation Actually Paid and Specified Performance Measures The graphs below reflects the relationship between (i) our TSR and our peer group’s TSR, and (ii) the PEO and average Non-PEO NEO compensation actually paid (CAP) and our TSR, net income, and revenue, respectively. For the purpose of the below charts, all data is calculated as described in the footnotes of the above Pay Versus Performance table.

  195. Description of Relationships Between Company and Peer Group TSR, and Between Compensation Actually Paid and Specified Performance Measures

    | * Consistent with the above Pay Versus Performance table, peer group TSR is calculated using the Auto Peers reflected in our Stock Performance Graph in the 2023 Annual Report on Form 10-K. For each year indicated, those Auto Peers consisted of Penske Automotive Group, AutoNation, Sonic Automotive, Group 1 Automotive, Asbury Automotive Group, and CarMax. |

  196. Description of Relationships Between Company and Peer Group TSR, and Between Compensation Actually Paid and Specified Performance Measures

    | Lithia Motors, Inc. 2024 Proxy Statement | 06: Compensation Tables 63 |

  197. Description of Relationships Between Company and Peer Group TSR, and Between Compensation Actually Paid and Specified Performance Measures

    Election of Directors Our Board of Directors has nominated each of the following persons for election as a director:

  198. Description of Relationships Between Company and Peer Group TSR, and Between Compensation Actually Paid and Specified Performance Measures

    | Nominee Name | Age | Has Been a Director Since/(During) | Independent | | Sidney B. DeBoer | 80 | 1968 | | | Bryan B. DeBoer | 57 | 2008 | | | James E. Lentz | 68 | 2022 | Yes | | Stacy C. Loretz-Congdon | 64 | 2023 | Yes | | Shauna F. McIntyre | 52 | 2019 | Yes | | Louis P. Miramontes | 69 | 2018 | Yes | | David J. Robino | 64 | 2016 | Yes |

  199. Biographical Information on our Nominees

    Biographical Information on our Nominees Our Board of Directors believes that the combination of the qualifications, skills and experiences of the nominees will contribute to an effective and well-functioning Board. Our Board of Directors and the Nominating and Governance Committee believe that individually, and as a group, the nominees possess the necessary qualifications to provide for future oversight of our business consistent with their fiduciary duties to shareholders. Included in each director nominee’s biography, above, is a description of the experience, skills and attributes of each nominee.

  200. Biographical Information on our Nominees

    | Our Board of Directors unanimously recommends a vote FOR each of the nominees named above. |

  201. Biographical Information on our Nominees

    | Lithia Motors, Inc. 2024 Proxy Statement | 07: Proposal No. 1 64 |

  202. Biographical Information on our Nominees

    Advisory vote to approve the compensation of our named executive officers We are asking shareholders to approve the following advisory resolution to approve the compensation of our named executive officers reported in this proxy statement: RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and related tables, notes and narrative discussion in the Proxy Statement for the Company’s 2024 Annual Meeting of Shareholders, is approved. The advisory vote, which is required by Section 14A of the Securities Exchange Act of 1934, is a vote to approve or disapprove the overall compensation package of our executive officers and not any one specific element of the compensation package or on the compensation received by any one person. The advisory vote is non-binding. However, the Compensation Committee and Board will review and consider the results of the advisory vote when making future decisions about executive compensation. Because we typically determine annual compensation before the advisory vote on the prior year’s compensation is cast, however, if we determine to make a change in our practices based on shareholder feedback, there may be a delay in implementing those changes. We urge shareholders to read the detailed information about our compensation philosophy and objectives included in Compensation Discussion and Analysis (“CD&A”), above, which provides context for the Summary Compensation Table and related information. As discussed in the CD&A, we believe our compensation programs align the interests of our executives and our shareholders, help us attract and retain experienced executive talent, and focus our executives on performance and achievement of our short-, mid- and long-term strategic goals and objectives. We believe the overall compensation paid in 2023 was appropriate, particularly considering our financial results in 2023. Our Board has adopted a policy providing for an annual say-on-pay vote until the next required shareholder vote on the frequency of such votes.