One Corporate Center May 23, 2003 Rye, NY 10580-1422 Tel (914) 921-5216 Gabelli & Company, Inc. Fax (914) 921-5098 www.gabelli.com

-Please refer to important disclosures at the end of this report-

AutoNation (AN - $13.60 – NYSE) The Lampert Effect FYE PMV EPS P/E 2005P $16 $1.50 9.1 Dividend: None Current Return: Nil 2004P 14 1.40 9.7 Shares O/S: 283.8 million f/d 2003E 13 1.30 10.5 52-Week Range: $18.73 – 9.05 2002A 10 1.19 11.4

SUMMARY & RECOMMENDATION

AutoNation reported first quarter earnings of $0.29 per share versus $0.28 per share a year ago, in line with our forecast that earnings in 2003 will grow to $1.28-$1.30 per share against the $1.19 per share reported in 2002. AutoNation looks extraordinarily cheap on a price-to-earnings basis, though we do have concerns about the short-term outlook for U.S. car sales. First, the results:

Table 1 AutoNation Inc. 2003 1Q vs. 2002 1Q

Source: Company Filings (a) Other revenue includes wholesale and reinsurance revenue. Other gross profit includes wholesale, reinsurance, and net floorplan profit.

Since our last report (“Consumer Surrogate”, 9/27/01):

• The Lampert Model. ESL Investments, led by Edward S. Lampert, purchased 27 million shares to increase its stake in the company to 75 million shares, about 27% of shares outstanding. Former Chairman Wayne Huizenga reduced his holdings from 29 million shares to 13.5 million. ESL’s model is simple: take large stakes in cash generating businesses and drive earnings and stock price through massive share repurchases. The model worked extremely well at AutoZone (AZO-NYSE), in which ESL invested in mid-1998 at around $30 per share and eventually acquired over 26% of shares outstanding. Since then, AutoZone repurchased $2.1 billion of stock (equal to cumulative cash flow from operations over this time and 40% of shares outstanding) and its price rose to $85. AutoNation repurchased $2.3 billion of shares (42% of shares outstanding) the past five years, and recently authorized an additional $500 million of repurchases. ESL began purchasing AutoNation shares in mid-2000, when the stock traded in the mid-single digits.

• IRS Settlement. On March 3, 2003, AutoNation announced it had reached an agreement with the IRS on the amount and timing of cash payments related to accelerated tax deductions the company took between 1997 and 1999. AutoNation will pay $350 million to the IRS in March 2004 and $40 million in March of 2005, 2006, and 2007. Previous guidance indicated the lump-sum payment could reach $500 million and the “tail” stream of payments as much as fifteen years. The settlement should be viewed as positive and removes an element of uncertainty surrounding the stock.

• S & P 500. AutoNation was added to the S & P 500 on February 19, 2003.

There are some headwinds facing AutoNation that weren’t present when we last wrote about the company: softer new car sales in the U.S., particularly the domestics, as well as a weak used car market. However, AutoNation has an excellent balance sheet, a footprint that can’t be replicated, and strong free cash flow. In this report we highlight the resilience of AutoNation’s business model, even in the event of an economic shock. Should automobile sales drop to 13 million annually, all other things constant, we believe AutoNation could still earn $1 per share. Cash flow, outstanding management and the “Lampert Effect” should continue to drive AutoNation’s stock and make it an outstanding long-term investment. In the short term, the stock will likely move in line with new car sales.

( in $ m il l io n s ) C o n t r ib u t io nR e v e n u e 2 0 0 3 2 0 0 2 G r o s s P r o f it 2 0 0 3 2 0 0 2 M a r g inN e w V e h ic le s $ 2 , 6 0 9 . 5 $ 2 , 8 1 3 . 1 N e w V e h ic le s $ 1 6 8 . 6 $ 1 9 2 . 5 1 1 . 7 %U s e d V e h ic le s 9 0 6 . 7 9 4 7 . 0 U s e d V e h ic le s 1 0 3 . 6 1 0 8 . 5 1 2 . 2P a r ts & S e r v ic e 5 9 9 . 4 6 1 1 . 9 P a r ts & S e r v ic e 2 6 0 . 7 2 6 4 . 8 3 2 . 8F in a n c e & I n s r u a n c e 1 2 2 . 2 1 2 1 . 1 F in a n c e & I n s r u a n c e 1 2 2 . 2 1 2 1 . 1 1 0 0 . 0O th e r ( a ) 2 2 1 . 5 2 5 7 . 6 O th e r ( a ) 3 3 . 5 3 4 . 8T O T A L $ 4 , 4 5 9 . 3 $ 4 , 7 5 0 . 7 T O T A L $ 6 8 8 . 6 $ 7 2 1 . 7 1 1 . 4 %

F ir s t Q u a r t e r F ir s t Q u a r t e r

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U.S. NEW CAR SALES

In Table 1 below we lay out industry sales by brand year-to-date as well as each brand’s estimated percentage of AutoNation’s new car revenue.

Table 2 U.S. New Car Sales By Brand & Est. % of AutoNation New Car Revenue

Source: Automotive News. (a) Other includes Mercedes, Hyundai. Mazda, Porsche, Isuzu, Subaru, Mini, Mitsubishi, Kia, Suzuki, Land Rover,Jaguar and all other luxury brands. New vehicle sales generate approximately 27% of AutoNation’s gross profit. Another 10-12% comes indirectly from commissions related to selling vehicle financing packages, insurance, and extended warranties. Included in this indirect amount are the gross profit recorded as finance and insurance on the P & L as well as an additional $50 per vehicle which shows up in “other” gross profit. This is generated by a fee AutoNation earns when directing customers toward preferred lenders. AutoNation’s true F & I per vehicle is actually higher than that detailed in its earnings releases. Management estimates AutoNation can earn $1.25-1.30 per share on an industry sales rate of 16 to 16.3 million units, down from 16.8 million in 2002. We believe this is a reasonable estimate. Through April, the industry was running at seasonally adjusted pace of 16 million. Should the industry slow down to a level of 15.3 million, we estimate AutoNation’s EPS would be closer to $1.20. Indeed, for each 1 million cars the industry sells, AutoNation’s EPS will move $0.10 per share, all other things equal. Table 3 depicts this analysis.

Table 3 AutoNation Inc. New Vehicle Variable Profit Analysis At Industry Sales Rate of 15.3 Million

Source: Company Filings & Presentations, Gabelli & Company Inc. estimates.

The analysis gives us confidence that AutoNation, while dependent on the level of new vehicle sales, has a resilient enough business model to be adequately profitable in a weaker industry environment.

A u t o N a t i o n E s t . % o f2 0 0 2 E N e w A u t o N a t i o n Y T D % o f

V e h i c l e R e v . T o t a l U . S . M a r k e tF o r d - 3 . 0 % - 2 . 1 % $ 2 , 8 6 5 2 5 % 2 1 . 5 %G e n e r a l M o t o r s - 4 . 9 - 8 . 6 2 , 1 9 9 1 9 2 7 . 2C h r y s l e r - 6 . 7 - 7 . 2 1 , 1 1 1 1 0 1 3 . 4T o y o t a / L e x u s - 3 . 0 0 . 7 1 , 1 6 9 1 0 1 0 . 8H o n d a / A c u r a 1 5 . 6 1 3 . 2 9 0 0 8 8 . 3N is s a n / I n f i n i t i - 0 . 4 - 5 . 4 8 3 0 7 4 . 6V o l k s w a g e n / A u d i - 1 2 . 7 - 1 1 . 4 6 4 3 6 2 . 3B M W - 6 . 4 - 1 . 1 2 8 1 2 2 . 5O t h e r ( a ) - 2 . 4 - 1 . 2 1 , 6 9 7 1 5 1 0 . 4

T O T A L - 2 . 4 % - 3 . 9 % $ 1 1 , 6 9 5 1 0 0 % 1 0 0 %

A p r - 0 3% C h a n g e

Y e a r - T o - D a t e% C h a n g e

G r o s s P r o f i t P e r N e w V e h i c l e R e t a i l e d 2 , 1 0 0$ F & I P e r N e w V e h i c l e R e t a i l e d 8 0 0 V a r i a b l e C o m p e n s a t i o n / A d v e r t i s i n g E x p e n s e ( 1 , 0 2 5 ) P r e - T a x P r o f i t P e r V e h i c l e 1 , 8 7 5 E f f e c t e d @ 3 8 . 3 % ~ ( 7 2 5 )

A f t e r - T a x P r o f i t P e r N e w V e h i c l e R e t a i l e d 1 , 1 5 0$

E s t i m a t e d A N E P S @ 1 6 . 3 M i l l i o n I n d u s t r y S a l e s 1 . 3 0$ L e s s 2 5 , 0 0 0 U n i t s @ 1 5 . 3 M i l l i o n( 2 . 5 % A N m a r k e t s h a r e o f 1 m i l l i o n u n i t s )

X A f t e r - T a x P r o f i t P e r N e w V e h i c l e o f $ 1 , 1 5 0~ $ 2 8 M i l l i o n N e t I n c o m e I m p a c tD i v i d e d b y 2 8 6 M i l l i o n S h s O / S ( 0 . 1 0 )$

~ $ 1 . 2 0

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USED CAR MARKET – AUTONATION OUTPERFORMS

About 14% of AutoNation’s gross profit comes directly from the sale of used cars, with another 5-6% coming from associated finance and insurance products. Due to attractive new vehicle incentives and oversupply due to heavy trade-ins, used vehicle prices declined 8% in 2002, according to the Manheim Used Vehicle Value Index. From December 2002 levels, used car prices declined a further 3.9% in the first quarter. In spite of this, AutoNation was able to maintain flat revenue per used unit retailed. In Chart 1 below, we lay out the Manheim index since 1995, showing the degree to which used car prices have declined the past two years. Chart 2 graphs AutoNation’s realized revenue per used vehicle retailed, which has remained essentially flat, an impressive accomplishment in light of the difficult pricing environment.

Chart 1 Manheim Used Vehicle Value Index Chart 2 AutoNation Inc. Revenue Per Used Vehicle January 1995 – March 2003 1Q 2001 – 1Q 2003

Source: Manheim Auctions Source: Company filing FREE CASH FLOW

AutoNation repurchased 16.6 million shares during the quarter at an average price of about $12.25. The company used an additional $45 million to acquire dealerships in Dallas, Houston, and Hawthorne, CA. These uses of cash to grow the business and earnings per share are a testament to the tremendous cash generated by AutoNation’s business model. We lay out our free cash flow model below.

Table 4 AutoNation Inc. Free Cash Flow Model

2003E – 2007 P

Source: Company Filings, Gabelli & Company Inc. estimates.

$14,000

$14,500

$15,000

$15,500

$16,000

1q 01 2q 01 3q 01 4q 01 1q 02 2q 02 3q 02 4q 02 1q 03

(in $ millions) 2003P 2004P 2005P 2006P 2007P

Net Income 368.8 377.9 397.5 433.3 473.3 IRS Payments - (350.0) (40.0) (40.0) (40.0) Cash Flow from Loan/Lease Receivables 30.0 45.0 17.0 - - Depreciation & Amortization 76.4 84.8 92.4 99.0 105.0 Working Capital 50.0 (25.0) (25.0) (25.0) (25.0) Capital Expenditures (150.0) (150.0) (150.0) (150.0) (150.0) FREE CASH FLOW 375.2$ (17.3)$ 291.8$ 317.3$ 363.3$

Property Divestiture Proceeds 30.0 30.0 - - - Divestitures (Acquisitions) (150.0) (150.0) (150.0) (150.0) (150.0) Net Cash For Buybacks / Option Exercises (310.0) (150.0) (150.0) (150.0) (150.0) Available Free Cash Flow (54.8) (287.3) (8.2) 17.3 63.3

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There are a few factors worth noting in Table 4:

• IRS Settlement Payments. The possibility of a settlement with the IRS involving a significant cash payment by AutoNation has been explicitly disclosed in the company’s filings since the 2001 10-K. A large deferred tax liability was incurred between 1997 an 1999 when the company accelerated deductions for employee healthcare expenses at newly acquired dealerships. The recent announced settlement is by our estimation a good one for AutoNation compared with the range the company had previously mentioned, which included a balloon payment of as much as $500 million and the possibility of cash payments as far out as fifteen years. AutoNation should have no difficulty making these payments and maintaining a solid balance sheet, which by December 31, 2003 we project will have about $530 million in net debt versus about $475 million at December 31, 2002.

• Property Divestitures. AutoNation still owns 11 sites related to the used-car megastore business it exited in 1999,

down from 64 at the time of the announcement. The company is aggressively marketing these properties and estimates they can generate $60 million in net proceeds, including $30-40 million in 2003.

• Loan / Lease Portfolio Liquidation. In December of 2001 the company made the strategic decision to exit the loan

and lease underwriting business. Prior to exiting the business, AutoNation had financed about 5% of its customers’ car loans. Through 2001 the company securitized most of its loan and lease receivables, maintaining a small interest in the form of interest only strips, subordinated tranches, servicing rights, and cash reserve accounts. The balance of this retained interest stood at $92.9 million at the end of 2002, substantially below the $175.7 million a year ago. Approximately $30 million of the remaining receivables are due in 2003 and the company believes the vast majority of the remainder will be collected in 2004. In 2002, AutoNation experienced lower defaults than projected, resulting in a $0.03 benefit to EPS. We have assumed zero benefit going forward, though it remains a possibility.

THE CASE FOR GROWTH

In the mid-90s AutoNation began a rapid initiative to combine hundreds of dealerships in desirable markets under one umbrella and benefit from the scale this would bring. Partially as result of companies like AutoNation and UnitedAuto Group (UAG-NYSE) and partially due to the country being “over-dealered”, the number of franchised dealerships has dropped each of the past ten years. Chart 3 shows this graphically. Chart 3 Number of Franchised Dealerships in the U.S.

At December 31 1992-2002

Source: National Automotive Dealers Association

22000

22400

22800

23200

23600

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

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The “Big Six” auto retailers—AutoNation, UAG, Sonic (SAH-NYSE), Group 1 (GPI), Asbury (ABG), and Lithia (LAD), control only about 6% new vehicle sales in the U.S. Thus there is still considerable room for these companies to expand through acquisitions, however the number of attractive properties in attractive markets is finite. First, let us lay out what we believe the most profitable brands are from strictly a new vehicle perspective. Table 5 Average Dealership New Vehicle Profitability By Brand

Source: Gabelli & Company, Inc. estimates.

Car Truck Total Per Vehicle Total Per Dealer

Lexus 779 439 1218 $4,782 $5,824,476Honda 728 356 1084 2,651 2,873,684 Toyota 698 571 1269 2,254 2,860,326 BMW / Mini 627 125 752 3,545 2,665,840 Mercedes 550 138 688 3,817 2,626,096 Ford 220 542 762 2,603 1,983,486 Jaguar 423 0 423 4,612 1,950,876 Chevrolet 177 446 623 3,024 1,883,952 Acura 437 207 644 2,920 1,880,480 Audi 330 0 330 4,471 1,475,430 Infiniti 456 107 563 2,361 1,329,243 Nissan 392 213 605 1,881 1,138,005 Land Rover 0 314 314 3,605 1,131,970 VW 549 12 561 1,804 1,012,044 Mitsubishi 465 152 617 1,607 991,519 Porsche 106 0 106 8,843 937,358 Saturn 466 146 612 1,528 935,136 GMC 0 244 244 3,773 920,612 Dodge 117 311 428 2,135 913,780 Hyundai 548 145 693 1,221 846,153 Volvo 310 9 319 1,794 572,286 Subaru 278 0 278 2,028 563,784 Mazda 220 137 357 1,421 507,297 Cadillac 100 34 134 3,725 499,150 Lincoln 71 29 100 4,031 403,100 Saab 180 0 180 2,121 381,780 Kia 248 143 391 967 378,097 Pontiac 157 26 183 1,835 335,805 Jeep 0 162 162 2,022 327,564 Chrysler 108 57 165 1,817 299,805 Buick 134 0 134 2,179 291,986 Mercury 87 29 116 2,141 248,356

(New Vehicles Only) Weighted Avg. Gross Profit Avg. 2002 Unit Volume

Not Adjusted for Dealer Incentives

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The estimated average gross profit per dealership is based on 2002 product mix and estimated dealer gross margin on each model. We used NADA data to arrive at dealer gross margin, which we defined for simplicity’s sake as MSRP less invoice price. The analysis reveals that, generally, foreign nameplates generate higher gross profits, at least on the new vehicle end of the business, than domestic nameplates, though high-volume domestic names like Ford and Chevrolet are likely able to hold their own simply on the number of vehicles they sell. This is a rather rudimentary analysis in that it does not take into account the management or location of individual dealerships. Directionally, however, we think it is revealing of which brands, in general, generate the most profit and volume. Next we depict the number of franchises each of the Big Six own by brand.

Table 6 Number of U.S. Franchises Owned by Big Six Publicly Traded Dealer Groups

Source: Company filings and websites, Automotive News.

Owned by % of U. S. OwnedAsbury AutoNation Group 1 Lithia Sonic UnitedAuto "Big Six" Total U. S. by "Big Six"

Acura 5 4 2 0 2 3 16 261 6. 1%Aston M artin 0 0 0 0 0 1 1 29 3. 4%Audi 3 5 1 1 5 4 19 259 7. 3%Bentley 0 1 0 0 0 1 2 37 5. 4%BM W 6 9 2 6 11 9 43 340 12. 6%Buick 0 12 3 0 1 2 18 2766 0. 7%Cadillac 1 1 2 1 11 2 18 1488 1. 2%Chevrolet 4 24 5 9 15 9 66 4180 1. 6%Chrysler 4 22 7 14 7 7 61 2942 2. 1%Dodge 4 25 9 31 9 9 87 3083 2. 8%Ferrari 0 0 0 0 0 1 1 25 4. 0%Ford 7 53 13 7 13 10 103 3927 2. 6%GM C 6 15 4 0 2 4 31 2237 1. 4%Honda 10 18 5 3 15 14 65 1005 6. 5%Hummer 0 0 1 0 2 4 7 150 4. 7%Hyundai 4 7 1 7 6 2 27 604 4. 5%Infiniti 3 3 1 0 1 2 10 162 6. 2%Isuzu 1 7 2 2 3 1 16 477 3. 4%Jaguar 1 2 0 0 0 0 3 160 1. 9%Jeep 3 22 6 12 7 7 57 2822 2. 0%Kia 4 3 0 2 5 0 14 638 2. 2%Land Rover 1 2 0 0 2 5 10 148 6. 8%Lexus 3 4 3 3 4 5 22 200 11. 0%Lincoln 6 9 2 6 3 3 29 1376 2. 1%Lotus 0 0 0 0 0 0 0 36 0. 0%Mazda 5 7 1 1 1 3 18 708 2. 5%Mercedes-Benz 3 10 2 3 4 7 29 317 9. 1%Mercury 6 9 2 6 4 2 29 2005 1. 4%Mini 1 0 0 0 0 0 1 70 1. 4%Mitsubishi 3 7 5 0 1 0 16 637 2. 5%Nissan 9 28 8 3 7 8 63 1067 5. 9%Oldsmobile 0 5 1 0 4 0 10 1848 0. 5%Pontiac 6 14 4 0 3 4 31 2807 1. 1%Porsche 2 2 1 0 3 5 13 192 6. 8%Saab 0 0 0 0 1 0 1 217 0. 5%Saturn 0 0 0 2 0 0 2 440 0. 5%Subaru 0 5 1 4 2 0 12 588 2. 0%Suzuki 1 2 0 3 0 1 7 440 1. 6%Toyota 5 15 8 4 10 17 59 1203 4. 9%Volkswagen 1 4 1 4 5 1 16 606 2. 6%Volvo 3 6 1 1 8 1 20 341 5. 9%TOTAL 121 373 104 136 177 154 1054 43363 2. 4%

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The trend in domestic (GM, Ford, Chrysler) market share over the past ten years makes foreign nameplates even more desirable. In 1992, domestic market share stood at close to 72%. Today, that number is 61% and continues to fall. AutoNation, which is weighted toward the domestics (55% of sales), reported same store new vehicle sales down 10.7% in the first quarter against an industry decline of 4.4%. UAG reported same store unit sales up 2.4%, Asbury down 1.5%, Lithia up 7.7%, Sonic down 4.9%, and Group 1 down 10.4%. Again, particular geographical markets may be stronger for some brands then for others, leading to reported results that may be better than a given brand mix would indicate. For example AutoNation reported particular market weakness in Houston, Denver, Atlanta, and the San Francisco Bay area. New vehicle sales are also a function of population growth, particularly that of the driving age population. The areas of the U.S. that have shown the most growth in these regards are those composing the sunbelt: from Florida through Texas to California. Not surprisingly, dealerships owned by the Big Six are located disproportionately in these states. We lay out this breakdown for AutoNation and its peer group in Table 7. Table 7 Number of Dealerships by State

Source: Company websites, NADA data.

# of # ofState Dealerships AN Big Six State Dealerships AN Big SixCalifornia 1638 63 121 Oklahoma 300 20Texas 1342 47 129 Kansas 291Pennsylvania 1258 Arkansas 284 22New York 1243 1 3 Oregon 276 29Illinois 1068 16 16 Colorado 266 18 32Ohio 1030 8 20 Mississippi 250 2Florida 966 63 124 Arizona 229 15 28Michigan 818 1 8 Nebraska 227 3North Carolina 701 1 28 West Virginia 188New Jersey 629 9 New Hampshire 176Wisconsin 629 Maine 154Georgia 614 15 35 New Mexico 135 8Indiana 576 4 South Dakotah 134 3Virginia 550 7 Utah 134Massachusetts 523 1 Montana 133Missourri 519 6 Idaho 131 8Minnesota 475 1 1 North Dakotah 110Tennessee 420 8 10 Nevada 103 11 20Iowa 414 Vermont 98Washington 386 11 11 Rhode Island 72Maryland 371 5 9 Wyoming 70Alabama 355 3 12 Delaware 68Connecticut 344 3 Hawaii 59Louisiana 338 4 Alaska 46 2Kentucky 334 Dist. Of Colombia 4South Carolina 321 20 TOTAL 21800 287 758

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Conclusion. There are still numerous attractive dealerships and franchises for consolidators like AutoNation to acquire. Restrictions put in place by manufacturers and states make the pool smaller than it appears, however. For example, Lexus has limited the number of franchises one group can own to four, unless it makes a special exception. Manufacturers such as Toyota also place limits on consolidation, and sometimes a manufacturer can hold up the sale of a franchise to a consolidator if it is not pleased with the group’s results elsewhere in the country. This is the case with Ford’s ongoing blockage of Asbury’s purchase of a dealership in California. Even the consolidators themselves potentially limit the universe of dealers they can acquire by removing management shortly after the acquisition; some individual dealership owners want to stay on in some capacity. Thus, while there are attractive properties still on the market, the remaining players will likely find themselves more and more in competition with one another as the pool dwindles in coming years. AutoNation has the advantage of already having achieved scale in most of its markets, which generates tremendous benefits and tremendous cash flow. It is unlikely any of the other players can replicate AutoNation’s existing portfolio of locations. EARNINGS MODEL

Table 8 AutoNation Inc. Earnings Model

2002A-2007P

Source: Company Filings, Gabelli & Company, Inc. estimates.

2002A 2003E 2004P 2005P 2006P 2007P CAGR

Revenue By ProductNew Vehicles 11,695$ 12,118$ 12,774$ 13,557$ 14,348$ 15,169$ 5.3%Used Vehicles 3,787 3,831 4,067 4,309 4,560 4,817 4.9%Parts & Service 2,453 2,525 2,673 2,852 3,038 3,232 5.7%Finance & Insurance 510 525 562 604 648 694 6.3%Wholesale Vehicles / Other 1,034 1,064 1,094 1,124 1,154 1,184 2.7%TOTAL REVENUE 19,479$ 20,063$ 21,169$ 22,446$ 23,747$ 25,095$ 5.2%

Cost of Goods Sold 16,567 17,083 18,033 19,120 20,215 21,348 Gross Profit 2,912$ 2,980$ 3,136$ 3,326$ 3,532$ 3,747$ 5.2%

SG & A 2,271 2,340 2,470 2,617 2,765 2,918 Operating Income 641$ 640$ 666$ 709$ 767$ 829$ 5.3%

Interest Expense 40 45 54 66 65 62 Other Expense (Income) (17) (3) - - - -

Pre-Tax Income 618$ 597$ 612$ 644$ 702$ 766$ Income Tax Expense 236 228 234 246 268 293

Net Income 382$ 369$ 378$ 397$ 433$ 473$ Shares Outstanding 322 288 271 262 255 248

Earnings Per Share 1.19$ 1.30$ 1.40$ 1.50$ 1.70$ 1.90$ 9.9%

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BALANCE SHEET

Table 9 AutoNation Inc. Balance Sheet At March 31, 2003

Source: Company Filings, Gabelli & Company, Inc. estimates. Table 10 Publicly Traded Auto Retailers

Source: Company Filings, Gabelli & Company, Inc. estimates.

C a s h & E q u i v a l e n t s 1 8 6$ F l o o r p l a n N o t e s P a y a b l e 2 , 5 6 3$ A c c o u n t s R e c e i v a b l e 7 1 5 A c c o u n t s P a y a b l e 1 6 0 I n v e n t o r y 2 , 8 0 4 N o t e s P a y a b l e & S h o r t T e r m D e b t 1 4 O t h e r C u r r e n t A s s e t s 1 4 4 C u r r e n t P o r t i o n o f I R S S e t t l e m e n t 3 6 0 T o t a l C u r r e n t A s s e t s 3 , 8 4 9 O t h e r C u r r e n t L i a b i l i t i e s 5 4 4

T o t a l C u r r e n t L i a b i l i t i e s 3 , 6 4 1

R e s t r i c t e d A s s e t s 9 2 L o n g - T e r m D e b t 6 9 8 P r o p e r t y & E q u i p m e n t 1 , 7 0 4 L o n g T e r m P o r t i o n o f I R S S e t t l e m e n t 1 2 0 I n t a n g i b l e A s s e t s 2 , 9 8 7 D e f e r r e d T a x e s & O t h e r 4 5 8 O t h e r A s s e t s 1 8 7

S h a r e h o l d e r s ' E q u i t y 3 , 9 0 1$

T o t a l A s s e t s 8 , 8 1 8$ T o t a l L i a b i l i t i e s & S h a r e h o l d e r s ' E q u i t y 8 , 8 1 8$

(in millions, except per share data) Asbury AutoNation Group 1 Lithia Motors Sonic UnitedAuto Group(numbers are pro forma if appropriate) (ABG-NYSE) (AN-NYSE) (GPI-NYSE) (LAD-NYSE) (SAH-NYSE) (UAG-NYSE)12-Month High/Low 20.50$ 5.70$ 18.10$ 9.05$ 46.97$ 18.00$ 30.35$ 10.81$ 36.69$ 13.22$ 29.40$ 9.81$ Capitalization FYE 31-Dec FYE 31-Dec FYE 31-Dec FYE 31-Dec FYE 31-Dec FYE 31-DecBalance Sheet as of: Mar-03 Mar-03 Mar-03 Mar-03 Mar-03 Mar-03Shares Outstanding 33.8 281.3 22.5 18.2 40.7 38.4Options/Converts 0.0 3.0 0.7 0.0 1.9 3.1Fully Diluted Shares Outstanding 33.8 284.3 23.2 18.3 42.6 41.5Price as of 5/23/2003 10.75$ 13.63$ 27.87$ 14.25$ 17.80$ 17.82$ Equity Market Capitalization 363.0$ 3,874.9$ 645.3$ 260.4$ 757.6$ 739.3$ Total Debt and Preferred Stock 466.9 712.0 83.9 119.8 640.3 720.2Minority InterestCash and Equivalents (38.1) (185.7) (20.2) (29.6) (10.6) (11.5)Hidden AssetsTotal Enterprise Value (TEV) 791.8$ 4,401.2$ 708.9$ 350.6$ 1,387.4$ 1,448.1$

Consolidated:Net Revenues 2004P 5,065.1$ 8.8% 21,168.9$ 5.5% 4,600.0$ 4.5% 2,800.0$ 7.7% 7,300.0$ 1.4% 8,675.9$ 9.7%

(growth) 2003E 4,656.0 3.8% 20,062.8 3.0% 4,400.0 4.4% 2,600.0 9.4% 7,200.0 1.8% 7,911.2 6.4%

2002E 4,486.0 19,478.5 4,214.4 2,376.9 7,071.0 7,434.9

EBITDA 2004P 167.6$ 3.3% 750.6$ 3.5% 159.8$ 3.5% 81.2$ 2.9% 251.6$ 3.4% 262.6$ 3.0%

(margin) 2003E 143.0 3.1% 716.2 3.6% 149.6 3.4% 72.8 2.8% 235.0 3.3% 232.6 2.9%

2002E 138.3 3.1% 710.8 3.6% 149.6 3.5% 78.7 3.3% 243.7 3.4% 194.8 2.6%

EPS 2004P 1.79$ 23.6% 1.40$ 9.1% 3.40$ 9.7% 1.75$ 12.9% 2.90$ 16.0% 2.30$ 11.0%

(growth) 2003E 1.45 6.3% 1.28 7.9% 3.10 10.7% 1.55 -15.8% 2.50 1.2% 2.07$ 14.0%

2002E 1.36 1.19 2.80 1.84 2.47 1.82$ TEV/EBITDA 2004P 4.7 x 5.9 x 4.4 x 4.3 x 5.5 x 5.5 xCalendarized, if necessary 2003E 5.5 6.1 4.7 4.8 5.9 6.2

2002E 5.7 6.2 4.7 4.5 5.7 7.4

Total Debt/EBITDA 3.3 x 1.0 x 0.6 x 1.6 x 2.7 x 3.1 xEBITDA/Interest 4.2 x 15.8 x 15.8 x 13.0 x 6.1 x 5.9 xNet Debt/TEV 54.2 % 12.0 % 9.0 % 25.7 % 45.4 % 48.9 %

Gabelli & Company, Inc.

-10-

Table 11 AutoNation Inc. Private Market Value Model

2002A-2007E

(a) After tax payments to options holders at PMV Source: Company filings, Gabelli & Company, Inc. estimates.

The Research Analyst who prepared this report hereby certifies that the views expressed in this report accurately reflect the analyst’s personal views about the subject companies and their securities. The Research Analyst has not been, is not and will not be receiving direct or indirect compensation for expressing the specific recommendation or view in this report. David J. Siino (914) 921-5216 Gabelli & Company, Inc. 2003

ONE CORPORATE CENTER RYE, NY 10580 GABELLI & COMPANY, INC. TEL (914) 921-3700 FAX (914) 921-5098 Gabelli & Company, Inc. (“we or “us”) attempts to provide timely, value-added insights into companies or industry dynamics for institutional investors. We do not have any formal ratings system for our research reports, and we do not undertake to “upgrade” or “downgrade” ratings after publishing a report. We generally write reports on securities that we believe to be undervalued and do not issue any “sell” ratings. Thus, virtually all of our reports containing recommendations would be considered “buy” ratings. We prepared this report as a matter of general information. We do not intend for this report to be a complete description of any security or company and it is not an offer or solicitation to buy or sell any security. All facts and statistics are from sources we believe to be reliable, but we do not guarantee their accuracy. We do not undertake to advise you of changes in our opinion or information. Unless otherwise noted, all stock prices reflect the closing price on the business day immediately prior to the date of this report. We do not use “price targets” predicting future stock performance. We do refer to “private market value” or PMV, which is the price that we believe an informed buyer would pay to acquire 100% of a company. There is no assurance that there are any willing buyers of a company at this price and we do not intend to suggest that any acquisition is likely. Additional information is available on request. In the last 12 months we have provided investment banking services as a syndicate or selling group member of underwritten offering to approximately 2% of the companies that were the subjects of our research reports (all of which would be considered “buy” ratings). Our affiliates beneficially own on behalf of their investment advisory clients or otherwise approximately 1.3% of the common stock of AN. Because the portfolio managers at our affiliates make individual investment decisions with respect to the client accounts they manage, these accounts may have transactions inconsistent with the recommendations in this report. These portfolio managers may know the substance of our research reports prior to their publication as a result of joint participation in research meetings or otherwise. The analyst who wrote this report may receive commissions from customers’ transactions in the securities mentioned in this report and may receive compensation that is based upon (among other factors) our revenues from acting as a syndicate or selling group member in underwritten offerings.

(in $ millions except per share) 2002 2003E 2004P 2005P 2006P 2007PRevenues 19,478.5$ 20,062.8$ 21,168.9$ 22,446.2$ 23,746.8$ 25,094.8$ EBITDA (after floorplan) 710.8 716.2 750.6 801.6 866.0 933.5 Valuation Multiple 6.5 6.5 6.5 6.5 6.5 6.5

Total Private Market Value 4,620.2 4,655.4 4,879.1 5,210.7 5,628.8 6,067.5 Less: Net Debt (475.1) (529.9) (817.1) (825.3) (807.9) (744.7) Less: IRS Tax Payable (479.8) (479.8) (129.8) (89.8) (49.8) - Less: Option Payments (a) - - (51.5) (108.1) (179.5) (262.2) Equity Private Market Value 3,665.3 3,645.8 3,880.6 4,187.6 4,591.5 5,060.6

Shares Outstanding 321.5 288.3 270.8 262.4 254.9 248.2 PMV per share 11$ 13$ 14$ 16$ 18$ 20$ Current Market - Discount to PMV -20.3% -8.4% 4.3% 14.1% 23.9% 32.8%

AutoNation Inc., Price Performance Since Last Report

Source: Public Data. On September 27, 2001 we recommended AN at a price of $8.35 per share.

Company Reports: AutoNation Inc. “Consumer Surrogate”

September 27, 2003