10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

            þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

or

            o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     .

Commission file number 1-12297

United Auto Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	22-3086739 (I.R.S. Employer Identification No.)
2555 Telegraph Road Bloomfield Hills, Michigan (Address of principal executive offices)	48302-0954 (Zip Code)

Registrant’s telephone number, including area code (248) 648-2500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each Exchange on which registered
Voting Common Stock, par value $0.0001 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ     No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ     No o

          The aggregate market value of the voting common stock held by non-affiliates as of June 30, 2003 was $475,718,000.

          As of March 1, 2004, there were 41,819,449 shares of voting common stock outstanding.

Documents Incorporated by Reference

Certain portions, as expressly described in this report, of the registrant’s proxy statement for the 2004 Annual Meeting of the Stockholders to be held May 21, 2004 are incorporated by reference into Part III, Items 10-14.

TABLE OF CONTENTS

Items			Page
PART I
	1.	Business		1
	2.	Properties		12
	3.	Legal Proceedings		12
	4.	Submission of Matters to a Vote of Security-Holders		13
PART II
	5.	Market for Registrant’s Common Equity and Related Stockholder Matters		14
	6.	Selected Consolidated Financial Data		15
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
	7A.	Quantitative and Qualitative Disclosures about Market Risk		33
	8.	Financial Statements and Supplementary Data		34
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		34
	9A.	Disclosure Controls and Procedures		34
PART III
	10.	Directors and Executive Officers of the Registrant		35
	11.	Executive Compensation		35
	12.	Security Ownership of Certain Beneficial Owners and Management		35
	13.	Certain Relationships and Related Transactions		35
	14.	Principal Accountant Fees and Services		35
PART IV
	15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		36
Certificate of Incorporation
First Supplemental Indenture dated 12/19/03
Amended & Restated Stock Option Plan
Amended & Restated Equity Compensation Plan
Amended & Restated Non-Employee Director Comp Plan
Subsidiaries
Consent of Deloitte & Touche LLP
Consent of KPMG Audit Plc
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to Section 906

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PART I

Item 1. Business

      We are the second largest automotive retailer in the United States as measured by total revenues and have the highest concentration of revenues from foreign and luxury brands among the publicly-traded automotive retailers. As of March 1, 2004, we owned and operated 137 franchises in the United States and 83 franchises internationally, primarily in the United Kingdom. We offer a full range of vehicle brands, with 78% of our revenues in 2003 generated from the combined sales of foreign brands such as Toyota, Honda, BMW, Lexus and Mercedes. In 2003, luxury brands represented 46% of our revenues. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services and the sale of higher margin products, such as third-party finance and insurance products, third-party extended service contracts and replacement and aftermarket automotive products.

      Much of our growth and success over the last four years has resulted from the experienced leadership of Roger S. Penske and our management team. Since May 1999, Mr. Penske, through Penske Corporation and its affiliates, has invested approximately $210 million in our equity securities. Since 1999, when Mr. Penske assumed leadership, our management team has improved same-store retail revenues by an average rate of 7.9% per year, grown total revenues from $3.2 billion in 1998 to $8.7 billion in 2003, and increased our income from continuing operations per diluted common share from $0.57 in 1998 to $2.07 in 2003.

      We benefit from our diversified revenue stream, which we believe helps to mitigate the historical cyclicality found in some other automotive sectors. Revenues from higher margin service and parts and finance and insurance sales are typically less cyclical than retail vehicle sales, and constitute the majority of our gross profit. The following graphic shows the percentage of our revenues by product area along with their respective contribution to our overall gross profit:

Revenue Mix	Gross Profit Mix

Business Strategy

      Our strategy is to increase our profitability by selling and maintaining the finest automotive brands in premium facilities. We believe offering our customers superior customer service in a premium location fosters a long-term relationship, which helps generate repeat and referral business, particularly in our higher-margin service and parts business. We believe our focus on developing a loyal customer base has helped to generate industry-leading same-store-sales and allowed us to increase our high margin service and parts sales. In addition, our national dealership base and international presence allows us to achieve cost savings and implement best practices, while also providing access to a broad base of potential acquisitions.

Offer Outstanding Brands in World Class Facilities

      Foreign vehicle brands have gained significant U.S. market share in the past five years, increasing from 31% to 40% of the total market. We have the highest concentration of revenues from foreign and luxury brands

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among the publicly-traded automotive retailers. We offer a full range of vehicle brands, however, 78% of our revenues in 2003 came from the combined sales of foreign brands such as Toyota, Honda, BMW, Lexus and Mercedes. In 2003, luxury brands represented 46% of our revenues. We believe our brand mix will allow us to continue to improve same-store sales and gross profits, as we believe luxury and foreign brands will increase market share and have higher parts, service and repair revenues.

      The following chart demonstrates our total revenue by brand:

      We sell and service these brands in our world-class facilities. We believe offering these outstanding brands in world-class facilities drives repeat and referral business, particularly in our higher margin service and parts operations. Where advantageous, we attempt to aggregate our dealerships in order to build a destination location for our customers, which we believe helps to drive increased customer traffic to each of our brands at the location. We also attempt to locate our dealerships in highly concentrated or rapidly growing demographic areas. We believe these strategies allow us to benefit by leveraging our operating expenses over a larger base of dealerships.

      For example, our Scottsdale 101 Auto Mall, the nation’s largest premium luxury automobile shopping destination, features ten separate showrooms and franchises with over 450,000 square feet of facilities. Typically, customers may choose from an inventory of over 2,000 new and used vehicles, and have access to approximately 250 service bays with service capacity of approximately 1,000 vehicles per day. It also features an on/off road test course where customers may experience the uniqueness of the brands offered. We will continue to evaluate other opportunities to aggregate our facilities to reap the benefits from a destination location.

Expand Existing Revenues and Grow Higher Margin Businesses.

      We aim to grow our business through increasing same-store sales at existing dealerships and by acquiring dealerships with strategic geographic locations and future growth potential. We also focus particularly on developing our higher margin businesses: used vehicles, finance, insurance and other products, service and parts sales and collision repair.

      Same-Store Sales. We believe our emphasis on improving customer service and upgrading our facilities will result in continued increases in same-store sales. We generally offer premium showrooms and displays and

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have recently added service bays and modernized many of our facilities. We believe these factors have helped to generate 2003 same-store retail revenue increases of 5.9% for new vehicles, 7.3% for used vehicles, 11.3% for finance and insurance and 7.3% for service and parts.

      Targeted Acquisitions. As of December 31, 2003, approximately 94% of the automotive retail market remained unconsolidated. We believe that attractive acquisition opportunities exist both in the U.S. and abroad for well-capitalized dealership groups with experience in identifying, acquiring and integrating dealerships. We seek to acquire dealerships with strategic geographic locations and significant earnings growth potential. We focus both on larger dealership operations that will benefit from our management assistance, manufacturer relations and scale of operations, as well as individual dealerships that can be effectively integrated into our existing operations.

      Higher Margin Business. Our increased new vehicle sales assist in developing our higher margin service and parts sales and finance and insurance sales. In 2003, our retail gross margins for these operations were 48.3% for service and parts and collision repair services and 100% for finance and insurance.

      Used Vehicles. Sales of used vehicles typically generate higher gross profit margins than sales of new vehicles because of limited comparability among them and the subjective nature of their valuation. Used vehicle sales have increased in part due to an increase in the availability of late-model, low-mileage, vehicles from termination of short-term leases and the adoption of manufacturer certified programs offering high quality, under-warranty vehicles. We believe our focus on manufacturer certified programs and increased vehicle availability as a result of our scale will continue to yield additional increases in used vehicle sales.

      Finance, Insurance and Other Aftermarket Products. Each sale of a vehicle provides us the opportunity to assist in financing the sale, sell the customer a third party extended service contract or insurance product and sell other aftermarket products, such as cellular phones, alarms and protective coatings. In order to improve our finance and insurance business, we are focusing on enhancing and standardizing our salesperson training program and increasing our product offerings.

      Service and Parts and Collision Repair. In 2003, we added numerous service bays and collision repair centers across our dealerships in an effort to expand this higher-margin segment of our business. Unlike independent service shops, our dealerships perform manufacturer warranty work which, because it is paid for by the manufacturer, is a more dependable source of repeat business. To increase this business, our dealerships track maintenance records of customers and contact them regarding dealership promotions and maintenance schedules. Warranty work accounts for approximately 40% of our service and parts revenue, with the balance being customer-pay work. We believe that our brand-mix, superior customer service and world-class facilities each contribute to the high level of customer pay work.

      We also own 35 collision repair centers. As each of these is operated as an integral part of our dealership operations, the repair centers benefit from the dealerships’ repeat and referral business.

Offer Outstanding Customer Service.

      Our ability to generate and maintain repeat and referral business depends on our ability to deliver superior customer service. We believe that customer satisfaction contributes directly to significant increases in same-store sales. By offering outstanding brands in world class facilities, and through “one-stop” shopping convenience, competitive pricing and our knowledgeable sales staff, we aim to establish lasting relationships with our customers, which enhances our reputation in the community and creates the opportunity for significant repeat and referral business.

      The quality of customer service provided by our dealerships’ sales and service departments is measured by customer satisfaction index (“CSI”) scores, which are derived from data accumulated by manufacturers through individual customer surveys. We rely on this data to track the performance of dealership operations and use it as a factor in determining the compensation of general managers and sales and service personnel in our dealerships. The majority of our dealerships exceeded manufacturer CSI metrics in 2003.

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Maintain Diversified Revenue Stream and Variable Cost Structure.

      We believe that our diversified revenue mix may mitigate the historical cyclicality of new vehicle sales. In addition, our variable cost structure affords us flexibility in responding to economic cycles. We believe that demand for our higher margin businesses is less affected by economic cycles than demand for new vehicles, as consumers are likely to continue to purchase used vehicles and service their vehicles in spite of difficult economic times. Our dealership operations are also diversified both in terms of the brands of vehicles they offer and geographic location, including internationally, as we operate 83 dealerships abroad, predominately in the United Kingdom.

      A significant percentage of our operating expenses are variable, such as sales compensation, floor plan interest expense (inventory-secured financing) and advertising, which we can adjust over time to reflect economic trends. Variable expenses like these can be more easily managed in difficult economic times. Currently, gross profit generated from our service and parts business absorbs a substantial portion of our total operating expenses, excluding salespersons’ compensation and advertising.

Capitalize on Experienced, Growth-Oriented Leadership Team.

      In May 1999, Roger S. Penske, a forty-year automotive industry veteran, became our Chairman and Chief Executive Officer. Mr. Penske has substantial experience as a leading operator in the automotive industry and a proven record of successful integration of acquired businesses. Under Mr. Penske’s leadership, we have enhanced our management team and forged mutually productive relationships with the domestic and international automotive manufacturers and suppliers.

Leverage Scale and Implement “Best Practices”.

      As one of the nations largest automotive retailers, we aim to eliminate redundant operating costs, such as marketing, supply and administrative costs, and take advantage of our purchasing power. Our scale also assists in managing inventory across dealerships. In addition, through our brand managers, who facilitate our relationship with each manufacturer, we leverage our industry relations to foster communication and cooperation between like brand dealerships throughout our organization.

      Our senior management and dealership management meet regularly to review the operating performance of our dealerships, examine industry trends and, where appropriate, agree on specific operating improvements. Key financial information is discussed and compared to other dealerships across all markets. This frequent interaction facilitates implementation of successful strategies throughout the organization so that each of our dealerships can benefit from the successes of our other dealerships and the knowledge and experience of our senior management.

Industry Overview

      With approximately $1 trillion in aggregate annual new vehicle, used vehicle and service and parts sales, the automotive retail industry is the largest retail trade sector in the United States, accounting for over 20% of the total U.S. retail sales. The industry is highly fragmented and largely privately held. There were about 22,000 franchised dealerships nationwide as of January 1, 2003, with the ten largest automotive retail groups accounting for approximately 6% of the total industry revenue.

      Of the close to $1 trillion in aggregate annual sales, new vehicle sales represent approximately $380 billion, or 38% of total revenues, used vehicle sales represent approximately $375 billion, or 37% of total industry revenues, followed by service and parts, which represent approximately $200 billion, or 20% of total revenues. In addition to new and used vehicles, dealerships offer a wide range of other higher-margin products and services, including service and repair work, replacement parts, third party extended service contracts, financing and credit insurance. Franchised dealers contributed $83 billion, or 41%, of the approximately $200 billion service and parts sector.

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      According to industry data, the number of franchised dealerships has declined from approximately 24,000 dealerships in 1990 to approximately 22,000 dealerships today. Although significant consolidation has already taken place, the industry today remains highly fragmented, with approximately 94% of the industry’s market share remaining in the hands of smaller regional and independent players. We believe that further consolidation in the industry is likely due to increased capital requirements of dealerships, the limited number of viable alternative exit strategies for dealership owners and the desire of certain manufacturers to strengthen their brand identity by consolidating their franchised dealerships.

      New vehicle unit sales are cyclical and, historically, fluctuations are influenced by factors such as interest rates, fuel prices, unemployment, inflation, weather, the level of personal discretionary spending, credit availability and consumer confidence. However, from a profitability perspective, automotive retailers have historically been less vulnerable than automobile manufacturers to declines in new vehicle sales. Historically, automotive retailers’ pre-tax profit margins have remained relatively stable, even in recessionary periods, while the average pre-tax profit margins of the three largest U.S. automobile manufacturers have fluctuated during the comparable periods. This has largely been due to a more flexible expense structure (a significant portion of the automotive retail industry’s costs are variable, relating to sales personnel, advertising and inventory finance cost) and a more diversified revenue stream. In addition, automobile manufacturers typically increase dealer incentives when sales are slow in part to meet production quotas set by contracts with labor unions, which further increases the volatility in profitability for automobile manufacturers and decreases the volatility for automotive retailers.

Acquisitions

      We have completed a number of dealership acquisitions since January 2001. Our financial statements include the results of operations of the acquired dealerships from the date of acquisition.

      In March 2002, we acquired the Sytner Group, plc. one of the leading retailers of luxury vehicles in the United Kingdom. At that time, the Sytner Group operated 62 franchises. Since March 2002, the Sytner Group has acquired or been awarded 20 additional franchises and now operates 79 franchises. Sytner’s franchises include: Alpina, Audi, Bentley, BMW, Chrysler, Ferrari, Jaguar, Jeep, Land Rover, Lexus, Maserati, Mercedes-Benz, Mini, Porsche, Rolls Royce, Saab, Smart, Toyota, Volkswagen and Volvo. Revenues attributable to the Sytner Group for the years ended December 31, 2003 and 2002 were $1.7 billion and $1.0 billion, respectively.

      The following table sets forth information with respect to our current domestic dealerships acquired or opened since January 2001:

	Date Opened
Dealership	or Acquired		Location		Franchises
Brett Morgan Chevrolet		1/01		Benton, AR	Chevrolet
Motorcars Toyota		2/01		Bedford, OH	Toyota
H.B.L		3/01		Vienna, VA	Mercedes Benz, Porsche, Audi
Honda of Nanuet		5/01		Nanuet, NY	Honda
Mercedes of Nanuet		5/01		Nanuet, NY	Mercedes Benz
North Olmsted Nissan		8/01		North Olmsted, OH	Nissan
Landers Nissan		8/01		Southaven, MS	Nissan
BMW of San Diego		10/01		San Diego, CA	BMW
Nelms Auto Group		10/01		Fayetteville, AR	Chevrolet, Honda, Acura
BMW of Austin		7/02		Austin, TX	BMW
Goodson Dodge North		7/02		Spring, TX	Dodge
Honda Bloomfield		8/02		Bloomfield Hills, MI	Honda
Landers Hummer		9/02		Benton, AR	Hummer

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	Date Opened
Dealership	or Acquired		Location		Franchises
Landers Hummer North		9/02		Fayetteville, AR	Hummer
Cerritos Hummer		9/02		Cerritos, CA	Hummer
Mini North Scottsdale		11/02		Phoenix, AZ	Mini
Audi North Scottsdale		11/02		Phoenix, AZ	Audi
Jaguar North Scottsdale		11/02		Phoenix, AZ	Jaguar
Lincoln-Mercury North Scottsdale		11/02		Phoenix, AZ	Lincoln, Mercury
Volkswagen North Scottsdale		11/02		Phoenix, AZ	Volkswagen
Lincoln-Mercury Volvo of Tulsa		12/02		Tulsa, OK	Lincoln, Mercury, Volvo
Aston Martin Tysons		3/03		Vienna, VA	Aston Martin
Pioneer Ford West		4/03		Goodyear, AZ	Ford
Inskip AutoCenter		4/03		Warwick, RI	Acura, Audi, Bentley, BMW, Infiniti, Lexus, Mercedes-Benz, Porsche and Volvo
Inskip Maserati		12/03		Warwick, RI	Maserati
Ronald Moran Cadillac		1/04		Torrance, CA	Cadillac
Maserati of Tulsa		2/04		Tulsa, OK	Maserati

      In addition, in July 2001, we invested in the Tulsa Auto Collection, a group of dealerships owned indirectly by Ford Motor Company, in Tulsa, Oklahoma, consisting of seven dealerships representing the Ford, Jaguar and Mazda brands. We currently own 50% of the Tulsa Auto Collection. We also are a 50% investor in six dealerships in Germany, and a minority investor in two dealerships in Mexico. Since 2001, we also have divested 20 dealerships. We expect to continue to pursue acquisitions and related transactions in the future, although there can be no assurance that we will succeed in this strategy.

Dealership Operations

      Franchises. The following chart reflects our franchises by location:

Location		Franchises
Arizona			22
Arkansas			15
California			10
Connecticut			4
Florida			5
Georgia			4
Indiana			2
Louisiana			1
Michigan			6
Mississippi			2
New Jersey			13
New York			3
North Carolina			3
Ohio			7
Oklahoma			10
Puerto Rico			6
Rhode Island			10
South Carolina			2
Tennessee			3
Texas			4
Virginia			5
	Total Domestic		137
United Kingdom			79
Brazil			4
	Total Foreign		83
	Total Worldwide		220

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      The following chart reflects our dealership mix by franchise:

Franchise		U.S.		Intl.		Total
DaimlerChrysler			24		18		42
Toyota/Lexus			19		14		33
Ford/PAG			17		16		33
BMW/MINI			8		17		25
General Motors			22		1		23
Honda/Acura			17		1		18
Nissan/Infiniti			10		—		10
Audi			5		3		8
Porsche			4		2		6
Others			11		11		22
	Total		137		83		220

      Management. Each dealership or group of dealerships has independent operational and financial management responsible for day-to-day operations. We believe experienced local managers are better qualified to make day-to-day decisions concerning successful operation of the dealership and can be more responsive to our customers’ needs. Our local dealership management not only have experience in the automotive industry but also are familiar with the local dealership’s market. Our regional management oversees operations at the individual dealerships and supports the dealerships operationally and administratively.

      New Vehicle Sales. New vehicle sales represented 60% of our revenue and 34% of our gross profit in 2003. As of March 1, 2004, we sold over forty brands of domestic and import family, sports and luxury cars, light trucks and sport utility vehicles through 220 franchises in 20 states, Puerto Rico, the U.K. and Brazil. As of March 1, 2004, we sold the following brands: Acura, Alpina, Aston Martin, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ferrari, Ford, GMC Truck, Honda, Hummer, Hyundai, Infiniti, Jaguar, Jeep, Land Rover, Lexus, Lincoln-Mercury, Lotus, Maybach, Mazda, Maserati, Mercedes Benz, Mini, Nissan, Pontiac, Porsche, Rolls Royce, Bentley, SAAB, Scion, Smart, Suzuki, Toyota, Volvo and Volkswagen.

      Our customers finance their purchases of new vehicles through both traditional financing sources as well as through consumer automobile leasing companies. Lease transactions are typically provided to consumers by short term financing sources. Off lease vehicles returned to the finance sources provide us a market of low mileage, late model vehicles for our used vehicle sales operations. Short-term leases also give us the opportunity to obtain repeat business from customers on a more regular basis than traditional purchase transactions.

      Our new vehicles are acquired by our dealerships directly from the manufacturer. Because of our long term presence in the automotive retail market, the reputation of our management team, our dedication to building and maintaining positive relationships with our manufacturers, and our consistent high sales volume from our dealerships, we believe that we can obtain high quality, in demand models for our customers. At December 31, 2003, our dealerships maintained on average a 57 day supply of new vehicles. Our dealerships finance the purchase of new vehicles from the manufacturers through floor plan financing provided by the manufacturers’ captive finance companies.

      Used Vehicle Sales. Used vehicle sales represented 27% of our revenue and 13% of our gross profit in 2003. We generally acquire used vehicles from auctions open only to authorized new vehicle dealers, public auctions, trade-ins in connection with new purchases and lease expirations or terminations. We clean, repair and recondition, as necessary, generally at our own service facilities, all used vehicles we acquire for resale. Used vehicles account for a significant portion of the revenues at each of our dealerships. Used vehicles typically sell for lower prices than new vehicles, but often generate higher margins and are less cyclical, especially at our domestic dealerships.

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      We believe growth opportunities relating to used vehicle sales exist due to decreased customer concerns regarding used vehicles as more well respected dealerships are engaging in the sale of high-quality, low-mileage, late model used vehicles, coupled with the proliferation of manufacturer certification processes for these vehicles. To improve customer confidence in our used vehicle inventory, each of our dealerships participates in any available manufacturer certification processes for used vehicles. If certification is obtained, the used vehicle owner is typically provided the benefits and warranties similar to those offered to new vehicle owners by the applicable manufacturer. In addition, we offer for sale third-party extended service contracts on all of our used vehicles. During 2003, our dealerships maintained on average a 36 day supply of used vehicles.

      Vehicle Finance, Extended Service and Insurance Sales. Finance and insurance sales represented 2% of our revenue and 17% of our gross profit in 2003. At our customers’ option, our dealerships arrange third party financing for our customers’ vehicle purchases, sell third party vehicle extended service contracts and arrange third party insurance in connection with vehicle financing. While these services are generally non-recourse to us, we are subject to chargebacks in certain circumstances such as default under a financing arrangement or other circumstances. We receive a portion of the cost of financing paid by the customer as fee income for each financed sale, however, we generally are limited in the amount of revenue per transaction we may receive from certain finance products by these finance companies. We also offer for sale other aftermarket products, such as cellular phones, alarms and protective coatings.

      Service and Parts Sales. Service and parts sales represented 11% of our revenue and 36% of our gross profit in 2003. We generate service and parts sales at each of our dealerships, primarily relating to the vehicle models sold at that dealership. We perform both warranty and non-warranty work. Our service and parts revenues have increased each year, in large part due to our increased service capacity and increasingly complex technology in vehicles, which makes it difficult for independent repair facilities to maintain, diagnose problems in and repair today’s automobiles. As part of our agreements with our manufacturers, we obtain all equipment required by the manufacturer and needed to service and maintain each make of vehicle sold at any particular dealership.

      A goal of each of our dealerships is to make each vehicle purchaser a customer of our service and parts department. Our dealerships keep detailed records of our customers’ maintenance and service history and many dealerships send reminders to customers when vehicles are due for periodic maintenance or service. Many of our dealerships also have extended evening and weekend service hours to add convenience for our customers. We also own 35 collision repair centers, each of which is operated as an integral part of our dealership operations.

      Internet Presence. In order to enhance our customer service, each of our dealerships maintains its own website, and our corporate website, www.unitedauto.com, provides a link to each of our dealership websites allowing consumers to source information and communicate directly with our dealerships locally. In addition, many automotive manufacturers’ websites link to our dealerships’ websites.

      According to industry analysts, the majority of car buyers nationwide will consult the Internet for new and pre-owned automotive information. The Internet is generating better-informed consumers and improving the efficiency of the sales process. Using our dealership websites, consumers can electronically search our inventory for vehicles that meet their model, feature requirements and price range. Our websites provide a service for the entire purchase process, including detailed information about vehicle availability, photos, prices, promotions, specifications, reviews, and financial applications. We believe these features make it easier for consumers to meet all of their automotive research needs. Customers can contact dedicated Internet sales consultants on line via unitedauto.com, the dealership websites or third party lead providers.

      We have also partnered with CarsDirect.com, a leading online car buying service which provides consumers with a full menu of research features. Consumers can also use CarsDirect.com to either buy a vehicle online or be sent to a network of dealerships in their market, including most of our dealerships. Research features include detailed safety ratings and reviews, financing, extended warranties, insurance quotes, anti-theft products and trade-in appraisals.

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Management Information Systems

      The Company consolidates financial, accounting and operational data received from our domestic dealers through an exclusive private communications network. The data from these dealers is gathered and processed through individual dealer management systems. All of our domestic dealerships use hardware and software from ADP, Inc. or the Reynolds and Reynolds Company for their management system. Each dealership is allowed to tailor the operational capabilities of that system locally, but we require that they follow our standardized accounting procedures.

      Our private communication network allows us to extract and aggregate information from the two systems in a consistent format to generate consolidating financial and operational data. The system also allows us to access detailed information for each dealership in the U.S., individually, as a group, or on a consolidated basis. Information we can access includes, among other things, inventory, cash, unit sales, the mix of new and used vehicle sales and sales of aftermarket products and services. Our ability to access this data allows us to continually analyze these dealerships’ operating results and financial position so as to identify areas for improvement. Our technology also enables us to quickly integrate dealerships or dealership groups we acquire in the U.S.

      Our foreign dealership financial, accounting and operational data is processed through dealer management systems provided by a number of local software providers. Financial and operational information is aggregated following U.S. policies and accounting requirements and in the Company’s U.S. reporting format to ensure consistency of results among our worldwide operations.

Marketing

      We believe that our marketing programs have contributed to our sales growth. Our advertising and marketing efforts are focused at the local market level, with the aim of building both our new and repeat sales and service business. We utilize many different media for our marketing activities, including newspapers, magazines, television, radio and the Internet. We also assist our local management in running special marketing events to generate sales such as tent sales or local product placement. Automobile manufacturers supplement our local and regional advertising efforts by producing large advertising campaigns to support their brands, promote attractive financing packages and draw traffic to local area dealerships. We believe that our ability to obtain favorable terms and other valuable concessions from advertising media should enable us to realize continued cost savings in marketing. In an effort to realize increased efficiencies, we are focusing on common marketing metrics across the Company, as well as negotiating enterprise arrangements for many marketing resources.

Agreements with Vehicle Manufacturers

      Each of our dealerships operates under separate franchise agreements with the manufacturers of each brand of vehicle sold at the dealership. These agreements contain provisions and standards governing almost every aspect of the operations of the dealership, including ownership, management, personnel, training, maintenance of minimum working capital and in some cases net worth, maintenance of minimum lines of credit, advertising and marketing, facilities, signs, products and services, acquisitions of other dealerships (including restrictions on how many dealerships can be acquired or operated in any given market), inventory, warranties offered to customers, maintenance of minimum amounts of insurance, achievement of minimum customer service standards, information systems and monthly financial reporting. Typically, the general manager and/or the owner of a dealership may not be changed without the manufacturer’s consent.

      In exchange for complying with these provisions and standards, we are granted the non-exclusive right to sell the manufacturer’s brand of vehicles and related parts and services at our dealerships. The agreements also grant us a non-exclusive license to use each manufacturer’s trademarks, service marks and designs in connection with our sales and service of its brands at our dealerships. Some of our franchise agreements expire after a specified period of time, ranging from one to five years. The agreements also permit the manufacturer to terminate or not renew the agreement for a variety of causes, including failure to adequately operate the dealership, insolvency or bankruptcy, impairment of the dealer’s reputation or financial standing,

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changing the dealership’s management or location without consent, sales of the dealership’s assets without consent, failure to maintain adequate working capital or floor plan financing, changes in the dealership’s financial or other condition, failure to submit information to the manufacturer on a timely basis, changes in the dealership’s owners without consent, pledging the dealership’s stock, failure to have any permit or license necessary to operate the dealership, and material breaches of other provisions of the agreement, subject to applicable state franchise laws that limit a manufacturer’s right to terminate a franchise. Many agreements grant the manufacturer a security interest in the vehicles and/or parts sold by the manufacturer to the dealership.

      Our agreements with manufacturers usually give the manufacturers the right, in some circumstances (including upon a merger, sale, or change of control of the Company, or in some cases a material change in our business or capital structure), to acquire from us, at fair market value, the dealerships that sell the manufacturers’ brands. In particular, our agreement with General Motors Corporation provides that, upon a proposed sale of 20% or more of our voting stock to any other person or entity (other than for passive investment) or another manufacturer, an extraordinary corporate transaction (such as a merger, reorganization or sale of a material amount of assets) or a change of control of our board of directors, General Motors has the right to acquire at fair market value, all assets, properties and business of any General Motors dealership owned by us. In addition, General Motors has a right of first refusal if we propose to sell any General Motors dealer to a third party. Our agreements with other major manufacturers contain provisions similar to the General Motors provisions. Some of the agreements also prohibit us from pledging, or impose significant limitations on our ability to pledge, the capital stock of some of our subsidiaries to lenders.

Competition

      For new vehicle sales, we compete primarily with other franchised dealers in each of our marketing areas. We do not have any cost advantage in purchasing new vehicles from the manufacturer, and typically we rely on our world-class facilities, advertising and merchandising, sales expertise, service reputation and the location of our dealerships to sell new vehicles. Each of our markets may include a number of well-capitalized competitors that have extensive automobile dealership managerial experience and strong retail locations and facilities. We compete with dealers that sell the same brands of new vehicles that we sell and with dealers that sell other brands of new vehicles that we do not represent in a particular market. Our new vehicle dealership competitors have franchise agreements with the various vehicle manufacturers and, as such, generally have access to new vehicles on the same terms as us. In recent years, automotive dealers have also faced increased competition in the sale of new vehicles from independent leasing companies and on-line purchasing services and warehouse clubs. Due to lower overhead and sales costs, these companies may be capable of operating on smaller gross profit margins and offering lower sales prices than franchised dealers.

      For used vehicle sales, we compete with other franchised dealers, independent used vehicle dealers, automobile rental agencies, private parties and used vehicle “superstores” for supply and resale of used vehicles.

      We believe that the principal competitive factors in vehicle sales are the marketing campaigns conducted by manufacturers, the ability of dealerships to offer a wide selection of the most popular vehicles, the location of dealerships and the quality of customer service. Other competitive factors include customer preference for particular brands of automobiles, pricing (including manufacturer rebates and other special offers) and warranties. We believe that our dealerships are competitive in all of these areas.

      We compete with other franchised dealers to perform warranty repairs and with other automotive dealers, franchised and unfranchised service center chains, and independent garages for non-warranty repair and routine maintenance business. We compete with other automotive dealers, service stores and auto parts retailers in our parts operations. We believe that the principal competitive factors in parts and service sales are price, the use of factory-approved replacement parts, facility location, the familiarity with a manufacturer’s brands and models and the quality of customer service. A number of regional or national chains offer selected parts and services at prices that may be lower than our prices.

      According to various industry sources, the automotive retail industry is served by approximately 22,000 franchised automotive dealerships, approximately 55,000 independent used vehicle dealerships and

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individual consumers who sell used vehicles in private transactions primarily through classified ads and by word of mouth. Several other public companies have established national or regional automotive retail chains. Additionally, certain vehicle manufacturers are engaged in the retail sale and service of vehicles, either independently or in conjunction with their franchised dealerships, and may do so on an expanded basis in the future, subject to various state laws that restrict or prohibit manufacturer ownership of dealerships.

      We believe that a growing number of consumers are utilizing the Internet, to differing degrees, in connection with the purchase of vehicles. Accordingly, we may face increased pressures from on-line automotive websites, including those developed by automobile manufacturers and other dealership groups. Consumers use the Internet to compare prices for vehicles and related services, which may cause reduced margins for new vehicles, used vehicles and related services.

Employees and Labor Relations

      As of December 31, 2003, we employed approximately 13,000 people, approximately 400 of whom are covered by collective bargaining agreements with labor unions. We consider our relations with our employees to be satisfactory. Our policy is to motivate our key managers through, among other things, variable compensation programs tied principally to dealership profitability and the Company’s equity incentive compensation plans. Due to our reliance on vehicle manufacturers, we may be adversely affected by labor strikes or work stoppages at the manufacturers’ facilities.

Environmental Matters

      We are subject to a wide range of foreign, federal, state and local environmental laws and regulations, including those governing discharges into the air and water, the operation and removal of aboveground and underground storage tanks, the use, handling, storage and disposal of hazardous substances and other materials and the investigation and remediation of contamination. As with automotive dealerships generally, and service, parts and body shop operations in particular, our business involves the generation, use, handling and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, refrigerant, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels. Similar to many of our competitors, we have incurred and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.

      Our operations involving the management of hazardous and other environmentally sensitive materials are subject to requirements of the Federal Resource Conservation and Recovery Act, or RCRA, and comparable state statutes. Our business also involves the operation of storage tanks containing such materials. Storage tanks are subject to periodic testing, containment, upgrading and removal under RCRA and comparable state statutes. Furthermore, investigation or remediation may be necessary in the event of leaks or other discharges from current or former underground or aboveground storage tanks. In addition, water quality protection programs under the federal Water Pollution Control Act (commonly known as the Clean Water Act), the Safe Drinking Water Act and comparable state and local programs govern certain discharges from some of our operations. Similarly, certain air emissions from our operations, such as auto body painting, may be subject to the federal Clean Air Act and related state and local laws. Various health and safety standards promulgated by the Occupational Safety and Health Administration of the United States Department of Labor and related state agencies also apply to our operations.

      We may also have liability in connection with materials that were sent to third-party recycling, treatment, and/or disposal facilities under the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, and comparable state statutes. These statutes impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct which contributed to the contamination. Responsible parties under these statutes may include the owner or operator of the site where the contamination occurred and companies that disposed or arranged for the disposal of the hazardous substances released at these sites.

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      We believe that we do not have any material environmental liabilities and that compliance with environmental laws and regulations will not, individually or in the aggregate, have a material adverse effect on our results of operations, financial condition or cash flows. However, soil and groundwater contamination is known to exist at certain of our current or former properties. Further, environmental laws and regulations are complex and subject to change. In addition, in connection with our acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. Compliance with current, amended, new or more stringent laws or regulations, stricter interpretations of existing laws or the future discovery of environmental conditions could require additional expenditures by us, and such expenditures could be material.

Insurance

      Due to the nature of the automotive retail industry and the large inventory maintained by dealerships, automotive retail dealerships generally require significant levels of insurance covering a broad variety of risks. The business is subject to substantial risk of property loss due to the significant concentration of property values at dealership locations, including vehicles and parts. Other potential liabilities arising out of our operations involve claims by employees, customers or third parties for personal injury or property damage and potential fines and penalties in connection with alleged violations of regulatory requirements.

      Accordingly, we have purchased liability and property insurance subject to specified deductibles and loss retentions. We also purchase umbrella and excess insurance to provide insurance in excess of our primary liability insurance. The level of risk we retain may change in the future as insurance market conditions or other factors affecting the economics of purchasing insurance change. Although we have, subject to limitations and exclusions, substantial insurance, we may be exposed to uninsured or underinsured losses that could have a material adverse effect on our results of operations, financial condition or cash flows.

Available Information

      United Auto’s internet website address is www.unitedauto.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. We are incorporated in the State of Delaware in December 1990 and began dealership operations in October 1992.

Item 2.     Properties

      We seek to structure our operations so as to minimize the ownership of real property. As a result, we lease or sublease substantially all of our dealerships and other facilities. These leases are generally for a period of between five and 20 years and are typically structured to include renewal options for an additional five to ten years in our favor. We lease office space in Bloomfield Hills, Michigan and Secaucus, New Jersey for our administrative headquarters and other corporate related activities. We believe that our facilities are sufficient for our needs and are in good repair.

Item 3.     Legal Proceedings

      From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. Such issues may relate to litigation with customers, employment related lawsuits, class action lawsuits, purported class action lawsuits and actions brought by governmental authorities. As of March 1, 2004, we are not a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on our results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our results of operations, financial condition or cash flows. We are a party to several class action lawsuits. While we believe these actions are without merit,

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any settlement or adverse ruling of one or more of these cases may result in the payment of significant costs and damages.

Item 4.     Submission of Matters to a Vote of Security-Holders

      No matter was submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2003.

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PART II

Item 5.     Market for Registrant’s Common Equity and Related Stockholder Matters

      Our common stock has been traded on the New York Stock Exchange under the symbol “UAG” since October 23, 1996. As of March 1, 2004, there were 220 holders of record of our common stock.

      The following table shows the high and low per share sales prices of our common stock as reported on the New York Stock Exchange Composite Tape for each quarter of 2003 and 2002.

		High		Low
2003:
	First Quarter	$	13.63	$	9.81
	Second Quarter		22.43		11.38
	Third Quarter		26.30		20.93
	Fourth Quarter		32.02		23.10
2002:
	First Quarter	$	27.70	$	20.20
	Second Quarter		32.00		19.30
	Third Quarter		21.70		12.52
	Fourth Quarter		16.06		11.12

      We paid our first cash dividend on our common stock on December 1, 2003 and paid an additional dividend on March 1, 2004. Both dividends were in the amount of ten cents per share. Future quarterly or other cash dividends will depend upon our earnings, capital requirements, financial condition, restrictions on any existing indebtedness and other factors considered relevant by the Board of Directors.

      The indenture governing our 9 5/8% senior subordinated notes contains certain limitations on our ability to pay dividends. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” We are a holding company whose assets consist primarily of the direct or indirect ownership of the capital stock of our operating subsidiaries. Consequently, our ability to pay dividends is dependent upon the earnings of our subsidiaries and their ability to distribute earnings and other advances and payments to us. Also, pursuant to the automobile franchise agreements to which our dealerships are subject, all dealerships are required to maintain a certain amount of working capital, which could limit our subsidiaries’ ability to pay dividends.

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Item 6. Selected Consolidated Financial Data

      The following table sets forth our selected historical consolidated financial and other data as of and for each of the five years in the period ended December 31, 2003, which has been derived from our audited consolidated financial statements. During the periods presented, we made a number of acquisitions, each of which has been accounted for using the purchase method of accounting. Accordingly, our financial statements include the results of operations of the acquired dealerships from the date of acquisition. As a result of the acquisitions, our period to period results of operations vary depending on the dates of the acquisitions and this selected financial data is not necessarily indicative of our future results. During 2003 and 2002, the Company sold four and five dealerships, respectively, which have been treated as discontinued operations in accordance with SFAS No. 144. You should read this selected consolidated financial data in conjunction with our audited consolidated financial statements and related footnotes included elsewhere in this report.

		As of and for the Years Ended December 31,
		2003(1)		2002(2)		2001(3)		2000(3)		1999(3)
				(in millions, except per share data)
Consolidated Statement of Income Data:
	Total revenues	$	8,671.5	$	7,209.8	$	5,664.6	$	4,408.9	$	3,728.4
	Gross profit		1,243.4		1,028.2		786.0		621.6		513.9
	Income from continuing operations		85.7		59.7		42.0		32.4		25.1
	Net income		82.9		62.2		44.7		30.0		27.5
	Income from continuing operations per diluted common share		2.07		1.45		1.23		1.10		.95
	Net income per diluted common share		2.00		1.51		1.31		1.02		1.04
	Shares used in computing diluted share data		41.4		41.2		34.2		29.4		26.5
Balance Sheet Data:
	Total assets	$	3,137.2	$	2,690.3	$	1,884.1	$	1,691.0	$	1,233.2
	Floor plan notes payable		1,138.5		882.1		565.4		625.3		437.4
	Total debt (excluding floor plan notes payable)		651.9		666.2		555.9		418.8		228.5
	Total stockholders’ equity		828.4		704.4		515.7		461.7		430.9

(1)	Includes a $3.1 million (net of tax) cumulative effect of an accounting change related to the adoption of EITF 02-16.
(2)	Includes a $22.8 million charge, which includes the estimated cash costs to be paid relating to employment contracts of certain employees terminated in connection with the streamlining of the Company’s dealership operations in the western region of the U.S. and the cost of a non-compete agreement with a former member of management which the Company determined no longer had a continuing economic benefit.
(3)	In accordance with SFAS 142, the Company stopped recording amortization expense relating to indefinite lived intangibles as of January 1, 2002. Amortization expense was $19.7 million, $15.4 million and $13.0 million in 2001, 2000 and 1999, respectively.

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Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

      This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors. See “Forward Looking Statements.”

Overview

      We are the second largest automotive retailer in the United States as measured by total revenues. As of March 1, 2004, we owned and operated 137 franchises in the United States and 83 franchises internationally, primarily in the United Kingdom. We offer a full range of vehicle brands, however, 78% of our revenues in 2003 came from the combined sales of foreign brands such as Toyota, Honda, BMW, Lexus and Mercedes. In 2003, luxury brands represented 46% of our revenues. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services and the sale of higher margin products, such as third party finance and insurance products, third-party extended service contracts and replacement and aftermarket automotive products.

      New vehicle revenues include sales to retail customers and to leasing companies providing consumer automobile leasing. Used vehicle revenues include amounts received for used vehicles sold to retail customers, leasing companies providing consumer leasing and other dealers. We generate finance and insurance revenues from sales of third-party extended service contracts, other third-party insurance policies, and accessories, as well as from fees for placing third-party finance and lease contracts. Service and parts revenues include fees paid for repair and maintenance service, the sale of replacement parts and collision repairs.

      Our gross profit tends to vary with the mix of revenues we derive from the sale of new vehicles, used vehicles, finance and insurance products, and service and parts services. Our gross profit generally varies across product lines, with new vehicle sales usually resulting in lower gross profit margins and our other products resulting in higher gross profit margins. Factors such as seasonality, weather, cyclicality and manufacturers’ advertising and incentives may impact the mix of our revenues, and therefore influence our gross profit margin.

      Our selling expenses consist of advertising and compensation for sales personnel, including commissions and related bonuses. General and administrative expenses include compensation for administration, finance, legal and general management personnel, rent, insurance, utilities and other outside services. A significant portion of our selling expenses are variable, and a significant portion of our general and administrative expenses are subject to our control, allowing us to adjust them over time to reflect economic trends.

      Floor plan interest expense relates to indebtedness incurred in connection with the acquisition of new and used vehicle inventories. Other interest expense consists of interest charges on all of our interest-bearing debt, other than interest relating to floor plan financing.

      We have acquired a number of dealerships each year since our inception. Each of these acquisitions has been accounted for using the purchase method of accounting. As a result, our financial statements include the results of operations of the acquired dealerships from the date of acquisition.

      The future success of our business will likely be dependent on, among other things, our ability to consummate and integrate acquisitions, our ability to increase sales of higher margin products, especially service and parts sales, our ability to realize returns on our significant capital investment in new and upgraded dealerships, and the success of our international operations. See “Forward Looking Statements.”

Critical Accounting Policies and Estimates

      The preparation of financial statements in accordance with accounting standards generally accepted in the United States of America requires the application of accounting policies that often involve making estimates and employing judgment. Such judgments influence the reported amounts of the assets, liabilities, revenues and expenses in the Company’s consolidated financial statements. Management, on an ongoing basis, reviews these estimates and assumptions. Management’s determination that modifications in assumptions and

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estimates are appropriate may result in a material change in our future results of operations or financial position as reported in the consolidated financial statements.

      Following is a summary of the accounting policies applied in the preparation of our consolidated financial statements that management believes are most dependent upon the use of estimates and assumptions.

Revenue Recognition

Vehicle, Parts and Service Sales

      We record revenue when vehicles are delivered and title has passed to the customer, when vehicle service or repair work is performed and when parts are delivered. Sales promotions that we offer to customers are accounted for as a reduction to the sales price at the time of sale. Incentives, rebates and holdbacks offered by manufacturers directly to us are recognized at the time of sale if they are vehicle specific, or as earned in accordance with the manufacturer program rules.

Finance and Insurance Sales

      We arrange financing for customers through various financial institutions and receive a commission from the lender equal to the difference between the interest rates charged to customers and the interest rates set by the financing institution. We also receive commissions from the sale of various third-party insurance products to customers, including credit, life, and health insurance policies and extended service contracts. These commissions are recorded as revenue at the time the customer enters into the contract. We are not the obligor under any of these contracts. In the case of finance contracts, a customer may prepay or fail to pay their contract, thereby terminating the contract. Customers may also terminate extended service contracts, which are fully paid at purchase, and become eligible for refunds of unused premiums. In these circumstances, a portion of the commissions we receive may be charged back to us based on the relevant terms of the contracts. The revenue we record relating to commissions is net of an estimate of the ultimate amount of chargebacks we will be required to pay. Such estimate of chargeback exposure is based on our historical chargeback experience arising from similar contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on extended service contracts and other insurance products.

Intangible Assets

Useful Lives

      Our principal intangible assets relate to our franchise agreements with vehicle manufacturers, which represent the estimated value of franchises acquired in business combinations consummated subsequent to July 1, 2001, and goodwill, which represents the excess of cost over the fair value of tangible and identified intangible assets acquired in connection with business combinations. We believe the franchise value of our dealerships have an indefinite life based on the following facts:

•  Automotive retailing is a mature industry and is based on franchise agreements with the vehicle manufacturers;

•  There are no known changes or events that would alter the automotive retailing franchise environment;

•  Certain franchise agreement terms are indefinite;

•  Franchise agreements that have limited terms have historically been renewed without substantial cost;

•  Our industry’s history shows that manufacturers rarely terminate franchise agreements; and

•  State franchise laws are typically in favor of the franchisee and limit the franchisor’s ability to terminate the franchise agreement without substantial cause.

      Intangible assets are amortized over their estimated useful lives.

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Impairment Testing

      Our intangible assets are reviewed for impairment on at least an annual basis. Franchise value impairment is assessed annually through a comparison of the fair value of the asset with its carrying value. If the carrying value of a franchise exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We evaluate the remaining useful life of our franchises at each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Goodwill impairment is assessed annually at the “reporting unit” level. We have three “regions” each of which has been determined to be a reporting unit because discrete financial information is available for each region and each region’s operating results are regularly reviewed by our Chief Executive Officer and executive management team. If the carrying amount of a reporting unit is determined to exceed its fair value, an impairment loss is recognized.

Investments

      Investments include marketable securities and investments in businesses accounted for under the equity method. Marketable securities include investments in debt and equity securities. Marketable securities held by us are typically classified as available for sale and are stated at fair value in our Consolidated Balance Sheets with unrealized gains and losses included in Other Comprehensive Income. Our investments are reviewed on at least an annual basis for impairment. Declines in investment values that are deemed to be other than temporary would result in an impairment charge adjusting the investments’ carrying value to fair value. A majority of our investments are in joint venture relationships that are more fully described in “Joint Ventures” in this Management’s Discussion and Analysis. Such joint ventures are accounted for under the equity method, under which we record our proportionate share of joint venture income each period.

Self-Insurance

      We retain risk relating to certain of our general liability insurance, workers’ compensation insurance and employee medical benefits in the United States. As a result, we are likely to be responsible for a majority of the claims and losses incurred under these programs. The amount of risk we retain varies by program, but we typically pay per occurrence deductibles and have pre-determined maximum exposure limits for each insurance period. The majority of losses, if any, above the pre-determined exposure limits are typically paid by third-party insurance carriers. Our estimate of future losses is prepared by management using the Company’s historical loss experience and industry based development factors.

Income Taxes

      Tax regulations require items to be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses which are not deductible on our tax return, and some are timing differences, such as the timing of depreciation expense. Timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which we have already recorded the tax benefit in our financial statements. Deferred tax liabilities generally represent expenses recognized in our financial statements for which payment has been deferred or deductions taken on our tax return which have not yet been recognized as expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not likely to allow for the use of the deduction or credit.

New Accounting Pronouncements

      Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities” was issued in April 2003. SFAS No. 149 clarifies the circumstances under which a contract with an initial net investment meets the characteristics of a derivative and clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 amends certain other existing pronouncements. SFAS No. 149 is generally effective for contracts entered into or modified after June 30, 2003 and should be applied prospectively. We do

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not expect SFAS No. 149 to have a material impact on our consolidated financial position, result of operations or cash flows.

      SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” was issued in May 2003. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. This statement establishes standards for an issuer’s classification and measurement of certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a freestanding financial instrument that is within its scope as a liability (or an asset in some circumstances). We do not expect SFAS No. 150 to have a material impact on our consolidated financial position, result of operations or cash flows.

      FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of APB No. 50 (“FIN 46”), was issued in January 2003. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. In December 2003, the FASB issued FIN No. 46 (Revised) (“FIN 46-R”) to address certain FIN 46 implementation issues. FIN 46-R also deferred the effective date of FIN 46 for entities not considered special-purpose entities to the first reporting period that ends after March 15, 2004. We do not expect FIN 46 to have a material impact on our consolidated financial position, result of operations or cash flows.

Results of Operations

     (in millions, except unit and per unit amounts)

							2003 vs. 2002												2002 vs. 2001
	2003			2002			Change			% Change			2002			2001			Change			% Change
Total Retail Data
Total retail unit sales		258,980			227,674			31,306			13.8	%		227,674			192,591			35,083			18.2	%
Total same store retail unit sales		204,737			196,636			8,101			4.1	%		173,239			171,492			1,747			1.0	%
Total retail sales revenue	$	8,026.9		$	6,650.2		$	1,376.7			20.7	%	$	6,650.2		$	5,199.3		$	1,450.9			27.9	%
Total same store retail sales revenue	$	5,838.5		$	5,483.6		$	354.9			6.5	%	$	4,795.9		$	4,606.4		$	189.5			4.1	%
Total retail gross profit	$	1,241.7		$	1,031.8		$	209.9			20.3	%	$	1,031.8		$	786.8		$	245.0			31.1	%
Total retail gross margin		15.5	%		15.5	%		0.0	%		0.0	%		15.5	%		15.1	%		0.4	%		2.5	%

Units

      Retail data includes new vehicle, used vehicle, finance and insurance and service and parts transactions. Retail unit sales of vehicles increased by 31,306, or 13.8%, from 2002 to 2003 and increased by 35,083, or 18.2%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) an 8,101, or 4.1%, increase in same store retail unit sales and (2) a 23,205 unit increase from net dealership acquisitions during the year. The increase from 2001 to 2002 is due to: (1) a 1,747, or 1.0%, increase in same store retail unit sales and (2) a 33,336 unit increase from net dealership acquisitions during the year. We believe that the same store increases during 2003 and 2002 are due in part to our favorable brand mix, which includes a higher concentration of foreign and luxury nameplates that have been increasing market share in the U.S. and aggressive incentive programs offered by domestic nameplate manufacturers beginning in the fourth quarter of 2001 that have helped sustain the overall new vehicle sales environment.

Revenues

      Retail sales revenue increased $1,376.7 million, or 20.7%, from 2002 to 2003 and increased $1,450.9 million, or 27.9%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a $354.9 million, or 6.5%, increase in same store revenues and (2) a $1,021.8 million increase from net dealership acquisitions during the year. The same store revenue increase is due to (1) a 4.1% increase in retail unit sales, which increased revenue by $183.3 million, (2) an $868, or 3.2%, increase in average new vehicle revenue per unit, which increased revenue by $117.1 million, (3) a $47, or 6.9%, increase in average finance and insurance revenue per unit, which increased revenue by $9.2 million and (4) a $45.3 million, or 7.3%, increase in service and parts

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revenues. The increase from 2001 to 2002 is due to: (1) a $189.5 million, or 4.1%, increase in same store revenues and (2) a $1,261.4 million increase from net dealership acquisitions during the year. The same store revenue increase is due to (1) a 1.0% increase in retail unit sales, which increased revenue by $58.2 million, (2) a $699, or 2.6%, increase in average new vehicle revenue per unit, which increased revenue by $81.3 million, (3) a $174, or 1.1%, increase in average used vehicle revenue per unit, which increased revenue by $9.6 million, (4) a $59, or 9.3%, increase in average finance and insurance revenue per unit, which increased revenue by $10.2 million, and (5) a $30.2 million, or 5.9%, increase in service and parts revenues.

Gross Profit

      Retail gross profit increased $209.9 million, or 20.3%, from 2002 to 2003 and increased $245.0 million, or 31.1%, from 2001 to 2002. The increase from 2002 to 2003 is due to (1) a 13.8% increase in retail unit sales, which increased gross profit $94.2 million, (2) a $98, or 2.3%, increase in average gross profit per vehicle retailed, which increased gross profit by $15.8 million, (3) a $48, or 6.4%, increase in average finance and insurance revenue per unit which increased gross profit by $10.9 million and (4) an $89.0 million, or 25.0%, increase in service and parts gross profit. The increase from 2001 to 2002 is due to (1) an 18.2% increase in retail unit sales, which increased gross profit by $103.8 million, (2) a $365, or 9.3%, increase in average gross profit per vehicle retailed, which increased gross profit by $33.9 million, (3) a $44, or 6.2%, increase in average finance and insurance revenue per unit, which increased gross profit by $8.5 million and (4) a $98.8 million, or 38.5%, increase in service and parts gross profit.

							2003 vs. 2002												2002 vs. 2001
	2003			2002			Change			% Change			2002			2001			Change			% Change
New Vehicle Data
New retail unit sales		170,664			153,730			16,934			11.0	%		153,730			130,821			22,909			17.5	%
Same store new retail unit sales		138,619			135,019			3,600			2.7	%		118,983			116,342			2,641			2.3	%
New retail sales revenue	$	5,052.5		$	4,292.1		$	760.4			17.7	%	$	4,292.1		$	3,470.7		$	821.4			23.7	%
Same store new retail sales revenue	$	3,906.5		$	3,687.9		$	218.6			5.9	%	$	3,232.3		$	3,079.2		$	153.1			5.0	%
New retail sales revenue per unit	$	29,605		$	27,920		$	1,685			6.0	%	$	27,920		$	26,530		$	1,390			5.2	%
Same store new retail sales revenue per unit	$	28,182		$	27,314		$	868			3.2	%	$	27,166		$	26,467		$	699			2.6	%
Gross profit — new	$	422.2		$	363.7		$	58.5			16.1	%	$	363.7		$	288.0		$	75.7			26.3	%
Average gross profit per new vehicle retailed	$	2,474		$	2,366		$	108			4.6	%	$	2,366		$	2,201		$	164			7.5	%
Gross margin % — new		8.4	%		8.5	%		(0.1	%)		(1.4	%)		8.5	%		8.3	%		0.2	%		2.1	%

Units

      Retail unit sales of new vehicles increased 16,934, or 11.0%, from 2002 to 2003 and increased 22,909, or 17.5%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a 3,600, or 2.7%, increase in same store retail unit sales and (2) a 13,334 unit increase from net dealership acquisitions during the year. The increase from 2001 to 2002 is due to: (1) a 2,641, or 2.3%, increase in same store retail unit sales and (2) a 20,268 unit increase from net dealership acquisitions during the year. We believe that these increases during 2003 and 2002 are due in part to our favorable brand mix, which includes a concentration of foreign and luxury nameplates that have been increasing market share in the U.S. and aggressive incentive programs offered by domestic nameplate manufacturers beginning in the fourth quarter of 2001 that have helped sustain the overall new vehicle sales environment.

Revenues

      New vehicle retail sales revenue increased $760.4 million, or 17.7%, from 2002 to 2003 and increased $821.4 million, or 23.7%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a $218.6 million, or 5.9%, increase in same store revenues and (2) a $541.8 million increase from net dealership acquisitions during the year. The same store revenue increase is due to a 2.7% increase in retail unit sales, which increased revenue by $101.5 million, and a 3.2% increase in comparative average selling prices per unit, which increased revenue by $117.1 million. The increase from 2001 to 2002 is due to: (1) a $153.1 million, or 5.0%, increase in same store revenues and (2) a $668.3 million increase from net dealership acquisitions during the year. The same store revenue increase is due to a 2.3% increase in retail unit sales, which increased revenue by

20

$71.7 million, and a 2.6% increase in comparative average selling prices per unit, which increased revenue by $81.4 million.

Gross Profit

      Retail gross profit from new vehicle sales increased $58.5 million, or 16.1%, from 2002 to 2003 and increased $75.7 million, or 26.3%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) an 11.0% increase in new retail unit sales, which increased gross profit by $41.9 million, and a $108, or 4.6%, increase in average gross profit per new vehicle retailed, which increased gross profit by $16.6 million. The increase from 2001 to 2002 is due to: (1) a 17.5% increase in new retail unit sales, which increased gross profit by $54.2 million, and a $164, or 7.5%, increase in average gross profit per new vehicle retailed, which increased gross profit by $21.5 million.

							2003 vs. 2002												2002 vs. 2001
	2003			2002			Change			% Change			2002			2001			Change			% Change
Used Vehicle Data
Used retail unit sales		88,316			73,944			14,372			19.4	%		73,944			61,770			12,174			19.7	%
Same store used retail unit sales		66,118			61,617			4,501			7.3	%		54,256			55,150			(894	)		(1.6	%)
Used retail sales revenue	$	1,847.0		$	1,432.8		$	414.2			28.9	%	$	1,432.8		$	1,019.9		$	412.9			40.5	%
Same store used retail sales revenue	$	1,119.5		$	1,043.5		$	76.0			7.3	%	$	896.9		$	902.1		$	(5.2	)		(0.6	%)
Used retail sales revenue per unit	$	20,914		$	19,377		$	1,537			7.9	%	$	19,377		$	16,511		$	2,866			17.4	%
Same store used retail sales revenue per unit	$	16,932		$	16,935		$	(3	)		0.0	%	$	16,531		$	16,357		$	174			1.1	%
Gross profit — used	$	168.0		$	141.5		$	26.5			18.7	%	$	141.5		$	105.8		$	35.7			33.7	%
Average gross profit per used vehicle retailed	$	1,902		$	1,913		$	(10	)		(0.5	%)	$	1,913		$	1,713		$	200			11.7	%
Gross margin % — used		9.1	%		9.9	%		(0.8	%)		(7.9	%)		9.9	%		10.4	%		(0.5	%)		(4.8	%)

Units

      Retail unit sales of used vehicles increased 14,372, or 19.4%, from 2002 to 2003 and increased 12,174, or 19.7%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a 4,501, or 7.3%, increase in same store used retail unit sales and (2) a 9,871 unit increase from net dealership acquisitions during the year. The increase from 2001 to 2002 is due to a 13,068 unit increase from net dealership acquisitions during the year, offset partially by an 894, or 1.6%, decrease in same store used retail unit sales.

Revenues

      Used vehicle retail sales revenue increased $414.2 million, or 28.9%, from 2002 to 2003 and increased $412.9 million, or 40.5%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a $76.0 million, or 7.3%, increase in same store revenues and (2) a $338.2 million increase from net dealership acquisitions during the year. The same store revenue increase is due to a 7.3% increase in retail unit sales, which increased revenue by $76.2 million, offset somewhat by a slight decrease in comparative average selling prices per vehicle, which decreased revenue by $0.2 million. The increase from 2001 to 2002 is due to: a $418.1 million increase from net dealership acquisitions during the year, offset somewhat by a $5.2 million, or 0.6%, decrease in same store revenues. The same store revenue decrease is due to a 1.6% decrease in retail unit sales, which decreased revenue by $14.8 million, offset somewhat by a $174, or 1.1%, increase in comparative average selling prices per unit, which increased revenue by $9.6 million.

Gross Profit

      Retail gross profit from used vehicle sales increased $26.5 million, or 18.7%, from 2002 to 2003 and increased $35.7 million, or 33.7%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a 19.4% increase in used retail unit sales, which increased gross profit by $27.3 million, offset somewhat by a $10, or 0.5%, decrease in average gross profit per used vehicle retailed, which decreased gross profit by $0.8 million. The increase from 2001 to 2002 is due to: (1) a 19.7% increase in used retail unit sales, which increased gross profit by $23.3 million, and a $200, or 11.7%, increase in average gross profit per used vehicle retailed, which increased gross profit by $12.4 million.

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					2003 vs. 2002									2002 vs. 2001
	2003		2002		Change		% Change			2002		2001		Change		% Change
Finance and Insurance Data
Total retail unit sales		258,980		227,674		31,306		13.8	%		227,674		192,591		35,083		18.2	%
Total same store retail unit sales		204,737		196,636		8,101		4.1	%		173,239		171,492		1,747		1.0	%
Finance and insurance revenue		$206.9		$171.0		$35.9		21.0	%		$171.0		$136.2		$34.8		25.6	%
Same store finance and insurance revenue		$147.8		$132.8		$15.0		11.3	%		$120.7		$109.3		$11.4		10.4	%
Finance and insurance revenue per unit		$  799		$  751		$  48		6.4	%		$  751		$  707		$  44		6.2	%
Same store finance and insurance revenue per unit		$  722		$  675		$  47		6.9	%		$  697		$  637		$  59		9.3	%

      Finance and insurance revenue increased $35.9 million, or 21.0%, from 2002 to 2003 and increased $34.8 million, or 25.6%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a $15.0 million, or 11.3%, increase in same store revenues and (2) a $20.9 million increase from net dealership acquisitions during the year. The same store revenue increase is due to (1) the 4.1% increase in retail unit sales, which increased revenue by $5.9 million and (2) a $47, or 6.9%, increase in comparative average finance and insurance revenue per unit, which increased revenue by $9.1 million. The increase from 2001 to 2002 is due to: (1) an $11.4 million, or 10.4%, increase in same store revenues and (2) a $23.4 million increase from net dealership acquisitions during the year. The same store revenue increase is due to (1) a 1.0% increase in retail unit sales, which increased revenue by $1.2 million and (2) a $59, or 9.3%, increase in comparative average finance and insurance revenue per unit, which increased revenue by $10.2 million.

							2003 vs. 2002												2002 vs. 2001
	2003			2002			Change			% Change			2002			2001			Change			% Change
Service and Parts Data
Service and parts revenue	$	920.5		$	754.3		$	166.2			22.0	%	$	754.3		$	572.5		$	181.8			31.8	%
Same store service and parts revenue	$	664.7		$	619.4		$	45.3			7.3	%	$	546.0		$	515.8		$	30.2			5.9	%
Gross profit	$	444.6		$	355.6		$	89.0			25.0	%	$	355.6		$	256.8		$	98.8			38.5	%
Gross margin		48.3	%		47.1	%		1.2	%		2.5	%		47.1	%		44.9	%		2.3	%		5.1	%

      Service and parts revenue increased $166.2 million, or 22.0%, from 2002 to 2003 and increased $181.8 million, or 31.8%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a $45.3 million, or 7.3%, increase in same store revenues and (2) a $120.9 million increase from net dealership acquisitions during the year. The increase from 2001 to 2002 is due to: (1) a $30.2 million, or 5.9%, increase in same store revenues and (2) a $151.6 million increase from net dealership acquisitions during the year. We believe that our service and parts business is being positively impacted by increases in retail unit sales at our dealerships and capacity increases in our service and parts operations resulting from our facility improvement and expansion programs.

							2003 vs. 2002												2002 vs. 2001
	2003			2002			Change			% Change			2002			2001			Change			% Change
Fleet Data
Fleet unit sales		5,831			6,003			(172	)		(2.9	%)		6,003			7,188			(1,185	)		(16.5	%)
Fleet sales revenue	$	114.5		$	108.2		$	6.3			5.8	%	$	108.2		$	138.5		$	(30.3	)		(21.9	%)
Fleet sales revenue per unit	$	19,636		$	18,024		$	1,612			8.9	%	$	18,024		$	19,268		$	(1,244	)		(6.5	%)
Gross profit — fleet	$	2.6		$	3.2		$	(0.6	)		(18.8	%)	$	3.2		$	3.7		$	(0.5	)		(13.5	%)
Average gross profit per fleet unit	$	446		$	533		$	(87	)		(16.4	%)	$	533		$	515		$	18			3.6	%
Gross margin % — fleet		2.3	%		3.0	%		(0.7	%)		(23.2	%)		3.0	%		2.7	%		0.3	%		10.7	%

      Fleet revenues increased $6.3 million, or 5.8%, from 2002 to 2003 and decreased $30.3 million, or 21.9%, from 2001 to 2002. We have generally elected to de-emphasize low margin fleet business, however, opportunities to obtain such business are considered on a case by case basis. We may elect to selectively pursue fleet opportunities in circumstances where we believe we will be able to generate higher margin service and parts revenues throughout the life cycle of the fleet vehicle.

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							2003 vs. 2002												2002 vs. 2001
	2003			2002			Change			% Change			2002			2001			Change			% Change
Wholesale Data
Wholesale unit sales		69,462			63,269			6,193			9.8	%		63,269			53,107			10,162			19.1	%
Same store wholesale unit sales		52,278			53,416			(1,138	)		(2.1	%)		47,700			47,573			127			0.3	%
Wholesale sales revenue		$530.0			$451.3			$78.7			17.4	%		$451.3			$326.8			$124.5			38.1	%
Same store wholesale sales revenue		$332.9			$341.1			$(8.2	)		(2.4	%)		$293.2			$284.6			$  8.6			3.0	%
Wholesale sales revenue per unit		$7,630			$7,133			$ 497			7.0	%		$7,133			$6,154			$  979			15.9	%
Same store wholesale sales revenue per unit		$6,368			$6,386			$ (18	)		(0.3	%)		$6,147			$5,982			$  164			2.7	%
Gross profit — wholesale		$ (0.9	)		$ (6.9	)		$ 6.0			87.0	%		$ (6.9	)		$ (4.6	)		$ (2.3	)		(50.0	%)
Average gross profit per wholesale unit		$  (14	)		$ (108	)		$  94			87.1	%		$ (108	)		$  (87	)		$  (21	)		(24.8	%)
Gross margin % — wholesale		(0.2	%)		(1.5	%)		1.4	%		88.9	%		(1.5	%)		(1.4	%)		(0.1	%)		(8.6	%)

      Wholesale sales increased $78.7 million, or 17.4%, from 2002 to 2003 and increased $124.5 million, or 38.1%, from 2001 to 2002. The increase from 2002 to 2003 is due to an $86.9 million increase from net dealership acquisitions during the year, offset somewhat by an $8.2 million, or 2.4%, decrease in same store wholesale sales revenue. The increase from 2001 to 2002 is due to: (1) a $115.9 million increase from net dealership acquisitions during the year and (2) an $8.6 million, or 3.0%, increase in same store wholesale revenues.

      Wholesale losses decreased $6.0 million, or 87.0%, from 2002 to 2003 and increased $2.3 million, or 50.0%, from 2001 to 2002. The decrease from 2002 to 2003 is due primarily to a $94, or 87.1%, decrease in average wholesale loss per vehicle. The increase from 2001 to 2002 is due primarily to a $21, or 24.8%, increase in average wholesale loss per vehicle. We believe that the improvement in wholesale losses over the periods is due in part to our used car initiatives, including implementing closed bid auctions at certain of our locations.

Selling, General and Administrative

      Selling, general and administrative “SG&A” expenses increased $149.8 million, or 18.0%, from 2002 to 2003 and increased $226.5 million, or 37.5%, from 2001 to 2002. The aggregate increase from 2002 to 2003 is primarily due to (1) a $28.1 million, or 4.1%, increase in same store SG&A and (2) a $121.7 million increase from net dealership acquisitions during the year. The aggregate increase in SG&A from 2001 to 2002 is primarily due to (1) a $53.6 million, or 9.4%, increase in same store SG&A, and (2) a $172.9 million increase from net dealership acquisitions during the year. The increase in same store selling, general and administrative expenses is due in large part to (1) increased variable selling expenses, including increases in variable compensation, as a result of the 20.3% and 31.1% increase in retail gross profit over the prior year in 2003 and 2002, respectively, (2) increased rent and related costs in both years due in part to our facility improvement and expansion program and, (3) increased advertising and promotion caused by the overall competitiveness of the retail vehicle market and the promotion of expanded manufacturer incentive programs, offset in part in 2003 by a decrease related to reduced legal and insurance expense as a result of favorable experience and the absence of a $22.8 million charge for estimated employment contract costs recorded in 2002. In 2003, SG&A expenses decreased as a percentage of total revenue from 11.5% to 11.3% and as a percentage of gross profit from 80.8% to 78.8%. In 2002, SG&A expenses increased as a percentage of total revenue from 10.7% to 11.5% and as a percentage of gross profit from 76.8% to 80.8%.

Depreciation and Amortization

      Depreciation and amortization increased $10.1 million, or 47.0%, from 2002 to 2003 and decreased $11.1 million, or 34.0%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a $6.6 million, or 40.5%, increase in same store depreciation and amortization and (2) a $3.5 million increase from net dealership acquisitions during the year. The same store increase is due in large part to our facility improvement and expansion program. The decrease from 2001 to 2002 is due to the absence of $19.7 million of goodwill amortization recorded in 2002, offset in part by a $4.0 million, or 36.0%, net increase in same store depreciation and leasehold amortization and a $4.6 million increase from net dealership acquisitions during the year.

23

Floor Plan Interest Expense

      Floor plan interest expense increased $8.6 million, or 24.6%, from 2002 to 2003 and decreased $4.3 million, or 11.0%, from 2001 to 2002. The increase from 2002 to 2003 is due to: (1) a $1.2 million, or 6.8%, increase in same store floor plan interest expense and (2) a $7.4 million increase from net dealership acquisitions during the year. The same store increase is primarily due to $6.0 million of incremental interest resulting from our March 2003 interest rate swap, pursuant to which a notional $350.0 million of our floating rate floor plan debt was exchanged for a 3.15% fixed rate for a five year period, offset partially by a decrease in average inventories during 2003 compared to 2002. The decrease from 2001 to 2002 is due to: (1) a $12.7 million, or 44.7%, decrease in same store floor plan interest expense, offset partially by an $8.4 million increase from net dealership acquisitions during the year. The same store decrease is due primarily to a decrease in average inventories during 2002 compared to 2001, coupled with a decrease in our weighted average borrowing rate on floor plan indebtedness during 2002.

Other Interest Expense

      Other interest expense increased $4.5 million, or 11.7%, from 2002 to 2003 and increased $3.5 million, or 10.1%, from 2001 to 2002. The increase from 2002 to 2003 is due primarily to increased working capital advances and acquisition related indebtedness, including approximately $67.0 million borrowed in connection with the April 2003 acquisition of the Inskip Autocenter dealerships located in Warwick, Rhode Island, offset in part by a decrease in our weighted average borrowing rate on our credit agreements during 2003. The increase from 2001 to 2002 is due primarily to additional acquisition related indebtedness, including approximately $140.0 million borrowed in connection with the acquisition of the Sytner Group plc in March 2002, offset in part by (1) a decrease in our weighted average borrowing rate on our credit agreements during 2002 and (2) the repayment of indebtedness with proceeds from equity offerings in 2002.

Income Taxes

      Income taxes increased $15.9 million, or 38.2%, from 2002 to 2003 and increased $8.6 million, or 26.1%, from 2001 to 2002. The increase from 2002 to 2003 is due primarily to an increase in pre-tax income compared with 2002, offset by a reduction in our effective rate resulting from an increase in the relative proportion of our income from our U.K. operations, which are taxed at a lower rate. The increase from 2001 to 2002 is due primarily to an increase in pre-tax income compared with 2001, partially offset by the impact of the elimination of goodwill amortization and the lower effective tax rate on foreign earnings.

Liquidity and Capital Resources

      Our cash requirements are primarily for working capital, the acquisition of new dealerships, the improvement and expansion of existing facilities, the construction of new facilities and dividends. Historically, these cash requirements have been met through cash flow from operations, borrowings under our credit agreements (including floor plan arrangements), the issuance of debt securities, sale-leaseback transactions and the issuance of equity securities. As of December 31, 2003, we had working capital of $91.4 million.

      As of December 31, 2003, we had approximately $13.8 million of cash available to fund operations and future acquisitions. In addition, as of March 1, 2004, $335.0 million and £15.0 million ($28.0 million) was available for borrowing under our U.S. Credit Agreement and our U.K. Credit Agreement, respectively. Availability under the U.S. Credit Agreement may be limited by a borrowing base collateral requirement (in general, the borrowing base is equal to certain tangible assets plus $300.0 million) and other conditions discussed below. Borrowings used to finance the cost of domestic acquisitions and domestic capital construction projects will typically increase tangible assets, allowing the Company to access borrowing capacity which might not be available due to the base collateral limitation in the U.S. Credit Agreement.

      We paid our first cash dividend on our common stock on December 1, 2003 and paid an additional dividend on March 1, 2004. Both dividends were in the amount of ten cents per share. Future quarterly or other cash dividends will depend upon our earnings, capital requirements, financial condition, restrictions on any then existing indebtedness and other factors considered relevant by our Board of Directors.

24

      Our principal source of growth has come from acquisitions of automotive dealerships. We believe that our cash flow provided by operating activities and our existing capital resources, including the liquidity provided by our credit agreements and floor plan financing arrangements, will be sufficient to fund our current operations and commitments for the next twelve months. To the extent we pursue additional significant acquisitions, we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional bank borrowings. We may not have sufficient availability under our credit agreements to finance significant additional acquisitions. In certain circumstances, a public equity offering could require the prior approval of certain automobile manufacturers. There is no assurance that we would be able to access the capital markets or increase our borrowing capabilities on terms acceptable to us, if at all.

Inventory Financing

      We finance the majority of our new and a portion of our used vehicle inventory under revolving floor plan financing arrangements between our subsidiaries and various lenders. In the U.S., we make monthly interest payments on the amount financed, but are generally not required to make loan principal repayments prior to the sale of the new and used vehicles we have financed. In the U.K., we pay interest only for 90 days, after which we repay the floor plan indebtedness with cash flow from operations or borrowings under our credit agreements. The floor plan agreements grant a security interest in substantially all of the assets of our automotive dealership subsidiaries. Interest rates under the floor plan arrangements are variable and increase or decrease based on movements in the prime rate or LIBOR. Outstanding borrowings under floor plan arrangements amounted to $1,138.5 million as of December 31, 2003, of which $253.0 million related to inventory held by our U.K. subsidiaries. The weighted average interest rate paid by the Company on floor plan indebtedness during 2003 was 4.48%.

U.S. Credit Agreement

      We are party to a credit agreement with DaimlerChrysler Services North America LLC and Toyota Motor Credit Corporation, dated December 22, 2002, as amended (the “U.S. Credit Agreement”), which provides for up to $700.0 million in revolving loans to be used for acquisitions, working capital, letters of credit, the repurchase of common stock and general corporate purposes. We are also party to an additional $50.0 million standby letter of credit facility provided by DaimlerChrysler Services North America LLC (the “Additional Facility”). Revolving loans under the U.S. Credit Agreement mature on August 3, 2005 and bear interest between U.S. LIBOR plus 2.00% and U.S. LIBOR plus 3.00%. The U.S. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by our domestic automotive dealership subsidiaries and contains a number of significant covenants that, among other things, restrict our ability to dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. We do not currently believe that such covenants will materially affect our acquisition or operating strategy. We are also required to comply with specified ratios and tests defined in the U.S. Credit Agreement. The U.S. Credit Agreement also contains typical events of default, including change of control and non-payment of obligations. Availability under the revolving portion of the U.S. Credit Agreement is subject to a collateral-based borrowing limitation, which is determined based on our allowable domestic tangible assets. Substantially all of our domestic assets are subject to security interests granted to lenders under the U.S. Credit Agreement. Our U.S. Credit Agreement, the subordinated notes discussed below and borrowings under floor plan financing arrangements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness. As of December 31, 2003, outstanding borrowings and letters of credit under the U.S. Credit Agreement amounted to $312.0 million and $10.3 million, respectively, and outstanding letters of credit amounted to $50.0 million under the Additional Facility. As of December 31, 2003 we were in compliance with all financial covenants under the U.S. Credit Agreement.

                  U.K. Credit Agreement

      We are party to a credit agreement with the Royal Bank of Scotland dated February 28, 2003 (the “U.K. Credit Agreement”), which provides for up to £45.0 million (approximately $80.0 million as of December 31,

25

2003) in revolving loans to be used for acquisitions, working capital, and general corporate purposes. The U.K. Credit Agreement also provides for an additional seasonally adjusted overdraft line of credit up to a maximum of £10.0 million (approximately $17.8 million as of December 31, 2003). Loans under the U.K. Credit Agreement bear interest between U.K. LIBOR plus 0.85% and U.K. LIBOR plus 1.25%. Our borrowing capacity under the U.K. Credit Agreement will be reduced by £2.0 million every six months, with the first reduction having occurred on January 1, 2004. The remaining £35.0 million of revolving loans mature on January 31, 2006. The U.K. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by our subsidiaries in the U.K. (the “U.K. Subsidiaries”), and contains a number of significant covenants that, among other things, restrict the ability of the U.K. Subsidiaries to pay dividends, dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. We do not currently believe that such covenants will materially affect our acquisition or operating strategy. In addition, the U.K. Subsidiaries are required to comply with specified ratios and tests defined in the U.K. Credit Agreement. The U.K. Credit Agreement also contains typical events of default, including change of control and non-payment of obligations. Substantially all of the U.K. Subsidiaries’ assets are subject to security interests granted to lenders under the U.K. Credit Agreement and the U.K. Credit Agreement has cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of the U.K. Subsidiaries. As of December 31, 2003, outstanding borrowings under the U.K. Credit Agreement amounted to approximately £20.0 million ($35.2 million), and we were in compliance with all financial covenants under the U.K. Credit Agreement.

                  Senior Subordinated Notes

      In March 2002, we issued $300.0 million aggregate principal amount of 9.625% Senior Subordinated Notes due 2012 (the “Notes”). The Notes are unsecured senior subordinated notes and rank behind all existing and future senior debt, including debt under our credit agreements and floor plan indebtedness. The Notes are guaranteed by substantially all of our domestic subsidiaries on a senior subordinated basis. We can redeem all or some of the Notes at our option beginning in 2007 at specified redemption prices. In addition, until 2005 we are allowed to redeem up to 35% of the Notes with the net cash proceeds from specified public equity offerings. Upon a change of control, each holder of Notes will be able to require us to repurchase all or some of the Notes at a redemption price of 101% of the principal amount of the Notes. The Notes also contain customary negative covenants and events of default.

                  Interest Rate Swaps

      During March 2003, we entered into a swap agreement of five years duration pursuant to which a notional $350.0 million of our U.S. floating rate debt was exchanged for fixed rate debt. The fixed rate interest is 3.15%. These swaps have been designated as cash flow hedges of future interest payments of our LIBOR based U.S. floor plan borrowings. During January 2000, we entered into a swap agreement of five years duration pursuant to which a notional $200.0 million of our U.S. floating rate debt was exchanged for fixed rate debt. The fixed rate interest was 7.15%. In October 2002, the terms of this swap were amended pursuant to which the interest rate was reduced to 5.86% and the term of the agreement was extended for an additional three years.

                  Other Financing Arrangements

      In the past, we have entered into sale-leaseback transactions to finance certain acquisitions and capital expenditures. In these transactions we sell property to a third-party and agree to lease that property back for a certain period of time. During 2003, 2002 and 2001, we received $133.4 million, $85.5 million and $20.9 million in proceeds from such transactions. We believe we will continue to finance certain acquisitions and capital expenditures in this fashion in the future. Commitments under such leases are included in the table of contractual payment obligations below.

                  Capital Transaction

      On February 16, 2004, we entered into a purchase agreement providing for the issuance and sale of 4,050,000 shares of our common stock to Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. (together

26

“Mitsui”) for $119,434,500, or $29.49 per share. The transaction is subject to customary closing conditions and approval of a majority of our stockholders. While we currently expect to consummate the sale by March 31, 2004, if these conditions are not satisfied the sale of the shares will not occur. While we expect the parties to satisfy all of the closing conditions, we cannot assure you that this transaction will be consummated. We will use the proceeds of the sale, if consummated, for general corporate purposes which will initially include reducing the outstanding indebtedness under our credit agreement.

Cash Flows

      Cash and cash equivalents increased by $3.2 million and $6.4 million during the years ended December 31, 2003, 2002 and decreased by $2.3 million during the year ended December 31, 2001. The major components of these changes are discussed below.

Cash Flows from Operating Activities

      Cash provided by operating activities was $180.8 million, $87.8 million and $72.5 million during the years ended December 31, 2003, 2002 and 2001, respectively. Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital.

Cash Flows from Investing Activities

      Cash used in investing activities was $179.7 million, $295.9 million and $216.5 million during the years ended December 31, 2003, 2002 and 2001, respectively. Cash flows from investing activities consist primarily of cash used for capital expenditures, proceeds from sale-leaseback transactions and net expenditures for dealership acquisitions. Capital expenditures were $199.8 million, $184.0 million and $99.0 million during the years ended December 31, 2003, 2002 and 2001, respectively. Capital investments relate primarily to improvements to our existing dealership facilities and the construction of new facilities. We expect capital expenditures in 2004 to be approximately $130 million before any sale-leaseback transactions. Proceeds from sale-leaseback transactions were $133.4 million, $85.5 million and $20.8 million during the years ended December 31, 2003, 2002 and 2001, respectively. Cash used in business acquisitions, net of cash acquired, was $113.4 million, $197.3 million and $138.4 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Cash Flows from Financing Activities

      Cash used in financing activities was $19.9 million during the year ended December 31, 2003, while financing activities provided $189.3 million and $147.5 million during the years ended December 31, 2002 and 2001, respectively. Cash flows from financing activities include net borrowings or repayments of long-term debt, proceeds from issuance of common stock, including proceeds from exercise of stock options, repurchases of common stock and other transactions as further described below. Net borrowings of long-term debt in 2002 included net proceeds of $292.9 million in connection with the issuance of the Notes. During 2003, 2002 and 2001, we received proceeds of $9.9 million, $135.3 million and $18.8 million, respectively, from the issuance of common stock, including the exercise of stock options. During 2002 and 2001 we repurchased $16.0 million and $5.8 million, respectively of our common stock. During 2003 we paid $4.1 million of cash dividends to our shareholders.

Contractual Payment Obligations

      The table below sets forth our best estimates as to the amounts and timing of future payments for our most significant contractual obligations as of December 31, 2003. The information in the table reflects future unconditional payments and is based upon, among other things, the terms of any relevant agreements. Future events, including the amount of borrowings under our credit agreements and floor plan arrangements and purchases or refinancing of our securities, could cause actual payments to differ significantly from these amounts. See “— Forward-Looking Statements.”

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	Payments due in
	Total		2004		2005		2006		2007		2008		Thereafter
	(in millions)
Floorplan Notes Payable(A)(B)	$	1,138.5	$	1,138.5	$	—	$	—	$	—	$	—	$	—
U.S. Credit Agreement(C)		312.0		—		312.0		—		—		—		—
U.K. Credit Agreement(C)		35.2		7.1		7.1		21.0		—		—		—
9.625% Senior Subordinated Notes		300.0		—		—		—		—		—		300.0
Other Debt		4.8		1.5		1.0		0.9		0.5		0.2		0.7
Operating Lease Commitments		1,434.6		113.7		110.4		106.1		102.7		100.4		901.3
Deferred Acquisition Payments		25.5		9.2		8.2		8.1		—		—		—
Employment Contract Termination Costs		13.4		7.7		5.7		—		—		—		—
	$	3,264.0	$	1,277.7	$	444.4	$	136.1	$	103.2	$	100.6	$	1,202.0

(A)  Floor plan notes payable are revolving financing arrangements. Payments are generally made as the individual vehicles are sold.

(B)	As a result of our interest rate swaps we are obligated to fixed interest rate payments for a portion of our floor plan debt through 2008.
(C)	Commitments under letters of credit expire concurrently with the expiration of our credit facilities.

      We expect that the amounts above will be funded through cash provided by operations. In the case of balloon payments at the end of the term of our debt instruments, we expect to be able to refinance such instruments as they expire in the normal course of business.

Commitments

      In connection with an acquisition of dealerships completed in October 2000, we agreed to make a contingent payment in cash to the extent 841,476 shares of common stock issued as consideration for the acquisition are sold subsequent to the fifth anniversary of the transaction and have a market value of less than $12.00 per share at the time of sale. We will be forever released from this guarantee in the event the average daily closing price of our common stock for any 90 day period subsequent to the fifth anniversary of the transaction exceeds $12.00 per share. In the event we are required to make a payment relating to this guarantee, such payment would result in the revaluation of the common stock issued in the transaction, resulting in a reduction of additional paid-in-capital. We have further granted the seller a put option pursuant to which we may be required to repurchase no more than 108,333 shares for $12.00 per share on each of the first five anniversary dates of the transaction. To date, no payments have been made by us relating to the put option. As of December 31, 2003, the maximum of future cumulative cash payments we may be required to make in connection with the put option amounted to $2.6 million.

      We have entered into an agreement with a third-party to jointly acquire and manage dealerships in Indiana, Illinois, Ohio, North Carolina and South Carolina. With respect to any joint venture established pursuant to this agreement, we are required to repurchase our partner’s interest at the end of the five-year period following the date of the acquisition, in accordance with the terms of the agreement. Pursuant to this arrangement, we have entered into a 2003 joint venture agreement with respect to the Honda of Mentor dealership. We are required to repurchase our partners’ interest in this joint venture in July 2008. We expect this payment to be approximately $2.7 million.

Related Party Transactions

Stockholders Agreement

      Roger S. Penske, our Chairman of the Board and Chief Executive Officer is also Chairman of the Board and Chief Executive Officer of Penske Corporation, and through entities affiliated with Penske Corporation, our largest stockholder. We are party to a stockholders agreement with International Motor Cars Group I, LLC and International Motors Cars Group II, LLC (the “PCP Entities”), Mitsui, Penske Corporation,

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Penske Automotive Holdings Corp., and Penske Capital Partners, LLC. Pursuant to this agreement, the parties have agreed to vote their shares of common stock to elect Roger S. Penske, four additional persons nominated by the PCP Entities, one person nominated by Mitsui and three independent persons as our directors. The PCP Entities’ nominees to the Board of Directors are Richard J. Peters, James A. Hislop and Eustace W. Mita. The PCP entities are entitled to nominate one additional director. Motokazu Yoshida is the nominee to the Board of Directors by Mitsui. The remaining parties have also agreed to use their reasonable best efforts to have our compensation committee of the Board of Directors consist of Roger S. Penske, one additional designee of the PCP Entities and two independent directors. The PCP Entities have not designated a member of the compensation committee and Mr. Penske does not currently serve on the compensation committee. These rights and obligations diminish if the parties fall below certain ownership levels of our common stock and the provisions regarding board membership terminate in February 2005. This agreement will be amended and restated as discussed below under “-Mitsui Transaction” if that transaction is consummated.

Other Related Party Interests

      James A. Hislop, one of our directors, is the President, Chief Executive Officer and a managing member of Penske Capital Partners (who is the managing member of IMCGI and IMCGII), a director of Penske Corporation and a managing director of Transportation Resource Partners, an organization affiliated with Roger S. Penske which undertakes investments in transportation related industries. Mr. Penske also is a managing member of Penske Capital Partners. Richard J. Peters, one of our directors, is a director of Penske Corporation and a managing director of Transportation Resource Partners. Robert H. Kurnick, Jr., our Executive Vice President and General Counsel, is also the President and a director of the Penske Corporation and Paul F. Walters, our Executive Vice President — Human Resources serves in a similar human resources capacity for Penske Corporation.

Mitsui Transaction

      Mitsui currently owns 3,170,349 shares, or 7.6% of our outstanding common stock. We are proposing to issue and sell to Mitsui an additional 4,050,000 shares, representing approximately 9.7% of our outstanding shares. In exchange for these 4,050,000 shares, Mitsui will pay us $119,434,500, or $29.49 per share. The transaction is subject to customary closing conditions and approval of a majority of our stockholders, which is expected to occur at a special meeting of our shareholders scheduled for March 26, 2004. If these conditions are not satisfied, then the sale of the shares will not occur. Proceeds of the sale, if consummated, will be used for general corporate purposes which will initially include reducing the outstanding indebtedness under our U.S. Credit Agreement. While we expect the parties to satisfy all of the closing conditions, we cannot assure you that this transaction will be consummated.

      If this transaction is consummated, the existing stockholders agreement discussed above will be terminated and Mitsui and the entities affiliated with Penske Corporation will enter into a new stockholders agreement. Under the new stockholders agreement, the Penske affiliated companies will agree to vote their shares for one director who is a representative of Mitsui. In turn, Mitsui will agree to vote their shares for up to fourteen directors voted for by the Penske affiliated companies. This agreement would terminate on its tenth anniversary, upon the mutual consent of the parties or when either party no longer owns any of our common stock.

Other Transactions

      We are currently a tenant under a number of non-cancelable lease agreements with Automotive Group Realty, LLC (“AGR”), a wholly-owned subsidiary of Penske Corporation. During 2003, we paid $5.9 million to AGR under these lease agreements. In addition, in 2003 we sold AGR real property and improvements for $19.3 million which were subsequently leased by AGR to us. The sale of each parcel of property was valued at a price which was either independently confirmed by a third party appraiser or at the price for which we purchased the property from an independent third party. In addition, we sometimes pay and/or receive fees from Penske Corporation and its affiliates for services rendered in the normal course of business, including the

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transactions with AGR, and reimburse payments made to third parties by Penske Corporation on our behalf. Payments made relating to services rendered reflect the provider’s cost or an amount mutually agreed upon by both parties, which we believe represent terms at least as favorable as those that could be obtained from an unaffiliated third party negotiated on an arm’s length basis.

      We are currently a tenant under a number of non-cancelable lease agreements with Samuel X. DiFeo and members of his family. Mr. DiFeo is our President and Chief Operating Officer and one of our directors. During 2003, we paid $5.5 million to Mr. DiFeo and his family under these lease agreements. We believe that the terms of these transactions are at least as favorable as those that could be obtained from an unaffiliated third party negotiated on an arm’s length basis. We have entered in to joint ventures with certain related parties as more fully discussed below.

Joint Ventures

      From time to time we enter into joint venture arrangements in the ordinary course of business, pursuant to which we acquire dealerships together with other investors. We may also provide these subsidiaries with working capital and other debt financing at costs that are based on our incremental borrowing rate.

      An entity controlled by one of our directors, Lucio A. Noto (the “Investor”) owns a 6.5% interest in one of our subsidiaries, UAG Connecticut I, LLC, which entitles the Investor to 20% of the operating profits of UAG Connecticut I. In addition, the Investor has an option to purchase up to a 20% interest in UAG Connecticut I for specified amounts.

      We own and operate three BMW dealerships in and around Munich, Germany. Our joint venture partner in Germany is Mr. Peter Reisacher. We contributed $5.0 million for a 50% interest and Mr. Reisacher contributed $5.0 million for a 50% interest in the joint venture.

      We own and operate Lexus and Toyota dealerships in and around Frankfurt, Germany. Our joint venture partner in Germany is Mr. Werner Nix. We contributed $4.7 million for a 50.0% interest and Mr. Nix contributed $4.7 million for a 50.0% interest, respectively, in the joint venture.

      We own and operate two Toyota dealerships in Mexico. Our joint venture partners in Mexico are Mr. Mario Padilla and Mr. Bernie Wolfe, one of our area vice presidents. In one of the dealerships, we contributed $2.0 million for a 48.7% interest, Mr. Padilla contributed $2.0 million for a 49.8% interest, and Mr. Wolfe contributed sixty thousand dollars for a 1.5% interest. In the second dealership, we contributed $1.3 million for a 45.0% interest, Mr. Padilla contributed $1.4 million for a 49.0% interest and Mr. Wolfe contributed one hundred thousand dollars for a 6.0% interest.

      We own and operate certain Mercedes-Benz, Audi and Porsche dealerships in the U.S. with our joint venture partner Roger S. Penske, Jr. We contributed $65.1 million for a 90% interest in HBL, LLC and Mr. Penske, Jr. contributed $7.2 million for the remaining 10% interest.

      We own and operate certain dealerships in Brazil. Our joint venture partners in Brazil are Roger S. Penske, Jr. and Andre Ribeiro Holdings, Ltda. We contributed $3.6 million for a 90.6% interest in United Auto do Brasil, Ltda. and Mr. Penske, Jr. and Mr. Ribeiro each contributed $0.2 million for 4.7% interests.

Cyclicality

      Unit sales of motor vehicles, particularly new vehicles, historically have been cyclical, fluctuating with general economic cycles. During economic downturns, the automotive retailing industry tends to experience similar periods of decline and recession as the general economy. We believe that the industry is influenced by general economic conditions and particularly by consumer confidence, the level of personal discretionary spending, fuel prices, interest rates and credit availability.

Seasonality

      Our business is modestly seasonal overall. Our U.S. operations generally experience higher volumes of vehicle sales in the second and third quarters of each year due in part to consumer buying trends and the

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introduction of new vehicle models. Also, demand for cars and light trucks is generally lower during the winter months than in other seasons, particularly in regions of the United States where dealerships may be subject to harsh winters. The greatest U.S. seasonalities exist with the dealerships we operate in the northeastern and upper mid-western U.S., for which the second and third quarters are the strongest with respect to vehicle-related sales. Our U.K. operations generally experience higher volumes of vehicle sales in the first and third quarters of each year due in part to vehicle registration practices in the U.K. The service and parts business at all dealerships experiences relatively modest seasonal fluctuations.

Effects of Inflation

      We believe that the relatively moderate rates of inflation over the last few years have not had a significant impact on revenues or profitability. We do not expect inflation to have any near-term material effects on the sale of our products and services. However, there can be no assurance that there will be no such effect in the future.

      We finance substantially all of our inventory through various revolving floor plan arrangements with interest rates that vary based on the prime rate or LIBOR. Such rates have historically increased during periods of increasing inflation. We do not believe that we would be placed at a competitive disadvantage should interest rates increase due to increased inflation since most other automotive dealerships have similar floating rate borrowing arrangements.

Forward Looking Statements

      This annual report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “intend,” “plan,” “estimate,” “predict,” “potential,” “forecast,” “continue” or variations of such terms, or the use of these terms in the negative. Forward-looking statements include statements regarding our current plans, forecasts, estimates, beliefs or expectations, including, without limitation, statements with respect to:

•  our future financial performance;

•  future acquisitions;

•  future capital expenditures;

•  our ability to obtain cost savings and synergies;

•  our ability to respond to economic cycles;

•  trends in the automotive retail industry and in the general economy;

•  trends in the European automotive market;

•  our ability to access the remaining availability under our credit agreements;

•  our liquidity;

•  interest rates;

•  trends affecting our future financial condition or results of operations; and

•  our business strategy.

      Forward-looking statements involve known and unknown risks and uncertainties and are not assurances of future performance. Actual results may differ materially from anticipated results due to a variety of factors,

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including the factors identified in the reports and our other periodic filings with the SEC. Important factors that could cause actual results to differ materially from our expectations include the following:

•  automobile manufacturers exercise significant control over our operations and we depend on them in order to operate our business;

•  because we depend on the success and popularity of the brands we sell, adverse conditions affecting one or more automobile manufacturers may negatively impact our revenues and profitability;

•  if we are unable to complete additional acquisitions or successfully integrate acquisitions, we may not be able to achieve desired results from our acquisition strategy;

•  we may not be able to satisfy our capital requirements for making acquisitions, dealership renovation projects or financing the purchase of our inventory;

•  our failure to meet a manufacturer’s consumer satisfaction requirements may adversely affect our ability to acquire new dealerships, our ability to obtain incentive payments from manufacturers and our profitability;

•  automobile manufacturers impose limits on our ability to issue additional equity and on the ownership of our common stock by third parties, which may hamper our ability to meet our financing needs;

•  our business and the automotive retail industry in general are susceptible to adverse economic conditions, including changes in consumer confidence, fuel prices and credit availability;

•  substantial competition in automotive sales and services may adversely affect our profitability;

•  automotive retailing is a mature industry with limited growth potential in new vehicle sales;

•  if we lose key personnel or are unable to attract additional qualified personnel, our business could be adversely affected;

•  our quarterly operating results may fluctuate due to seasonality in the automotive retail business and other factors;

•  because most customers finance the cost of purchasing a vehicle, increased interest rates may adversely affect our vehicle sales;

•  our business may be adversely affected by import product restrictions and foreign trade risks that may impair our ability to sell foreign vehicles profitably;

•  our automobile dealerships are subject to substantial regulation which may adversely affect our profitability;

•  if state dealer laws in the United States are repealed or weakened, our automotive dealerships will be more susceptible to termination, non-renewal or renegotiation of their franchise agreements;

•  our automotive dealerships are subject to foreign, federal, state and local environmental regulations that may result in claims and liabilities;

•  our dealership operations may be affected by severe weather or other periodic business interruptions;

•  our principal stockholders have substantial influence over us and may make decisions with which stockholders may disagree;

•  some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests;

•  our substantial amount of indebtedness may limit our ability to obtain financing for acquisitions and may require that a significant portion of our cash flow be used for debt service;

•  due to the nature of the automotive retailing business, we may be involved in legal proceedings that could have a material adverse effect on our business;

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•  changes in the European Commission’s regulations regarding automobile manufacturers may have an adverse effect on our European operations;

•  our overseas operations subject us to foreign currency translation risk and exposure to changes in exchange rates; and

•  we are a holding company and as a result rely on the receipt of payments from our subsidiaries in order to meet our cash needs and service our indebtedness.

      Furthermore,

•  the price of our common stock is subject to substantial fluctuation, which may be unrelated to our performance; and

•  shares eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well.

      We urge you to carefully consider these risk factors in evaluating all forward-looking statements regarding our business. Readers of this report are cautioned not to place undue reliance on the forward-looking statements contained in this report. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Except to the extent required by the federal securities laws and Securities and Exchange Commission rules and regulations, we have no intention or obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

      Interest Rates. We are exposed to market risk from changes in the interest rates on a significant portion of our outstanding indebtedness. Outstanding balances under our U.S. and U.K. credit agreements bear interest at a variable rate based on a margin over LIBOR, as defined. Based on the amount outstanding as of December 31, 2003, a 100 basis point change in interest rates would result in an approximate $3.5 million change to our annual interest expense. Similarly, amounts outstanding under floor plan financing arrangements bear interest at a variable rate based on a margin over defined LIBOR or Prime rates. We continually evaluate our exposure to interest rate fluctuations and follow established policies and procedures to implement strategies designed to manage the amount of variable rate indebtedness outstanding at any point in time in an effort to mitigate the effect of interest rate fluctuations on our earnings and cash flows. We are currently party to swap agreements pursuant to which a notional $200.0 million of our floating rate floor plan debt was exchanged for 5.86% fixed rate debt through January 2008 and an additional notional $350.0 million of our floating rate floor plan debt was exchanged for 3.15% fixed rate debt through March 2008. Based on an average of the aggregate amounts outstanding under our floor plan financing arrangements, a 100 basis point change in interest rates would result in an approximate $5.1 million change to our annual floor plan interest expense.

      Interest rate fluctuations affect the fair market value of our fixed rate debt, including the Notes and certain seller financed promissory notes, but, with respect to such fixed rate instruments, do not impact our earnings or cash flows.

      Foreign Currency Exchange Rates. The Company currently has operations in the U.K. and Brazil and has investments in Germany and Mexico. In each of these markets, the local currency is the functional currency. Due to the Company’s intent to remain permanently invested in these foreign markets, we do not hedge against foreign currency fluctuations. Other than the U.K., the Company’s foreign operations are not significant. In the event we change our intent with respect to the investment in any of our international operations, the Company would expect to implement strategies designed to manage those risks in an effort to mitigate the effect of foreign currency fluctuations on the Company’s earnings and cash flows.

      In common with other automotive retailers, we purchase certain of our new vehicle and parts inventories from foreign manufacturers. Although we purchase the majority of our inventories in the local functional currency, including the U.S. Dollar, our business is subject to certain risks, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility which may influence such manufacturers’ ability to provide

33

their products at competitive prices in the local jurisdictions. Our future results could be materially and adversely impacted by changes in these or other factors.

Item 8. Financial Statements and Supplementary Data

      See the consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements for the information required by this item.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

      None.

Item 9A. Disclosure Controls and Procedures

      We maintain disclosure controls and procedures designed to ensure that both non-financial and financial information required to be disclosed in our periodic reports is recorded, processed, summarized and reported in a timely fashion. Based on the fourth quarter evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective. In addition, we maintain internal controls designed to provide the Company with the information it requires for accounting and financial reporting purposes. There were no changes in our internal controls over financial reporting that occurred during our fourth quarter of 2003 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART III

      The information required by Items 10 through 14 is included in the Company’s definitive proxy statement under the caption “Election of Directors,” “Executive Officers,” “Executive Compensation,” “Security Ownership of Certain Beneficial Owners and Management,” “Related Party Transactions,” “Other Matters” and “The Board and its Committees.” Such information is incorporated herein by reference. The following is a list of our executive officers and directors, including their principal occupation.

Name	Age		Position	Other Occupation
Roger S. Penske		67	Chairman of the Board and Chief Executive Officer	Chairman of the Board and CEO of Penske Corporation
Samuel X. DiFeo		54	President, Chief Operating Officer and Director
James R. Davidson		58	Executive Vice President — Finance
Robert H. Kurnick, Jr.		42	Executive Vice President and General Counsel	President of Penske Corporation
Paul F. Walters		60	Executive Vice President — Human Resources	Executive Vice President — Administration of Penske Corporation
John Barr		56	Director	President and CEO of Automotive Performance Industries, LLC
Michael R. Eisenson		48	Director	Managing Director and CEO of Charlesbank Capital Partners, LLC
James A. Hislop		46	Director	Managing Director, Transportation Resource Partners, LLC
Eustace W. Mita		49	Director	Chairman of Mita Management, LLP
Lucio A. Noto		65	Director	Retired Vice Chairman, ExxonMobil Corporation
Richard J. Peters		56	Director	Managing Director, Transportation Resource Partners
Ronald G. Steinhart		63	Director	Retired Chairman and CEO Commercial Banking Group, Bank One Corporation
H. Brian Thompson		64	Director	Chairman, Universal Telecommunications, Inc.
Laurence Vaughan		40	Director	Chairman, Sytner Group, plc
Motokazu Yoshida		56	Director	Executive Managing Officer and COO of the Motor Vehicles, Marine and Aerospace Business Unit of Mitsui & Co., Ltd.

35

PART IV

Item 15.     Exhibits, Financial Statement Schedules and Reports on Form 8-K

      (a) Financial Statements

      The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report on Form 10-K.

      (b) Reports on Form 8-K.

      We filed the following Current Reports on Form 8-K during the three month period ended December 31, 2003:

1.	October 15, 2003, reporting under Items 5, 7 and 12 certain preliminary third quarter 2003 financial results.
2.	October 21, 2003, reporting under Items 5 and 7 the anticipated payment of a dividend in the amount of $0.10 per share on December 1, 2003 to holders of record as of November 10, 2003.
3.	November 4, 2003, reporting under Items 5, 7 and 12 its third quarter 2003 financial results and other information.

      (c) Exhibits

      Each management contract or compensatory plan or arrangement is identified with an asterisk.

3	.1	Certificate of Incorporation.
3	.2	Bylaws (incorporated by reference to exhibit 3.2 to our registration statement on Form S-1, registration no. 333-09429 (the “1996 Form S-1”)).
4	.1	Certificate of Designation of Series A Convertible Preferred Stock of the Company, filed with the Secretary of State of the State of Delaware on April 30, 1999 (incorporated by reference to our Form 8-K filed on May 10, 1999).
4	.2	Certificate of Designation of Series B Convertible Preferred Stock of the Company, filed with the Secretary of State of the State of Delaware on April 30, 1999 (incorporated by reference to our Form 10-Q for the quarter ended March 31, 2002).
4	.3.1	Indenture dated as of March 18, 2002 among us, as Issuer, and certain of our domestic subsidiaries, as Guarantors, and Bank One Trust Company, N.A., as Trustee (incorporated by reference to exhibit 4.3 to our registration statement on Form S-4, registration no. 333-87452, filed May 2, 2002).
4	.3.2	First Supplemental Indenture dated as of December 19, 2003 among us, as Issuer, and certain of our domestic subsidiaries, as Guarantors, and J.P. Morgan Trust Company, N.A. (as successor in interest to Bank One Trust Company, N.A.), as Trustee.
4	.4.1	Amended and Restated Credit Agreement, dated as of December 22, 2000, among us, various financial institutions and Chrysler Financial Company, L.L.C., as Agent (incorporated by reference to exhibit 10.1.19.6 to our Form 10-K for the year ended December 31, 2000) (the “DaimlerChrysler Credit Agreement”).
4	.4.2	First Amendment to the DaimlerChrysler Credit Agreement dated as of October 29, 2001 (incorporated by reference to exhibit 10.1.19.7 to our registration statement on Form S-3, file no. 333-82264, filed on February 6, 2002).
4	.4.3	Second Amendment to the DaimlerChrysler Credit Agreement dated as of February 8, 2002 (incorporated by reference to exhibit 10.1.19.8 to our Form 10-K for the year ended December 31, 2001 (the “2001 Form 10-K”)).

36

4	.4.4	Third Amendment to the DaimlerChrysler Credit Agreement dated March 12, 2002 (incorporated by reference to exhibit 10.1.19.9 to our Form 10-Q for the quarter ended March 31, 2002).
4	.4.5	Fourth Amendment to the DaimlerChrysler Credit Agreement dated July 19, 2002 (incorporated by reference to exhibit 10.1.19.1 to our Form 10-Q for the quarter ended June 30, 2002).
4	.4.6	Fifth Amendment to the DaimlerChrysler Credit Agreement dated January 15, 2003 (incorporated by reference to exhibit 10.1.19.11 to our Form 10-K for the year ended December 31, 2002) (the “2001 Form 10-K”).
4	.4.7	Sixth Amendment to the DaimlerChrysler Credit Agreement dated April 16, 2003 (incorporated by reference to exhibit 10.1 to our Form 10-Q for the quarter ended March 31, 2003).
4	.4.8	Seventh Amendment to the DaimlerChrysler Credit Agreement dated May 1, 2003 (incorporated by reference to exhibit 10.1 to our Form 10-Q for the quarter ended June 30, 2003).
4	.5	Credit Agreement dated February 28, 2003 between Sytner Group Limited and The Royal Bank of Scotland plc, as agent for National Westminster Bank plc (incorporated by reference to exhibit 10.2 to our Form 10-Q for the quarter ended March 31, 2003).
10	.1	Form of Dealer Agreement with Infiniti Division of Nissan North America, Inc. (incorporated by reference to exhibit 10.2.1 to our 2001 Form 10-K).
10	.2	Form of Dealer Agreement with Jaguar Cars, a division of Ford Motor Company (incorporated by reference to exhibit 10.2.2 to our 2001 Form 10-K).
10	.3	Form of Dealer Agreement With Honda Automobile Division, American Honda Motor Co. (incorporated by reference to exhibit 10.2.3 to our 2001 Form 10-K).
10	.4	Form of Dealer Agreement with Lexus, a division of Toyota Motor Sales, U.S.A., Inc. (incorporated by reference to exhibit 10.2.4 to our 2001 Form 10-K).
10	.5	Form of Car Center Agreement with BMW of North America, Inc. (incorporated by reference to exhibit 10.2.5 to our 2001 Form 10-K).
10	.6	Form of SAV Center Agreement with BMW of North America, Inc. (incorporated by reference to exhibit 10.2.6 to our 2001 Form 10-K).
10	.7	Form of Dealer Agreement with Toyota Motor Company (incorporated by reference to exhibit 10.2.7 to our 2001 Form 10-K),
10	.8	Form of Dealer Agreement with General Motors Corporation (incorporated by reference to exhibit 10.2.8 to our 2001 Form 10-K).
10	.9	Form of Dealer Agreement with Nissan North America, Inc. (incorporated by reference to exhibit 10.2.9 to our 2001 Form 10-K).
10	.10	Form of Sales and Service Agreement with Chrysler Corporation (incorporated by reference to exhibit 10.2.10 to our 2001 Form 10-K).
10	.11	Form of Mercedes-Benz USA, Inc. Passenger and Car Retailer Agreement (incorporated by reference to exhibit 10.2.11 to our Form 10-Q for the quarter ended March 31, 2000).
10	.12	Form of Mercedes-Benz USA, Inc. Light Truck Retailer Agreement (incorporated by reference to exhibit 10.2.12 to our Form 10-Q for the quarter ended March 31, 2000).
10	.13	Form of Mercedes Benz USA, LLC Maybach Passenger Car Dealer Agreement (incorporated by reference to exhibit 10.2 to our Form 10-Q for the quarter ended June 30, 2003).
10	.14	Form of Sales and Service Agreement with Ford Motor Company (incorporated by reference to exhibit 10.2.13 to our 2001 Form 10-K).

37

10	.15	Form of Dealer Agreement with Audi of America, Inc., a division of Volkswagen of America, Inc. (incorporated by reference to exhibit 10.2.14 to our 2001 Form 10-K).
10	.16	Form of Dealer Agreement with Acura Division, American Honda Motor Co., Inc. (incorporated by reference to exhibit 10.2.15 to our 2001 Form 10-K).
10	.17	Form of Sales and Service Agreement with Porsche Cars North America (incorporated by reference to exhibit 10.2.16 to our 2001 Form 10-K).
10	.18	Form of Dealer Agreement with Land Rover North America, Inc. (incorporated by reference to exhibit 10.2.17 to our 2001 Form 10-K).
*10	.19	Settlement Agreement dated October 3, 1996 among us, Samuel X. DiFeo and other parties named therein (incorporated by reference to exhibit 10.26.2 to the 1996 Form S-1).
*10	.20	Letter Agreement dated August 3, 1999 between us and Samuel X. DiFeo (incorporated by reference to exhibit 10.23 to our Form 10-K for the year ended December 31, 1999).
*10	.21	Stock Option Agreement, dated as of August 3, 1999, between us and Roger S. Penske (incorporated by reference to exhibit 10.3 to our Form 8-K filed August 13, 1999).
*10	.22	United Auto Group, Inc. Amended and Restated Stock Option Plan dated as of December 10, 2003.
*10	.23	Amended and Restated United Auto Group, Inc. 2002 Equity Compensation Plan.
*10	.24	Form of Restricted Stock Agreement (incorporated by reference to exhibit 10.3 to our Form 10-Q for the quarter ended June 30, 2003).
*10	.25	Amended and Restated United Auto Group, Inc. Non-Employee Director Compensation Plan.
*10	.26	United Auto Group, Inc. Management Incentive Plan (effective July 1, 2003) (incorporated by reference to exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
10	.27	Limited Liability Company Agreement of UAG Mentor Acquisition, LLC dated July 1, 2003 between us and YAG Mentor Investors, LLC (incorporated by reference to exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
10	.28.1	First Amended and Restated Limited Liability Company Agreement dated April 1, 2003 between UAG Connecticut I, LLC and Noto Holdings, LLC (incorporated by reference to exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003).
10	.28.2	Letter Agreement dated April 1, 2003 among UAG Connecticut I, LLC, Noto Holdings, LLC and the other parties named therein (incorporated by reference to exhibit 10.4 to our Form 10-Q for the quarter ended March 31, 2003).
10	.28.3	Letter Agreement dated April 1, 2003 between UAG Connecticut I, LLC and Noto Holdings, LLC (incorporated by reference to exhibit 10.2 to our Form 10-Q for the quarter ended March 31, 2003).
10	.29	CarsDirect.com, Inc. Series D Preferred Stock Purchase and Warrant Agreement (incorporated by reference to exhibit 10.24 to our Form 10-Q for the quarter ended June 30, 2000).
10	.30	Operating Agreement dated May 12, 2000 between us, Penske Automotive Group, Inc. and CarsDirect.com, Inc. (incorporated by reference to exhibit 10.25 to our Form 10-Q for the quarter ended June 30, 2000).
10	.31	Registration Rights Agreement dated May 3, 1999 by and among us, International Motorcars Group I, L.L.C., and International Motorcars Group II, L.L.C. (incorporated by reference to exhibit 10.20.7 to our Form 8-K filed on May 10, 1999).
10	.32	Registration Rights Agreement among us and Penske Automotive Holdings Corp. dated as of December 22, 2000 (incorporated by reference to exhibit 10.26.1 to our Form 10-K for the year ended December 31, 2000).

38

10	.33	Amended and Restated Registration Rights Agreement among us, Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. dated as of February 22, 2002 (incorporated by reference to the exhibit 10.33 to our 2001 Form 10-K).
10	.34	Second Amended and Restated Stockholders Agreement by and among Aeneas Venture Corporation, International Motor Cars Group I, L.L.C., International Motor Cars Group II, L.L.C., J.P. Morgan Partners (BHCA), L.P., Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.), Inc., Penske Corporation, Penske Automotive Holdings Corp., Penske Capital Partners, L.L.C., Combined Specialty Insurance Company (formerly Virginia Surety Company, Inc.) and us dated as of February 22, 2002 (incorporated by reference to exhibit 10.27.2 to our 2001 Form 10-K).
10	.35	Letter Agreement among Penske Corporation, Penske Capital Partners, L.L.C., Penske Automotive Holdings Corp., International Motor Cars Group I, L.L.C., Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. dated April 4, 2003 (incorporated by reference to exhibit 5 to the Schedule 13D filed by Mitsui on April 10, 2003).
10	.36	Purchase Agreement by and between Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.), Inc., International Motor Cars Group I, L.L.C., International Motor Cars Group II, L.L.C., Penske Corporation, Penske Automotive Holdings Corp, and United Auto Group, Inc. (incorporated by reference to exhibit 10.1 to our Form 8-K filed on February 17, 2004).
10	.37	HBL, LLC Limited Liability Company Agreement dated December 31, 2001, between H.B.L. Holdings, Inc. and Roger S. Penske, Jr. (incorporated by reference to exhibit 10.28.1 to registration statement no. 333-82264 filed February 6, 2002).
10	.38	Operating Agreement of United Auto do Brasil, LTDA dated November 4, 1999 between UAG Holdings do Brasil, LTDA and RSP Holdings do Brasil, LTDA (incorporated by reference to exhibit 10.29 to our Form 10-Q for the quarter ended June 30, 2001).
10	.39	Lease Agreement between Automotive Group Realty, LLC and UAG Realty, LLC, dated as of September 29, 2000 (incorporated by reference to exhibit 10.35 to our Form 10-Q for the quarter ended September 30, 2002).
10	.40	Lease Agreement between Car Chauncey, LLC and UAG Realty, LLC, dated as of September 11, 2002 (incorporated by reference to exhibit 10.36 to our Form 10-Q for the quarter ended September 30, 2002).
10	.41	Risk Factors relating to United Auto Group (incorporated by reference to pages 12-21 of amendment 5 to registration statement number 333-87452 filed January 15, 2003).
21		Subsidiary List.
23	.1	Consent of Deloitte & Touche LLP.
23	.2	Consent of KPMG Audit Plc.
31	.1	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31	.2	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32		Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002

      (d) Schedules — Schedule II — Valuation and Qualifying Accounts.

39

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 15, 2004.

UNITED AUTO GROUP, INC.

By:  /s/ ROGER S. PENSKE

Roger S. Penske

Chairman of the Board and

Chief Executive Officer

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed by following persons on behalf of the registrant and in the capacity and on the date indicated.

Signature	Title	Date
/s/ ROGER S. PENSKE Roger S. Penske	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	March 15, 2004
/s/ JAMES R. DAVIDSON James R. Davidson	Executive Vice President — Finance (Principal Accounting Officer)	March 15, 2004
/s/ SAMUEL X. DIFEO Samuel X. DiFeo	President, Chief Operating Officer and Director	March 15, 2004
/s/ JOHN BARR John Barr	Director	March 15, 2004
/s/ MICHAEL R. EISENSON Michael R. Eisenson	Director	March 15, 2004
/s/ JAMES A. HISLOP James A. Hislop	Director	March 15, 2004
/s/ EUSTACE W. MITA Eustace W. Mita	Director	March 15, 2004
/s/ LUCIO A. NOTO Lucio A. Noto	Director	March 15, 2004
/s/ RICHARD J. PETERS Richard J. Peters	Director	March 15, 2004
/s/ RONALD G. STEINHART Ronald G. Steinhart	Director	March 15, 2004

40

Signature	Title	Date
/s/ H. BRIAN THOMPSON H. Brian Thompson	Director	March 15, 2004
/s/ LAURENCE VAUGHAN Laurence Vaughan	Director	March 15, 2004
/s/ MOTOKAZU YOSHIDA Motokazu Yoshida	Director	March 15, 2004

41

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

UNITED AUTO GROUP, INC

As of December 31, 2003 and 2002 and for the years ended

December 31, 2003, 2002 and 2001

Independent Auditors’ Report	F-2
Independent Auditors’ Report	F-3
Consolidated Balance Sheets	F-4
Consolidated Statements of Income	F-5
Consolidated Statements of Stockholders’ Equity and Comprehensive Income	F-6
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-8

F-1

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of United Auto Group, Inc.

Bloomfield Hills, Michigan

      We have audited the accompanying consolidated balance sheets of United Auto Group, Inc. (the “Company”) and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2003. Our audits included the financial statement schedule included in Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We did not audit the financial statements of UAG UK Holdings Limited (a consolidated subsidiary) for the years ended December 31, 2003 and 2002, which statements reflect total assets constituting 15% and 10% of consolidated total assets as of December 31, 2003 and 2002 and total revenues constituting 20% and 15% of consolidated total revenues for the years then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for, UAG UK Holdings Limited for the years ended December 31, 2003 and December 31, 2002 is based solely on the report of such other auditors.

      We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

      In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

      As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for cash consideration received from a vendor in 2003 to conform to Emerging Issues Task Force Issue No. 02-16 and for goodwill and other intangible assets in 2002 to conform to Statement of Financial Accounting Standards No. 142.

/s/ DELOITTE & TOUCHE LLP

New York, New York

March 11, 2004

F-2

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of UAG UK Holdings

Limited Leicester, United Kingdom

      We have audited the consolidated balance sheet of UAG UK Holdings Limited and subsidiaries (the “Company”) as of December 31, 2003 and 2002, and the related consolidated statements of income, stockholder’s equity and comprehensive income, and cash flows (not presented separately herein) for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of UAG UK Holdings Limited and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG AUDIT PLC

Birmingham, United Kingdom

January 26, 2003

F-3

UNITED AUTO GROUP, INC.

CONSOLIDATED BALANCE SHEETS

		December 31,
		2003			2002
		(In thousands, except
		per share amounts)
ASSETS
Cash and cash equivalents		$	13,845		$	10,641
Accounts receivable, net			347,802			310,378
Inventories			1,183,868			942,732
Other current assets			43,150			27,230
	Total current assets		1,588,665			1,290,981
Property and equipment, net			371,326			306,234
Goodwill			993,332			937,317
Franchise value			93,720			36,025
Assets of discontinued operations			—			53,085
Other assets			90,138			66,672
	Total Assets	$	3,137,181		$	2,690,314
LIABILITIES AND STOCKHOLDERS’ EQUITY
Floor plan notes payable		$	1,138,476		$	882,100
Accounts payable			164,259			127,623
Accrued expenses			185,995			143,413
Current portion of long-term debt			8,574			14,979
	Total current liabilities		1,497,304			1,168,115
Long-term debt			643,343			651,176
Other long-term liabilities			168,122			135,036
Liabilities of discontinued operations			—			31,545
	Total Liabilities		2,308,769			1,985,872
Commitments and contingent liabilities
Stockholders’ Equity
Preferred Stock, $0.0001 par value; 100 shares authorized; none issued and outstanding at December 31, 2003 and 2002.			—			—
Common Stock, $0.0001 par value, 80,000 shares authorized; 46,552 shares issued, including 4,830 treasury shares, at December 31, 2003; 43,669 shares issued, including 4,830 treasury shares, at December 31, 2002.			4			4
Non-voting Common Stock, $0.0001 par value, 7,125 shares authorized; none issued and outstanding at December 31, 2003; 1,759 shares issued and outstanding at December 31, 2002.			—			—
Class C Common Stock, $0.0001 par value, 20,000 shares authorized; none issued and outstanding at December 31, 2003 and 2002			—			—
Additional paid-in-capital			582,104			564,609
Retained earnings			212,605			133,794
Unearned compensation			(2,616	)		—
Accumulated other comprehensive income			36,315			6,035
	Total Stockholders’ Equity		828,412			704,442
	Total Liabilities and Stockholders’ Equity	$	3,137,181		$	2,690,314

See Notes to Consolidated Financial Statements.

F-4

UNITED AUTO GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

			Year Ended December 31,
			2003			2002			2001
			(In thousands, except per share amounts)
New vehicle sales			$	5,052,529		$	4,292,108		$	3,470,690
Used vehicle sales				1,847,061			1,432,789			1,019,856
Finance and insurance				206,903			171,016			136,225
Service and parts				920,454			754,330			572,525
Fleet sales				114,490			108,241			138,531
Wholesale vehicle sales				530,048			451,314			326,806
		Total revenues		8,671,485			7,209,798			5,664,633
Cost of sales				7,428,065			6,181,580			4,878,608
		Gross profit		1,243,420			1,028,218			786,025
Selling, general and administrative expenses				980,011			830,231			603,657
Depreciation and amortization				31,583			21,547			32,621
Operating income				231,826			176,440			149,747
Floor plan interest expense				(43,527	)		(34,875	)		(39,181	)
Other interest expense				(42,847	)		(38,300	)		(34,762	)
	Income from continuing operations before minority interests, income taxes and cumulative effect of accounting change			145,452			103,265			75,804
Minority interests				(2,305	)		(1,963	)		(815	)
Income taxes				(57,456	)		(41,598	)		(32,973	)
	Income from continuing operations			85,691			59,704			42,016
Income from discontinued operations, net of income taxes				296			2,537			2,729
	Income before cumulative effect of accounting change			85,987			62,241			44,745
Cumulative effect of accounting change, net of tax				(3,058	)		—			—
	Net income			82,929			62,241			44,745
Preferred dividends				—			(6,293	)		(8,290	)
	Income available to common stockholders		$	82,929		$	55,948		$	36,455
Basic earnings per common share:
	Continuing operations		$	2.10		$	1.43		$	1.46
	Discontinued operations			—			.07			.11
	Cumulative effect of accounting change			(.07	)		—			—
	Net income			2.03			1.50			1.57
Shares				40,826			37,245			23,147
Diluted earnings per common share:
	Continuing operations		$	2.07		$	1.45		$	1.23
	Discontinued operations			—			.06			.08
	Cumulative effect of accounting change			(.07	)		—			—
	Net income			2.00			1.51			1.31
Shares				41,434			41,161			34,196

See Notes to Consolidated Financial Statements.

F-5

UNITED AUTO GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

	Class A					Class B					Voting and
	Convertible					Convertible					Non-voting
	Preferred Stock					Preferred Stock					Common Stock
	Issued					Issued					Issued
	Shares			Amount		Shares			Amount		Shares			Amount
	(Dollars in thousands)
Balances, December 31, 2000.		8,342			—		521			—		21,989,866		$	2
Issuance of common stock		—			—		—			—		1,593,869			—
Exercise of options		—			—		—			—		343,588			—
Repurchase of common stock		—			—		—			—		(387,092	)		—
Payment in kind dividends		452			—		128			—		—			—
Payment of preferred stock dividends		—			—		—			—		—			—
Fair value of interest rate swap agreements		—			—		—			—		—			—
Foreign currency translation		—			—		—			—		—			—
Net income		—			—		—			—		—			—
Balances, December 31, 2001.		8,794			—		649			—		23,540,231			2
Issuance of common stock		(1,913	)		—		—			—		9,936,812			1
Exercise of options		—			—		—			—		441,407			—
Repurchase of common stock		—			—		—			—		(1,009,463	)		—
Payment in kind dividends		152			—		3			—		—			—
Conversion of preferred stock to common stock		(7,033	)		—		(652	)		—		7,688,823			1
Payment of preferred stock dividends		—			—		—			—		—			—
Fair value of interest rate swap agreements		—			—		—			—		—			—
Foreign currency translation		—			—		—			—		—			—
Net income		—			—		—			—		—			—
Balances, December 31, 2002.		—			—		—			—		40,597,810			4
Issuance of restricted stock		—			—		—			—		324,195			—
Exercise of options		—			—		—			—		800,163			—
Unrealized appreciation of investments		—			—		—			—		—			—
Dividends		—			—		—			—		—			—
Fair value of interest rate swap agreements		—			—		—			—		—			—
Foreign currency translation		—			—		—			—		—			—
Net income		—			—		—			—		—			—
Balances, December 31, 2003.		—			—		—			—		41,722,168		$	4

[Additional columns below]

[Continued from above table, first column(s) repeated]

							Accumulated Other
	Additional									Comprehensive						Total
	Paid-in			Retained			Unearned			Income			Stockholders’			Comprehensive
	Capital			Earnings			Compensation			(Loss)			Equity			Income
	(Dollars in thousands)
Balances, December 31, 2000.	$	420,166		$	41,502		$	—		$	—		$	461,670		$	—
Issuance of common stock		19,041			—			—			—			19,041			—
Exercise of options		4,781			—			—			—			4,781			—
Repurchase of common stock		(5,790	)		—			—			—			(5,790	)		—
Payment in kind dividends		7,113			(7,113	)		—			—			—			—
Payment of preferred stock dividends		—			(384	)		—			—			(384	)		—
Fair value of interest rate swap agreements		—			—			—			(7,205	)		(7,205	)		(7,205	)
Foreign currency translation		—			—			—			(1,175	)		(1,175	)		(1,175	)
Net income		—			44,745			—			—			44,745			44,745
Balances, December 31, 2001.		445,311			78,750			—			(8,380	)		515,683			36,365
Issuance of common stock		124,184			—			—			—			124,185			—
Exercise of options		7,682			—			—			—			7,682			—
Repurchase of common stock		(16,000	)		—			—			—			(16,000	)		—
Payment in kind dividends		4,267			(4,267	)		—			—			—			—
Conversion of preferred stock to common stock		(835	)		—			—			—			(834	)		—
Payment of preferred stock dividends		—			(2,930	)		—			—			(2,930	)		—
Fair value of interest rate swap agreements		—			—			—			(3,815	)		(3,815	)		(3,815	)
Foreign currency translation		—			—			—			18,230			18,230			18,230
Net income		—			62,241			—			—			62,241			62,241
Balances, December 31, 2002.		564,609			133,794			—			6,035			704,442			76,656
Issuance of restricted stock		4,111			—			(2,616	)		—			1,495			—
Exercise of options		13,384			—			—			—			13,384			—
Unrealized appreciation of investments		—			—			—			5,718			5,718			5,718
Dividends		—			(4,118	)		—			—			(4,118	)		—
Fair value of interest rate swap agreements		—			—			—			3,552			3,552			3,552
Foreign currency translation		—			—			—			21,010			21,010			21,010
Net income		—			82,929			—			—			82,929			82,929
Balances, December 31, 2003.	$	582,104		$	212,605		$	(2,616	)	$	36,315		$	828,412		$	113,209

See Notes to Consolidated Financial Statements.

F-6

UNITED AUTO GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

				Year Ended December 31,
				2003			2002			2001
				(Dollars in thousands)
Operating Activities:
	Net income			$	82,929		$	62,241		$	44,745
	Adjustments to reconcile net income to net cash from operating activities:
		Depreciation and amortization			31,583			21,547			32,621
		Amortization of unearned compensation			1,495			—			—
		Deferred income taxes			26,614			12,878			12,546
		Long-term contract settlement			—			22,839			—
		Minority interests			2,305			1,963			815
		Cumulative effect of accounting change			3,058			—			—
	Changes in operating assets and liabilities:
		Accounts receivable			(37,424	)		(27,324	)		(48,640	)
		Inventories			(212,880	)		(181,506	)		144,059
		Floor plan notes payable			231,791			176,907			(114,951	)
		Accounts payable and accrued expenses			54,767			(10,664	)		4,681
		Other			(3,451	)		8,967			(3,332	)
			Net cash from operating activities		180,787			87,848			72,544
Investing Activities:
	Purchase of equipment and improvements				(199,766	)		(184,048	)		(99,016	)
	Proceeds from sale-leaseback transactions				133,373			85,500			20,870
	Dealership acquisitions, net of cash acquired				(113,356	)		(197,343	)		(138,389	)
			Net cash from investing activities		(179,749	)		(295,891	)		(216,535	)
Financing Activities:
	Net borrowings (repayments) of long-term debt				(25,722	)		78,105			134,507
	Proceeds from issuance of common stock and warrants				9,907			135,295			18,823
	Dividends				(4,118	)		—			—
	Repurchase of common stock				—			(16,000	)		(5,790	)
	Deferred financing costs				—			(8,065	)		—
			Net cash from financing activities		(19,933	)		189,335			147,540
			Net cash from discontinued operations		22,099			25,090			(5,828	)
			Net increase (decrease) in cash and cash equivalents		3,204			6,382			(2,279	)
	Cash and cash equivalents, beginning of year				10,641			4,259			6,538
	Cash and cash equivalents, end of year			$	13,845		$	10,641		$	4,259

See Notes to Consolidated Financial Statements.

F-7

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in Thousands, Except Per Share Amounts)

1.     Organization and Summary of Significant Accounting Policies

Overview

      United Auto Group, Inc. (“UAG” or the “Company”) is engaged in the sale of new and used motor vehicles and related products and services, including vehicle service, parts, collision repair, third-party finance and insurance products and other aftermarket products. The Company operates dealerships under franchise agreements with a number of automotive manufacturers. In accordance with individual franchise agreements, each dealership is subject to certain rights and restrictions typical of the industry. The ability of the manufacturers to influence the operations of the dealerships, or the loss of a franchise agreement, could have a negative impact on the Company’s operating results.

Basis of Presentation

      The consolidated financial statements include all majority-owned subsidiaries. Investments in affiliated companies, typically representing an ownership interest in the voting stock of the affiliate of between 20% and 50%, are stated at cost of acquisition plus the Company’s equity in undistributed net income since acquisition. Investments representing less than a 20% ownership interest in the voting stock of a company are stated at cost. All significant intercompany accounts and transactions have been eliminated in consolidation.

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accounts requiring the use of significant estimates include accounts receivable, inventories, income taxes, intangible assets and certain reserves.

      Certain prior year amounts have been reclassified to conform to the current year presentation.

Accounting Change

      In March 2003, the Financial Accounting Standards Board’s Emerging Issues Task Force finalized Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor” (“EITF 02-16”), which addresses the accounting treatment for vendor allowances. EITF 02-16 provides that cash consideration received from a vendor should be presumed to be a reduction of the prices of the vendors’ product and should therefore be shown as a reduction in the purchase price of the merchandise. To the extent that the cash consideration represents a reimbursement of a specific, incremental and identifiable cost, then such allowances should be used to offset such costs. Historically, the Company recorded non-refundable floor plan credits and certain other non-refundable credits when received. As a result of EITF 02-16, these credits are now presumed to be reductions in the cost of purchased inventory and are deferred until the related vehicle is sold. In accordance with EITF 02-16, The Company recorded a cumulative effect of accounting change as of January 1, 2003, (the date of adoption) that decreased net income by $3.1 million, or $0.07 per diluted share.

Cash and Cash Equivalents

      Cash and cash equivalents include all highly-liquid investments that have an original maturity of three months or less at the date of purchase.

F-8

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contracts in Transit

      Contracts in transit represent customer finance contracts evidencing loan agreements or lease agreements between the Company, as creditor, and the customer, as borrower, to acquire or lease a vehicle whereby a third-party finance source has given the Company initial, non-binding approval to assume the Company’s position as creditor. Funding and final approval from the finance source is provided upon the finance source’s review of the loan or lease agreement and related documentation executed by the customer at the dealership. These finance contracts are typically funded within ten days of the initial approval of the finance transaction by the third-party finance source. The finance source is not contractually obligated to make the loan or lease to the customer until it gives its final approval and funds the transaction. Until such final approval is given, contracts in transit represent amounts due from the customer to the Company. Contracts in transit, included in accounts receivable, net in the Company’s Consolidated Balance Sheets, amounted to $154,969 and $154,979 as of December 31, 2003 and 2002, respectively.

Inventory Valuation

      Inventories are stated at the lower of cost or market. Cost for new and used vehicle inventories is determined using the specific identification method. Cost for parts, accessories and other inventories is based on factory list prices.

Property and Equipment

      Property and equipment are recorded at cost and depreciated over estimated useful lives using the straight-line method. Useful lives for purposes of computing depreciation for assets, other than equipment under capital lease and leasehold improvements, are between 5 and 15 years. Leasehold improvements and equipment under capital lease are depreciated over the shorter of the term of the lease or the estimated useful life of the asset.

      Expenditures relating to recurring repair and maintenance are expensed as incurred. Expenditures that increase the useful life or substantially increase the serviceability of an existing asset are capitalized. When equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income.

Income Taxes

      Tax regulations require items to be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses which are not deductible on our tax return, and some are timing differences, such as the timing of depreciation expense. Timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the Company has already recorded the tax benefit in our financial statements. Deferred tax liabilities generally represent expenses recognized in the financial statements for which payment has been deferred or deductions taken on the tax return which have not yet been recognized as expense in our financial statements. The Company has established valuation allowances for deferred tax assets if the amount of expected future taxable income is not likely to allow for the use of the deduction or credit.

Intangible Assets

Useful Lives

      The Company’s principal intangible assets relate to its franchise agreements with vehicle manufacturers, which represent the estimated value of franchises acquired in business combinations consummated subsequent to July 1, 2001, and goodwill, which represents the excess of cost over the fair value of tangible and identified

F-9

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

intangible assets acquired in connection with business combinations. The Company believes the franchise value of its dealerships have an indefinite life based on the following facts:

•  Automotive retailing is a mature industry and is based on franchise agreements with the vehicle manufacturers;

•  There are no known changes or events that would alter the automotive retailing franchise environment;

•  Certain franchise agreement terms are indefinite;

•  Franchise agreements that have limited terms have historically been renewed without substantial cost;

•  The industry’s history shows that manufacturers rarely terminate franchise agreements; and

•  State franchise laws are typically in favor of the franchisee and limit the franchisor’s ability to terminate the franchise agreement without substantial cause.

      Intangible assets are amortized over their estimated useful lives.

Impairment Testing

      The Company’s intangible assets are reviewed for impairment on at least an annual basis. Franchise value impairment is assessed annually through a comparison of the fair value of the asset with its carrying value. If the carrying value of a franchise exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Company evaluates the remaining useful life of its franchises at each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Goodwill impairment is assessed annually at the “reporting unit” level. The Company has three “regions” each of which has been determined to be a reporting unit because discrete financial information is available for each region and each region’s operating results are regularly reviewed by the Chief Executive Officer and executive management team. If the carrying amount of a reporting unit is determined to exceed its fair value, an impairment loss is recognized.

      Following is a summary of the changes in the carrying amount of goodwill and franchise value for the year ended December 31, 2003:

				Franchise
	Goodwill			Value
Balance — January 1, 2003	$	937,317		$	36,025
Additions during period		39,536			55,298
Dispositions during period		(1,098	)		—
Foreign currency translation		17,577			2,397
Balance — December 31, 2003	$	993,332		$	93,720

      The Company no longer amortizes indefinite lived intangibles. Prior to January 1, 2002, indefinite lived intangibles were amortized on a straight-line basis over periods not exceeding 40 years. Amortization expense for the year ended December 31, 2001 was $19,705.

F-10

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following is presented as if the statement was adopted at January 1, 2001:

	December 31,
	2001
Income from continuing operations	$	42,016
Net income	$	44,745
Goodwill amortization, net of tax	$	11,133
Pro forma income from continuing operations	$	53,149
Pro forma net income	$	55,878
Preferred dividends	$	8,290
Pro forma income available to common stockholders	$	47,588
Pro forma basic earnings from continuing operations per common Share	$	1.94
Pro forma earnings from continuing operations per diluted common share	$	1.55
Pro forma basic earnings per common share	$	2.06
Pro forma earnings per diluted common share	$	1.63

Impairment of Long-Lived Assets

      The carrying value of long-lived assets subject to amortization is reviewed if the facts and circumstances, such as significant declines in revenues, earnings or cash flows or material adverse changes in the business climate, indicate that they may be impaired. The carrying value of long-lived assets not subject to amortization is reviewed for impairment annually during the fourth quarter or more frequently if the factors above indicate that they may be impaired. The Company performs its review by comparing the carrying amounts of long-lived assets to the estimated undiscounted cash flows relating to such assets. If any impairment in the value of the long-lived assets is indicated, the carrying value of the long-lived assets is adjusted to reflect such impairment based on the fair value of the impaired assets or an estimate of fair value based on discounted cash flows.

Investments

      Investments include marketable securities and investments in businesses accounted for under the equity method. Marketable securities include investments in debt and equity securities. Marketable securities held by the Company are typically classified as available for sale and are stated at fair value in the Consolidated Balance Sheets with unrealized gains and losses included in Other Comprehensive Income. The Company’s investments are reviewed on at least an annual basis for impairment. Declines in investment values that are deemed to be other than temporary would result in an impairment charge adjusting the investments’ carrying value to fair value.

Foreign Currency Translation

      For all significant foreign operations, the functional currency is the local currency. The revenue and expense accounts of the Company’s foreign operations are translated into U.S. dollars using the average exchange rates that prevailed during the period. Assets and liabilities of foreign operations are translated into U.S. dollars using period end exchange rates. Cumulative translation adjustments relating to foreign functional

F-11

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

currency assets and liabilities are recorded in accumulated other comprehensive income, a separate component of stockholders’ equity.

Fair Value of Financial Instruments

      Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, debt, including floor plan notes payable, and interest rate swaps used to hedge future cash flows. Other than our subordinated notes, the carrying amount of all significant financial instruments approximates fair value due either to length of maturity or the existence of variable interest rates that approximate prevailing market rates. The fair value of the subordinated notes, estimated using their quoted fair market value, was approximately $332,000 at December 31, 2003.

Revenue Recognition

Vehicle, Parts and Service Sales

      The Company records revenue when vehicles are delivered and title has passed to the customer, when vehicle service or repair work is performed and when parts are delivered. Sales promotions that we offer to customers are accounted for as a reduction to the sales price at the time of sale. Incentives, rebates and holdbacks offered by manufacturers directly to us are recognized at the time of sale if they are vehicle specific, or as earned in accordance with the manufacturer program rules.

Finance and Insurance Sales

      The Company arranges financing for customers through various financial institutions and receives a commission from the lender equal to the difference between the interest rates charged to customers and the interest rates set by the financing institution. The Company also receives commissions from the sale of various third-party insurance products to customers, including credit, life, and health insurance policies and extended service contracts. These commissions are recorded as revenue at the time the customer enters into the contract. The Company is not the obligor under any of these contracts. In the case of finance contracts, a customer may prepay or fail to pay their contract, thereby terminating the contract. Customers may also terminate extended service contracts, which are fully paid at purchase, and become eligible for refunds of unused premiums. In these circumstances, a portion of the commissions the Company receives may be charged back based on the relevant terms of the contracts. The revenue the Company records relating to commissions is net of an estimate of the ultimate amount of chargebacks the Company will be required to pay. Such estimate of chargeback experience is based on our historical chargeback expense arising from similar contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on extended service contracts and other insurance products.

Defined Contribution Plans

      The Company sponsors a number of defined contribution plans covering a significant majority of the Company’s employees. Company contributions to such plans are discretionary and are typically based on the level of compensation and contributions by plan participants. The Company incurred expense of $7,729, $3,811 and $1,575 relating to such plans during the years ended December 31, 2003, 2002 and 2001, respectively.

Advertising

      Advertising costs are expensed as incurred. The Company incurred total advertising costs of $77,199, $62,832 and $53,479 during the years ended December 31, 2003, 2002 and 2001, respectively. Qualified advertising expenditures reimbursed by manufacturers, which are treated as a reduction of selling, general and

F-12

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

administrative expense, were $11,444, $11,817 and $6,325 during the years ended December 31, 2003, 2002 and 2001, respectively.

Self Insurance

      The Company retains risk relating to certain general liability insurance, workers’ compensation insurance and employee medical benefits in the United States. As a result, the Company is likely to be responsible for a majority of the claims and losses incurred under these programs. The amount of risk retained varies by program, but the Company typically pays per occurrence deductibles and has pre-determined maximum exposure limits for each insurance period. The majority of losses, if any, above the pre-determined exposure limits are typically paid by third-party insurance carriers. The Company’s estimate of future losses is prepared by management using the Company’s historical loss experience and industry based development factors.

Net Income Per Common Share

      Income available to common stockholders used in the computation of basic earnings per share data was computed based on net income, as adjusted to reflect dividends relating to outstanding preferred stock. Basic earnings per share data was computed based on the weighted average number of common shares outstanding. Diluted earnings per share data was computed based on the weighted average number of common shares outstanding, adjusted for the dilutive effect of stock options, restricted stock, preferred stock and warrants. For the years ended December 31, 2003, 2002 and 2001, 487, 505 and 932 shares attributable to outstanding common stock equivalents were excluded from the calculation of diluted earnings per share because the effect of such securities was antidilutive. A reconciliation of the number of shares used in the calculation of basic and dilutive earnings per share for the years ended December 31, 2003, 2002 and 2001 follows:

	Year Ended December 31,
	2003		2002		2001
Weighted average number of common shares outstanding		40,826		37,245		23,147
Effect of stock options		479		925		820
Effect of restricted stock		129		—		—
Effect of preferred stock		—		2,778		9,334
Effect of warrants		—		213		895
Weighted average number of common shares outstanding, including effect of dilutive securities		41,434		41,161		34,196

Hedging

      Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted (“SFAS No. 133”) establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Under SFAS 133, all derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. SFAS 133 defines requirements for designation and documentation of hedging relationships, as well as ongoing effectiveness assessments, which must be met in order to qualify for hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value would be recorded in earnings immediately. If the derivative is designated in a fair-value hedge, the changes in the fair value of the derivative and the hedged item are recorded in earnings. If the derivative is designated in a cash-flow hedge, effective changes in the fair value of the derivative are recorded in other comprehensive income and recorded in the income statement when the hedged item affects earnings. Changes in the fair value of the derivative attributable to hedge ineffectiveness are recorded in earnings immediately.

F-13

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock-Based Compensation

      Pursuant to Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, the Company accounts for option grants using the intrinsic value method. Accordingly, no compensation expense has been recorded in the consolidated financial statements with respect to option grants. The Company has adopted the disclosure only provisions of SFAS 123, “Accounting for Stock Based Compensation”, as amended by SFAS 148, “Accounting for Stock Based Compensation — Transition and Disclosure, an Amendment of FASB Statement No. 123”. Had the Company elected to recognize compensation expense for option grants using the fair value method, net income, basic earnings per common share and diluted earnings per common share would have been as follows:

	Year Ended December 31,
	2003			2002			2001
Net income	$	82,929		$	62,241		$	44,745
Fair value method compensation expense attributable to stock-based compensation, net of tax		1,591			2,300			1,991
Pro forma net income	$	81,338		$	59,941		$	42,754
Basic earnings per common share	$	2.03		$	1.50		$	1.57
Pro forma basic earnings per common share	$	1.99		$	1.44		$	1.49
Diluted earnings per common share	$	2.00		$	1.51		$	1.31
Pro forma diluted earnings per common share	$	1.96		$	1.46		$	1.25
Weighted average fair value of options granted	$	12.95		$	11.11		$	4.15
Expected dividend yield		—	%		—	%		—	%
Risk free interest rates		4.0	%		4.0	%		5.5	%
Expected life		5.0 years			5.0 years			5.0 years
Expected volatility		61.0	%		60.8	%		38.5	%

      See footnote 12 for a detailed description of the Company’s stock compensation plans.

New Accounting Pronouncements

      Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities”, was issued in April 2003. SFAS No. 149 clarifies the circumstances under which a contract with an initial net investment meets the characteristics of a derivative and clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 amends certain other existing pronouncements. SFAS No. 149 is generally effective for contracts entered into or modified after June 30, 2003, and should be applied prospectively. The Company does not expect SFAS No. 149 to have a material impact on its consolidated financial position, result of operations or cash flows.

      SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” was issued in May 2003. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. This statement establishes standards for an issuer’s classification and measurement of certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a freestanding financial instrument that is within its scope as a liability (or an asset in some circumstances). The Company does not expect SFAS No. 150 to have a material impact on its consolidated financial position, result of operations or cash flows.

F-14

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of APB No. 50” (“FIN 46”), was issued in January 2003. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. In December 2003, the FASB issued FIN No. 46 (Revised) (“FIN 46-R”) to address certain FIN 46 implementation issues. FIN 46-R also deferred the effective date of FIN 46 for entities not considered special-purpose entities to the first reporting period that ends after March 15, 2004. The Company does not expect FIN 46 to have a material impact on its consolidated financial position, result of operations or cash flows.

2.     Unusual Items

      During the fourth quarter of 2002, the Company recorded a $22,839 ($13,589 after-tax) charge (the “Charge”). The Charge related primarily ($20.3 million) to the accrual of an estimate of the costs associated with the employment contracts of certain employees terminated in December, 2002 in connection with the streamlining of operations in the western region of the United States. Under the terms of the separation agreements, the Company is required to continue to pay the terminated employees under the terms of their employment agreements through October 2005. The Charge was included in selling, general and administrative expense and payments will be made through October 2005; the unpaid balance is approximately $13,483 as of December 31, 2003. The remainder of the charge included the cost of a non-compete agreement with a former member of management which the Company determined no longer had a continuing economic benefit.

3.     Business Combinations

      During 2003 and 2002, the Company completed a number of acquisitions. Each of these acquisitions has been accounted for using the purchase method of accounting. As a result, the Company’s financial statements include the results of operations of the acquired dealerships from the date of acquisition.

      During 2003, the Company acquired 26 automobile dealership franchises. The aggregate consideration paid in connection with such acquisitions amounted to approximately $113,300 in cash. The consolidated balance sheets include preliminary allocations of the purchase price relating to such acquisitions, resulting in the recognition of approximately $25,251 of goodwill and $47,935 of franchise value. During 2002, the Company acquired 71 automobile dealership franchises. The aggregate consideration paid in connection with such acquisitions amounted to $189,193 in cash and the assumption of approximately $22,448 of debt. The consolidated balance sheets include allocations of the purchase price relating to such acquisitions, resulting in the recognition of approximately $156,013 of goodwill and $36,025 of franchise value.

      The following unaudited consolidated pro forma results of operations of the Company for the years ended December 31, 2003 and 2002 give effect to acquisitions consummated during 2003 and 2002 as if they had occurred on January 1, 2002.

	December 31,
	2003		2002
Revenues	$	8,844,662	$	7,901,449
Income from continuing operations		88,106		74,659
Net income		84,401		71,139
Net income per diluted common share	$	2.04	$	1.73

      In July 2001, the Company invested in the Tulsa Auto Collection, a group of dealerships owned indirectly by Ford Motor Company, in Tulsa, Oklahoma, which consists of seven dealerships representing the Ford, Jaguar and Mazda brands. The Company has obligations with respect to this acquisition totaling approximately $24,450 over the next three years.

F-15

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In connection with an acquisition of dealerships completed in October 2000, the Company agreed to make a contingent payment in cash to the extent 841 shares of common stock issued as consideration in connection with that acquisition are sold subsequent to the fifth anniversary of the transaction and have a market value of less than $12.00 per share at the time of sale. The Company will be forever released from this guarantee in the event the average daily closing price of the Company’s common stock for any 90 day period subsequent to the fifth anniversary of the transaction exceeds $12.00 per share. In the event the Company is required to make a payment relating to this guarantee, such payment would result in the revaluation of the common stock issued in the transaction, resulting in a reduction of additional paid-in-capital. The Company has further granted the seller a put option pursuant to which the Company may be required to repurchase no more than 108 shares for $12.00 per share on each of the first five anniversary dates of the transaction. As of December 31, 2003, the maximum of future cumulative cash payments the Company may be required to make in connection with the put option amounted to $2,600. To date, no payments have been made by the Company relating to the put option.

      In January 1998, the Company entered into an agreement with a third-party to jointly acquire and manage dealerships in Indiana, Illinois, Ohio, North Carolina and South Carolina. With respect to any joint venture established pursuant to this agreement, the Company is required to repurchase the partner’s interest at the end of the five-year period following the date of the acquisition, in accordance with the terms of the agreement. Pursuant to this arrangement, the Company has entered into a 2003 joint venture agreement with respect to the Honda of Mentor dealership. The Company is required to repurchase the partners interest in this joint venture in July 2008, the payment is expected to be approximately $2,700.

      In connection with an acquisition of dealerships completed in October 1997, the Company agreed that if the acquired companies achieved aggregate specified base earnings levels in any of the five years beginning with the year ending December 31, 1999, the Company would pay to the sellers, for each year in which the acquired companies exceeded base earnings, an amount equal to $700 plus defined percentages of the amounts earned in excess of such base earnings for any such year. The total amount of payments to be made pursuant to this agreement is limited to $7,000. To date the Company has paid $2,000 relating to this agreement and will make a final payment of $1,000 in the first quarter of 2004. Payments relating to this earnings contingency are recorded as additional cost of the acquired dealerships, resulting in an increase in goodwill.

4. Discontinued Operations

      The Company periodically enters into transactions to sell or otherwise dispose of non-core or unprofitable dealerships. Such transactions typically result in treating the sold dealerships as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets. Consequently, such dealerships have been reported as discontinued operations for all periods presented. Combined financial information of these dealerships follows:

	Year Ended December 31,
	2003			2002			2001
Revenues	$	132,396		$	366,697		$	450,702
Pre-tax income (loss)		(4,040	)		(3,375	)		4,831
Gain on disposal		4,523			6,874			—

F-16

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31,
	2002
Inventories	$	30,453
Other assets		22,632
Total assets	$	53,085
Floor plan notes payable	$	25,803
Other liabilities		5,742
Total Liabilities	$	31,545

5.     Inventories

      Inventories consisted of the following:

		December 31,
		2003		2002
New vehicles		$	909,574	$	728,456
Used vehicles			219,912		167,097
Parts, accessories and other			54,382		47,179
	Total inventories	$	1,183,868	$	942,732

6.     Property and Equipment

      Property and equipment consisted of the following:

				December 31,
				2003		2002
Buildings and leasehold improvements				$	287,092	$	234,502
Furniture, fixtures and equipment					161,444		123,653
	Total				448,536		358,155
		Less: Accumulated depreciation and amortization			77,210		51,921
			Property and equipment, net	$	371,326	$	306,234

7.     Floor Plan Notes Payable

      The Company finances the majority of its new and a portion of its used vehicle inventory under revolving floor plan financing arrangements with various lenders. In the U.S., the Company typically makes monthly interest payments on the amount financed, but is not required to make loan principal repayments prior to the sale of new and used vehicles. In the U.K., principal balances outstanding for 90 days must be repaid whether the vehicle has been sold or not. Outstanding borrowings under floor plan financing arrangements amounted to $1,138,476 and $882,100 as of December 31, 2003 and 2002, respectively, of which $252,992 and $143,020 related to inventory held by our U.K. subsidiaries.

      The floor plan agreements grant a security interest in substantially all of the assets of the Company’s dealership subsidiaries. Interest rates on the floor plan agreements are variable and increase or decrease based on movements in prime or LIBOR borrowing rates. The weighted average interest rate on floor plan borrowings was 4.48%, 5.13% and 7.36% for the years ended December 31, 2003, 2002 and 2001, respectively. The Company receives non-refundable credits from certain of its vehicle manufacturers, which are treated as a

F-17

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reduction of cost of goods sold. Such credits amounted to $33,455, $31,609 and $29,459 during the years ended December 31, 2003, 2002 and 2001, respectively.

8.     Long-Term Debt

      Long-term debt consisted of the following:

			December 31,
			2003		2002
U.S. Credit Agreement — Revolving Loans, weighted average interest — 3.23% and 3.79% at December 31, 2003 and 2002, respectively			$	312,000	$	343,300
U.K. Credit Agreement — Revolving Loans, weighted average interest — 4.55% and 4.75% at December 31, 2003 and 2003, respectively				35,203		16,019
9.625% Senior Subordinated Notes due 2012.				300,000		300,000
Seller financed promissory notes payable through 2004, weighted average interest — 8.00% and 7.83% at December 31, 2003 and 2002, respectively				2,356		3,008
Other				2,358		3,828
	Total long-term debt			651,917		666,155
		Less: Current portion		8,574		14,979
	Net long-term debt		$	643,343	$	651,176

      Scheduled maturities of long-term debt for each of the next five years and thereafter are as follows:

2004		$	8,574
2005			320,071
2006			21,830
2007			495
2008			197
2009 and thereafter			300,750
	Total long-term debt	$	651,917

     U.S. Credit Agreement

      The Company is party to a credit agreement with DaimlerChrysler Services North America LLC and Toyota Motor Credit Corporation, dated December 22, 2000, as amended (the “U.S. Credit Agreement”), which provides for up to $700,000 in revolving loans to be used for acquisitions, working capital, letters of credit, the repurchase of common stock and general corporate purposes. The Company is also party to an additional $50,000 standby letter of credit agreement provided by DaimlerChrysler Services North America LLC (the “Additional Facility”). Revolving loans mature on August 3, 2005. Loans under the U.S. Credit Agreement bear interest between U.S. LIBOR plus 2.00% and U.S. LIBOR plus 3.00%. The U.S. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by the Company’s domestic automotive dealership subsidiaries and contains a number of significant covenants that, among other things, restrict the Company’s ability to dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. The Company is also required to comply with specified ratios and tests defined in the U.S. Credit Agreement. The U.S. Credit Agreement also contains typical events of default, including change of control and non-payment of obligations. Availability under the revolving portion of the U.S. Credit Agreement is subject to a collateral-

F-18

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

based borrowing limitation, which is determined based on allowable domestic tangible assets. Substantially all of the Company’s domestic assets are subject to security interests granted to lenders under the U.S. Credit Agreement. The U.S. Credit Agreement, the subordinated notes discussed below and borrowings under floor plan financing arrangements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness. As of December 31, 2003, outstanding borrowings and letters of credit under the U.S. Credit Agreement amounted to $312,000 and $10,300, respectively, and outstanding letters of credit amounted to $50,000 under the Additional Facility. As of December 31, 2003 the Company was in compliance with all financial covenants under the U.S. Credit Agreement.

     U.K. Credit Agreement

      The Company is party to a credit agreement with the Royal Bank of Scotland dated February 28, 2003 (the “U.K. Credit Agreement”), which provides for up to £45,000 (approximately $80,000 as of December 31, 2003) in revolving loans to be used for acquisitions, working capital, and general corporate purposes. The U.K. Credit Agreement also provides for an additional seasonally adjusted overdraft line of credit up to a maximum of £10,000 (approximately $17,800 as of December 31, 2003). Loans under the U.K. Credit Agreement bear interest between U.K. LIBOR plus 0.85% and U.K. LIBOR plus 1.25%. The borrowing capacity under the U.K. Credit Agreement will be reduced by £2,000 every six months, with the first reduction occurring on January 1, 2004. The remaining £35,000 of revolving loans mature on January 31, 2006. The U.K. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by the Company’s subsidiaries in the U.K. (the “U.K. Subsidiaries”), and contains a number of significant covenants that, among other things, restrict the ability of the U.K. Subsidiaries to pay dividends, dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. In addition, the U.K. Subsidiaries are required to comply with specified ratios and tests defined in the U.K. Credit Agreement. The U.K. Credit Agreement also contains typical events of default, including change of control and non-payment of obligations. Substantially all of the U.K. Subsidiaries’ assets are subject to security interests granted to lenders under the U.K. Credit Agreement and the U.K. Credit Agreement has cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of the U.K. Subsidiaries. As of December 31, 2003, outstanding borrowings under the U.K. Credit Agreement amounted to approximately £20,000 ($35,203), and the Company was in compliance with all financial covenants under the U.K. Credit Agreement.

     Senior Subordinated Notes

      In March 2002, the Company issued $300,000 aggregate principal amount of 9.625% Senior Subordinated Notes due 2012 (the “Notes”). The Notes are unsecured senior subordinated notes and rank behind all existing and future senior debt, including debt under our credit agreements and floor plan indebtedness. The Notes are guaranteed by substantially all domestic subsidiaries on a senior subordinated basis. The Company can redeem all or some of the Notes at its option beginning in 2007 at specified redemption prices. In addition, until 2005 the Company is allowed to redeem up to 35% of the Notes with the net cash proceeds from specified public equity offerings. Upon a change of control, each holder of Notes will be able to require the company to repurchase all or some of the Notes at a redemption price of 101% of the principal amount of the Notes. The Notes also contain customary negative covenants and events of default.

9.     Interest Rate Swaps

      During March 2003, we entered into a swap agreement of five years duration pursuant to which a notional $350,000 of our U.S. floating rate debt was exchanged for fixed rate debt. The fixed rate interest is 3.15%. These swaps have been designated as cash flow hedges of future interest payments of our LIBOR based U.S. floor plan borrowings.

F-19

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      During January 2000, we entered into a swap agreement of five years duration pursuant to which a notional $200,000 of our U.S. floating rate debt was exchanged for fixed rate debt. The fixed rate interest was 7.15%. In October 2002, the terms of this swap were amended pursuant to which the interest rate was reduced to 5.86% and the term of the agreement was extended for an additional three years.

10.     Operating Lease Obligations

      The Company leases its dealership facilities and corporate offices under non-cancelable operating lease agreements with expiration dates through 2035, including all option periods available to the Company. The Company’s lease arrangements typically allow for a base term with options for extension in the Company’s favor and include escalation clauses tied to the Consumer Price Index.

      Minimum future rental payments required under non-cancelable operating leases in effect as of December 31, 2003 are as follows:

2004	$	113,688
2005		110,432
2006		106,117
2007		102,765
2008		100,351
2009 and thereafter		901,277
	$	1,434,630

      Rent expense for the years ended December 31, 2003, 2002 and 2001 amounted to $84,342, $63,924 and $31,974, respectively. A number of the dealership leases are with former owners who continue to operate the dealerships as employees of the Company or with other affiliated entities. Of the total rental payments, $11,384, $19,124 and $12,954, respectively, were made to related parties during 2003, 2002, and 2001, respectively (See Note 11).

11.     Related Party Transactions

      The Company currently is a tenant under a number of non-cancelable lease agreements with Automotive Group Realty, LLC (“AGR”), a wholly-owned subsidiary of Penske Corporation. During the years ended December 31 2003, 2002 and 2001 the Company paid $5,884, $10,228 and $5,753, respectively, to AGR under these lease agreements. In addition, during the years ended December 31 2003, 2002 and 2001 the Company sold AGR real property and improvements for $19,300, $50,000 and $20,870, respectively, which were subsequently leased by AGR to the Company. The sale of each parcel of property was valued at a price which was either independently confirmed by a third party appraiser or at the price for which the Company purchased the property from an independent third party. In addition, the Company sometimes pays and/or receives fees from Penske Corporation and its affiliates for services rendered in the normal course of business including the transactions with AGR, and reimburse payments made to third parties by Penske Corporation on the Company’s behalf. Payments made relating to services rendered reflect the provider’s cost or an amount mutually agreed upon by both parties, which the Company believes represent terms at least as favorable as those that could be obtained from an unaffiliated third party negotiated on an arm’s length basis.

      The Company is also currently a tenant under a number of non-cancelable lease agreements with former owners who continue to operate the dealerships as employees of the Company or with other affiliated entities. A number of the lease agreements are with Samuel X. DiFeo and members of his family. Mr. DiFeo is the Company’s President and Chief Operating Officer and one of its directors. During the years ended December 31 2003, 2002 and 2001 the Company paid $5,500, $4,000 and $2,900, respectively, to Mr. DiFeo

F-20

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and his family under these lease agreements. The Company believes that the terms of these transactions are at least as favorable as those that could be obtained from an unaffiliated third party negotiated on an arm’s length basis.

      From time to time the Company enters into joint venture arrangements in the ordinary course of business, pursuant to which dealerships are acquired together with a minority investor. The Company may also provide these subsidiaries with working capital and other debt financing at costs that are based on the Company’s incremental borrowing rate.

      An entity controlled by one of the Company’s directors, Lucio A. Noto (the “Investor”) owns a 6.5% interest in one of the Company’s subsidiaries, UAG Connecticut I, LLC, which entitles the Investor to 20% of the operating profits of UAG Connecticut I. In addition, the Investor has an option to purchase up to a 20% interest in UAG Connecticut I for specified amounts.

      The Company participates in a joint venture with Roger S. Penske, Jr., the Company’s Executive Vice President, to own and operate certain Mercedes-Benz, Audi and Porsche dealerships. The Company contributed $65,100 for a 90% interest in HBL, LLC and Mr. Penske, Jr. contributed $7,200 for the remaining 10% interest.

      The Company participates in a joint venture to own and operate certain dealerships in Brazil. One of the joint venture partners in Brazil is Roger S. Penske, Jr., the Company’s Executive Vice President. The Company contributed approximately $3,600 for a 90.6% interest and Mr. Penske, Jr. contributed approximately $200 for a 4.7% interest.

12.     Stock Compensation Plans

      Full-time employees of the Company and its subsidiaries and affiliates are eligible to receive awards pursuant to the terms of the Company’s 2002 Equity Compensation Plan (the “Plan”). The Plan allows for the Company to issue 2,100 common stock equivalents, including; stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and other awards to key employees, outside directors, consultants and advisors of the Company. As of December 31, 2003, 1,779 common stock equivalents were available for grant under the Plan. In addition, 150 shares of common stock equivalents are available for grant pursuant to a prior equity compensation plan.

      During 2003, the Company granted 329 shares of restricted common stock at no cost to certain employees. The restricted stock entitles the participants to vote their respective shares and receive dividends. However, the shares are subject to forfeiture and are non-transferable, which restrictions lapse ratably over a three-year period from the grant date. The grant date fair value of the restricted stock is amortized to expense over the restriction period. During 2003, the Company recorded $4,111 of deferred compensation expense related to the restricted stock, of which $2,616 remained unamortized at December 31, 2003.

F-21

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Presented below is a summary of the status of stock options held by eligible employees during 2003, 2002 and 2001:

	2003				2002				2001
			Weighted				Weighted				Weighted
			Average				Average				Average
			Exercise				Exercise				Exercise
Stock Options	Shares		Price		Shares		Price		Shares		Price
Options outstanding at beginning of year		1,862	$	14.22		1,816	$	11.82		2,020	$	13.63
Granted		29		16.78		575		20.14		466		9.78
Exercised		355		13.55		361		10.83		268		11.14
Forfeited		30		12.11		168		15.81		402		18.96
Options outstanding at end of year		1,506	$	14.29		1,862	$	14.22		1,816	$	11.82

      The following table summarizes the status of stock options outstanding and exercisable at January 1, 2004:

			Weighted		Weighted				Weighted
	Stock		Average		Average		Stock		Average
	Options		Remaining		Exercise		Options		Exercise
Range of Exercise Prices	Outstanding		Contractual Life		Price		Exercisable		Price
$7 to $13		784		5.87	$	9.29		776	$	9.27
13 to 30		722		6.32		19.72		414		18.74
		1,506						1,190

      In connection with the Securities Purchase Agreement described in Note 13 to the Consolidated Financial Statements, the Company issued 800 options to purchase Common Stock with an exercise price of $10.00 per share, the then fair value. As of December 31, 2003, 400 of such options remain outstanding.

13. Stockholders’ Equity

      In September 2002, the Company repurchased 1,009 shares of its common stock from Combined Specialty Insurance Company, a wholly owned subsidiary of Aon Corporation, for $16,000. During 2001, the Company repurchased 387 shares through open market purchases and negotiated transactions at an aggregate cost of $5,790. The Company financed these purchases with funds obtained from borrowings under the U.S. Credit Agreement. To date, the Company has repurchased 1,397 shares at an aggregate cost of $21,790 under the terms of a repurchase program for up to three million shares of the Company’s common stock that was authorized by the Company’s Board of Directors in September 2001.

      In March 2002, the Company completed the sale of 3,000 shares of voting common stock to the public in an underwritten registered offering at $22.00 per share. Net proceeds to the Company totaled approximately $60,873, which was used to repay indebtedness under the U.S. Credit Agreement.

      On April 12, 1999, the Company entered into a securities purchase agreement with International Motor Cars Group I, L.L.C. and International Motor Cars Group II, L.L.C. (the “Securities Purchase Agreement”), Delaware limited liability companies controlled by Penske Capital Partners, L.L.C. (together, the “PCP Entities”), pursuant to which the PCP Entities agreed purchased 7.903124 shares of our Series A convertible preferred stock, (2) 0.396876 shares of our Series B convertible preferred stock, and (3) warrants to purchase 3,899 shares of common stock and 1,101 shares of non-voting common stock, for $83,000. The Series A and Series B preferred stock entitled the PCP Entities to dividends at a rate of 6.5% per year. The dividends were payable in kind for the first two years after issuance, after which they were payable in cash.

F-22

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Actual cash dividends paid relating to the preferred stock amounted to $2,930 during the year ended December 31, 2002. The Series A preferred stock was converted into 7,033 shares of our voting common stock in May 2002. The Series B preferred stock was converted into 652 shares of our non-voting common stock in August 2002.

      The warrants held by the PCP Entities, as originally issued, were exercisable at a price of $12.50 per share until February 3, 2002, and $15.50 per share thereafter until May 2, 2004. Pursuant to the anti-dilution provisions of the warrants and as a result of a sale of equity to Mitsui & Co. in 2001, (a) the number of warrants to purchase common stock was increased from 3,899 shares to 3,916 shares, (b) the number of warrants to purchase non-voting common stock was increased from 1,101 shares to 1,106 shares, and (c) the warrant exercise price was lowered from $12.50 to $12.45. The PCP Entities exercised their warrants in February 2002 for $62,500. Accordingly, the Company issued 3,916 shares of voting common stock and 1,106 shares of non-voting common stock. Proceeds from the exercise of the warrants were used to repay indebtedness under the U.S. Credit Agreement

      In February 2001, the Company issued 1,302 shares of voting common stock to Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. in a private placement for $10.75 per share. Aggregate proceeds, amounting to $14,000, were used to repay indebtedness under the U.S. Credit Agreement.

14. Income Taxes

      The income tax provision relating to income from continuing operations consisted of the following:

			Year Ended December 31,
			2003		2002		2001
Current:
	Federal		$	15,230	$	18,372	$	15,976
	State and local			5,513		5,083		4,447
	Foreign			10,099		5,265		4
		Total current		30,842		28,720		20,427
Deferred:
	Federal			20,203		9,406		10,214
	State and local			3,930		1,643		2,080
	Foreign			2,481		1,829		252
		Total deferred		26,614		12,878		12,546
Income tax provision relating to continuing Operations			$	57,456	$	41,598	$	32,973

      The income tax provision relating to income from continuing operations varied from the U.S. federal statutory income tax rate due to the following:

	Year Ended December 31,
	2003		2002		2001
Income tax provision at the federal statutory rate of 35%	$	50,908	$	36,671	$	27,208
State and local income taxes, net of federal benefit		6,138		4,141		3,862
Non-deductible amortization of goodwill		—		—		2,393
Other		410		786		(490	)
Income tax provision relating to continuing operations	$	57,456	$	41,598	$	32,973

F-23

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The components of deferred tax assets and liabilities at December 31, 2003 and 2002 were as follows:

			2003			2002
Deferred Tax Assets
Accrued liabilities			$	30,599		$	23,185
Interest rate swaps				8,930			11,098
Net operating loss carryforwards				2,494			2,494
Other				574			725
Total deferred tax assets				42,597			37,502
Valuation allowance				(2,662	)		—
		Net deferred tax assets		39,935			37,502
Deferred Tax Liabilities
Depreciation and amortization				(79,249	)		(51,974	)
Partnership investments				(20,758	)		(16,726	)
Other				(3,629	)		(2,174	)
	Total deferred tax liabilities			(103,636	)		(70,874	)
	Net deferred tax liabilities		$	(63,701	)	$	(33,372	)

      The Company does not provide for federal income taxes or tax benefits relating to the undistributed earnings or losses of its international subsidiaries. It is management’s belief that such earnings will be indefinitely reinvested in the companies that produced them. At December 31, 2003, the Company had not provided federal income taxes on a total of $83,630 of earnings of individual international subsidiaries. If these earnings were remitted as dividends, the Company would be subject to U.S. income taxes and certain foreign withholding taxes.

      At December 31, 2003, the Company has $73,756 of state net operating loss carryforwards that expire at various dates through 2022.

15. Supplemental Cash Flow Information

      The following table presents supplementary cash flow information:

		2003		2002		2001
Cash paid interest		$	86,986	$	65,495	$	78,136
Cash paid income taxes			18,738		20,063		23,972
Non-cash financing and investing activities:
	Dealership acquisition costs financed by issuance of stock		—		—		5,000
	Dealership acquisition cost financed by long-term debt		—		22,448		5,550

16. Segment Information

      The Company operates in one reportable segment. The reportable segment is an aggregation of three operating segments; Eastern U.S., Western U.S. and International. Such aggregation is based on the Company’s belief that each operating segment, (i) has similar economic characteristics (each is a collection of automobile dealerships), (ii) offers similar products and services (each sells new and used vehicles, service, parts and third-party finance and insurance products), (iii) has similar target markets and customers (generally individuals) and (iv) has similar distribution and marketing practices (all distribute products and

F-24

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

services through dealership facilities that market to customers in similar fashions).The following table presents certain data by geographic area:

			Year Ended December 31,
			2003		2002		2001
Sales to external customers:
	United States		$	6,914,693	$	6,129,618	$	5,620,981
	International			1,756,792		1,080,180		43,652
		Total sales to external customers	$	8,671,485	$	7,209,798	$	5,664,633
Long-lived assets, net:
	United States			362,503		310,280
	International			98,961		62,626
		Total long-lived assets	$	461,464	$	372,906

      The Company’s international operations are predominantly based in the United Kingdom.

17. Summary of Quarterly Financial Data (Unaudited)

		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
2003(1)(2)
	Total revenues	$	1,924,525	$	2,221,646	$	2,363,095	$	2,162,219
	Gross profit		279,372		316,574		335,995		311,479
	Income before cumulative effect of accounting change		16,791		23,864		25,255		20,077
	Net income		13,733		23,864		25,255		20,077
	Net income per diluted common share	$	0.34	$	0.58	$	0.61	$	0.48

		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter (3)
2002(1)(2)
	Total revenues	$	1,522,579	$	1,863,067	$	1,997,714	$	1,826,438
	Gross profit		219,962		265,175		278,450		264,631
	Net income		15,711		23,889		21,989		652
	Net income per diluted common share	$	0.40	$	0.56	$	0.53	$	0.02

(1)	As discussed in Note 4, the Company has treated the operations of certain entities as discontinued operations. The results for all periods have been restated to reflect such treatment.
(2)	Per share amounts are calculated independently for each of the quarters presented. The sum of the quarters may not equal the full year per share amounts due to rounding.
(3)	As discussed in Note 2, the Company recorded a $22,839 ($13,589 after-tax) charge in the fourth quarter of 2002.

18. Subsequent Event

      On February 16, 2004, the Company entered into a purchase agreement providing for the issuance and sale of 4,050,000 shares of common stock to Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.) Inc. (together “Mitsui) for $119,434,500, or $29.49 per share. The transaction is subject to customary closing conditions and

F-25

UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

approval of a majority of the stockholders. The Company currently expects to consummate the sale by March 31, 2004. If these conditions are not satisfied, the sale of the shares will not occur. Proceeds of the sale, if consummated, will be used for general corporate purposes which will initially include reducing the outstanding indebtedness under the revolving U.S. Credit Agreement, and may consist of additional capital improvements, potential acquisitions or other investments.

19. Condensed Consolidating Financial Information

      As noted, the Notes are fully and unconditionally guaranteed on a joint and several basis by the Company’s domestic automotive dealership subsidiaries. The following tables include condensed consolidating financial information as of December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001 for United Auto Group, Inc. (as the issuer), the wholly-owned subsidiary guarantors, the non-wholly owned subsidiary guarantors, and the non-guarantor subsidiaries (primarily representing foreign entities). The condensed consolidating financial information includes certain allocations of corporate balance sheet, income statement and cash flow items which are not necessarily indicative of the financial position, results of operations and cash flows that these entities would have realized on a stand alone basis.

F-26

UNITED AUTO GROUP, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2003

											Non-Wholly
											Owned			Non-
		Total					United Auto		Guarantor		Guarantor			Guarantor
		Company		Eliminations			Group, Inc.		Subsidiaries		Subsidiaries			Subsidiaries
		(In Thousands)
Cash and cash equivalents		$	13,845	$	—		$	6,977	$	—	$	1,975		$	4,893
Accounts receivable, net			347,802		—			—		242,865		18,819			86,118
Inventories			1,183,868		—			—		807,281		58,011			318,576
Other current assets			43,150		—			581		23,817		911			17,841
	Total current assets		1,588,665		—			7,558		1,073,963		79,716			427,428
Property and equipment, net			371,326		—			4,235		235,509		29,440			102,142
Intangible assets			1,087,052		—			—		773,876		92,741			220,435
Other assets			90,138		(780,286	)		837,653		26,398		303			6,070
	Total Assets	$	3,137,181	$	(780,286	)	$	849,446	$	2,109,746	$	202,200		$	756,075
Floor plan notes payable		$	1,138,476	$	—		$	—	$	790,276	$	58,907		$	289,293
Accounts payable			164,259		—			18,068		55,482		5,582			85,127
Accrued expenses			185,995		—			2,966		57,450		31,577			94,002
Current portion of long-term debt			8,574		—			—		1,460		—			7,114
	Total current liabilities		1,497,304		—			21,034		904,668		96,066			475,536
Long-term debt			643,343		—			—		411,084		108,266			123,993
Other long-term liabilities			168,122		—			—		153,759		10,446			3,917
	Total Liabilities		2,308,769		—			21,034		1,469,511		214,778			603,446
	Total Stockholders’ Equity		828,412		(780,286	)		828,412		640,235		(12,578	)		152,629
	Total Liabilities and Stockholders’ Equity	$	3,137,181	$	(780,286	)	$	849,446	$	2,109,746	$	202,200		$	756,075

F-27

UNITED AUTO GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Year Ended December 31, 2003

													Non-Wholly
													Owned			Non-
	Total						United Auto			Guarantor			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries			Subsidiaries
	(In Thousands)
Total revenues	$	8,671,485		$	—		$	—		$	6,207,469		$	451,899		$	2,012,117
Cost of sales		7,428,065			—			—			5,306,678			383,681			1,737,706
Gross profit		1,243,420			—			—			900,791			68,218			274,411
Selling, general, and administrative expenses		1,011,594			—			14,121			725,300			51,365			220,808
Operating income		231,826			—			(14,121	)		175,491			16,853			53,603
Floor plan interest expense		(43,527	)		—			—			(34,896	)		(1,327	)		(7,304	)
Other interest expense		(42,847	)		—			—			(29,547	)		(3,662	)		(9,638	)
Equity in earnings of subsidiaries		—			(198,932	)		198,932			—			—			—
Income from continuing operations before minority interests, income taxes and cumulative effect of accounting change		145,452			(198,932	)		184,811			111,048			11,864			36,661
Minority interests		(2,305	)		—			—			(296	)		(1,974	)		(35	)
Income taxes		(57,456	)		84,148			(78,175	)		(47,551	)		(5,019	)		(10,859	)
Income from continuing operations		85,691			(114,784	)		106,636			63,201			4,871			25,767
Income (loss) from discontinued operations, net of tax		296			—			1,908			(315	)		—			(1,297	)
Income before cumulative effect of accounting change, net of tax		85,987			(114,784	)		108,544			62,886			4,871			24,470
Cumulative effect of accounting change, net of tax		(3,058	)		—			—			(3,014	)		(44	)		—
Net income	$	82,929		$	(114,784	)	$	108,544		$	59,872		$	4,827		$	24,470

F-28

UNITED AUTO GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2003

													Non-Wholly
													Owned			Non-
		Total					United Auto			Guarantor			Guarantor			Guarantor
		Company			Eliminations		Group, Inc.			Subsidiaries			Subsidiaries			Subsidiaries
		(In Thousands)
Net cash from operating activities		$	180,787		$	—	$	3,942		$	106,339		$	32,844		$	37,662
Investing Activities:
Purchase of equipment and improvements			(199,766	)		—		(1,626	)		(152,869	)		(20,606	)		(24,665	)
Proceeds from sale — leaseback transactions			133,373			—		—			133,373			—			—
Dealership acquisitions, net			(113,356	)		—		—			(86,086	)		—			(27,270	)
	Net cash from investing activities		(179,749	)		—		(1,626	)		(105,582	)		(20,606	)		(51,935	)
Financing Activities:
Net borrowings (repayments) of long-term debt			(25,722	)		—		—			(44,831	)		—			19,109
Proceeds from issuance of common stock			9,907			—		9,907			—			—			—
Distributions to (from) parent			—			—		(1,128	)		13,045			(10,717	)		(1,200	)
Dividends			(4,118	)		—		(4,118	)		—			—			—
	Net cash from financing activities		(19,933	)		—		4,661			(31,786	)		(10,717	)		17,909
	Net cash from discontinued operations		22,099			—		—			21,122			—			977
	Net increase (decrease) in cash and cash equivalents		3,204			—		6,977			(9,907	)		1,521			4,613
Cash and cash equivalents, beginning of period			10,641			—		—			9,907			454			280
Cash and cash equivalents, end of period		$	13,845		$	—	$	6,977		$	—		$	1,975		$	4,893

F-29

UNITED AUTO GROUP, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2002

											Non-wholly
											Owned			Non-
		Total					United Auto		Guarantor		Guarantor			Guarantor
		Company		Eliminations			Group, Inc.		Subsidiaries		Subsidiaries			Subsidiaries
		(In Thousands)
Cash and cash equivalents		$	10,641	$	—		$	—	$	9,907	$	454		$	280
Accounts receivable, net			310,378		—			—		236,598		17,852			55,928
Inventories			942,732		—			—		683,467		57,389			201,876
Other current assets			27,230		—			545		17,949		457			8,279
	Total current assets		1,290,981		—			545		947,921		76,152			266,363
Property and equipment, net			306,234		—			4,186		220,359		9,928			71,761
Intangible assets			973,342		—			—		706,135		92,741			174,466
Assets of discontinued operations			53,085		—			—		48,022		—			5,063
Other assets			66,672		(671,823	)		706,772		23,412		3			8,308
	Total Assets	$	2,690,314	$	(671,823	)	$	711,503	$	1,945,849	$	178,824		$	525,961
Floor plan notes payable		$	882,100	$	—		$	—	$	646,103	$	54,919		$	181,078
Accounts payable			127,623		—			4,581		69,416		4,363			49,263
Accrued expenses			143,413		—			2,480		61,982		23,187			55,764
Current portion of long-term debt			14,979		—			—		8,596		—			6,383
	Total current liabilities		1,168,115		—			7,061		786,097		82,469			292,488
Long-term debt			651,176		—			—		426,737		95,535			128,904
Other long-term liabilities			135,036		—			—		128,834		5,702			500
Liabilities of discontinued operations			31,545		—			—		27,459		—			4,086
	Total Liabilities		1,985,872		—			7,061		1,369,127		183,706			425,978
	Total Stockholders’ Equity		704,442		(671,823	)		704,442		576,722		(4,882	)		99,983
	Total Liabilities and Stockholders’ Equity	$	2,690,314	$	(671,823	)	$	711,503	$	1,945,849	$	178,824		$	525,961

F-30

UNITED AUTO GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Year Ended December 31, 2002

													Non-wholly
													Owned			Non-
	Total						United Auto			Guarantor			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries			Subsidiaries
	(In Thousands)
Total revenues	$	7,209,798		$	—		$	—		$	5,466,381		$	420,106		$	1,323,311
Cost of sales		6,181,580			—			—			4,678,678			360,286			1,142,616
Gross profit		1,028,218			—			—			787,703			59,820			180,695
Selling, general, and administrative expenses		851,778			—			13,916			644,694			44,496			148,672
Operating income		176,440			—			(13,916	)		143,009			15,324			32,023
Floor plan interest expense		(34,875	)		—			—			(28,656	)		(1,184	)		(5,035	)
Other interest expense		(38,300	)		—			—			(25,315	)		(3,897	)		(9,088	)
Equity in earnings of subsidiaries		—			(175,443	)		175,443			—			—			—
Income from continuing operations before minority interests, income taxes and cumulative effect of accounting change		103,265			(175,443	)		161,527			89,038			10,243			17,900
Minority interests		(1,963	)		—			—			(405	)		(1,427	)		(131	)
Income taxes		(41,598	)		75,440			(69,457	)		(38,649	)		(4,404	)		(4,528	)
Income from continuing operations		59,704			(100,003	)		92,070			49,984			4,412			13,241
Income from discontinued operations, net of tax		2,537			—			—			2,092			—			445
Net income		62,241			(100,003	)		92,070			52,076			4,412			13,686
Preferred dividends		(6,293	)		—			(6,293	)		—			—			—
Income available to common shareholders	$	55,948		$	(100,003	)	$	85,777		$	52,076		$	4,412		$	13,686

F-31

UNITED AUTO GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2002

													Non-Wholly
													Owned			Non-
		Total					United Auto			Guarantor			Guarantor			Guarantor
		Company			Eliminations		Group, Inc.			Subsidiaries			Subsidiaries			Subsidiaries
		(In thousands)
Net cash from operating activities		$	87,848		$	—	$	11,268		$	15,717		$	20,832		$	40,031
Investing Activities:
Purchase of equipment and improvements			(184,048	)		—		(3,620	)		(94,365	)		(6,175	)		(79,888	)
Proceeds from sale — leaseback transactions			85,500			—		—			85,500			—			—
Dealership acquisitions, net			(197,343	)		—		—			(54,454	)		—			(142,889	)
	Net cash from investing activities		(295,891	)		—		(3,620	)		(63,319	)		(6,175	)		(222,777	)
Financing Activities:
Net borrowings (repayments) of long-term debt			78,105			—		—			(20,131	)		(6,237	)		104,473
Deferred financing costs			(8,065	)		—		(8,065	)		—			—			—
Proceeds from issuance of common stock			135,295			—		135,295			—			—			—
Repurchase of common stock			(16,000	)		—		(16,000	)		—			—			—
Distributions to (from) parent			—			—		(119,295	)		56,533			(8,010	)		70,772
	Net cash from financing activities		189,335			—		(8,065	)		36,402			(14,247	)		175,245
	Net cash from discontinued operations		25,090			—		—			17,309			—			7,781
	Net increase (decrease) in cash and cash equivalents		6,382			—		(417	)		6,109			410			280
Cash and cash equivalents, beginning of period			4,259			—		417			3,798			44			—
Cash and cash equivalents, end of period		$	10,641		$	—	$	—		$	9,907		$	454		$	280

F-32

UNITED AUTO GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

	For the Year Ended December 31, 2001
													Non-wholly
													Owned			Non-
	Total						United Auto			Guarantor			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries			Subsidiaries
	(In Thousands)
Total revenues	$	5,664,633		$	—		$	—		$	4,943,898		$	398,640		$	322,095
Cost of sales		4,878,608			—			—			4,248,509			343,793			286,306
Gross profit		786,025			—			—			695,389			54,847			35,789
Selling, general, and administrative expenses		636,278			—			9,912			549,480			42,148			34,738
Operating income		149,747			—			(9,912	)		145,909			12,699			1,051
Floor plan interest expense		(39,181	)		—			—			(35,530	)		(1,876	)		(1,775	)
Other interest expense		(34,762	)		—			—			(27,220	)		(4,991	)		(2,551	)
Equity in earnings of subsidiaries		—			(48,685	)		48,685			—			—			—
Income from continuing operations before minority interests, income taxes and cumulative effect of accounting change		75,804			(48,685	)		38,773			83,159			5,832			(3,275	)
Minority interests		(815	)		—			—			401			(772	)		(444	)
Income taxes		(32,973	)		21,189			(16,866	)		(35,739	)		(2,982	)		1,425
Income from continuing operations		42,016			(27,496	)		21,907			47,821			2,078			(2,294	)
Income from discontinued operations, net of tax		2,729			—			—			2,729			—			—
Net income		44,745			(27,496	)		21,907			50,550			2,078			(2,294	)
Preferred dividends		(8,290	)		—			(8,290	)		—			—			—
Income available to common shareholders	$	36,455		$	(27,496	)	$	13,617		$	50,550		$	2,078		$	(2,294	)

F-33

UNITED AUTO GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

			For the Year Ended December 31, 2001
														Non-wholly
														Owned			Non-
			Total					United Auto			Guarantor			Guarantor			Guarantor
			Company			Eliminations		Group, Inc.			Subsidiaries			Subsidiaries			Subsidiaries
			(In Thousands)
Net cash from operating activities			$	72,544		$	—	$	(4,003	)	$	72,738		$	9,654		$	(5,845	)
Investing Activities:
	Purchase of equipment and improvements			(99,016	)		—		(189	)		(92,820	)		(3,243	)		(2,764	)
	Proceeds from sale — leaseback transactions			20,870			—		—			20,870			—			—
	Dealership acquisitions, net			(138,389	)		—		—			(137,233	)		—			(1,156	)
		Net cash from investing activities		(216,535	)		—		(189	)		(209,183	)		(3,243	)		(3,920	)
Financing Activities:
	Net borrowings (repayments) of long-term debt			134,507			—		—			123,878			3,906			6,723
	Proceeds from issuance of common stock			18,823			—		—			18,823			—			—
	Repurchase of common stock			(5,790	)		—		(5,790	)		—			—			—
	Distributions to (from) parent			—			—		10,274			598			(10,280	)		(592	)
		Net cash from financing activities		147,540			—		4,484			143,299			(6,374	)		6,131
		Net cash from discontinued operations		(5,828	)		—		—			(9,462	)		—			3,634
		Net increase (decrease) in cash and cash equivalents		(2,279	)		—		292			(2,608	)		37			—
Cash and cash equivalents, beginning of period				6,538			—		125			6,406			7			—
Cash and cash equivalents, end of period			$	4,259		$	—	$	417		$	3,798		$	44		$	—

F-34

Schedule II

UNITED AUTO GROUP, INC.

VALUATION AND QUALIFYING ACCOUNTS

	Balance at				Deductions,			Balance
	Beginning				Recoveries			at End
Description	of Year		Additions		& Other			of Year
	(In Thousands)
Year Ended December 31, 2003
Allowance for doubtful accounts	$	3,431	$	2,055	$	(2,065	)	$	3,421
Allowance for chargebacks		14,187		20,629		(19,011	)		15,805
	$	17,618	$	22,684	$	(21,076	)	$	19,226
Year Ended December 31, 2002
Allowance for doubtful accounts	$	2,845	$	1,874	$	(1,288	)	$	3,431
Allowance for chargebacks		13,049		18,548		(17,410	)		14,187
	$	15,894	$	20,422	$	(18,698	)	$	17,618
Year Ended December 31, 2001
Allowance for doubtful accounts	$	1,922	$	2,114	$	(1,191	)	$	2,845
Allowance for chargebacks		9,440		19,517		(15,908	)		13,049
	$	11,362	$	21,631	$	(17,099	)	$	15,894

F-35

INDEX OF EXHIBITS

      Each management contract or compensatory plan or arrangement is identified with an asterisk.

3.1	Certificate of Incorporation.
3.2	Bylaws (incorporated by reference to exhibit 3.2 to our registration statement on Form S-1, registration no. 333-09429 (the “1996 Form S-1”)).
4.1	Certificate of Designation of Series A Convertible Preferred Stock of the Company, filed with the Secretary of State of the State of Delaware on April 30, 1999 (incorporated by reference to our Form 8-K filed on May 10, 1999).
4.2	Certificate of Designation of Series B Convertible Preferred Stock of the Company, filed with the Secretary of State of the State of Delaware on April 30, 1999 (incorporated by reference to our Form 10-Q for the quarter ended March 31, 2002).
4.3.1	Indenture dated as of March 18, 2002 among us, as Issuer, and certain of our domestic subsidiaries, as Guarantors, and Bank One Trust Company, N.A., as Trustee (incorporated by reference to exhibit 4.3 to our registration statement on Form S-4, registration no. 333-87452, filed May 2, 2002).
4.3.2	First Supplemental Indenture dated as of December 19, 2003 among us, as Issuer, and certain of our domestic subsidiaries, as Guarantors, and J.P. Morgan Trust Company, N.A. (as successor in interest to Bank One Trust Company, N.A.), as Trustee.
4.4.1	Amended and Restated Credit Agreement, dated as of December 22, 2000, among us, various financial institutions and Chrysler Financial Company, L.L.C., as Agent (incorporated by reference to exhibit 10.1.19.6 to our Form 10-K for the year ended December 31, 2000) (the “DaimlerChrysler Credit Agreement”).
4.4.2	First Amendment to the DaimlerChrysler Credit Agreement dated as of October 29, 2001 (incorporated by reference to exhibit 10.1.19.7 to our registration statement on Form S-3, file no. 333-82264, filed on February 6, 2002).
4.4.3	Second Amendment to the DaimlerChrysler Credit Agreement dated as of February 8, 2002 (incorporated by reference to exhibit 10.1.19.8 to our Form 10-K for the year ended December 31, 2001 (the “2001 Form 10-K”)).
4.4.4	Third Amendment to the DaimlerChrysler Credit Agreement dated March 12, 2002 (incorporated by reference to exhibit 10.1.19.9 to our Form 10-Q for the quarter ended March 31, 2002).
4.4.5	Fourth Amendment to the DaimlerChrysler Credit Agreement dated July 19, 2002 (incorporated by reference to exhibit 10.1.19.1 to our Form 10-Q for the quarter ended June 30, 2002).
4.4.6	Fifth Amendment to the DaimlerChrysler Credit Agreement dated January 15, 2003 (incorporated by reference to exhibit 10.1.19.11 to our Form 10-K for the year ended December 31, 2002) (the “2001 Form 10-K”).
4.4.7	Sixth Amendment to the DaimlerChrysler Credit Agreement dated April 16, 2003 (incorporated by reference to exhibit 10.1 to our Form 10-Q for the quarter ended March 31, 2003).
4.4.8	Seventh Amendment to the DaimlerChrysler Credit Agreement dated May 1, 2003 (incorporated by reference to exhibit 10.1 to our Form 10-Q for the quarter ended June 30, 2003).
4.5	Credit agreement dated February 28, 2003 between Sytner Group Limited and The Royal Bank of Scotland plc, as agent for National Westminster Bank plc (incorporated by reference to exhibit 10.2 to our Form 10-Q for the quarter ended March 31, 2003).
10.1	Form of Dealer Agreement with Infiniti Division of Nissan North America, Inc. (incorporated by reference to exhibit 10.2.1 to our 2001 Form 10-K).
10.2	Form of Dealer Agreement with Jaguar Cars, a division of Ford Motor Company (incorporated by reference to exhibit 10.2.2 to our 2001 Form 10-K.

	10.3	Form of Dealer Agreement With Honda Automobile Division, American Honda Motor Co. (incorporated by reference to exhibit 10.2.3 to our 2001 Form 10-K).
	10.4	Form of Dealer Agreement with Lexus, a division of Toyota Motor Sales, U.S.A., Inc. (incorporated by reference to exhibit 10.2.4 to our 2001 Form 10-K).
	10.5	Form of Car Center Agreement with BMW of North America, Inc. (incorporated by reference to exhibit 10.2.5 to our 2001 Form 10-K).
	10.6	Form of SAV Center Agreement with BMW of North America, Inc. (incorporated by reference to exhibit 10.2.6 to our 2001 Form 10-K).
	10.7	Form of Dealer Agreement with Toyota Motor Company (incorporated by reference to exhibit 10.2.7 to our 2001 Form 10-K),
	10.8	Form of Dealer Agreement with General Motors Corporation (incorporated by reference to exhibit 10.2.8 to our 2001 Form 10-K).
	10.9	Form of Dealer Agreement with Nissan North America, Inc. (incorporated by reference to exhibit 10.2.9 to our 2001 Form 10-K).
	10.10	Form of Sales and Service Agreement with Chrysler Corporation (incorporated by reference to exhibit 10.2.10 to our 2001 Form 10-K).
	10.11	Form of Mercedes-Benz USA, Inc. Passenger and Car Retailer Agreement (incorporated by reference to exhibit 10.2.11 to our Form 10-Q for the quarter ended March 31, 2000).
	10.12	Form of Mercedes-Benz USA, Inc. Light Truck Retailer Agreement (incorporated by reference to exhibit 10.2.12 to our Form 10-Q for the quarter ended March 31, 2000).
	10.13	Form of Mercedes Benz USA, LLC Maybach Passenger Car Dealer Agreement (incorporated by reference to exhibit 10.2 to our Form 10-Q for the quarter ended June 30, 2003).
	10.14	Form of Sales and Service Agreement with Ford Motor Company (incorporated by reference to exhibit 10.2.13 to our 2001 Form 10-K).
	10.15	Form of Dealer Agreement with Audi of America, Inc., a division of Volkswagen of America, Inc. (incorporated by reference to exhibit 10.2.14 to our 2001 Form 10-K).
	10.16	Form of Dealer Agreement with Acura Division, American Honda Motor Co., Inc. (incorporated by reference to exhibit 10.2.15 to our 2001 Form 10-K).
	10.17	Form of Sales and Service Agreement with Porsche Cars North America (incorporated by reference to exhibit 10.2.16 to our 2001 Form 10-K).
	10.18	Form of Dealer Agreement with Land Rover North America, Inc. (incorporated by reference to exhibit 10.2.17 to our 2001 Form 10-K).
*	10.19	Settlement Agreement dated October 3, 1996 among us, Samuel X. DiFeo and other parties named therein (incorporated by reference to exhibit 10.26.2 to the 1996 Form S-1).
*	10.20	Letter Agreement dated August 3, 1999 between us and Samuel X. DiFeo (incorporated by reference to exhibit 10.23 to our Form 10-K for the year ended December 31, 1999).
*	10.21	Stock Option Agreement, dated as of August 3, 1999, between us and Roger S. Penske (incorporated by reference to exhibit 10.3 to our Form 8-K filed August 13, 1999).
*	10.22	United Auto Group, Inc. Amended and Restated Stock Option Plan dated as of December 10, 2003.
*	10.23	Amended and Restated United Auto Group, Inc. 2002 Equity Compensation Plan.
*	10.24	Form of Restricted Stock Agreement (incorporated by reference to exhibit 10.3 to our Form 10-Q for the quarter ended June 30, 2003).
*	10.25	Amended and Restated United Auto Group, Inc. Non-Employee Director Compensation Plan.
*	10.26	United Auto Group, Inc. Management Incentive Plan (effective July 1, 2003) (incorporated by reference to exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
	10.27	Limited Liability Company Agreement of UAG Mentor Acquisition, LLC dated July 1, 2003 between us and YAG Mentor Investors, LLC (incorporated by reference to exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).

10.28.1	First Amended and Restated Limited Liability Company Agreement dated April 1, 2003 between UAG Connecticut I, LLC and Noto Holdings, LLC (incorporated by reference to exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003).
10.28.2	Letter Agreement dated April 1, 2003 among UAG Connecticut I, LLC, Noto Holdings, LLC and the other parties named therein (incorporated by reference to exhibit 10.4 to our Form 10-Q for the quarter ended March 31, 2003)
10.28.3	Letter Agreement dated April 1, 2003 between UAG Connecticut I, LLC and Noto Holdings, LLC (incorporated by reference to exhibit 10.2 to our Form 10-Q for the quarter ended March 31, 2003).
10.29	CarsDirect.com, Inc. Series D Preferred Stock Purchase and Warrant Agreement (incorporated by reference to exhibit 10.24 to our Form 10-Q for the quarter ended June 30, 2000).
10.30	Operating Agreement dated May 12, 2000 between us, Penske Automotive Group, Inc. and CarsDirect.com, Inc. (incorporated by reference to exhibit 10.25 to our Form 10-Q for the quarter ended June 30, 2000).
10.31	Registration Rights Agreement dated May 3, 1999 by and among us, International Motorcars Group I, L.L.C., and International Motorcars Group II, L.L.C. (incorporated by reference to exhibit 10.20.7 to our Form 8-K filed on May 10, 1999).
10.32	Registration Rights Agreement among us and Penske Automotive Holdings Corp. dated as of December 22, 2000 (incorporated by reference to exhibit 10.26.1 to our Form 10-K for the year ended December 31, 2000).
10.33	Amended and Restated Registration Rights Agreement among us, Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. dated as of February 22, 2002 (incorporated by reference to the exhibit 10.33 to our 2001 Form 10-K).
10.34	Second Amended and Restated Stockholders Agreement by and among Aeneas Venture Corporation, International Motor Cars Group I, L.L.C., International Motor Cars Group II, L.L.C., J.P. Morgan Partners (BHCA), L.P., Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.), Inc., Penske Corporation, Penske Automotive Holdings Corp., Penske Capital Partners, L.L.C., Combined Specialty Insurance Company (formerly Virginia Surety Company, Inc.) and us dated as of February 22, 2002 (incorporated by reference to exhibit 10.27.2 to our 2001 Form 10-K).
10.35	Letter Agreement among Penske Corporation, Penske Capital Partners, L.L.C., Penske Automotive Holdings Corp., International Motor Cars Group I, L.L.C., Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. dated April 4, 2003 (incorporated by reference to exhibit 5 to the Schedule 13D filed by Mitsui on April 10, 2003).
10.36	Purchase Agreement by and between Mitsui & Co., Ltd., Mitsui & co. (U.S.A.), Inc., International Motor Cars Group I, L.L.C., International Motor Cars Group II, L.L.C., Penske Corporation, Penske Automotive Holdings Corp, and United Auto Group, Inc. (incorporated by reference to exhibit 10.1 to our Form 8-K filed on February 17, 2004).
10.37	HBL, LLC Limited Liability Company Agreement dated December 31, 2001, between H.B.L. Holdings, Inc. and Roger S. Penske, Jr. (incorporated by reference to exhibit 10.28.1 to registration statement no. 333-82264 filed February 6, 2002).
10.38	Operating Agreement of United Auto do Brasil, LTDA dated November 4, 1999 between UAG Holdings do Brasil, LTDA and RSP Holdings do Brasil, LTDA (incorporated by reference to exhibit 10.29 to our Form 10-Q for the quarter ended June 30, 2001).
10.39	Lease Agreement between Automotive Group Realty, LLC and UAG Realty, LLC, dated as of September 29, 2000 (incorporated by reference to exhibit 10.35 to our Form 10-Q for the quarter ended September 30, 2002).
10.40	Lease Agreement between Car Chauncey, LLC and UAG Realty, LLC, dated as of September 11, 2002 (incorporated by reference to exhibit 10.36 to our Form 10-Q for the quarter ended September 30, 2002).
10.41	Risk Factors relating to United Auto Group (incorporated by reference to pages 12-21 of amendment 5 to registration statement number 333-87452 filed January 15, 2003).
21	Subsidiary List.

23.1	Consent of Deloitte & Touche LLP.
23.2	Consent of KPMG Audit Plc.
31.1	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002

EX-3.1

                                                                     EXHIBIT 3.1

                          CERTIFICATE OF INCORPORATION
                                (COMPOSITE COPY)

                                       OF

                             UNITED AUTO GROUP, INC.

                                   * * * * * *

                                    ARTICLE I

                                      NAME

The name of the corporation is: United Auto Group, Inc. (the "Corporation").

                                   ARTICLE II

                           REGISTERED OFFICE AND AGENT

The address of the Corporation's registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name of
the Corporation's registered agent at such address is The Corporation Trust
Company.

                                   ARTICLE III

                                     PURPOSE

The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware (the
"DGCL").

                                      - 1 -



                                   ARTICLE IV

                                     CAPITAL

1. Designation.

The total number of shares of capital stock which the Corporation shall have the
authority to issue is 107,225,000, consisting of: (i) 80,000,000 shares of
Voting Common Stock, par value $0.0001 per share (the "Voting Common Stock");
(ii) 7,125,000 shares of Non-Voting Common Stock, par value $0.0001 per share
(the "Non-Voting Common Stock"); (iii) 20,000,000 shares of Class C Common
Stock, par value $0.0001 per share (the "Class C Common Stock" and collectively
with the Voting Common Stock, and the Non-Voting Common Stock, the "Common
Stock"); and (iv) 100,000 shares of Preferred Stock, par value $0.0001 per
share.

All shares of Common Stock issued and outstanding shall be identical and shall
entitle the holders thereof to the same rights and privileges, except as
otherwise provided in this Article IV. Holders of shares of Common Stock shall
not have preemptive or other rights to subscribe for additional shares of Common
Stock or for any other securities of the Corporation.

The Preferred Stock may be issued from time to time in one or more series. The
Board of Directors of the Corporation (the "Board") is expressly authorized at
any time, and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series, for such consideration (not less than its
par value) and with such designations, powers, preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations or restrictions, as shall be determined by the Board and fixed by
resolution or resolutions adopted by the Board providing for the number of
shares in each such series.

2. Voting Power of Common Stock.

(a) Except as otherwise required by law, each holder of Voting Common Stock
shall be entitled to vote on all matters and shall be entitled to one vote for
each share of Voting Common Stock standing in such holder's name on the books of
the Corporation determined as of the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken.

(b) Except as provided in this Section 2 or as otherwise required by law, no
holder of Non-Voting Common Stock shall be entitled to vote such stock on any
matter on which the stockholders of the Corporation shall be entitled to vote,
and shares of Non-Voting Common Stock shall not be included in determining the
number of shares voting or entitled to vote on any such matters; provided that
the holders of Non-Voting Common Stock shall have the right to vote as a
separate class on any merger or consolidation of the Corporation with or into
another entity or entities, or any recapitalization or reorganization, in which
shares of Non-Voting Common Stock would receive or be exchanged for
consideration different on a per share basis from consideration received with
respect to or in exchange for the shares of Voting Common Stock or would
otherwise be treated differently from shares of Voting Common Stock in
connection with such transaction, except that shares of Non-Voting Common Stock
may, without

                                      - 2 -



such a separate class vote, receive or be exchanged for non-voting securities
which are otherwise identical on a per share basis in amount and form to the
voting securities received with respect to or exchanged for the Voting Common
Stock so long as (i) such non-voting securities are convertible into such voting
securities on the same terms as the Non-Voting Common Stock is convertible into
Voting Common Stock and (ii) all other consideration is equal on a per share
basis. Notwithstanding the foregoing, holders of shares of the Non-Voting Common
Stock shall be entitled to vote as a separate class on any amendment to this
paragraph (b) of this Section 2.

(c) Except as provided in this Section 2 or as otherwise required by law, each
holder of Class C Common Stock shall be entitled to one-tenth of one vote for
each share of Class C Common Stock standing in such holder's name on the books
of the Corporation determined as of the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken, and each share of Class C Common
Stock shall be counted as one-tenth of one share in determining the number of
shares voting or entitled to vote on any such matters.

(d) Except as otherwise provided in this Section 2 or as otherwise required by
law, the holders of shares of Voting Common Stock and Class C Common Stock and,
on any matter on which the holders of shares of Non-Voting Common Stock are
entitled to vote, the holders of shares of Non-Voting Common Stock, shall vote
together as a single class; provided, however, that the holders of shares of
Non-Voting Common Stock or Class C Common Stock shall be entitled to vote as a
separate class on any amendment, repeal or modification of any provision of this
Certificate of Incorporation that adversely affects the powers, preferences or
special rights of the holders of the Non-Voting Common Stock or Class C Common
Stock, respectively.

3. Certain Provisions relating to Common Stock.

(a) Subject to and upon compliance with the provisions of this Section 3, any
Regulated Stockholder (as hereinafter defined) shall be entitled to convert, at
any time and from time to time, any or all of the shares of Voting Common Stock
held by such stockholder into an equal number of shares of Non-Voting Common
Stock.

(b) Subject to a nd upon compliance with the provisions of this Section 3, each
holder of Non-Voting Common Stock shall be entitled to convert, at any time and
from time to time, any or all of the shares of Non-Voting Common Stock held by
such stockholder into an equal number of shares of Voting Common Stock;
provided, however, that no holder of shares of Non-Voting Common Stock shall be
entitled to convert any such shares to the extent that, as a result of such
conversion, such holder and its Affiliates (as hereinafter defined), directly or
indirectly, would own, control or have the power to vote (i) a greater number of
shares of Voting Common Stock or other securities of any kind issued by the
Corporation than such holder and its Affiliates shall be permitted to own,
control or have power to vote under any law, regulation, rule or other
requirement of any governmental authority at the time applicable to such holder
or its Affiliates or (ii) with respect to a holder or Affiliate that is subject
to regulation under the insurance laws of any jurisdiction, 5% or more of the
outstanding voting capital stock of the Corporation and, provided, further, that
each holder of Non-Voting Common Stock may convert such shares into Voting
Common Stock if such holder reasonably believes that such converted shares will
be

                                      - 3 -



transferred within fifteen (15) days pursuant to a Conversion Event (as
hereinafter defined) and such holder agrees not to vote any such shares of
Voting Common Stock prior to such Conversion Event and undertakes to promptly
convert such shares back into Non-Voting Common Stock if such shares are not
transferred pursuant to a Conversion Event. Each Regulated Stockholder may
provide for further restrictions upon the conversion of any shares of Non-Voting
Common Stock by providing the Corporation with signed, written instructions
specifying such additional restrictions and legending such shares as to the
existence of such restrictions.

(c) To exercise its conversion privilege pursuant to this Section 3, a holder of
Common Stock shall surrender the certificate or certificates representing the
shares of Common Stock being converted (the "Converting Shares") to the
Corporation's transfer agent and shall give written notice to the Corporation
and its transfer agent that such holder elects to convert the Converting Shares
into an equal number of shares of the class into which such shares may be
converted (the "Converted Shares"). Such notice shall also state the name or
names (with address or addresses) and denominations in which the certificate or
certificates for Converted Shares are to be issued. The Corporation shall
promptly notify each Regulated Stockholder (that has previously informed the
Corporation in writing of its status as a Regulated Stockholder) of its receipt
of such notice. The certificate or certificates for Converting Shares shall be
accompanied by proper assignment thereof to the Corporation or in blank. The
date when such written notice is received by the Corporation's transfer agent,
together with the certificate or certificates representing the Converting
Shares, shall be the "Conversion Date." As promptly as possible after the
Conversion Date, the Corporation shall issue and deliver to the holder of the
Converting Shares, or on its written order, such certificate or certificates as
it may request for the Converted Shares issuable upon such conversion, and the
Corporation shall deliver to the converting holder a certificate (which shall
contain such legends as were set forth on the surrendered certificate or
certificates) representing any shares which were represented by the certificate
or certificates that were delivered to the Corporation in connection with such
conversion but which were not converted, provided, however, that if such
conversion is subject to part (d) of this Section 3, the Corporation shall not
issue such certificate or certificates until the expiration of the Deferral
Period (as hereinafter defined) referred to therein. Such conversion, to the
extent permitted by the close of business on the Conversion Date, and at such
time the rights of the holder of the Converting Shares as such holder shall
cease (except that, in the case of a conversion subject to part (d) of this
Section 3, the conversion shall be deemed effective upon the expiration of the
Deferral Period referred to therein), and the person or persons in whose name or
names the certificate or certificates for the Converted Shares shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the Converted Shares. Upon the issuance of shares in accordance with
this Section 3, such Converted Shares shall be deemed to be duly authorized,
validly issued, fully paid and non-assessable. Notwithstanding any provision of
this Section 3 to the contrary, each holder of Non-Voting Common Stock shall be
entitled to convert shares of Non-Voting Common Stock in connection with any
Conversion Event if such holder reasonably believes that such Conversion Event
consummated, and a written request for conversion from any holder of Non-Voting
Common Stock to the Corporation stating such holder's reasonable belief that a
Conversion Event shall occur shall be conclusive and shall obligate the
Corporation to effect such conversion in a timely manner so as to enable each
such holder to participate in such Conversion Event. The Corporation will not
cancel the shares of

                                      - 4 -



Non-Voting Common Stock so converted before the 15th day following such
Conversion Event and will reserve such shares until such 15th day for reissuance
in compliance with the next sentence. If any shares of Non-Voting Common Stock
are converted into shares of Voting Common Stock in connection with a Conversion
Event and such shares of Voting Common Stock are not actually distributed,
disposed of or sold pursuant to such Conversion Event, such shares of Voting
Common Stock shall be promptly converted back into the same number of shares of
Non-Voting Common Stock.

(d) The Corporation shall not convert or directly or indirectly redeem, purchase
or otherwise acquire any shares of Voting Common Stock or any other class of
capital stock of the Corporation or take any other action affecting the voting
rights of such shares if such action will increase the percentage of any class
of outstanding voting securities owned or controlled by any Regulated
Stockholder (other than any such stockholder which requested that the
Corporation take such action or which otherwise waives in writing its rights
under part (d) of this Section 3) unless the Corporation gives written notice
(the "Deferral Notice") of such action to each Regulated Stockholder (that has
previously informed the Corporation in writing of its status as a Regulated
Stockholder). The Corporation shall defer making any such conversion,
redemption, purchase or other acquisition, or taking any such other action, for
a period of 30 days (the "Deferral Period") after giving the Deferral Notice in
order to allow each Regulated Stockholder to determine whether it wishes to
convert or take any other action with respect to the Common Stock it owns,
controls or has the power to vote, and if any such Regulated Stockholder then
elects to convert any shares of Voting Common Stock it shall notify the
Corporation in writing within 20 days of the issuance of the Deferral Notice, in
which case the Corporation shall (i) defer taking the pending action until the
end of the Deferral Period, (ii) promptly notify from time to time each other
Regulated Stockholder of each proposed conversion and the proposed transactions
and (iii) effect the conversions requested by all Regulated Stockholders in
response to the notices issued pursuant to part (d) of this Section 3 at the end
of the Deferral Period.

(e) If the Corporation shall in any manner subdivide (by stock split, stock
dividend or otherwise) or combine (by reverse stock split or otherwise) the
outstanding shares of the Voting Common Stock, the Non-Voting Common Stock or
the Class C Common Stock, the outstanding shares of each other class of Common
Stock shall be subdivided or combined, as the case may be, to the same extent,
share and share alike, and effective provision shall be made for the protection
of the conversion rights hereunder.

If, at any time and from time to time, there shall be a capital reorganization
of the Voting Common Stock (other than a change in par value or from par value
to no par value or from no par value to par value as a result of any stock
dividend or subdivision, split-up or combination of shares) or a merger or
consolidation of the Corporation with or into another corporation, or sale of
all or substantially all of the Corporation's properties and assets, then, as
part of such reorganization, merger, consolidation or sale, provision shall be
made so that each holder of any shares of Non-Voting Common Stock shall
thereafter be entitled to receive upon conversion of any such shares, so long as
the conversion right hereunder with respect to such shares would exist had such
event not occurred, the number of shares of stock or other securities or
property of the Corporation, or of the successor corporation resulting from such
merger, consolidation or sale, to which such holder would have been entitled if
such holder had converted such shares

                                      - 5 -


immediately prior to such capital reorganization, merger, consolidation or s
ale. In the event of such a merger, consolidation or sale, effective provision
shall be made in the certificate of incorporation of the successor corporation
or otherwise for the protection of the conversion rights of the shares of
Non-Voting Common Stock that shall be applicable, as nearly as reasonably may
be, to any such other shares of stock and other securities and property
deliverable upon conversion of shares of Voting Common Stock into which such
Non-Voting Common Stock could have been converted immediately prior to such
event. The Corporation shall not be a party to any reorganization, merger or
consolidation pursuant to which any Regulated Stockholder would be required to
take (i) any voting securities which would cause such holder to violate any law,
regulation or other requirement of any governmental body applicable to such
holder or (ii) any securities convertible into voting securities which if such
conversion took place would cause such holder to violate any law, regulation or
other requirement of any governmental body applicable to such holder, other than
securities which are specifically provided to be convertible only in the event
that such conversion may occur without any such violation.

(f) The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Voting Common Stock, Non-Voting Common Stock
or its treasury shares, solely for the purpose of effecting the conversion of
shares of Voting Common Stock and Non-Voting Common Stock, such number of shares
of such class as shall from time to time be sufficient to effect the conversion
of all then outstanding shares of Voting Common Stock that are entitled to so
convert and all then outstanding shares of Non-Voting Common Stock.

(g) The issuance of certificates for shares of any class of Common Stock upon
conversion of shares of any other class of Common Stock pursuant to this Section
3 shall be made without charge to the holders of such shares for any issuance
tax in respect thereof or other cost incurred by the Corporation in connection
with such conversion and the related issuance of shares of Common Stock;
provided, however, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Common Stock converted.

(h) "Conversion Event" shall mean (a) any public offering or public sale of
securities of the Corporation (including a public offering registered under the
Securities Act of 1933 and a public sale pursuant to Rule 144 of the Securities
and Exchange Commission or any similar rule then in force), (b) any sale of
securities of the Corporation to a person or group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended (the "1934 Act")) if,
after such sale, such person or group of persons in the aggregate would own or
control securities which possess in the aggregate the ordinary voting power to
elect a majority of the Corporation's directors (provided that such sale has
been approved by the Corporation's Board of Directors or a committee thereof),
(c) any sale of securities of the Corporation to a person or group of persons
(within the meaning of the 1934 Act) if, after such sale, such person or group
of persons in the aggregate would own or control securities of the Corporation
(excluding any Non-Voting Common Stock being converted and disposed of in
connection with such Conversion Event) which possess in the aggregate the
ordinary voting power to elect a majority of the Corporation's directors, (d)
any sale of securities of the Corporation to a person or group of persons
(within the meaning of the 1934 Act) if, after such sale, such person or group
of persons would not, in the

                                     - 6 -



aggregate, own, control or have the right to acquire more than two percent (2%)
of the outstanding securities of any class of voting securities of the
Corporation, and (e) a merger, consolidation or similar transaction involving
the Corporation if, after such transaction, a person or group of persons (within
the meaning of the 1934 Act) in the aggregate would own or control securities
which possess in the aggregate the ordinary voting power to elect a majority of
the surviving corporation's directors (provided that the transaction has been
approved by the Corporation's Board of Directors or committee thereof).

"Affiliate" shall mean with respect to any person, any other person, directly or
indirectly controlling, controlled by or under common control with such person.
For the purpose of the above definition, the term "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as used with respect to any person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.

"Regulated Stockholder" shall mean (i) any stockholder that is subject to the
provisions of Regulation Y of the Board of Governors of the Federal Reserve
System (12 C.F.R. Part 225) or any successor to such regulation ("Regulation Y")
and to which shares of Common Stock of the Corporation were issued pursuant to
the warrants issued to J.P. Morgan Capital Corporation, so long as such
stockholder shall hold such shares of Common Stock or shares issued upon
conversion(s) of such shares, (ii) any stockholder that is subject to regulation
under the New York Insurance Law and to which shares of Common Stock of the
Corporation were issued pursuant to the warrants issued to The Equitable Life
Assurance Society of the United States, so long as such stockholder shall hold
such shares of Common Stock or shares issued upon conversion(s) of such shares,
(iii) any Affiliate of any such Regulated Stockholder that is a transferee of
any such shares of Common Stock of the Corporation, so long as such Affiliate
shall hold, and only with respect to, such shares of Common Stock or shares
issued upon conversion of such shares (iv) any person to which such Regulated
Stockholder or any of its Affiliates has transferred such shares, so long as
such transferee shall hold, and only with respect to, any shares transferred by
such stockholder or Affiliates or any shares issued upon conversion of such
shares but only if such person (or any Affiliate of such person) is (A) subject
to the provisions of Regulation Y or (B) subject to regulation under the
insurance laws of any jurisdiction, and (v) International Motor Cars Group II,
LLC, Chase Equity Associates, L.P. or any other stockholder (x) that is subject
to the provisions of Regulation Y and (y) that holds shares of Common Stock or
Preferred Stock of the Corporation.

                                    ARTICLE V

                               BOARD OF DIRECTORS

Except as otherwise provided by law, the number of directors which shall
constitute the Board shall be as set forth in the Bylaws of the Corporation.
Elections of directors need not be by written ballot. The directors of the
Corporation shall be divided into three classes: Class I, Class II and Class
III. The number of directors in each class shall be divided equally so far as
possible among the three Classes. The initial Class I, Class II and Class III
directors shall be designated

                                     - 7 -



and the terms of the Board shall be as follows:

(i) Class I directors shall be elected to serve until the 1997 Annual Meeting of
Stockholders,

(ii) Class II directors shall be elected to serve until the 1998 Annual Meeting
of Stockholders, and

(iii) Class III directors shall be elected to serve until the 1999 Annual
Meeting of Stockholders, and until their successors shall be duly elected and
qualified. At each annual election of directors, beginning with the 1997 annual
election, the successors to the directors of each class whose term shall expire
at such meeting shall be elected to hold office for a term of three years from
the date of their election and until their successors shall be duly elected and
qualified. In case of any increase or decrease in the number of directors, the
increase or decrease shall be apportioned by the directors among the several
classes as nearly equally as possible; provided, however, that any decrease in
the number of directors which shall cause a director to be removed prior to the
expiration of his term shall be subject to the provisions of the next succeeding
paragraph of this Article V.

Anything herein to the contrary notwithstanding, the provisions of this Article
V shall apply only to directors elected by holders of Voting Common Stock
together with holders of all other classes of the Corporation's capital stock
voting as a single class therewith on the election of directors. If holders of
any class of the Corporation's capital stock have the right to elect directors
voting as a separate class and such right be then in effect, the maximum number
of directors of the Corporation shall be increased by the number of directors
which such holders may so elect and upon termination of such right the number
shall be reduced to the extent it was previously so increased.

Notwithstanding any other provisions of this Certificate of Incorporation or the
Bylaws (and notwithstanding the fact that some lesser percentage may be
specified by law), the affirmative vote of the holders of 2/3 or more of the
outstanding shares of capital stock of the Corporation entitled to vote on such
amendment, alteration, change or repeal (considered for this purpose as one
class) shall be required to amend, alter, change or repeal this Article V.

                                   ARTICLE VI

                                     BYLAWS

In furtherance and not in limitation of the powers conferred by statute, the
Board is expressly authorized to make, alter or repeal Bylaws of the Corporation
(except insofar as Bylaws adopted by the stockholders shall otherwise provide).

                                     - 8 -



                                   ARTICLE VII

                            AGREEMENT WITH CREDITORS

Whenever a compromise or arrangement is proposed between the Corporation and its
creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the DGCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title 8 of the DGCL, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.

                                  ARTICLE VIII

                      NO STOCKHOLDER ACTION WITHOUT MEETING

Any action required or permitted to be taken at an annual or special meeting of
the Corporation's stockholders may be taken only at such duly called annual or
special meeting.

                                   ARTICLE IX

                                 INDEMNIFICATION

The Corporation shall indemnify to the fullest extent permitted under and in
accordance with the laws of the State of Delaware any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
trustee, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or agent of
or in any other capacity with another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.

                                     - 9 -



Expenses incurred in defending a civil or criminal action, suit or proceeding
shall (in the case of any action, suit or proceeding against a director of the
Corporation) or may (in the case of any action, suit or proceeding against an
officer, trustee, employee or agent) be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board upon receipt of an undertaking by or on behalf of the indemnified person
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article IX.

The indemnification and other rights set forth in this Article IX shall not be
exclusive of any provisions with respect thereto in the Bylaws or any other
contract or agreement between the Corporation and any director, officer,
trustee, employee or agent of the Corporation.

Neither the amendment nor repeal of this Article IX, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
IX, shall eliminate or reduce the effect of this Article IX in respect of any
matter occurring before such amendment, repeal or adoption of an inconsistent
provision or in respect of any cause of action, suit or claim relating to any
such matter which would have given rise to a right of indemnification or right
to receive expenses pursuant to this Article IX, if such provision had not been
so amended or repealed or if a provision inconsistent therewith had not been so
adopted.

                                    ARTICLE X

                  ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS

To the fullest extent permitted by the DGCL, as the same presently exists or may
hereafter be amended, no director shall be personally liable to the Corporation
or to any stockholder for monetary damages for breach of fiduciary duty as a
director, except for any matter in respect of which such director (a) shall be
liable under Section 174 of the DGCL or any amendment thereto or successor
provision thereto, or (b) shall be liable by reason that, in addition to any and
all other requirements for liability, he (A) shall have breached his duty of
loyalty to the Corporation or its stockholders, (B) shall not have acted in good
faith or, in failing to act, shall not have acted in good faith, (C) shall have
acted in a manner involving intentional misconduct or a knowing violation of law
or, in failing to act, shall have acted in a manner involving intentional
misconduct or a knowing violation of law or (d) shall have derived an improper
personal benefit.

Any repeal or modification of this Article X shall no adversely affect any right
or protection of a director with respect to any act or omission occurring prior
to such repeal or modification. If the DGCL is amended after the date of
incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.

                                     - 10 -



                                   ARTICLE XI

                                  SEVERABILITY

If any provisions contained in this Certificate of Incorporation shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not invalidate this entire
Certificate of Incorporation or any other provisions hereof. Such provision
shall be deemed to be modified to the extent necessary to render it valid and
enforceable and if no such modification shall render it valid and enforceable,
then this Certificate of Incorporation shall be construed as if not containing
such provision.

                                    * * * * *
                                     - 11 -

EX-4.3.2

                                                                   EXHIBIT 4.3.2

                             UNITED AUTO GROUP, INC.
                                   as Issuer,

                           THE GUARANTORS NAMED HEREIN
                                 as Guarantors,

                                       and

                         J.P. MORGAN TRUST COMPANY, N.A.
                                   as Trustee,
                           AS SUCCESSOR IN INTEREST TO
                          BANK ONE TRUST COMPANY, N.A.

                    9 5/8% SENIOR SUBORDINATED NOTES DUE 2012

                          FIRST SUPPLEMENTAL INDENTURE

                          DATED AS OF DECEMBER 19, 2003

                                       to

                                    INDENTURE

                           DATED AS OF MARCH 18, 2002



                          FIRST SUPPLEMENTAL INDENTURE

THIS FIRST SUPPLEMENTAL INDENTURE, dated as of December 19, 2003 (this "First
Supplemental Indenture"), to the Indenture (as defined below), among United Auto
Group, Inc., a Delaware corporation (the "Company"), the Guarantors (as defined
in the Indenture), the additional Guarantors listed on Schedule A annexed hereto
(individually, the "Additional Guarantor" collectively, the "Additional
Guarantors") and J.P. Morgan Trust Company, N.A. (as successor in interest to
Bank One Trust Company, N.A.) in its capacity as trustee (the "Trustee").

WHEREAS, each Additional Guarantor has become a Restricted Subsidiary and
pursuant to Section 901 of the Indenture is entering into this First
Supplemental Indenture to thereby become a Guarantor as provided in Article 1013
of the Indenture; and

WHEREAS, pursuant to Section 901(e) of the Indenture, the Company, the
Guarantors, each Additional Guarantor and the Trustee may enter into this First
Supplemental Indenture without the consent of any Holder; and

WHEREAS, all consents and notices required to be obtained and given as
conditions to the execution of this First Supplemental Indenture pursuant to the
Indenture and all other documents relating to the Notes have been obtained and
given;

NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:

                      ARTICLE 1: AUTHORIZATION; DEFINITIONS

SECTION 1.01. FIRST SUPPLEMENTAL INDENTURE.

This First Supplemental Indenture is supplemental to, and is entered into, in
accordance with Section 901(e) of the Indenture, and except as modified, amended
and supplemented by this First Supplemental Indenture, the provisions of the
Indenture are in all respects ratified and confirmed and shall remain in full
force and effect.

SECTION 1.02. DEFINITIONS.

Unless the context shall otherwise require, all terms which are defined in
Section 1.01 of the Indenture shall have the same meanings, respectively, in
this First Supplemental Indenture as such terms are given in said Section 1.01
of the Indenture.

ARTICLE 2: ADDITIONAL GUARANTORS

SECTION 2.01. ADDITIONAL GUARANTORS.

Pursuant to Section 1013 of the Indenture, each Additional Guarantor hereby
expressly assumes the obligations of, and otherwise agrees to perform all of the
duties of, a Guarantor under the Indenture, subject to the terms and conditions
thereof.

ARTICLE 3: MISCELLANEOUS

SECTION 3.01. EFFECTIVE DATE.

This First Supplemental Indenture shall become effective upon execution and
delivery hereof.

SECTION 3.02. COUNTERPARTS.

This First Supplemental Indenture may be executed in several counterparts, each
of which shall be an



original and all of which shall constitute but one and the same instrument.

SECTION 3.03. ACCEPTANCE.

The Trustee accepts the Indenture, as supplemented by this First Supplemental
Indenture, and agrees to perform the same upon the terms and conditions set
forth therein as so supplemented. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this First
Supplemental Indenture or the due execution by the Company, the Guarantors or
each Additional Guarantor, or for or in respect of the recitals contained
herein, all of which are made solely by the Company.

SECTION 3.04. SUCCESSORS AND ASSIGNS.

All covenants and agreements in this First Supplemental Indenture, by the
Company, the Guarantors, each Additional Guarantor or the Trustee shall bind its
respective successors and assigns, whether so expressed or not.

SECTION 3.05. SEVERABILITY.

In case any provision in this First Supplemental Indenture shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

SECTION 3.06. GOVERNING LAW.

This First Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts made
and performed within the State of New York, without regard to principles of
conflict of laws. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this First Supplemental Indenture.

SECTION 3.07. INCORPORATION INTO INDENTURE.

All provisions of this First Supplemental Indenture shall be deemed to be
incorporated in, and made part of, the Indenture, and the Indenture, as amended
and supplemented by this First Supplemental Indenture, shall be read, taken and
construed as one and the same instrument.

IN WITNESS WHEREOF, the parties have caused this First Supplemental Indenture to
be duly executed as of the date first above written.

                             UNITED AUTO GROUP, INC.

                 By:  /s/ James R. Davidson
                     ----------------------------------
                 Name:  James R. Davidson
                 Title: Executive Vice President -
                        Finance

Attest:  /s/Robert H. Kurnick, Jr.
         ----------------------------------
          Name:  Robert H. Kurnick, Jr.
          Title:  Executive Vice President,
                  General Counsel and
                  Secretary



                          UAG NORTHEAST BODY SHOP, INC.
                      LANDERS UNITED AUTO GROUP NO. 2, INC.
                               UAG SOUTHEAST, INC.
                                UAG DULUTH, INC.
                            UNITED NISSAN, INC. (GA)
                             PEACHTREE NISSAN, INC.
                                 UAG TEXAS, INC.
                               UAG TEXAS II, INC.
                                 UAG EAST, INC.
                              PALM AUTO PLAZA, INC.
                         FLORIDA CHRYSLER PLYMOUTH, INC.
                              WEST PALM NISSAN, IN.
                           NORTHLANK AUTO FINISH, INC.
                                JS IMPORTS, INC.
                            WEST PALM AUTO MALL, INC.
                        AUTO MALL PAYROLL SERVICES, INC.
                               UAG CAROLINA, INC.
                          REED-LALLIER CHEVROLET, INC.
                       MICHAEL CHEVROLET-OLDSMOBILE, INC.
                            GENE REED CHEVROLET, INC.
                               UAG GOLDSBORO, INC.
                           UAG KISSIMMEE MOTORS, INC.
                          UNITEDAUTOCARE PRODUCTS, LLC
                        UNITED AUTO FOURTH FUNDING, INC.
                         UNITED AUTO FIFTH FUNDING, INC.
                            UAG FINANCE COMPANY, INC.
                        ATLANTIC AUTO FUNDING CORPORATION
                    ATLANTIC AUTO SECOND FUNDING CORPORATION
                     ATLANTIC AUTO THIRD FUNDING CORPORATION
                          UAG HOUSTON ACQUISITIN, LTD.
                        UAG INTERNATIONAL HOLDINGS, INC.
                                 UAG REALTY, LLC
                            UNITED AUTO FINANCE, INC.
                             UAG CONNECTICUT I, LLC
                           UAG ATLANTA IV MOTORS, INC.
                             UAG TULSA HOLDINGS, LLC

                 By: /s/ James R. Davidson
                     ----------------------------------
                 Name:  James R. Davidson
                 Title: Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
         ------------------------------------
         Name:  Robert H. Kurnick, Jr.
         Title:  Secretary



                                 UAG CHCC, INC.
                                    LRP, LTD.
                               UAG NORTHEAST, INC.
                             DIFEO PARTNERSHIP, INC.
                                UAG HUDSON, INC.
                              SOMERSET MOTORS INC.
                            LANDERS AUTO SALES, INC.
                           LANDERS BUICK-PONTIAC, INC.
                            LANDERS FORD NORTH, INC.
                            UNITED NISSAN, INC. (TN)
                                 UAG WEST, INC.
                               SA AUTOMOTIVE, LTD.
                               SL AUTOMOTIVE, LTD.
                                SUN MOTORS, LTD.
                        SCOTTSDALE MANAGEMENT GROUP, LTD.
                              SAU AUTOMOTIVE, LTD.
                                 SK MOTORS, LTD.
                                  KMT/UAG, INC.
                      RELENTLESS PURSUIT ENTERPRISES, INC.
                             TRI-CITY LEASING, INC.
                               HT AUTOMOTIVE, LTD.
                            WESTBURY SUPERSTORE, LTD.
                      UNITEDAUTO DODGE OF SHREVEPORT, INC.
                           COVINGTON PIKE DODGE, INC.
                          THE NEW GRACELAND DODGE, INC.
                             UAG GRACELAND II, INC.
                              UAG MEMPHIS II, INC.
                              UAG MEMPHIS IV, INC.
                               UAG MEMPHIS V, INC.
                               UAG-CARIBBEAN, INC.
                            DAN YOUNG CHEVROLET, INC.
                          YOUNG MANAGEMENT GROUP, INC.
                               UAG YOUNG II, INC.
                                UAG CLASSIC, INC.
                            CLASSIC AUTO GROUP, INC.
                        CLASSIC MANAGEMENT COMPANY, INC.
                              CLASSIC IMPORTS, INC.
                            CLASSIC MOTOR SALES, LLC
                             D. YOUNG CHEVROLET LLC
                              DAN YOUNG MOTORS LLC
                        UAG YOUNG AUTOMOTIVE HOLDINGS LLC
                            EUROPA AUTO IMPROTS, INC.
                              UAG LAKE NORMAN, LLC
                              UAG INDIANAPOLIS, LLC
                           MOTORCARS ACQUISITION, LLC
                          MOTORCARS ACQUISITION II, LLC
                         MOTORCARS ACQUISITION III, LLC
                             SCOTTSDALE FERRARI, LLC
                         UAG OLDSMOBILE OF INDIANA, LLC
                               GOODSON NORTH, LLC
                            GOODSON PONTIAC GMC, LLC
                           GOODSON SPRING BRANCH, LLC
                              UAG NEVADA LAND, LLC
                                UAG CERRIOTS, LLC
                              UAG CONNECTICUT, LLC



                              UAG FAIRFIELD CA, LLC
                              UAG FAIRFIELD CM, LLC
                              UAG FAIRFIELD CP, LLC
                           UAG LANDERS SPRINGDALE, LLC
                           UAG MENTOR ACQUISITION, LLC
                           UAG MICHIGAN CADILLAC, LLC
                          UAG MICHIGAN PONTIAC-GMC, LLC
                              UAG MICHIGAN T1, LLC
                              UAG MICHIGAN TMV, LLC
                               UAG PHOENIX VC, LLC
                                 UAG SPRING, LLC
                          UNITED RANCH AUTOMOTIVE, LLC
                               UAG CHEVROLET, INC.
                        BRETT MORGAN CHEVROLET-GEO, INC.
                                    HBL, LLC
                          MOTORCARS ACQUISITION IV, LLC
                                UAG NANUET I, LLC
                               UAG NANUET II, LLC
                          NISSAN OF NORTH OLMSTED, LLC
                               LANDERS NISSAN, LLC
                             UAG FAYETTEVILLE I, LLC
                            UAG FAYETTEVILLE II, LLC
                            UAG FAYETTEVILLE III, LLC

                     By: /s/ James R. Davidson
                         ----------------------------------
                     Name:    James R. Davidson
                     Title:   Assistant Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ---------------------------------
         Name:  Robert H. Kurnick, Jr.
         Title: Assistant Secretary



                            DIFEO HYUNDAI PARTNERSHIP
                            DIFEO NISSAN PARTNERSHIP
                 DIFEO CHRYSLRE PLYMOUTH JEEP EAGLE PARTNERSHIP
                            DIFEO LEASING PARTNERSHIP
                            DANBURY AUTO PARTNERSHIP
                            DIFEO TENAFLY PARTNERSHIP
                                 OCT PARTNERSHIP
                            HUDSON MOTORS PARTNERSHIP
                          COUNTY AUTO GROUP PARTNERSHIP
                           SOMERSET MOTORS PARTNERSHIP

                           BY: DIFEO PARTNERSHIP, INC.
                                A general partner

                By:  /s/ James R. Davidson
                     ----------------------------------
                Name:     James R. Davidson
                Title:    Assistant Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ---------------------------------
         Name:  Robert H. Kurnick, Jr.
         Title: Assistant Secretary

                            SHANNON AUTOMOTIVE, LTD.

                     BY: UAG TEXAS, INC., A GENERAL PARTNER

                By: /s/ James R. Davidson
                     ----------------------------------
                Name:  James R. Davidson
                Title: Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ---------------------------------
         Name:  Robert H. Kurnick, Jr.
         Title: Secretary



                            CLASSIC ENTERPRISES, LLC
                       CLASSIC NISSAN OF TURNERSVILLE, LLC

                          BY: UAG CLASSIC, INC., MEMBER

                 By: /s/ James R. Davidson
                     ----------------------------------
                 Name:    James R. Davidson
                 Title:   Assistant Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ----------------------------------
         Name:  Robert H. Kurnick, Jr.
         Title: Assistant Secretary

                               LANDERS FORD, INC.
                            NATIONAL CITY FORD, INC.
                            CENTRAL FORD CENTER, INC.
                            PIONEER FORD SALES, INC.

                 By: /s/ James R. Davidson
                     ----------------------------------
                 Name:    James R. Davidson
                 Title:   Assistant Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ----------------------------------
        Name:  Robert H. Kurnick, Jr.
        Title: Assistant Secretary



                           CLASSIC TURNERSVILLE, INC.
                                GMG MOTORS, INC.
                                    KMPB, LLC
                             SCOTTSDALE JAGUAR, LTD.
                           UNITED AUTO LICENSING, LLC
                                    CJNS, LLC
                              H.B.L. HOLDINGS, INC.
                        LANTZCH-ANDREAS ENTERPRISES, INC.
                                    LMNS, LLC
                                   UAG VK, LLC

                By: /s/ James R. Davidson
                    -----------------------------------
                Name:    James R. Davidson
                Title:   Assistant Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ---------------------------------
         Name:  Robert H. Kurnick, Jr.
         Title: Assistant Secretary

                          UAG TURNERSVILLE REALTY, LLC

            By: /s/ James R. Davidson
                ----------------------------------
                Name:  James R. Davidson
                Title: Treasurer

Attest:  /s/ Robert H. Kurnick, Jr.
         --------------------------------
            Name:  Robert H. Kurnick, Jr.
            Title: Secretary

                              UAG MICHIGAN H1, LLC
                            LATE ACQUISITION II, LLC
                                UAG TULSA VC, LLC
                           UAG MICHIGAN HOLDINGS, LLC
                              UAG WEST BAY AM, LLC
                              UAG WEST BAY IA, LLC
                              UAG WEST BAY IAU, LLC
                              UAG WEST BAY IB, LLC
                              UAG WEST BAY II, LLC
                              UAG WEST BAY IL, LLC
                              UAG WEST BAY IM, LLC
                              UAG WEST BAY IP, LLC
                              UAG WEST BAY IV, LLC
                              UAG WEST BAY IW, LLC
                              UAG WEST BAY FM, LLC



                          UAG TURNERSVILLE MOTORS, LLC
                               UAG CENTRAL NJ, LLC
                               UAG ROYAL PALM, LLC
                         UAG CENTRAL FLORIDA MOTORS, LLC
                          MOTORCARS ACQUISITION V, LLC
                          BEDFORD COLLISION CENTER, LLC
                                    PMRC, LLC
                             UAG CITRUS MOTORS, LLC

                By: /s/ James R. Davidson
                    -----------------------------------
                Name:    James R. Davidson
                Title:   Assistant Treasurer

Attest:  /s/ Robert H. Kurnick, Jr.
        ----------------------------------
         Name:  Robert H. Kurnick, Jr.
         Title: Assistant Secretary

                             LATE ACQUISITION I, LLC

                           BY: UNITED AUTO GROUP, INC.
                                        MEMBER

                By: /s/ James R. Davidson
                   ------------------------------------
                Name:  James R. Davidson
                Title: Executive Vice President -
                       Finance

Attest: /s/ Robert H. Kurnick, Jr.
       ----------------------------------
        Name:  Robert H. Kurnick, Jr.
        Title:  Executive Vice President,
                General Counsel and
                Secretary


                                WTA MOTORS, LTD.
                          BY: LATE ACQUISITION II, LLC
                                 GENERAL PARTNER

                   By: /s/ James R. Davidson
                       ------------------------------
                       Name: James R. Davidson
                       Title: Assistant Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ----------------------------
        Name: Robert H. Kurnick, Jr.
        Title: Assistant Secretary

                                  UAG GN, LTD.
                                  UAG GW, LTD.
                                  UAG GD, LTD.

                        BY: UAG HOUSTON ACQUISITION, LTD.
                                 GENERAL PARTNER
                             BY: UAG TEXAS II, INC.
                                 GENERAL PARTNER

                   By: /s/ James R. Davidson
                       --------------------------------
                   Name:  James R. Davidson
                   Title: Assistant Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ---------------------------------
        Name: Robert H. Kurnick, Jr.
        Title: Assistant Secretary

                               UAG TORRANCE, INC.

                   By: /s/ James R. Davidson
                       --------------------------------
                   Name:  James R. Davidson
                   Title: Assistant Treasurer

Attest: /s/ Robert H. Kurnick, Jr.
        ----------------------------------
        Name: Robert H. Kurnick, Jr.
        Title: Assistant Secretary



                   J.P. MORGAN TRUST COMPANY, NA, AS TRUSTEE,
                           AS SUCCESSOR IN INTEREST TO
                          BANK ONE TRUST COMPANY, N.A.

                   By: /s/ Renee Johnson
                      -------------------------------
                   Name:   Renee Johnson
                   Title:  Vice President



STATE OF NEW JERSEY )
                    ) ss.:
COUNTY OF HUDSON    )

         On the 18th day of December, 2003, before me personally came James R.
Davidson to me known, who, being by me duly sworn, did depose and say that he is
employed at One Harmon Plaza, 9th Floor, Secaucus, NJ 07094, that he is the
Executive Vice President - Finance of United Auto Group, Inc., a corporation
described in and which executed the foregoing instrument; that he holds the
positions identified on Annex I hereto with respect to each of the guarantors
identified on Annex I hereto, each of which has executed the foregoing
instrument; and that he signed his name thereto pursuant to the respective
authority of the Board of Directors of United Auto Group, Inc. and such
guarantors that are corporations, the Boards of Directors of the general partner
of such guarantors that are limited partnerships, and the members or managers of
such guarantors that are limited liability companies.

                                                 (NOTORIAL SEAL)

                                                 /s/ Ellen A. Shyne
                                                 -------------------------------
                                                                   Notary Public



                                   Schedule A

UAG Michigan H1, LLC
UAG Tulsa VC, LLC
WTA Motors, Ltd.
Late Acquisition I, LLC
Late Acquisition II, LLC
UAG Michigan Holdings, LLC
UAG West Bay AM, LLC
UAG West Bay IA, LLC
UAG West Bay IAU, LLC
UAG West Bay IB, LLC
UAG West Bay II, LLC
UAG West Bay IL, LLC
UAG West Bay IM, LLC
UAG West Bay IP, LLC
UAG West Bay IW, LLC
UAG West Bay IV, LLC
UAG West Bay FM, LLC
UAG Turnersville Motors, LLC
UAG Central NJ, LLC
UAG Torrance, Inc.
UAG Royal Palm, LLC
UAG Central Florida Motors, LLC
Motorcars Acquisition V, LLC
Bedford Collision Center, LLC
PMRC, LLC
UAG Citrus Motors, LLC
UAG GN, Ltd.
UAG GW, Ltd.
UAG GD, Ltd.





                                         POSITION OF JAMES R.
           GUARANTOR                          DAVIDSON
- -------------------------------      -----------------------------
                                  
UAG Michigan H1, LLC                 Assistant Treasurer
UAG Tulsa VC, LLC                    Assistant Treasurer
WTA Motors, Ltd.                     Assistant Treasurer
Late Acquisition I, LLC              Executive Vice President -
                                     Finance of United Auto Group,
                                     Inc., Member
Late Acquisition II, LLC             Assistant Treasurer
UAG Michigan Holdings, LLC           Assistant Treasurer
UAG West Bay AM, LLC                 Assistant Treasurer
UAG West Bay IA, LLC                 Assistant Treasurer
UAG West Bay IAU, LLC                Assistant Treasurer
UAG West Bay IB, LLC                 Assistant Treasurer
UAG West Bay II, LLC                 Assistant Treasurer
UAG West Bay IL, LLC                 Assistant Treasurer
UAG West Bay IM, LLC                 Assistant Treasurer
UAG West Bay IP, LLC                 Assistant Treasurer
UAG West Bay IW, LLC                 Assistant Treasurer
UAG West Bay IV, LLC                 Assistant Treasurer
UAG West Bay FM, LLC                 Assistant Treasurer
UAG Turnersville Motors, LLC         Assistant Treasurer
UAG Central NJ, LLC                  Assistant Treasurer
UAG Torrance, Inc.                   Assistant Treasurer
UAG Royal Palm, LLC                  Assistant Treasurer
UAG Central Florida Motors, LLC      Assistant Treasurer
Motorcars Acquisition V, LLC         Assistant Treasurer
Bedford Collision Center, LLC        Assistant Treasurer
PMRC, LLC                            Assistant Treasurer
UAG Citrus Motors, LLC               Assistant Treasurer
UAG GN, Ltd.                         Assistant Treasurer
UAG GW, Ltd.                         Assistant Treasurer
UAG GD, Ltd.                         Assistant Treasurer

EX-10.22

                                                                   EXHIBIT 10.22

                             UNITED AUTO GROUP, INC.
                              AMENDED AND RESTATED
                                STOCK OPTION PLAN

1. DEFINITIONS: As used herein, the following definitions shall apply:

     (a)  "Award" shall mean any stock option, stock appreciation right,
          restricted stock, restricted stock unit, performance share award or
          other stock-based award granted under the Plan.

     (b)  "Committee" shall mean a committee consisting of two or more members
          of the Board of Directors of the Corporation, each of whom shall be an
          "outside director" as defined under Section 162(m) of the Internal
          Revenue Code of 1986, as amended (the "CODE"), and the Treasury
          Regulations thereunder, as appointed by the Board of Directors of the
          Corporation to administer the Plan. The Committee shall initially
          consist of the Corporation's Compensation and Management Development
          Committee.

     (c)  "Corporation" shall mean United Auto Group, Inc., a Delaware
          corporation, or any successor thereof.

     (d)  "Discretion" shall mean in the sole discretion of the Committee, with
          no requirement whatsoever that the Committee follow past practices,
          act in a manner consistent with past practices, or treat a Participant
          (as hereinafter defined) in a manner consistent with the treatment
          afforded other Participants with respect to the Plan.

     (e)  "Incentive Option" shall mean an option to purchase Common Stock of
          the Corporation which meets the requirements set forth in the Plan and
          also meets the definition of an incentive stock option set forth in
          Section 422 of the Code.

     (f)  "Nonqualified Option" shall mean an option to purchase Common Stock of
          the Corporation which meets the requirements set forth in the Plan but
          does not meet the definition of an incentive stock option set forth in
          Section 422 of the Code.

     (g)  "Other stock-based award" shall mean any right granted under Paragraph
          20 of the Plan.



     (h)  "Participant" shall mean (i) any person employed on a full-time basis
          by the Corporation or any of its subsidiaries or (ii) any person
          employed by an affiliate of the Corporation who performs services for
          the Corporation or any of its subsidiaries or (iii) any director or
          former employee of the Corporation or any of its subsidiaries.

     (i)  "Performance share" shall mean a grant of Common Stock of the
          Corporation upon the attainment of one or more performance goals
          during a performance period established by the Committee, as provided
          in Paragraph 19.

     (j)  "Plan" shall mean this United Auto Group, Inc. Amended and Restated
          Stock Option Plan, which is a continuation of, but which amends and
          restates, the Second Amended and Restated Stock Option Plan of the
          Corporation dated December 11, 2002 (the "Predecessor Plan").

     (k)  "Restricted stock" shall mean a grant of Common Stock of the
          Corporation which is subject to restrictions against transfer,
          forfeiture and such other terms and conditions determined by the
          Committee, as provided in Paragraph 18.

     (l)  "Restricted stock unit" shall mean a grant of a right to obtain the
          value of a share of Common Stock of the Corporation which is subject
          to restrictions against transfer, forfeiture and such other terms and
          conditions determined by the Committee, as provided in Paragraph 18.

     (m)  "Stock appreciation right" shall mean a right to receive the
          appreciation in value, or a portion of the appreciation in value, of a
          specified number of shares of the Common Stock of the Corporation, as
          provided in Paragraph 12.

2.   PURPOSE OF PLAN: The purpose of the Plan is to provide Participants
     selected to participate in the Plan with incentives to make significant and
     extraordinary contributions to the long-term performance and growth of the
     Corporation and its subsidiaries and affiliates, to join the interests of
     Participants selected to participate in the Plan with the interests of the
     shareholders of the Corporation, and to facilitate attracting and retaining
     persons with exceptional abilities by selecting them as Participants for
     participation in the Plan.

3.   ADMINISTRATION: The Plan shall be administered by the Committee. Subject to
     the provisions of the Plan, the Committee shall determine, from those
     eligible to be Participants under the Plan, the persons to be granted
     Awards, the type of Awards and the amount of stock or rights covered by
     Awards to be granted to each such person, and the terms and conditions of
     any Awards. Subject to the provisions of the Plan, the Committee is
     authorized to interpret the Plan, to promulgate, amend and rescind rules
     and regulations relating to the Plan and to make all other determinations
     necessary or advisable for its administration. Interpretation and

                                     - 2 -



     construction of any provision of the Plan by the Committee shall, unless
     otherwise determined by the Board of Directors of the Corporation, be final
     and conclusive. A majority of the Committee shall constitute a quorum, and
     the acts approved by a majority of the members present at any meeting at
     which a quorum is present, or acts approved in writing by a majority of the
     Committee, shall be the acts of the Committee.

4.   INDEMNIFICATION OF COMMITTEE MEMBERS: In addition to such other rights of
     indemnification as they may have, the members of the Committee shall be
     indemnified by the Corporation against the reasonable expenses, including
     attorneys' fees, actually and necessarily incurred in connection with the
     defense of any action, suit or proceeding, or in connection with any appeal
     therein, to which they or any of them may be a party by reason of any
     action taken or failure to act under or in connection with the Plan or any
     Award granted hereunder, and against all amounts paid by them in settlement
     thereof (provided such settlement is approved by the Board of Directors of
     the Corporation) or paid by them in satisfaction of a judgment in any such
     action, suit or proceeding, except in relation to matters as to which it
     shall be determined in such action, suit or proceeding that such Committee
     member has acted in bad faith; provided, however, that within sixty (60)
     days after receipt of notice of institution of any such action, suit or
     proceeding, a Committee member shall offer the Corporation in writing the
     opportunity, at its own cost, to handle and defend the same.

5.   MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN: The stock to be issued pursuant
     to Awards which may be granted under the Plan and the stock with respect to
     which Awards may be granted under the Plan shall be shares of authorized
     but unissued Common Stock of the Corporation or previously issued shares of
     Common Stock of the Corporation which have been reacquired by the
     Corporation. The aggregate number of shares of Common Stock as to which
     Awards may be granted under the Plan at any time shall not exceed
     3,000,838, subject to adjustment from time to time in accordance with the
     provisions of this Paragraph 5. The aggregate number of shares of Common
     Stock of the Corporation with respect to which Awards may be granted during
     any calendar year to any Participant is 500,000.

     The number of shares of Common Stock of the Corporation with respect to
     which Awards may be granted at any time under the Plan shall be decreased
     by the number of shares with respect to which Awards have been granted
     prior to such time under the Plan or under the Predecessor Plan; provided,
     however, that if, prior to the end of the period during which Awards may be
     granted under the Plan, any shares covered by an Award or to which an Award
     relates are forfeited, or if an Award otherwise terminates without delivery
     of shares or of other consideration, then the shares covered by such Award,
     or to which such Award relates, or the number of shares otherwise counted
     against the aggregate number of shares available under the Plan with
     respect to such Award, to the extent of any such forfeiture or termination,
     shall again be, or shall become, available for granting Awards under the
     Plan. Notwithstanding the foregoing, all shares with respect to which an
     Award is



     granted shall be counted against the available remaining shares for
     purposes of the 500,000 share per-Participant per-calendar year limitation,
     regardless of whether the Participant did not realize the benefit of the
     Award as a result of forfeiture, cancellation, expiration, termination or
     other event; for this purpose, if, after grant, the exercise price of a
     stock option or the base amount applicable to a stock appreciation right is
     reduced, the transaction shall be treated as cancellation of the stock
     option or stock appreciation right and the grant of a new stock option or
     stock appreciation right.

     The number of shares with respect to each outstanding Award, the option
     price with respect to outstanding stock options, the grant value with
     respect to outstanding stock appreciation rights, the aggregate number of
     shares available at any time under the Plan, and the maximum number of
     shares with respect to which Awards may be made to an individual
     Participant during any calendar year shall be appropriately adjusted for
     any increase or decrease in the number of outstanding shares of Common
     Stock of the Corporation resulting from a stock split or other subdivision
     or consolidation of shares of Common Stock of the Corporation or for other
     capital adjustments or payments of stock dividends or stock distributions
     or other increases or decreases in the outstanding shares of Common Stock
     effected without receipt of consideration in any form permitted under
     Delaware law; provided, however, that no fractional shares shall be issued
     pursuant to the Plan, no Awards may be granted under the Plan with respect
     to fractional shares, and any fractional shares resulting from such
     adjustments shall be eliminated from any outstanding Award. Any adjustment
     pursuant to this Paragraph 5 shall be conclusively determined by the
     Committee.

6.   PARTICIPANTS: Participants shall be limited to those eligible persons who
     have received notice of their selection to participate in the Plan and who
     have entered into a written agreement as specified in Paragraph 7 of the
     Plan. No eligible person shall at any time have a right to be selected as a
     Participant.

7.   WRITTEN AGREEMENT: Each Award granted under the Plan shall be evidenced by
     a written agreement between the Corporation and the Participant which shall
     contain such provisions as may be approved by the Committee. Such
     agreements shall constitute binding contracts between the Corporation and
     the Participant, and every Participant, upon acceptance of such agreement,
     shall be bound by the terms and restrictions of the Plan and of such
     agreement. The terms of each such agreement shall be in accordance with the
     Plan, but the agreements may include such additional provisions and
     restrictions determined by the Committee, provided that such additional
     provisions and restrictions do not violate the terms of the Plan.

8.   ALLOTMENT OF SHARES: The Committee shall determine and fix, in its
     Discretion, the number of shares with respect to which each Participant may
     be granted Awards; provided, however, that no Incentive Option may be
     granted under the Plan to any one Participant which would result in the
     aggregate fair market value, determined as of the date the option is
     granted, of underlying stock with respect to



     which Incentive Options are exercisable for the first time by such
     Participant during any calendar year under any plan maintained by the
     Corporation (or any parent or subsidiary of the Corporation) exceeding
     $100,000.

9.   STOCK OPTIONS: Subject to the terms of the Plan, the Committee, in its
     Discretion, may grant to Participants either Incentive Options,
     Nonqualified Options or any combination thereof; provided, however, that an
     Incentive Option may only be granted to an employee of the Corporation or a
     subsidiary or affiliate of the Corporation, and in the case of a subsidiary
     or affiliate only if (i) the subsidiary or affiliate is treated as a
     disregarded entity owned by the Corporation, or (ii) the subsidiary or
     affiliate is a corporation (or is treated as a disregarded entity owned by
     a corporation) fifty percent or more of the combined voting power of all
     classes of stock of which is owned, directly or indirectly, by the
     Corporation. Moreover, an Incentive Option may only be granted within ten
     (10) years after the earlier of (i) the date the Predecessor Plan was
     adopted, or (ii) the date the Predecessor Plan was approved by the
     shareholders of the Corporation. Each option granted under the Plan shall
     designate the number of shares covered thereby, if any, with respect to
     which the option is an Incentive Option, and the number of shares covered
     thereby, if any, with respect to which the option is a Nonqualified Option.

10.  STOCK OPTION PRICE: Subject to the rules set forth in this Paragraph 10, at
     the time any stock option is granted, the Committee, in its Discretion,
     shall establish the price per share for which the shares covered by the
     option may be purchased. With respect to an Incentive Option, such option
     price shall not be less than 100% of the fair market value of the stock on
     the date on which such option is granted; provided, however, that with
     respect to an Incentive Option granted to a Participant who at the time of
     the grant owns (after applying the attribution rules of Section 424(d) of
     the Code) more than 10% of the total combined voting stock of the
     Corporation or of any parent or subsidiary, the option price shall not be
     less than 110% of the fair market value of the stock on the date such
     option is granted. With respect to a Nonqualified Option, the option price
     shall not be less than 50% of the fair market value of the stock on the
     date such option is granted. Fair market value of a share shall be
     determined by the Committee and may be determined by taking the mean
     between the highest and lowest quoted selling prices of the Corporation's
     stock on any exchange or other market on which the shares of Common Stock
     of the Corporation shall be traded on such date or, if there are no sales
     on such date, on the next following day on which there are sales. The
     option price shall be subject to adjustment in accordance with the
     provisions of Paragraph 5 of the Plan.

11.  PAYMENT OF STOCK OPTION PRICE: At the time of the exercise in whole or in
     part of any stock option granted hereunder, payment of the option price in
     full in cash or, with the consent of the Committee, in Common Stock of the
     Corporation or by a promissory note payable to the order of the Corporation
     which is acceptable to the Committee, shall be made by the Participant for
     all shares so purchased. Such payment may, with the consent of the
     Committee, also consist of a cash down payment and delivery of such a
     promissory note in the amount of the unpaid



     exercise price. In the Discretion of, and subject to such conditions as may
     be established by, the Committee, payment of the option price may also be
     made by the Corporation retaining from the shares to be delivered upon
     exercise of the stock option that number of shares having a fair market
     value on the date of exercise equal to the option price of the number of
     shares with respect to which the Participant exercises the option. In the
     Discretion of the Committee, a Participant may exercise an option, if then
     exercisable, in whole or in part, by delivery to the Corporation of written
     notice of the exercise in such form as the Committee may prescribe,
     accompanied by irrevocable instructions to a stock broker to promptly
     deliver to the Corporation full payment for the shares with respect to
     which the option is exercised from the proceeds of the stock broker's sale
     of or loan against some or all of the shares (a "Regulation T Stock Option
     Exercise"). In the event the Corporation then has in effect a stock
     repurchase program, in its Discretion and subject to such terms and
     conditions as it may impose, the Committee may permit a Participant to
     exercise an option and pay the option price by delivering to the
     Corporation a written notice of exercise which includes a request that the
     Corporation repurchase (and retain the repurchase price of) that number of
     the option shares having a fair market value on the date of exercise equal
     to the option price of the number of shares with respect to which the
     Participant exercises the option. Such payment may also be made in such
     other manner as the Committee determines is appropriate, in its Discretion.
     No Participant shall have any of the rights of a shareholder of the
     Corporation under any stock option until the actual issuance of shares to
     said Participant, and prior to such issuance no adjustment shall be made
     for dividends, distributions or other rights in respect of such shares,
     except as provided in Paragraph 5.

12.  STOCK APPRECIATION RIGHTS: Subject to the terms of the Plan, the Committee
     may grant stock appreciation rights to Participants either in conjunction
     with, or independently of, any stock options granted under the Plan. A
     stock appreciation right granted in conjunction with a stock option may be
     an alternative right wherein the exercise of the stock option terminates
     the stock appreciation right to the extent of the number of shares
     purchased upon exercise of the stock option and, correspondingly, the
     exercise of the stock appreciation right terminates the stock option to the
     extent of the number of shares with respect to which the stock appreciation
     right is exercised. Alternatively, a stock appreciation right granted in
     conjunction with a stock option may be an additional right wherein both the
     stock appreciation right and the stock option may be exercised. A stock
     appreciation right may not be granted in conjunction with an Incentive
     Option under circumstances in which the exercise of the stock appreciation
     right affects the right to exercise the Incentive Option or vice versa,
     unless the stock appreciation right, by its terms, meets all of the
     following requirements:

     (a)  the stock appreciation right will expire no later than the Incentive
          Option;

     (b)  the stock appreciation right may be for no more than the difference
          between the option price of the Incentive Option and the fair market
          value of the shares subject



          to the Incentive Option at the time the stock appreciation right is
          exercised;

     (c)  the stock appreciation right is transferable only when the Incentive
          Option is transferable, and under the same conditions;

     (d)  the stock appreciation right may be exercised only when the Incentive
          Option is eligible to be exercised; and

     (e)  the stock appreciation right may be exercised only when the fair
          market value of the shares subject to the Incentive Option exceeds the
          option price of the Incentive Option.

     Upon exercise of a stock appreciation right, a Participant shall be
     entitled to receive, without payment to the Corporation (except for
     applicable withholding taxes), an amount equal to the excess of or, in the
     Discretion of the Committee, a portion of the excess of (i) the then
     aggregate fair market value of the number of shares with respect to which
     the Participant exercises the stock appreciation right, over (ii) the
     aggregate fair market value of such number of shares at the time the stock
     appreciation right was granted. This amount shall be payable by the
     Corporation, in the Discretion of the Committee, in cash, in shares of
     Common Stock of the Corporation, in other property or any combination
     thereof.

13.  GRANTING AND EXERCISE OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS:
     Subject to the provisions of this Paragraph 13, each stock option and stock
     appreciation right granted hereunder shall be exercisable at any such time
     or times or in any such installments as may be determined by the Committee
     at the time of the grant; provided, however, that the aggregate fair market
     value (determined at the time the option is granted) of the stock with
     respect to which Incentive Options are exercisable for the first time by a
     Participant during any calendar year shall not exceed $100,000. A
     Participant may exercise a stock option or stock appreciation right, if
     then exercisable, in whole or in part, by delivery to the Corporation of
     written notice of the exercise, in such form as the Committee may
     prescribe, accompanied, in the case of a stock option, by payment for the
     shares with respect to which the stock option is exercised as provided in
     Paragraph 11 (unless the Committee, in its Discretion, permits a cashless
     form of option exercise permitted by Paragraph 11). Except as provided in
     Paragraph 17, stock options and stock appreciation rights may be exercised
     only while the Participant is an employee of the Corporation or one of its
     subsidiaries or otherwise continues to qualify as a Participant. Successive
     stock options and stock appreciation rights may be granted to the same
     Participant, whether or not the stock option(s) and stock appreciation
     right(s) previously granted to such Participant remain unexercised. A
     Participant may exercise a stock option or stock appreciation right, if
     then exercisable, notwithstanding that stock options and stock appreciation
     rights previously granted to such Participant remain unexercised.



14.  NON-TRANSFERABILITY OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS: No
     stock option or stock appreciation right granted under the Plan to a
     Participant shall be transferable by such Participant otherwise than by
     will, or by the laws of descent and distribution, and stock options and
     stock appreciation rights shall be exercisable, during the lifetime of the
     Participant, only by the Participant. Notwithstanding the foregoing, in its
     Discretion and subject to such terms and conditions as it may prescribe,
     the Committee may permit a Participant to transfer a Nonqualified Option or
     a related or independently granted stock appreciation right.

15.  TERM OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS: If not sooner
     terminated, each stock option and stock appreciation right granted
     hereunder shall expire not more than ten (10) years from the date of the
     granting thereof; provided, however, that with respect to an Incentive
     Option granted to a Participant who, at the time of the grant, owns (after
     applying the attribution rules of Section 424(d) of the Code) more than 10%
     of the total combined voting stock of all classes of stock of the
     Corporation or any parent or subsidiary, such option shall expire not more
     than five (5) years after the date of granting thereof.

16.  CONTINUATION OF EMPLOYMENT: The Committee may require, in its Discretion,
     that any Participant under the Plan to whom a stock option or a stock
     appreciation right shall be granted shall agree in writing as a condition
     of the granting of such stock option or stock appreciation right to remain
     an employee of the Corporation or a subsidiary (or to otherwise remain
     qualified as a Participant) for a designated minimum period from the date
     of the granting of such stock option or stock appreciation right as shall
     be fixed by the Committee, and the Committee may further require, in its
     Discretion, that any Participant agree in writing to comply with any
     confidentiality, non-solicitation, non-competition and non-disparagement
     provisions and covenants that the Committee may require as a condition
     precedent to the exercise of a stock option or a stock appreciation right.

17.  TERMINATION OF EMPLOYMENT: If the employment of an employee Participant
     terminates or if a director Participant ceases to be a director
     (hereinafter collectively referred to as a "termination of employment"),
     the Committee may, in its Discretion, permit the exercise of stock options
     and stock appreciation rights granted to such Participant (a) for a period
     not to exceed three months following such termination of employment (or one
     year following termination of employment on account of the Participant's
     death or permanent disability) with respect to Incentive Options or related
     stock appreciation rights, and (b) for a period not to extend beyond the
     expiration date with respect to Nonqualified Options or related or
     independently granted stock appreciation rights. In no event, however,
     shall a stock option or stock appreciation right be exercisable subsequent
     to its expiration date. A stock option or stock appreciation right may only
     be exercised after a Participant's termination of employment to the extent
     exercisable on the date of termination of employment; provided, however,
     that if the termination of employment is due to the Participant's death,
     permanent disability or retirement at a retirement age permitted under the
     Corporation's or a subsidiary's retirement plan or policies, or if the
     termination of



     employment results from action by the Corporation or a subsidiary without
     cause or from an agreement between the Corporation or a subsidiary and the
     Participant (hereinafter collectively referred to as a "qualifying
     termination of employment"), the Committee, in its Discretion, may permit
     all or part of the stock options and stock appreciation rights granted to
     such Participant to thereupon become exercisable in full or in part. For
     purposes of this Paragraph 17 and any other provision of the Plan where the
     term is used, the Committee's definition of "cause" shall be final and
     conclusive.

18.  RESTRICTED STOCK OR RESTRICTED STOCK UNITS: Subject to the terms of the
     Plan, the Committee may award Participants shares of restricted stock
     and/or the Committee may grant Participants restricted units with respect
     to a specified number of shares of stock. All shares of restricted stock
     and all restricted stock units granted to Participants under the Plan shall
     be subject to the following terms and conditions (and to such other terms
     and conditions prescribed by the Committee):

     (a)  At the time of each award of restricted shares or restricted stock
          units, there shall be established for the shares or units a restricted
          period, which period may differ among Participants and may have
          different expiration dates with respect to portions of shares or units
          covered by the same award.

     (b)  Shares of restricted stock or restricted stock units awarded to
          Participants may not be sold, assigned, transferred, pledged,
          hypothecated or otherwise encumbered during the restricted period
          applicable to such shares or units. Except for such restrictions on
          transfer, a Participant may be provided all of the rights of a
          shareholder in respect of restricted shares including, but not limited
          to, the right to receive dividends on, and the right to vote, the
          shares. A Participant shall have no ownership interest in shares of
          stock with respect to which restricted stock units are granted;
          provided, however, that the Committee may, in its Discretion, permit
          payment to such Participant of dividend equivalents on such units
          equal to the amount of dividends, if any, which are paid on that
          number of shares with respect to which the restricted stock units are
          granted.

     (c)  If there is a termination of employment of a Participant, all shares
          or units theretofore awarded to the Participant which are still
          subject to the restrictions imposed by Paragraph 18(b) shall upon such
          termination of employment be forfeited and transferred back to the
          Corporation, without payment of any consideration by the Corporation;
          provided, however, that in the event of a qualifying termination of
          employment, the Committee may, in its Discretion, release some or all
          of the shares or units from the restrictions.

     (d)  Shares of restricted stock granted under the Plan may be evidenced in
          such manner as the Committee may deem appropriate, including, without
          limitation, book-entry registration or issuance of stock certificates.
          If stock certificates are issued in respect of shares of restricted
          stock, such certificates shall be registered in the name of the
          Participant, deposited with the Corporation or its designee,



          together with a stock power endorsed in blank, and, in the Discretion
          of the Committee, a legend shall be placed upon such certificates
          reflecting that the shares represented thereby are subject to
          restrictions against transfer and forfeiture.

     (e)  At the expiration of the restricted period applicable to restricted
          shares, the Corporation shall deliver to the Participant or the legal
          representative of the Participant's estate stock certificates for such
          shares. If stock certificates were previously issued for the shares
          and a legend has been placed on such certificates, the Corporation
          shall cause such certificates to be reissued without the legend.

     (f)  At the expiration of the restricted period applicable to restricted
          stock units, the Corporation shall pay to the Participant an amount
          equal to the then fair market value of that number of shares to which
          such restricted stock units relate. In the Discretion of the
          Committee, such amount may be paid in cash, stock, other property or
          any combination thereof. Moreover, in the Discretion of the Committee,
          such amount may be paid in a lump sum or in installments, currently
          upon expiration of the restricted period or on a deferred basis, with
          provision for the payment or crediting of a dividend equivalent or
          reasonable rate of interest on installment or deferred payments in the
          Discretion of the Committee.

          In the case of events such as stock dividends, stock splits,
          recapitalizations, mergers, consolidations or reorganizations of or by
          the Corporation, any stock, securities or other property which a
          Participant receives or is entitled to receive by reason of his
          ownership of restricted shares shall, unless otherwise determined by
          the Committee, be subject to the same restrictions applicable to the
          restricted shares.

19.  PERFORMANCE SHARES: The Committee may grant to a Participant the right to
     obtain performance shares subject to the following terms and conditions:

     (a)  The Participant's right to obtain performance shares shall be subject
          to attainment of one or more performance goals over a performance
          period prescribed by the Committee.

     (b)  The performance goal applicable to an award to a Participant of the
          right to obtain performance shares shall be based upon free cash flow,
          cash flow return on investment, stock price, market share, sales,
          revenues, earnings per share, return on equity, total stockholder
          return, costs, net income, working capital turnover, inventory or
          receivable turnover and/or margins of the Corporation, a subsidiary,
          an affiliate or a division or unit thereof. The specific targets and
          other details of the performance goal shall be established by the
          Committee in its Discretion. A performance goal must, however, be
          objective so that a third party with knowledge of the relevant facts
          could determine whether the goal has been attained.



     (c)  The performance goal applicable to an award to a Participant of the
          right to obtain performance shares shall be established by the
          Committee in writing at any time during the period beginning on the
          date of the award and ending on the earlier of (i) ninety (90) days
          after commencement of the performance period applicable to the award,
          or (ii) expiration of the first 25% of the performance period;
          provided, however, that there must be substantial uncertainty whether
          a performance goal will be attained at the time it is established by
          the Committee.

     (d)  The performance goal established by the Committee must prescribe an
          objective formula or standard, that could be applied by a third party
          having knowledge of the relevant performance results, to compute the
          number of performance shares issuable to the Participant if the goal
          is attained.

     (e)  Unless otherwise determined by the Committee in the case of a
          Participant who dies or becomes permanently disabled, performance
          shares shall be issued to a Participant only after (i) expiration of
          the performance period and attainment of the performance goal
          applicable to the award, and (ii) issuance of a written certification
          by the Committee (including approved minutes of the meeting of the
          Committee at which the certification is made) that the performance
          goal and any other material terms of the award have been attained or
          satisfied.

     (f)  No Participant shall have any of the rights of a shareholder of the
          Corporation in respect of the shares covered by a performance share
          award until the actual issuance of the shares to said Participant and,
          prior to such issuance, no adjustments shall be made for dividends,
          distributions or other rights in respect of such shares, except as
          provided in Paragraph 5.

     (g)  In its Discretion and subject to such terms and conditions as it may
          impose, the Committee may permit a Participant to elect to defer
          receipt of performance shares to a time later than the time the shares
          otherwise would be issued to the Participant. In such event, the
          Committee may, in its Discretion, provide for the payment by the
          Corporation of a dividend equivalent or interest at a rate determined
          by the Committee.

     (h)  In the Discretion of the Committee, in lieu of settling a performance
          share award by issuance of shares of Common Stock of the Corporation
          to a Participant, all or a portion of the award may be settled by
          payment of cash or other property to the Participant in an amount or
          having a value equal to the then value of the otherwise issuable
          shares; provided, however, that the amount of cash and the value of
          any other property paid to any Participant during any calendar year in
          settlement of a performance share award shall not exceed $5.0 Million.

     (i)  Unless otherwise determined by the Committee, performance shares or
          rights therein awarded to a Participant may not be sold, assigned,
          transferred, pledged, hypothecated or otherwise encumbered by the
          Participant at any time before actual issuance of the shares to the
          Participant.



     (j)  In its Discretion, the Committee may subject a performance share award
          to a Participant to any other terms or conditions not inconsistent
          with the foregoing, including, without limitation, a requirement that
          the Participant remain an employee of the Corporation or a subsidiary
          or affiliate (including at or above a specified salary grade), or that
          the Participant remain a director of the Corporation or a subsidiary,
          for the entire performance period applicable to the award.

20.  OTHER STOCK-BASED AWARDS: The Committee may grant to Participants such
     other awards that are denominated or payable in, valued in whole or in part
     by reference to, or otherwise based on or related to, shares of Common
     Stock of the Corporation as are deemed by the Committee, in its Discretion,
     to be consistent with the purposes of the Plan; provided, however, that
     such grants must comply with applicable law.

21.  INVESTMENT PURPOSE: If the Committee, in its Discretion, determines that as
     a matter of law such procedure is or may be desirable, it may require a
     Participant, upon any acquisition of stock hereunder and as a condition to
     the Corporation's obligation to deliver certificates representing such
     shares, to execute and deliver to the Corporation a written statement in
     form satisfactory to the Committee, representing and warranting that the
     Participant's acquisition of shares of stock shall be for such person's own
     account, for investment and not with a view to the resale or distribution
     thereof and that any subsequent offer for sale or sale of any such shares
     shall be made either pursuant to (a) a Registration Statement on an
     appropriate form under the Securities Act of 1933, as amended (the
     "Securities Act"), which Registration Statement has become effective and is
     current with respect to the shares being offered and sold, or (b) a
     specific exemption from the registration requirements of the Securities
     Act, but in claiming such exemption the Participant shall, prior to any
     offer for sale or sale of such shares, obtain a favorable written opinion
     from counsel for or approved by the Corporation as to the availability of
     such exemption. The Corporation may endorse an appropriate legend referring
     to the foregoing restriction upon the certificate or certificates
     representing any shares issued or transferred to the Participant under the
     Plan.

22.  RIGHTS TO CONTINUED EMPLOYMENT: Nothing contained in the Plan or in any
     Award granted pursuant to the Plan, nor any action taken by the Committee
     hereunder, shall confer upon any Participant any right with respect to
     continuation of employment or service as an employee or as a director of
     the Corporation or a subsidiary or affiliate nor interfere in any way with
     the right of the Corporation or a subsidiary or affiliate to terminate such
     person's employment or service at any time with or without cause.

23.  WITHHOLDING PAYMENTS: If, upon the grant, exercise, release of restrictions
     or settlement of or in respect of an Award, or upon any other event or
     transaction under or relating to the Plan, there shall be payable by the
     Corporation or a subsidiary or affiliate any amount for income or
     employment tax withholding, in the Committee's



     Discretion, either the Corporation shall appropriately reduce the amount of
     stock, cash or other property to be paid to the Participant or the
     Participant shall pay such amount to the Corporation or subsidiary or
     affiliate to enable it to pay or to reimburse it for paying such income or
     employment tax withholding. The Committee may, in its Discretion, permit
     Participants to satisfy such withholding obligations, in whole or in part,
     by electing to have the amount of Common Stock delivered or deliverable by
     the Corporation in respect of an Award appropriately reduced, or by
     electing to tender Common Stock back to the Corporation subsequent to
     receipt of such stock in respect of an Award. The Corporation or any of its
     subsidiaries or affiliates shall also have the right to withhold the amount
     of such taxes from any other sums or property due or to become due from the
     Corporation or any of its subsidiaries or affiliates to the Participant
     upon such terms and conditions as the Committee shall prescribe. The
     Corporation may also defer issuance of stock under the Plan until payment
     by the Participant to the Corporation or any of its subsidiaries or
     affiliates of the amount of any such tax. In the case of a Regulation T
     Stock Option Exercise, the Committee may in its Discretion permit the
     Participant to irrevocably instruct a stock broker to promptly deliver to
     the Corporation an amount (in addition to the option exercise price) equal
     to any withholding tax owing in respect of such option exercise from the
     proceeds of the stock broker's sale of or loan against some or all of the
     shares. In the event the Corporation then has in effect a stock repurchase
     program, in its Discretion and subject to such terms and conditions as it
     may impose, the Committee may permit Participants to satisfy their
     withholding tax obligations by requesting that the Corporation repurchase
     (and retain the repurchase price of) that number of shares issuable or
     issued under the Plan having a then fair market value equal to the amount
     of withholding tax due. The Committee may make such other arrangements with
     respect to income or employment tax withholding as it shall determine.

24.  CHANGE IN CONTROL: Notwithstanding any other provision of the Plan or any
     provision of a grant or award agreement, in the event the Committee
     determines that there has been or will be a change in control of the
     Corporation or of any subsidiary or affiliate, the Committee may, without
     the consent of the holder, provide for any treatment of outstanding Awards
     which it determines, in its Discretion, to be appropriate. Such treatment
     may include, without limitation, acceleration of vesting of stock options
     and stock appreciation rights, release of restrictions applicable to
     restricted stock or restricted stock units, or deeming performance share
     awards to have been earned. In determining whether there has been or will
     be a change in control of the Corporation or of any subsidiary or
     affiliate, the Committee may utilize a definition it deems appropriate of a
     change in control contained in any existing agreement between the
     Corporation or a subsidiary or affiliate, and one of its senior executives.

25.  EFFECTIVENESS OF PLAN: The Plan shall be effective on the date the Board of
     Directors of the Corporation adopts the Plan and shall apply with respect
     to Awards granted on or after such date; provided, however, that the terms
     of the Predecessor Plan shall continue to apply to Awards granted prior to
     the date the Board of Directors of the Corporation adopts the Plan.



26.  TERMINATION, DURATION AND AMENDMENTS OF PLAN: The Plan may be abandoned or
     terminated at any time by the Board of Directors of the Corporation. Unless
     sooner terminated by the Board of Directors, the Plan shall terminate on
     the date ten (10) years after the adoption by the Board of Directors of the
     Predecessor Plan, and no Awards may be granted thereafter. The termination
     of the Plan shall not affect the validity of any Award outstanding on the
     date of termination.

For the purpose of conforming to any changes in applicable law or governmental
regulations, or for any other lawful purpose, the Board of Directors of the
Corporation shall have the right, without approval of the shareholders of the
Corporation, to amend or revise the terms of the Plan at any time; provided,
however, that no such amendment or revision shall (i) with respect to the Plan,
increase the maximum number of shares in the aggregate which are subject to the
Plan or with respect to which Awards may be made to individual Participants
(subject, however, to the provisions of Paragraph 5), or materially change the
class of persons eligible to be Participants under the Plan, without approval or
ratification of the shareholders of the Corporation; or (ii) with respect to an
Award previously granted under the Plan, except as otherwise specifically
provided in the Plan, alter or impair any such Award without the consent of the
holder thereof.

As adopted by the Board of Directors on December 10, 2003.

EX-10.23

                                                                   EXHIBIT 10.23

                              AMENDED AND RESTATED
                             UNITED AUTO GROUP, INC.
                          2002 EQUITY COMPENSATION PLAN

1.   DEFINITIONS: As used herein, the following definitions shall apply:

     (a)  "Award" shall mean any stock option, stock appreciation right,
          restricted stock, restricted stock unit, performance share award or
          other stock-based award granted under the Plan.

     (b)  "Committee" shall mean a committee consisting of two or more members
          of the Board of Directors of the Corporation, each of whom shall be an
          "outside director" as defined under Section 162(m) of the Internal
          Revenue Code of 1986, as amended (the "CODE"), and the Treasury
          Regulations thereunder, as appointed by the Board of Directors of the
          Corporation to administer the Plan. The Committee shall initially
          consist of the Corporation's Compensation and Management Development
          Committee.

     (c)  "Corporation" shall mean United Auto Group, Inc., a Delaware
          corporation, or any successor thereof.

     (d)  "Discretion" shall mean in the sole discretion of the Committee, with
          no requirement whatsoever that the Committee follow past practices,
          act in a manner consistent with past practices, or treat a Participant
          (as hereinafter defined) in a manner consistent with the treatment
          afforded other Participants with respect to the Plan.

     (e)  "Incentive Option" shall mean an option to purchase Common Stock of
          the Corporation which meets the requirements set forth in the Plan and
          also meets the definition of an incentive stock option set forth in
          Section 422 of the Code.

     (f)  "Nonqualified Option" shall mean an option to purchase Common Stock of
          the Corporation which meets the requirements set forth in the Plan but
          does not meet the definition of an incentive stock option set forth in
          Section 422 of the Code.

     (g)  "Other stock-based award" shall mean any right granted under Paragraph
          20 of the Plan.

     (h)  "Participant" shall mean any individual designated by the Committee
          under Paragraph 6 for participation in the Plan who is (i) a key
          employee (including an officer or director who is also a key employee)
          of the Corporation or any Subsidiary, (ii) a director who is not an
          employee of the Corporation or any Subsidiary (hereinafter sometimes
          referred to as an "outside director"), and (iii) a consultant or
          advisor of the Corporation or any Subsidiary.



     (i)  "Performance share" shall mean a grant of Common Stock of the
          Corporation upon the attainment of one or more performance goals
          during a performance period established by the Committee, as provided
          in Paragraph 19.

     (j)  "Plan" shall mean this Amended and Restated United Auto Group, Inc.
          2002 Equity Compensation Plan which is a continuation of, but which
          amends and restates, the United Auto Group, Inc. 2002 Equity
          Compensation Plan (the "Predecessor Plan").

     (k)  "Restricted stock" shall mean a grant of Common Stock of the
          Corporation which is subject to restrictions against transfer,
          forfeiture and such other terms and conditions determined by the
          Committee, as provided in Paragraph 18.

     (l)  "Restricted stock unit" shall mean a grant of a right to obtain the
          value of a share of Common Stock of the Corporation which is subject
          to restrictions against transfer, forfeiture and such other terms and
          conditions determined by the Committee, as provided in Paragraph 18.

     (m)  "Stock appreciation right" shall mean a right to receive the
          appreciation in value, or a portion of the appreciation in value, of a
          specified number of shares of the Common Stock of the Corporation, as
          provided in Paragraph 12.

     (n)  "Subsidiary" shall mean any corporation, limited liability company,
          partnership or any other entity in which the Corporation owns,
          directly or indirectly, stock or other ownership interest therein,
          possessing more than twenty-five percent (25%) of the combined voting
          power of all classes of stock or other ownership interest.

2.   PURPOSE OF PLAN: The purpose of the Plan is to provide key employees
     (including officers and directors who are also key employees), outside
     directors, consultants and advisors of the Corporation and its Subsidiaries
     with incentives to make significant and extraordinary contributions to the
     long-term performance and growth of the Corporation and its Subsidiaries,
     to join the interests of key employees, outside directors, consultants and
     advisors with the interests of the shareholders of the Corporation, and to
     facilitate attracting and retaining key employees, outside directors,
     consultants and advisors with exceptional abilities.

3.   ADMINISTRATION: The Plan shall be administered by the Committee. Subject to
     the provisions of the Plan, the Committee shall determine, from those
     eligible to be Participants under the Plan, the persons to be granted
     Awards, the type of Awards and the amount of stock or rights covered by
     Awards to be granted to each such person, and the terms and conditions of
     any Awards. Subject to the provisions of the Plan, the Committee is
     authorized to interpret the Plan, to promulgate, amend and rescind rules
     and regulations relating to the Plan and to make all other determinations
     necessary or advisable for its administration. Interpretation and
     construction of any provision of the Plan by the Committee shall, unless
     otherwise

                                     - 2 -



     determined by the Board of Directors of the Corporation, be final and
     conclusive. A majority of the Committee shall constitute a quorum, and the
     acts approved by a majority of the members present at any meeting at which
     a quorum is present, or acts approved in writing by a majority of the
     Committee, shall be the acts of the Committee.

4.   INDEMNIFICATION OF COMMITTEE MEMBERS: In addition to such other rights of
     indemnification as they may have, the members of the Committee shall be
     indemnified by the Corporation against the reasonable expenses, including
     attorneys' fees, actually and necessarily incurred in connection with the
     defense of any action, suit or proceeding, or in connection with any appeal
     therein, to which they or any of them may be a party by reason of any
     action taken or failure to act under or in connection with the Plan or any
     Award granted hereunder, and against all amounts paid by them in settlement
     thereof (provided such settlement is approved by the Board of Directors of
     the Corporation) or paid by them in satisfaction of a judgment in any such
     action, suit or proceeding, except in relation to matters as to which it
     shall be determined in such action, suit or proceeding that such Committee
     member has acted in bad faith; provided, however, that within sixty (60)
     days after receipt of notice of institution of any such action, suit or
     proceeding, a Committee member shall offer the Corporation in writing the
     opportunity, at its own cost, to handle and defend the same.

5.   MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN: The maximum number of shares of
     stock which may be issued pursuant to Awards granted under the Plan or with
     respect to which Awards may be granted under the Plan shall not exceed in
     the aggregate 2,100,000 shares of Common Stock of the Corporation (subject
     to adjustments as provided in this Paragraph 5). Any shares that are
     delivered by the Corporation, and any awards or grants that are made by, or
     become obligations of, the Corporation through the assumption by the
     Corporation or a Subsidiary of, or in substitution for, outstanding awards
     or grants previously made by an acquired company, shall not be counted
     against the number of shares available under the Plan. Consistent with the
     purpose of the Plan and with a view to avoiding over or under counting, the
     Committee shall, in its Discretion, determine the number of shares to
     charge against the shares remaining available under the Plan as a result of
     the grant or settlement of Awards made under the Plan. If any shares
     covered by an Award or to which an Award relates are forfeited, or if an
     Award otherwise terminates without the delivery of shares or of other
     consideration, then the shares covered by such Award, or to which such
     Award relates, or the number of shares otherwise counted against the
     aggregate number of shares available under the Plan with respect to such
     Award, to the extent of any such forfeiture or termination, shall again be,
     or shall become, available for granting Awards under the Plan.

     The maximum number of shares with respect to which Awards may be granted to
     any Participant during the term of the Plan shall not exceed 500,000 shares
     of Common Stock of the Corporation (subject to adjustments as provided in
     this Paragraph 5). All shares with respect to which an Award is granted
     shall be counted

                                     - 3 -



     for purposes of this per-person share limitation, regardless of whether the
     Participant did not realize the benefit of the Award as a result of
     forfeiture, cancellation, expiration, termination or other event.

     The number of shares with respect to each outstanding Award, the option
     price with respect to outstanding stock options, the grant value with
     respect to outstanding stock appreciation rights, the aggregate number of
     shares available at any time under the Plan, and the maximum number of
     shares with respect to which Awards may be made to an individual
     Participant during the term of the Plan shall be subject to such adjustment
     as the Committee, in its Discretion, deems appropriate to reflect such
     events as stock dividends, stock splits, recapitalizations, mergers,
     consolidations or reorganizations of or by the Corporation; provided,
     however, that no fractional shares shall be issued pursuant to the Plan, no
     Awards may be granted under the Plan with respect to fractional shares, and
     any fractional shares resulting from such adjustments shall be eliminated
     from any outstanding Award.

6.   PARTICIPANTS: The Committee shall determine and designate from time to
     time, in its Discretion, those key employees (including officers and
     directors who are also key employees), outside directors, consultants or
     advisors of the Corporation or any Subsidiary to receive Awards who, in the
     judgment of the Committee, are or will become responsible for the direction
     and financial success of the Corporation or any Subsidiary.

7.   WRITTEN AGREEMENT: Each Award granted under the Plan shall be evidenced by
     a written agreement between the Corporation and the Participant which shall
     contain such provisions as may be approved by the Committee. Such
     agreements shall constitute binding contracts between the Corporation and
     the Participant, and every Participant, upon acceptance of such agreement,
     shall be bound by the terms and restrictions of the Plan and of such
     agreement. The terms of each such agreement shall be in accordance with the
     Plan, but the agreements may include such additional provisions and
     restrictions determined by the Committee, provided that such additional
     provisions and restrictions do not violate the terms of the Plan.

8.   ALLOTMENT OF SHARES: The Committee shall determine and fix, in its
     Discretion, the number of shares with respect to which each Participant may
     be granted Awards; provided, however, that no Incentive Option may be
     granted under the Plan to any one Participant which would result in the
     aggregate fair market value, determined as of the date the option is
     granted, of underlying stock with respect to which Incentive Options are
     exercisable for the first time by such Participant during any calendar year
     under any plan maintained by the Corporation (or any parent or Subsidiary
     of the Corporation) exceeding $100,000.

9.   STOCK OPTIONS: Subject to the terms of the Plan, the Committee, in its
     Discretion, may grant to Participants either Incentive Options,
     Nonqualified Options or any combination thereof; provided, however, that an
     Incentive Option may only be granted to an employee of the Corporation or a
     Subsidiary, and in the case of a

                                     - 4 -



     Subsidiary only if (i) the Subsidiary is treated as a disregarded entity
     owned by the Corporation, or (ii) the Subsidiary is a corporation (or is
     treated as a disregarded entity owned by a corporation) fifty percent or
     more of the combined voting power of all classes of stock of which is
     owned, directly or indirectly, by the Corporation. Each option granted
     under the Plan shall designate the number of shares covered thereby, if
     any, with respect to which the option is an Incentive Option, and the
     number of shares covered thereby, if any, with respect to which the option
     is a Nonqualified Option.

10.  STOCK OPTION PRICE: Subject to the rules set forth in this Paragraph 10, at
     the time any stock option is granted, the Committee, in its Discretion,
     shall establish the price per share for which the shares covered by the
     option may be purchased. With respect to an Incentive Option, such option
     price shall not be less than 100% of the fair market value of the stock on
     the date on which such option is granted; provided, however, that with
     respect to an Incentive Option granted to a Participant who at the time of
     the grant owns (after applying the attribution rules of Section 424(d) of
     the Code) more than 10% of the total combined voting stock of the
     Corporation or of any parent or Subsidiary, the option price shall not be
     less than 110% of the fair market value of the stock on the date such
     option is granted. With respect to a Nonqualified Option, the option price
     shall not be less than 50% of the fair market value of the stock on the
     date such option is granted. Fair market value of a share shall be
     determined by the Committee and may be determined by taking the mean
     between the highest and lowest quoted selling prices of the Corporation's
     stock on any exchange or other market on which the shares of Common Stock
     of the Corporation shall be traded on such date or, if there are no sales
     on such date, on the next following day on which there are sales. The
     option price shall be subject to adjustment in accordance with the
     provisions of Paragraph 5 of the Plan.

11.  PAYMENT OF STOCK OPTION PRICE: At the time of the exercise in whole or in
     part of any stock option granted hereunder, payment of the option price in
     full in cash or, with the consent of the Committee, in Common Stock of the
     Corporation shall be made by the Participant for all shares so purchased.
     In the Discretion of, and subject to such conditions as may be established
     by, the Committee, payment of the option price may also be made by the
     Corporation retaining from the shares to be delivered upon exercise of the
     stock option that number of shares having a fair market value on the date
     of exercise equal to the option price of the number of shares with respect
     to which the Participant exercises the option. In the Discretion of the
     Committee, a Participant may exercise an option, if then exercisable, in
     whole or in part, by delivery to the Corporation of written notice of the
     exercise in such form as the Committee may prescribe, accompanied by
     irrevocable instructions to a stock broker to promptly deliver to the
     Corporation full payment for the shares with respect to which the option is
     exercised from the proceeds of the stock broker's sale of or loan against
     some or all of the shares (a "Regulation T Stock Option Exercise"). In the
     event the Corporation then has in effect a stock repurchase program, in its
     Discretion and subject to such terms and conditions as it may impose, the
     Committee may permit a Participant to exercise an option and pay the option
     price

                                     - 5 -



     by delivering to the Corporation a written notice of exercise which
     includes a request that the Corporation repurchase (and retain the
     repurchase price of) that number of the option shares having a fair market
     value on the date of exercise equal to the option price of the number of
     shares with respect to which the Participant exercises the option. Such
     payment may also be made in such other manner as the Committee determines
     is appropriate, in its Discretion. No Participant shall have any of the
     rights of a shareholder of the Corporation under any stock option until the
     actual issuance of shares to said Participant, and prior to such issuance
     no adjustment shall be made for dividends, distributions or other rights in
     respect of such shares, except as provided in Paragraph 5.

12.  STOCK APPRECIATION RIGHTS: Subject to the terms of the Plan, the Committee
     may grant stock appreciation rights to Participants either in conjunction
     with, or independently of, any stock options granted under the Plan. A
     stock appreciation right granted in conjunction with a stock option may be
     an alternative right wherein the exercise of the stock option terminates
     the stock appreciation right to the extent of the number of shares
     purchased upon exercise of the stock option and, correspondingly, the
     exercise of the stock appreciation right terminates the stock option to the
     extent of the number of shares with respect to which the stock appreciation
     right is exercised. Alternatively, a stock appreciation right granted in
     conjunction with a stock option may be an additional right wherein both the
     stock appreciation right and the stock option may be exercised. A stock
     appreciation right may not be granted in conjunction with an Incentive
     Option under circumstances in which the exercise of the stock appreciation
     right affects the right to exercise the Incentive Option or vice versa,
     unless the stock appreciation right, by its terms, meets all of the
     following requirements:

     (a)  the stock appreciation right will expire no later than the Incentive
          Option;

     (b)  the stock appreciation right may be for no more than the difference
          between the option price of the Incentive Option and the fair market
          value of the shares subject to the Incentive Option at the time the
          stock appreciation right is exercised;

     (c)  the stock appreciation right is transferable only when the Incentive
          Option is transferable, and under the same conditions;

     (d)  the stock appreciation right may be exercised only when the Incentive
          Option is eligible to be exercised; and

     (e)  the stock appreciation right may be exercised only when the fair
          market value of the shares subject to the Incentive Option exceeds the
          option price of the Incentive Option.

     Upon exercise of a stock appreciation right, a Participant shall be
     entitled to receive, without payment to the Corporation (except for
     applicable withholding taxes), an

                                     - 6 -



     amount equal to the excess of or, in the Discretion of the Committee, a
     portion of the excess of (i) the then aggregate fair market value of the
     number of shares with respect to which the Participant exercises the stock
     appreciation right, over (ii) the aggregate fair market value of such
     number of shares at the time the stock appreciation right was granted. This
     amount shall be payable by the Corporation, in the Discretion of the
     Committee, in cash, in shares of Common Stock of the Corporation, in other
     property or any combination thereof.

13.  GRANTING AND EXERCISE OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS:
     Subject to the provisions of this Paragraph 13, each stock option and stock
     appreciation right granted hereunder shall be exercisable at any such time
     or times or in any such installments as may be determined by the Committee
     at the time of the grant; provided, however, that the aggregate fair market
     value (determined at the time the option is granted) of the stock with
     respect to which Incentive Options are exercisable for the first time by a
     Participant during any calendar year shall not exceed $100,000. A
     Participant may exercise a stock option or stock appreciation right, if
     then exercisable, in whole or in part, by delivery to the Corporation of
     written notice of the exercise, in such form as the Committee may
     prescribe, accompanied, in the case of a stock option, by payment for the
     shares with respect to which the stock option is exercised as provided in
     Paragraph 11 (unless the Committee, in its Discretion, permits a cashless
     form of option exercise permitted by Paragraph 11). Except as provided in
     Paragraph 17, stock options and stock appreciation rights may be exercised
     only while the Participant is an employee, outside director, consultant or
     advisor, as the case may be, of the Corporation or a Subsidiary. Successive
     stock options and stock appreciation rights may be granted to the same
     Participant, whether or not the stock option(s) and stock appreciation
     right(s) previously granted to such Participant remain unexercised. A
     Participant may exercise a stock option or stock appreciation right, if
     then exercisable, notwithstanding that stock options and stock appreciation
     rights previously granted to such Participant remain unexercised.

14.  NON-TRANSFERABILITY OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS: No
     stock option or stock appreciation right granted under the Plan to a
     Participant shall be transferable by such Participant otherwise than by
     will, or by the laws of descent and distribution, and stock options and
     stock appreciation rights shall be exercisable, during the lifetime of the
     Participant, only by the Participant. Notwithstanding the foregoing, in its
     Discretion and subject to such terms and conditions as it may prescribe,
     the Committee may permit a Participant to transfer a Nonqualified Option or
     a related or independently granted stock appreciation right.

15.  TERM OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS: If not sooner
     terminated, each stock option and stock appreciation right granted
     hereunder shall expire not more than ten (10) years from the date of the
     granting thereof; provided, however, that with respect to an Incentive
     Option granted to a Participant who, at the time of the grant, owns (after
     applying the attribution rules of Section 424(d) of the

                                     - 7 -



     Code) more than 10% of the total combined voting stock of all classes of
     stock of the Corporation or any parent or Subsidiary, such option shall
     expire not more than five (5) years after the date of granting thereof.

16.  CONTINUATION OF EMPLOYMENT: The Committee may require, in its Discretion,
     that any Participant under the Plan to whom a stock option or a stock
     appreciation right shall be granted shall agree in writing as a condition
     of the granting of such stock option or stock appreciation right to remain
     an employee, consultant, advisor or outside director of the Corporation or
     a Subsidiary, as the case may be, for a designated minimum period from the
     date of the granting of such stock option or stock appreciation right as
     shall be fixed by the Committee, and the Committee may further require, in
     its Discretion, that any Participant agree in writing to comply with any
     confidentiality, non-solicitation, non-competition and non-disparagement
     provisions and covenants that the Committee may require as a condition
     precedent to the exercise of a stock option or a stock appreciation right.

17.  TERMINATION OF EMPLOYMENT: If the employment of an employee Participant
     terminates, if the consultancy or advisorship of a consultant or advisor
     Participant terminates, or if an outside director Participant ceases to be
     a director (hereinafter collectively referred to as a "termination of
     employment"), the Committee may, in its Discretion, permit the exercise of
     stock options and stock appreciation rights granted to such Participant (a)
     for a period not to exceed three months following such termination of
     employment (or one year following termination of employment on account of
     the Participant's death or permanent disability) with respect to Incentive
     Options or related stock appreciation rights, and (b) for a period not to
     extend beyond the expiration date with respect to Nonqualified Options or
     related or independently granted stock appreciation rights. In no event,
     however, shall a stock option or a stock appreciation right be exercisable
     subsequent to its expiration date. A stock option or stock appreciation
     right may only be exercised after a Participant's termination of employment
     to the extent exercisable on the date of termination of employment;
     provided, however, that if the termination of employment is due to the
     Participant's death, permanent disability or retirement at a retirement age
     permitted under the Corporation's or Subsidiary's retirement plan or
     policies, or if the termination of employment results from action by the
     Corporation or a Subsidiary without cause or from an agreement between the
     Corporation or a Subsidiary and the Participant (hereinafter collectively
     referred to as a "qualifying termination of employment"), the Committee, in
     its Discretion, may permit all or part of the stock options and stock
     appreciation rights granted to such Participant to thereupon become
     exercisable in full or in part. For purposes of this Paragraph 17 and any
     other provision of the Plan where the term is used, the Committee's
     definition of "cause" shall be final and conclusive.

18.  RESTRICTED STOCK OR RESTRICTED STOCK UNITS: Subject to the terms of the
     Plan, the Committee may award Participants shares of restricted stock
     and/or the Committee may grant Participants restricted units with respect
     to a specified number of shares of stock. All shares of restricted stock
     and all restricted stock units

                                     - 8 -



     granted to Participants under the Plan shall be subject to the following
     terms and conditions (and to such other terms and conditions prescribed by
     the Committee):

     (a)  At the time of each award of restricted shares or restricted stock
          units, there shall be established for the shares or units a restricted
          period, which period may differ among Participants and may have
          different expiration dates with respect to portions of shares or units
          covered by the same award.

     (b)  Shares of restricted stock or restricted stock units awarded to
          Participants may not be sold, assigned, transferred, pledged,
          hypothecated or otherwise encumbered during the restricted period
          applicable to such shares or units. Except for such restrictions on
          transfer, a Participant may be provided all of the rights of a
          shareholder in respect of restricted shares including, but not limited
          to, the right to receive dividends on, and the right to vote, the
          shares. A Participant shall have no ownership interest in shares of
          stock with respect to which restricted stock units are granted;
          provided, however, that the Committee may, in its Discretion, permit
          payment to such Participant of dividend equivalents on such units
          equal to the amount of dividends, if any, which are paid on that
          number of shares with respect to which the restricted stock units are
          granted.

     (c)  If there is a termination of employment of a Participant, all shares
          or units theretofore awarded to the Participant which are still
          subject to the restrictions imposed by Paragraph 18(b) shall upon such
          termination of employment be forfeited and transferred back to the
          Corporation, without payment of any consideration by the Corporation;
          provided, however, that in the event of a qualifying termination of
          employment, the Committee may, in its Discretion, release some or all
          of the shares or units from the restrictions.

     (d)  Shares of restricted stock granted under the Plan may be evidenced in
          such manner as the Committee may deem appropriate, including, without
          limitation, book-entry registration or issuance of stock certificates.
          If stock certificates are issued in respect of shares of restricted
          stock, such certificates shall be registered in the name of the
          Participant, deposited with the Corporation or its designee, together
          with a stock power endorsed in blank, and, in the Discretion of the
          Committee, a legend shall be placed upon such certificates reflecting
          that the shares represented thereby are subject to restrictions
          against transfer and forfeiture.

     (e)  At the expiration of the restricted period applicable to restricted
          shares, the Corporation shall deliver to the Participant or the legal
          representative of the Participant's estate stock certificates for such
          shares. If stock certificates were previously issued for the shares
          and a legend has been placed on such certificates, the Corporation
          shall cause such certificates to be reissued without the legend.

                                     - 9 -



     (f)  At the expiration of the restricted period applicable to restricted
          stock units, the Corporation shall pay to the Participant an amount
          equal to the then fair market value of that number of shares to which
          such restricted stock units relate. In the Discretion of the
          Committee, such amount may be paid in cash, stock, other property or
          any combination thereof. Moreover, in the Discretion of the Committee,
          such amount may be paid in a lump sum or in installments, currently
          upon expiration of the restricted period or on a deferred basis, with
          provision for the payment or crediting of a dividend equivalent or
          reasonable rate of interest on installment or deferred payments in the
          Discretion of the Committee.

          In the case of events such as stock dividends, stock splits,
          recapitalizations, mergers, consolidations or reorganizations of or by
          the Corporation, any stock, securities or other property which a
          Participant receives or is entitled to receive by reason of his
          ownership of restricted shares shall, unless otherwise determined by
          the Committee, be subject to the same restrictions applicable to the
          restricted shares.

19.  PERFORMANCE SHARES: The Committee may grant to a Participant the right to
     obtain performance shares subject to the following terms and conditions:

     (a)  The Participant's right to obtain performance shares shall be subject
          to attainment of one or more performance goals over a performance
          period prescribed by the Committee.

     (b)  The performance goal applicable to an award to a Participant of the
          right to obtain performance shares shall be based upon free cash flow,
          cash flow return on investment, stock price, market share, sales,
          revenues, earnings per share, return on equity, total stockholder
          return, costs, net income, working capital turnover, inventory or
          receivable turnover and/or margins of the Corporation, a Subsidiary,
          or a division or unit thereof. The specific targets and other details
          of the performance goal shall be established by the Committee in its
          Discretion. A performance goal must, however, be objective so that a
          third party with knowledge of the relevant facts could determine
          whether the goal has been attained.

     (c)  The performance goal applicable to an award to a Participant of the
          right to obtain performance shares shall be established by the
          Committee in writing at any time during the period beginning on the
          date of the award and ending on the earlier of (i) ninety (90) days
          after commencement of the performance period applicable to the award,
          or (ii) expiration of the first 25% of the performance period;
          provided, however, that there must be substantial uncertainty whether
          a performance goal will be attained at the time it is established by
          the Committee.

     (d)  The performance goal established by the Committee must prescribe an
          objective formula or standard, that could be applied by a third party
          having knowledge of

                                     - 10 -



          the relevant performance results, to compute the number of performance
          shares issuable to the Participant if the goal is attained.

     (e)  Unless otherwise determined by the Committee in the case of a
          Participant who dies or becomes permanently disabled, performance
          shares shall be issued to a Participant only after (i) expiration of
          the performance period and attainment of the performance goal
          applicable to the award, and (ii) issuance of a written certification
          by the Committee (including approved minutes of the meeting of the
          Committee at which the certification is made) that the performance
          goal and any other material terms of the award have been attained or
          satisfied.

     (f)  No Participant shall have any of the rights of a shareholder of the
          Corporation in respect of the shares covered by a performance share
          award until the actual issuance of the shares to said Participant and,
          prior to such issuance, no adjustments shall be made for dividends,
          distributions or other rights in respect of such shares, except as
          provided in Paragraph 5.

     (g)  In its Discretion and subject to such terms and conditions as it may
          impose, the Committee may permit a Participant to elect to defer
          receipt of performance shares to a time later than the time the shares
          otherwise would be issued to the Participant. In such event, the
          Committee may, in its Discretion, provide for the payment by the
          Corporation of a dividend equivalent or interest at a rate determined
          by the Committee.

     (h)  In the Discretion of the Committee, in lieu of settling a performance
          share award by issuance of shares of Common Stock of the Corporation
          to a Participant, all or a portion of the award may be settled by
          payment of cash or other property to the Participant in an amount or
          having a value equal to the then value of the otherwise issuable
          shares; provided, however, that the amount of cash and the value of
          any other property paid to any Participant during any calendar year in
          settlement of a performance share award shall not exceed $5.0 Million.

     (i)  Unless otherwise determined by the Committee, performance shares or
          rights therein awarded to a Participant may not be sold, assigned,
          transferred, pledged, hypothecated or otherwise encumbered by the
          Participant at any time before actual issuance of the shares to the
          Participant.

     (j)  In its Discretion, the Committee may subject a performance share award
          to a Participant to any other terms or conditions not inconsistent
          with the foregoing, including, without limitation, a requirement that
          the Participant remain an employee of the Corporation or a Subsidiary
          (including at or above a specified salary grade), or that the
          Participant remain a consultant, advisor or outside director of the
          Corporation or a Subsidiary, for the entire performance period
          applicable to the award.

                                     - 11 -



          Performance share awards under the Plan are intended to constitute
          qualified performance-based compensation for purposes of Section
          162(m)(4)(C) of the Code and the Treasury Regulations thereunder, and
          the provisions of this Paragraph 19 (and the other provisions of the
          Plan relating to performance share awards) shall be interpreted and
          administered to effectuate that intent. Moreover, the Committee may
          revise or modify the terms of an outstanding performance share award
          to the extent the Committee determines, in its Discretion, that such
          revision or modification is necessary for such award to constitute
          qualified performance-based compensation.

20.  OTHER STOCK-BASED AWARDS: The Committee may grant to Participants such
     other awards that are denominated or payable in, valued in whole or in part
     by reference to, or otherwise based on or related to, shares of Common
     Stock of the Corporation as are deemed by the Committee, in its Discretion,
     to be consistent with the purposes of the Plan; provided, however, that
     such grants must comply with applicable law.

21.  INVESTMENT PURPOSE: If the Committee, in its Discretion, determines that as
     a matter of law such procedure is or may be desirable, it may require a
     Participant, upon any acquisition of stock hereunder and as a condition to
     the Corporation's obligation to deliver certificates representing such
     shares, to execute and deliver to the Corporation a written statement in
     form satisfactory to the Committee, representing and warranting that the
     Participant's acquisition of shares of stock shall be for such person's own
     account, for investment and not with a view to the resale or distribution
     thereof and that any subsequent offer for sale or sale of any such shares
     shall be made either pursuant to (a) a Registration Statement on an
     appropriate form under the Securities Act of 1933, as amended (the
     "Securities Act"), which Registration Statement has become effective and is
     current with respect to the shares being offered and sold, or (b) a
     specific exemption from the registration requirements of the Securities
     Act, but in claiming such exemption the Participant shall, prior to any
     offer for sale or sale of such shares, obtain a favorable written opinion
     from counsel for or approved by the Corporation as to the availability of
     such exemption. The Corporation may endorse an appropriate legend referring
     to the foregoing restriction upon the certificate or certificates
     representing any shares issued or transferred to the Participant under the
     Plan.

22.  RIGHTS TO CONTINUED EMPLOYMENT: Nothing contained in the Plan or in any
     Award granted pursuant to the Plan, nor any action taken by the Committee
     hereunder, shall confer upon any Participant any right with respect to
     continuation of employment or service as an employee, consultant, advisor
     or outside director of the Corporation or a Subsidiary nor interfere in any
     way with the right of the Corporation or a Subsidiary to terminate such
     person's employment or service at any time with or without cause.

                                     - 12 -



23.  WITHHOLDING PAYMENTS: If, upon the grant, exercise, release of restrictions
     or settlement of or in respect of an Award, or upon any other event or
     transaction under or relating to the Plan, there shall be payable by the
     Corporation or a Subsidiary any amount for income or employment tax
     withholding, in the Committee's Discretion, either the Corporation shall
     appropriately reduce the amount of stock, cash or other property to be paid
     to the Participant or the Participant shall pay such amount to the
     Corporation or Subsidiary to enable it to pay or to reimburse it for paying
     such income or employment tax withholding. The Committee may, in its
     Discretion, permit Participants to satisfy such withholding obligations, in
     whole or in part, by electing to have the amount of Common Stock delivered
     or deliverable by the Corporation in respect of an Award appropriately
     reduced, or by electing to tender Common Stock back to the Corporation
     subsequent to receipt of such stock in respect of an Award. The Corporation
     or any of its Subsidiaries shall also have the right to withhold the amount
     of such taxes from any other sums or property due or to become due from the
     Corporation or any of its Subsidiaries to the Participant upon such terms
     and conditions as the Committee shall prescribe. The Corporation may also
     defer issuance of stock under the Plan until payment by the Participant to
     the Corporation or any of its Subsidiaries of the amount of any such tax.
     In the case of a Regulation T Stock Option Exercise, the Committee may in
     its Discretion permit the Participant to irrevocably instruct a stock
     broker to promptly deliver to the Corporation an amount (in addition to the
     option exercise price) equal to any withholding tax owing in respect of
     such option exercise from the proceeds of the stock broker's sale of or
     loan against some or all of the shares. In the event the Corporation then
     has in effect a stock repurchase program, in its Discretion and subject to
     such terms and conditions as it may impose, the Committee may permit
     Participants to satisfy their withholding tax obligations by requesting
     that the Corporation repurchase (and retain the repurchase price of) that
     number of shares issuable or issued under the Plan having a then fair
     market value equal to the amount of withholding tax due. The Committee may
     make such other arrangements with respect to income or employment tax
     withholding as it shall determine.

24.  CHANGE IN CONTROL: Notwithstanding any other provision of the Plan or any
     provision of a grant or award agreement, in the event the Committee
     determines that there has been or will be a change in control of the
     Corporation or of any Subsidiary, the Committee may, without the consent of
     the holder, provide for any treatment of outstanding Awards which it
     determines, in its Discretion, to be appropriate. Such treatment may
     include, without limitation, acceleration of vesting of stock options and
     stock appreciation rights, release of restrictions applicable to restricted
     stock or restricted stock units, or deeming performance share awards to
     have been earned. In determining whether there has been or will be a change
     in control of the Corporation or of any Subsidiary, the Committee may
     utilize a definition it deems appropriate of a change in control contained
     in any existing agreement between the Corporation or a Subsidiary and one
     of its senior executives.

                                     - 13 -



25.  EFFECTIVENESS OF PLAN: The Plan shall be effective on the date the Board of
     Directors of the Corporation adopts the Plan and shall apply with respect
     to Awards granted on or after such date; provided, however, that the terms
     of the Predecessor Plan shall continue to apply to Awards granted prior to
     the date the Board of Directors of the Corporation adopts the Plan.

26.  TERMINATION, DURATION AND AMENDMENTS OF PLAN: The Plan may be abandoned or
     terminated at any time by the Board of Directors of the Corporation. Unless
     sooner terminated by the Board of Directors, the Plan shall terminate on
     the date ten (10) years after the adoption by the Board of Directors of the
     Predecessor Plan, and no Awards may be granted thereafter. The termination
     of the Plan shall not affect the validity of any Award outstanding on the
     date of termination.

For the purpose of conforming to any changes in applicable law or governmental
regulations, or for any other lawful purpose, the Board of Directors of the
Corporation shall have the right, without approval of the shareholders of the
Corporation, to amend or revise the terms of the Plan at any time; provided,
however, that no such amendment or revision shall (i) with respect to the Plan,
increase the maximum number of shares in the aggregate which are subject to the
Plan or with respect to which Awards may be made to individual Participants
(subject, however, to the provisions of Paragraph 5), materially change the
class of persons eligible to be Participants under the Plan or establish
additional and different business criteria on which performance share goals are
based without approval or ratification of the shareholders of the Corporation;
or (ii) with respect to an Award previously granted under the Plan, except as
otherwise specifically provided in the Plan, alter or impair any such Award
without the consent of the holder thereof.

As adopted by the Board of Directors on December 10, 2003.

                                     - 14 -

EX-10.25

                                                                   EXHIBIT 10.25

                              AMENDED AND RESTATED
                             UNITED AUTO GROUP, INC.
                     NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

                                DECEMBER 10, 2003

I.   INTRODUCTION AND DEFINITIONS

     A.   Purpose. The purpose of this Plan is to promote the interests of
          United Auto Group, Inc. and its affiliates and stockholders by helping
          to attract and retain highly qualified non-employee directors. This
          Plan amends and restates the Second Amended and Restated United Auto
          Group, Inc. Non-Employee Director Compensation Plan adopted by the
          Board of Directors on December 11, 2002.

     B.   Definitions. Unless the context clearly indicates otherwise, the
          following terms, when used in the Plan, shall have the meanings set
          forth in this section:

          1.   "Board" shall mean the Board of Directors of the Company.

          2.   "Company" shall mean United Auto Group, Inc., a Delaware
               corporation, and any successor corporation.

          3.   "Director" shall mean a member of the Board.

          4.   "Exchange Act" shall mean the Securities Exchange Act of 1934, as
               amended.

          5.   "Non-Employee Director" shall mean a Director who is not also a
               salaried employee of the Company or any of its subsidiaries.

          6.   "Payment Date" shall mean a date selected by the Board which
               falls within the first quarter of the year following the year in
               which a Non-Employee Director served on the Board.

          7.   "Plan" shall mean this Amended and Restated United Auto Group,
               Inc. Non-Employee Director Compensation Plan, as set forth herein
               and as it may be amended from time to time.

          8.   "Stock" shall mean shares of the Voting Common Stock of the
               Company, par value $0.0001 per share.

II.  NON-EMPLOYEE DIRECTOR FEES

     A.   Fee. Each Non-Employee Director shall be paid for each year or partial
          year of service a fee of $40,000 (pro rated for partial years) (the
          "Fee").

     B.   Manner of Payment. The Non-Employee Director must annually elect
          whether to receive the Fee in the form of cash or Stock. This election
          must be received by



          the Company on or before March 1 (the "Election Date") of each year.
          Once made, this election is irrevocable for such year.

     C.   Payment Date. That portion of the Fee not deferred shall be paid on
          the Payment Date. If a Non-Employee Director fails to elect the manner
          of payment of the Fee by the Election Date, or if a Non-Employee
          Director's election to receive the Fee in Stock has not been
          previously approved by the Board, then that Non-Employee Director's
          Fee shall be payable in Cash.

     D.   Election to Receive Fee in Stock

               1.   A Non-Employee Director's election to receive the Fee in
                    Stock must be approved by the Board prior to the Payment
                    Date.

               2.   If a Non-Employee Director's election is approved by the
                    Board, then the Non-Employee Director's Fee, if not
                    deferred, shall be paid in shares of Stock or, if deferred,
                    then payable in Units, the number of which will be
                    determined as follows: by dividing the Fee, (or the prorated
                    portion for partial years) by the average of the closing
                    market price of the Stock as reported on the New York Stock
                    Exchange for the 20 trading days immediately preceding and
                    including the Payment Date.

               3.   Such shares of Stock shall not be subject to any transfer or
                    resale restrictions other than those applicable under
                    federal and state securities laws.

               4.   If a Non-Employee Director becomes a member of the Board
                    after the Election Date, then such Director may elect to
                    receive the Fee in the form of Stock on the Payment Date by
                    making such election within 30 days after becoming a
                    Director, provided that such election shall be subject to
                    approval by the Board.

III. DEFERRAL OF NON-EMPLOYEE DIRECTOR FEE.

     A.   Introduction: Non-Employee Directors, on an individual basis, may
          defer all or part of their Fee until such time as their service on the
          Board terminates.

     B.   Manner of Deferral: On or before the Election Date, a Non-Employee
          Director may elect to defer all or a portion of the Fee (the "Deferred
          Fee"). Such election shall be irrevocable for the period of service
          for which the Fee is payable. The Deferred Fee will be credited to the
          Non-Employee Director's deferred fees account (the "Deferred Fees
          Account") as of the Payment Date and accounted for pursuant to the
          manner of payment elected by the Non-Employee Director until fully
          paid out.

     C.   Deferral of Stock: If a Non-Employee Director elects to receive the
          Fee in Stock, the payment of which has been deferred in whole or in
          part, then the Non-

                                       2



          Employee Director's Deferred Fees Account will be credited with the
          number of stock units ("Units"), calculated to the nearest thousandths
          of a Unit, determined by dividing the amount of the Deferred Fee by
          the average of the closing market price of the Stock as reported on
          the New York Stock Exchange for the 20 trading days immediately
          preceding and including the Payment Date. The Non-Employee Director's
          Deferred Fees Account will also be credited with the number of Units
          determined by multiplying the number of Units in the Non-Employee
          Director's Deferred Fees Account by any per share cash dividends
          declared by the Company on its Stock and dividing the product by the
          closing market price of the Stock as reported on the New York Stock
          Exchange on the related dividend payment date, and also by multiplying
          the number of Units in the Non-Employee Director's Deferred Fees
          Account by any stock dividends declared by the Company on its Stock.

     D.   Deferral of Cash: If a Non-Employee Director elects to receive the Fee
          in cash, the payment of which has been deferred in whole or in part,
          then the Non-Employee Director's Deferred Fees Account (a) will be
          credited on the Payment Date in an amount equal to the Deferred Fee,
          and (b) will be credited as of the end of each calendar quarter
          additional compensation equal to interest on the amounts credited to
          such account from the date credited (or the end of the preceding
          quarter, if later) to the end of such quarter at the rate of interest
          payable on the last issue of U.S. 90-day Treasury Bills made prior to
          the end of such quarter, as published in the Wall Street Journal.

     E.   Recapitalization: If, as a result of a recapitalization of the Company
          (including stock splits), the Company's outstanding shares of Stock
          shall be changed into a greater or smaller number of shares, the
          number of Units credited to a Non-Employee Director's Deferred Fees
          Account shall be appropriately adjusted on the same basis.

     F.   Distribution of Deferred Fees.

          1.   Upon a Non-Employee Director's retirement, death or other
               termination of his membership on the Board (collectively,
               "Termination"), the Non-Employee Director shall receive the
               amount credited to his Deferred Fees Account in five
               substantially equal annual installments commencing on the first
               Payment Date following the Non-Employee Director's Termination
               (the "Installment Payment Date"). Upon request of the
               Non-Employee Director, and subject to the Board's approval,
               distributions may be made in a lump sum following the
               Non-Employee Director's Termination or in installments, equal or
               otherwise, more rapidly than provided in this paragraph.

          2.   Survivor Payout Elections. In the event of a Non-Employee
               Director's death prior to receiving all entitled deferred
               payments, the value of the Deferred Fees Account on the date of
               the Non-Employee Director's death shall be determined and paid to
               the beneficiary(s) designated by the Non-Employee Director (or,
               failing such designation, to the Non-Employee Director's estate)

                                       3



               in accordance with the installment schedule set forth in
               paragraph F(1) above, unless the Non-Employee Director has
               elected to have the remaining payments made in a single lump sum
               upon his death, in which case a lump sum payment will be made to
               the designated beneficiaries or the Non-Employee Director's
               estate as soon as practicable after the Non-Employee Director's
               death.

          3.   Form of Payment Elections.

               a)   All installment payments from the Non-Employee Director's
                    Deferred Fees Account shall be in the form of cash.

               b)   Notwithstanding the preceding paragraph, upon request of the
                    Non-Employee Director, and subject to the Board's approval,
                    a Non-Employee Director, former Non-Employee Director, or
                    deceased Non-Employee Director's beneficiary or legal
                    representative may elect at anytime to have any or all
                    payouts, or remaining payouts, of the Non-Employee
                    Director's Deferred Fees Account paid out in cash or in
                    shares of the Stock.

          4.   Determination of Amount of Cash Installment Payments.

               a)   The amount of the first cash installment payment shall be a
                    fraction of the Cash and/or Units in the Non-Employee
                    Director's Deferred Fees Account on the first Installment
                    Payment Date, the numerator of which is one and the
                    denominator of which is the total number of installments
                    elected. Each subsequent installment shall be calculated in
                    the same manner as of each subsequent Installment Payment
                    Date except that the denominator shall be reduced by the
                    number of installments which have been previously paid.

               b)   The amount of cash payable for deferred fees accounted for
                    as Units based on the Company's Stock value will be paid as
                    described above, based on the number of Units in the
                    Non-Employee Director's Deferred Fees Account on the
                    Installment Payment Date multiplied by the closing market
                    price of the Company's Stock as reported on the New York
                    Stock Exchange on the last trading day preceding the
                    Installment Payment Date.

          5.   Determination of Amount of Installment Payments in Shares of
               Stock.

               (a)  The amount of the first installment payment payable in
                    shares of the Stock for deferred fees shall be a fraction of
                    the value of the Cash and/or Units in the Non-Employee
                    Director's Deferred Fees Account on the date of the first
                    Installment Payment Date, the numerator of which is one and
                    the denominator of which is the total number of installments
                    elected. Each subsequent installment shall be calculated in
                    the same manner as of each subsequent Installment Payment
                    Date except that the denominator shall be reduced by the
                    number of installments which have been previously paid.

                                       4



               (b)  If a payout to be made in shares of the Stock is based on
                    deferred fees accounted for as Cash, the number of shares
                    payable shall be determined by dividing the amount of cash
                    that would otherwise be payable by the closing market price
                    of the Stock as reported on the New York Stock Exchange on
                    the last trading day preceding the Installment Payment Date.

               (c)  Except for the final installment payment, only whole shares
                    shall be payable, and the value of any fractional share
                    payable shall re retained in the Non-Employee Director's
                    Deferred Fees Account until the final installment payment,
                    at which time the value of any fractional share payable
                    shall be paid in cash, based on the fractional share
                    multiplied by the closing market price of Stock as reported
                    on the New York Stock Exchange on the last trading day
                    preceding the Installment Payment Date.

IV.  GENERAL TERMS

     A.   Unfunded Plan. It is presently intended that the fund constitute an
          unfunded plan for deferred compensation. No provision of the Plan
          shall require the Company, for the purpose of satisfying any
          obligations under the Plan, to purchase units or place any units in a
          trust or other entity to which contributions are made or otherwise to
          segregate any assets, nor shall the Company maintain separate bank
          accounts, books, records, or other evidence of the existence of a
          segregated or separately maintained or administered fund for such
          purposes.

     B.   Effective Date. The Amended and Restated Compensation Plan shall be
          effective upon approval by the Board.

     C.   Amendment and Termination of the Plan. The Board in its discretion may
          terminate the Plan or alter or amend the Plan or any part thereof from
          time to time.

     D.   Rule 16b-3. The terms and conditions of each grant of a Stock or Units
          under the Plan shall be approved in advance by the Board for purposes
          of the exemption from Section 16(b) of the Exchange Act available
          under Rule 16b-3(d)(1) and other applicable rules promulgated under
          Section 16 the Exchange Act.

     E.   Nonassignability. It shall be a condition of this Plan (and all rights
          of each Non-Employee Director and beneficiary shall be subject
          thereto) that no amount payable hereunder shall be assignable in whole
          or in part, either directly or by operation of law except by will or
          the laws of descent or distribution. Further, no right or interest of
          each Non-Employee Director or beneficiary under the Plan shall be
          liable for, or subject to, any obligation or liability of such
          director or beneficiary, including claims for alimony or the support
          of any spouse.

                                       5



                   NOTICE OF ELECTION FOR FORM OF PAYMENT FOR
                         NON-EMPLOYEE DIRECTOR SERVICES

TO: (Input Director's Name and Address)

I.   MANNER OF PAYMENT ELECTION

         Pursuant to the United Auto Group, Inc.'s Non-Employee Director
Compensation Plan, for the annual fees payable to me as a Director of the
Company for the year ending December 31, 2003, I hereby irrevocably elect:

[ ]      To receive shares of United Auto Group, Inc. Voting Common Stock, par
         value $0.0001 per share, in lieu of cash in payment of the annual fee.
         The shares should be issued according to instructions set forth below;
         or

[ ]      Cash in payment of the annual fee.

II.  DEFERRAL OPTION ELECTION

         Pursuant to the United Auto Group, Inc.'s Non-Employee Compensation
Plan, I hereby irrevocably elect to defer the amount of the annual fee payable
to me as Director of the Company for the year ended December 31, 2003, as
follows:

         ____% of, or $_____ of my annual fee.

         The amount or percentage of the annual fee deferred shall be in the
manner of payment elected in Section I.

                                       6



III. BENEFICIARY

         A. If my membership on the Company's Board of Directors is terminated
by death, or if I shall die after I cease to serve as a Director but before
complete distribution of my Deferred Fees Account, I direct the balance in such
account to be paid to:

                                         ____________________________________
                                         Name of Designated Beneficiary

                                         ____________________________________
                                         Address

                                         ____________________________________
                                         Relationship to Me

___________, 20____                      ____________________________________
Date                                     Director

         B. If my membership on the Company's Board of Directors is terminated
by death, or if I shall die after I cease to serve as a Director but before
complete distribution of my Deferred Fees Account, I direct the balance in such
account to be paid:

  [ ]    In one lump sum to the Designated Beneficiary

  [ ]    In accordance with the Plan's Installment Payment Schedule or the
         schedule previously elected by me and approved by the Board.

IV.  SPECIAL INSTRUCTIONS

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

                                       7



V.  SIGNATURE

_____________, 20___                     ___________________________________
Date                                     Director

Name: __________________________________________

Address: _______________________________________

         _______________________________________

Social Security Number: ________________________

                                       8

EX-21

                                                                      EXHIBIT 21

                           SUBSIDIARIES OF THE COMPANY

Atlantic Auto Funding Corporation (DE)
Atlantic Auto Second Funding Corporation (DE)
Atlantic Auto Third Funding Corporation (DE)
Auto Care Insurance Agency, Inc. (PR)
Auto Mall Payroll Services, Inc. (FL)
Bedford Collision Center (DE)
Brett Morgan Chevrolet-Geo, Inc. (DE)
Central Ford Center, Inc. (AR)
CJNS, LLC (DE)
Classic Auto Group, Inc. (NJ)
Classic Enterprises, LLC (DE)
Classic Imports, Inc. (NJ)
Classic Management Company, Inc. (NJ)
Classic Motor Sales, LLC (DE)
Classic Nissan of Turnersville, LLC (DE)
Classic Turnersville, Inc. (NJ)
Covington Pike Dodge, Inc. (DE)
D. Young Chevrolet, LLC (DE)
Dan Young Chevrolet, Inc. (IN)
Dan Young Motors, LLC (DE)
DiFeo Partnership, Inc. (DE)
DiFeo Partnership, Inc. on behalf of
         County Auto Group Partnership
         Danbury Auto Partnership
         DiFeo Chrysler Plymouth Jeep Eagle Partnership
         DiFeo Hyundai Partnership
         DiFeo Leasing Partnership
         DiFeo Nissan Partnership
         DiFeo Tenafly Partnership
         Hudson Motor Partnership
         OCT Partnership
         Somerset Motors Partnership
Europa Auto Imports, Inc. (CA)
Florida Chrysler Plymouth, Inc. (FL)
Gene Reed Chevrolet, Inc. (SC)
GMG Motors, Inc. (CA)
Goodson North, LLC (DE)
Goodson Pontiac GMC, LLC (DE)
Goodson Spring Branch, LLC (DE)
H.B.L. Holdings, Inc. (VA)
HBL, LLC (DE)
HT Automotive, Ltd. (DE)
HVP Motor Corporation (PR)
H.V.P.H. Motor Corporation (PR)
JS Imports, Inc. (FL)
KMPB, LLC (DE)
KMT/UAG, Inc. (CA)
Landers Auto Sales, Inc. (AR)
Landers Buick-Pontiac, Inc. (AR)
Landers Ford, Inc. (AR)
Landers Nissan, LLC (DE)
Landers United Auto Group No.2, Inc. (AR)
Landers Ford North, Inc. (AR)
Lantzsch-Andreas Enterprises, Inc. (VA)
Late Acquisition I, LLC (DE)
Late Acquisition II, LLC (DE)
LMNS, LLC (DE)
LRP, Ltd. (AZ)
Michael Chevrolet-Oldsmobile, Inc. (SC)
Motorcars Acquisition, LLC (DE)
Motorcars Acquisition II, LLC (DE)
Motorcars Acquisition III, LLC (DE)
Motorcars Acquisition IV, LLC (DE)
Motorcars Acquisition V, LLC (DE)



National City Ford, Inc. (DE)
Nissan of North Olmsted, LLC (DE)
Northlake Auto Finish, Inc. (FL)
Palm Auto Plaza, Inc. (FL)
Peachtree Nissan, Inc. (GA)
Pioneer Ford Sales, Inc. (AZ)
PMRC, LLC (DE)
Reed-Lallier Chevrolet, Inc. (NC)
Relentless Pursuit Enterprises, Inc. (CA)
SA Automotive, Ltd. (AZ)
SAU Automotive, Ltd. (AZ)
Scottsdale Ferrari, LLC (AZ)
Scottsdale Jaguar, Ltd. (AZ)
Scottsdale Management Group, Ltd. (AZ)
S.H.V.P. Motor Corp. (PR)
SK Motors, Ltd. (AZ)
SL Automotive, Ltd. (AZ)
Somerset Motors, Inc. (NJ)
Sun Motors, Ltd. (AZ)
Sytner Group, PLC (UK)
The New Graceland Dodge, Inc. (TN)
TriCity Leasing, Inc. (CA)
UAG Atlanta IV, Motors, Inc. (GA)
UAG Central Florida Motors, LLC (DE)
UAG Central NJ, LLC (DE)
UAG Carolina, Inc. (DE)
UAG Cerritos, LLC (DE)
UAG Citrus Motors, LLC (DE)
UAG CHCC, Inc. (NJ)
UAG Chevrolet, Inc. (NJ)
UAG Classic, Inc. (DE)
UAG Connecticut, LLC (DE)
UAG Connecticut I, LLC (DE)
UAG Duluth, Inc. (TX)
UAG East, Inc. (DE)
UAG Fairfield CA, LLC (DE)
UAG Fairfield CP, LLC (DE)
UAG Fairfield CM, LLC (DE)
UAG Fayetteville I, LLC (DE)
UAG Fayetteville II, LLC (DE)
UAG Fayetteville III, LLC (DE)
UAG Finance Company, Inc. (DE)
UAG GD, Ltd. (TX)
UAG GN, Ltd. (TX)
UAG of Goldsboro, Inc. (DE)
UAG GP, Ltd. (TX)
UAG Graceland II, Inc. (DE)
UAG GW, Ltd. (TX)
UAG Houston Acquisition, Ltd. (TX)
UAG Hudson, Inc. (NJ)
UAG Indianapolis, LLC (IN)
UAG International Holdings, Inc. (DE)
UAG Kissimmee Motors, Inc. (DE)
UAG Lake Norman, LLC (NC)
UAG Landers Springdale, LLC (DE)
UAG Memphis II, Inc. (DE)
UAG Memphis IV, Inc. (DE)
UAG Memphis V, Inc. (DE)
UAG Mentor Acquisition, LLC (DE)
UAG Michigan Cadillac, LLC (DE)
UAG Michigan H1, LLC (DE)
UAG Michigan Holdings, Inc. (DE)
UAG Michigan Pontiac-GMC, LLC (DE)
UAG Michigan T1, LLC (DE)
UAG Michigan TMV, LLC (DE)
UAG Nanuet I, LLC (DE)
UAG Nanuet II, LLC (DE)
UAG Nevada Land, LLC (DE)
UAG Northeast, Inc. (DE)
UAG Northeast Body Shop, Inc. (DE)



UAG Oldsmobile of Indiana, LLC (IN)
UAG Phoenix VC, LLC (DE)
UAG Realty, LLC (DE)
UAG Royal Palm, LLC (DE)
UAG Southeast, Inc. (DE)
UAG Spring, LLC (DE)
UAG Tulsa Holdings, LLC (DE)
UAG Tulsa VC, LLC (DE)
UAG Turnersville Motors, LLC (DE)
UAG Texas II, Inc. (DE)
UAG Texas, Inc. (DE)
UAG Texas, Inc. on behalf of
         Shannon Automotive, Ltd.
UAG Torrance, Inc. (DE)
UAG Turnersville Realty, LLC (DE)
UAG VK, LLC (DE)
UAG West, Inc. (DE)
UAG West Bay AM, LLC (DE)
UAG West Bay FM, LLC (DE)
UAG West Bay IA, LLC  (DE)
UAG West Bay IAU, LLC (DE)
UAG West Bay IB, LLC (DE)
UAG West Bay II, LLC (DE)
UAG West Bay IL, LLC (DE)
UAG West Bay IM, LLC (DE)
UAG West Bay IP, LLC (DE)
UAG West Bay IV, LLC (DE)
UAG West Bay IW, LLC (DE)
UAG Young II, Inc. (DE)
UAG Young Automotive Group, LLC (DE)
UAG-Caribbean, Inc. (DE)
United Auto Dodge of Shreveport, Inc. (DE)
United AutoCare Products, LLC (DE)
United Nissan, Inc. (TN)
United Nissan, Inc. (GA)
United Auto Fourth Funding, Inc. (DE)
United Auto Fifth Funding, Inc. (DE)
UnitedAuto Finance, Inc. (DE)
United Auto Licensing, LLC (DE)
United Ranch Automotive, LLC (DE)
VPH Motor Corporation (PR)
West Palm Auto Mall, Inc. (FL)
West Palm Nissan, Inc.(FL)
Westbury Superstore, Ltd. (NY)
WTA Motors, Ltd. (TX)
Young Automotive Holdings, LLC (DE)
Young Management Group, Inc. (DE)

EX-23.1

EXHIBIT 23.1

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in Registration Statement Nos. 333-105311, 333-14971, 333-26219 and 333-50816 on Form S-8, of our report dated March 11, 2004 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s change in accounting for goodwill and intangible assets in 2002 to conform to Statement of Financial Accounting Standards No. 142, and a change in accounting for certain consideration received from vendors to conform with Emerging Issues Task Force Issue 02-16), appearing in this Annual Report on Form 10-K of United Auto Group, Inc. for the year ended December 31, 2003.

/s/ DELOITTE & TOUCHE LLP

New York, New York
March 11, 2004

EX-23.2

EXHIBIT 23.2

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in Registration statements (No. 333-14971, No. 333-26219 and No. 333-50816) of United Auto Group, Inc. on Form S-8, of our report dated January 26, 2004, with respect to the consolidated balance sheet of UAG UK Holdings Limited and subsidiaries as of December 31, 2003, and the related consolidated statements of income, stockholder’s equity and cash flows for the year then ended, which report appears in the December 31, 2003 Annual Report on Form 10-K of United Auto Group, Inc. (none of the aforementioned financial statements are presented separately therein).

KPMG Audit Plc

Birmingham, United Kingdom
March 11, 2004

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

I, Roger S. Penske, certify that:

     1. I have reviewed this annual report on Form 10-K of United Auto Group, Inc.;

     2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

     3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

     4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ ROGER S. PENSKE

Roger S. Penske
Title: Chief Executive Officer

March 15, 2004

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

I, James R. Davidson, certify that:

     1. I have reviewed this annual report on Form 10-K of United Auto Group, Inc.;

     2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

     3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

     4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ JAMES R. DAVIDSON

James R. Davidson
Executive Vice President — Finance

March 15, 2004

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of United Auto Group, Inc. (the “Company”) on Form 10-K for the year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Roger S. Penske and James R. Davidson, Principal Executive Officer and Principal Financial Officer, respectively of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,that:

     1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Roger S. Penske

Roger S. Penske
Chief Executive Officer

March 15, 2004

/s/ James R. Davidson

James R. Davidson
Executive Vice President — Finance
(Principal Financial Officer)

March 15, 2004

A signed original of this written statement required by Section 906 has been provided to United Auto Group, Inc. and will be retained by United Auto Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.