SONIC AUTOMOTIVE INC, S-1/A, 1997-10-03

SONIC AUTOMOTIVE INC
S-1/A, 1997-10-03
AUTO DEALERS & GASOLINE STATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 3, 1997

REGISTRATION NO. 333-33295
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2

TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

SONIC AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)

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<S> <C> <C>
DELAWARE 5511 56-2010790
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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5401 EAST INDEPENDENCE BOULEVARD
P.O. BOX 18747
CHARLOTTE, NORTH CAROLINA 28218
TELEPHONE (704) 532-3301
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

MR. O. BRUTON SMITH
CHIEF EXECUTIVE OFFICER
SONIC AUTOMOTIVE, INC.
5401 EAST INDEPENDENCE BOULEVARD
P.O. BOX 18747
CHARLOTTE, NORTH CAROLINA 28218
TELEPHONE (704) 532-3301
(Name, address, including zip code, and telephone number, including
area code, of agent for service)

COPIES TO:

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<S> <C>
GARY C. IVEY, ESQ. STUART H. GELFOND, ESQ.
PARKER, POE, ADAMS & BERNSTEIN L.L.P. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
2500 CHARLOTTE PLAZA ONE NEW YORK PLAZA
CHARLOTTE, NORTH CAROLINA 28244 NEW YORK, NEW YORK 10004
TELEPHONE (704) 372-9000 TELEPHONE (212) 859-8000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] .
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8 (A), MAY DETERMINE.

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SONIC AUTOMOTIVE, INC.

CROSS-REFERENCE SHEET
PURSUANT TO SECTION 501(B)(4) OF REGULATION S-K SHOWING LOCATION
IN THE PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS OF PART I OF FORM S-1

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<CAPTION>
REGISTRATION STATEMENT ITEM AND CAPTION PROSPECTUS HEADING OR LOCATION

<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.......... Facing Page; Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front and Outside Back Cover Pages; Additional Information

3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges....................... Prospectus Summary; Risk Factors

4. Use of Proceeds................................. Prospectus Summary; Use of Proceeds

5. Determination of Offering Price................. Outside Front Cover Page; Underwriting

6. Dilution........................................ Dilution

7. Selling Security Holders........................ Not Applicable

8. Plan of Distribution............................ Outside Front Cover Page; Underwriting

9. Description of Capital Stock to be Registered... Outside Front Cover Page; Dividend Policy; Description of Capital
Stock

10. Interests of Named Experts and Counsel.......... Not Applicable

11. Information with Respect to the Registrant...... Outside Front Cover Page; Prospectus Summary; Risk Factors; The
Reorganization; The Acquisitions; Use of Proceeds; Dividend Policy;
Capitalization; Selected Combined and Consolidated Financial Data;
Pro Forma Combined and Consolidated Financial Data; Management's
Discussion and Analysis of Financial Condition and Results of
Operations; Business; Management; Certain Transactions; Principal
Stockholders; Description of Capital Stock; Shares Eligible for
Future Sale; Financial Statements

12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.. Not Applicable
</TABLE>

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(Red Herring language appears flush left of this page rotated 90 degrees
and reads as follows:)

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1997
PROSPECTUS
SHARES
(Sonic Logo appears here) SONIC AUTOMOTIVE, INC.
CLASS A COMMON STOCK

All of the shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), offered hereby are being sold by Sonic Automotive,
Inc. ("Sonic" or the "Company").
Each share of Class A Common Stock entitles its holder to one vote per
share. Each share of Class B Common Stock, par value $.01 per share (the "Class
B Common Stock," and together with the Class A Common Stock, the "Common
Stock"), entitles the holder to ten votes per share, except in certain limited
circumstances. All of the shares of Class B Common Stock are held by the members
of the Smith Group (as defined herein), who are all of the stockholders of the
Company prior to the consummation of the Offering. After consummation of the
Offering, the Smith Group will beneficially own shares representing
approximately % of the combined voting power of the Company's Common Stock
(approximately % if the underwriters' over-allotment option is exercised in
full). See "Description of Capital Stock -- Common Stock."
Prior to the Offering, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
will be between $ and $ per share. For a discussion of factors to be
considered in determining the initial public offering price, see "Underwriting."
The Company intends to apply for listing of the Class A Common Stock on the
New York Stock Exchange under the symbol "DLR."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

[CAPTION]
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total (3)........................................... $ $ $
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of additional
shares of Class A Common Stock solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."

The shares of Class A Common Stock are being offered by the several
Underwriters, subject to prior sale, when, as and if issued to and accepted by
them, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Class A Common Stock will be made
in New York, New York on or about , 1997.

MERRILL LYNCH & CO.
MONTGOMERY SECURITIES
WHEAT FIRST BUTCHER SINGER

The date of this Prospectus is , 1997.

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[Photographs of various of the Company's dealerships and a map of the United
States showing locations of the Company's operations]

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent public accountants
and will make available copies of its quarterly reports for the first three
quarters of each year.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK
TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

This Prospectus includes statistical data regarding the retail automotive
industry. Unless otherwise indicated herein, such data is taken or derived from
information published by a division of Intertec Publishing Corp. in its "Ward's
Dealer Business", Crain's Communications, Inc. in its "Automotive News" and
"1997 Market Data Book" and by the Industry Analysis Division of the National
Automobile Dealers Association ("NADA") in its "Industry Analysis and Outlook"
and "Automotive Executive Magazine" publications.

No Manufacturer (as defined in this Prospectus) has been involved, directly
or indirectly, in the preparation of this Prospectus or in the Offering being
made hereby. Although, as described in this Prospectus, Manufacturers will have
granted consents for various of the Acquisitions (as defined herein) and for
this Offering, no Manufacturer has made any statements or representations for
the purpose of such statements or representations being included in this
Prospectus, and no Manufacturer has any responsibility for the accuracy or
completeness of this Prospectus.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES
IN THIS PROSPECTUS TO "SONIC" OR THE "COMPANY" (I) ARE TO SONIC AUTOMOTIVE, INC.
AND, UNLESS THE CONTEXT INDICATES OTHERWISE, ITS CONSOLIDATED SUBSIDIARIES AND
THEIR RESPECTIVE PREDECESSORS, (II) GIVE EFFECT TO A RECENTLY COMPLETED
REORGANIZATION (AS DEFINED BELOW) OF THE COMPANY AND (III) ASSUME THAT THE
COMPANY HAS CONSUMMATED THE ACQUISITION OF THE ASSETS OR ALL THE CAPITAL STOCK
OF SIX ADDITIONAL DEALERSHIPS OR DEALERSHIP GROUPS, AS DESCRIBED HEREIN, IN
NORTH CAROLINA, TENNESSEE, FLORIDA, GEORGIA AND SOUTH CAROLINA (THE
"ACQUISITIONS"). SEE "THE ACQUISITIONS." REFERENCES TO THE "OFFERING" ARE TO THE
OFFERING OF CLASS A COMMON STOCK MADE HEREBY. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS GIVES RETROACTIVE EFFECT TO A -FOR-1 STOCK
SPLIT TO BE CONSUMMATED IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE OFFERING
(THE "STOCK SPLIT") AND ASSUMES THAT THE UNDERWRITERS'OVER-ALLOTMENT OPTION IS
NOT EXERCISED. THE ACQUISITIONS WILL BE CONSUMMATED ON OR BEFORE THE CLOSING OF
THE OFFERING.

THE COMPANY

Sonic Automotive, Inc. is one of the leading automotive retailers in the
United States, operating 19 dealerships, four standalone used vehicle facilities
and seven collision repair centers in the southeastern and southwestern United
States. Sonic sells new and used cars and light trucks, sells replacement parts,
provides vehicle maintenance, warranty, paint and repair services and arranges
related financing and insurance ("F&I") for its automotive customers. The
Company's business is geographically diverse, with dealership operations in the
Charlotte, Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta
markets, each of which the Company believes are experiencing favorable
demographic trends. Sonic sells 16 domestic and foreign brands, which consist of
BMW, Cadillac, Chrysler, Dodge, Eagle, Ford, Honda, Infiniti, Jaguar, Jeep, KIA,
Oldsmobile, Plymouth, Toyota, Volkswagen and Volvo. In several of its markets,
the Company has a significant market share for new cars and light trucks,
including 13.7% in Charlotte and 9.1% in Chattanooga in 1996. Pro forma for the
Acquisitions, the Company had revenues of $899.6 million and retail unit sales
of 24,206 new and 13,475 used vehicles in 1996. The Company believes that in
1996, based on pro forma retail unit sales it would have been one of the ten
largest dealer groups out of a total of more than 15,000 dealer groups in the
United States.

The Company's founder and Chief Executive Officer, O. Bruton Smith, has
over 30 years of automotive retailing experience. In addition, the Company's
other executive officers, regional vice presidents and executive managers have
on average 18 years of automotive retailing experience. The Company's
dealerships have won the highest attainable awards from various manufacturers
measuring quality and customer satisfaction. These awards include the Five Star
Award from Chrysler, the Chairman's Award from Ford, the President's Award from
BMW and the President's Circle Award from Infiniti. In addition, the Company was
named to Ford's Top 100 Club, which consists of Ford's top 100 retailers based
on retail volume and consumer satisfaction.

The Company intends to pursue an acquisition growth strategy led by a
management team that has experience in the consolidation of both automotive
retailing as well as motor sports businesses. Bruton Smith, who is also the
Chief Executive Officer of Speedway Motorsports, Inc., the owner and operator of
several motor sports facilities, first entered the automotive retailing business
in the mid-1960's. Mr. Smith will devote approximately 50% of his business time
to the Company. Since 1990, Mr. Smith has successfully acquired three
dealerships and increased revenues from his dealerships from $199.4 million in
1992 to $376.6 million in 1996, without giving effect to the Acquisitions. In
the Tennessee market, Nelson E. Bowers, II, the Company's Executive Vice
President, has acquired or opened eight dealerships since 1992 and increased
revenues of the dealerships to be acquired by the Company from $13.2 million in
1992 to $101.5 million in 1996. No assurance can be given that Messrs. Smith and
Bowers will be successful in acquiring or opening new dealerships for the
Company or increasing the Company's revenues.

The Company believes the competitive advantages which differentiate it from
its local competitors include the reputation of the Company's management in the
automotive retailing industry, regional and national economies of scale, brand
and geographic diversity, and the established customer base and local name
recognition of the Company's dealerships. The Company has developed and
implemented several growth strategies to capitalize on these competitive
advantages. One of these is to continue to expand its operations in the
Southeast and Southwest by acquiring additional dealerships both within its
current markets and in new markets. The Company also is seeking additional
growth from the increased sale of higher margin products and services such as
wholesale parts, after-market products, collision repair services and F&I.

The Company believes that an opportunity exists for dealership groups with
significant equity capital and experience in identifying, acquiring and
professionally managing dealerships, to acquire additional dealerships and
capitalize on changes in the automotive retailing industry. With approximately
$640 billion in 1996 sales, automotive retailing is the largest consumer retail
market in the United States. The industry today is highly fragmented, with the
largest 100 dealer groups generating less than 10% of total sales revenues and
controlling less than 5% of all new vehicle dealerships. The Company believes
that

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these factors, together with increasing capital costs of operating automobile
dealerships, the lack of alternative exit strategies (especially for larger
dealerships) and the aging of many dealership owners provide attractive
consolidation opportunities.

Automobile retailing is highly competitive. The Company's competition
includes franchised automobile dealerships, some with greater resources than the
Company, selling the same or similar makes of vehicles offered by the Company.
Other competitors include other franchised dealers, private market buyers and
sellers of used vehicles, used vehicle dealers, service center chains and
independent service and repair shops. Gross profit margins on new vehicle sales
have been declining since 1986. The Company also experienced gross profit margin
pressure on used vehicle sales over the last 18 months. For further discussion
of competition affecting the Company's business, see "Risk
Factors -- Competition" and "Business -- Competition."

GROWTH STRATEGY

(Bullet) ACQUIRE DEALERSHIPS. The Company plans to implement a "hub and spoke"
acquisition program primarily by pursuing (i) well-managed dealerships
in new metropolitan and growing suburban geographic markets, and (ii)
dealerships that will allow the Company to capitalize on regional
economies of scale, offer a greater breadth of products and services in
any of its markets or increase brand diversity.

NEW MARKETS. The Company looks to acquire well-managed dealerships in
geographic markets it does not currently serve, principally in the
Southeast and Southwest regions of the United States. Generally, the
Company will seek to retain the acquired dealerships' operational and
financial management, and thereby benefit from their market knowledge, name
recognition and local reputation.

(Bullet) PURSUE OPPORTUNITIES IN ANCILLARY PRODUCTS AND SERVICES. The Company
intends to pursue opportunities to increase its sales of higher-margin
products and services by expanding its collision repair centers and its
wholesale parts and after-market products businesses, which, other than
after market products, are not directly related to the new vehicle
cycle.

WHOLESALE PARTS. Over time, the Company plans to capitalize on its
growing representation of numerous manufacturers in order to increase its
sales of factory authorized parts to wholesale buyers such as independent
mechanical and body repair garages and rental and commercial fleet
operators.

AFTER-MARKET PRODUCTS. The Company intends to expand its offerings of
after-market products in many of its dealership locations. After-market
products, such as custom wheels, performance parts, telephones and other
accessories, enable the dealership to capture incremental revenue on new
and used vehicle sales.

(Bullet) ENHANCE PROFIT OPPORTUNITIES IN FINANCE AND INSURANCE. The Company
offers its customers a wide range of financing and leasing alternatives
for the purchase of vehicles, as well as credit life, accident and
health and disability insurance and extended service contracts. As a
result of its size and scale, the Company believes it will be able to
negotiate with the lending institutions that purchase its financing
contracts to increase the Company's revenues. Likewise, the Company
expects to negotiate to increase the commissions it earns on extended
service and insurance products.

(Bullet) INCREASE USED VEHICLE SALES. The Company believes that there will be
opportunities to improve the used vehicle departments at several of its
dealerships. The Company currently operates four standalone used
vehicle facilities. In 1998, the Company intends to convert part of an
existing facility in Nashville to a used vehicle facility. It also
intends to develop facilities in other markets where management
believes an opportunity exists.

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OPERATING STRATEGY

(Bullet) ACHIEVE HIGH LEVELS OF CUSTOMER SATISFACTION. Customer satisfaction has
been and will continue to be a focus of the Company. The Company's
personalized sales process is intended to satisfy customers by
providing high-quality vehicles in a positive, "consumer friendly"
buying environment. Some Manufacturers offer specific performance
incentives, on a per vehicle basis, if certain customer satisfaction
index ("CSI") levels (which vary by Manufacturer) are achieved by a
dealer. Manufacturers can withhold approval of acquisitions if a dealer
fails to maintain a minimum CSI score. Historically, the Company has
not been denied Manufacturer approval of acquisitions based on CSI
scores. To keep management focused on customer satisfaction, the
Company includes CSI results as a component of its incentive
compensation program.

(Bullet) CAPITALIZE ON EFFICIENCIES IN OPERATIONS. Because management
compensation is based primarily on dealership performance, expense
reduction and operating efficiencies are a significant management
focus. As the Company pursues its acquisition strategy, the Company's
size and market presence should provide it with an opportunity to
negotiate favorable contracts on such expense items as advertising,
purchasing, bank financings, employee benefit plans and other vendor
contracts.

(Bullet) UTILIZE PROFESSIONAL MANAGEMENT PRACTICES AND INCENTIVE BASED
COMPENSATION PROGRAMS. As a result of Sonic's size and geographic
dispersion, the Company's senior management has instituted a
multi-tiered management structure to supervise effectively its
dealership operations. In an effort to align management's interest with
that of stockholders, a portion of the incentive compensation program
for each officer, vice president and executive manager is provided in
the form of Company stock options, with additional incentives based on
the performance of individual profit centers. Sonic believes that this
organizational structure, with room for advancement and the opportunity
for equity participation, serves as a strong motivation for its
employees.

THE REORGANIZATION

The Company was recently incorporated and capitalized with the stock of the
existing automobile dealerships that have been under the control of Bruton Smith
comprised of Town & Country Ford, Town & Country Toyota, Lone Star Ford, Fort
Mill Ford and Frontier Oldsmobile-Cadillac (the "Sonic Dealerships"). As of June
30, 1997, the Company effected a reorganization (the "Reorganization") pursuant
to which: (i) the Company acquired all of the capital stock or limited liability
company interests of the Sonic Dealerships (the "Dealership Securities"); and
(ii) the Company issued Class B Common Stock in exchange for the Dealership
Securities. In connection with the Reorganization and the Offering, the Company
intends to convert from the last-in-first-out method (the "LIFO Method") of
inventory accounting to the first-in-first-out method (the "FIFO Method") of
inventory accounting (the "FIFO Conversion"), conditioned upon the closing of
the Offering. The FIFO Conversion will increase retained earnings by
approximately $8.1 million and will result in a tax liability of approximately
$5.5 million as of June 30, 1997 in connection with a restatement of the
Company's financial statements. See "The Reorganization."

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THE ACQUISITIONS

In the past four months, the Company has consummated or signed definitive
agreements to purchase six dealerships or dealership groups for an aggregate
purchase price of approximately $100.7 million. (The aggregate purchase price
for these acquisitions is subject to downward adjustment because one
manufacturer has failed to consent to the Company's acquisition of a dealership
from one of the sellers, and the Company, the manufacturer and the seller are
currently negotiating the purchase price to be paid by the manufacturer for that
dealership under a right of first refusal it has exercised concerning the
dealership. Throughout this Prospectus, all references the aggregate purchase
price are subject to this downward adjustment.) These acquisitions consist of
Ken Marks Ford located in Clearwater, Florida (the "Ken Marks Acquisition"), the
Bowers Transportation Group, which consists of seven dealerships in Chattanooga,
Tennessee and one dealership in Nashville, Tennessee (the "Bowers Acquisition"),
Lake Norman Dodge and Lake Norman Chrysler-Plymouth-Jeep Eagle located in
Cornelius, North Carolina (the "Lake Norman Acquisition"), Dyer & Dyer Volvo
located in Atlanta, Georgia (the "Dyer Acquisition"), Jeff Boyd
Chrysler-Plymouth-Dodge, located in Fort Mill, South Carolina (the "Fort Mill
Acquisition"), and Williams Motors located in Rock Hill, South Carolina (the
"Williams Acquisition") (collectively, the "Acquisitions"). The dealerships
underlying the Acquisitions had aggregate total revenues of approximately $490.1
million in 1996 and enhance the Company's market presence in the Southeast. See
"The Acquisitions."

The Company's principal executive office is located at 5401 East
Independence Boulevard, Charlotte, North Carolina. Its mailing address is P.O.
Box 18747, Charlotte, North Carolina 28218, and its telephone number is (704)
532-3301.

THE OFFERING

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Class A Common Stock Offered by the Company........... shares (1)
Common Stock to be outstanding after the Offering:
Class A Common Stock................................ shares (2)
Class B Common Stock................................ shares
Total.......................................... shares
Voting Rights......................................... The Class A Common Stock and Class B Common Stock vote as a single
class on all matters, except as otherwise required by law, with each
share of Class A Common Stock entitling its holders to one vote and
each share of Class B Common Stock entitling its holder to ten votes
except with respect to certain limited matters. See "Description of
Capital Stock."
Use of proceeds....................................... The net proceeds of the Offering will be used to fund the
Acquisitions, including repaying indebtedness incurred by the Company
in connection with the Acquisitions. See "The Acquisitions" and "Use
of Proceeds."
Listing............................................... The Company intends to apply for listing of the Class A Common Stock
on the New York Stock Exchange (the "NYSE"), under the symbol "DLR."
</TABLE>

(1) Does not include up to an aggregate of shares of Class A Common Stock
that may be sold by the Company upon exercise of the over-allotment option
granted to the Underwriters. See "Underwriting."
(2) Excludes shares of Class A Common Stock reserved for future issuance
to Company employees under the Company's stock option plan (including up to
shares of Class A Common Stock reserved for issuance upon exercise of
options to be granted on or before the consummation of the Offering pursuant
to the Company's Stock Option Plan (as defined herein)) and excludes
shares of Class A Common Stock ( shares if the Underwriters'
over-allotment option is exercised) reserved for issuance under the Dyer
Warrant (defined herein). See "The Acquisitions -- The Dyer Acquisition" and
"Management -- Stock Option Plan."

RISK FACTORS

The Company's ability to make acquisitions in the future may be limited to
some extent by the Manufacturers. Under the limitations currently imposed by,
and without the prior consent of, the applicable Manufacturers, the Company
could acquire no additional Chrysler dealerships, no Saturn dealerships and no
more than: 15 Ford and 15 Lincoln Mercury dealerships or that number of Ford and
Lincoln Mercury dealerships accounting for 2% of the preceding year's retail
sales of those brands in the United States; six additional Toyota dealerships;
three Lexus dealerships; six additional Honda dealerships; three Acura
dealerships; and five additional GM dealerships (within the next two years,
subject to being increased). The Manufacturers without limitations on future
acquisitions are Volvo and Volkswagen. Other Manufacturers have not imposed
limitations but may do so. See "Risk Factors -- Risks Associated with
Acquisitions," " -- Manufacturers' Restrictions on Acquisitions".

See "Risk Factors" beginning on page 9 for a discussion of other factors
that should be considered by prospective purchasers of the Class A Common Stock
offered hereby.

<PAGE>
SUMMARY HISTORICAL AND PRO FORMA COMBINED AND CONSOLIDATED FINANCIAL DATA

The following summary historical and pro forma combined and consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Combined and
Consolidated Financial Statements of the Company and the related notes and "Pro
Forma Combined and Consolidated Financial Data" included elsewhere in this
Prospectus. The Company acquired Fort Mill Ford, Inc. and Fort Mill
Chrysler-Plymouth-Dodge in February 1996 and in June 1997, respectively. Both of
these acquisitions were accounted for using the purchase method of accounting.
As a result the Summary Historical Combined and Consolidated Financial Data
below does not include the results of operations of these dealerships prior to
the date they were acquired by the Company. Accordingly, the actual historical
data for the periods after the acquisition may not be comparable to data
presented for periods prior to the acquisitions of Fort Mill Ford and Fort Mill
Chrysler-Plymouth-Dodge. Additionally, the Summary Historical and Pro Forma
Combined and Consolidated Financial Data below is not necessarily indicative of
the results of operations or financial position which would have resulted had
the Reorganization, the FIFO Conversion, the Acquisitions and the Offering
occurred during the periods presented.

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<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO
ACTUAL FORMA ACTUAL
1992 1993 1994 1995 1996(2) 1996(1) 1996(2) 1997(3)
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(IN THOUSANDS, EXCEPT PER SHARE AND VEHICLES UNIT DATA)
COMBINED AND CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Vehicle sales...................... $171,065 $203,630 $227,960 $267,308 $326,842 $788,255 $164,333 $185,077
Parts, service and collision
repair........................... 24,543 30,337 33,984 35,860 42,644 94,912 21,005 22,907
Finance and insurance.............. 3,743 3,711 5,181 7,813 7,118 16,471 4,277 4,763
Total revenues................... 199,351 237,678 267,125 310,981 376,604 899,638 189,615 212,747
Cost of sales........................ 174,503 210,046 234,461 272,179 332,407 786,129 167,191 188,368
Gross profit (4)..................... 24,848 27,632 32,664 38,802 44,197 113,509 22,424 24,379
Selling, general and administrative
expenses........................... 20,251 22,738 24,632 29,343 33,677 85,804 16,590 18,413
Depreciation and amortization........ 682 788 838 832 1,076 3,625 360 396
Operating income..................... 3,915 4,106 7,194 8,627 9,444 24,080 5,474 5,570
Interest expense floor plan.......... 2,215 2,743 3,001 4,505 5,968 9,342 2,801 3,018
Interest expense, other.............. 290 263 443 436 433 974 184 269
Other income......................... 1,360 613 609 449 618 2,222 369 274
Income before income taxes and
minority interest (4).............. 2,770 1,713 4,359 4,135 3,661 15,986 2,858 2,557
Provision for income taxes........... 108 107 1,560 1,675 1,400 6,372 1,093 937
Income before minority interest...... 2,662 1,606 2,799 2,460 2,261 9,614 1,765 1,620
Minority interest in earnings (loss)
of subsidiary...................... (31) (22) 15 22 114 -- 41 47
Net income........................... $ 2,693 $ 1,628 $ 2,784 $ 2,438 $ 2,147 $ 9,614 $ 1,724 $ 1,573
Net income per share (5)............. $ --

<CAPTION>
PRO
FORMA
1997(1)
<S> <C>
COMBINED AND CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Vehicle sales...................... $418,624
Parts, service and collision
repair........................... 49,881
Finance and insurance.............. 9,410
Total revenues................... 477,915
Cost of sales........................ 419,493
Gross profit (4)..................... 58,422
Selling, general and administrative
expenses........................... 43,553
Depreciation and amortization........ 1,720
Operating income..................... 13,149
Interest expense floor plan.......... 5,241
Interest expense, other.............. 575
Other income......................... 1,247
Income before income taxes and
minority interest (4).............. 8,580
Provision for income taxes........... 3,212
Income before minority interest...... 5,368
Minority interest in earnings (loss)
of subsidiary...................... --
Net income........................... $ 5,368
Net income per share (5)............. $ --
</TABLE>

OTHER COMBINED AND
CONSOLIDATED OPERATING DATA:

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New vehicle units sold............... 8,060 9,429 9,686 10,273 11,693 24,206 6,027 6,553
Used vehicle units sold -- retail
(6)................................ 3,892 4,104 4,374 5,172 5,488 13,475 2,836 2,638
New vehicle sales revenues........... $126,230 $152,525 $164,361 $186,517 $233,146 $540,505 $115,721 $137,069
Used vehicle sales revenues -- retail
(6)................................ 33,636 37,742 47,537 60,766 68,054 181,780 35,200 32,666
Parts, service and collision repair
sales revenues..................... 24,543 30,337 33,984 35,860 42,644 94,908 21,005 22,906
Gross profit margin (FIFO) (7)....... 12.4% 12.3% 12.8% 12.9% 12.1% 12.6% 11.8% 11.5%
New vehicle gross margin (FIFO)
(7)................................ 6.7% 6.9% 7.0% 7.3% 7.4% 7.4% 6.6% 6.5%
Used vehicle gross margin (retail)
(FIFO) (7)(6)...................... 10.7% 10.5% 10.9% 9.5% 8.4% 9.2% 8.4% 8.5%
Parts, service and collision repair
gross margin (FIFO) (7)(6)......... 36.3% 36.4% 35.9% 36.1% 36.5% 42.3% 35.8% 35.4%

<CAPTION>
New vehicle units sold............... 12,596
<S> <C>
Used vehicle units sold -- retail
(6)................................ 7,043
New vehicle sales revenues........... $285,143
Used vehicle sales revenues -- retail
(6)................................ 96,249
Parts, service and collision repair
sales revenues..................... 49,881
Gross profit margin (FIFO) (7)....... 12.2%
New vehicle gross margin (FIFO)
(7)................................ 7.3%
Used vehicle gross margin (retail)
(FIFO) (7)(6)...................... 8.9%
Parts, service and collision repair
gross margin (FIFO) (7)(6)......... 42.3%
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JUNE 30, 1997
1996 ACTUAL PRO FORMA
<S> <C> <C> <C>
COMBINED AND CONSOLIDATED BALANCE SHEET DATA:
Working capital.............................................................. $ 6,201 $ 4,287 $ 51,233
Total assets................................................................. 94,930 106,859 312,692
Long-term debt............................................................... 5,286 5,137 11,130
Total liabilities............................................................ 78,867 86,499 185,913
Minority interest............................................................ 314 -- --
Stockholders' equity (4)..................................................... 15,749 20,360 126,779
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

<PAGE>
(1) For information regarding the pro forma adjustments made to the Company's
historical financial data, which give effect to the Reorganization, the FIFO
Conversion, the Acquisitions, and the Offering, see "Pro Forma Combined and
Consolidated Financial Data."
(2) The actual statement of operations data for the year ended December 31, 1996
includes the results of Fort Mill Ford, Inc. from the date of acquisition,
February 1, 1996.
(3) The actual statement of operations data for the six months ended June 30,
1997 include the results of Fort Mill Chrysler-Plymouth-Dodge, Inc. from the
date of acquisition June 6, 1997.
(4) The Company currently utilizes the LIFO Method of inventory accounting. See
Note 3 to the Company's Combined and Consolidated Financial Statements. The
Company intends to file an election with the Internal Revenue Service to
convert, upon the closing of the Offering, to the FIFO Method of inventory
accounting and report its earnings for tax purposes and in its financial
statements on the FIFO Method. If the Company had previously utilized the
FIFO Method, gross profit and income before income taxes and minority
interest for the periods shown in the table, and stockholders' equity as of
December 31, 1996 and June 30, 1997, would have been as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Gross profit............................ $24,638 $29,233 $34,114 $40,103 $45,557 $22,424 $24,379
Income before income taxes and minority
interest.............................. 2,560 3,314 5,809 5,436 5,021 2,858 2,557
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 JUNE 30, 1997
<S> <C> <C>
(IN THOUSANDS)
Stockholders' equity..................................................................... $23,829 $28,440
</TABLE>

(5) Historical net income per share is not presented, as the historical capital
structure of the Company prior to the Offering is not comparable with the
capital structure that will exist after the Offering.
(6) The term "retail" describes sales to consumers as compared to sales to
wholesalers.
(7) Data is presented on the FIFO Method of inventory accounting. The Company
has historically used the LIFO Method of inventory accounting and intends to
convert to the FIFO Method conditioned and effective upon the closing of the
Offering. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview."

<PAGE>
RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER AND EVALUATE ALL OF THE
INFORMATION SET FORTH IN THIS PROSPECTUS, INCLUDING THE PRINCIPAL RISK FACTORS
SET FORTH BELOW.

DEPENDENCE ON AUTOMOBILE MANUFACTURERS

Each of the Company's dealerships operates pursuant to a franchise
agreement between the applicable automobile manufacturer (or authorized
distributor thereof) (the "Manufacturer") and the subsidiary of the Company that
operates such dealership. The Company is dependent to a significant extent on
its relationship with such Manufacturers.

After giving effect to the Reorganization and the Acquisitions, vehicles
manufactured by Ford Motor Company ("Ford"), Chrysler Corporation ("Chrysler"),
Volvo Motors ("Volvo") and Toyota Motor Sales (U.S.A.) ("Toyota") accounted for
approximately 64.5%, 17.9%, 6.0% and 5.8%, respectively, of the Company's 1996
pro forma unit sales of new vehicles. No other Manufacturer accounted for more
than 5% of the new vehicle sales of the Company during 1996. See
"Business -- New Vehicle Sales," and " -- Relationships with Manufacturers."
Accordingly, a significant decline in the sale of Ford, Chrysler, Toyota, or
Volvo new cars could have a material adverse effect on the Company.
Manufacturers exercise a great degree of control over dealerships, and the
franchise agreement provides for termination or non-renewal for a variety of
causes. The Company believes that it is in compliance in all material respects
with all its franchise agreements except that Lake Norman Dodge (one of the
dealerships whose assets are being purchased in the Lake Norman Acquisition) is
in violation of its franchise agreement with Chrysler. The Company does not have
any reason to believe that this will have an effect on its ability to consummate
the Lake Norman Acquisition. The Company's franchise agreements generally expire
at various times between 1997 and 2000, although some franchise agreements have
no specific expiration date and continue in effect unless terminated pursuant to
certain limited circumstances. The Company has no reason to believe that it will
not be able to renew all of its franchise agreements upon expiration, but there
can be no assurance that any of such agreements will be renewed or that the
terms and conditions of such renewals will be favorable to the Company. If a
Manufacturer terminates or declines to renew one or more of the Company's
significant franchise agreements, such action could have a material adverse
effect on the Company and its business. Actions taken by Manufacturers to
exploit their superior bargaining position in negotiating the terms of such
renewals or otherwise could also have a material adverse effect on the Company.
See "Business -- Relationships with Manufacturers."

The Company also depends on the Manufacturers to provide it with a
desirable mix of popular new vehicles that produce the highest profit margins
and which may be the most difficult to obtain from the Manufacturers. If the
Company is unable to obtain a sufficient allocation of the most popular
vehicles, its profitability may be materially adversely affected. In some
instances, in order to obtain additional allocations of these vehicles, the
Company purchases a larger number of less desirable models than it would
otherwise purchase and its profitability may be materially adversely affected
thereby. The Company's dealerships depend on the Manufacturers for certain sales
incentives and other programs that are intended to promote dealership sales or
support dealership profitability. Manufacturers have historically made many
changes to their incentive programs during each year. A reduction or
discontinuation of a Manufacturer's incentive programs may materially adversely
affect the profitability of the Company.

The success of each of the Company's dealerships depends to a great extent
on the financial condition, marketing, vehicle design, production capabilities
and management of the Manufacturers which the Company represents. Events such as
strikes and other labor actions by unions, or negative publicity concerning a
particular Manufacturer or vehicle model, may materially and adversely affect
the Company. Although, the Company has attempted to lessen its dependence on any
one Manufacturer by establishing dealer relationships with a number of different
domestic and foreign automobile Manufacturers, adverse conditions affecting
Ford, Chrysler, Toyota and Volvo in particular, could have a material adverse
affect on the Company. For instance, workers at a Chrysler engine plant went on
strike in April 1997 for 29 days. The strike by the United Auto Workers caused
Chrysler's vehicle production to drop during the Spring of 1997, especially for
production of its most popular truck and van models. This strike materially
affected the Company due to Chrysler's inability to provide the Company with a
sufficient supply of new vehicles and parts during such period. In the event of
another such strike, the Company may need to purchase inventory from other
automobile dealers at prices higher than it would be required to pay to the
Manufacturers, in order to carry an adequate level and mix of inventory.
Consequently, such events could materially adversely affect the financial
results of the Company. See "Business -- New Vehicle Sales" and
" -- Relationship with Manufacturers."

<PAGE>
Many Manufacturers attempt to measure customers' satisfaction with their
sales and warranty service experiences through systems, which vary from
Manufacturer to Manufacturer but which are generally known as CSI. These
Manufacturers may use a dealership's CSI scores as a factor in evaluating
applications for additional dealership acquisitions and other matters such as
vehicle inventory allocations. The components of CSI have been modified from
time to time in the past, and there is no assurance that such components will
not be further modified or replaced by different systems in the future. To date,
the Company has not been adversely affected by these standards and has not been
denied approval of any acquisition. However, there can be no assurance that the
Company will be able to comply with such standards in the future. Failure of the
Company's dealerships to comply with the standards imposed by Manufacturers at
any given time may have a material adverse effect on the Company.

The Company must also obtain approvals by the applicable Manufacturer for
any of its acquisitions. See " -- Risks Associated with Acquisitions."

COMPETITION

Automobile retailing is a highly competitive business with over 22,000
franchised automobile dealerships in the United States at the beginning of 1996.
The Company's competition includes franchised automobile dealerships selling the
same or similar makes of new and used vehicles offered by the Company in the
same markets as the Company and sometimes at lower prices than those of the
Company. These dealer competitors may be larger and have greater financial and
marketing resources than the Company. Other competitors include other franchised
dealers, private market buyers and sellers of used vehicles, used vehicle
dealers, service center chains and independent service and repair shops. Gross
profit margins on sales of new vehicles have been declining since 1986. The
Company has also had margin pressure on its used vehicle sales over the last 18
months. The used car market faces increasing competition from non-traditional
outlets such as used-car "superstores," which use sales techniques such as one
price shopping and the Internet. Several groups have begun to establish
nationwide networks of used vehicle superstores. In Charlotte and Atlanta, where
the Company has significant operations, CarMax Superstores operate in
competition with the Company. In addition, car superstores operate in many of
the Company's other markets. "No negotiation" sales methods are also being tried
for new cars by at least one of these superstores and by dealers for Saturn and
other dealerships. Some recent market entrants may be capable of operating on
smaller gross margins compared to the Company. In addition, certain
Manufacturers have publicly announced that they may directly enter the retail
market in the future which could have a material adverse effect on the Company.
The increased popularity of short-term vehicle leasing also has resulted, as
these leases expire, in a large increase in the number of late model vehicles
available in the market, which puts added pressure on margins. As the Company
seeks to acquire dealerships in new markets, it may face increasingly
significant competition (including from other large dealer groups and dealer
groups that have publicly-traded equity) as it strives to gain market share
through acquisitions or otherwise.

The Company's franchise agreements do not give the Company the exclusive
right to sell a Manufacturer's product within a given geographic area. The
Company could be materially adversely affected if any of its Manufacturers award
franchises to others in the same markets where the Company is operating. A
similar adverse affect could occur if existing competing franchised dealers
increase their market share in the Company's markets. The Company's gross
margins may decline over time as it expands into markets where it does not have
a leading position. These and other competitive pressures could materially
adversely affect the Company's results of operations. See
"Business -- Competition."

OPERATING CONDITION OF ACQUIRED BUSINESSES

Although the Company has conducted what it believes to be a prudent level
of investigation regarding the operating condition of the assets to be purchased
in the Acquisitions in light of the circumstances of each transaction, certain
unavoidable levels of risk remain regarding the actual operating condition of
these assets. Until the Company actually assumes operating control of such
assets, it will not be able to ascertain their actual value and, therefore, will
be unable to ascertain whether the price paid for the Acquisitions represented a
fair valuation. The same risk regarding the actual operating condition of
businesses to be acquired will also apply to future acquisitions by the Company.

RISKS OF CONSOLIDATING OPERATIONS AS A RESULT OF THE ACQUISITIONS

In connection with the Acquisitions, Sonic acquired six dealerships or
dealership groups. Each of these dealerships or groups has been operated and
managed as a separate independent entity to date, and the Company's future
operating results will depend on its ability to integrate the operations of
these businesses and manage the combined enterprise. The Company's management
group has been expanded in connection with these Acquisitions. There can be no
assurance that the management group will be able effectively and profitably
integrate in a timely manner each of the dealerships included in the

<PAGE>
Acquisitions or any future acquisitions, or to manage the combined entity. The
inability of the Company to do so could have a material adverse effect on the
Company's business, financial condition and results of operations.

RISKS ASSOCIATED WITH ACQUISITIONS

The retail automobile industry is considered a mature industry in which
minimal growth is expected in unit sales of new vehicles. Accordingly, the
Company's future growth will depend in large part on its ability to acquire
additional dealerships as well as on its ability to manage expansion, control
costs in its operations and consolidate dealership acquisitions, including the
Acquisitions, into existing operations. In pursuing a strategy of acquiring
other dealerships, including the Acquisitions, the Company faces risks commonly
encountered with growth through acquisitions. These risks include, but are not
limited to, incurring significantly higher capital expenditures and operating
expenses, failing to assimilate the operations and personnel of the acquired
dealerships, disrupting the Company's ongoing business, dissipating the
Company's limited management resources, failing to maintain uniform standards,
controls and policies, impairing relationships with employees and customers as a
result of changes in management and causing increased expenses for accounting
and computer systems, as well as integration difficulties. Installing new
computer systems has in the past disrupted existing operations as management and
salespersons adjust to new technologies. In addition, as contracts with existing
suppliers of the Company's computer systems expire, the Company's strategy may
be to install new systems at its existing dealerships. The Company expects that
it will take one to two years to fully integrate an acquired dealership into the
Company's operations and realize the full benefit of the Company's strategies
and systems. There can be no assurance that the Company will be successful in
overcoming these risks or any other problems encountered with such acquisitions,
including in connection with the Acquisitions. Acquisitions may also result in
significant goodwill and other intangible assets that are amortized in future
years and reduce future stated earnings. See "The Acquisitions," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Growth Strategy."

Although there are many potential acquisition candidates that fit the
Company's acquisition criteria, there can be no assurance that the Company will
be able to consummate any such transactions in the future or identify those
candidates that would result in the most successful combinations or that future
acquisitions will be able to be consummated at acceptable prices and terms. The
magnitude, timing and nature of future acquisitions will depend upon various
factors, including the availability of suitable acquisition candidates,
competition with other dealer groups for suitable acquisitions, the negotiation
of acceptable terms, the Company's financial capabilities, the availability of
skilled employees to manage the acquired companies and general economic and
business conditions.

In addition, the Company's future growth as a result of its acquisition of
automobile dealerships will depend on its ability to obtain the requisite
Manufacturer approvals. There can be no assurance that Manufacturers will grant
such approvals. It is also possible that one or more Manufacturers might object
to ownership by one company of many of its franchises. For example, it is
currently the policy of Toyota to restrict any company from holding more than
seven Toyota or more than three Lexus franchises and to impose restrictions
based on the number of franchises held within certain geographic areas. Chrysler
also recently announced its policy to restrict any company from holding more
than ten Chrysler and Chrysler division dealerships and to impose restrictions
based on the number of franchises held within certain geographic areas. Although
the Company has been to date able to obtain Manufacturer approvals (except from
Saturn with regards to the Company's attempted acquisition of a Saturn
dealership from Nelson Bowers as to which Saturn exercised its right of first
refusal) for its acquisitions on acceptable terms, there can be no assurance
that it will be able to do so in the future. See " -- Manufacturers'
Restrictions on Acquisitions" and "Business -- Relationships with
Manufacturers."

As a condition to granting their consent to the Acquisitions, a number of
Manufacturers have imposed restrictions on the Company. In addition to the
restrictions under " -- Stock Ownership/Issuance Limits" below, these
restrictions include restrictions on (i) certain material changes in the Company
or extraordinary corporate transactions such as a merger, sale of a material
amount of assets or change in the Board of Directors or management of the
Company which could have a material adverse effect on the Manufacturer's image
or reputation or could be materially incompatible with the Manufacturer's
interests; (iii) the removal of a dealership general manager without the consent
of the Manufacturer; and (iv) the use of dealership facilities to sell or
service new vehicles of other Manufacturers. If the Company is unable to comply
with these restrictions, the Company generally must (i) sell the assets of the
dealerships to the Manufacturer or to a third party acceptable to the
Manufacturer, or (ii) terminate the dealership agreements with the Manufacturer.

In certain cases, the Company may be required to file applications and
obtain clearances, under applicable federal antitrust laws before consummation
of an acquisition. These regulatory requirements may restrict or delay the
Company's acquisitions, and may increase the cost of completing such
transactions.

<PAGE>

LIMITATIONS ON FINANCIAL RESOURCES AVAILABLE FOR ACQUISITIONS

The Company intends to finance acquisitions with cash on hand, through
issuances of equity or debt securities and through borrowings under credit
arrangements. The Company is currently negotiating new credit arrangements,
although none has been consummated and no assurance can be given that any
lending or credit arrangement will be consummated or that such arrangements will
adequately meet the Company's financing needs on acceptable terms. Similarly,
there is no assurance that the Company will be able to obtain additional debt or
equity securities financing. Using cash to complete acquisitions could
substantially limit the Company's operating or financial flexibility. Using
stock to consummate acquisitions may result in significant dilution of
stockholders' percentage interest in the Company, which dilution may be
prohibited by the Company's franchise agreements with Manufacturers. See
" -- Stock Ownership/Issuance Limits." If the Company is unable to obtain
financing on acceptable terms, the Company may be required to reduce
significantly the scope of its presently anticipated expansion, which could
materially adversely affect the Company's business. See "The Acquisitions,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources" and "Business -- Growth Strategy."

In addition, the Company is dependent to a significant extent on its
ability to finance the purchase of inventory, which in the automotive retail
industry involves significant sums of money in the form of floor plan financing.
As of June 30, 1997 on a pro forma basis for the Acquisitions, the Company had
approximately $142.2 million of floor plan indebtedness. Substantially all the
assets of the Company's dealerships are pledged to secure such indebtedness,
which may impede the Company's ability to borrow from other sources. Many floor
plan lenders are associated with Manufacturers with whom the Company has
franchise agreements. Consequently, deterioration of the Company's relationship
with a Manufacturer could adversely affect its relationship with the affiliated
floor plan lender and vice-versa. In addition, the Company must obtain new floor
plan financing or obtain consents to assume such financing in connection with
its acquisition of dealerships. See " -- Dependence on Automobile
Manufacturers."

STOCK OWNERSHIP/ISSUANCE LIMITS

Standard automobile franchise agreements prohibit transfers of any
ownership interests of a dealership and its parent, such as Sonic, and,
therefore, often do not by their terms accommodate public trading of the capital
stock of a dealership or its parent. While, prior to the Offering and as a
condition thereto, all of the Manufacturers of which Company subsidiaries are
franchisees will have agreed to permit the Offering and trading in the Class A
Common Stock, a number of Manufacturers will continue to impose restrictions
upon the transferability of the Common Stock. For instance, Ford may cause the
Company to sell or resign from its Ford franchises if any person or entity
acquires 15% or more of the Company's voting securities. Likewise, General
Motors and Toyota may force the sale of their respective franchises if 20% of
more of the Company's voting securities are so acquired. Volkswagen has approved
of the public sale of only 25% of the voting control of the Company and requires
prior approval of any change in control or management of the Company that would
affect the Company's control or management of its Volkswagen franchise
subsidiaries. See "Business -- Relationships with Manufacturers." In a similar
manner, the lending arrangements the Company is currently negotiating will
require that voting control over the Company be held by the Smith Group. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." Any transfer of shares of the
Company's Common Stock, including a transfer by members of the Smith Group, will
be outside the control of the Company and, if such transfer results in a change
in control of the Company, could result in the termination or non-renewal of one
or more of its franchise agreements and in a default under its credit
arrangements. Moreover, these issuance limitations may impede the Company's
ability to raise capital through additional equity offerings or to issue Common
Stock as consideration for, and therefore, to consummate, future acquisitions.
Such restrictions also may prevent or deter prospective acquirors from acquiring
control of the Company and, therefore, may adversely impact the Company's equity
value. See " -- Limitations on Financial Resources Available for Acquisitions."

Upon consummation of the Offering, % of the Common Stock (on a fully
diluted basis) will be publicly owned (assuming full exercise of the
Underwriters' over-allotment option). The Company has contractual obligations to
provide "piggyback" registration rights to holders of Class B Common Stock to
register their shares under the Securities Act under certain circumstances.
Additionally, such shares will become in the future, eligible for sale pursuant
to the terms of Rule 144 under the Securities Act ("Rule 144"). See "Certain
Transactions -- Registration Rights Agreement" and "Shares Eligible for Future
Sale."

<PAGE>

MANUFACTURERS' RESTRICTIONS ON ACQUISITIONS

The Company is required to obtain the consent to the applicable
Manufacturer prior to the acquisition of any additional dealership franchises.
Obtaining the consent of the Manufacturers for acquisitions of dealerships could
take a significant amount of time. Obtaining the approvals of the Manufacturers
for the Acquisitions has taken almost five months, although the Company believes
that subsequent acquisitions by the Company will take significantly less time
since the Company has current completed applications and agreements with all
Manufacturers except BMW, Honda, Infiniti, Jaguar and KIA. Nevertheless, if the
Company experiences delays in obtaining, or fails to obtain, approvals of the
Manufacturers for acquisitions of dealerships, the Company's growth strategy
could be materially adversely affected. In determining whether to approve an
acquisition, the Manufacturers may consider many factors, including the moral
character, business experience, financial condition, ownership structure and CSI
scores of the Company.

In addition, Manufacturers may limit the number of such Manufacturers'
dealerships that may be owned by the Company or the number that may be owned in
a particular geographic area. For example, Ford currently limits the Company to
no more than 15 Ford and 15 Lincoln Mercury dealerships or that number of Ford
and Lincoln Mercury dealerships accounting for 2% of the preceding year's retail
sales of those brands in the United States and limits the Company to owning only
one Ford dealership in any market area, as defined by Ford, having three or less
Ford dealerships in it and no more than 25% of the Ford dealerships in market
area having four or more Ford. Chrysler have asked the Company to defer any
further acquisitions of Chrysler or Chrysler division dealerships until it has
established a proven performance record with the Chrysler dealerships it owns or
is acquiring in the Acquisitions. Moreover, Chrysler has recently announced its
general policy of limiting ownership to ten Chrysler dealerships in the United
States, six Chrysler dealerships in the same sales zone, as determined by
Chrysler and two dealerships in the same market (but no more than one like
vehicle line brand in the same market). Toyota currently limits the number of
dealerships which my be owned by any one group to seven Toyota and three Lexus
dealerships nationally and restricts the number of dealerships that may be owned
to (i) the greater of one dealership, or 20% of the Toyota dealer count in a
"Metro" market (as defined by Toyota), (ii) the lesser of the five dealerships
of 5% of the Toyota dealerships in any Toyota region (currently 12 geographic
regions), and (iii) two Lexus dealerships in any one of the four Lexus
geographic areas. Toyota further requires that at least nine months elapse
between acquisitions. Similarly, it is currently the policy of American Honda
Motor Co., Inc. ("Honda") to restrict any company from holding more than seven
Honda or more than three Acura franchises nationally and to restrict the number
of franchises to (i) one Honda dealership in a "Metro" market (a metropolitan
market represented by two or more Honda dealers) with two to 10 Honda dealership
points, (b) two Honda dealerships in a Metro market with 11 to 20 Honda
dealership points, (iii) three Honda dealerships in a Metro market with 21 or
more Honda dealership points, (iv) no more than 4% of the Honda dealerships in
any one of the 10 Honda geographic zones, (v) one Acura dealership in a Metro
market (a metropolitan market with two or more Acura dealership points), and
(vi) two Acura dealerships in any one of the six Acura geographic zones. Toyota
and Honda also prohibit ownership of contiguous dealerships and the dualing of a
franchise with any other brand without their consent. General Motors Corporation
("GM" or "General Motors") has limited the number of GM dealerships that the
Company may acquire during the next two years to up to five additional GM
dealership locations, which number may be increased on a case-by-case basis. In
addition, GM limits the maximum number of GM dealerships that the Company may
acquire to 50% of the GM dealership, by franchise line, in a GM-defined
geographic market area having multiple GM dealers.

The Company owns, after giving effect to the Reorganization and the
Acquisitions, five Ford dealerships, six Chrysler dealerships, two BMW
dealerships, two Volvo dealerships, two Volkswagen dealerships and one
dealership each of GM, Toyota, Honda, Jaguar, Infiniti and KIA.

POTENTIAL CONFLICTS OF INTEREST

Bruton Smith, the Chairman and Chief Executive Officer of the Company, will
continue to serve as the Chairman and Chief Executive Officer of Speedway
Motorsports. Accordingly, the Company will compete with Speedway Motorsports for
the management time of Mr. Smith. Under his employment agreement with the
Company, Mr. Smith is required to devote approximately 50% of his business time
to the affairs of the Company. The remainder of his business time may be devoted
to other entities including Speedway Motorsports.

The Company has in the past and will likely in the future enter into
transactions with entities controlled by either Mr. Smith, Nelson Bowers or Ken
Marks or other affiliates of the Company. The Company believes that all of these
arrangements are favorable to the Company and were entered into on terms that,
taken as a whole, reflect arms'-length negotiations, although certain lease
provisions included in such transactions may be at below-market rates. Since no
independent appraisals evaluating these business transactions were obtained,
there can be no assurance that such transactions are on terms no less

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favorable than could have been obtained from unaffiliated third parties. Certain
of the existing arrangements will continue after the Offering. Potential
conflicts of interest could also arise in the future between the Company and
these affiliated parties in connection with the enforcement, amendment or
termination of these arrangements. See "Certain Transactions." The Company
anticipates renegotiating its leases with all related parties at lease
expiration at fair market rentals, which may be higher than current rents. For
further discussion of these related party leases, see "Certain
Transactions -- Certain Dealership Leases."

In addition to his interest and responsibilities with the Company, Nelson
Bowers has ownership interests in several non-Company entities, including a
Toyota dealership in Cleveland, Tennessee, an auto body shop in Chattanooga,
Tennessee and a used-car auction house. These enterprises are involved in
businesses that are related to, and that compete with, the businesses of the
Company. Pursuant to his employment agreement, Mr. Bowers is not permitted to
participate actively in the operation of those businesses and is only permitted
to maintain a passive investment in these enterprises.

Under the General Corporation Law of Delaware ("Delaware Law") generally, a
corporate insider is precluded from acting on a business opportunity in his
individual capacity if that opportunity is one which the corporation is
financially able to undertake, is in the line of the corporation's business, is
of practical advantage to the corporation and is one in which the corporation
has an interest or reasonable expectancy. Accordingly, corporate insiders are
generally required to engage in new business opportunities of the Company only
through the Company unless a majority of the Company's disinterested directors
decide under the standards discussed above that it is not in the best interest
of the Company to pursue such opportunities.

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") contains provisions providing that transactions between the
Company and its affiliates must be no less favorable to the Company than would
be available in corporate transactions in arms'-length dealing with an unrelated
third party. Moreover, any such transactions involving aggregate payments in
excess of $500,000 must be approved by a majority of the Company's directors and
a majority of the Company's independent directors. Otherwise, the Company must
obtain an opinion as to the financial fairness of the transaction to be issued
by an investment banking or appraisal firm of national standing.

LACK OF INDEPENDENT DIRECTORS

As of the date hereof, all of the members of the Company's Board of
Directors are employees and/or majority shareholders of the Company or
affiliates thereof. Although the Company intends to appoint at least two
independent directors following completion of the Offering, such directors will
not constitute a majority of the Board, and the Company's Board may not have a
majority of independent directors in the future. In the absence of a majority of
independent directors, the Company's executive officers, who also are principal
stockholders and directors, could establish policies and enter into transactions
without independent review and approval thereof, subject to certain restrictions
under the Certificate. In addition, although the Company intends to establish
audit and compensation committees which will consist entirely of outside
directors, until those committees are established, audit and compensation
policies could be approved without independent review. These and other
transactions could present the potential for a conflict of interest between the
Company and its stockholders generally and the controlling officers,
stockholders or directors. See "Management."

DEPENDENCE ON KEY PERSONNEL AND LIMITED MANAGEMENT AND PERSONNEL RESOURCES

The Company's success depends to a significant degree upon the continued
contributions of its management team (particularly its senior management) and
service and sales personnel. The loss of the services of one or more of these
key employees could have a material adverse effect on the Company. Although the
Company has employment agreements with Bruton Smith, Bryan Scott Smith, Nelson
Bowers, Theodore M. Wright, O. Ken Marks, Jr. and Jeffrey C. Rachor, the Company
will not have employment agreements in place with other key personnel. In
addition, as the Company expands it may need to hire additional managers. The
market for qualified employees in the industry and in the regions in which the
Company operates, particularly for general managers and sales and service
personnel, is highly competitive and may subject the Company to increased labor
costs in periods of low unemployment. The loss of the services of key employees
or the inability to attract additional qualified managers could have a material
adverse effect on the Company. In addition, the lack of qualified management or
employees employed by the Company's potential acquisition candidates may limit
the Company's ability to consummate future acquisitions. See "Business -- Growth
Strategy," "Business -- Competition" and "Management."

MATURE INDUSTRY; CYCLICAL AND LOCAL NATURE OF AUTOMOBILE SALES

The United States automobile dealership industry generally is considered a
mature industry in which minimal growth is expected in unit sales of new
vehicles. As a consequence, growth in the Company's revenues and earnings are
likely to be

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significantly affected by the Company's success in acquiring and integrating
dealerships and the pace and size of such acquisitions. See " -- Risks
Associated with Acquisitions" and "Business -- Growth Strategy."

The automobile industry is cyclical and historically has experienced
periodic downturns, characterized by oversupply and weak demand. Many factors
affect the industry, including general economic conditions and consumer
confidence, the level of discretionary personal income, interest rates and
credit availability. For the six months ended June 30, 1997, industry retail
sales were down 2% as a result of retail car sales declines of 5.3% and retail
truck sales gains of 2.4% from the same period in 1996. Future recessions may
have a material adverse effect on the Company's business.

Local economic, competitive and other conditions also affect the
performance of dealerships. The Sonic Dealerships are located in the Charlotte
and Houston markets. Pursuant to the Acquisitions, the Company is acquiring
dealerships in the metropolitan areas of Charlotte, Chattanooga, Nashville,
Tampa-Clearwater and Atlanta. While the Company intends to pursue acquisitions
outside of these markets, the Company expects that the majority of its
operations will continue to be concentrated in these areas for the foreseeable
future. As a result, the Company's results of operations will depend
substantially on general economic conditions and consumer spending habits in the
Southeast and, to a lesser extent, in the Houston market, as well as various
other factors, such as tax rates and state and local regulations, specific to
North Carolina, Tennessee, Florida, Texas, Georgia and South Carolina. There can
be no assurance that the Company will be able to expand geographically, or that
any such expansion will adequately insulate it from the adverse effects of local
or regional economic conditions. See "Business -- Growth Strategy."

SEASONALITY

The Company's business is seasonal, with a disproportionate amount of
revenues occurring in the second, third and fourth fiscal quarters. See
"Managements's Discussion and Analysis of Financial Condition and Results of
Operations."

IMPORTED PRODUCT RESTRICTIONS AND FOREIGN TRADE RISKS

Certain motor vehicles retailed by the Company, as well as certain major
components of vehicles retailed by the Company, are of foreign origin.
Accordingly, the Company is subject to the import and export restrictions of
various jurisdictions and is dependent to some extent upon general economic
conditions in and political relations with a number of foreign countries,
particularly Japan. Additionally, fluctuations in currency exchange rates may
adversely affect the Company's sales of vehicles produced by foreign
manufacturers. Imports into the United States may also be adversely affected by
increased transportation costs.

ADVERSE EFFECT OF GOVERNMENTAL REGULATION; UNKNOWN ENVIRONMENTAL REGULATION
COMPLIANCE COSTS

The Company is subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements, consumer protection laws and
regulations relating to gasoline storage, waste treatment and other
environmental matters. Future acquisitions by the Company may also be subject to
regulation, including antitrust reviews. The Company believes that it complies
in all material respects with all laws and regulations applicable to its
business, but future regulations may be more stringent and require the Company
to incur significant additional costs.

The Company's facilities and operations are subject to federal, state and
local laws and regulations relating to environmental protection and human health
and safety, including those governing wastewater discharges, air emissions, the
operation and removal of underground storage tanks, the use, storage, treatment,
transportation and disposal of solid and hazardous materials and the remediation
of contamination associated with such disposal. Certain of these laws and
regulations may impose joint and several liability on certain statutory classes
of persons for the costs of investigation or remediation of contaminated
properties, regardless of fault or the legality of the original disposal. These
persons include the present or former owner or operator of a contaminated
property and companies that generated, disposed of or arranged for the disposal
of hazardous substances found at the property.

Past and present business operations of the Company subject to such laws
and regulations include the use, storage 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, freon, waste paint and lacquer thinner,
batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels.
The Company is subject to other laws and regulations as a result of the past or
present existence of underground storage tanks at many of the Company's
properties. The Company, like many of its competitors, has incurred, and will
continue to incur, capital and operating expenditures and other costs in
complying with such laws and regulations. In addition, soil and groundwater
contamination exist at certain of the

<PAGE>
Company's properties, and there can be no assurance that other properties have
not been contaminated by any leakage from underground storage tanks or by any
spillage or other releases of hazardous or toxic substances or wastes.

Certain laws and regulations, including those governing air emissions and
underground storage tanks, have been amended so as to require compliance with
new or more stringent standards as of future dates. The Company cannot predict
what other environmental legislation or regulations will be enacted in the
future, how existing or future laws or regulations will be administered or
interpreted or what environmental conditions may be found to exist in the
future. Compliance with new or more stringent laws or regulations, stricter
interpretation of existing laws or the future discovery of environmental
conditions may require additional expenditures by the Company, some of which may
be material. See "Business -- Governmental Regulations and Environmental
Matters."

CONCENTRATION OF VOTING POWER AND ANTI-TAKEOVER PROVISIONS

The Common Stock is divided into two classes with different voting rights,
which allows for the maintenance of control of the Company by the holders of the
Class B Common Stock. Holders of Class A Common Stock are entitled to one vote
per share on all matters submitted to a vote of the stockholders of the Company.
Holders of Class B Common Stock are entitled to ten votes per share on all
matters, except that the Class B Common Stock is entitled to only one vote per
share with respect to any transaction proposed or approved by the Company's
Board of Directors, proposed by or on behalf of the holders of the Class B
Common Stock or their affiliates or as to which any members of the Smith Group
or any affiliate thereof has a material financial interest (other than as a then
existing stockholder of the Company) constituting a (a) "going private"
transaction (as defined herein), (b) disposition of substantially all of the
Company's assets, (c) transfer resulting in a change in the nature of the
Company's business, or (d) merger or consolidation in which current holders of
Common Stock would own less than 50% of the Common Stock following such
transaction. The two classes vote together as a single class on all matters,
except where class voting is required by Delaware Law, which exception would
apply, among other situations, to a vote on any proposal to modify the voting
rights of the Class B Common Stock. See "Description of Capital Stock." Upon
completion of this Offering (assuming the Underwriters' over-allotment option is
not exercised), the existing holders of Class B Common Stock will have
approximately % of the combined voting power of the Common Stock (in those
circumstances in which the Class B Common Stock has ten votes per share) and %
of the outstanding Common Stock. Accordingly such holders of Class B Common
Stock will effectively have the ability to elect all of the directors of the
Company and to control all other matters requiring the approval of the Company's
stockholders. In addition, the Company may issue additional shares of Class B
Common Stock to members of the Smith Group in the future for fair market value.
See "Principal Stockholders."

The disproportionate voting rights of the Class B Common Stock under the
above-mentioned circumstances could have a material adverse effect on the market
price of the Class A Common Stock. Such disproportionate voting rights may make
the Company a less attractive target for a takeover than it otherwise might be,
or render more difficult or discourage a merger proposal, a tender offer or a
proxy contest, even if such actions were favored by a majority of the holders of
the Class A Common Stock.

Certain provisions of the Certificate and the Company's Bylaws make it more
difficult for stockholders of the Company to effect certain corporate actions.
See "Description of Capital Stock -- Delaware Law, Certain Charter and Bylaw
Provisions and Certain Franchise Agreement Provisions." Under the Company's
Stock Option Plan, options outstanding thereunder become immediately exercisable
upon a change in control of the Company. See "Management -- Employment
Agreements" and " -- Stock Option Plan." The agreements, corporate documents and
laws described above, as well as provisions of the Company's franchise
agreements described in " -- Dependence on Automobile Manufacturers" and
" -- Stock Ownership/Issuance Limits" above permitting Manufacturers to
terminate such agreements upon a change of control and provisions of lending
arrangements currently under negotiation described in " -- Stock
Ownership/Issuance Limits" above creating an event of default thereunder upon a
change in control, may have the effect of delaying or preventing a change in
control of the Company or preventing stockholders from realizing a premium on
the sale of their shares of Class A Common Stock upon an acquisition of the
Company.

The Certificate authorizes the Board of Directors of the Company to issue
three million shares of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights or preferences that could adversely affect the voting
power or other rights of the holders of the Class A Common Stock. In the event
of issuance, the preferred stock could be utilized, under certain circumstances,
as a method of discouraging, delaying, or preventing a change in control of the
Company. The issuance of

<PAGE>
preferred stock could also prevent stockholders from realizing a premium upon
the sale of their shares of Class A Common Stock upon an acquisition of the
Company. Although the Company has no present intention to issue any shares of
its preferred stock, there can be no assurance that the Company will not do so
in the future. See "Description of Capital Stock."

Additionally, the Company's Bylaws provide: (i) for a Board of Directors
divided into three classes serving staggered terms; (ii) that special meetings
of stockholders may be called only by the Chairman or by the Company's Secretary
or Assistant Secretary at the request in writing of a majority of the Board of
Directors; (iii) that no stockholder action may be taken by written consent; and
(iv) that stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an annual
or a special meeting of stockholders must provide timely notice thereof in
writing. These provisions will impair the stockholders' ability to influence or
control the Company or to effect a change in control of the Company, and may
prevent stockholders from realizing a premium on the sale of their shares of
Class A Common Stock upon an acquisition of the Company. See "Description of
Capital Stock."

NO PRIOR PUBLIC MARKET FOR CLASS A COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK
PRICE

Prior to the Offering, there has been no public market for the Class A
Common Stock. The Company intends to apply for a listing of the Class A Common
Stock on the NYSE. The initial public offering price of the Class A Common Stock
will be determined by negotiations among the Company and representatives of the
Underwriters. See "Underwriting." There can be no assurance that the market
price of the Class A Common Stock prevailing at any time after this Offering
will equal or exceed the initial public offering price. Quarterly and annual
operating results of the Company, variations between such results and the
results expected by investors and analysts, changes in local or general economic
conditions or developments affecting the automobile industry, the Company or its
competitors could cause the market price of the Class A Common Stock to
fluctuate substantially. As a result of these factors, as well as other factors
common to initial public offerings, the market price could fluctuate
substantially from the initial offering price. In addition, the stock market
has, from time to time, experienced extreme price and volume fluctuations, which
could adversely effect the market price for the Class A Common Stock without
regard to the financial performance of the Company.

DILUTION

Purchasers of Class A Common Stock in the Offering will experience
immediate and substantial dilution in the amount of $ per share in net
tangible book value per share from the initial offering price. See "Dilution."

POTENTIAL ADVERSE MARKET PRICE EFFECT OF ADDITIONAL SHARES ELIGIBLE FOR FUTURE
SALE

The shares of Class B Common Stock owned beneficially by existing
stockholders of the Company and the shares of Class A Common Stock underlying
options to be granted by the Company under the Stock Option Plan and underlying
the Dyer Warrant (as defined herein), are "restricted securities" as defined in
Rule 144 under the Securities Act, and may in the future be resold in compliance
with Rule 144. See "Management -- Stock Option Plan" and "The Acquisitions --
The Dyer Acquisition." In addition, shares of Common Stock constituting
restricted securities are subject to certain piggyback registration rights. See
"Certain Transactions -- Registration Rights Agreements." No prediction can be
made as to the effect that resale of shares of Common Stock, or the availability
of shares of Common Stock for resale, will have on the market price of the Class
A Common Stock prevailing from time to time. The resale of substantial amounts
of Common Stock, or the perception that such resales may occur, could materially
and adversely affect prevailing market prices for the Common Stock and the
ability of the Company to raise equity capital in the future. The Company has
agreed not to issue, and all executive officers of the Company and all owners of
the Class B Common Stock have agreed not to resell, any shares of Common Stock
or other equity securities of the Company for 180 days after the date of this
Prospectus without the prior written consent of the representatives of the
Underwriters. See "Management -- Stock Option Plan," "Shares Eligible for Future
Sale" and "Underwriting."

<PAGE>
THE REORGANIZATION

The Company was recently incorporated and capitalized with the stock of the
Sonic Dealerships, which have been under the control of Bruton Smith and which
are comprised of Town & Country Ford, Town & Country Toyota, Lone Star Ford,
Fort Mill Ford and Frontier Oldsmobile-Cadillac. As of June 30, 1997, the
Company effected the Reorganization pursuant to which: (i) the Company acquired
all of the Dealership Securities; and (ii) the Company issued Class B Common
Stock in exchange for the Dealership Securities. See "Certain
Transactions -- Other Transactions." Subsequent to the Reorganization, the
Company intends to convert from the LIFO Method of inventory accounting to the
industry standard FIFO Method of inventory accounting, conditioned upon the
closing of the Offering. As a result of the Reorganization and the FIFO
Conversion, the historical combined financial information included in this
Prospectus is not necessarily indicative of the results of operations, financial
position and cash flows of the Company in the future or of those which would
have resulted had the Reorganization and FIFO Conversion been in effect during
the periods presented in the Company's Combined and Consolidated Financial
Statements included elsewhere in this Prospectus. Upon election of the FIFO
Method, the Company will be required under generally accepted accounting
principles to restate its historical financial statements. The FIFO Conversion
will increase retained earnings by $8.1 million and will result in a tax
liability of approximately $5.5 million as of June 30, 1997. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

THE ACQUISITIONS

In the last four months, the Company consummated or signed definitive
agreements to purchase six additional dealerships or dealership groups for an
aggregate purchase price of approximately $100.7 million. (The aggregate
purchase price for the Acquisitions is subject to downward adjustment pending
the conclusion of negotiations among the Company, Nelson Bowers and Saturn
regarding the purchase price for Mr. Bowers' Saturn dealership, previously a
part of the Bowers Acquisition, over which Saturn has exercised its right of
first refusal. Until such negotiations are concluded, all references in this
Prospectus to the aggregate purchase price for the Acquisitions and to the
purchase price for the Bowers Acquisition are subject to this downward
adjustment.) These acquisitions consist of the Ken Marks Acquisition, the Bowers
Acquisition, the Lake Norman Acquisition, the Dyer Acquisition, the Fort Mill
Acquisition and the Williams Acquisition.

The closing of the Offering is contingent upon the Company consummating the
Acquisitions. The Company intends to use the proceeds from the Offering to pay
the purchase prices of the Acquisitions and to repay indebtedness, if any,
incurred in connection with the Acquisitions. See "Use of Proceeds." In
addition, the Company intends to refinance all of the floor plan indebtedness of
the dealerships constituting the Acquisitions.

THE KEN MARKS ACQUISITION. Ken Marks Ford is located in Clearwater,
Florida. Ken Marks, Jr., together with the other stockholders of Ken Marks Ford,
and the Company entered into a definitive stock purchase agreement in July 1997,
providing for the acquisition by the Company of all of the outstanding stock of
Ken Marks Ford. Ken Marks Ford had retail sales of approximately 4,369 new and
1,764 used vehicles, had aggregate revenues of approximately $148.4 million in
1996, and, based on revenues, is one of the 20 largest Ford dealerships in the
United States. This acquisition further implements the Company's growth strategy
by adding a well-managed dealership with significant presence in a new market.
Ken Marks, Jr., with over 13 years of automotive retailing experience in central
Florida, will continue to serve as the Executive Manager of Ken Marks Ford and
will join the senior management team of the Company as the Regional Vice
President for Florida.

In the Ken Marks Acquisition, the Company has agreed to purchase all of the
outstanding capital stock of Ken Marks Ford for a total of approximately $25.0
million. At closing, the Company will pay the stockholders of Ken Marks Ford the
sum of approximately $25.0 million, less $0.5 million which will be deposited
into escrow for certain contingencies. The $25.0 million sum will be adjusted
downward to the extent that the net book value of Ken Marks Ford as of the
closing is less than approximately $5.1 million. At the closing, Ken Marks Ford
will lease its facilities from an affiliate of the original stockholders of Ken
Marks Ford. See "Business -- Facilities" and "Certain Transactions -- Certain
Dealership Leases." If the Company fails to perform its obligation to close the
Ken Marks Acquisition by October 15, 1997, it has agreed to pay a termination
fee.

THE BOWERS ACQUISITION. European Motors of Nashville (a BMW and Volkswagen
dealership), European Motors (a BMW and Volvo dealership), Jaguar of Chattanooga
(a Jaguar and Infiniti dealership), Cleveland Chrysler-Plymouth-Jeep-Eagle,
Nelson Bowers Dodge, Cleveland Village Imports (a Honda dealership), Nelson
Bowers Ford, L.P. and KIA of Chattanooga (a KIA and Volkswagen dealership),
(collectively, the "Bowers Dealerships") and the Company, as well as the persons
and entities controlling the Bowers Dealerships, have entered into a definitive
asset purchase agreement dated as of June 24, 1997. The Bowers Dealerships are
located in the Chattanooga, Tennessee metropolitan area, with the exception of

<PAGE>

European Motors of Nashville, which is located in Nashville, Tennessee. The
Bowers Dealerships had retail sales of approximately 2,331 new and 1,777 used
vehicles, and had aggregate revenues of approximately $101.5 million in 1996.
The Bowers Dealerships estimate that their combined market share of total new
vehicle unit sales in the Chattanooga metropolitan market was approximately 9.1%
for 1996. This acquisition serves the Company's growth strategy by adding a
group of well-managed dealerships with a substantial portion of its sales in
luxury vehicles. Nelson Bowers, the Bowers Dealerships' chief executive, and
Jeffrey Rachor, their chief operating officer, have over 20 and 10 years of
experience in the automotive industry, respectively. Mr. Bowers will join the
Company's senior management team as Executive Vice President. Mr. Rachor will be
the Company's Regional Vice President for Tennessee, Georgia, Kentucky and
Alabama.

The Company will acquire substantially all the Bowers Dealerships' assets,
excluding real property, and assume substantially all the liabilities associated
with the purchased assets. For the Bowers Acquisition, the Company agreed to pay
up to $33.5 million. At closing, the Company will pay $27.5 million in cash to
the sellers and will deposit $1.0 million into an escrow account, all subject to
certain potential downward adjustments based on the net book value of the
purchased assets and assumed liabilities as of the closing. The balance (up to
$5.0 million) of the purchase price will be evidenced by the Company's
promissory notes that will be payable in 28 equal quarterly installments and
will bear interest at NationsBank's prime rate less 0.5%. The sellers or their
affiliates will retain ownership of certain real property underlying some of the
dealerships and will lease such property to the Company. See
"Business -- Facilities" and "Certain Transactions -- Certain Dealership
Leases." In the event the Company fails to close the Bowers Acquisition by
October 31, 1997, it has agreed to pay a termination fee.

Volvo's consent to the Company's acquisition of the European Motors' Volvo
franchise assets requires that Mr. Bowers maintain a 20% interest in, and serve
as the manager of, the Company's Volvo franchisee subsidiary operating the
European Motors' Volvo assets. See "Certain Transactions -- The Bowers Note."

THE LAKE NORMAN ACQUISITION. Lake Norman Chrysler-Plymouth-Jeep-Eagle and
Lake Norman Dodge (collectively, the "Lake Norman Dealerships") are both located
in Cornelius, North Carolina approximately 20 miles north of Charlotte. The Lake
Norman Dealerships had retail sales of approximately 3,572 new and 2,320 used
vehicles, and had aggregate revenues of approximately $137.7 million in 1996.
The existing management of the Lake Norman Dealerships will continue with the
Company.

In September 1997, the Company acquired substantially all the Lake Norman
Dealerships' assets, excluding real property, and assume substantially all of
the sellers' liabilities. For the Lake Norman Acquisition, the Company agreed to
pay up to $18.2 million. At closing, the Company paid $17.7 million in cash to
the sellers and deposit $0.5 million into an escrow account. The purchase price
will be adjusted downward based on the net book value of the purchased assets
and assumed liabilities as of the closing date, to be determined after the
closing. The sellers of the assets retained ownership of the three tracts of
real property underlying the dealerships and lease such property to the Company.
See "Business -- Facilities."

THE DYER ACQUISITION. Dyer & Dyer, Inc. ("Dyer Volvo"), which is located in
Atlanta, Georgia, is the largest Volvo dealership in the United States in terms
of retail unit sales. For 1996, Dyer Volvo had retail sales of approximately
1,284 new and 1,493 used vehicles, and had aggregate revenues of approximately
$72.6 million. This acquisition is a significant step in the Company's growth
strategy in that it adds a large, well-managed dealership in a new geographic
market and increases the Company's presence in the luxury car market. Richard
Dyer, who has over 25 years in the automotive retailing industry, will continue
as the Company's Executive Manager of Dyer Volvo.

The Company will acquire all of the operating assets of Dyer Volvo for
$18.0 million plus assumption of substantially all of Dyer Volvo's existing
recorded liabilities and obligations. The $18.0 million purchase price is
subject to adjustment in the event that net book value of the purchased assets,
less assumed liabilities, is more or less than $10.5 million as of the date of
the closing. At the closing, the Company will pay $17.0 million in cash to the
seller and deposit $1.0 million into an escrow account. In addition, the Company
will issue a warrant to Richard Dyer to purchase 0.375% of the Company's
outstanding shares of Common Stock (in the form of Class A Common Stock) after
consummation of the Offering ( shares if the Underwriters' over-allotment
option is exercised in full) pursuant to his employment agreement with the
Company at a per share exercise price equal to the initial public offering per
share price (the "Dyer Warrant"). The Dyer Warrant is exercisable immediately
and will expire five years after the consummation of the Dyer Acquisition. The
Dyer Warrant is in addition to stock options that are to be granted to Richard
Dyer pursuant to the Company's Stock Option Plan. Dyer Volvo leases its
dealership premises and the Company will assume Dyer Volvo's obligations under
the leases at the closing. See "Business -- Facilities." The closing of the Dyer
acquisition will occur no later than November 1, 1997. If the Company fails to
perform its obligation to close by that date, it has agreed to pay a termination
fee.

<PAGE>

Volvo's consent to the Dyer Acquisition requires that Richard Dyer maintain
a 20% interest in, and serve as the manager of, the Company's Volvo franchisee
subsidiary operating the Dyer Volvo assets.

THE FORT MILL ACQUISITION. Fort Mill Chrysler-Plymouth-Dodge is located in
Fort Mill, South Carolina, which is a part of the Charlotte market. In 1996,
Jeff Boyd Chrysler-Plymouth-Dodge (the predecessor to Fort Mill
Chrysler-Plymouth-Dodge) had retail sales of approximately 632 new and 842 used
vehicles, and had total revenues of $20.3 million.

The Company purchased in June 1997 certain dealership assets, excluding
real property, of Jeff Boyd Chrysler-
Plymouth-Dodge for a total purchase price of approximately $3.7 million in cash
and assumed the floor plan liabilities of the sellers. Of the $3.7 million
purchase price paid, $3.5 million was advanced to the Company by Bruton Smith
and is to be repaid with proceeds from the Offering. See "Certain
Transactions -- The Smith Advance." An affiliate of Jeff Boyd
Chrysler-Plymouth-Dodge retained ownership of the real property underlying the
dealership and leased the property to the Company. See "Business -- Facilities."

THE WILLIAMS ACQUISITION. Williams Motors, Inc.
(Chrysler-Plymouth-Jeep-Eagle dealerships) is located in Rock Hill, South
Carolina, approximately 35 miles south of Charlotte. In 1996, Williams Motors
had retail sales of approximately 248 new and 280 used vehicles, and had total
revenues of $9.6 million.

The Company has entered into a definitive asset purchase agreement to
acquire substantially all of the operating assets of Williams Motors (excluding
primarily used car inventory and real estate) for up to $1.8 million plus
assumption of floor plan indebtedness to Chrysler Credit Corporation. The exact
price will depend upon the net book value of the purchased assets, less assumed
liabilities, as of the closing. The Company will also lease the dealership
premises from the sellers for one to five years, at the Company's option. See
"Business -- Facilities."

FUTURE ACQUISITIONS. The Company intends to pursue acquisitions in the
future that will be financed with cash or debt or equity financing or a
combination thereof. Although the Company has identified and has held
preliminary discussions with several potential acquisition candidates, at this
time, the Company has no agreements to effect any such acquisitions other than
the Acquisitions. There is no assurance that the Company will consummate any
future acquisition, that they will be on favorable terms to the Company or that
financing for such acquisitions will be available. All future acquisitions by
the Company will be contingent upon the consent of the applicable manufacturer.
Although no assurance can be given that any such consents will be obtained, the
Company historically has not been denied manufacturer approval of acquisitions
with the exception of Saturn. The Company is currently negotiating with several
lending institutions for credit arrangements to finance acquisitions and general
corporate purposes, although there can be no assurance that the Company will
obtain any such financing. See "Risk Factors -- Risks Associated with
Acquisitions" and " -- Limitations on Financial Resources Available for
Acquisitions," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Class A Common
Stock offered hereby are estimated to be approximately $ million ($
million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $ per share (the midpoint of
the range of the initial public offering price set forth on the cover page of
this Prospectus) and after deducting the underwriting discount and estimated
expenses of the Offering. The net proceeds will be used to pay a portion of the
purchase price for the Acquisitions or repay short-term borrowings incurred to
finance any of the Acquisitions that close before the consummation of the
Offering, including approximately $3.5 million to repay a loan advanced by
Bruton Smith in connection with the Acquisitions, which bears interest at 3.83%
per annum. See "The Acquisitions" and "Certain Transactions -- The Smith
Advance."

The Company also anticipates obtaining from Ford Motor Credit Company
("Ford Motor Credit") a secured revolving credit facility (the "Revolving
Facility") with a borrowing limit of $75.0 million. The Revolving Facility is
intended to provide, among other things, a portion of the funds necessary for
consummation of the Acquisitions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

DIVIDEND POLICY

The Company intends to retain all of its earnings to finance the growth and
development of its business, including future acquisitions, and does not
anticipate paying any cash dividends on its Common Stock for the foreseeable
future. Any future change in the Company's dividend policy will be made at the
discretion of the Board of Directors of the Company and will depend upon the
Company's operating results, financial condition, capital requirements, general
business conditions and such other factors as the Board of Directors deems
relevant. Furthermore, the Revolving Facility will include covenants which
preclude the payment of dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of Capital Stock."

<PAGE>
CAPITALIZATION

The following table sets forth, as of June 30, 1997, the capitalization of
the Company (a) on an actual basis, including the Reorganization which is
effective as of June 30, 1997, (b) on a pro forma basis, as adjusted to reflect
the FIFO Conversion and the Acquisitions, and (c) on a pro forma basis,
additionally adjusted to reflect the Offering and the application of the
estimated net proceeds to be received by the Company. See "Use of Proceeds."
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the unaudited Pro
Forma Combined and Consolidated Financial Statements of the Company and the
related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
PRO FORMA
FOR THE
FIFO CONVERSION PRO FORMA
AND THE FOR THE
ACTUAL ACQUISITIONS(1) OFFERING(2)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Short-term debt:
Notes payable -- floor plan.................................................... $67,856 $142,191 $ 142,191
Current maturities of long-term debt........................................... 487 1,343 1,343
Total short-term debt....................................................... $68,343 $143,534 $ 143,534
Long-term debt................................................................... $ 5,137 $ 11,130 $ 11,130
Stockholders' equity:
Preferred Stock, $.10 par value, 3,000,000 shares authorized; no shares issued
and outstanding............................................................. -- -- --
Class A Common Stock, $.01 par value, 50,000,000 shares authorized; no shares
issued and outstanding, actual; shares issued and outstanding, as
adjusted (3)(4)............................................................. -- --
Class B Common Stock, $.01 par value, 15,000,000 shares authorized; 10,000
shares issued and outstanding, actual; shares issued and outstanding,
as adjusted (5)............................................................. -- --
Additional paid-in capital..................................................... 16,604 16,604 116,604
Retained earnings and members' and partners' equity............................ 6,486 12,905 12,905
Due from Affiliates............................................................ (2,633) (2,633) (2,633)
Unrealized loss on marketable equity securities............................. (97) (97) (97)
Total stockholders' equity.................................................. 20,360 26,779 126,779
Total capitalization...................................................... $25,497 $ 37,909 $ 137,909
</TABLE>

(1) Adjusted to give pro forma effect to the FIFO Conversion and the
Acquisitions. See "Pro Forma Combined and Consolidated Financial Data."

(2) Adjusted to give pro forma effect to the FIFO Conversion, the Acquisitions
and the Offering.

(3) shares if the Underwriters' overallotment option is exercised in
full. Excludes shares of Class A Common Stock reserved for future issuance
under the Company's Stock Option Plan (including up to shares of
Class A Common Stock reserved for issuance upon exercise of options to be
granted on or before the consummation of the Offering pursuant to the Stock
Option Plan) and excludes shares of Class A Common Stock (
shares if the Underwriters' over-allotment option is exercised in full)
reserved for issuance under the Dyer Warrant. See "The Acquisitions -- The
Dyer Acquisition" and "Management -- Stock Option Plan."

(4) The number of shares of Class A Common Stock offered hereby, may be reduced
to the extent the Company elects to finance a portion of the purchase price
of the Acquisitions through borrowings under a revolving credit facility or
other form of indebtedness. In such event, pro forma debt will increase by
the amount of such borrowings.

(5) Actual shares of Class B Common Stock do not include the effect of the Stock
Split (which will be effected in the form of a stock dividend).

<PAGE>
DILUTION

The pro forma net tangible book value of the Company (after giving effect
to the FIFO Conversion and the Acquisitions) as of June 30, 1997 was $ per
share of Common Stock. Pro forma net tangible book value per share is determined
by dividing the pro forma tangible net worth of the Company (pro forma total
assets less goodwill less pro forma total liabilities) by the total number of
outstanding shares of Common Stock. After giving effect to the sale of the
shares of Class A Common Stock offered hereby and the receipt of an assumed
$ million of net proceeds from the Offering (based on an assumed initial
public offering price of $ per share and net of the underwriting discounts
and estimated offering expenses), pro forma net tangible book value of the
Company at June 30, 1997 would have been $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to the new
investors purchasing Class A Common Stock in the Offering. The following table
illustrates the per share dilution:

<TABLE>
<S> <C>
Assumed initial public offering price per share................................................. $
Pro forma net tangible book value per share before giving effect to the Offering..............
Increase in pro forma net tangible book value per share attributable to the Offering..........
Pro forma net tangible book value per share after giving effect to the Offering.................
Dilution per share to new investors............................................................. $
</TABLE>

The following table sets forth, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid to the
Company by existing stockholders and new investors purchasing shares from the
Company in the Offering (before deducting underwriting discounts and commissions
and estimated offering expenses):

<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)............................................... % $ % $
New investors (2).......................................................
Total.............................................................. 100.0% $ 100.0%
</TABLE>

(1) Does not reflect the possible exercise of options to purchase
shares of Class A Common Stock reserved for issuance under the Company's
Stock Option Plan including options to purchase shares of Class A
Common Stock that will be granted immediately before the completion of the
Offering with an exercise price equal to the initial public offering price
and the possible exercise of the Dyer Warrant to purchase shares of
Class A Common Stock. See "Management -- Stock Option Plan" and "Certain
Transactions."

(2) Assumes that the Underwriters' over-allotment option is not exercised. Sales
pursuant to the exercise by the Underwriters of the over-allotment option
will cause the total number of shares purchased by new investors, total
consideration paid by new investors, percent of total consideration paid by
new investors and average price per share for all investors to increase to
, $ , % and $ , respectively.

<PAGE>
SELECTED COMBINED AND CONSOLIDATED FINANCIAL DATA

The selected combined and consolidated statement of operations data for the
years ended December 31, 1994, 1995 and 1996 and the selected combined balance
sheet data as of December 31, 1995 and 1996 are derived from the Company's
audited financial statements, which are included elsewhere in this Prospectus.
The selected combined and consolidated statement of operations data for the
years ended December 31, 1992 and 1993 and the selected combined and
consolidated balance sheet data as of December 31, 1992, 1993 and 1994 are
derived from the Company's unaudited financial statements, which are not
included in this Prospectus. The selected combined and consolidated results of
operations data for the six months ended June 30, 1996 and 1997, and the
selected combined and consolidated balance sheet data at June 30, 1997, are
derived from the unaudited financial statements of the Company, which are
included elsewhere in this Prospectus. In the opinion of management, these
unaudited financial statements reflect all adjustments necessary for a fair
presentation of its results of operations and financial condition. All such
adjustments are of a normal recurring nature. The results of operations for an
interim period are not necessarily indicative of results that may be expected
for a full year or any other interim period. This selected combined and
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Combined and Consolidated Financial Statements and related notes included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
1992 1993 1994 1995 1996(1)(5) 1996(1)(5) 1997(2)(5)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
COMBINED AND CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Vehicle sales......................... $171,065 $203,630 $227,960 $267,308 $326,842 $164,333 $185,077
Parts, service and collision repair... 24,543 30,337 33,984 35,860 42,644 21,005 22,907
Finance and insurance................. 3,743 3,711 5,181 7,813 7,118 4,277 4,763
Total revenues..................... 199,351 237,678 267,125 310,981 376,604 189,615 212,747
Cost of sales........................... 174,503 210,046 234,461 272,179 332,407 167,191 188,368
Gross profit(3)......................... 24,848 27,632 32,664 38,802 44,197 22,424 24,379
Selling, general and administrative
expenses.............................. 20,251 22,738 24,632 29,343 33,677 16,590 18,413
Depreciation and amortization........... 682 788 838 832 1,076 360 396
Operating income........................ 3,915 4,106 7,194 8,627 9,444 5,474 5,570
Interest expense, floor plan............ 2,215 2,743 3,001 4,505 5,968 2,801 3,018
Interest expense, other................. 290 263 443 436 433 184 269
Other income............................ 1,360 613 609 449 618 369 274
Income before income taxes and minority
interest(3)........................... 2,770 1,713 4,359 4,135 3,661 2,858 2,557
Provision for income taxes.............. 108 107 1,560 1,675 1,400 1,093 937
Income before minority interest......... 2,662 1,606 2,799 2,460 2,261 1,765 1,620
Minority interest in earnings (loss) of
subsidiary............................ (31) (22) 15 22 114 41 47
Net income(4)........................... $ 2,693 $ 1,628 $ 2,784 $ 2,438 $ 2,147 $ 1,724 $ 1,573

COMBINED AND CONSOLIDATED BALANCE SHEET
DATA:
Working capital (deficit)............... $ (1,985) $ 160 $ 2,327 $ 5,920 $ 6,201 $ 8,405 $ 4,287
Total assets............................ 40,656 45,448 58,142 67,242 94,930 87,236 106,859
Long-term debt.......................... 3,904 4,142 3,773 3,561 5,286 4,825 5,137
Total liabilities....................... 40,035 42,905 52,602 57,980 78,867 68,719 86,499
Minority interest....................... 139 161 177 200 314 240 --
Stockholders' equity(3)................. 482 2,382 5,166 9,062 15,749 18,517 20,360
</TABLE>

(1) The statement of operations data includes the results of Fort Mill Ford,
Inc. from the date of acquisition, February 1, 1996.

(2) The statement of operations data for the six months ended June 30, 1997
includes the results of Fort Mill Chrysler-Plymouth-Dodge, Inc. from the
date of acquisition, June 3, 1997.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

<PAGE>
(3) The Company currently utilizes the LIFO Method of inventory accounting.
See Note 3 to the Company's Combined and Consolidated Financial
Statements. The Company intends to file an election with the IRS to
convert, effective January 1, 1997, to the FIFO Method of inventory
accounting and report its earnings for tax purposes and in its
financial statements on the FIFO Method. If the Company had previously
utilized the FIFO Method, gross profit and income before income taxes
and minority interest for the periods shown in the table, and
stockholders' equity as of December 31, 1996 and June 30, 1997, would
have been as follows:

<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 JUNE 30, 1997
<S> <C> <C>
(IN THOUSANDS)
Stockholders' equity............................................................... $23,829 $28,440
</TABLE>

(4) Historical net income per share is not presented, as the historical
capital structure of the Company prior to the Offering is not
comparable with the capital structure that will exist after the
Offering.

(5) The Company acquired Fort Mill Ford, Inc. and Fort Mill
Chrysler-Plymouth-Dodge in February 1996 and in June 1997,
respectively. Both of these acquisitions were accounted for using the
purchase method of accounting. As a result, the Selected Combined and
Consolidated Financial Data below does not include the results of
operations of these dealerships prior to the date they were acquired by
the Company. Accordingly, the actual historical data for periods after
the acquisition may not be comparable to data presented for periods
prior to the acquisition of Fort Mill Ford and Fort Mill
Chrysler-Plymouth-Dodge.

<PAGE>
PRO FORMA COMBINED AND CONSOLIDATED FINANCIAL DATA

The following unaudited pro forma combined and consolidated statements of
operations for the year ended December 31, 1996 and for the six months ended
June 30, 1997 reflect the historical accounts of the Company for those periods,
adjusted to give pro forma effect to the Reorganization, the FIFO Conversion,
the Acquisitions and the Offering, as if these events had occurred at January 1,
1996. The following unaudited pro forma consolidated balance sheet as of June
30, 1997 reflects the historical accounts of the Company as of that date
adjusted to give pro forma effect to the FIFO Conversion, the Acquisitions and
the Offering as if these events had occurred on June 30, 1997. The Acquisitions
will be consummated on or before the closing of the Offering and are conditions
precedent to the closing of the Offering. The Company intends to convert to the
FIFO Method of inventory accounting conditioned and effective upon the closing
of the Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."

The pro forma combined and consolidated financial data and accompanying
notes should be read in conjunction with the Combined and Consolidated Financial
Statements and related notes of the Company as well as the financial statements
and related notes of the Bowers Dealerships, the Lake Norman Dealerships, Ken
Marks Ford and Dyer Volvo, all of which are included elsewhere in this
Prospectus. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the pro forma
financial data. The pro forma combined financial data is provided for
informational purposes only and should not be construed to be indicative of the
Company's financial condition or results of operations had the transactions and
events described above been consummated on the dates assumed, and are not
intended to project the Company's financial condition on any future date or its
results of operation for any future period.

<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
COMPANY
PRO FORMA
ADJUSTMENTS THE ACQUISITIONS
FOR THE PRO FORMA
REORGANI- ADJUSTMENTS FOR
ZATION AND BOWERS THE
THE FIFO DEALERSHIPS LAKE NORMAN KEN MARKS DYER ACQUISITIONS
ACTUAL (1) CONVERSION PRO FORMA (2) DEALERSHIPS FORD (3) VOLVO (4)(5)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Vehicle sales............... $ 326,842 $ $ 144,177 $ 124,539 $ 131,826 $60,871 $
Parts, service and collision
repair.................... 42,644 17,338 9,543 14,224 11,163
Finance and insurance....... 7,118 2,877 3,617 2,317 542
Total revenues............ 376,604 164,392 137,699 148,367 72,576
Cost of sales................. 332,407 (1,360)(8) 142,424 121,806 128,850 62,547 (545)(12)
Gross profit.................. 44,197 1,360 21,968 15,893 19,517 10,029 545
Selling, general and
administrative expenses..... 33,677 18,977 14,215 16,190 6,997 (1,351)(13)
(3,351)(14)
249(15)
Depreciation and
amortization................ 1,076 75(9) 733 89 94 126 (193)(16)
1,654(17)
(29)(15)
Operating income.............. 9,444 1,285 2,258 1,589 3,233 2,906 3,566
Interest expense, floor
plan(6)..................... 5,968 1,522 1,552 2,054 373 (2,127)(11)
Interest expense, other....... 433 199 50 400(18)
(108)(15)
Other income.................. 618 797 258 97 452
Income before income taxes and
minority interest........... 3,661 1,285 1,334 245 1,276 2,985 5,401
Provision for income taxes.... 1,400 513(10) 61 546 955 2,244(19)
1,627(20)
61(21)
(955)(22)
Income before minority
interest.................... 2,261 772 1,273 245 730 2,030 2,424
Minority interest in earnings
of subsidiary............... 114 (114)(9)
Net income.................... $ 2,147 $ 886 $ 1,273 $ 245 $ 730 $ 2,030 $ 2,424
Pro forma net income per
share(7)....................
Weighted average shares
outstanding.................

<CAPTION>
PRO FORMA
FOR THE
REORGANI-
ZATION, FIFO
CONVERSION,
PRO FORMA THE
ADJUSTMENTS ACQUISITIONS
FOR THE AND THE
OFFERING OFFERING
<S> <C> <C>
Revenues:
Vehicle sales............... $ $788,255
Parts, service and collision
repair.................... 94,912
Finance and insurance....... 16,471
Total revenues............ 899,638
Cost of sales................. 786,129
Gross profit.................. 113,509
Selling, general and
administrative expenses..... 201(23) 85,804
Depreciation and
amortization................ 3,625
Operating income.............. (201) 24,080
Interest expense, floor
plan(6)..................... 9,342
Interest expense, other....... 974
Other income.................. 2,222
Income before income taxes and
minority interest........... (201) 15,986
Provision for income taxes.... (80)(24) 6,372
Income before minority
interest.................... (121) 9,614
Minority interest in earnings
of subsidiary...............
Net income.................... $ (121) $ 9,614
Pro forma net income per
share(7).................... $
Weighted average shares
outstanding.................
</TABLE>

<PAGE>

PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
COMPANY
PRO FORMA
ADJUSTMENTS THE ACQUISITIONS
FOR THE PRO FORMA
REORGANI- ADJUSTMENTS
ZATION AND BOWERS FOR THE
THE FIFO DEALERSHIPS LAKE NORMAN KEN MARKS ACQUISITIONS
ACTUAL(1) CONVERSION PRO FORMA (2) DEALERSHIPS FORD (3) DYER VOLVO (4)(5)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Vehicle sales.............. $ 185,077 $ $67,219 $69,798 $ 65,157 $31,373 $
Parts, service and
collision repair......... 22,907 9,694 5,321 5,999 5,960
Finance and insurance...... 4,763 1,539 1,950 1,029 129
Total revenues........... 212,747 78,452 77,069 72,185 37,462
Cost of sales................ 188,368 55(8) 67,390 68,272 63,402 32,377 (371)(12)
Gross profit................. 24,379 (55) 11,062 8,797 8,783 5,085 371
Selling, general and
administrative expenses.... 18,413 8,744 6,937 7,547 3,498 (944)(13)
(1,004)(14)
191(15)
Depreciation and
amortization............... 396 36(9) 338 47 47 151 (100)(16)
827(17)
(22)(15)
Operating income............. 5,570 (91) 1,980 1,813 1,189 1,436 1,423
Interest expense, floor plan
(6)........................ 3,018 885 1,185 925 276 (1048)(11)
Interest expense, other...... 269 118 68 200(18)
(80)(15)
Other income................. 274 459 176 91 247
Income before income taxes
and minority interest...... 2,557 (91) 1,436 736 355 1,407 2,351
Provision for income taxes... 937 (36)(10) 31 147 833(19)
1,285(20)
83(21)
Income before minority
interest................... 1,620 (55) 1,405 736 208 1,407 150
Minority interest in earnings
of subsidiary.............. 47 (47)(9)
Net income................... $ 1,573 $ (8) $1,405 $ 736 $ 208 $1,407 $ 150
Pro forma net income per
share (7)..................
Weighted average shares
outstanding................

<CAPTION>
PRO FORMA FOR THE
REORGANI-
PRO FORMA ZATION, FIFO
ADJUSTMENTS CONVERSION, THE
FOR THE ACQUISITIONS AND THE
OFFERING OFFERING
<S> <C> <C>
Revenues:
Vehicle sales.............. $ $418,624
Parts, service and
collision repair......... 49,881
Finance and insurance...... 9,410
Total revenues........... 477,915
Cost of sales................ 419,493
Gross profit................. 58,422
Selling, general and
administrative expenses.... 43,553
171(23)
Depreciation and
amortization............... 1,720
Operating income............. (171) 13,149
Interest expense, floor plan
(6)........................ 5,241
Interest expense, other...... 575
Other income................. 1,247
Income before income taxes
and minority interest...... (171) 8,580
Provision for income taxes... (68) (24) 3,212
Income before minority
interest................... (103) 5,368
Minority interest in earnings
of subsidiary..............
Net income................... $ (103) $ 5,368
Pro forma net income per
share (7).................. $
Weighted average shares
outstanding................
</TABLE>

(1) The actual combined statement of operations data for the Company includes
the results of Fort Mill Ford from February 1, 1996, the effective date of
its acquisition. Pro forma adjustments have not been presented to include
the results of operations for Fort Mill Ford for the one month period ended
February 1, 1996 because management believes such results are not material.
The actual consolidated statement of operations data for the six months
ended June 30, 1997 include the results of Fort Mill
Chrysler-Plymouth-Dodge from June 3, 1997, the date of its acquisition.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

<PAGE>

(2) During 1996 and 1997, Nelson Bowers acquired three automobile
dealerships whose operating results, from their respective dates of
acquistion, are included in the historical combined and consolidated
statement of operations in the table below. The following table
adjusts the historical combined and consolidated statements of
operations to include the acquirees as if the acquisitions, had
occurred on January 1, 1996.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
BOWERS EUROPEAN EUROPEAN NELSON BOWERS
DEALERSHIPS(A) MOTORS OF MOTORS OF BOWERS PRO FORMA DEALERSHIPS
(HISTORICAL) CHATTANOOGA(E) NASHVILLE(B) DODGE(B) ADJUSTMENTS (PRO FORMA)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Vehicle sales............................... $ 91,183 $6,940 $ 21,827 $24,227 $ $144,177
Parts, service and collision repair......... 7,970 1,194 4,740 3,434 17,338
Finance and insurance....................... 2,337 199 341 2,877
Total revenues............................ 101,490 8,134 26,766 28,002 164,392
Cost of sales................................. 87,757 7,130 23,054 24,483 142,424
Gross profit.................................. 13,733 1,004 3,712 3,519 21,968
Selling, general and administrative
expenses...................................... 11,807 926 3,401 2,843 18,977
Depreciation and amortization................. 365 37 86 106 139(d) 733
Operating income.............................. 1,561 41 225 570 (139) 2,258
Interest expense, floor plan.................. 1,178 87 208 49 1,522
Interest expense, other....................... 196 3 199
Other income.................................. 121 92 166 418 797
Income before income taxes.................... 308 46 183 936 (139) 1,334
Provision for income taxes.................... 61 61
Net Income.................................... $ 247 $ 46 $ 183 $ 936 $ (139) $ 1,273
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
BOWERS NELSON BOWERS
DEALERSHIPS(A) BOWERS PRO FORMA DEALERSHIPS
(HISTORICAL) DODGE(C) ADJUSTMENTS (PRO FORMA)
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Vehicle sales.......................................................... $ 63,950 $ 3,269 $ $ 67,219
Parts, service and collision repair.................................... 9,107 587 9,694
Finance and insurance.................................................. 1,497 42 1,539
Total revenues....................................................... 74,554 3,898 78,452
Cost of sales............................................................ 63,945 3,445 67,390
Gross profit............................................................. 10,609 453 11,062
Selling, general and administrative expenses............................. 8,294 450 8,744
Depreciation and amortization............................................ 309 14 15(d) 338
Operating income (loss).................................................. 2,006 (11 ) (15) 1,980
Interest expense, floor plan............................................. 881 4 885
Interest expense, other.................................................. 118 118
Other income............................................................. 422 37 459
Income before income taxes............................................... 1,429 22 (15) 1,436
Provision for income taxes............................................... 31 31
Net Income............................................................... $ 1,398 $ 22 $ (15) $ 1,405
</TABLE>

(a) The historical statement of operations data for the Bowers
Dealerships includes the results of Nelson Bowers Dodge from
March 1, 1997, the date of its acquisition by the owners of the
Bowers Dealerships. Such statement also includes the results of
European Motors of Nashville and European Motors of Chattanooga
from October 1, 1996 and May 1, 1996, respectively, which were
acquired by the owners of the Bowers Dealerships on those dates.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

<PAGE>
(b) Reflects the results of operations of (i) Nelson Bowers Dodge for
the year ended December 31, 1996; and (ii) European Motors of
Nashville for the period from January 1, 1996 to October 1, 1996,
the date of its acquisition by the owners of the Bowers
Dealerships. Such data was obtained from monthly financial
statements prepared by the dealership as required by the
manufacturers.

(c) Reflects the results of operations of Nelson Bowers Dodge for the
period from January 1, 1997 to March 1, 1997, the date of its
acquisition by the owners of the Bowers Dealerships. Such data
was obtained from monthly financial statements prepared by the
dealership as required by the manufacturers.

(d) Reflects the amortization of goodwill resulting from the
acquisition of Nelson Bowers Dodge, European Motors of Nashville
and European Motors of Chattanooga over an assumed amortization
period of 40 years for the period not included in the historical
financial statements, assuming that such acquisitions were
consummated on January 1, 1996.

(e) Reflects the results of operations of European Motors of
Chattanooga for the period from January 1, 1996 to April 30,
1996, the date of its acquisition by the owners of the Bowers
Dealerships. Such data was obtained from monthly financial
statements prepared by the dealership as required by the
manufacturers.

(3) Ken Marks Ford's fiscal year ends on April 30 of each year.
Accordingly, the Statement of Operations data for Ken Marks Ford for
the year ended December 31, 1996 was derived by adjusting the data for
the year ended April 30, 1997 to include results from January 1, 1996
through April 30, 1996, and exclude results from January 1, 1997
through April 30, 1997. The Statement of Operations data for the six
months ended June 30, 1997 was similarly derived by adjusting the
historical financial statements for the year ended April 30, 1997 to
include results from May 1, 1997 through June 30, 1997, and excludes
results from May 1, 1996 through December 31, 1996.

(4) The Company has excluded (i) the results of operations of Fort Mill
Chrysler-Plymouth-Dodge for the year ended December 31, 1996 and the
period ended June 3, 1997 and (ii) the historical results of
operations and related pro forma adjustments related to the Williams
Acquisition because management believes such results and adjustments
are not material to the Pro Forma Combined and Consolidated Statement
of Operations.

(5) Prior to the Company's acquisition of the Lake Norman Dealerships, its
former owners directed $550,000 and $150,000 in contributions to
charitable organizations during the year ended December 31, 1996 and
the six months ended June 30, 1997, respectively. It is the Company's
intention not to maintain the level of charitable contributions
already reflected in the Company's historical combined financial
statements. Although no pro forma adjustment to eliminate this expense
has been included in the accompanying Pro Forma Combined and
Consolidated Statements of Operations, the Company believes disclosure
and consideration of the Lake Norman Dealerships contributions is
appropriate to understand the continuing impact on the Company's
results of operations of the acquisition of the Lake Norman
Dealerships.

(6) The Company intends to raise sufficient funds in the Offering to fund
the Acquisitions. In the event that the Company determines not to
raise sufficient funds in the Offering to acquire the dealerships
being acquired in the Acquisitions, the Company would incur additional
indebtedness and the related interest expense. The Pro Forma Combined
and Consolidated Statements of Operations do not give effect to any
additional interest expense that would be incurred.

(7) Pro forma net income per share is based upon the assumption that
shares of Class A Common Stock are outstanding after the
Offering. This amount represents shares of Class A Common
Stock to be issued in the Offering, and shares of Common
Stock owned by the Company's stockholders immediately following the
Reorganization and the Acquisitions. See "Principal Stockholders" and
Note 1 to the Company's Combined and Consolidated Financial Statements
included elsewhere in this Prospectus.

(8) Reflects the conversion from the LIFO Method of inventory accounting
to the FIFO Method of inventory accounting. The Company intends to
convert to the FIFO Method conditioned and effective upon the closing
of the Offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview."

(9) Reflects the elimination of minority interest in earnings as a result
of the acquisition of the 31% minority ownership interest in Town &
Country Toyota, Inc. for $3.2 million of Class B Common Stock in
connection with the Reorganization, and the amortization of
approximately $2.8 million in related goodwill over 40 years arising
from such acquisition.

(10) Reflects the net increase in the provision for income taxes due to the
conversion to the FIFO Method and the amortization of goodwill related
to the acquisition of the minority interest pursuant to the
Reorganization, calculated at the effective rate of 39.9%.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

<PAGE>

(11) Reflects the decrease in interest expense, floor plan resulting from
the refinancing of the Company's and the Acquisition's floor plan
notes payable into one master agreement. This agreement is
irrevocable, contingent upon the Offering, and charges interest at
rates that are more favorable than the current rates in effect.

(12) Adjustment reflects the conversion from the LIFO Method of inventory
accounting to the FIFO Method of inventory accounting at the Lake
Norman Dealerships, Ken Marks Ford and Dyer Volvo in the amount of
$169,000, $260,000 and $116,000, respectively for the year ended
December 31, 1996 and $324,000 at the Lake Norman Dealerships and
$47,000 at Ken Marks Ford for the six months ended June 30, 1997 (no
significant amount for Dyer Volvo during this period). The Company
intends to convert to the FIFO Method conditioned upon the closing of
the Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."

(13) Reflects the net decrease in selling, general and administrative
expenses related to the net reduction in salaries and fringe benefits
of owners and officers of the acquired dealerships who will become
employees of the Company after the Offering, consistent with reduced
salaries pursuant to employment agreements with the Company, effective
upon consummation of the Offering.

(14) The decrease in selling, general and administrative expenses reflects
the elimination of salaries paid to owners of certain dealerships
acquired in the Acquisitions whose positions and salaries will be
eliminated in conjunction with the Offering.

(15) Reflects the Company's estimate of the increase in rent expense
related to lease agreements entered into with the sellers of the
Bowers Dealerships for the dealerships' real property that will not be
acquired by the Company, and decreases in depreciation expense and
interest expense related to mortgage indebtedness encumbering such
property. The increase in rent expense and decreases in depreciation
expense and interest expense are based on the terms of the asset
purchase agreement.

(16) Reflects the elimination of amortization expense related to goodwill
that arose in previous acquisitions in the Bowers Dealerships,
assuming that each of the acquisitions giving rise to goodwill was
consummated on January 1, 1996. See Note 2.

(17) Reflects the amortization over an assumed amortization period of 40
years of approximately $66.2 million in intangible assets, which
consist primarily of goodwill, resulting from the Acquisitions which
were assumed to occur on January 1, 1996. See "Acquisitions" and "Pro
Forma Combined and Consolidated Balance Sheet."

(18) In connection with the Bowers Acquisition, the Company will issue a
promissory note of up to $5.0 million that will bear interest at
NationsBank's prime rate less 0.5%. This adjustment reflects an
increase in interest expense related to the promissory note assuming a
prime rate of 8.5%.

(19) Reflects the net increase in provision for income taxes resulting from
adjustments 11 through 18 above, computed using effective income tax
rates ranging from 38.5% to 42.8%.

(20) Certain of the Bowers Dealerships, the Lake Norman Dealerships, and
Dyer Volvo were not subject to federal and state income taxes because
they were either S corporations, partnerships, or limited liability
companies during the period indicated. This adjustment reflects an
increase in the federal and state income tax provision as if these
entities had been taxable at the combined statutory income tax rate of
approximately 39%. Upon completion of the Acquisitions, these
businesses that have historically not been subject to corporate income
tax will thereafter be subject to federal and state income tax as C
corporations.

(21) Reflects an increase from the Company's historical effective tax rate
resulting from a higher statutory tax rate used due to an increase in
taxable income for the pro forma combined entity and from an
additional pro forma permanent difference for non-taxable goodwill
amortization.

(22) Reflects the elimination of federal and state tax expense which were
assessed on the recapture of the LIFO inventory reserve which was
required by tax law pursuant to the conversion of Dyer Volvo from a C
corporation to an S corporation effective January 1, 1996.

(23) Reflects the increase in salaries of existing and new officers who
have entered into employment agreements with the Company, effective
upon consummation of the Offering.

(24) Reflects the net increase in provision for income taxes resulting from
adjustment 23 above, computed using an effective income tax rate of
40.6%.

<PAGE>
PRO FORMA COMBINED AND CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997

<TABLE>
<CAPTION>
PRO FORMA THE ACQUISITIONS
ADJUSTMENTS FOR PRO FORMA
ACTUAL FIFO BOWERS LAKE NORMAN KEN MARKS ADJUSTMENTS FOR
ASSETS (1) CONVERSION DEALERSHIPS DEALERSHIPS FORD DYER VOLVO THE ACQUISITIONS
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Current Assets:
Cash and cash equivalents... $ 9,238 $ $ 4,766 $ 3,467 $ 2,491 $ 173 $ (90,200)(3)
Marketable equity
securities................ 769
Receivables................. 12,897 2,649 2,535 2,347 2,535
Inventories................. 59,885 13,580(2) 30,948 22,778 14,802 11,129 6,817(5)

Deferred income taxes....... 256 96
Other current assets........ 818 2,779 244 679 32
Total current assets.... 83,863 13,580 41,142 29,024 20,415 13,869 (81,722)
Property and equipment, net... 13,270 4,106 567 489 1,156 (2,311)(6)
Goodwill, net................. 9,463 8,286 66,150(3)
(8,285)(7)
Other assets.................. 263 255 462 14 297
Total assets............ $106,859 $13,580 $53,789 $30,053 $20,918 $ 15,322 $ (26,168)
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable-floor plan.... $ 67,856 $ $26,771 $25,865 $16,165 $ 5,534 $
Notes payable-other......... 3,685 28
Trade accounts payable...... 3,848 1,190 1,352 622
Accrued interest............ 491 178
Other accrued liabilities... 3,394 1,424 472 1,648 512
Taxes payable............... 917(2) 67 239 176(8)
Payable to Company's
Chairman.................. 3,500
Current maturities of
long-term debt............ 487 428 71 357(3)
Total current
liabilities........... 79,576 917 33,676 27,788 18,502 6,285 533
Long-term debt................ 5,137 2,332 786 (1,768)(6)
4,643(3)
Payable to affiliated
companies.................... 855
Deferred income taxes......... 931 4,583(2) 17 882(8)
Other long-term liabilities... 238
Stockholders' Equity:
Common Stock of combined
companies................. 300 75 1 153 (529)(3)
Class A Common Stock........
Class B Common Stock........
Paid-in capital............. 16,604 600 424 28 (1,052)(3)
Treasury stock.............. (4,976) 4,976(3)
Retained earnings and
members' and partners'
equity.................... 6,486 8,080(2) 17,884 804 1,974 13,594 6,817(5)
(1,058)(8)
(543)(6)
(32,848)(3)
(8,285)(7)
Due from affiliates......... (2,633) (403) 403(3)
Unrealized loss on
marketable equity
securities................ (97)
Total stockholders'
equity................ 20,360 8,080 17,781 1,479 2,399 8,799 (30,458)
Total liabilities and
stockholders' equity......... $106,859 $13,580 $53,789 $30,053 $20,918 $ 15,322 $ (26,168)

<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
ASSETS THE OFFERING TOTAL
<S> <C> <C>
Current Assets:
Cash and cash equivalents... $ 100,000(9) $ 29,935
Marketable equity
securities................ 769
Receivables................. 22,963
Inventories................. 159,939
Deferred income taxes....... 352
Other current assets........ 4,552
Total current assets.... 100,000 218,510
Property and equipment, net... 17,277
Goodwill, net................. 75,614
Other assets.................. 1,291
Total assets............ $ 100,000 $312,692
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable-floor plan.... $ $142,191
Notes payable-other......... 3,713
Trade accounts payable...... 7,012
Accrued interest............ 669
Other accrued liabilities... 7,450
Taxes payable............... 1,399
Payable to Company's
Chairman.................. 3,500
Current maturities of
long-term debt............ 1,343
Total current
liabilities........... 167,277
Long-term debt................ 11,130
Payable to affiliated
companies.................... 855
Deferred income taxes......... 6,413
Other long-term liabilities... 238
Stockholders' Equity:
Common Stock of combined
companies.................
Class A Common Stock........
Class B Common Stock........
Paid-in capital............. 100,000(9) 116,604
Treasury stock..............
Retained earnings and
members' and partners'
equity.................... 12,905
Due from affiliates......... (2,633)
Unrealized loss on
marketable equity
securities................ (97)
Total stockholders'
equity................ 100,000 126,779
Total liabilities and
stockholders' equity......... $ 100,000 $312,692
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

<PAGE>
(1) The Reorganization, including the acquisition of the 31% minority interest
in Town & Country Toyota for $3.2 million in Class B Common Stock in
exchange therefor, was effective as of June 30, 1997 and is therefore
reflected in the actual balance sheet as of that date. The acquisition of
the minority interest resulted in the recognition of $2.8 million of
additional goodwill.

(2) Reflects the conversion from the LIFO Method of inventory accounting to the
FIFO Method of inventory accounting and the amount of taxes payable that
will result from this conversion. The Company intends to convert to the FIFO
Method conditioned upon the closing of the Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

(3) Reflects the preliminary allocation of the aggregate purchase price of the
Acquisitions based on the estimated fair value of the net assets acquired.
Because the carrying amount of the net assets acquired, which primarily
consist of accounts receivable, inventory, equipment, and floor plan
indebtedness, approximates their fair value, management believes the
application of purchase accounting will not result in an adjustment to the
carrying amount of those net assets. Under the acquisition agreement, the
negotiated purchase prices for the Acquisitions will be adjusted downward to
the extent that the fair value of the tangible net assets as of the closing
is less than an agreed upon amount. Under the provisions of purchase
accounting, the Company has one year from the date of acquisition to
finalize the allocation of the purchase price to the assets and liabilities
acquired to the extent that additional information is required for the final
measurement of a contingency related to an acquisition. Thus, the amount of
goodwill and the corresponding amortization may ultimately be different from
the amounts estimated here, depending upon the actual fair value of tangible
net assets acquired at closing of the Acquisitions. The estimated purchase
price allocation consists of the following:

<TABLE>
<CAPTION>
BOWERS DEALERSHIPS KEN MARKS FORD LAKE NORMAN DEALERSHIPS DYER VOLVO TOTAL
<S> <C> <C> <C> <C> <C>
Estimated total consideration:
Cash.............................. $ 28,500 $ 25,500 $18,200 $ 18,000 $90,200
Promissory note issued............ 5,000 5,000
Total......................... 33,500 25,500 18,200 18,000 95,200
Less negotiated minimum fair value
of tangible net assets acquired... 10,500 5,050 3,000 10,500 29,050
Excess of purchase price over fair
value of net tangible assets
acquired.......................... $ 23,000 $ 20,450 $15,200 $ 7,500 $66,150
</TABLE>

The purchase price for the acquisition of the Bowers Dealerships has not been
adjusted in the Pro Forma Combined and Consolidated Balance Sheet as of June
30, 1997 reflecting the elimination of Saturn of Chattanooga, Inc. as one of
the dealerships acquired in the Bowers acquisition. This purchase price will
be subject to downward adjustment pending the conclusion of negotiations
among the Company, Nelson Bowers and Saturn regarding this purchase price.

In connection with the acquisition of Dyer Volvo, the Company will issue a
warrant that will entitle the holder to acquire Class A shares representing a
0.375% ownership interest in the Company at an exercise price per share equal
to the price offered in the Offering. Because the number of underlying shares
and the exercise price of the underlying shares is not determinable at this
time, the Company is currently not able to value this warrant. Accordingly,
the Pro Forma Combined and Consolidated Balance Sheet does not give effect to
the issuance of this warrant, however, management believes the effect on the
Company's pro forma financial position and results of operations would not be
materially different from that which is presented. The difference between the
purchase price and the fair market value of the net tangible assets acquired
will be allocated to intangible assets, primarily goodwill and amortized over
40 years.

In connection with the acquisition of European Motors' Volvo franchise as
part of the Bowers Dealerships and the acquisition of Dyer Volvo, Volvo's
consent requires that the former owners maintain a 20% voting interest in,
and serve as the manager of these respective dealerships. Company management
believes that the effect of these arrangements, as currently structured, on
the Company's pro forma financial positions and results of operations would
not be materially different from that which is presented.

(4) Not used.

(5) Reflects the conversion from the LIFO Method of inventory accounting to the
FIFO Method of inventory accounting at the Lake Norman Dealerships, Ken
Marks Ford and Dyer Volvo in the amounts of $1,564,000, $2,750,000 and
$2,503,000, respectively. The Company intends to convert to the FIFO Method
conditioned upon the closing of the Offering. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview."

(6) Reflects the distribution of real property of the Bowers Dealerships with a
net depreciated cost of approximately $2.3 million, which are not being
acquired in the Acquisitions, and the related mortgage indebtedness in the
amount of approximately $1.8 million. See "Certain Transactions."

(7) Reflects the elimination of goodwill that arose in previous acquisitions of
the Bowers Dealerships.

(8) Reflects the amount of taxes payable that will result from the FIFO
conversion at Ken Marks Ford in the amount of $1,058,000.

(9) Reflects the issuance of Class A Common Stock in the Offering. See "Use of
Proceeds."

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the results of operations and financial
condition should be read in conjunction with the Sonic Automotive, Inc. and
Affiliated Companies Combined and Consolidated Financial Statements and the
related notes thereto included elsewhere in this Prospectus.

OVERVIEW

Sonic Automotive, Inc. is one of the leading automotive retailers in the
United States, operating 19 dealerships, four standalone used vehicle facilities
and seven collision repair centers in the southeastern and southwestern United
States. Sonic sells new and used cars and light trucks, sells replacement parts,
provides vehicle maintenance, warranty, paint and repair services and arranges
related F&I for its automotive customers. The Company's business is
geographically diverse, with dealership operations in the Charlotte,
Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets, each of
which the Company believes are experiencing favorable demographic trends. Sonic
sells 16 domestic and foreign brands, which consist of BMW, Cadillac, Chrysler,
Dodge, Eagle, Ford, Honda, Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth,
Toyota, Volkswagen and Volvo. In several of its markets, the Company has a
significant market share for new cars and light trucks, including 13.7% in
Charlotte and 9.1% in Chattanooga in 1996. Pro forma for the Acquisitions, the
Company had revenues of $899.6 million and retail unit sales of 24,206 new and
13,475 used vehicles in 1996. The Company believes that in 1996, based on pro
forma retail unit sales it would have been one of the ten largest dealer groups
out of a total of more than 15,000 dealer groups in the United States and, based
on pro forma revenues, it would have had three of the top 100 individual
dealerships locations in the United States.

The Company intends to pursue an acquisition growth strategy led by a
management team that has experience in the consolidation of both automotive
retailing as well as motor sports businesses. Bruton Smith, who is also the
Chief Executive Officer of Speedway Motorsports, Inc., the owner and operator of
several motor sports facilities, first entered the automotive retailing business
in the mid-1960's. Mr. Smith will devote approximately 50% of his business time
to the Company. Since 1990, Mr. Smith has successfully acquired three
dealerships and increased revenues from his dealerships from $199.4 million in
1992 to $376.6 million in 1996, without giving effect to the Acquisitions. In
the Tennessee market, Mr. Bowers has acquired or opened eight dealerships since
1992 and increased revenues of the Bowers Dealerships from $13.2 million in 1992
to $101.5 million in 1996. No assurance can be given that Messrs. Smith and
Bowers will be successful in acquiring or opening new dealerships for the
Company or increasing the Company's revenues.

New vehicle revenues include the sale and lease of new vehicles. Used
vehicle revenues include amounts received for used vehicles sold to retail
customers, other dealers and wholesalers. Other operating revenues include parts
and services revenues, fees and commissions for arranging F&I and sales of third
party extended warranties for vehicles (collectively, "F&I transactions"). In
connection with vehicle financing contracts, the Company receives a fee (a
"finance fee") from the lender for originating the loan. If within 90 days of
origination the customer pays off the loans through refinancing or
selling/trading in the vehicle, or defaults on the loan the finance company will
assess a charge (a "chargeback") for a portion of the original commission. The
amount of the chargeback depends on how long the related loan was outstanding.
As a result, the Company has established reserves based on its historical
chargeback experience. The Company also sells warranties provided by third party
vendors, and recognizes a commission at the time of sale.

While the automotive retailing business is cyclical, Sonic sells several
products and services that are not closely tied to the sale of new and used
vehicles. Such products and services include the Company's parts and service and
collision repair businesses, both of which are not dependent upon near-term new
vehicle sales volume. One measure of cyclical exposure in the automotive
retailing business is based on the dealerships' ability to cover fixed costs
with gross profit from revenues independent of vehicle sales. According to this
measurement of "fixed coverage," a higher percentage of non-vehicle sales
revenue to fixed costs indicates a lower exposure to economic cycles. Each
manufacturer requires its dealerships to report fixed coverage according to a
specific method, and the methods used vary widely among the manufacturers and
are not comparable. However, on an aggregate basis, the Company believes its
exposure to cyclicality may be measured by dividing the sum of the gross profit
for parts, service and collision repair by the sum of all operating expenses
with the exception of advertising expenses and variable payroll ("Fixed
Coverage"). Under this definition, the Company's Fixed Coverage was 89.3% in
1996. For the first half of 1997, the Sonic Dealership's Fixed Coverage was
84.2% compared to 89.7% in the first half of 1996.

<PAGE>
The Company's cost of sales and profitability are also affected by the
allocations of new vehicles which its dealerships receive from Manufacturers.
When the Company does not receive allocations of new vehicle models adequate to
meet customer demand, it purchases additional vehicles from other dealers at a
premium to the manufacturer's invoice, reducing the gross margin realized on the
sales of such vehicles. In addition, the Company follows a disciplined approach
in selling vehicles to other dealers and wholesalers when the vehicles have been
in the Company's inventory longer than the guidelines set by the Company. Such
sales are frequently at or below cost and, therefore, affect the Company's
overall gross margin on vehicle sales. The Company's salary expense, employee
benefits costs and advertising expenses comprise the majority of its selling,
general and administrative ("SG&A") expenses. The Company's interest expense
fluctuates based primarily on the level of the inventory of new vehicles held at
its dealerships, substantially all of which is financed (such financing being
called "floor plan financing").

The Company has historically accounted for all of its dealership
acquisitions using the purchase method of accounting and, as a result, does not
include in its financial statements the results of operations of these
dealerships prior to the date they were acquired by the Company. The combined
and consolidated financial statements of the Company discussed below reflect the
results of operations, financial position and cash flows of each of the
Company's dealerships acquired prior to June 30, 1997. As a result of the
foregoing effects of the Reorganization, as well as the effects of the
Acquisitions and the Offering, the historical combined and consolidated
financial information described in the Management's Discussion and Analysis of
Financial Condition and Results of Operations is not necessarily indicative of
the results of operations, financial position and cash flows of the Company in
the future or the results of operations, financial position and cash flows which
would have resulted had the Reorganization and Acquisitions occurred at the
beginning of the periods presented in the Combined and Consolidated Financial
Statements.

The Company's total revenues have increased from $199.4 million in 1992 to
$376.6 million in 1996, for a compound annual growth rate of 17.2%. Operating
income during this period experienced faster growth, with operating income
increasing from $3.9 million in 1992 to $9.4 million in 1996, for a 24.6%
compound annual growth rate. Income before income taxes and minority interest,
however, has only increased at a compound annual growth rate of 7.2% primarily
because interest expense on floor plan obligations has increased from 1.1% of
total revenues in 1992 to 1.6% of total revenues in 1996. Inventory and floor
plan balances increased during 1995 and 1996 to support the Company's strategy
of increasing market share. In early 1997, the Company instituted additional
inventory controls in order to reduce interest costs to levels typical of the
industry. Interest expense on floor plan obligations as a percentage of total
revenues has improved from 1.5% for the six months ended June 30, 1996 to 1.4%
for the six months ended June 30, 1997.

As of June 30, 1997, the Company effected the Reorganization pursuant to
which the Company (i) acquired all of the capital stock of the Sonic Dealerships
and (ii) issued Class B Common Stock in exchange for the Dealer Securities. The
Company will acquire these minority interests in purchase transactions at a
price in excess of their book value by approximately $2.5 million. This excess
will be capitalized as goodwill and amortized over forty years. In May, June and
July 1997, the Company consummated or signed definitive agreements to purchase
six additional dealerships or dealership groups for an aggregate purchase price
of $100.7 million. The Company intends to use the proceeds from the Offering to
pay the purchase price of the Acquisitions. In connection with the Acquisitions,
the Company will book approximately $66.2 million of goodwill which will be
amortized over forty years.

The Company currently utilizes the LIFO Method of accounting for inventory
but intends to convert to the FIFO Method of accounting, upon the closing of the
Offering, effective January 1, 1997. If the FIFO Method of inventory accounting
had been used by the Company in prior periods, income before taxes and minority
interest would have been higher by $1.5 million, $1.3 million and $1.4 million
for the years ended December 31, 1994, 1995 and 1996, respectively, and
immaterially changed for the six months ended June 30, 1996 and 1997,
respectively, from the reported results under the LIFO Method. Upon election of
the FIFO Method, the Company will be required under generally accepted
accounting principles to restate its historical financial statements. The
Company estimates that it will incur a tax liability of approximately $5.5
million in connection with this conversion to the FIFO Method.

The automobile industry is cyclical and historically has experienced
periodic downturns, characterized by oversupply and weak demand. Many factors
affect the industry including general economic conditions and consumer
confidence, the level of discretionary personal income, interest rates and
available credit. During the five years ended December 31, 1996, the automobile
industry was generally in a growth period with new vehicles sales growing at a
compound rate of 10.5% as a result of price increases of 6.2% and unit sales
increases of 4.0%. During the first six months of 1997, however, industry sales
of new cars declined by 2.0%, although the Company's new car and light truck
unit sales increased by 7.0% during the period. During these periods, interest
rates were relatively stable.

<PAGE>
RESULTS OF OPERATIONS

The following table summarizes, for the periods presented, the percentages
of total revenues represented by certain items reflected in the Company's
statement of operations.

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES FOR
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales........................................................ 61.5 % 60.0 % 61.9 % 61.0 % 64.4 %
Used vehicle sales....................................................... 23.9 % 26.0 % 24.9 % 25.6 % 22.6 %
Parts, service and collision repair...................................... 12.7 % 11.5 % 11.3 % 11.1 % 10.8 %
Finance and insurance.................................................... 1.9 % 2.5 % 1.9 % 2.3 % 2.2 %
Total revenues........................................................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales............................................................ 87.8 % 87.5 % 88.3 % 88.2 % 88.5 %
Gross profit............................................................. 12.2 % 12.5 % 11.7 % 11.8 % 11.5 %
Selling, general and administrative...................................... 9.2 % 9.4 % 8.9 % 8.8 % 8.7 %
Operating income......................................................... 2.7 % 2.8 % 2.5 % 2.9 % 2.6 %
Interest expense......................................................... 1.3 % 1.6 % 1.7 % 1.6 % 1.6 %
Income before income taxes............................................... 1.6 % 1.3 % 1.0 % 1.5 % 1.2 %
</TABLE>

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

REVENUES. Revenues grew in each of the Company's primary revenue areas,
except for used vehicles, for the first half of 1997 as compared with the first
half of 1996, causing total revenues to increase 12.2% to $212.7 million. New
vehicle sales revenue increased 18.4% to $137.1 million, compared with $115.7
million. New vehicle unit sales increased from 6,027 to 6,553, accounting for
51.5% of the increase in vehicle sales revenues. The remainder of the increase
was primarily due to a 8.9% increase in the average selling price resulting from
changes in vehicle prices, particularly a shift in customer preference to higher
cost light trucks and sport utility vehicles.

Used vehicle revenues from retail sales declined 7.2% from $35.2 million in
the first half of 1996 to $32.7 million in the first half of 1997. The decline
in used vehicle revenues was due principally to declines in used vehicle unit
sales at the Company's Town & Country Ford and Lone Star Ford locations, which
related to changes in consumer demand.

The Company's parts, service and collision repair revenue increased 9.0% to
$22.9 million from $21.0 million, and declined as a percentage of revenue to
10.8% from 11.1%. The increase in service and parts revenue was due principally
to increased parts revenue, including wholesale parts, from the Company's Lone
Star Ford and Fort Mill Ford locations. F&I revenue increased $0.5 million, due
principally to increased new vehicle sales and related financings.

GROSS PROFIT. Gross profit increased 8.7% in the 1997 period to $24.4
million from $22.4 million in the 1996 period due to increases in revenues of
new vehicles principally at the Company's Lone Star Ford and Fort Mill Ford
locations. Parts and service revenue increases also contributed to the increase
in gross profit. Gross profit as a percentage of sales declined from 11.8% to
11.5% due principally to reductions in higher margin used vehicle sales from the
prior period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased 10.8%
from $16.6 million to $18.4 million. These expenses increased due to increases
in sales volume as well as expenses associated with the Acquisitions and the
Offering.

INTEREST EXPENSE. The Company's interest expense increased 10.1% from $3.0
million to $3.3 million. The increase in interest expense was due to the
acquisition of Fort Mill Chrysler Plymouth Dodge dealership in June of 1997,
increases in interest rates on floor plan debt and increased new vehicle
inventory levels at existing dealerships.

NET INCOME. As a result of the factors noted above, the Company's net
income decreased by $0.2 million in the first half of 1997 compared to the first
half of 1996.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

REVENUES. The Company's total revenue increased 21.1% to $376.6 million in
1996 from $311.0 million in 1995. New vehicle sales increased 25.0% to $233.1
million in 1996 from $186.5 million in 1995, primarily because of the
acquisition in

<PAGE>

February 1996 of the Company's Fort Mill Ford dealership. The inclusion of the
results of the Fort Mill Ford dealership accounted for 65.3% of the Company's
overall increase in new vehicle sales in 1996. Of the increase in sales, 60.7%
was attributable to increases in unit sales from 1995 to 1996. The remainder of
the increase in new vehicle sales in 1996 was largely attributable to an
increase in average unit sales prices of 9.8% which the Company believes was
primarily due to changes in inventory mix (particularly shifting customer
preferences to light trucks and sport utility vehicles) and general increases in
new vehicle sales prices.

Used vehicle revenues from retail sales increased 12.0% to $68.0 million in
1996 from $60.8 million in 1995. The inclusion of the results of the Company's
Fort Mill Ford dealership accounted for substantially all of this increase in
used vehicle sales. The Company attributes the remainder of the increase in its
used vehicle sales in 1996 to increases of approximately 5.6% in the average
retail selling price per vehicle sold. Increases in average retail selling
prices were due to changes in product mix and general price increases.

The Company's parts, service and collision repair revenue increased 19.0%
to $42.6 million for 1996, compared to $35.9 million in 1995. Of this increase,
$4.4 million or 64.5% was due to the inclusion of the Company's Fort Mill Ford
dealership in the 1996 results of operations. The remainder of the increase was
principally the result of improved service operations and wholesale parts
distribution at the Company's Town and Country Ford dealership. F&I revenues
declined $0.7 million, or 8.9%, due principally to reductions in sales of
finance and insurance products at Town and Country Ford.

GROSS PROFIT. Gross profit increased 13.9% in 1996 to $44.2 million from
$38.8 million in 1995 primarily due to the addition of the Fort Mill Ford
dealership. Gross profit decreased from 12.5% to 11.7% as a percentage of sales
due principally to declines in F&I income and declines in gross profit margins
on the sale of used vehicles. Gross margins on new vehicles increased primarily
due to increases in the average selling price per unit due to a change in mix of
new vehicles sold, particularly higher margin light trucks and sport utility
vehicles.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's SG&A expenses
increased $4.3 million, or 14.8%, from $29.3 million in 1995 to $33.7 million in
1996. However, as a percentage of revenue, SG&A expenses decreased from 9.4% to
8.9%. Expenses associated with the Fort Mill Ford dealership acquired by the
Company in 1996 accounted for approximately 91.4% of this increase. The Company
attributes the remainder of the increase in selling, general and administrative
expenses primarily to higher compensation levels in 1996 and to an increase in
advertising expenses.

INTEREST EXPENSE. The Company's interest expense in 1996 increased 29.6% to
$6.4 million from $4.9 million in 1995. Of this increase $1.0 million or 70.4%
was attributable to floor plan financing at the Company's Fort Mill Ford
dealership acquired in February 1996. The remainder of the increase primarily
reflects interest expense on the debt assumed in the acquisition of Fort Mill
Ford and an increase in floor plan interest rates during 1996.

NET INCOME. The Company's net income in 1996 decreased 11.9% to $2.1
million from $2.4 million in 1995. This decrease was principally caused by
increased interest costs related to floor plan financing and debt assumed in the
acquisition of Fort Mill Ford.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

REVENUES. The Company's total revenue increased 16.4% to $311.0 million in
1995 from $267.1 million in 1994. New vehicle sales increased 13.5% to $186.5
million in 1995 from $164.4 million in 1994. The Company attributes the increase
in new vehicle sales to unit sales increases of 6.1% primarily from the Town &
Country Ford and Lone Star Ford dealerships which increased 9.3% and 7.1%,
respectively. The remainder of the increase was due to increased sales of higher
priced light trucks and sport utility vehicles and general price increases.

Used vehicle revenues from retail sales increased by 27.9% to $60.8 million
in 1995, compared with $47.5 million in 1994. The increase in used vehicle unit
sales was due principally to increases at the Company's Lone Star Ford, Town &
Country Ford and Frontier Cadillac-Oldsmobile locations. Unit sales volume
increased 18.2%, or 798 units, accounting for 70.9% of the increase in used
vehicle revenues. The remainder of the increase was due to improvements in
product mix and general increases in used vehicle selling prices.

The Company's parts, service and collision repair revenue increased 5.5% or
$1.9 million, from $34.0 million in 1994 to $35.9 million in 1995. Wholesale
parts sale increases at the Company's Lone Star Ford dealership and improved
service operations at the Company's Town and Country Toyota dealership account
for the majority of the increase. F&I revenue increased $2.6 million due
principally to additional sales of F&I products at the Company's Town and
Country Ford and Lone Star Ford dealerships.

<PAGE>

GROSS PROFIT. Gross profit increased 18.8% in 1995 to $38.8 million from
$32.6 million in 1994. Gross profit as a percentage of sales increased from
12.2% to 12.5% due principally to a 50.8% increase in high margin F&I product
sales. Gross margins on used vehicles improved due to the Company's strategy of
improved inventory management and the purchase of quality used vehicles.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's SG&A expenses
increased $4.7 million to $29.3 million or 19.1% and represented 9.4% in total
revenues in 1995 from $24.6 million or 9.2% of total revenues in 1994.

INTEREST EXPENSE. The Company's interest expense in 1995 increased 43.5% to
$4.9 million from $3.4 million in 1994. Increased interest expense was due to
increases in inventory levels and related floor plan borrowings.

NET INCOME. The Company's net income in 1995 decreased 12.4% to $2.4
million from $2.8 million in 1994. This decrease was caused by the increase in
floor plan financing due to an increase in vehicle inventory levels.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal needs for capital resources are to finance
acquisitions, debt service and working capital requirements. Historically, the
Company has relied primarily upon internally generated cash flows from
operations, borrowing under its various credit facilities and borrowings and
capital contributions from its stockholders to finance its operations and
expansion. After the Offering, the Company does not expect to receive any
additional financing from its existing stockholders.

The Company has historically maintained a separate revolving floor plan
credit facility for each dealership which has been used to finance vehicle
inventory. The Company currently has floor plan credit facilities with Ford
Motor Credit, Chrysler Financial Corporation and World Omni Financial
Corporation. As of June 30, 1997 there was an aggregate of $67.9 million
outstanding under the floor plan credit facilities. These floor plan facilities
bear interest at variable rates ranging from LIBOR plus 2.75% to prime plus
1.0%. Typically new vehicle floor plan indebtedness exceeds the related
inventory balances. The amount of vehicle cost financed with floor plan
indebtedness includes manufacturers' purchase discounts not reflected in the
inventory balance.

The Company makes monthly interest payments on the amount financed under
the floor plan lines but is not required to make loan principal repayments prior
to the sale of the vehicles. The underlying notes are due when the related
vehicles are sold and are collateralized by vehicle inventories and other assets
of the Company. The floor plan financing agreements contain a number of
covenants, including among others, covenants restricting the Company with
respect to limitations on liens and changes in ownership, officers and key
management personnel.

Prior to consummation of the Offering, the Company intends to consolidate
its new vehicle floor plan lines and obtain an additional revolving line of
credit. The Company is currently negotiating with credit sources for more
favorable terms. Based on current discussions with these lenders, the Company
expects the interest rate on its floor plan debt to decrease compared to the
interest rates currently being charged. The additional credit facility will be
used principally for acquisitions.

The Company leases various facilities and equipment under operating lease
agreements including leases with related parties. See "Certain
Transaction -- Leases."

During the first six months of 1997, the Company generated net cash of $4.0
million from operating activities. Net cash provided by operating activities was
$2.1 million in 1996 and was primarily attributable to net income of $2.1
million. Increased inventory levels and accounts receivable were primarily
offset by increased floor plan indebtedness and accounts payable. The increase
in inventory levels in 1996 reflects an increase in the volume of sales and the
timing of shipments from the Manufacturers. Increased receivables reflect
increased sales primarily attributable to Fort Mill Ford and Fort Mill
Chrysler-Plymouth-Dodge acquired in 1996 and 1997, respectively. The Company
generated net cash from operations of $3.0 million in 1995 and 1994.

Cash used for investing activities was approximately $1.2 million for the
first six months of 1997 and related primarily to acquisitions of property and
equipment. Cash provided by (used in) investing activities was ($11.5) million,
$0.3 million and ($1.7) million in 1996, 1995 and 1994, respectively, including
$1.9 million, $1.5 million and $1.4 million of capital expenditures during such
periods.

In 1996, cash provided by financing activities of $7.1 million reflected
the purchase of capital stock by a stockholder of the Company, the proceeds of
which were used to fund the acquisition of Fort Mill Ford and the purchase of
stock by a

<PAGE>
stockholder of Town & Country Ford. Cash used in financing activities for the
six months ended June 30, 1997 was $0.2 million principally due to scheduled
payments on long-term debt.

In conjunction with the recent consummation of the Lake Norman Acquisition,
the Company obtained from NationsBank, N.A. ("NationsBank") a short-term line of
credit in an aggregate principal amount of up to $20.0 million that matures no
later than February 15, 1998 (the "Six Month Facility"). A total of $20.0
million in aggregate principal amount is currently outstanding under the Six
Month Facility, which amount has been applied to fund the purchase price of the
Lake Norman Acquisition. The Six Month Facility is secured by a pledge of
Speedway Motorsports, Inc. common stock shares owned by Bruton Smith, the
Company's Chairman and Chief Executive Officer. See "Certain Transactions -- The
Smith Pledges." No assets of the Company secure the Six Month Facility, and the
Company is under no obligation to repay or reimburse Mr. Smith should
NationsBank foreclose on the securities pledged by Mr. Smith.

The Company has received a commitment for an acquisition line of credit
from Ford Motor Credit to provide (1) the Revolving Facility in an initial
aggregate principal amount of $26.0 million (the "Initial Loan Commitment") to
be increased to an aggregate principal amount of $75.0 million (the "Maximum
Loan Commitment"), and (2) to provide floor plan financing of up to $200.0
million to the Company's wholly-owned dealership subsidiaries (the "Wholesale
Credit Lines" and, together with the Revolving Facility, the "Facilities"). The
closing of the Revolving Facility with respect to the Initial Loan Commitment is
expected to occur before the consummation of the Offering. The Revolving
Facility will mature in two years, unless the Company requests that such term be
extended, at the option of Ford Motor Credit, for a number of additional one
year terms to be negotiated by the parties. The Revolving Facility is expected
to be increased to the Maximum Loan Commitment after the consummation of the
Offering and upon the satisfaction of other conditions relating to no defaults
in existence, the accuracy of the Company's representations and warranties and
the satisfaction of certain conditions precedent to lending at the time of such
increase. The proceeds from the Initial Loan Commitment are to be used to
consummate the Ken Marks Acquisition. Amounts to be drawn under the Maximum Loan
Commitment are to be used (i) for the acquisition of additional dealership
subsidiaries and to pay a portion of the purchase price for the Borrowers
Acquisition, the Dyer Acquisition and the Williams Acquisition, (ii) to
refinance up to not more than $20.0 million of the amounts outstanding under the
Six Month Facility, which will result in the retirement of the Six Month
Facility, and (iii) to provide up to $10.0 million for general working capital
needs of the Company. The Wholesale Credit Lines will be provided to the
Company's dealership subsidiaries, including the dealerships acquired in the
Acquisitions, on terms substantially the same as the floor plan financing
currently provided by Ford Motor Credit to the Company's subsidiaries.

Although management believes that negotiations of the Facilities will be
completed before the consummation of the Offering, no assurance can be given
that the Facilities will be consummated. The Initial Loan Commitment will be
secured by a pledge of Speedway Motorsports, Inc. common stock owned by Bruton
Smith. See "Certain Transactions -- The Smith Pledges." The Company will be
under no obligation to repay or reimburse Mr. Smith if Ford Motor Credit
forecloses on his securities. In addition, all of the Facilities are expected to
be secured by a pledge by the Company of all the capital stock, membership
interests and partnership interests of all of the Company's dealership
subsidiaries and a lien on all of the Company's other assets, except for real
estate owned by the Company that is currently subject to mortgages. Mr. Smith
and the Company's subsidiaries will also guarantee the Facilities, and the
Company will guarantee the Wholesale Credit Lines. After the Revolving Facility
is increased to the Maximum Loan Commitment, Mr. Smith's guaranty and pledge of
Speedway Motorsports, Inc. common stock will be terminated. The Company will
also agree not to pledge any of its assets to any third party (with the
exception of currently encumbered real estate).

The Company will make certain financial covenants under the Revolving
Facility, including covenants restricting or prohibiting the payment of
dividends, capital expenditure and material dispositions of assets as well as
other customary covenants and specified ratios of (i) debt to tangible equity
(as defined in the Revolving Facility), (ii) current assets to current
liabilities, (iii) earnings before interest, taxes, depreciation and
amortization (EBITDA) to fixed charges, (iv) EBITDA to interest expense, (v)
EBITDA to total debt and (vi) EBITDA to total floor plan debt. Moreover, the
loss of voting control over the Company by the Smith Group or the failure by
the Company, with certain exceptions, to own all the outstanding equity,
membership or partnership interests in its dealership subsidiaries will
constitute an event of default under the Revolving Facility.

<PAGE>
Capital expenditures, excluding amounts paid in acquisitions, were $0.9
million, $1.9 million, $1.5 million and $1.4 million in the first six months of
1997 and in 1996, 1995 and 1994, respectively. The Company's principal capital
expenditures typically include building improvements and equipment for use in
the Company's dealerships. Capital expenditures in 1996 and 1995 were primarily
attributable to expenditures for the addition of a used car lot in 1996 and
other capital improvements at the Lone Star Ford dealership. Excluding the
purchase price for the Acquisitions and future acquisitions, the Company is
anticipating total capital expenditures in the second half of 1997 to be
approximately $1.0 million. The Company expects to increase its capital
expenditures over the next few years as part of its acquisition and growth
strategy.

The Company believes that funds generated through future operations and
availability of borrowings under its floor plan financing (or any replacements
thereof) and its other credit arrangements will be sufficient to fund its debt
service and working capital requirements and any seasonal operating
requirements, including its currently anticipated internal growth for the
foreseeable future. The Company estimates that it will incur a tax liability of
approximately $5.5 million in connection with the change in its tax basis of
accounting for inventory from LIFO to FIFO. The Company believes that it will be
required to pay this liability in three to six equal annual installments,
beginning in March 1998, and believes that it will be able to pay such
obligation with cash provided by operations. The Company expects to fund any
future acquisitions from its future cash flow from operations, additional debt
financing, or Class A Common Stock issuances. The Company does not currently
have in place any credit facilities for acquisitions. There can be no assurance
that additional financing can be obtained on terms favorable to the Company, or
that the Company will be able to use its common stock to fund any future
acquisitions. See "Risk Factors -- Limitations on Financial Resources Available
for Acquisitions."

SEASONALITY

The Company's operations are subject to seasonal variations. The first
quarter generally contributes less revenue and operating profits than the
second, third and fourth quarters. Seasonality is principally caused by weather
conditions and timing of manufacturer incentive programs and model changeovers.

Set forth below is revenue information with respect to the Company's
operations for the most recent six quarters.

<TABLE>
<CAPTION>
1996 1997
1ST 2ND 3RD 4TH 1ST 2ND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C> <C> <C>
Revenues................................................ $85,669 $103,946 $93,222 $93,767 $98,739 $114,008
</TABLE>

EFFECTS OF INFLATION

Due to the relatively low levels of inflation in 1994, 1995 and 1996 and
the first half of 1997, inflation did not have a significant effect on the
Company's results of operations for those periods.

NEW ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." This Statement
specifies the computation, presentation and disclosure requirements for earnings
per share. The Company believes that the adoption of such Statement would not
result in earnings per share materially different than pro forma earnings per
share presented in the accompanying statements of income.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for the Company's fiscal year ending December 31,
1998, and the Company does not intend to adopt this statement prior to the
effective date. Had the Company adopted this Statement as of January 1, 1994, it
would have reported comprehensive income of $2.8 million, $2.4 million and $2.1
million for the years ended December 31, 1994, 1995 and 1996, respectively.

<PAGE>
BUSINESS

OVERVIEW

Sonic Automotive, Inc. is one of the leading automotive retailers in the
United States, operating 19 dealerships, four standalone used vehicle facilities
and seven collision repair centers in the southeastern and southwestern United
States. Sonic sells new and used cars and light trucks, sells replacement parts,
provides vehicle maintenance, warranty, paint and repair services and arranges
related F&I for its automotive customers. The Company's business is
geographically diverse, with dealership operations in the Charlotte,
Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets, each of
which the Company believes are experiencing favorable demographic trends. Sonic
sells 16 domestic and foreign brands, which consist of BMW, Cadillac, Chrysler,
Dodge, Eagle, Ford, Honda, Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth,
Toyota, Volkswagen and Volvo. In several of its markets, the Company has a
significant market share for new cars and light trucks, including 13.7% in
Charlotte and 9.1% in Chattanooga in 1996. Pro forma for the Acquisitions, the
Company had revenues of $899.6 million and retail unit sales of 24,206 new and
13,475 used vehicles in 1996. The Company believes that in 1996, based on pro
forma retail unit sales it would have been one of the ten largest dealer groups
out of a total of more than 15,000 dealer groups in the United States and, based
on pro forma revenues, it would have had three of the top 100 individual
dealerships locations in the United States.

The Company intends to pursue an acquisition growth strategy led by a
management team that has experience in the consolidation of both automotive
retailing as well as motor sports businesses. Bruton Smith, who is also the
Chief Executive Officer of Speedway Motorsports, Inc., the owner and operator of
several motor sports facilities, first entered the automotive retailing business
in the mid-1960's. Mr. Smith will devote approximately 50% of his business time
to the Company. Since 1990, Mr. Smith has successfully acquired three
dealerships and increased revenues from his dealerships from $199.4 million in
1992 to $376.6 million in 1996, without giving effect to the Acquisitions. In
the Tennessee market, Mr. Bowers has acquired or opened eight dealerships since
1992 and increased revenues of the Bowers Dealerships from $13.2 million in 1992
to $101.5 million in 1996. No assurance can be given that Messrs. Smith and
Bowers will be successful in acquiring or opening new dealerships for the
Company or increasing the Company's revenues.

GROWTH STRATEGY

The Company's objective is to capitalize on the consolidation of the
automotive retailing industry. Key elements of the Company's strategy to achieve
this objective include the acquisition of additional dealerships and the
leveraging of the Company's new vehicle franchises to increase sales of higher
margin products and services.

<PAGE>
(Bullet) ACQUIRE DEALERSHIPS. The Company plans to implement a "hub and spoke"
acquisition program primarily by pursuing (i) well-managed dealerships
in new metropolitan and growing suburban geographic markets, and (ii)
dealerships that will allow the Company to capitalize on regional
economies of scale, offer a greater breadth of products and services in
any of its markets or increase brand diversity. The growth generated
through acquisitions creates opportunities for economies of scale,
including more favorable financing terms from lenders and cost savings
from the consolidation of administrative functions such as employee
benefits, risk management and employee training.

NEW MARKETS. The Company looks to acquire well-managed dealerships in
geographic markets it does not currently serve, principally in the
Southeast and Southwest regions of the United States. The Company will
target dealers having superior operational and financial management.
Generally, the Company will seek to retain the acquired dealerships'
operational and financial management, and thereby benefit from their market
knowledge, name recognition and local reputation. The Company also
anticipates that management teams at the acquired dealerships will enable
the Company to identify more effectively additional acquisition
opportunities in these markets.

EXISTING MARKETS. The Company seeks growth in its operations within
existing markets by acquiring dealerships that increase the brands,
products and services offered in those markets. These acquisitions should
produce opportunities for additional operating efficiencies, promote
increased name recognition and provide the Company with better
opportunities for repeat and referral business. Such acquisitions should
also create opportunities for regional economies of scale in areas such as
vendor consolidation, facility and personnel utilization and advertising
spending. Additionally, cost savings may be achieved by consolidating
certain administrative functions on a regional basis that would not be
efficient on a national basis, such as accounting, information systems,
title work, credit and collection.

COLLISION REPAIR CENTERS. The Company's collision repair business
provides favorable margins and is not significantly affected by economic
cycles or consumer spending habits. The Company believes that, because of
the high capital investment required for collision repair shops, and the
cost of complying with environmental and worker safety regulations, large
volume body shops will be more successful in the future than smaller volume
shops. The Company believes that this industry will consolidate and that it
will be able to capitalize on this trend by expanding its collision repair
business. The Company also believes that opportunities exist for those
automotive retailers that can establish relationships with major insurance
carriers. The Company currently participates in 35 direct repair programs
with major insurance companies and its relationships with these carriers
provide a source of collision repair customers. The Company currently has
eight collision repair centers accounting for approximately $8.9 million in
pro forma revenue for the year ended 1996. Sonic intends over the next
several years to establish collision repair centers at various of its other
facilities as market conditions warrant.

<PAGE>
OPERATING STRATEGY

Sonic's operating objectives are to focus on customer satisfaction
throughout the organization in order to build long-term customer relationships
and to capitalize on operating efficiencies which will enhance its financial
performance. The Company seeks to achieve these objectives by implementing the
following operating strategies.

(Bullet) OPERATE MULTIPLE DEALERSHIPS IN GEOGRAPHICALLY DIVERSE MARKETS. The
Company operates dealerships in Charlotte, Chattanooga, Nashville,
Tampa-Clearwater, Houston and Atlanta. By operating in several
locations throughout the United States, the Company believes it will be
better able to insulate its earnings from local economic downturns. In
addition, the Company believes that by establishing a significant
market presence in its operating regions, it will be able to provide
superior customer service through a market-specific sales, service,
marketing and inventory strategy. It is the Company's strategy, for
instance, that the savings in a market on reduced advertising costs
will be re-deployed into customer service and customer retention
programs. The Company's market share in its Charlotte and Chattanooga
markets was 13.7% and 9.1%, respectively in 1996.

(Bullet) ACHIEVE HIGH LEVELS OF CUSTOMER SATISFACTION. Customer satisfaction has
been and will continue to be a focus of the Company. The Company's
personalized sales process is intended to satisfy customers by
providing high-quality, affordable vehicles in a positive, "consumer
friendly" buying environment. The Company's service department also
seeks to provide its customers with a professional and reliable service
experience of a consistently high standard. Beyond establishing strong
consumer loyalty, this focus on customer satisfaction engenders good
relations with Manufacturers. Manufacturers generally measure CSI,
which is a result of a survey given to new vehicle buyers. Some
Manufacturers offer specific performance incentives, on a per vehicle
basis, if certain CSI levels (which vary by Manufacturer) are achieved
by a dealer. Manufacturers can withhold approval of acquisitions if a
dealer fails to maintain a minimum CSI score. Historically, the Company
has not been denied Manufacturer approval of acquisitions based on CSI
scores. To keep management focused on customer satisfaction, the
Company includes CSI results as a component of its incentive
compensation program.

(Bullet) TRAIN AND DEVELOP QUALIFIED MANAGEMENT. Sonic requires all of its
employees, from service technicians to regional vice presidents, to
participate in in-house training programs. The Company leverages the
experience of senior management, along with third party trainers from
manufacturers, industry affiliates and vendors, to formally train all
employees. This training regimen has resulted in many of the Company's
regional vice presidents, executive managers and salespeople being
certified by NADA, and has become a convenient and effective way to
share best practices among the Company's employees at all levels of the
various dealerships. The Company is developing an education center (the
"Education Center") to be equipped with classrooms specifically
designed on a departmental basis. The F&I classroom in the Education
Center, for example, is to be equipped with simulation software that
replicates the dealers' systems and allows the employee to handle all
facets of an F&I transaction. The Company believes that its
comprehensive training of all employees at every level of their career
path offers the Company a competitive advantage over other dealership
groups in the development and retention of its workforce.

(Bullet) OFFER A DIVERSE RANGE OF AUTOMOTIVE PRODUCTS AND SERVICES. Sonic offers
a broad range of automotive products and services, including a wide
selection of new and used vehicles, vehicle financing and insurance
programs, replacement parts and maintenance and repair programs. The
Company offers 16 product lines ranging from economy to luxury brands
consisting of BMW, Cadillac, Chrysler, Dodge, Eagle, Ford, Honda,
Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth, Toyota, Volkswagen
and Volvo. The Company also offers a variety of used vehicles at a
broad range of prices. Offering numerous new vehicle brands enables the
Company to satisfy a variety of customers, reduces dependence on any
one Manufacturer and reduces exposure to supply problems and product
cycles.

(Bullet) UTILIZE PROFESSIONAL MANAGEMENT PRACTICES AND INCENTIVE BASED
COMPENSATION PROGRAMS. As a result of Sonic's size and geographic
dispersion, the Company's senior management has instituted a
multi-tiered management structure to supervise effectively its
dealership operations. In addition to the officers of the Company, this
structure includes executive managers who are responsible for
individual dealership operations, as well as regional vice presidents
responsible for various regions throughout the country. In an effort to
align management's interest with that of stockholders, a portion of

<PAGE>
the incentive compensation program for each officer, vice president and
executive manager is provided in the form of Company stock options,
with additional incentives based on the performance of individual
profit centers. Sonic believes that this organizational structure, with
room for advancement and the opportunity for equity participation,
serves as a strong motivation for its employees.

(Bullet) APPLY TECHNOLOGY THROUGHOUT OPERATIONS. The Company believes that, with
the customized technology it has introduced in certain markets, it has
been able to improve its operations over time by integrating its
systems into all aspects of its business. In these markets the Company
uses computer-based technology to monitor its dealerships' operating
performance and quickly adjust to market changes, and to integrate
computer systems into its sales, F&I and parts and service operations.
For example, sales managers use a database to identify and solicit
prospective customers, and to design appropriate financing packages for
prospective buyers. Service and parts managers utilize computer
technology to coordinate between the two departments and to service
customers more efficiently. In addition to these uses, the Company's
technology also plays a role in its inventory management. The Company
intends to expand this computer system into more of its dealerships and
markets as the existing contracts for computer systems expire.

INDUSTRY OVERVIEW

Automotive retailing, with approximately $640 billion in 1996 retail sales,
is the largest consumer retail market in the United States, representing
approximately 8% of the domestic gross product based on data collected by NADA
and the U.S. Department of Commerce. Retail sales of new vehicles, which are
sold exclusively through new vehicle dealers, were approximately $328 billion.
In addition, used vehicle retail sales in 1996 were estimated at $311 billion,
with approximately $260 billion in sales by franchised and independent dealers
and the balance in privately negotiated transactions. From 1992 to 1996, new
vehicles sales have grown at an annual compound rate of 10.5%, while used
vehicle sales have grown at a rate of 15.8% for retail used vehicle sales and
6.7% for wholesale used vehicle sales. This significant increase in sales
revenue is primarily because the average price of a new vehicle has risen at a
compound average rate of 6.2% from 1992 to 1996 and newer, high-quality used
vehicles now comprise a larger part of the used vehicle market. During this
period, unit sales grew at rates of only 4.0% for new vehicles, 6.4% for retail
used vehicles and 1.4% for wholesale used vehicles. For the six months ended
June 30, 1997, industry retail sales were down 2% as a result of retail car
sales declines of 5.3% and retail truck sales gains of 2.4% from the same period
in 1996.

The following table sets forth information regarding vehicle sales by new
vehicle dealerships for the periods indicated.

<TABLE>
<CAPTION>
UNITED STATES NEW VEHICLE DEALERS' VEHICLE SALES
(1)
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
(UNITS IN MILLIONS; DOLLARS IN BILLIONS)
New vehicle unit sales................................................. 12.9 13.9 15.1 14.7 15.1
New vehicle sales (2).................................................. $220.3 $253.3 $289.1 $301.2 $328.4
Used vehicle unit sales-retail......................................... 9.3 9.9 10.9 11.5 11.9
Used vehicle sales-retail (2).......................................... $ 77.1 $ 90.7 $110.6 $126.9 $137.9
Used vehicle unit sales-wholesale...................................... 6.9 6.4 6.9 7.0 7.3
Used vehicle sales -- wholesale (2).................................... $ 26.2(3) $ 24.3 $ 27.9 $ 30.4 $ 33.9
Total vehicle sales.................................................... $323.6 $368.3 $427.6 $458.5 $500.2
Annual growth in total vehicle sales................................... -- 13.8% 16.1% 7.2% 9.1%
</TABLE>

(1) Reflects new vehicle dealership sales at retail and wholesale. In addition,
sales by independent retail used vehicle dealers were approximately $81,
$100, $134, $130 and $122 billion, respectively, and casual used car sales
were estimated at approximately $36, $33, $40, $52 and $51 billion,
respectively, for each of the five years ended December 31, 1996.

(2) Sales figures are calculated by multiplying unit sales by the average sales
price for the year.

(3) The NADA did not report the averages sales price for wholesale transactions
prior to 1993. As a result, the 1992 wholesale used vehicle sales were
calculated using the 1993 average wholesale price for used vehicles.

In addition to new and used vehicles, dealerships offer a wide range of
other products and services, including repair and warranty work, replacement
parts, extended warranty coverage, financing and credit insurance. In 1996, the
average dealership's revenue consisted of 57.7% new vehicles sales, 30.4% used
vehicle sales, and 11.9% other products and services. As a result of intense
competition for new vehicle sales, the average dealership generates the majority
of its profits from the sale of used vehicles and other products and services,
including finance and insurance, mechanical and collision repair, and parts and

<PAGE>
service. In 1996, for example, a used vehicle earned an average gross margin of
11.0% as compared to a new vehicle's average gross margin of 6.4%, in each case
for sales by new vehicle dealerships. As is typical in the retailing industry,
dealership profitability varies widely across different stores and, ultimately,
profitability depends on effective management of inventory, competition,
marketing, quality control and, most importantly, responsiveness to the
customer.

NEW VEHICLE SALES. Franchised dealerships were originally established by
automobile manufacturers for the distribution of their new vehicles. In return
for exclusive distribution rights within specified territories, manufacturers
exerted significant influence over their dealers by limiting the transferability
of ownership in dealerships, designating the dealerships location, and managing
the supply and composition of the dealership's inventory. These arrangements
resulted in the proliferation of small, single-owner operations that, at their
peak in the late 1940's, totaled almost 50,000. As a result of competitive,
economic and political pressures during the 1970's and 1980's, significant
changes and consolidation occurred in the automotive retail industry. One of the
most significant changes was the increased penetration by foreign manufacturers
and the resulting loss of market share by domestic car makers, which forced many
dealerships to close or sell to better-capitalized dealership groups. According
to industry data, the number of franchised dealerships has declined from
approximately 25,000 dealerships in 1990 to approximately 22,000 in 1996.
Although significant consolidation has taken place since the automotive
retailing industry's inception, the industry today remains highly fragmented,
with the largest 100 dealer groups generating less than 10% of total sales
revenues and controlling less than 5% of all franchised dealerships.

USED VEHICLE SALES. Sales of used vehicles have increased over the past
five years, primarily as a result of the substantial increase in new vehicle
prices and the greater availability of newer used vehicles due to the increased
popularity of short-term leases. Like the new vehicle market, the used vehicle
market is highly fragmented, with approximately 22,000 new vehicle dealers
accounting for approximately $172 billion in 1996 sales. In addition, an even
greater number of independent used car dealers accounted for approximately $122
billion in 1996 sales. Privately negotiated transactions accounted for the
remaining 1996 sales, estimated at $51 billion. In addition, an increasing
number of used vehicles are being sold by "superstore" outlets, which market
only used vehicles and offer a wide selection of low mileage, popular models. In
1996, the top 100 new vehicle dealer groups accounted for less than 2% of used
vehicle sales.

INDUSTRY CONSOLIDATION. The Company believes that further consolidation 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. The Company also believes that an opportunity exists for
dealership groups with significant equity capital, and experience in
identifying, acquiring and professionally managing dealerships, to acquire
additional dealerships for cash, stock, debt or a combination thereof. Publicly
owned dealer groups, such as the Company, are able to offer prospective sellers
tax advantaged transactions through the use of publicly traded stock which may,
in certain circumstances, make them more attractive to prospective sellers.

DEALERSHIP OPERATIONS

Upon completion of the Reorganization and the Acquisitions, the Company
will own eight dealerships in the Charlotte market, seven dealerships in the
Chattanooga market, one dealership in the Nashville market, one dealership in
the Houston market, one dealership in the Clearwater market and one dealership
in the Atlanta market.

The following table sets forth, for each of those areas, information
relating to the Company's pro forma performance for the year ended December 31,
1996 and the six months ended June 30, 1997:

<TABLE>
<CAPTION>
NASHVILLE/ TAMPA/
CHARLOTTE CHATTANOOGA HOUSTON CLEARWATER ATLANTA
MARKET MARKET MARKET MARKET MARKET TOTAL
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1996 SALES:
New vehicles........................................ $ 229,181 $ 98,767 $ 83,763 $ 88,844 $39,940 $540,495
Used vehicles....................................... 105,034 45,410 33,403 42,982 20,931 247,760
Parts, service and collision repair................. 33,260 17,338 18,927 14,224 11,163 94,912
Finance and insurance............................... 7,397 2,877 3,338 2,317 542 16,471
Total............................................. $ 374,872 $ 164,392 $139,431 $148,367 $72,576 $899,638
SIX MONTHS ENDED JUNE 30, 1997 SALES:
New vehicles........................................ $ 123,130 $ 40,939 $ 55,902 $ 45,577 $19,596 $285,144
Used vehicles....................................... 57,978 26,280 17,865 19,580 11,777 133,480
Parts, service and collision repair................. 17,865 9,694 10,363 5,999 5,960 49,881
Finance and insurance............................... 4,464 1,539 2,249 1,029 129 9,410
Total............................................. $ 203,437 $ 78,452 $ 86,379 $ 72,185 $37,462 $477,915
</TABLE>

<PAGE>
Since 1990 the Company has grown significantly, as a result of the
acquisition and integration of new vehicle dealerships and an increase in
revenues at its existing dealerships. The following table sets forth the name,
brands, year of acquisition and location of the dealerships acquired by or
awarded to the Company or one of the Bowers Dealerships since 1990:

<TABLE>
<CAPTION>
YEAR
ACQUIRED LOCATION
<S> <C> <C>
DEALERSHIP AND BRANDS CURRENTLY REPRESENTED
SONIC AUTOMOTIVE
Town & Country Toyota............................................................. 1990 Charlotte
Fort Mill Ford.................................................................... 1996 Charlotte
Fort Mill Chrysler-Plymouth-Dodge................................................. 1997 Charlotte
BOWERS DEALERSHIPS
Nelson Bowers Ford................................................................ 1993 Chattanooga
Cleveland Village Honda/Infiniti.................................................. 1994 Chattanooga
Cleveland Chrysler-Plymouth-Jeep-Eagle............................................ 1995 Chattanooga
Jaguar of Chattanooga (awarded franchise)......................................... 1995 Chattanooga
European Motors of Nashville
"BMW, Volkswagen"............................................................... 1996 Nashville
European Motors
"BMW, Volvo".................................................................... 1996 Chattanooga
Nelson Bowers Dodge............................................................... 1997 Chattanooga
KIA -- VW of Chattanooga (awarded franchise)...................................... 1997 Chattanooga
</TABLE>

DEALERSHIP MANAGEMENT

Operations of the dealerships are overseen by Regional Vice Presidents, who
report to the Company's Chief Operating Officer. Each of the Company's
dealerships is managed by an Executive Manager who is responsible for the
operations of the dealership and the dealership's financial and customer
satisfaction performance. The Executive Manager is responsible for selecting,
training and retaining dealership personnel. All Executive Managers report to
the Company's senior management on a regular basis and prepare a comprehensive
monthly financial and operating statement of their dealership. In addition, the
Company's senior management meets on a monthly basis with its Executive Managers
to address changing customer preferences, operational concerns and to share best
practices, such as maintaining a customer-friendly buying environment,
maximizing potential revenues per new vehicle sale through increased F&I
penetration, using customer calling and coupon programs to attract and retain
service customers, and continued training of dealership personnel.

Each Executive Manager is complemented by a team which includes two senior
managers that aid in the operation of the dealership. The General Sales Manager
is primarily responsible for the operations, personnel, financial performance
and customer satisfaction performance of the new vehicle sales, used vehicle
sales, and finance and insurance departments. The Parts and Service Director is
primarily responsible for the operations, personnel, financial and customer
satisfaction performance of the service, parts and collision repair departments
(if applicable). Each of the departments of the dealership typically has a
manager who reports to the General Sales Manager or Parts and Service Director.

After the Acquisitions, the Company's Regional Vice Presidents will be as
listed, with their region of responsibility and age, on the following table:

<TABLE>
<CAPTION>
NAME AGE REGION OF RESPONSIBILITY
<S> <C> <C>
Ken Marks, Jr. 35 Florida
Jeffrey C. Rachor 35 Tennessee, Georgia, Kentucky and Alabama
Ivan A. Tufty 57 Texas
William Sullivan 65 North Carolina and South Carolina
</TABLE>

NEW VEHICLE SALES

The Company sells 16 brands of cars, light trucks and sport utility
vehicles. The products have a broad range of prices from lower priced, or
economy vehicles, to luxury vehicles. The Company believes that its brand,
product and price diversity reduces the risk of changes in customer preferences,
product supply shortages and aging products. Sales of new vehicles in 1996 were
approximately 41% cars and 59% trucks. Approximately 13% of sales in 1996 were
luxury brands (BMW, Cadillac, Infiniti, Jaguar and Volvo). See "Risk
Factors -- Dependence on Automobile Manufacturers."

<PAGE>
The following table sets forth, by vehicle brand, information relating to
the Company's and the Acquisitions' new vehicle sales for 1996 and the first six
months of 1997:

<TABLE>
<CAPTION>
NEW VEHICLE SALES
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 (1) JUNE 30,
PERCENTAGE OF 1997 (1)
NEW VEHICLE NEW VEHICLE NEW VEHICLE
REVENUES REVENUES REVENUES
<S> <C> <C> <C>
(REVENUE AMOUNTS IN THOUSANDS)
VEHICLE BRAND/MANUFACTURER
BMW................................................................... $ 10,838 2.2% $ 13,993
Cadillac.............................................................. 2,029 0.4% 770
Chrysler/Dodge/Plymouth/Jeep/Eagle.................................... 88,951 17.9% 50,935
Ford.................................................................. 297,169 59.9% 164,768
Honda................................................................. 11,599 2.3% 4,992
Infiniti.............................................................. 6,618 1.3% 3,247
Jaguar................................................................ 2,296 0.5% 1,405
KIA................................................................... -- -- 685
Oldsmobile............................................................ 2,212 0.4% 1,055
Toyota................................................................ 30,520 6.2% 19,246
Volvo................................................................. 43,060 8.7% 21,478
Volkswagen............................................................ 732 0.1% 257
Total............................................................... $ 496,024 100.0% $ 282,831

<CAPTION>
PERCENTAGE OF
NEW VEHICLE
REVENUES
<S> <C>
VEHICLE BRAND/MANUFACTURER
BMW................................................................... 4.9%
Cadillac.............................................................. 0.3%
Chrysler/Dodge/Plymouth/Jeep/Eagle.................................... 18.0%
Ford.................................................................. 58.3%
Honda................................................................. 1.8%
Infiniti.............................................................. 1.1%
Jaguar................................................................ 0.5%
KIA................................................................... 0.2%
Oldsmobile............................................................ 0.4%
Toyota................................................................ 6.8%
Volvo................................................................. 7.6%
Volkswagen............................................................ 0.1%
Total............................................................... 100.0%
</TABLE>

(1) Does not include Nelson Bowers Dodge as it was purchased on March 1, 1997
and KIA-VW of Chattanooga which was purchased April 1997. European Motors of
Nashville and European Motors were purchased in October 1996 and May 1996,
respectively, and information for such dealerships is included from their
purchase dates through December 1996.

The Company seeks to provide customer oriented service and build lasting
customer relationships that will result in repeat and referral business. Sales
techniques and processes vary depending on the product line and local market
conditions. All of the Company's dealerships use computer technology for
prospecting and customer follow-up and extensively train sales staff to meet the
needs of customers. Certain of the dealerships use computer kiosks to allow
customers to browse vehicle inventories at their leisure. Depending on brand and
local market, dealerships may use "greeters" rather than sales people to
initially assist customers entering a dealership.

Substantially all of the Company's new vehicles are acquired from
Manufacturers. Allocation of vehicle inventory from Manufacturers is based
primarily on sales volume and input from dealers. Vehicle purchases are financed
through revolving credit facilities known in the industry as floor plan lending.

The following table presents information with respect to the Company's new
vehicle sales:

PRO FORMA
FOR THE
ACQUISITIONS
1997
<S> <C>

Unit sales............ 12,596
Sales revenue......... $285,143
Gross profit.......... $ 20,749
Gross profit margin... 7.3%
</TABLE>

New vehicle sales include retail lease transactions and lease-type
transactions, both of which are arranged by the Company. New vehicle leases
generally have short terms. Lease customers, therefore, return to the new
vehicle market more frequently. Leases also provide a source of late-model,
generally low mileage, vehicles for its used vehicle inventory. Generally,
leased vehicles are under warranty for the entire lease term, which allows the
Company to provide repair service to the lessee throughout the term of the
lease.

<PAGE>
USED VEHICLE SALES

The Company sells a broad variety of makes and models of used cars, vans,
trucks and sport utility vehicles. On a pro forma basis in 1996, the Company
sold 9,281 used car and 4,194 used truck (including sport utility vehicles)
units. Used vehicle retail sales for 1996 represented 35.8% of pro forma total
retail unit sales.

Used vehicles are obtained by the Company through customer trade-ins, at
"closed" auctions which may be attended only by new vehicle dealers and which
offer off-lease, rental and fleet vehicles, and at "open" auctions which offer
repossessed vehicles and vehicles sold by other dealers. The Company sells its
used vehicles to retail customers and, in the case of vehicles in poor condition
or vehicles which remain unsold for a specified period of time, to other dealers
or wholesalers. Sales to other dealers or wholesalers are frequently close to or
below cost and therefore negatively affect the Company's gross margin on used
vehicle sales.

The Company emphasizes retail sales of used vehicles in order to offer a
wider variety of vehicles and to benefit from the higher gross margins from used
vehicle sales. To improve the marketability of used vehicles the Company employs
both manufacturer supported and in-house used car certification programs and
sale of extended warranties on used vehicles. At certain locations, the Company
provides a five day money back guarantee on the sale of all used vehicles. The
Company intends to expand this guarantee program to all locations.

After the Acquisitions, the Company will operate four standalone used car
facilities. As the Company enters new markets and gains market share in existing
markets, the Company intends to expand its standalone used car facilities to
take advantage of the high quality sources of vehicles available to new vehicle
retailers.

The following table sets forth information on the Company's used vehicle
sales:

<TABLE>
<CAPTION>
SONIC DEALERSHIPS
SONIC DEALERSHIPS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO FORMA
FOR THE
ACTUAL ACQUISITIONS ACTUAL
1992 1993 1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT VEHICLE UNIT DATA)
Retail unit sales.......... 3,892 4,104 4,374 5,172 5,488 13,475 2,836 2,638
Retail sales revenue....... $33,636 $37,742 $47,537 $60,766 $68,054 $181,787 $35,200 $32,666
Retail gross profit........ 3,610 3,964 5,182 5,792 5,748 16,762 2,968 2,772
Retail gross margin........ 10.7% 10.5% 10.9% 9.5% 8.4% 9.2% 8.4% 8.5%
Wholesale unit sales....... 3,756 4,189 4,656 5,009 5,344 12,385 2,751 2,750
Wholesale sales revenue.... $11,199 $13,363 $16,062 $20,025 $25,642 $ 65,963 $13,412 $15,342
Wholesale gross profit..... 16 27 43 (45) (23) (52) (12) (145)
Wholesale gross margin..... 0.1% 0.2% 0.3% (0.2)% (0.1)% (.1)% (0.1)% (0.9)%
Total unit sales........... 7,648 8,293 9,030 10,181 10,832 25,860 5,587 5,388
Total revenue.............. $44,835 $51,105 $63,599 $80,791 $93,696 $247,750 $48,612 $48,009
Total gross profit......... 3,626 3,991 5,225 5,747 5,725 16,710 2,956 2,627
Total gross margin......... 8.1% 7.8% 8.2% 7.1% 6.1% 6.7% 6.1% 5.5%

PRO FORMA
FOR THE
ACQUISITIONS
1997
<S> <C>

Retail unit sales.......... 7,043
Retail sales revenue....... $ 96,249
Retail gross profit........ 8,521
Retail gross margin........ 8.9%
Wholesale unit sales....... 6,513
Wholesale sales revenue.... $ 37,232
Wholesale gross profit..... (34)
Wholesale gross margin..... .1%
Total unit sales........... 13,556
Total revenue.............. $ 133,481
Total gross profit......... 8,487
Total gross margin......... 6.4%
</TABLE>

SERVICE AND PART SALES

The Company provides service and parts at each of its franchised
dealerships. The Company provides maintenance and repair services at its 19 new
vehicle dealerships and three used vehicle facilities. The Company utilizes
approximately 400 service bays in providing both warranty and non-warranty
services. Service and parts sales provide higher gross margins than vehicle
sales. On a pro forma basis in 1996, the Company's service and parts operations
generated $85.9 million in revenues and $35.1 million in gross profit,
representing 9.6% and 31.0% of total revenues and gross profit, respectively.

Historically, the automotive repair industry has been highly fragmented.
However, the Company believes the increased use of advanced technology in
vehicles has made it difficult for independent repair shops to perform major or
technical repairs. Additionally, manufacturers permit warranty work to be
performed only at franchised dealerships. Given the increasing technological
complexity of motor vehicles and the trend to long term warranties, the Company
believes an increasing percentage of repair work will be performed at franchised
dealerships.

The Company regards its service operations as an integral part of its
overall approach to customer service. Vehicle service provides additional
opportunities to build long-term customer relationships. The Company uses
customer calling, coupon programs and other techniques to attract and retain
service customers. Although individual dealerships vary based on markets and
brands, many Company dealerships use service "teams" and variable rate or "menu"
pricing structures to improve customer satisfaction with repair service.

<PAGE>
Sales of factory authorized equipment and parts to wholesale customers are
an integral component of parts operations at certain of the Company's
dealerships. For example, the Company's Lone Star Ford dealership sold
approximately $9.3 million in wholesale parts in 1996. The Company plans to
capitalize on its representation of numerous manufacturers and its experience as
a wholesale parts distributor in order to increase sales of factory authorized
equipment and parts to wholesale customers.

The following table sets forth information regarding the Company's service
and parts sales:

<TABLE>
<CAPTION>
SONIC DEALERSHIPS
SONIC DEALERSHIPS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO FORMA
FOR THE
ACTUAL ACQUISITIONS ACTUAL
1992 1993 1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales revenue.............. $21,778 $27,243 $30,298 $31,957 $37,702 $ 85,958 $18,607 $20,220
Gross profit............... 7,540 9,540 10,344 11,003 13,106 35,142 6,317 6,822
Gross profit margin........ 34.6% 35.0% 34.1% 34.4% 34.8% 40.9% 33.9% 33.7%

PRO FORMA
FOR THE
ACQUISITIONS
1997
<S> <C>

Sales revenue.............. $ 44,649
Gross profit............... 18,494
Gross profit margin........ 41.4%
</TABLE>

COLLISION REPAIR

The Company operates collision repair centers, or body shops, at eight of
its dealership locations. In 1996, collision repair accounted for $8.9 million,
or 1.0%, of the Company's pro forma revenues and 4.4% of the Company's gross
profit. The Company's collision repair business provides favorable margins and,
similar to service and parts, is not significantly affected by business cycles
or consumer preferences. In addition, because of the higher cost of used
vehicles, insurance adjusters are more hesitant to declare a vehicle a total
loss, resulting in more significant, and higher cost, repair jobs. The Company
believes that, because of the high capital investment required for collision
repair shops and the cost of complying with governmental regulations, large
volume body shops will be more successful in the future than smaller volume
shops. The Company believes the collision repair business will consolidate and
that it will be able to capitalize on this consolidation.

The following table sets forth information regarding the Company's
collision repair operations:

<TABLE>
<CAPTION>
SONIC
DEALERSHIPS
SONIC DEALERSHIPS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO FORMA
FOR THE
ACTUAL ACQUISITIONS ACTUAL
1992 1993 1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales revenue...................... $2,765 $3,094 $3,686 $3,903 $4,942 $8,950 $2,398 $2,686
Gross profit....................... 1,378 1,516 1,870 1,956 2,452 4,993 1,201 1,284
Gross profit margin................ 49.8% 49.0% 50.7% 50.1% 49.6% 55.8% 50.1% 47.8%

PRO FORMA
FOR THE
ACQUISITIONS
1997
<S> <C>

Sales revenue...................... $5,232
Gross profit....................... 2,628
Gross profit margin................ 50.2%
</TABLE>

FINANCE AND INSURANCE

The Company offers its customers a wide range of financing and leasing
alternatives for the purchase of vehicles. In addition, as part of each sale,
the Company offers customers credit life, accident and health and disability
insurance to cover the financing cost of their vehicle, as well as warranty or
extended service contracts. The Sonic Dealerships' pro forma revenue from
financing, insurance and extended warranty transactions was $16.5 million in
1996 and $9.4 million for the six months ended June 30, 1997.

The Company believes that its customers' ability to obtain financing at its
dealerships significantly enhances the Company's ability to sell new and used
vehicles. The Company provides a variety of financing and leasing alternatives
in order to meet the specific needs of each potential customer. The Company
believes its ability to obtain customer-tailored financing on a "same day" basis
provides it with an advantage over many of its competitors, particularly smaller
competitors which do not generate sufficient volume to attract the diversity of
financing sources that are available to the Company. The dealership will then be
able to provide a customer with a broader array of lease payment alternatives
and, consequently, appeal to a term buyer who is trying to purchase a vehicle of
choice at or below a specific monthly payment. During 1996, the Company arranged
for financing for approximately 44.0% of its new vehicle sales and 53.1% of its
used vehicle sales.

The Company assigns its vehicle financing contracts and leases to other
parties, instead of directly financing sales, which reduces the Company's
exposure to loss from financing activities. The Company receives a commission
from the lender for originating and assigning the loan or lease but is assessed
a chargeback fee by the lender if a loan is canceled, in most cases, within 120
days of making the loan. Early cancellation can result from early repayment
because of refinancing of the loan, the sale or trade-in of the vehicle, or
default on the loan. The Company establishes an allowance to absorb estimated

<PAGE>
chargebacks and refunds. The Company believes that its high volume of business
makes the Company's retail contracts more attractive to lenders, which may
enable the Company to negotiate higher commission rates in contrast to lower
volume dealerships.

In addition to its financing activities, the Company offers extended
service contracts in connection with the sale of new and used vehicles. Extended
service contracts on new vehicles supplement the warranties offered by the
vehicle manufacturer, and on used vehicles, such contracts supplement any
remaining manufacturer warranty or serve as the primary service contract on the
vehicle. The extended service contracts sold by the Company are issued by
third-party insurers that pay the Company a commission upon sale of the
contract. In 1996, the Company sold extended service contracts on 24.0% and
36.1% respectively, of its new and used retail vehicle sales. The Company also
offers its customers credit life, health and accident insurance when they
finance an automobile purchase, and receives a commission on each policy sold.

SALES AND MARKETING

The Company's marketing and advertising activities vary among its
dealerships and among its markets. The Company advertises primarily through
television, newspapers, radio and direct mail and regularly conducts special
promotions designed to focus vehicle buyers on its product offerings. The
Company intends to continue tailoring its marketing efforts to the relevant
marketplace in order to reach the Company's targeted customer base. The Company
also has computer technology to aid sales people in prospecting for customers.
Under arrangements with manufacturers, the Company receives a subsidy for a
portion of its advertising expenses incurred in connection with a manufacturer's
vehicles. Because of the Company's leading market presence in certain markets,
the Company believes it has been able to realize cost savings on its advertising
expenses due to volume discounts and other concessions from media. The Company
also believes its consolidated marketing campaigns within particular markets
result in enhanced name recognition and sales volume when compared with smaller
competitors in the same market.

RELATIONSHIPS WITH MANUFACTURERS

Each of the Company's dealerships operates under a separate franchise or
dealer agreement (a "Dealer Agreement") which governs the relationship between
the dealership and the Manufacturer. In general, each Dealer Agreement specifies
the location of the dealership for the sale of vehicles and for the performance
of certain approved services in a specified market area. The designation of such
areas generally does not guarantee exclusivity within a specified territory. In
addition, most Manufacturers allocate vehicles on a "turn and earn" basis which
rewards high volume. A Dealer Agreement requires the dealer to meet specified
standards regarding showrooms, the facilities and equipment for servicing
vehicles, inventories, minimum net working capital, personnel training, and
other aspects of the business. The Dealer Agreement with each dealership also
gives each Manufacturer the right to approve the dealership's general manager
and any material change in management or ownership of the dealership. Each
Manufacturer may terminate a Dealer Agreement under certain circumstances, such
as a change in control of the dealership without Manufacturer approval, the
impairment of the reputation or financial condition of the dealership, the
death, removal or withdrawal of the dealership's general manager, the conviction
of the dealership or the dealership's owner or general manager of certain
crimes, a failure to adequately operate the dealership or maintain wholesale
financing arrangements, insolvency or bankruptcy of the dealership or a material
breach of other provisions of the Dealer Agreement. In connection with the
Offering, the Company is amending its Dealer Agreements to revise those
provisions which would have prohibited the Company from selling its Common Stock
to the public. See "Description of Capital Stock -- Delaware Law, Certain
Charter and Bylaw Provisions and Certain Franchise Agreement Provisions."

Many automobile manufacturers are still developing their policies regarding
public ownership of dealerships. The Company believes that these policies will
continue to change as more dealership groups sell their stock to the public, and
as the established, publicly-owned dealership groups acquire more franchises. To
the extent that new or amended manufacturer policies restrict the number of
dealerships which may be owned by a dealership group, or the transferability of
the Company's Common Stock, such policies could have a material adverse effect
on the Company. See "Risk Factors -- Dependence on Automobile Manufacturers" and
" -- Concentration of Voting Power and Anti-Takeover Provisions."

Under the Company's Dealer Agreement with General Motors ("GM"), the
Company has agreed, among other things, to disclose the following provisions:

Sonic will deliver to GM copies of all Schedules 13D and 13G, and all
amendments thereto and terminations thereof, received by Sonic, within five
days of receipt of such Schedules. If Sonic is aware of any ownership of
its stock that should have been reported to it on Schedule 13D but that is
not reported in a timely manner, it will promptly give GM written notice of
such ownership, with any relevant information about the owner that Sonic
possesses.

<PAGE>

If Sonic through its Board of Directors or through shareholder action
proposes or if any person, entity or group sends Sonic a Schedule 13D, or
any amendments thereto, disclosing (a) a binding agreement to acquire or
the acquisition of aggregate ownership of more than 20% of the voting stock
of Sonic and (b) Sonic through its Board of Directors or through
shareholder action proposes or if any plans or proposals which relate to or
would result in the following: (i) the acquisition by any person of more
than 20% of the voting stock of Sonic other than for the purposes of
ordinary passive investment; (ii) an extraordinary corporate transaction,
such as a material merger, reorganization or liquidation, involving Sonic
or a sale or transfer of material amount of assets of Sonic and its
subsidiaries; (iii) any change which together with any changes made to the
Board of Directors within the preceding year, would result in a change in
control of the then current Board of Sonic; or (iv) in the case of an
entity that produces or controls or is controlled by or is under common
control with an entity that either produces motor vehicles or is a motor
vehicle franchisor, the acquisition by any person entity or group of more
than 20% of the voting stock of Sonic and any proposal by any such person,
entity or group through the Sonic Board of Directors or shareholders action
to change the Board of Directors of Sonic, then if such actions in GM's
business judgment could have a material or adverse effect on its image or
reputation in the GM dealerships operated by Sonic or be materially
incompatible with GM's interests (and upon notice of GM's reasons for such
judgment), Sonic has agreed that it will take one of the remedial actions
set forth in the next paragraph within 90 days of receiving such Schedule
13D or such amendment.

If Sonic is obligated under the previous paragraph to take remedial
action, it will (a) transfer to GM or its designee, and GM or its designee
will acquire the assets, properties or business associated with any GM
dealership operated by Sonic at fair market value as determined in
accordance with GM's Dealership Agreement with the Company, or (b) provide
evidence to the GM that such person entity or group no longer has such
threshold level of ownership interest in Sonic or that the actions
described in clause (b) of the previous paragraph will not occur.

Should Sonic or its GM franchisee subsidiary enter into an agreement
to transfer the assets of the GM franchisee subsidiary to a third party,
the right of first refusal described in the GM Dealer Agreement shall apply
to any such transfer.

Likewise, the Company's Dealer Agreement with Ford requires the Company to
deliver to Ford all Securities and Exchange Commission filings made by the
Company or third-parties, including Schedules 13D and 13G. If any such filing
shows that (a) any person or entity would acquire 15% or more of Sonic's voting
securities, (b) an extraordinary corporate transaction, such as a merger or
liquidation, involving Sonic or any of its subsidiaries is anticipated, (c) a
material asset sale involving Sonic or any of its subsidiaries is anticipated,
(d) a change in Sonic's Board of Directors or management is planned or has
occurred, or (e) any other change in Sonic's business or structure is planned or
has occurred, then the Company must give Ford prior notice of such event. If
Ford reasonably determines that such an event is not in its interest, the
Company may be required to sell or resign from one or more of its Ford
franchises. Should Sonic or any of its Ford franchisee subsidiaries enter into
an agreement to transfer the assets of a Ford franchisee subsidiary to a third
party, the right of first refusal described in the Ford Dealer Agreement will
apply.

Under the Company's Dealer Agreement with Toyota, Toyota has the right to
"approve any ownership or voting rights of Sonic of twenty percent (20%) or
greater by any individual or entity." Volkswagen has approved the sale of no
more than 25% of the voting control of Sonic in the Offering, and any future
changes in ownership or transfers among the Company's current stockholders that
could effect the voting or managerial control of Sonic's Volkswagen franchisee
subsidiaries requires the prior approval of Volkswagen.

Certain state statutes in Florida and other states limit manufacturers'
control over dealerships. Under Florida law, notwithstanding any contrary terms
in a dealer agreement, manufacturers may not unreasonably withhold approval for
the sale of a dealership. Acceptable grounds for disapproval include material
shortcomings in the character, financial condition or business experience of the
proposed transferee. In addition, dealerships may challenge manufacturers'
attempts to establish new dealerships in the dealer's markets, and state
regulators may deny applications to establish new dealerships for a number of
reasons, including a determination that the manufacturer is adequately
represented in the area. Manufacturers must have "good cause" for any
termination or failure to renew a dealer agreement, and an automaker's license
to distribute vehicles in Florida may be revoked if, among other things, the
automaker has forced or attempted to force an automobile dealer to accept
delivery of motor vehicles not ordered by that dealer.

Under Texas law, despite the terms of contracts between manufacturers and
dealers, manufacturers may not unreasonably withhold approval of a transfer of a
dealership. It is unreasonable under Texas law for a manufacturer to reject a
prospective transferee of a dealership who is of good moral character and who
otherwise meets the manufacturer's written, reasonable and uniformly applied
standards or qualifications relating to the prospective transferee's business
experience and financial qualifications. In addition, under Texas law and the
laws of other states, franchised dealerships may challenge

<PAGE>
manufacturers' attempts to establish new franchises in the franchised dealers'
markets, and state regulators may deny applications to establish new dealerships
for a number of reasons, including a determination that the manufacturer is
adequately represented in the region. Texas law limits the ability of
manufacturers to terminate or fail to renew franchises. In addition, other laws
in Texas and elsewhere limit the ability of manufacturers to withhold their
approval for the relocation of a franchise or require that disputes be
arbitrated. In addition, a manufacturer's license to distribute vehicles in
Texas may be revoked if, among other things, the manufacturer has forced or
attempted to force an automobile dealer to accept delivery of motor vehicles not
ordered by that dealer.

Georgia law provides that no manufacturer may arbitrarily reject a proposed
change of control or sale of an automobile dealership, and any manufacturer
challenging such a transfer of a dealership must provide written reasons for its
rejection to the dealer. Manufacturers bear the burden of proof to show that any
disapproval of a proposed transfer of a dealership is not arbitrary. If a
manufacturer terminates a franchise agreement due to a proposed transfer of the
dealership or for any other reason not considered to constitute good cause under
Georgia law, such termination will be ineffective. As an alternative to
rejecting or accepting a proposed transfer of a dealership or terminating the
franchise agreement, Georgia law provides that a manufacturer may offer to
purchase the dealership on the same terms and conditions offered to the
prospective transferee.

Under Tennessee law, a manufacturer may not modify, terminate or refuse to
renew a franchise agreement with a dealer except for good cause, as defined in
the governing Tennessee statutes. Further, a manufacturer may be denied a
Tennessee license, or have an existing license revoked or suspended if the
manufacturer modifies, terminates, or suspends a franchise agreement due to an
event not constituting good cause. Good cause includes material shortcomings in
the character, financial condition or business experience of the dealer. A
manufacturer's Tennessee license may also be revoked if the manufacturer
prevents or attempts to prevent the sale or transfer of the dealership by
unreasonably withholding consent to the transfer.

COMPETITION

The retail automotive industry is highly competitive. Depending on the
geographic market, the Company competes with both dealers offering the same
brands and product line as the Company and dealers offering other automakers'
vehicles. The Company also competes for vehicle sales with auto brokers and
leasing companies. The Company competes with small, local dealerships and with
large multi-franchise auto dealerships. Many of the Company's larger competitors
are larger and have greater financial and marketing resources and are more
widely known than the Company. Some of the Company's competitors also may
utilize marketing techniques, such as Internet visibility or "no negotiation"
sales methods, not currently used by the Company.

The Company also competes with regional and national car rental companies,
which sell their used rental cars, and used automobile "superstores," such as
AutoNation and CarMax. In the future, new competitors may enter the automotive
retailing market, including automobile manufacturers that may decide to open
additional retail outlets or acquire other dealerships. In addition, the used
vehicle superstores generally offer a greater and more varied selection of
vehicles than the Company's dealerships. As the Company seeks to acquire
dealerships in new markets, it may face significant competition (including
competition from other publicly-owned dealer groups) as it strives to gain
market share. See "Risk Factors -- Competition"

The Company believes that the principal competitive factors in vehicle
sales are the marketing campaigns conducted by automakers, 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 makes of automobiles, pricing (including
manufacturer rebates and other special offers) and warranties.

In addition to competition for vehicle sales, the Company also competes
with other auto dealers, service stores, auto parts retailers and independent
mechanics in providing parts and service. The Company believes that the
principal competitive factors in parts and service sales are price, the use of
factory-approved replacement parts, the familiarity with a dealer's makes and
models and the quality of customer service. A number of regional and national
chains offer selected parts and service at prices that may be lower than the
Company's prices.

In arranging or providing financing for its customers' vehicle purchases,
the Company competes with a broad range of financial institutions. The Company
believes that the principal competitive factors in providing financing are
convenience, interest rates and contract terms.

The Company's success depends, in part, on national and regional
automobile-buying trends, local and regional economic factors and other regional
competitive pressures. The Company sells its vehicles in the Charlotte,
Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets.
Conditions and competitive pressures affecting these markets, such as
price-cutting by dealers in these areas, or in any new markets the Company
enters, could adversely affect the Company, although the retail automobile
industry as a whole might not be affected. See "Risk Factors -- Competition."

<PAGE>
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS

A number of regulations affect the Company's business of marketing,
selling, financing and servicing automobiles. The Company also is subject to
laws and regulations relating to business corporations generally.

Under North Carolina, South Carolina, Tennessee, Florida, Georgia and Texas
law as well as the laws of other states into which the Company may expand, the
Company must obtain a license in order to establish, operate or relocate a
dealership or operate an automotive repair service. These laws also regulate the
Company's conduct of business, including its advertising and sales practices.
Other states may have similar requirements.

The Company's operations are also subject to laws governing consumer
protection. Automobile dealers and manufacturers are subject to so-called "Lemon
Laws" that require a manufacturer or the dealer to replace a new vehicle or
accept it for a full refund within one year after initial purchase if the
vehicle does not conform to the manufacturer's express warranties and the dealer
or manufacturer, after a reasonable number of attempts, is unable to correct or
repair the defect. Federal laws require certain written disclosures to be
provided on new vehicles, including mileage and pricing information.

The imported automobiles purchased by the Company are subject to United
States customs duties and, in the ordinary course of its business, the Company
may, from time to time, be subject to claims for duties, penalties, liquidated
damages, or other charges. Currently, United States customs duties are generally
assessed at 2.5% of the customs value of the automobiles imported, as classified
pursuant to the Harmonized Tariff Schedule of the United States. See "Risk
Factors -- Imported Products."

The Company's financing activities with its customers are subject to
federal truth-in-lending, consumer leasing and equal credit opportunity
regulations as well as state and local motor vehicle finance laws, installment
finance laws, usury laws and other installment sales laws. Some states regulate
finance fees that may be paid as a result of vehicle sales. State and federal
environmental regulations, including regulations governing air and water quality
and the storage and disposal of gasoline, oil and other materials, also apply to
the Company.

The Company believes that it complies in all material respects with the
laws affecting its business. Possible penalties for violation of any of these
laws include revocation of the Company's licenses and fines. In addition, many
laws may give customers a private cause of action.

As with automobile dealerships generally, and service parts and body shop
operations in particular, the Company's business involves the use, storage,
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, freon,
waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing
agents, gasoline and diesel fuels. The Company's business also involves the past
and current operation and/or removal of aboveground and underground storage
tanks containing such substances or wastes. Accordingly, the Company is subject
to regulation by federal, state and local authorities establishing health and
environmental quality standards, and liability related thereto, and providing
penalties for violations of those standards. The Company is also subject to
laws, ordinances and regulations governing remediation of contamination at
facilities it operates or to which it sends hazardous or toxic substances or
wastes for treatment, recycling or disposal.

The Company believes that it does 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 the
Company's results of operations or financial condition. However, soil and
groundwater contamination is known to exist at certain properties used by the
Company. Furthermore, environmental laws and regulations are complex and subject
to frequent change. There can be no assurance that compliance with amended, new
or more stringent laws or regulations, stricter interpretations of existing laws
or the future discovery of environmental conditions will not require additional
expenditures by the Company, or that such expenditures will not be material. See
"Risk Factors -- Adverse Effect of Government Regulation; Unknown Environmental
Regulatory Compliance Costs."

<PAGE>
FACILITIES

The Company's principal executive offices are located at 5401 East
Independence Boulevard, Charlotte, North Carolina 28218, and its telephone
number is (704) 532-3301. These executive offices are located on the premises
owned by Town & Country Ford. The following table identifies, for each of the
properties to be utilized by the Company's dealership operations the location,
the owner/lessor, and the term and rental rate of the Company's lease for such
property, if applicable:

<TABLE>
<CAPTION>
1997
OWNERSHIP MONTHLY EXPIRATION
DEALERSHIP STATUS OWNER/LESSOR RENT (2) DATE FACILITY
<S> <C> <C> <C> <C> <C>
Town & Country Ford.................. Lease STC Properties (1) $ 34,083 2000 Main Bldg.
Body Shop
5401 East Independence Blvd.,
Charlotte
Lone Star Ford....................... Lease Viking Investments (1) $ 30,000 2005 Main Bldg.
Used Car Bldg.
8477 North Freeway, Houston Body Shop
Fleet Bldg.
Fort Mill Ford....................... Own -- -- -- Main Bldg.
Body Shop
788 Gold Hill Rd., Fort Mill, SC
Fort Mill Chrysler-Plymouth-Dodge.... Lease Jeffrey Boyd $ 16,667 2002 Main Bldg.
Used Car Bldg.
3310 Hwy. 51, Fort Mill, SC
Town & Country Toyota................ Own -- -- -- Main Bldg.
Body Shop
9101 South Blvd., Charlotte
Frontier Olsmobile-Cadillac.......... Lease Landers Oldsmobile-Cadillac $ 17,000 1998(3) Main Bldg.
Body Shop
2501 Roosevelt Blvd., Monroe, NC Used Car Bldg.
Ken Marks Ford....................... Lease Marks Holding Company (1) $ 95,000 2007(3) Main Bldg.
24825 US Hwy. 19 North, Clearwater
&
3925 Tampa Rd., Oldsmar, FL
Dyer Volvo........................... Lease D&R Investments (1) $ 50,000 (4) 2009(3) Main Bldg.
5260 Peachtree Industrial Blvd.,
Atlanta
Lake Norman Lease Phil M. and Quinton M. Gandy $ 40,000 (4) 2007(3) Main Bldg.
Chrysler-Plymouth-Jeep-Eagle....... and affiliates
Chartwell Center Dr., Cornelius, NC
Lake Norman Dodge.................... Lease Phil M. and Quinton M. Gandy $ 40,000 (4) 2007(3) Main Bldg.
and affiliates Truck Center
I-77 & Torrence Chapel Rd.,
Cornelius, NC
KIA/VW of Chattanooga................ Lease KIA Land Development (1) $ (5) 2007(3) Main Bldg.
6015 International Dr., Chattanooga
European Motors of Nashville......... Lease Third National Bank, $ 21,070 1998(3) Main Bldg.(7)
David P'Pool,
630 Murfreeboro Pike, Nashville Stella P'Pool
European Motors...................... Lease Nelson Bowers (1) $ 16,846 (4) 2007(3) Main Bldg.
5949 Brainerd Rd., Chattanooga
Jaguar of Chattanooga................ Lease JAG Properties LLC, Thomas $ 22,010 2017(3) Main Bldg.
Green, Jr. and
5915 Brainerd Rd., Chattanooga Nelson Bowers (1)
Cleveland Lease Cleveland Properties LLC (1) $ 14,000 2011(3) Main Bldg.
Chrysler-Plymouth-Jeep-Eagle.......
2496 South Lee Hwy., Cleveland, TN
Nelson Bowers Dodge.................. Lease Edward & Barbara Wright $ 16,800 2001(3) Main Bldg.
402 West Martin Luther King Blvd.,
Chattanooga
Cleveland Village Imports............ Lease Thomas Green, Jr. and Nelson $ 11,000 1997(3) Main Bldg.(8)
Bowers (1)
2490 & 2492 South Lee Hwy.,
Cleveland, TN
Nelson Bowers Ford................... Lease Robert G. Card, Jr. $ 8,900 Month to Main Bldg.
Month(3)
717 South Lee Hwy., Cleveland, TN
Williams Motors...................... Lease J.T. Williams $ 14,000 1998(6) Main Bldg.
803 North Anderson Rd., Rock Hill,
SC

<CAPTION>
DEALERSHIP SQ. FT. ACRES
<S> <C> <C>
Town & Country Ford.................. 85,013 12.48
24,768
5401 East Independence Blvd.,
Charlotte
Lone Star Ford....................... 79,725 24.76
2,125
8477 North Freeway, Houston 26,450
1,500
Fort Mill Ford....................... 34,162 10.00
11,275
788 Gold Hill Rd., Fort Mill, SC
Fort Mill Chrysler-Plymouth-Dodge.... 9,809 5.50
1,470
3310 Hwy. 51, Fort Mill, SC
Town & Country Toyota................ 50,800 5.70
17,840
9101 South Blvd., Charlotte
Frontier Olsmobile-Cadillac.......... 14,825 7.08
11,250
2501 Roosevelt Blvd., Monroe, NC 2,200
Ken Marks Ford....................... 79,100 22.00
24825 US Hwy. 19 North, Clearwater
&
3925 Tampa Rd., Oldsmar, FL
Dyer Volvo........................... 60,000 6.00
5260 Peachtree Industrial Blvd.,
Atlanta
Lake Norman 26,000 6.00
Chrysler-Plymouth-Jeep-Eagle.......
Chartwell Center Dr., Cornelius, NC
Lake Norman Dodge.................... 25,000 6.00
5,000
I-77 & Torrence Chapel Rd.,
Cornelius, NC
KIA/VW of Chattanooga................ 8,445 3.75
6015 International Dr., Chattanooga
European Motors of Nashville......... 49,385 4.00
630 Murfreeboro Pike, Nashville
European Motors...................... 40,295 12.24
5949 Brainerd Rd., Chattanooga
Jaguar of Chattanooga................ 34,850 3.57
5915 Brainerd Rd., Chattanooga
Cleveland 17,750 5.60
Chrysler-Plymouth-Jeep-Eagle.......
2496 South Lee Hwy., Cleveland, TN
Nelson Bowers Dodge.................. 30,000 4.88
402 West Martin Luther King Blvd.,
Chattanooga
Cleveland Village Imports............ 15,760 2.05
2490 & 2492 South Lee Hwy.,
Cleveland, TN
Nelson Bowers Ford................... 19,725 1.40
717 South Lee Hwy., Cleveland, TN
Williams Motors...................... 15,000(9) 3.0(9)
803 North Anderson Rd., Rock Hill,
SC
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

<PAGE>
(1) These lessors are affiliates of the Company's stockholders and/or executive
officers. See "Risk Factors -- Potential Conflicts of Interest," "Certain
Transactions -- Certain Dealership Leases" and "Principal Stockholders."

(2) All of the Company's leases are "triple net" leases and require the Company
to pay all real estate taxes, maintenance and insurance costs for the
property.

(3) Each of these leases provides for two renewal terms of five years each, at
the option of the Company.

(4) Monthly rent expense based on estimate from the purchase agreement relating
to the Acquisition.

(5) Lease rent currently under negotiation.

(6) This lease provides for four renewal terms of one year each, at the option
of the Company.

(7) European Motors of Nashville has entered into a 20-year lease with H.G. Hill
Realty Company, an entity unaffiliated with the Company, regarding a new BMW
facility to be constructed at a site separate from its existing facility.
The monthly rent payments under this lease are not presently fixed and will
depend upon the final construction costs of the new facility. The lease term
will begin when the Company occupies these premises.

(8) Cleveland Village Imports also leases a used-car lot across the street from
its main facility from individuals not affiliated with the Company for a
term expiring in 2002 and providing for $3,000 in monthly rent.

(9) Estimated size.

All of the Company's dealerships are located along major U.S. or interstate
highways. One of the principal factors considered by the Company in evaluating
an acquisition candidate is its location. The Company prefers to acquire
dealerships located along major thoroughfares, primarily interstate highways
with ease of access, which can be easily visited by prospective customers.

The Company owns certain of the real estate associated with Town & Country
Toyota and Frontier Oldsmobile-Cadillac. The remainder of the properties
utilized by the Company's dealership operations are leased as set forth in the
foregoing table. The Company believes that its facilities are adequate for its
current needs. In connection with its acquisition strategy, the Company intends
to lease the real estate associated with a particular dealership whenever
practicable.

Under the terms of its franchise agreements, the Company must maintain an
appropriate appearance and design of its facilities and is restricted in its
ability to relocate its dealerships. See " -- Relationships with Manufacturers."

EMPLOYEES

As of June 30, 1997 the Company employed 1,814 people, of whom
approximately 271 were employed in managerial positions, 654 were employed in
non-managerial sales positions, 387 were employed in non-managerial parts and
service positions and 502 were employed in administrative support positions.

The Company believes that many dealerships in the retail automobile
industry have difficulty in attracting and retaining qualified personnel for a
number of reasons, including the historical inability of dealerships to provide
employees with an equity interest in the profitability of the dealerships. The
Company intends, upon completion of the Offering, to provide certain executive
officers, managers and other employees with stock options and all employees with
a stock purchase plan and believes this type of equity incentive will be
attractive to existing and prospective employees of the Company. See
"Management -- Stock Option Plan" and " -- Employee Stock Purchase Plan" and
"Risk Factors -- Dependence on Key Personal and Limited Management and Personnel
Resources."

The Company believes that its relationship with its employees is good. None
of the Company's employees is represented by a labor union. Because of its
dependence on the Manufacturers, however, the Company may be affected by labor
strikes, work slowdowns and walkouts at the Manufacturer's manufacturing
facilities. See "Risk Factors -- Dependence on Automobile Manufacturers."

LEGAL PROCEEDINGS AND INSURANCE

From time to time, the Company is named in claims involving the manufacture
of automobiles, contractual disputes and other matters arising in the ordinary
course of the Company's business. Currently, no legal proceedings are pending
against or involve the Company that, in the opinion of management, could
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of the Company.

Because of their vehicle inventory and nature of business, automobile
retail dealerships generally require significant levels of insurance covering a
broad variety of risks. The Company's insurance includes an umbrella policy as
well as insurance on its real property, comprehensive coverage for its vehicle
inventory, general liability insurance, employee dishonesty coverage and errors
and omissions insurance in connection with its vehicle sales and financing
activities.

<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS; KEY PERSONNEL

The executive officers, directors and key personnel of the Company, and
their ages as of the date of this Prospectus, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
<S> <C> <C>
O. Bruton Smith..................... 70 Chairman, Chief Executive Officer and Director*
Bryan Scott Smith................... 29 President, Chief Operating Officer and Director*
Nelson E. Bowers, II................ 53 Executive Vice President and Director Nominee*
Chief Financial Officer, Vice President-Finance, Treasurer, Secretary and
Theodore M. Wright.................. 35 Director*
William R. Brooks................... 47 Director
Jeffrey C. Rachor................... 35 Regional Vice President-Mid South Region
O. Ken Marks, Jr.................... 35 Regional Vice President-Florida
Ivan A. Tufty....................... 57 Regional Vice President-Texas
William M. Sullivan................. 65 Regional Vice President-North and South Carolina
</TABLE>

* Executive Officer

O. BRUTON SMITH has been the Chairman, Chief Executive Officer and a
director of the Company since its organization in 1997 and presently is the
controlling shareholder of the Company through his direct and indirect ownership
of Class B Common Stock. Mr. Smith has been the president and controlling
shareholder of Sonic Financial since its formation, which prior to the
Reorganization owned a controlling interest in all of the Company's dealerships
except Town & Country Toyota and presently owns a controlling interest in the
Company's Common Stock. Mr. Smith, prior to the Reorganization, owned a
controlling interest in Town & Country Toyota. Mr. Smith currently is, and since
their acquisition by Sonic Financial has been, a director and the president of
each of the Company's dealerships. Mr. Smith has worked in the retail automobile
industry since 1966. Mr. Smith's initial term as a director of the Company will
expire at the annual meeting of stockholders of the Company to be held in 2000.
Mr. Smith is also the chairman and chief executive officer, a director and
controlling shareholder, either directly or through Sonic Financial, of Speedway
Motorsports, Inc. ("SMI"). SMI is a public company traded on the NYSE. Among
other things, it owns and operates the following NASCAR racetracks: Atlanta
Motor Speedway, Bristol Motor Speedway, Charlotte Motor Speedway, Sears Point
Raceway and Texas Motor Speedway. He is also the executive officer and a
director of each of SMI's operating subsidiaries. Under his employment agreement
with the Company, Mr. Smith is required to devote approximately 50% of his
business time to the Company's business.

BRYAN SCOTT SMITH has been the President and Chief Operating Officer of the
Company since April 1997, and a director of the Company since its organization
in 1997. Mr. Smith, who is the son of Bruton Smith, has been the Vice President
since 1993 and, prior to the Reorganization, the minority owner of Town &
Country Ford. Mr. Smith joined the Company's predecessor in January 1991 on a
full-time basis as an assistant used car manager. In August of 1991, Mr. Smith
became the used car manager at Town & Country Ford. Mr. Smith was promoted to
General Manager of Town & Country Ford in November 1992 where he remained until
his appointment to President and Chief Operating Officer of the Company in April
of 1997. Mr. Smith's initial term as a director of the Company will expire at
the annual meeting of stockholders of the Company to be held in 1998.

NELSON E. BOWERS, II will be appointed the Executive Vice President and a
director of the Company upon consummation of the Bowers Acquisition. Mr. Bowers
owns a controlling interest in the dealerships that are the subject of the
Bowers Acquisition and has worked in the retail automobile industry since 1974.
Mr. Bowers has served on national dealer councils for BMW and Volvo and has
owned and operated dealerships since 1979. Several of the dealerships owned by
Mr. Bowers have been awarded the highest awards available from manufacturers for
customer satisfaction. Mr. Bowers' initial term as a director of the Company
will expire at the annual meeting of stockholders to be held in 1999.

THEODORE M. WRIGHT has been the Chief Financial Officer, Vice
President-Finance, Treasurer and Secretary of the Company since April 1997, and
a director of the Company since June 1997. Before joining the Company, Mr.
Wright was a Senior Manager and in charge of the Columbia, South Carolina office
of Deloitte & Touche LLP. Prior to joining the Columbia office, Mr. Wright was a
Senior Manager in Deloitte & Touche LLP's National Office Accounting Research
and SEC Services Departments from 1994 to 1995. From 1992 to 1994 Mr. Wright was
an audit manager with Deloitte & Touche LLP. Mr. Wright's initial term as a
director of the Company will expire at the annual meeting of stockholders to be
held in 1999.

<PAGE>
WILLIAM R. BROOKS has been a director of the Company since its formation.
Mr. Brooks also served as the Company's Treasurer, Vice President and Secretary
from its organization in February 1997 to April 1997 when Mr. Wright was
appointed to those positions. Since December 1994, Mr. Brooks has been the Vice
President, Treasurer, Chief Financial Officer and a director of SMI. Mr. Brooks
also serves as an executive officer and a director for various operating
subsidiaries of SMI. Before the formation of SMI in December 1994, Mr. Brooks
was the Vice President of the Charlotte Motor Speedway and a Vice President and
a director of Atlanta Motor Speedway. Mr. Brooks joined Sonic Financial from
Price Waterhouse in 1983. At Sonic Financial, he was promoted from Manager to
Controller in 1985 and again to Chief Financial Officer in 1989. Mr. Brooks'
initial term as a director of the Company will expire at the annual meeting of
stockholders to be held in 2000.

JEFFREY C. RACHOR will be appointed Regional Vice President upon
consummation of the Bowers Acquisition. Mr. Rachor has over 13 years experience
in automobile retailing and has been the chief operating officer at the Bowers
Dealerships since 1989. During this period, Mr. Rachor has also served at
various times as the general manager of Toyota, Saturn and
Chrysler-Plymouth-Jeep-Eagle dealerships. Prior to joining the Bowers
organization, Mr. Rachor was an assistant regional manager with American Suzuki
Motor Corporation from 1987 to 1989 and a Metro Sales Manager and a District
Sales Manager with GM's Buick Motor Division from 1983 to 1987.

O. KEN MARKS, JR. owns a controlling interest in Ken Marks Ford and has
operated that dealership as its chief executive since prior to 1992. Mr. Marks
is a Chairman's award winner from Ford and has over 13 years experience in auto
retailing. Ken Marks Ford is one of the top 100 automobile dealerships in the
United States and one of the 30 largest Ford dealerships. Mr. Marks will be
appointed a Regional Vice President upon consummation of the Offering.

IVAN A. TUFTY has been Executive Manager of Lone Star Ford since 1990 and
will be appointed a Regional Vice President upon consummation of the Offering.
Under Mr. Tufty's leadership, Lone Star Ford has been recognized as one of the
30 largest Ford dealerships and one of the 100 largest dealerships in the United
States. Mr. Tufty has over 40 years of experience in auto retailing and was a
dealer principal and equity owner for 12 years.

WILLIAM M. SULLIVAN has been Vice-President of Town & Country Ford since
prior to 1992 and will be appointed a Regional Vice President upon consummation
of the Offering. Mr. Sullivan has over 25 years experience in auto retailing as
an Executive Manager, head of F&I and in other roles.

As soon as practicable after the Offering, the Company intends to name two
or three individuals not employed by or affiliated with the Company to the
Company's Board of Directors.

The Board of Directors of the Company is divided into three classes, each
of which, after a transitional period, will serve for three years, with one
class being elected each year. The executive officers are elected annually by,
and serve at the discretion of, the Company's Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Since the Company's organization in February 1997, all matters concerning
executive officer compensation have been addressed by the entire Board of
Directors. Bruton Smith, Scott Smith and Theodore Wright were executive officers
of the Company and, together with William R. Brooks, will constitute the entire
Board until the consummation of the Offering when Nelson Bowers, an executive
officer of the Company, is to be appointed. Bruton Smith serves as Chairman of
the Board of SMI. William R. Brooks, an executive officer of SMI, serves on the
Board of the Company. As soon as practicable after the Offering, the Company
intends to name at least two independent directors who will comprise the
Company's compensation committee. See "Management."

LIMITATIONS OF DIRECTORS LIABILITY

The Certificate includes a provision that effectively eliminates the
liability of directors to the Company or to the Company's stockholders for
monetary damages for breach of the fiduciary duties of a director, except for
breaches of the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, certain actions
with respect to unlawful dividends, stock repurchases or redemptions and any
transaction from which the director derived an improper personal benefit. This
provision does not prevent stockholders from seeking nonmonetary remedies
covering any such action, nor does it affect liabilities under the federal
securities laws. The Company's Bylaws further provide that the Company shall
indemnify each of its directors and officers, to the fullest extent authorized
by Delaware Law, with respect to any threatened, pending or completed action,
suit or proceeding to which such person may be a party by reason of serving as a
director or officer. Delaware Law currently authorizes a corporation to
indemnify its directors and

<PAGE>
officers against expenses (including attorney's fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by a third party if such
officers or directors acted in good faith and in a manner they 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 reason to believe
their conduct was unlawful. Indemnification is permitted in more limited
circumstances with respect to derivative actions. The Company believes that
these provisions of the Certificate and the Bylaws are necessary to attract and
retain qualified persons to serve as directors and officers.

COMMITTEES OF THE BOARD

The Board of Directors will establish a Compensation Committee and an Audit
Committee consisting of independent directors upon the election of at least two
independent directors. The Compensation Committee will review and approve
compensation for the executive officers, and administer, and determine awards
under, the Stock Option Plan and any other incentive compensation plans for
employees of the Company. See " -- Stock Option Plan" and " -- Employee Stock
Purchase Plan." The Audit Committee will recommend the selection of auditors for
the Company and will review the results of the audit and other reports and
services provided by the Company's independent auditors. The Company has not
previously had either of these committees.

DIRECTOR COMPENSATION

Members of the Board of Directors who are not employees of the Company will
be compensated for their services in amounts to be determined. The Company will
also reimburse all directors for their expenses incurred in connection with
their activities as directors of the Company. Directors who are also employees
of the Company receive no compensation for serving on the Board of Directors.

EXECUTIVE COMPENSATION

Sonic was incorporated on January 31, 1997 and did not conduct any
operations prior to that time. The Company anticipates that during 1997 its most
highly compensated executive officers with annual salaries exceeding $100,000,
and their annual base salaries for 1997, will be: Bruton Smith -- $350,000,
Scott Smith -- $300,000, Nelson Bowers, -- $400,000, and Theodore
Wright -- $180,000.

Set forth below is information for the years ended December 31, 1996, 1995
and 1994 with respect to compensation for services to the Company's predecessors
of the Company's executive officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
OTHER NUMBER OF SHARES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY (1) BONUS (2) COMPENSATION OPTIONS (4) COMPENSATION (5)
<S> <C> <C> <C> <C> <C> <C>
O. Bruton Smith 1996 $ 164,750 $ 33,350(3) -- --
Chairman, Chief Executive Officer 1995 142,200 41,350(3) -- --
and Director 1994 142,200 41,000(3) -- --
Bryan Scott Smith 1996 $ 48,000 $ 230,714 (5) -- --
President, Chief 1995 48,000 168,670 (5) -- --
Operating Officer 1994 48,000 134,537 (5) -- --
and Director
</TABLE>

(1) Does not include the dollar value of perquisites and other personal
benefits.

(2) The amounts shown are cash bonuses earned in the specified year and paid in
the first quarter of the following year.

(3) The Company provides Mr. Smith with the use of automobiles for personal use,
the annual cost of which is reflected as Other Annual Compensation.

(4) The Company's Stock Option Plan was adopted in September 1997. Therefore, no
options were granted to any of the Company's executive officers in 1996,
1995 or 1994.

(5) The aggregate amount of perquisites and other personal benefits received did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such executive officer.

<PAGE>

The Compensation Committee is expected to deliberate upon matters
concerning executive compensation, including possible changes in the components
and amounts of such compensation.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Messrs. Bruton
Smith, Scott Smith, Bowers, Wright, Marks and Rachor (the "Employment
Agreements"), effective upon consummation of the Offering, which provide for an
annual base salary and certain other benefits. Pursuant to the Employment
Agreements, the 1997 base salaries of Messrs. Bruton Smith, Scott Smith, Bowers,
Wright, Marks and Rachor will be $350,000, $300,000, $400,000, $180,000,
$48,000, and $150,000, respectively. The executives will also receive such
additional increases as may be determined by the Compensation Committee. The
Employment Agreements, except those of Messrs. Rachor and Marks, provide for the
payment of annual performance-based bonuses equal to a percentage of the
executive's base salary, upon achievement by the Company (or relevant region) of
certain performance objectives, based on the Company's pre-tax income, to be
established by the Compensation Committee. The Employment Agreements of Messrs.
Rachor and Marks provide for the payment of annual performance-based bonuses,
paid in equal installments on a monthly basis, equal to a percentage of the
pre-tax earnings, of subsidiaries of the Company located within his regions of
responsibility, in the case of Mr. Rachor, and of Ken Marks Ford in the case of
Mr. Marks. See " -- Incentive Compensation Plan." Under the terms of the
Employment Agreements, the Company will employ Mr. Bruton Smith through
September 2000. Under the terms of their respective Employment Agreements, the
Company will employ Messrs. Scott Smith, Bowers, Wright, Marks and Rachor for
five years or until their respective Employment Agreements are terminated by the
Company or the executive. Messrs. Scott Smith, Bowers, Wright, Marks and Rachor
also receive under their Employment Agreements, options pursuant to the
Company's Stock Option Plan, for shares, shares, shares, shares
and shares, of the Class A Common Stock, respectively, exercisable at the
initial public offering price, vesting in three equal annual installments
beginning October 1998 and expiring in October 2007.

Each of the Employment Agreements contain similar noncompetition
provisions. These provisions (i) prohibit the disclosure or use of confidential
Company information, and (ii) for a period of two years following the expiration
or termination of an Employment Agreement, prohibit competition with the Company
for the Company's employees and its customers, interference with the Company's
relationships with its vendors, and employment with any competitor of the
Company in specified territories. With respect to Messrs. Bruton Smith, Scott
Smith and Wright, the geographic restrictions apply in any Standard Metropolitan
Statistical Area ("SMSA") or county in which the Company has a place of business
at the time their employment ends. With respect to Messrs. Bowers and Rachor,
the restrictions apply only in the SMSA's for Houston, Charlotte, Chattanooga,
and Nashville. With respect to Mr. Marks, the territorial restrictions apply
only in the SMSA's or counties in which the Company has a place of business and
about which Marks had access to confidential information or for which he had
operational or managerial involvement.

STOCK OPTION PLAN

In September 1997, the Board of Directors and stockholders of the Company
adopted the Company's 1997 Stock Option Plan (the "Stock Option Plan") in order
to attract and retain key personnel. The following discussion of the material
features of the Stock Option Plan is qualified by reference to the text of such
Plan filed as an exhibit to the Registration Statement of which this Prospectus
is a part.

Under the Stock Option Plan, options to purchase up to an aggregate of
shares of Class A Common Stock may be granted to key employees of the
Company and its subsidiaries and to officers, directors, consultants and other
individuals providing services to the Company. Members of the Board of Directors
who serve on the Compensation Committee must qualify as "non-employee
directors," as that term is defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and may not
participate in the Stock Option Plan.

The Compensation Committee of the Board of Directors of the Company will
administer the Stock Option Plan and will determine, among other things, the
persons who are to receive options, the number of shares to be subject to each
option and the vesting schedule of options. The Board of Directors of the
Company will determine the terms and conditions upon which the Company may make
loans to enable an optionee to pay the exercise price of an option. In selecting
individuals for options and determining the terms thereof, the Compensation
Committee may consider any factors it considers relevant, including present and
potential contributions to the success of the Company. Options granted under the
Stock Option Plan must be exercised within a period fixed by the Compensation
Committee, which period may not exceed ten years from the date of grant of the
option or, in the case of incentive stock options ("ISOs") granted to any holder
on the date of grant of more than

<PAGE>
ten percent of the total combined voting power of all classes of stock of the
Company, five years from the date of grant of the option. Options may be made
exercisable in whole or in installments, as determined by the Compensation
Committee.

Options may not be transferred other than by will or the laws of descent
and distribution. During the lifetime of an optionee, options may be exercised
only by the optionee. The exercise price of options that are not ISOs will be
determined at the discretion of the Compensation Committee. The exercise price
of ISOs may not be less than the market value of the Class A Common Stock on the
date of grant of the option. In the case of ISOs granted to any holder on the
date of grant of more than ten percent of the total combined voting power of all
classes of stock of the Company and its subsidiaries, the exercise price may not
be less than 110% of the market value per share of the Class A Common Stock on
the date of grant. Unless designated as "incentive stock options" intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), options granted under the Stock Option Plan are intended to be
"nonstatutory stock options" ("NSOs"). The exercise price may be paid in cash,
in shares of Class A Common Stock owned by the optionee, in NSOs granted under
the Stock Option Plan (except that the exercise price of an ISO may not be paid
in NSOs) or in any combination of cash, shares and NSOs.

Options granted under the Stock Option Plan may include the right to
acquire a "reload" option. In such a case, if a participant pays all or part of
the exercise price of an option with shares of Class A Common Stock held by the
participant for at least six months, then, upon exercise of the option, the
participant is granted a second option to purchase, at the fair market value as
of the date of grant of the second option, the number of shares of Class A
Common Stock transferred to the Company by the participant in payment of the
exercise price of the original option. A reload option is not exercisable until
one year after the grant date of such reload option or the expiration date of
the original option. If the exercise price of a reload option is paid for with
shares of Class A Common Stock that have been held by the optionee for more than
six months, then another reload option will be issued. Shares of Class A Common
Stock covered by a reload option will not reduce the number of shares of Class A
Common Stock available under the Stock Option Plan.

The Stock Option Plan provides that, in the event of changes in the
corporate structure of the Company or certain events affecting the shares of the
Company, adjustments will automatically be made in the number and kind of shares
available for issuance and in the number and kind of shares covered by
outstanding options. It further provides that, in connection with any merger or
consolidation in which the Company is not the surviving corporation and which
results in the holders of the outstanding voting securities of the Company
owning less than a majority of the surviving corporation or any sale or transfer
by the Company of all or substantially all its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, by any person or
group of all or a majority of the then-outstanding voting securities of the
Company, all outstanding options under the Stock Option Plan will become
exercisable in full on and after (i) the 15th day prior to the effective date of
such merger, consolidation, sale, transfer or acquisition or (ii) the date of
commencement of such tender offer or exchange offer, as the case may be.

The Board of Directors of the Company, on or before the consummation of the
Offering, intends to grant NSOs and ISOs to purchase an aggregate of
shares of Class A Common Stock under the Stock Option Plan to three executive
officers, five regional vice presidents and one dealer manager of the Company.
Messrs. Scott Smith, Bowers, and Wright are to be granted NSOs to purchase
shares, shares, and shares, respectively at an exercise
equal to the public offering price of the Class A Common Stock sold in the
Offering. Messrs. Scott Smith, Bowers and Wright are also to be granted ISOs to
purchase shares, shares and shares, respectively, at an
exercise price equal to the public offering price of the Class A Common Stock
sold in the Offering. All these options will become exerciseable in three equal
annual installments beginning in October 1998 with the last installment vesting
in October 2000, and all these options will expire in October 2007.
Consequently, all executive officers as a group are to be granted NSOs to
purchase an aggregate of shares and ISOs to purchase an aggregate of
shares. Non-executive officer employees are to be granted NSOs and ISOs
to purchase an aggregate of shares and shares, respectively. See
" -- Employment Agreements."

The issuance of the aforementioned NSO's under the Stock Option Plan will
be treated by the Company as a deferred tax asset, valued at $ as of
.

While the issuance and exercise of ISOs generally have no ordinary income
tax consequences to the holder, upon the exercise of an ISO, the holder will
treat the excess of the fair market value on the date of exercise over the
exercise price as an item of tax adjustment for alternative minimum tax
purposes. The issuance and exercise of ISOs have no federal income tax
consequences to the Company. The disposition of Class A Common Stock acquired
from the exercise of an ISO will ordinarily result in capital gains or loss to
the holder for federal income tax purposes equal to the difference between the
amount realized on disposition of the Class A Common Stock and the option
exercise price. If the holder of Class A Common Stock acquired upon the exercise
of an ISO disposes of such stock before the later of (i) two years following the
grant of the

<PAGE>
ISO and (ii) one year following the exercise of the ISO (a "Disqualifying
Disposition"), the holder will recognize ordinary income for federal income tax
purposes in an amount equal to the lesser of (i) the excess of the Class A
Common Stock's fair market value on the date of exercise over the option
exercise price, and (ii) the excess of the amount realized on disposition of the
Class A Common Stock over the option exercise price. Any additional gain upon
the disposition will be taxed as capital gains. The Company will be entitled to
a compensation expense deduction for the Company's taxable year in which the
disposition occurs equal to the amount of ordinary income recognized by the
holder.

The issuance of NSOs has no federal income tax consequences to the Company
or the holder. Upon the exercise of an NSO, the Company generally will be
allowed a federal income tax deduction equal to the amount by which the fair
market value of the underlying shares on the date of exercise exceeds the
exercise price. NSO holders will recognize ordinary income for federal income
tax purposes at the time of option exercise in the same amount. Any gains or
losses upon the disposition of shares acquired by exercise of a NSO will be
taxed to the holder as capital gains or losses.

Registration of the shares underlying the Stock Option Plan is presently
not contemplated. Such shares may be issued upon option exercise in reliance
upon the private offering exemption codified in Section 4(2) of the Securities
Act. Resale of such shares may be permitted subject to the limitations of Rule
144.

EMPLOYEE STOCK PURCHASE PLAN

In September 1997, the Board of Directors and stockholders of the Company
adopted the Sonic Employee Stock Purchase Plan (the "ESPP"). The ESPP is
intended to promote the interests of the Company by providing employees of the
Company the opportunity to acquire a proprietary interest in the Company through
the purchase of Class A Common Stock. The following discussion of the material
features of the ESPP is qualified by reference to the text of such Plan filed in
an exhibit to the Registration Statement of which this Prospectus is a part.

The ESPP is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. The ESPP is administered by the Compensation Committee,
which, subject to the terms of the ESPP, has plenary authority in its discretion
to interpret and construe the ESPP. The Compensation Committee will construe the
provisions of the ESPP so as to extend and limit participation in a manner
consistent with the requirements of that Code section. A total of shares
of Class A Common Stock have been reserved for purchase under the ESPP.

On January 1 of each year during the term of the ESPP (the "Grant Date"),
all eligible employees electing to participate in the ESPP ("Participating
Employees") will be granted an option to purchase shares of Class A Common
Stock. Prior to each Grant Date, the Compensation Committee will determine the
number of shares of Class A Common Stock available for purchase under each
option, with the same number of shares to be available under each option granted
on the same Grant Date. No Participating Employee may be granted an option which
would permit such employee to purchase stock under the ESPP and all other
employee stock purchase plans of the Company at a rate which exceeds $25,000 of
the fair market value of such stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any time.

A Participating Employee may elect to designate a limited percentage of
such employee's compensation (as defined in the ESPP) to be deferred by payroll
deduction as a contribution to the ESPP. A Participating Employee instead may
elect to make contributions by direct cash payment to the ESPP rather than by
payroll deduction. To the extent a Participating Employee has accumulated enough
funds, his or her contributions to the ESPP will be used to exercise the option
granted under the ESPP through purchases of Class A Common Stock on the last
business day of March, June, September and December on which the principal
trading market for the Class A Common Stock is open for trading and on any other
interim dates during the year which the Compensation Committee designates for
such purpose (the "Exercise Date"). Contributions which are not enough to
purchase a whole share of Class A Common Stock will be carried forward and
applied on the next Exercise Date in that calendar year; provided that
contributions remaining after the last Exercise Date of the calendar year may be
distributed to the Participating Employee at his election.

The purchase price at which Class A Common Stock will be purchased through
the ESPP shall be 85% of the lesser of (i) the fair market value of the Class A
Common Stock on the applicable Grant Date, and (ii) the fair market value of the
Class A Common Stock on the applicable Exercise Date. Any option granted to a
Participating Employee will be exercised automatically on each Exercise Date
during the calendar year of the option's Grant Date in whole or in part such
that the Participating Employee's accumulated contributions as of such Exercise
Date, either through direct cash payment or payroll deduction, will be applied
to the purchase of the maximum number of whole shares of Class A Common Stock
that such contribution will permit at the applicable option price, limited to
the number of shares available for purchase under the option.

<PAGE>
Any option granted to a Participating Employee will expire on the last
Exercise Date of the calendar year in which granted. However, if a Participating
Employee withdraws from the ESPP or terminates employment prior to such Exercise
Date, the option may expire earlier.

Upon termination of a Participating Employee's employment for any reason
other than cause, death or leave of absence in excess of ninety days, such
employee may, at his election, request the return of contributions not yet used
to purchase Class A Common Stock or continue participation in the ESPP until the
Exercise Date next following the date of termination of employment such that any
unexpired option held will be exercised automatically on such Exercise Date. If
a Participating Employee dies while employed by the Company or prior to the
Exercise Date next following termination of employment, such employee's estate
will have the right to elect to withdraw all contributions not yet used to
purchase Class A Common Stock or to exercise the Participating Employee's option
for the purchase of Class A Common Stock on the Exercise Date next following the
date of such employee's death.

The Board of Directors of the Company may at any time amend, suspend or
terminate the ESPP; provided, however, that the ESPP may not be amended to (i)
increase the maximum number of shares of Class A Common Stock for which options
may be granted under the ESPP, other than in connection with a change in
capitalization, (ii) materially modify the requirements as to the class of
employees eligible to receive options and purchase Class A Common Stock under
the ESPP, or (iii) materially increase the benefits accruing to Participating
Employees under the ESPP without in any such case obtaining approval of Sonic
stockholders.

The ESPP is intended to meet the requirements of an "employee stock
purchase plan" under Section 423 of the Code. No federal taxable income will be
recognized by Participating Employees upon the grant of an option to purchase
Class A Common Stock under the ESPP. In addition, a Participating Employee will
not recognize federal taxable income on the exercise of an option granted under
the ESPP.

If the Participating Employee holds shares of Class A Common Stock acquired
upon the exercise of an option granted under the ESPP until a date that is more
than two years from the grant date of the relevant option and one year from the
date of option exercise (or dies while owning such shares), the employee must
report as ordinary income in the year of disposition of the shares (or at death)
the lesser of (a) the excess of the fair market value of the shares at the time
of disposition (or death) over the option exercise price and (b) the excess of
the fair market value of the shares on the date the relevant option was granted
over the option exercise price. For this purpose the option exercise price is
85% of the fair market value of the shares on the date the relevant option was
granted (assuming the shares are offered at a 15% discount). Any additional
income is treated as long-term capital gain. If these holding period
requirements are met, the Company is not entitled to any deduction for tax
purposes. If the Participating Employee does not meet the holding period
requirements, the employee recognizes at the time of disposition of the shares
ordinary income equal to the difference between the price paid for the shares
and the fair market value on the date of exercise, irrespective of the price at
which the employee disposes of the shares, and an amount equal to such ordinary
income is generally deductible by the Company. Any gain or loss realized on the
disposition of the shares will be capital gain or loss, and will be long-term
gain or loss if the shares were held for more than one year.

Because the ESPP is based on voluntary participation, benefits thereunder
are not determinable.

Registration of the shares underlying the ESPP is presently not
contemplated. Such shares may be issued upon option exercise in reliance upon
the private offering exemption codified in Section 4(2) of the Securities Act.
Resale of such shares may be permitted subject to the limitations of Rule 144.

CERTAIN TRANSACTIONS

REGISTRATION RIGHTS AGREEMENT

As part of the Reorganization, the Company entered into a Registration
Rights Agreement dated as of June 30, 1997 (the "Registration Rights
Agreements") with Sonic Financial, Bruton Smith, Scott Smith and William S.
Egan. Sonic Financial, Bruton Smith, Scott Smith and Egan Group, LLC, an
assignee of Mr. Egan (the "Egan Group") currently are the owners of record of
, , and shares of Class B Common Stock,
respectively. Upon the registration of any of their shares or as otherwise
provided in the Certificate, such shares will automatically be converted into a
like number of shares of Class A Common Stock. Subject to certain limitations,
the Registration Rights Agreements provide Sonic Financial, Bruton Smith, Scott
Smith and the Egan Group with certain piggyback registration rights that permit
them to have their shares of Common Stock, as selling security holders, included
in any registration statement pertaining to the registration of Class A Common
Stock for issuance by the Company or for resale by other selling security
holders, with the exception of registration statements on Forms S-4 and S-8
relating to exchange offers (and certain other transactions) and employee stock
compensation plans, respectively. These registration rights will be limited or
restricted to the extent an underwriter of an

<PAGE>
offering, if an underwritten offering, or the Company's Board of Directors, if
not an underwritten offering, determines that the amount to be registered by
Sonic Financial, Bruton Smith, Scott Smith or the Egan Group would not permit
the sale of Class A Common Stock in the quantity and at the price originally
sought by the Company or the original selling security holders, as the case may
be. The Registration Rights Agreement expires on the tenth anniversary of the
closing of the Offering. Sonic Financial is controlled by the Company's Chairman
and Chief Executive Officer, Bruton Smith.

THE SMITH ADVANCE

In connection with the Fort Mill Acquisition, Mr. Smith advanced
approximately $3.5 million to the Company (the "Smith Advance"). The Smith
Advance was used by the Company to pay a portion of the cash consideration for
the Fort Mill Acquisition at closing. The Smith Advance is evidenced by a demand
note bearing interest at the minimum statutory rate of 3.83% per annum. The
Company anticipates seeking additional cash advances or credit support in the
form of guarantees or collateral from Mr. Smith in order to meet cash payment
obligations in the remaining Acquisitions, which close prior to the consummation
of the Offering. The Company intends to repay the principal and interest on the
Smith Advance and any similar future advances from Mr. Smith used to fund the
Acquisitions from the proceeds of this Offering.

THE SMITH PLEDGES

Under the Six Month Facility, Bruton Smith has pledged, and, under the
Revolving Facility, Mr. Smith will pledge, shares of common stock of Speedway
Motorsports, Inc. owned directly or indirectly by him to secure amounts loaned
or to be loaned to the Company by NationsBank and Ford Motor Credit,
respectively. Mr. Smith pledged securities having an estimated value of $40.0
million to secure the Six Month Facility (the "Six Month Pledge"). Should
NationsBank foreclose on the Six Month Pledge, the Company is under no
obligation to repay or reimburse Mr. Smith. Mr. Smith will pledge securities
having an estimated value of $50.0 million to secure the Initial Loan Commitment
under the Revolving facility (the "Revolving Pledge"). The Revolving Pledge will
be terminated and released whenever the Revolving Facility is increased to the
Maximum Loan Commitment. The Company will be under no obligation to repay or
reimburse Mr. Smith if Ford Motor Credit forecloses on the Revolving Pledge. For
further discussion of these lending arrangements, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

CERTAIN DEALERSHIP LEASES

Certain of the properties leased by the Company's dealership subsidiaries
are owned by officers, directors or holders of 5% or more of the Common Stock of
the Company or their affiliates. These leases contain terms comparable to, or
more favorable to the Company than, terms that would be obtained from
unaffiliated third parties. Town & Country Ford operates at facilities leased
from STC Properties, a North Carolina joint venture ("STC"). Town & Country Ford
maintains a 5% undivided interest in STC and Sonic Financial owns the remaining
95% of STC. The STC lease on the Town & Country Ford facilities will expire in
October 2000. Annual payments under the STC lease were $510,085 for each of
1994, 1995 and 1996. Current minimum rent payments are $409,000 annually
($34,083 monthly) through 1999, and will be decreased to $340,833 in 2000, such
rents being below market. When this lease expires, the Company anticipates
obtaining a long-term lease on the Town & Country Ford facility at fair market
rent.

Lone Star Ford operates, in part, at facilities leased from Viking
Investments Associates, a Texas association ("Viking"), which is controlled by
Mr. Bruton Smith. The Viking lease on the Lone Star Ford property expires in
2005. Annual payments under the Viking lease were $351,420, $331,302 and
$360,000 for 1994, 1995 and 1996, respectively. Minimum annual rents under this
lease are $360,000 ($30,000 monthly), such amount being below market. When this
lease expires, the Company anticipates obtaining a long-term lease on the Lone
Star Ford facility at fair market rent.

The dealership leases discussed below will be executed and effective as of
the consummation of the Acquisitions. The terms of these leases are comparable
to terms that would be obtained from unaffiliated third parties because they
were negotiated at arms-length before the lessors became affiliated with the
Company.

KIA of Chattanooga operates at facilities leased from KIA Land Development,
a company in which Nelson Bowers, the Company's Executive Vice President,
maintains an ownership interest. The Company negotiated this lease in connection
with the Bowers Acquisition. This triple net lease expires in 2007 and monthly
rent is currently under negotiation. The Company may renew this lease at its
option for two additional five year terms. At each renewal, the lessor may
adjust lease rents to reflect fair market rents for the property.

European Motors operates at its Chattanooga facilities under a triple net
lease from Mr. Bowers. The Company negotiated this lease in connection with the
Bowers Acquisition. The European Motors lease expires in 2007 and provides for
monthly rent of $16,846. This lease also provides for renewals on terms
identical to the KIA of Chattanooga lease.

<PAGE>
Jaguar of Chattanooga operates at facilities leased from JAG Properties, a
company in which Mr. Bowers maintains an ownership interest. The Company
negotiated this lease in connection with the Bowers Acquisition. This triple net
lease expires in 2017 and provides for monthly rent of $22,010. The Company may
renew this lease on terms identical to the KIA of Chattanooga renewal options.

Cleveland Chrysler-Plymouth-Jeep-Eagle leases its facilities from Cleveland
Properties LLC, a limited liability company in which Mr. Bowers maintains an
ownership interest. The Company negotiated this lease in connection with the
Bowers Acquisition. This triple net lease expires in 2011, provides for monthly
rent of $14,000 and may be renewed on terms identical to the KIA of Chattanooga
lease.

Cleveland Village Imports operates at facilities leased from Nelson Bowers
and another individual. Nelson Bowers, the Company's President and a director,
owns a 75% undivided interest in the land and buildings leased by Cleveland
Village Imports, with the remaining interests owned by an unrelated party. Such
land and buildings are leased under two leases: one is a triple net fixed lease
expiring on December 31, 1997 with rent of $8,000 per month and the other,
pertaining to a used car lot, is a month-to-month lease with rent of $3,000 per
month. In connection with the Bowers Acquisition, the lessors have agreed to
allow the expiration of these leases in October 1997, and to replace them with a
triple net lease at a negotiated rental rate for a 15-year initial term and two
five-year renewals at the option of the Company.

Dyer Volvo operates at facilities leased from D&R Investments, an entity in
which Richard Dyer, the Company's Executive Manager for Dyer Volvo, maintains an
ownership interest. This triple net lease, negotiated by the Company in
connection with the Dyer Acquisition, expires in 2009 and provides for monthly
rent of $50,000. The Dyer Volvo lease also provides the Company with two
optional renewals of five years each with rent at each renewal being adjusted to
fair market rent.

Ken Marks Ford ("KMF") operates at facilities leased from Marks Holding
Company, a corporation that is owned by Ken Marks, the Company's Regional Vice
President-Florida. In connection with the Ken Marks Acquisition, the lessor has
agreed to enter into a triple net lease with the Company as lessee at a
negotiated rental rate of $95,000 per month for an initial term expiring 2007
with two five-year renewals at the option of the Company.

CHARTOWN TRANSACTIONS

Chartown is a general partnership engaged in real estate development and
management. Before the Reorganization, Town & Country Ford maintained a 49%
partnership interest in Chartown with the remaining 51% held by SMDA, LLC, a
North Carolina limited liability company ("SMDA"). Mr. Smith owns a 80% direct
membership interest in SMDA with the remaining 20% owned indirectly through
Sonic Financial. In addition, Sonic Financial also held a demand promissory note
for $1.2 million issued by Chartown (the "Chartown Note"), which was
uncollectible due to insufficient funds. As part of the Reorganization, the
Chartown Note was canceled and Town & Country Ford transferred its partnership
interest in Chartown to Sonic Financial for nominal consideration. In connection
with that transfer, Sonic Financial agreed to indemnify Town & Country Ford for
any and all obligations and liabilities, whether known or unknown, relating to
Chartown and Town & Country Ford's ownership thereof.

THE BOWERS NOTE

In connection with Volvo's approval of the Company's acquisition of a Volvo
franchise in the Bowers Acquisition, Volvo, among other things, has conditioned
its approval upon Nelson Bowers, the Company's Executive Vice President and a
director nominee, acquiring and maintaining a 20% voting interest in the
Company's Sonic Automotive of Chattanooga, LLC ("Chattanooga Volvo") subsidiary
that will operate the Volvo franchise. Mr. Bowers will finance all of the
purchase price for this 20% interest by issuing a promissory note (the "Bowers
Note") in favor of Sonic Automotive of Nevada, Inc. ("Sonic Nevada"), a
wholly-owned subsidiary of the Company that controls a majority interest in
Chattanooga Volvo. Sonic Nevada, in turn, will fully fund the capital
contribution to Chattanooga Volvo necessary for Mr. Bowers' purchase of his
interest. The Bowers Note will be secured by Mr. Bowers' interest in Chattanooga
Volvo.

The Bowers Note will be in a principal amount in excess of $500,000 and
bear interest at the lowest applicable federal rate as published by the U.S.
Treasury Department in effect on the date Mr. Bowers purchases his interest in
Chattanooga Volvo. Accrued interest will be payable annually. The operating
agreement of Chattanooga Volvo will provide that profits and distributions are
to be allocated first to Mr. Bowers to the extent of interest to be paid on the
Bowers Note and next to the other members of Chattanooga Volvo according to
their percentages of ownership. No other profits or any losses of Chattanooga
Volvo will be allocated to Mr. Bowers under this arrangement. Mr. Bowers'
interest in Chattanooga Volvo will be redeemed and the Bowers Note will be due
and payable in full when Volvo no longer requires Mr. Bowers to maintain his
interest in Chattanooga Volvo.

<PAGE>
OTHER TRANSACTIONS

During each of the three years ended December 31, 1996, Town & Country Ford
paid $48,000 to Sonic Financial as a management fee. Sonic Financial's services
to Town & Country Ford have included performance of the following functions,
among others: maintenance of lender and creditor relationships; tax planning;
preparation of tax returns and representation in tax examinations; record
maintenance; internal audits and special audits; assistance to independent
public accountants; and litigation support to company counsel. Payments of fees
to and receipt of services from Sonic Financial ceased before the
Reorganization. Since that time, the Company has been providing these services
for itself.

Beginning in early 1997, certain of the Sonic Dealerships have entered into
arrangements to sell to their customers credit life insurance policies
underwritten by American Heritage Life Insurance Company, an insurer
unaffiliated with Sonic ("American Heritage"). American Heritage in turn
reinsures all of these policies with Provident American Insurance Company, a
Texas insurance company ("Provident American"). Under these arrangements, the
Sonic Dealerships paid an aggregate of $140,000 to American Heritage in premiums
for these policies since January 1, 1997. The Company anticipates terminating
this arrangement with American Heritage by 1998. Provident American is a
wholly-owned subsidiary of Sonic Financial.

Town & Country Ford and Lone Star Ford have each made several non-interest
bearing advances to Sonic Financial. As of June 30, 1997, Town & Country Ford
had made approximately $2.0 million of such advances. In preparation for the
Reorganization, a demand promissory note by Sonic Financial evidencing certain
of Town & Country Ford's advances was canceled in exchange for the redemption of
certain shares of the capital stock of Town & Country Ford held by Sonic
Financial. As of June 30, 1997, Lone Star Ford had made approximately $0.5
million of advances to Sonic Financial. In preparation for the Reorganization, a
demand promissory note by Sonic Financial evidencing certain of Lone Star Ford's
advances was canceled pursuant to a dividend. At years ended December 31, 1996,
1995 and 1994, the aggregate balances of such advances due from Sonic Financial
were approximately $2.5 million, $0 and $0, respectively.

Certain subsidiaries of Sonic (such subsidiaries together with Sonic and
Sonic Financial being hereinafter referred to as the "Sonic Group") have joined
with Sonic Financial in filing consolidated federal income tax returns for
several years. Such subsidiaries will join with Sonic Financial in filing for
1996 and for the period ending on June 30, 1997. Under applicable federal tax
law, each corporation included in Sonic Financial's consolidated return is
jointly and severally liable for any resultant tax. Under a tax allocation
agreement dated as of June 30, 1997, however, Sonic agreed to pay to Sonic
Financial, in the event that additional federal income tax is determined to be
due, an amount equal to Sonic's separate federal income tax liability computed
for all periods in which any member of the Sonic Group has been a member of
Sonic Financial's consolidated group less amounts previously recorded by Sonic.
Also pursuant to such agreement, Sonic Financial agreed to indemnify Sonic for
any additional amount determined to be due from Sonic Financial's consolidated
group in excess of the federal income tax liability of the Sonic Group for such
periods. The tax allocation agreement establishes procedures with respect to tax
adjustments, tax claims, tax refunds, tax credits and other tax attributes
relating to periods ending prior to the time that the Sonic Group shall leave
Sonic Financial's consolidated group.

The Company acquired the Sonic Dealerships in the Reorganization pursuant
to four separate stock subscription agreements (the "Subscription Agreements").
The Subscription Agreements provide for the acquisition of 100% of the capital
stock or membership interests, as the case may be, of each of the Sonic
Dealerships from Sonic Financial, Mr. Smith, the Egan Group (an assignee of Mr.
Egan) and Bryan Scott Smith in exchange for certain amounts of the Company's
issued and outstanding Class B Common Stock. See "Principal Stockholders."

For additional information concerning related party transactions of Sonic,
see Note (7) to the Combined and Consolidated Financial Statements of Sonic and
for the businesses being acquired in the Acquisitions, see the notes to the
historical financial statements for each respective business acquired included
in this Prospectus.

<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 1, 1997 by (i) each
stockholder who is known by the Company to own beneficially more than five
percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each executive officer of the Company, and (iv) all directors and
executive officers of the Company as a group, and as adjusted to reflect the
sale by the Company of the shares of Class A Common Stock in this Offering.
Prior to this Offering, no shares of Class A Common Stock were issued and
outstanding. However, options to acquire shares of Class A Common Stock
will be issued on or before the closing of the Offering to certain of the
Company's officers and employees, and the Dyer Warrant will be issued upon the
closing of the Dyer Acquisition. Holders of Class A Common Stock are entitled to
one vote per share on all matters submitted to a vote of the stockholders of the
Company. Holders of Class B Common Stock are entitled to ten votes per share on
all matters submitted to a vote of the stockholders, except that the Class B
Common Stock is entitled to only one vote per share with respect to any
transaction proposed or approved by the Board of Directors of the Company or
proposed by all the holders of the Class B Common Stock or as to which any
member of the Smith Group or any affiliate thereof has a material financial
interest other than as a then existing stockholder of the Company constituting a
(a) "going private" transaction (as defined herein), (b) disposition of
substantially all of the Company's assets, (c) transfer resulting in a change in
the nature of the Company's business or (d) merger or consolidation in which
current holders of Common Stock would own less than 50% of the Common Stock
following such transaction. In the event of any transfer outside of the Smith
Group or the Smith Group holds less than 15% of the total number of shares of
Common Stock outstanding, such transferred shares or all shares, respectively,
of Class B Common Stock will automatically convert into an equal number of
shares of Class A Common Stock. See "Description of Capital Stock."

<TABLE>
<CAPTION>
PERCENTAGE OF ALL
OUTSTANDING
NUMBER OF SHARES NUMBER OF SHARES COMMON STOCK
OF CLASS A COMMON OF CLASS B COMMON BEFORE AFTER
NAME (1) STOCK OWNED STOCK OWNED OFFERING OFFERING(2)
<S> <C> <C> <C> <C>
O. Bruton Smith (3)(4) 87.62% %
Sonic Financial Corporation (3) 71.05% %
Bryan Scott Smith (3)(5) 7.65% %
William R. Brooks (3) -- %
Theodore M. Wright (3)(5) -- %
Nelson E. Bowers, II (3)(5) -- %
All directors and executive officers as a group (10 persons) 95.27%
</TABLE>

* Less than one percent.

(1) Unless otherwise noted, each person has sole voting and investment power
over the shares listed opposite his name subject to community property laws
where applicable.

(2) The percentages of total voting power would be as follows: Bruton Smith,
%; Sonic Financial, %; Scott Smith, %; William Brooks, less than 1%;
Theodore Wright, less than 1%; Nelson E. Bowers, II, less than 1%; and all
directors and executive officers as a group, %. Assumes the
Underwriters' over-allotment option is not exercised.

(3) The address of such person is care of the Company at 5401 East Independence
Boulevard, Charlotte, North Carolina 28218.

(4) The shares of Common Stock shown as owned by such person or group include
all of the shares owned by Sonic Financial as indicated elsewhere in the
table. Mr. Smith owns the substantial majority of Sonic's outstanding
capital stock.

(5) All shares of Class A Common Stock beneficially owned by such person
underlie options granted (or, in the case of Mr. Bowers, to be granted upon
the closing of the Bowers Acquisition) by the Company at the public
offering price. One-third of such options become exercisable on October ,
1998, one-third on October , 1999 and one-third on October , 2000. See
"Management -- Stock Option Plan."

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of (i) 50,000,000 shares of
Class A Common Stock, $.01 par value, (ii) 15,000,000 shares of Class B Common
Stock, $.01 par value, and (iii) 3,000,000 shares of preferred stock, $.10 par
value. Upon completion of this Offering, the Company will have
outstanding shares of Class A Common Stock and outstanding shares of
Class B Common Stock and no outstanding shares of preferred stock.

<PAGE>
The following summary description of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
Company's Certificate, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and Delaware Law. Reference is
made to such exhibit and Delaware Law for a detailed description of the
provisions thereof summarized below.

COMMON STOCK

The Company's Class A Common Stock and Class B Common Stock are equal in
all respects except for voting rights, conversion rights of the Class B Common
Stock and as required by law, as discussed more fully below.

VOTING RIGHTS; CONVERSION OF CLASS B COMMON STOCK TO CLASS A COMMON STOCK

The voting powers, preferences and relative rights of the Class A Common
Stock and the Class B Common Stock are subject to the following provisions.
Holders of Class A Common Stock have one vote per share on all matters submitted
to a vote of the stockholders of the Company. Holders of Class B Common Stock
are entitled to ten votes per share except as described below. Holders of all
classes of Common Stock entitled to vote will vote together as a single class on
all matters presented to the stockholders for their vote or approval except as
otherwise required by Delaware Law. There is no cumulative voting with respect
to the election of directors. In the event any shares of Class B Common Stock
held by a member of the Smith Group (as defined below) are transferred outside
of the Smith Group, such shares will automatically be converted into shares of
Class A Common Stock. In addition, if the total number of shares of Common Stock
held by members of the Smith Group is less than 15% of the total number of
shares of Common Stock outstanding, all of the outstanding shares of Class B
Common Stock automatically will be reclassified as Class A Common Stock. In any
merger, consolidation or business combination, the consideration to be received
per share by holders of Class A Common Stock must be identical to that received
by holders of Class B Common Stock, except that in any such transaction in which
shares of common stock are distributed, such shares may differ as to voting
rights to the extent that voting rights now differ between the classes of Common
Stock.

Notwithstanding the foregoing, the holders of Class A Common Stock and
Class B Common Stock vote as a single class, with each share of each class
entitled to one vote per share, with respect to any transaction proposed or
approved by the Board of Directors of the Company or proposed by or on behalf of
holders of the Class B Common Stock or as to which any member of the Smith Group
or any affiliate thereof has a material financial interest other than as a then
existing stockholder of the Company constituting a (a) "going private"
transaction, (b) sale or other disposition of all or substantially all of the
Company's assets, (c) sale or transfer which would cause the nature of the
Company's business to be no longer primarily oriented toward automobile
dealership operations and related activities or (d) merger or consolidation of
the Company in which the holders of the Common Stock will own less than 50% of
the Common Stock following such transaction. A "going private" transaction is
defined as any "Rule 13e-3 Transaction," as such term is defined in Rule 13e-3
promulgated under the Securities Exchange Act of 1934. An "affiliate" is defined
as (i) any individual or entity who or that, directly or indirectly, controls,
is controlled by, or is under common control with any member of the Smith Group,
(ii) any corporation or organization (other than the Company or a majority-owned
subsidiary of the Company) of which any member of the Smith Group is an officer
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of voting securities, or in which any member of the Smith Group has a
substantial beneficial interest, (iii) a voting trust or similar arrangement
pursuant to which any member of the Smith Group generally controls the vote of
the shares of Common Stock held by or subject to such trust or arrangement, (iv)
any other trust or estate in which any member of the Smith Group has a
substantial beneficial interest or as to which any member of the Smith Group
serves as trustee or in a similar fiduciary capacity, or (v) any relative or
spouse of any member of the Smith Group or any relative of such spouse, who has
the same residence as any member of the Smith Group.

As used in this Prospectus, the term the "Smith Group" consists of the
following persons: (i) Mr. Smith and his guardian, conservator, committee, or
attorney-in-fact; (ii) William S. Egan and his guardian, conservator, committee,
or attorney-in-fact; (iii) each lineal descendant of Messrs. Smith and Egan (a
"Descendant") and their respective guardians, conservators, committees or
attorneys-in-fact; and (iv) each "Family Controlled Entity" (as defined below).
The term "Family Controlled Entity" means (i) any not-for-profit corporation if
at least 80% of its board of directors is composed of Mr. Smith, Mr. Egan and/or
Descendants; (ii) any other corporation if at least 80% of the value of its
outstanding equity is owned by members of the Smith Group; (iii) any partnership
if at least 80% of the value of the partnership interests are owned by members
of the Smith Group; and (iv) any limited liability or similar company if at
least 80% of the value of the company is owned by members of the Smith Group.
For a discussion of the effects of the disproportionate voting rights of the
Common Stock, see "Risk Factors -- Concentration of Voting Power and
Antitakeover Provisions."

<PAGE>
Under the Company's Certificate and Delaware Law, the holders of Class A
Common Stock and/or Class B Common Stock are each entitled to vote as a separate
class, as applicable, with respect to any amendment to the Company's Certificate
that would increase or decrease the aggregate number of authorized shares of
such class, increase or decrease the par value of the shares of such class, or
modify or change the powers, preferences or special rights of the shares of such
class so as to affect such class adversely.

DIVIDENDS

Holders of the Class A Common Stock and the Class B Common Stock are
entitled to receive ratably such dividends, if any, as are declared by the
Company's Board of Directors out of funds legally available for that purpose,
provided, that dividends paid in shares of Class A Common Stock or Class B
Common Stock shall be paid only as follows: shares of Class A Common Stock shall
be paid only to holders of Class A Common Stock and shares of Class B Common
Stock shall be paid only to holders of Class B Common Stock. The Company's
Certificate provides that if there is any dividend, subdivision, combination or
reclassification of either class of Common Stock, a proportionate dividend,
subdivision, combination or reclassification of the other class of Common Stock
shall simultaneously be made.

OTHER RIGHTS

Stockholders of the Company have no preemptive or other rights to subscribe
for additional shares. In the event of the liquidation, dissolution or winding
up of the Company, holders of Class A Common Stock and Class B Common Stock are
entitled to share ratably in all assets available for distribution to holders of
Common Stock after payment in full of creditors. No shares of any class of
Common Stock are subject to a redemption or a sinking fund. All outstanding
shares of Common Stock are, and all shares offered by this Prospectus will be,
when sold, validly issued, fully paid and nonassessable.

TRANSFER AGENT AND REGISTRAR

The Company has appointed First Union National Bank as the transfer agent
and registrar for the Class A Common Stock. The Company has not appointed a
transfer agent for the Class B Common Stock.

PREFERRED STOCK

No shares of preferred stock are outstanding. The Company's Certificate
authorizes the Board of Directors to issue up to 3,000,000 shares of preferred
stock in one or more series and to establish such designations and such relative
voting, dividend, liquidation, conversion and other rights, preferences and
limitations as the Board of Directors may determine without further approval of
the stockholders of the Company. The issuance of preferred stock by the Board of
Directors could, among other things, adversely affect the voting power of the
holders of Class A Common Stock and, under certain circumstances, make it more
difficult for a person or group to gain control of the Company. See "Risk
Factors -- Concentration of Voting Power and Anti-takeover Provisions."

The issuance of any series of preferred stock, and the relative
designations, rights, preferences and limitations of such series, if and when
established, will depend upon, among other things, the future capital needs of
the Company, the then-existing market conditions and other factors that, in the
judgment of the Board of Directors, might warrant the issuance of preferred
stock. At the date of this Prospectus, there are no plans, agreements or
understandings for the issuance of any shares of preferred stock.

DELAWARE LAW, CERTAIN CHARTER AND BYLAW PROVISIONS AND CERTAIN FRANCHISE
AGREEMENT PROVISIONS

Certain provisions of Delaware Law and of the Company's Certificate and
Bylaws, summarized in the following paragraphs, may be considered to have an
antitakeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by stockholders.

DELAWARE ANTITAKEOVER LAW. The Company, a Delaware corporation, is subject
to the provisions of Delaware Law, including Section 203. In general, Section
203 prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which such person became an interested
stockholder unless: (i) prior to such date, the Board of Directors approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; or (ii) upon becoming an
interested stockholder, the stockholder then owned at least 85% of the voting
stock, as defined in Section 203; or (iii) subsequent to such date, the business
combination is approved by both the Board of Directors and by holders of at
least 66 2/3% of the

<PAGE>
corporation's outstanding voting stock, excluding shares owned by the interested
stockholder. For these purposes, the term "business combination" includes
mergers, asset sales and other similar transactions with an "interested
stockholder." An "interested stockholder" is a person who, together with
affiliates and associates, owns (or, within the prior three years, did own) 15%
or more of the corporation's voting stock. Although Section 203 permits a
corporation to elect not to be governed by its provisions, the Company to date
has not made this election.

CLASSIFIED BOARD OF DIRECTORS. The Company's Bylaws provide for the Board
of Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. Classification of the Board of Directors expands the
time required to change the composition of a majority of directors and may tend
to discourage a takeover bid for the Company. Moreover, under Delaware Law, in
the case of a corporation having a classified board of directors, the
stockholders may remove a director only for cause. This provision, when coupled
with the provision of the Bylaws authorizing only the board of directors to fill
vacant directorships, will preclude stockholders of the Company from removing
incumbent directors without cause, simultaneously gaining control of the Board
of Directors by filing the vacancies with their own nominees.

SPECIAL MEETINGS OF STOCKHOLDERS. The Company's Bylaws provide that special
meetings of stockholders may be called only by the Chairman or by the Secretary
or any Assistant Secretary at the request in writing of a majority of the Board
of Directors of the Company. The Company's Bylaws also provide that no action
required to be taken or that may be taken at any annual or special meeting of
stockholders may be taken without a meeting; the powers of stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied. These provisions may make it more difficult for
stockholders to take action opposed by the Board of Directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Company's Bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual or a special meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive office
of the Company, (i) in the case of an annual meeting that is called for a date
that is within 30 days before or after the anniversary date of the immediately
preceding annual meeting of stockholders, not less than 60 days nor more than 90
days prior to such anniversary date, and, (ii) in the case of an annual meeting
that is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, or in the case of
a special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth day following the day on which
notice of the date of the meeting was mailed or public disclosure of the date of
the meeting was made, whichever occurs first. The Bylaws also specify certain
requirements for a stockholder's notice to be in proper written form. These
provisions may preclude some stockholders from bringing matters before the
stockholders at an annual or special meeting or from making nominations for
directors at an annual or special meeting.

CONFLICT OF INTEREST PROCEDURES. The Company's Certificate contains
provisions providing that transactions between the Company and its affiliates
must be no less favorable to the Company than would be available in transactions
involving arms'-length dealing with unrelated third parties. Moreover, any such
transaction involving aggregate payments in excess of $500,000 must be approved
by a majority of the Company's directors and a majority of the Company's
independent directors. Otherwise, the Company must obtain an opinion as to the
financial fairness of the transactions to be issued by an investment banking or
appraisal firm of national standing.

RESTRICTIONS UNDER FRANCHISE AGREEMENTS. The Company's franchise agreements
impose restrictions on the transfer of the Common Stock. A number of
Manufacturers prohibit transactions which affect changes in management control
of the Company. For instance, Ford may cause the Company to sell or resign from
its Ford franchises if any person or entity acquires 15% or more of the
Company's voting securities. Likewise, General Motors and Toyota may force the
sale of their respective franchises if 20% or more of the Company's voting
securities are so acquired. Volkswagen has approved of the public sale of only
25% of the voting control of the Company and requires prior approval of any
change in control or management of the Company that would affect the Company's
control or management of its Volkswagen franchisee subsidiaries. Such
restrictions may prevent or deter prospective acquirers from obtaining control
of the Company. See "Risk Factors -- Stock Ownership/Issuance Limits" and
"Business -- Relationships with Manufacturers."

<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
shares of Class A Common Stock (assuming no exercise of the Underwriters'
over-allotment option). All of such shares will be freely transferable and may
be resold without further registration under the Securities Act, except for any
shares purchased by an "affiliate" of the Company (as defined by Rule 144),
which shares will be subject to the resale limitations of Rule 144. The
shares (the "Restricted Shares") of Class B Common Stock outstanding, which are
convertible into Class A Common Stock, are "restricted" securities within the
meaning of Rule 144 irrespective of whether the conversion right is exercised.
The shares of Class A Common Stock, which underlie options to be granted
on or before the closing of the Offering under the Company's Stock Option Plan
and the Dyer Warrant, may be resold only pursuant to a registration statement
under the Securities Act or an applicable exemption from registration thereunder
such as an exemption provided by Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
for at least one year may, under certain circumstances, resell within any
three-month period, such number of shares as does not exceed the greater of one
percent of the then-outstanding shares of Class A Common Stock or the average
weekly trading volume of Class A Common Stock during the four calendar weeks
prior to such resale. Rule 144 also permits, under certain circumstances, the
resale of shares without any quantity limitation by a person who has satisfied a
two-year holding period and who is not, and has not been for the preceding three
months, an affiliate of the Company. In addition, holding periods of successive
non-affiliate owners are aggregated for purposes of determining compliance with
these one- and two-year holding period requirements.

Upon completion of this Offering, none of the shares of Class B
Common Stock outstanding on the date of this Prospectus and not sold in the
Offering will have been held for at least one year. Since all such shares are
restricted securities, none of them may be resold pursuant to Rule 144 upon
completion of this Offering. Any transfer of shares of the Class B Common Stock
to any person other than a member of the Smith Group will result in a conversion
of such shares to Class A Common Stock.

The Restricted Shares will not be eligible for sale under Rule 144 until
the expiration of the one-year holding period from the date such Restricted
Shares were acquired.

The availability of shares for sale or actual sales under Rule 144 and the
perception that such shares may be sold may have a material adverse effect on
the market price of the Class A Common Stock. Sales under Rule 144 also could
impair the Company's ability to market additional equity securities.

Additionally, the Company has entered into the Registration Rights
Agreement with Sonic Financial, Bruton Smith, Scott Smith and William Egan. The
Registration Rights Agreement provides piggyback registration rights with
respect to shares of Common Stock in the aggregate. For further
information regarding the Registration Rights Agreement, see "Certain
Transactions -- Registration Rights Agreements."

The Company, all of the executive officers of the Company and the holders
of Class B Common Stock have agreed, subject to certain exceptions, not,
directly or indirectly, to (i) sell, grant an option or otherwise transfer or
dispose of any Class A Common Stock or securities convertible into or
exchangeable or exercisable for Class A Common Stock, including shares of Class
B Common Stock, or file a registration statement under the Securities Act with
respect to the foregoing or (ii) enter into any swap or other agreement or
transaction that transfers, in whole or part, the economic consequences of
ownership of the Class A Common Stock for 180 days from the date of this
Prospectus without the prior written consent of Merrill Lynch.

<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Montgomery Securities and
Wheat, First Securities, Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Company, the
number of shares of Class A Common Stock set forth opposite its name below. In
the Purchase Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the shares of Class A
Common Stock offered hereby, if any are purchased. In the event of a default by
an Underwriter, the Purchase Agreement provides that, in certain circumstances,
purchase commitments of the nondefaulting Underwriters may be increased or the
Purchase Agreement may be terminated.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................................................................
Montgomery Securities.............................................................................................
Wheat, First Securities, Inc......................................................................................

Total................................................................................................
</TABLE>

The Underwriters have advised the Company that they propose initially to
offer the shares of Class A Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share of
Class A Common Stock. The Underwriters may allow, and such dealers may reallow,
a discount not in excess of $ per share of Class A Common Stock to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.

At the request of the Company, the Underwriters have reserved up to
shares of Class A Common Stock for sale at the initial public offering price,
and otherwise on the same terms as sales pursuant to the Offering, to directors,
officers, employees, business associates and related persons of the Company. The
number of shares of Class A Common Stock available for sale to the general
public will be reduced to the extent such persons purchase such reserved shares.
Any reserved shares which are not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby.

The Company, all of the executive officers of the Company and all the
holders of Class B Common Stock have agreed, subject to certain exceptions, not
to, directly or indirectly, (i) sell, grant any option to purchase or otherwise
transfer or dispose of any Class A Common Stock or securities convertible into
or exchangeable or exercisable for Class A Common Stock, including shares of
Class B Common Stock, or file a registration statement under the Securities Act
with respect to the foregoing or (ii) enter into any swap or other agreement or
transaction that transfers, in whole or part, the economic consequence of
ownership of the Class A Common Stock, without the prior written consent of
Merrill Lynch, for a period of 180 days after the date of this Prospectus.

The Company has granted an option to the Underwriters, exercisable within
30 days after the date of this Prospectus, to purchase up to an aggregate of
additional shares of Class A Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The Underwriters may exercise this option only to cover
over-allotments, if any, made on the sale of the Class A Common Stock offered
hereby. To the extent that the Underwriters exercise this option, each
Underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares of Class A Common Stock proportionate to such
Underwriter's initial amount reflected in the foregoing table.

<PAGE>
Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock
will be determined by negotiation between the Company and the Representatives.
The factors considered in determining the initial public offering price, in
addition to prevailing market conditions, are price-earnings ratios of publicly
traded companies that the Representatives believe to be comparable to the
Company, certain financial information of the Company, the history of, and the
prospects for, the Company and the industry in which it competes, and an
assessment of the Company's management, its past and present operations, the
prospects for and the timing of future revenues of the Company, the present
state of the Company's development, and the above factors in relation to market
values and various valuation measures of other companies engaged in activities
similar to the Company. There can be no assurance that an active trading market
will develop for the Class A Common Stock or that the Class A Common Stock will
trade in the public market subsequent to the Offering made hereby at or above
the initial public offering price.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.

The Company intends to apply for listing of the Class A Common Stock on the
NYSE under the symbol "DLR." In order to meet the requirements for listing of
the Class A Common Stock on that exchange, the Underwriters have undertaken to
sell lots of 100 or more shares to a minimum of 2,000 beneficial holders.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Class A Common Stock offered hereby to any accounts
over which they exercise discretionary authority.

Until the distribution of the Class A Common Stock is completed, rules of
the Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Class A Common
Stock. As an exception to these rules, the Representatives are permitted to
engage in certain transactions that stabilize the price of Class A Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Class A Common Stock.

If the Underwriters create a short position in the Class A Common Stock in
connection with the Offering, I.E., if they sell more shares of Class A Common
Stock than are set forth on the cover page of this Prospectus, the
Representatives may reduce that short position by purchasing Class A Common
Stock in the open market. The Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described above.

The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Class A Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Class A Common Stock, they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Class A Common Stock. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.

LEGAL MATTERS

Parker, Poe, Adams & Bernstein L.L.P., Charlotte, North Carolina, counsel
to the Company, will render an opinion that the shares of Class A Common Stock
offered hereby, when issued and paid for in accordance with the terms of the
Underwriting Agreement, will be duly authorized, validly issued, fully paid and
nonassessable. Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York, has served as counsel to the
Underwriters in connection with this Offering. Fried, Frank, Harris, Shriver &
Jacobson will rely on Parker, Poe, Adams & Bernstein L.L.P. with respect to
matters of North Carolina law.

<PAGE>
EXPERTS

The combined and consolidated financial statements of Sonic Automotive,
Inc. and Affiliated Companies as of the year ended December 31, 1996 and for
each of the three years then ended, the financial statements of Dyer & Dyer,
Inc., the combined financial statements of Bowers Automotive Group, the combined
financial statements of Lake Norman Dodge, Inc. and Affiliated Companies, and
the financial statements of Ken Marks Ford, Inc. included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein, and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-1 under the Securities Act with
respect to the shares of Class A Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
the Company and the shares of Class A Common Stock offered hereby, reference is
made to the Registration Statement, including the exhibits and schedules filed
as part thereof. Statements contained in this Prospectus as to the contents of
any contract or any other documents are not necessarily complete, and, in each
such instance, reference is made to the copy of the contract or document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference thereto. The Registration Statement, together
with its exhibits and schedules, may be inspected at the Public Reference
Section of the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the SEC located at 7 World Trade Center, Suite
1300, New York, New York 10048 and at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part
of such materials may be obtained from any such office upon payment of the fees
prescribed by the SEC. Such information may also be inspected and copied at the
office of the NYSE at 20 Broad Street, New York, New York 10005. The Commission
also maintains a Website (http://www.sec.gov.) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.

<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE

<S> <C>
SONIC AUTOMOTIVE, INC. AND AFFILIATED COMPANIES:
INDEPENDENT AUDITORS' REPORT........................................................................................ F-2
COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS:
Combined and Consolidated Balance Sheets at December 31, 1995 and 1996 and unaudited at June 30, 1997............ F-3
Combined and Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996 and unaudited
for the six months ended June 30, 1996 and 1997................................................................. F-4
Combined and Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996 and unaudited for the six months ended June 30, 1997.......................... F-5
Combined and Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and
unaudited for the six months ended June 30, 1996 and 1997....................................................... F-6
Notes to Combined and Consolidated Financial Statements.......................................................... F-7

DYER & DYER, INC.:
INDEPENDENT AUDITORS' REPORT........................................................................................ F-16
FINANCIAL STATEMENTS:
Balance Sheets at December 31, 1995 and 1996 and unaudited at June 30, 1997...................................... F-17
Statements of Income and Retained Earnings for the years ended December 31, 1994, 1995 and 1996 and unaudited for
the six months ended June 30, 1996 and 1997..................................................................... F-18
Statements of Stockholder's Equity for the years ended December 31, 1994, 1995 and 1996 and unaudited for the six
months ended June 30, 1997...................................................................................... F-19
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and unaudited for the six months
ended June 30, 1996 and 1997.................................................................................... F-20
Notes to Financial Statements.................................................................................... F-21

BOWERS DEALERSHIPS AND AFFILIATED COMPANIES:
INDEPENDENT AUDITORS' REPORT........................................................................................ F-25
COMBINED FINANCIAL STATEMENTS:
Combined Balance Sheets at December 31, 1995 and 1996 and unaudited at June 30, 1997............................. F-26
Combined Statements of Income for the years ended December 31, 1995 and 1996 and unaudited for the six months
ended June 30, 1996 and 1997.................................................................................... F-27
Combined Statements of Stockholders' Equity for the years ended
December 31, 1995 and 1996 and unaudited for the six months ended June 30, 1997................................ F-28
Combined Statements of Cash Flows for the years ended December 31, 1995 and 1996 and unaudited for the six months
ended June 30, 1996 and 1997.................................................................................... F-29
Notes to Combined Financial Statements........................................................................... F-30

LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES:
INDEPENDENT AUDITORS' REPORT........................................................................................ F-37
COMBINED FINANCIAL STATEMENTS:
Combined Balance Sheets at December 31, 1996 and unaudited at June 30, 1997...................................... F-38
Combined Statements of Income for the year ended December 31, 1996 and unaudited for the six months ended June
30, 1996 and 1997............................................................................................... F-39
Combined Statements of Stockholders' Equity for the year ended December 31, 1996 and unaudited for the six months
ended June 30, 1997............................................................................................. F-40
Combined Statements of Cash Flows for the year ended December 31, 1996 and unaudited for the six months ended
June 30, 1996 and 1997.......................................................................................... F-41
Notes to Combined Financial Statements........................................................................... F-42

KEN MARKS FORD, INC.:
INDEPENDENT AUDITORS' REPORT........................................................................................ F-46
FINANCIAL STATEMENTS:
Balance Sheets at April 30, 1997 and July 31, 1997............................................................... F-47
Statements of Income for the year ended April 30, 1997 and three months ended July 31, 1996 and 1997............. F-48
Statements of Stockholders' Equity for the year ended April 30, 1997 and three months ended July 31, 1997........ F-49
Statements of Cash Flows for the year ended April 30, 1997 and three months ended July 31, 1996 and 1997......... F-50
Notes to Financial Statements.................................................................................... F-51
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SONIC AUTOMOTIVE, INC.
Charlotte, North Carolina

We have audited the accompanying combined balance sheet of Sonic Automotive,
Inc. and Affiliated Companies (the "Company"), which are under common ownership
and management, as of December 31, 1995 and 1996, and the related combined
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Sonic Automotive, Inc.
and Affiliated Companies as of December 31, 1995 and 1996, and the combined
results of their operations and their combined cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina

September 29, 1997

F-2

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

COMBINED AND CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1995 AND 1996 AND JUNE 30, 1997

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................... $ 8,993,887 $ 6,679,490 $ 9,237,585
Marketable equity securities................................................. 706,126 638,500 769,123
Receivables (Note 5) (net of allowance for doubtful accounts of $160,031 and
$224,789 at December 31, 1995 and 1996,
respectively)............................................................. 9,085,376 11,907,786 12,897,264
Inventories (Notes 3 and 5).................................................. 39,128,041 57,970,020 59,884,909
Deferred income taxes (Note 6)............................................... 117,500 279,896 256,032
Other current assets......................................................... 311,019 332,561 818,171
Total current assets...................................................... 58,341,949 77,808,253 83,863,084
PROPERTY AND EQUIPMENT, NET (Notes 4 and 5).................................... 8,527,338 12,466,713 13,269,789
GOODWILL, NET (Note 1)......................................................... -- 4,266,084 9,463,179
OTHER ASSETS................................................................... 372,610 389,277 263,374
TOTAL ASSETS................................................................... $67,241,897 $94,930,327 $106,859,426
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable -- floor plan (Note 3)......................................... $45,151,111 $63,893,356 $ 67,855,408
Trade accounts payable....................................................... 3,043,180 3,642,572 3,847,922
Accrued interest............................................................. 503,391 521,190 491,341
Other accrued liabilities.................................................... 1,554,713 3,031,473 3,394,178
Payable to affiliated companies (Note 7)..................................... 2,000,000 -- --
Payable to Company's Chairman (Note 2)....................................... -- -- 3,500,000
Current maturities of long-term debt......................................... 169,932 518,979 487,242
Total current liabilities................................................. 52,422,327 71,607,570 79,576,091
LONG-TERM DEBT (Note 5)........................................................ 3,560,766 5,285,862 5,137,210
PAYABLE TO AFFILIATED COMPANIES (Note 7)....................................... 1,219,204 914,339 854,984
DEFERRED INCOME TAXES (Note 6)................................................. 777,600 1,059,380 930,923
MINORITY INTEREST (Note 1)..................................................... 199,522 313,912 --
COMMITMENTS AND CONTINGENCIES (Notes 7 and 10)
STOCKHOLDERS' EQUITY (Notes 8 and 9):
Preferred stock, $.10 par, 3,000,000 shares authorized and unissued.......... -- -- --
Class A Common Stock, $.01 par, 50,000,000 shares authorized and unissued.... -- -- --
Class B Common Stock, $.01 par, 15,000,000 shares authorized,
10,000 shares issued and outstanding...................................... 100 100 100
Paid-in capital.............................................................. 6,331,446 13,395,560 16,604,070
Retained earnings............................................................ 2,766,420 4,913,095 6,486,412
Unrealized loss on marketable equity securities.............................. (35,488) (93,562) (97,433)
Due from affiliates (Note 7)................................................. -- (2,465,929) (2,632,931)
Total stockholders' equity................................................ 9,062,478 15,749,264 20,360,218
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $67,241,897 $94,930,327 $106,859,426
</TABLE>

See notes to combined and consolidated financial statements.

F-3

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

COMBINED AND CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales............................ $227,959,827 $267,307,949 $326,841,772 $164,332,724 $185,077,493
Parts, service and collision repair...... 33,984,096 35,859,960 42,643,812 21,005,202 22,906,377
Finance and insurance.................... 5,180,998 7,813,408 7,118,217 4,277,094 4,763,248
Total revenues........................ 267,124,921 310,981,317 376,603,801 189,615,020 212,747,118
COST OF SALES.............................. 234,461,089 272,178,737 332,406,803 167,191,296 188,367,591
GROSS PROFIT............................... 32,663,832 38,802,580 44,196,998 22,423,724 24,379,527
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................. 24,631,532 29,343,430 33,677,529 16,590,478 18,413,226
DEPRECIATION AND AMORTIZATION.............. 838,011 832,261 1,075,618 359,630 395,573
OPERATING INCOME........................... 7,194,289 8,626,889 9,443,851 5,473,616 5,570,728
OTHER INCOME AND EXPENSE:
Interest expense, floor plan............. 3,000,622 4,504,526 5,968,430 2,800,778 3,017,903
Interest expense, other.................. 443,409 436,435 433,250 183,898 269,145
Gain on sale of marketable equity
securities............................ -- 107,007 354,922 278,917 134,496
Other income............................. 609,088 342,047 263,676 90,495 139,346
Total other expense................... 2,834,943 4,491,907 5,783,082 2,615,264 3,013,206
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST........................ 4,359,346 4,134,982 3,660,769 2,858,352 2,557,522
PROVISION FOR INCOME TAXES
(Note 6)................................. 1,559,750 1,674,900 1,399,704 1,093,034 937,212
INCOME BEFORE MINORITY
INTEREST................................. 2,799,596 2,460,082 2,261,065 1,765,318 1,620,310
MINORITY INTEREST IN EARNINGS
OF SUBSIDIARY............................ 15,564 22,167 114,390 40,612 46,993
NET INCOME................................. $ 2,784,032 $ 2,437,915 $ 2,146,675 $ 1,724,706 $ 1,573,317
PRO FORMA NET INCOME PER SHARE
(Note 1) (unaudited)..................... $ 215 $ 157
PRO FORMA NUMBER OF SHARES
USED TO COMPUTE PER SHARE
DATA (Note 1) (unaudited)................ 10,000 10,000
</TABLE>

See notes to combined and consolidated financial statements.

F-4

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

COMBINED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
UNREALIZED LOSS
CLASS B RETAINED ON MARKETABLE DUE
COMMON STOCK PAID-IN EARNINGS EQUITY FROM
SHARES AMOUNT CAPITAL (DEFICIT) SECURITIES AFFILIATES
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993........... 10,000 $ 100 $ 4,837,100 $ (2,455,527) $ -- $ --
Net income........................... -- -- -- 2,784,032 -- --
BALANCE AT DECEMBER 31, 1994........... 10,000 100 4,837,100 328,505 -- --
Capital contribution................. -- -- 1,494,346 -- -- --
Change in net unrealized loss on
marketable equity
securities......................... -- -- -- -- (35,488) --
Net income........................... -- -- -- 2,437,915 -- --
BALANCE AT DECEMBER 31, 1995........... 10,000 100 6,331,446 2,766,420 (35,488) --
Capital contribution -- -- 7,064,114 -- -- --
Advance to affiliates................ -- -- -- -- -- (2,465,929)
Change in net unrealized loss on
marketable equity
securities......................... -- -- -- -- (58,074) --
Net income........................... -- -- -- 2,146,675 -- --
BALANCE AT DECEMBER 31, 1996........... 10,000 100 13,395,560 4,913,095 (93,562) (2,465,929)
Capital contribution (unaudited)..... -- -- 3,208,510 -- -- --
Advance to affiliates (unaudited).... -- -- -- -- -- (167,002)
Change in net unrealized loss on
marketable equity
securities (unaudited)............. -- -- -- -- (3,871) --
Net income (unaudited)............... -- -- -- 1,573,317 -- --
BALANCE AT JUNE 30, 1997 (UNAUDITED)... 10,000 $ 100 $ 16,604,070 $ 6,486,412 $ (97,433) $(2,632,931)

<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
<S> <C>
BALANCE AT DECEMBER 31, 1993........... $ 2,381,673
Net income........................... 2,784,032
BALANCE AT DECEMBER 31, 1994........... 5,165,705
Capital contribution................. 1,494,346
Change in net unrealized loss on
marketable equity
securities......................... (35,488)
Net income........................... 2,437,915
BALANCE AT DECEMBER 31, 1995........... 9,062,478
Capital contribution 7,064,114
Advance to affiliates................ (2,465,929)
Change in net unrealized loss on
marketable equity
securities......................... (58,074)
Net income........................... 2,146,675
BALANCE AT DECEMBER 31, 1996........... 15,749,264
Capital contribution (unaudited)..... 3,208,510
Advance to affiliates (unaudited).... (167,002)
Change in net unrealized loss on
marketable equity
securities (unaudited)............. (3,871)
Net income (unaudited)............... 1,573,317
BALANCE AT JUNE 30, 1997 (UNAUDITED)... $ 20,360,218
</TABLE>

See notes to combined and consolidated financial statements.

F-5

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 2,784,032 $ 2,437,915 $ 2,146,675 $ 1,724,706 $ 1,573,317
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 838,011 832,261 1,075,618 359,630 395,573
Minority interest................................... 15,564 22,167 114,390 40,612 46,993
Loss (gain) on disposal of property and equipment -- (38,721) 79,660 -- --
Gain on sale of marketable equity securities........ -- (107,007) (354,922) (278,917) (134,496)
Deferred income taxes............................... 258,400 450,400 (240,548) (62,002) 23,864
Changes in assets and liabilities that relate to
operations:
(Increase) decrease in receivables................ (2,091,063) (228,084) (2,420,651) 287,459 (989,478)
(Increase) decrease in inventories................ (8,942,669) (3,724,725) (12,653,222) (3,511,263) 2,745,061
(Increase) decrease in other current assets....... (66,945) 21,173 (10,455) (189,391) (483,564)
Increase (decrease) in other non-current assets... (679) (14,104) (69,883) 2,851 113,403
Increase in notes payable-floor plan.............. 9,489,146 3,431,241 12,984,772 4,117,088 290,190
Increase (decrease) in accounts payable and
accrued expenses............................... 676,526 (42,224) 1,439,486 1,285,875 396,972
Total adjustments.............................. 176,291 602,377 (55,755) 2,051,942 2,404,579
Net cash provided by operating activities...... 2,960,323 3,040,292 2,090,920 3,776,648 3,977,835
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business, net of cash received............ -- -- (5,126,595) (692,883) (3,627,347)
Purchases of property and equipment................... (1,386,877) (1,508,848) (1,906,739) -- (886,149)
Proceeds from sale of property and equipment.......... 32,162 556,789 4,036 -- --
Purchase of marketable equity securities.............. (82,801) (1,622,845) (207,400) -- --
Proceeds from sales of marketable equity securities... -- 1,073,539 514,700 88,900 --
Net (advances to) receipts from affiliate companies... (295,578) 1,772,022 (4,770,794) (3,251,199) 65,633
Net cash provided by (used in) investing
activities................................... (1,733,094) 270,657 (11,492,792) (3,855,182) (4,447,863)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions................................. -- 1,494,346 7,064,114 1,000,000 3,208,510
Proceeds from long-term debt.......................... 107,284 2,899 599,206 -- --
Payments of long-term debt............................ (441,500) (269,254) (575,845) (468,970) (180,387)
Net cash provided by (used in) financing
activities................................... (334,216) 1,227,991 7,087,475 531,030 3,028,123
NET INCREASE (DECREASE) IN CASH......................... 893,013 4,538,940 (2,314,397) 452,496 2,558,095
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD............................................. 3,561,934 4,454,947 8,993,887 8,993,887 6,679,490
CASH AND CASH EQUIVALENTS, END OF PERIOD................ $ 4,454,947 $ 8,993,887 $ 6,679,490 $ 9,446,383 $ 9,237,585
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION -- Cash paid during the period for:
Interest.............................................. $ 3,324,678 $ 4,776,504 $ 6,488,657 $ 2,839,031 $ 3,320,996
Income taxes.......................................... $ 998,850 $ 1,522,100 $ 2,042,268 $ 834,000 $ 930,000
</TABLE>

See notes to combined and consolidated financial statements.

F-6

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Sonic Automotive, Inc ("Sonic" or the
"Company") was incorporated in the State of Delaware in February, 1997 in order
to effect a reorganization of certain affiliated companies (the
"Reorganization") and to undertake an initial public offering of Sonic's common
stock (the "Offering"). Sonic and affiliated companies (collectively, the
"Company") operate automobile dealerships in the Houston, Texas and Charlotte,
North Carolina metropolitan areas. The Company sells new and used cars and light
trucks, sells replacement parts, provides vehicle maintenance, warranty, paint
and repair services and arranges related financing and insurance. The financial
statements for the periods through June 30, 1997 represent the combined data for
the entities under common ownership and control which became subsidiaries of
Sonic pursuant to the Reorganization on June 30, 1997, including the following
entities:

<TABLE>
<S> <C>
Town and Country Ford, Inc.................................................... Charlotte
Lone Star Ford, Inc........................................................... Houston
FMF Management, Inc. (d/b/a Fort Mill Ford)................................... Charlotte
Town and Country Toyota, Inc.................................................. Charlotte
Frontier Oldsmobile-Cadillac, Inc............................................. Charlotte
</TABLE>

All material intercompany transactions have been eliminated in the combined
financial statements. Effective June 30, 1997, these five entities became
wholly-owned subsidiaries of Sonic through the exchange of their common stock or
membership interests for 10,000 shares of Sonic's Class B common stock having a
$.01 par value per share. On June 2, 1997 Sonic, through its wholly-owned
subsidiary, Fort Mill Chrysler-Plymouth-Dodge, acquired certain dealership
assets and liabilities of Jeff Boyd Chrysler-Plymouth-Dodge, Inc. (a previously
unrelated entity) for a total purchase price of approximately $3.7 million. The
unaudited consolidated financial statements as of and for the six months ended
June 30, 1997, which give effect to the Reorganization, include the accounts of
the above five entities and also include the accounts and results of operations
of Fort Mill Chrysler-Plymouth-Dodge from the date of its acquisition.

The Reorganization was accounted for at historical cost in a manner similar
to a pooling-of-interests as the entities were under the common management and
control of Mr. O. Bruton Smith. The acquisition of Jeff Boyd
Chrysler-Plymouth-Dodge was accounted for as a purchase.

Prior to the Reorganization, Town and Country Toyota, Inc. was 69% owned by
Mr. O. Bruton Smith, the Company's Chairman and Chief Executive Officer, Lone
Star Ford, Inc. and Frontier Oldsmobile -- Cadillac, Inc. were 100% owned by
Sonic Financial Corporation ("SFC"), which in turn is 100% owned by Mr. Smith
and related family trusts. Town and Country Ford, Inc. was owned 80% by SFC and
20% by Mr. Scott Smith (O. Bruton Smith's son). FMF Management, Inc. was owned
50% by SFC and 50% by Mr. O. Bruton Smith.

In connection with the Reorganization, the Company purchased the 31%
minority interest in Town and Country Toyota, Inc. for $3.2 million in a
transaction accounted for using purchase accounting.

In connection with the anticipated Offering, Sonic expects to issue shares
of its Class A common stock. The Class B common stock entitles the holder to ten
votes per share, except in certain circumstances, while the Class A common stock
entitles its holder to one vote per share.

PRO FORMA NET INCOME PER SHARE -- Pro forma net income per share in the
accompanying financial statements has been prepared based upon the shares
outstanding after the Reorganization and without giving effect to the issuance
of common stock related to the Offering.

REVENUE RECOGNITION -- The Company records revenue when vehicles are
delivered to customers, and when vehicle service work is performed. Finance and
insurance commission revenue is recognized principally at the time the contract
is placed with the financial institution.

F-7

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Each dealership operates under a dealer agreement with the manufacturer
which generally restricts the location, management and ownership of the
respective dealership. The ability of the Company to acquire additional
franchises from a particular manufacturer may be limited due to certain
restrictions imposed by manufacturers. Additionally, the Company's ability to
enter into other significant acquisitions may be restricted and the acquisition
of the Company's stock by third parties may be limited by the terms of the
franchise agreement.

CASH AND CASH EQUIVALENTS -- The Company considers contracts in transit and
all highly liquid debt instruments with an initial maturity of three months or
less to be cash equivalents. Contracts in transit represent cash in transit to
the Company from finance companies related to vehicle purchases, and was
$2,644,804 and $5,222,589 at December 31, 1995 and 1996, respectively.

INVENTORIES -- Inventories of new vehicles, including demonstrators, are
valued at the lower of last-in, first-out ("LIFO") cost or market. Inventories
of used vehicles are stated at the lower of specific cost or market, and parts
and accessories are stated at the lower of first-in, first-out ("FIFO") cost or
market.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation is computed using straight-line and accelerated methods over the
estimated useful lives of the assets. The range of estimated useful lives is as
follows:

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Building..................................................................... 40
Office equipment and fixtures................................................ 5-7
Parts and service equipment.................................................. 5
Company vehicles............................................................. 5
</TABLE>

Leasehold improvements are amortized over the lesser of the terms of their
respective leases or the estimated useful lives of the related assets.

Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.

GOODWILL -- Goodwill represents the excess of purchase price over the
estimated fair value of the net assets acquired and is being amortized over a 40
year period. The cumulative amount of goodwill amortization at December 31, 1996
was approximately $98,000.

The Company periodically reviews goodwill to assess recoverability. The
Company's policy is to compare the carrying value of goodwill with the expected
undiscounted cash flows from operations of the acquired business.

MARKETABLE EQUITY SECURITIES -- The Company's marketable equity securities
are classified as "available for sale" and are not bought and held principally
for the purpose of selling them in the near term. As such, these securities are
reported at fair value, with unrealized gains and losses, net of tax, excluded
from earnings and reported as a separate component of stockholders' equity.
Realized gains and losses on sales of marketable equity securities are
determined using the specific identification method.

INCOME TAXES -- Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
due plus deferred taxes related primarily to the capitalization of additional
inventory costs for income tax purposes, the recording of chargebacks and
repossession losses on the direct write-off method for income tax purposes, the
direct write-off of uncollectible accounts for income tax purposes, and the
accelerated depreciation method used for income tax purposes. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. In addition, deferred tax assets are
recognized for state operating losses that are available to offset future
taxable income.

CONCENTRATIONS OF CREDIT RISK -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash
on deposit with financial institutions. At times, amounts invested with
financial institutions may exceed FDIC insurance limits.

F-8

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the large
number of customers comprising the trade receivables balances. Trade receivables
are concentrated in the Company's two market areas of Houston, Texas and
Charlotte, North Carolina metropolitan areas.

FAIR VALUE OF FINANCIAL INSTRUMENTS -- As of December 31, 1995 and 1996 the
fair values of the Company's financial instruments including receivables, due
from affiliates, notes payable-floor plan, trade accounts payable, payables to
affiliated companies and Company Chairman and long-term debt approximate their
carrying values.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and 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.

ADVERTISING -- The Company expenses advertising costs in the period
incurred. Advertising expense amounted to $3,765,363, $4,525,670 and $4,989,283
for 1994, 1995 and 1996, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS -- Effective January 1, 1996, the Company
adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This Statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Adoption of SFAS No. 121 did not have a material impact on the
Company's results of operations, financial position, and cash flows.

NEW ACCOUNTING STANDARDS -- In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." This Statement specifies the computation, presentation and
disclosure requirements for earnings per share. The Company believes that the
adoption of such Statement would not result in earnings per share materially
different than pro forma earnings per share presented in the accompanying
statements of income.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
Standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for the Company's fiscal year ending December 31,
1998, and the Company does not intend to adopt this Statement prior to the
effective date. Had the Company early adopted this Statement, it would have
reported comprehensive income of $2,784,032, $2,402,427 and $2,088,601 for the
years ended December 31, 1994, 1995 and 1996, respectively.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the six months ended June 30, 1996 and 1997 has been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein. The results
for interim periods are not necessarily indicative of the results to be expected
for the entire fiscal year.

F-9

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

2. BUSINESS ACQUISITIONS

In June 1997, the Company through its wholly-owned subsidiary, Fort Mill
Chrysler-Plymouth-Dodge, acquired certain dealership assets and liabilities of
Jeff Boyd Chrysler-Plymouth-Dodge for a total purchase price of $3.7 million. Of
the total purchase price of $3.7 million, $3.5 million was advanced to the
Company by Mr. O. Bruton Smith, with interest charged at 3.83%. It is
anticipated that this advance will be repaid in full with proceeds from the
Offering. This transaction was accounted for using purchase accounting and the
results of the operations of this dealership have been included from the date of
acquisition through June 30, 1997 in the accompanying Unaudited Combined and
Consolidated Statement of Income. Company management believes that on a
pro-forma basis, revenues, net income and earnings per share would not have been
materially affected assuming this acquisition had occurred on January 1, 1996.
The purchase price has been allocated to the assets and liabilities acquired at
their estimated fair market value at the acquisition date as follows:

<TABLE>
<S> <C>
Working capital............................................................. $ 977,000
Property and equipment...................................................... 250,000
Goodwill.................................................................... 2,473,000
Total....................................................................... $3,700,000
</TABLE>

In June, July and August the Company entered into definitive agreements to
purchase six additional dealership groups for an aggregate purchase price of
$100.7 million as follows:

<TABLE>
<S> <C>
Bowers Dealerships.......................... Chattanooga, Tennessee
Lake Norman Dodge and Affiliates............ Cornelius, North Carolina
Ken Marks Ford.............................. Clearwater, Florida
Dyer Volvo.................................. Atlanta, Georgia
Jeff Boyd Chrysler-Plymouth-Dodge........... Fort Mill, South Carolina
Williams Motors, Inc........................ Rock Hill, South Carolina
</TABLE>

The Lake Norman Dodge and Affiliates and the Jeff Boyd
Chrysler-Plymouth-Dodge acquisitions have been consummated. The completion of
the remaining acquisitions may be dependent upon the successful completion of
the Offering.

The $100.7 million of aggregate purchase price includes $33.5 million
related to the Bowers Dealerships. Included in the original group of companies
in the Bowers Dealerships was a Saturn dealership which has subsequently been
eliminated from the group of dealerships being acquired. The Company is in the
process of renegotiating the purchase price of the acquisition of the Bowers
Dealerships, and both the $33.5 million and the $100.7 million will be subject
to downward adjustment as a result of these negotiations.

On February 1, 1996, the Company acquired Fort Mill Ford for a total
purchase price of $5,741,114. The acquisition has been accounted for as a
purchase and the results of operations of Fort Mill Ford have been included in
the accompanying combined financial statements from the date of acquisition. The
purchase price has been allocated to the assets and liabilities acquired at
their estimated fair market value at the acquisition date as follows:

<TABLE>
<S> <C>
Working capital............................................................. $ 822,000
Property and equipment...................................................... 3,022,000
Goodwill.................................................................... 4,364,000
Non-current liabilities assumed............................................. (2,467,000)
Total....................................................................... $5,741,000
</TABLE>

F-10

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

2. BUSINESS ACQUISITIONS -- Continued

The following unaudited pro forma financial data is presented as if Fort
Mill Ford had been acquired at January 1, 1995. Fort Mill Ford results of
operations for 1995 are based on application of the first-in, first-out method
of accounting for inventories for all classes of inventory. Pro forma results of
operations for 1996 are not presented because the acquisition occurred in
February 1996, and the pro forma results for the year ended December 31, 1996
would not be materially different from the historical results presented:

<TABLE>
<CAPTION>
1995
<S> <C>
Revenues.................................................................. $345,198,523
Net income................................................................ $ 2,874,909
Earnings per share........................................................ $ 287
</TABLE>

The pro forma information presented above is not necessarily indicative of
the operating results that would have occurred had Fort Mill Ford been acquired
on January 1, 1995. These results are also not necessarily indicative of the
results of future operations.

3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
New vehicles.................................................................... $25,675,122 $38,218,187 $42,601,014
Used vehicles................................................................... 8,913,145 14,372,285 11,826,874
Parts and accessories........................................................... 4,185,547 4,939,724 4,997,869
Other........................................................................... 354,227 439,824 459,152
Total........................................................................... $39,128,041 $57,970,020 $59,884,909
</TABLE>

At December 31, 1995 and 1996 and at June 30, 1997, the excess of current
replacement cost over the stated LIFO valuation of new vehicles amounted to
$12,219,953, $13,579,696 and $13,525,047 (unaudited), respectively.

Had the Company used the FIFO method of valuing new vehicle inventory,
pretax earnings would have been $5,809,357, $5,435,709 and $5,020,512 in 1994,
1995 and 1996, respectively.

All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $45,151,111 and
$63,893,356 at December 31, 1996. The floor plan notes bear interest, payable
monthly on the outstanding balance, at the prime rate plus 1% (9 1/4% at
December 31, 1995 and 1996). Total floor plan interest expense amounted to
$3,000,622, $4,504,526 and $5,968,430 in 1994, 1995 and 1996, respectively. The
notes payable are due when the related vehicle is sold. As such, these floor
plan notes payable are shown as a current liability in the accompanying combined
and consolidated balance sheets.

F-11

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

4. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Land............................................................................ $ 1,477,795 $ 2,677,795 $ 2,677,795
Buildings and improvements...................................................... 7,085,878 10,080,659 10,381,145
Office equipment and fixtures................................................... 2,442,965 2,036,980 2,360,424
Parts and service equipment..................................................... 2,955,729 2,866,291 2,941,456
Company vehicles................................................................ 373,683 437,261 512,113
Construction in progress........................................................ 265,677 -- --
Total, at cost.................................................................. 14,601,727 18,098,986 18,872,933
Less accumulated depreciation................................................... (6,074,389) (5,632,273) (5,603,144)
Property and equipment, net..................................................... $ 8,527,338 $12,466,713 $13,269,789
</TABLE>

5. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1995 1996
<S> <C> <C>
Note payable in monthly installments of $8,333 plus interest at the prime rate plus 1 1/2%,
through July 2001, collateralized by accounts receivable, inventory and equipment............... $ -- $ 458,335
Mortgage payable in monthly installments of $12,222 plus interest at prime plus 3/4%, through May
2004, collateralized by building................................................................ -- 1,087,778
Unsecured note payable in monthly installments of $9,100, including interest at 8%, through March
2004............................................................................................ -- 599,238
Mortgage note payable in monthly installments of $4,203, including interest at 7%, through
November 2008, collateralized by land and building.............................................. 425,751 405,700
Mortgage note payable in monthly installments of $27,415 including interest at prime plus 1/2%,
through April 2001, at which time remaining outstanding principal balance is due, collateralized
by building..................................................................................... 3,135,379 3,062,926
Other notes payable............................................................................... 169,568 190,864
3,730,698 5,804,841
Less current maturities........................................................................... (169,932) (518,979)
Long-term debt.................................................................................... $3,560,766 $5,285,862
</TABLE>

Future maturities of debt at December 31, 1996 are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1997........................................................................ $ 518,979
1998........................................................................ 455,505
1999........................................................................ 434,609
2000........................................................................ 446,374
2001........................................................................ 3,096,525
Thereafter.................................................................. 852,849
Total....................................................................... $5,804,841
</TABLE>

F-12

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

6. INCOME TAXES

The provision (benefit) for income taxes consists of the following
components:

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Current:
Federal........................................................................... $1,301,350 $1,147,700 $1,374,280
State............................................................................. -- 76,800 265,972
1,301,350 1,224,500 1,640,252
Deferred............................................................................ 244,900 427,200 (189,179)
Change in valuation allowance....................................................... 13,500 23,200 (51,369)
Total............................................................................. $1,559,750 $1,674,900 $1,399,704
</TABLE>

The reconciliation of the statutory federal income tax rate with the
Company's federal and state overall effective income tax rate is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Statutory federal rate............................................................................... 34.00% 34.00% 34.00%
State income taxes................................................................................... -- 3.84 3.60
Miscellaneous........................................................................................ 1.78 2.67 .64
Effective tax rates.................................................................................. 35.78% 40.51% 38.24%
</TABLE>

Deferred income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31 are as
follows:

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Deferred tax assets:
Allowance for bad debts......................................................................... $ 62,300 $ 85,992
Inventory reserves.............................................................................. 126,400 160,820
Net operating loss carryforwards................................................................ 183,800 74,931
Other........................................................................................... 1,300 75,656
Total deferred tax assets....................................................................... 373,800 397,399
Valuation allowance............................................................................. (126,300) (75,000)
Deferred tax assets, net........................................................................ 247,500 322,399
Deferred tax liabilities:
Basis difference in fixed assets................................................................ (155,200) (556,384)
Basis difference in equity investment........................................................... (644,400) (478,876)
Other........................................................................................... (108,000) (66,623)
Total deferred tax liability...................................................................... (907,600) (1,101,883)
Net deferred tax liability........................................................................ $(660,100) $ (779,484)
</TABLE>

The net changes in the valuation allowance against deferred tax assets were
an increase of $23,200 for the year ended December 31, 1995 and a decrease of
($51,300) for the year ended December 31, 1996. The increase (decrease) was
related primarily to the generation (expiration) of state net operating loss
carryforwards. At December 31, 1996, the Company had state net operating loss
carryforwards of $1,259,000 which will expire between 1998 and 2002.

The Company expects to convert its method of valuing inventories from the
LIFO method to the FIFO method in 1997 for financial reporting and income tax
reporting purposes. The Company estimates that it will incur a tax liability of
approximately $5.5 million in connection with this conversion.

F-13

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

6. INCOME TAXES -- Continued

Certain subsidiaries of Sonic (such subsidiaries together with the Company
and Sonic Financial being hereinafter referred to as the "Sonic Group") have
joined with Sonic Financial in filing consolidated federal income tax returns
for several years. Such subsidiaries will join with Sonic Financial in filing
for 1996 and for the period ending on June 30, 1997. Under applicable federal
tax law, each corporation included in Sonic Financial's consolidated return is
jointly and severally liable for any resultant tax. Under a tax allocation
agreement dated as of June 30, 1997, however, the Company agreed to pay to Sonic
Financial, in the event that additional federal income tax is determined to be
due, an amount equal to the Company's separate federal income tax liability
computed for all periods in which any member of the Sonic Group has been a
member of Sonic Financial's consolidated group. Also pursuant to such agreement,
Sonic Financial agreed to indemnify the Company for any additional amount
determined to be due from Sonic Financial's consolidated group in excess of the
federal income tax liability of the Sonic Group for such periods. The tax
allocation agreement establishes procedures with respect to tax adjustments, tax
claims, tax refunds, tax credits and other tax attributes relating to periods
ending prior to the time that the Sonic Group shall leave Sonic Financial's
consolidated group.

7. RELATED PARTIES

Town & Country Ford and Lone Star Ford have each made several non-interest
bearing advances to Sonic Financial. As of December 31, 1996, Town & Country
Ford had made $1,956,326 of such advances. In preparation for the
Reorganization, a demand promissory note by Sonic Financial evidencing these
advances was canceled in exchange for the redemption of certain shares of the
capital stock of Town & Country Ford held by Sonic Financial. As of June 30,
1997, Lone Star Ford had made $509,603 of advances to Sonic Financial. In
preparation for the Reorganization, a demand promissory note by Sonic Financial
evidencing certain of Lone Star Ford's advances was canceled pursuant to a
dividend. As such, $2,465,929 of amounts due from affiliates has been shown in
the stockholders' equity section of the December 31, 1996 combined and
consolidated balance sheet.

The Company had amounts payable to affiliated companies of $3,219,204 and
$914,339, at December 31, 1995 and 1996, respectively. The balance, consisting
of non-interest bearing loans from affiliates, is classified as noncurrent based
upon its expected repayment date.

Town & Country Ford, Inc. operates at facilities leased from an entity
owned 5% by Town & Country Ford, Inc. and 95% by Sonic Financial Corporation.
This lease expires in October 2000. Annual payments under this lease were
$510,085 for each of the 1994, 1995 and 1996 fiscal years. Current minimum rent
payments are $409,000 annually ($34,083 monthly) through 1999, and will be
decreased to $340,833 in 2000.

Lone Star Ford operates in part from an entity controlled by the Company's
Chairman and Chief Executive Officer. This lease expires in 2005. Annual
payments under this lease were $351,420, $331,302 and $360,000 for the 1994,
1995 and 1996 fiscal years, respectively. Current minimum rent payments are
$360,000 annually ($30,000 monthly).

Beginning in early 1997, certain of Sonic's dealerships have entered into
arrangements to sell to their customers credit life insurance policies
underwritten by American Heritage Life Insurance Company, an insurer
unaffiliated with Sonic ("American Heritage"). American Heritage in turn
reinsures all of these policies with Provident American Insurance Company, a
Texas insurance company ("Provident American") and a wholly-owned subsidiary of
Sonic Financial. Under these arrangements, the dealerships paid an aggregate of
$140,000 to American Heritage in premiums for these policies for the six months
ended June 30, 1997. The Company anticipates terminating this arrangement with
American Heritage by 1998.

F-14

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

7. RELATED PARTIES -- Continued

Chartown is a general partnership engaged in real estate development and
management. Before the Reorganization, Town & Country Ford maintained a 49%
partnership interest in Chartown with the remaining 51% held by SMDA, LLC, a
North Carolina limited liability company ("SMDA"). The Company's Chairman and
Chief Executive Officer owns an 80% direct membership interest in SMDA with the
remaining 20% owned indirectly through Sonic Financial. In addition, Sonic
Financial also held a demand promissory note for $1.2 million issued by Chartown
(the "Chartown Note"), which was uncollectible due to insufficient funds. As a
part of the Reorganization, the Chartown Note was cancelled and Town & Country
Ford transferred its partnership interest in Chartown to Sonic Financial for
nominal consideration. In connection with that transfer, Sonic Financial agreed
to indemnify Town & Country Ford for any and all obligations and liabilities,
whether known or unknown, relating to Chartown and Town & Country Ford's
ownership thereof. Town & Country Ford's recorded investment in Chartown was
nominal for all periods presented in the accompanying financial statements.

8. PREFERRED STOCK

In 1997, the Company authorized 3,000,000 shares of "blank check" preferred
stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. No preferred shares were issued and
outstanding at June 30, 1997.

9. EMPLOYEE BENEFIT PLANS

Substantially all of the employees of the Company are eligible to
participate in a 401(k) plan maintained by SFC. Contributions by the Company to
the plan were not significant in any period presented.

The Company intends to adopt the 1997 Stock Option Plan (the "Plan"). Under
the provisions of the Plan, options to purchase shares of Class A Common Stock
may be granted to key employees of the Company and its subsidiaries and to
officers, directors, consultants and other individuals providing services to the
Company. The exercise price of the options may not be less than the market value
of the Class A Common Stock on the date of grant. Vesting periods will range
from 5 to 10 years. The Company intends to adopt the provisions of Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" to
account for the Plan's transactions.

The Company intends to adopt the Sonic Employee Stock Purchase Plan (the
"ESPP"). The ESPP provides employees of the Company the opportunity to purchase
Class A Common Stock after completion of the Offering. Under the terms of the
ESPP, on January 1 of each year all eligible employees electing to participate
will be granted an option to purchase shares of Class A Common Stock. The
Company's Compensation Committee will annually determine the number of shares of
Class A Common Stock available for purchase under each option. The purchase
price at which Class A Common Stock will be purchased through the ESPP will be
90% of the lesser of (i) the fair market value of the Class A Common Stock on
the applicable Grant Date and (ii) the fair market value of the Class A Common
Stock on the applicable Exercise Date. Options will expire on the last exercise
date of the calendar year in which granted.

10. CONTINGENCIES

The Company is contingently liable for customer contracts placed with
financial institutions of approximately $741,000 at December 31, 1996. However,
the Company's potential loss is limited to the difference between the present
value of the installment contract at the date of the repossession and the market
value of the vehicle at the date of sale. Other accrued liabilities include a
provision for repossession losses. The Company provides a reserve for
repossession losses based on the ratio that historical loss experience bears to
the amount of outstanding customer contracts.

The Company has available $1,500,000 under draft-clearing credit lines with
a bank in order to immediately fund the Company's checking account for sold
vehicle contracts from other financial institutions. The Company is contingently
liable to the bank until the contracts are approved by the financial
institutions. At December 31, 1996, $151,227 was outstanding under these lines.

F-15

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

10. CONTINGENCIES -- Continued
In the event that the Company fails to close the acquisitions of Lake
Norman Dodge and Affiliates, Dyer Volvo, Ken Marks Ford, and the Bowers
Dealerships by certain dates, the Company will be required to pay termination
fees which total approximately $5.5 million.

The Company is involved in various legal proceedings. Management believes
that the outcome of such proceedings will not have a materially adverse effect
on the Company's financial position or future results of operations and cash
flows.

F-16

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDER OF
DYER & DYER, INC.
Atlanta, Georgia

We have audited the accompanying balance sheets of Dyer & Dyer, Inc. (the
"Company") as of December 31, 1995 and 1996, and the related statements of
income, stockholder's equity, and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dyer & Dyer, Inc. as of
December 31, 1995 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina

August 7, 1997

F-17

<PAGE>
DYER & DYER, INC.

BALANCE SHEETS

DECEMBER 31, 1995 AND 1996 AND JUNE 30, 1997

See notes to financial statements.

F-18

<PAGE>
DYER & DYER, INC.

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales.................................. $52,245,947 $52,613,480 $60,870,919 $30,767,026 $31,373,513
Parts, service and collision repair............ 8,680,440 9,097,763 11,163,230 5,481,708 5,960,212
Finance and insurance.......................... 203,198 404,505 542,474 213,711 128,911
Total..................................... 61,129,585 62,115,748 72,576,623 36,462,445 37,462,636
COST OF SALES.................................... 54,121,066 55,776,668 62,547,497 31,969,022 32,377,247
GROSS PROFIT..................................... 7,008,519 6,339,080 10,029,126 4,493,423 5,085,389
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..... 6,160,564 5,621,343 6,997,283 3,353,559 3,498,432
DEPRECIATION AND AMORTIZATION.................... 123,228 90,538 126,359 45,451 150,621
OPERATING INCOME................................. 724,727 627,199 2,905,484 1,094,413 1,436,336
OTHER INCOME AND EXPENSE:
Interest expense, floor plan................... 56,944 171,690 372,590 178,970 276,393
Other income................................... 609,684 314,788 452,063 234,834 247,213
Total other income (expense).............. 552,740 143,098 79,473 55,864 (29,180)
INCOME BEFORE INCOME TAXES....................... 1,277,467 770,297 2,984,957 1,150,277 1,407,156
PROVISION FOR INCOME TAXES (Notes 1
and 5)......................................... 491,365 295,850 954,846 954,846 --
NET INCOME....................................... $ 786,102 $ 474,447 $ 2,030,111 $ 195,431 $ 1,407,156
PRO FORMA PROVISION FOR INCOME TAXES (Note 5).... $ 1,149,507 $ 442,972 $ 541,896
PRO FORMA NET INCOME (Note 5).................... $ 1,835,450 $ 707,305 $ 865,260
</TABLE>

See notes to financial statements

F-19

<PAGE>
DYER & DYER, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
TOTAL
COMMON PAID-IN TREASURY RETAINED STOCKHOLDER'S
STOCK CAPITAL STOCK EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1993...................................... $153,100 $27,623 $(4,976,143) $12,448,928 $ 7,653,508
Net income............................................. -- -- -- 786,102 786,102
BALANCE
DECEMBER 31, 1994...................................... 153,100 27,623 (4,976,143) 13,235,030 8,439,610
Net income............................................. -- -- -- 474,447 474,447
BALANCE
DECEMBER 31, 1995...................................... 153,100 27,623 (4,976,143) 13,709,477 8,914,057
Dividends.............................................. -- -- -- (1,526,828) (1,526,828)
Net income............................................. -- -- -- 2,030,111 2,030,111
BALANCE
DECEMBER 31, 1996...................................... 153,100 27,623 (4,976,143) 14,212,760 9,417,340
Dividends (unaudited).................................. -- -- -- (2,026,183) (2,026,183)
Net income (unaudited)................................. -- -- -- 1,407,156 1,407,156
BALANCE
JUNE 30, 1997 (unaudited).............................. $153,100 $27,623 $(4,976,143) $13,593,733 $ 8,798,313
</TABLE>

See notes to financial statements.

F-20

<PAGE>
DYER & DYER, INC.

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 786,102 $ 474,447 $2,030,111 $ 195,431 $1,407,156
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on disposal of fixed assets........... 8,011 11,757 86,745 -- (116)
Depreciation and amortization..................... 123,228 90,538 126,359 45,451 150,621
Changes in assets and liabilities that relate to
operations:
(Increase) decrease in accounts receivable........ (390,834) 191,714 (768,730) (39,751) (1,355,959)
(Increase) decrease in inventories................ 11,184 (4,213,189) (6,028,157) (1,566,226) 3,942,980
(Increase) decrease in prepaid expenses........... 79,966 (177,992) 171,040 218,576 71,691
Increase (decrease) in notes payable,
floor plan...................................... (127,470) 2,581,585 4,535,310 290,990 (1,612,320)
Increase (decrease) in accounts payable........... 7,048 498,092 620,180 (376,134) (1,131,472)
Increase (decrease) in other accrued
liabilities..................................... 105,201 (187,726) 147,106 170,944 25,008
Increase (decrease) in income taxes payable....... (20,682) 8,484 760,526 760,526 (242,212)
Total adjustments............................... (204,348) (1,196,737) (349,621) (495,624) (151,779)
Net cash provided by (used) in operating
activities................................... 581,754 (722,290) 1,680,490 (300,193) 1,255,377
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................... (18,485) (181,259) (717,969) (14,013) (26,938)
Increase in cash value of life insurance............. (15,398) (26,316) (4,622) (2,311) (5,174)
Deposits held by financial institutions.............. 13,001 10,849 (12,337) 22,238 34,575
Net cash provided by (used) in investing
activities................................... (20,882) (196,726) (734,928) 5,914 2,463
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid....................................... -- -- (1,526,828) (759,810) (2,026,183)
INCREASE (DECREASE) IN CASH............................ 560,872 (919,016) (581,266) (1,054,089) (768,343)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....... 1,880,690 2,441,562 1,522,546 1,522,546 941,280
CASH AND CASH EQUIVALENTS AT END OF PERIOD............. $2,441,562 $1,522,546 $ 941,280 $ 468,457 $ 172,937
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.......................................... $ 57,766 $ 176,464 $ 509,621 $ 247,970 $ 279,460
Income taxes...................................... $ 399,605 $ 438,810 $ 31,826 $ 31,826 $ 242,237
</TABLE>

See notes to financial statements.

F-21

<PAGE>
DYER & DYER, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Dyer & Dyer, Inc. (the "Company") was
incorporated in South Carolina in 1978, and operates a Volvo automobile
dealership in Atlanta, Georgia. The Company sells new and used cars, sells
replacement parts, provides vehicle maintenance, warranty, paint and repair
services and arranges related financing and insurance.

In August 1997, the Company signed a definitive purchase agreement whereby
its net assets would be acquired by Sonic Automotive, Inc. for $18 million. This
acquisition is to be effective prior to the completion of an anticipated public
offering of common stock by Sonic Automotive in 1997.

DEALER AGREEMENTS -- The Company purchases substantially all of its new
vehicles from the manufacturer at the prevailing prices charged by the
manufacturer to its franchised dealers. The Company's sales could be unfavorably
impacted by the manufacturer's unwillingness or inability to supply the
dealership with an adequate supply of new car inventory.

The dealership operates under a dealer agreement with the manufacturer
which generally restricts the location, management and ownership of the
dealership. The ability of the Company to acquire additional franchises may be
limited due to certain restrictions imposed by the manufacturer. Additionally,
the Company's ability to enter into significant acquisitions may be restricted
and the acquisition of the Company's stock by third parties may be limited by
the terms of the franchise agreement.

The manufacturer has implemented various incentive programs for its dealers
that provide for specified payments to the dealers based on the results of
customer satisfaction surveys and the implementation of certain standardized
policies and procedures. These programs are for a limited duration and remain
subject to cancellation by the manufacturer at any time. Incentive payments
credited to cost of sales amounted to approximately $210,000, $267,000 and
$1,326,000 during 1994, 1995 and 1996, respectively, and $290,000 and $912,000
for the six months ended June 30, 1996 and 1997, respectively.

CASH AND CASH EQUIVALENTS -- The Company considers contracts in transit and
all highly liquid debt instruments with an initial maturity of three months or
less to be cash equivalents. Contracts in transit represent cash in transit to
the Company from finance companies related to vehicle purchases, and was
approximately $1,522,000 and $934,000 at December 31, 1995 and 1996,
respectively, and $167,000 at June 30, 1997.

INVENTORIES -- Inventories of new vehicles, including demonstators, are
valued at the lower of last-in, first-out ("LIFO") cost or market. Inventories
of used vehicles are stated at the lower of first-in, first-out ("FIFO") cost or
market, and parts and accessories are stated at the lower of specific cost or
market.

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Office equipment and fixtures............................................................ 5-7
Parts and service equipment.............................................................. 5
Company vehicles......................................................................... 5
</TABLE>

Leasehold improvements are amortized over the lesser of the terms of their
respective leases or the estimated useful lives of the related assets.
Expenditures for maintenance and repairs are expensed as incurred. Significant
betterments are capitalized.

INCOME TAXES -- For the years ended December 31, 1994 and 1995, the Company
was a C Corporation and, therefore, provided for income taxes using the balance
sheet method. There were no significant deferred tax assets and liabilities as
of December 31, 1995. Effective January 1, 1996, the Company elected to be
treated as an S Corporation for federal and state income tax purposes. As such
the Company's taxable income is included in the stockholder's annual income tax
return. Accordingly, no provision for federal or state income taxes has been
included in the Company's statements of income for the

F-22

<PAGE>
DYER & DYER, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
periods beginning after December 31, 1995, except for the amounts associated
with the Company's change to an S corporation (See Note 5).

Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the large
number of customers comprising the trade receivables balances. Trade receivables
are concentrated in the Atlanta, Georgia area.

ADVERTISING -- The Company expenses advertising costs in the period
incurred. Advertising expense approximated $709,000, $525,000 and $765,000
during 1994, 1995 and 1996, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS -- Effective January 1, 1996, the Company
adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Adoption of SFAS No. 121 did not have a material impact on the
Company's results of operations or financial position.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the six months ended June 30, 1996 and 1997 has been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein. The results
of interim periods are not necessarily indicative of results to be expected for
the entire fiscal year.

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
New vehicles.................................................................... $ 5,692,043 $ 7,980,256 $ 5,017,765
Used vehicles................................................................... 2,768,230 6,362,410 5,542,979
Parts and accessories........................................................... 503,490 586,129 420,959
Other........................................................................... 79,393 142,518 146,630
Total........................................................................... $ 9,043,156 $15,071,313 $11,128,333
</TABLE>

At December 31, 1995 and 1996 and at June 30, 1997, the excess of current
replacement cost over the stated LIFO valuation of new vehicles, parts and
accessories amount to $2,387,114, $2,503,330 and $2,503,330 (unaudited),
respectively.

Had the Company used the FIFO method of valuing new vehicle, parts and
accessories inventory, pretax earnings would have been $1,335,380, $1,200,776
and $3,101,173 in 1994, 1995 and 1996, respectively.

All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $2,610,935 and
$7,146,245 at December 31, 1995 and 1996, respectively. The floor plan notes
bear interest, payable monthly on the outstanding balance, at the prime rate
plus 1/2% to 1 1/2% (prime rate was 8.25% at December 31, 1996). Total floor
plan interest expense amounted to $56,944, $171,690 and $372,590 in 1994, 1995
and 1996, respectively.

F-23

<PAGE>
DYER & DYER, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN -- Continued
The notes payable are due when the related vehicle is sold. As such, these floor
plan notes payable are shown as a current liability in the accompanying balance
sheets.

3. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Leasehold improvements.............................................................. $1,479,385 $1,885,415 $1,885,415
Furniture and fixtures.............................................................. 1,372,801 1,546,987 1,550,022
Other equipment..................................................................... 565,398 571,778 571,778
Computer equipment.................................................................. 188,851 195,598 198,428
Service vehicles.................................................................... 117,535 122,916 143,989
3,723,970 4,322,694 4,349,632
Less accumulated depreciation and amortization...................................... (2,949,061) (3,042,920) (3,193,425)
Property and equipment, net......................................................... $ 774,909 $1,279,774 $1,156,207
</TABLE>

4. LEASES

The Company leases its business premises under noncancelable operating
leases for five to twenty-five year terms from a partnership partially owned by
the sole stockholder of the Company. Future minimum rental payments required
under noncancelable leases at December 31, 1996 are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1997.................................................................................... $ 754,162
1998.................................................................................... 756,956
1999.................................................................................... 759,832
2000.................................................................................... 762,800
2001.................................................................................... 765,856
Thereafter.............................................................................. 5,551,504
Total................................................................................... $9,351,110
</TABLE>

Rent expense approximated $711,000, $708,000 and $715,000 during 1994, 1995
and 1996, respectively.

5. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1994 1995 1996
<S> <C> <C> <C>
Current:
Federal................................................................................ $439,714 $231,720 $811,620
State.................................................................................. 47,463 40,864 143,226
487,177 272,584 954,846
Deferred................................................................................. 4,188 23,266 --
Total.................................................................................... $491,365 $295,850 $954,846
</TABLE>

Effective with the Company's S Corporation election, it was required to
recapture its December 31, 1995 LIFO reserve of approximately $2,400,000 and pay
tax on that amount for both Federal and State income tax purposes. The taxes are

F-24

<PAGE>
DYER & DYER, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

5. INCOME TAXES -- Continued
payable in four equal annual installments beginning March 15, 1996. This
conversion to S Corporation status resulted in the recognition of approximately
$955,000 in income tax expense.

As a result of the Company's change to S Corporation status on January 1,
1996 (see Note 1), it is exposed to potential future taxes on built-in gains
which were present on the date of the conversion. If the planned acquisition of
the net assets of the Company described in Note 1 is consummated, the disposal
of tangible and intangible property which appreciated prior to the election of S
Corporation status will result in the assessment of the built-in gains tax.

The pro forma provision for income taxes and the pro forma net income for
the year ended December 31, 1996 and the six months ended June 30, 1996 and 1997
reflect amounts that would have been recorded had the Company's income been
taxed for federal and state purposes as if it was a C Corporation.

6. RETIREMENT PLAN

The Company has a contributory 401(k) plan covering substantially all
employees. Company contributions to the Plan are equal to 25% of the first 4% of
participant contributions. Company contributions amounted to $1,000, $18,000 and
$18,000 in 1994, 1995 and 1996, respectively.

F-25

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARDS OF DIRECTORS AND STOCKHOLDERS OF
BOWERS DEALERSHIPS AND AFFILIATED COMPANIES
Chattanooga, Tennessee

We have audited the accompanying combined balance sheets of Bowers
Dealerships and Affiliated Companies (the "Company"), which are under common
ownership and management, as of December 31, 1995 and 1996, and the related
combined statements of income, stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Bowers Dealerships
and Affiliated Companies as of December 31, 1995 and 1996, and the combined
results of their operations and their combined cash flows for the years then
ended in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina
August 7, 1997

F-26

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

COMBINED BALANCE SHEETS

DECEMBER 31, 1995 AND 1996 AND JUNE 30, 1997

See notes to combined financial statements

F-27

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales.................................. $67,318,855 $91,182,583 $37,133,540 $63,950,004
Parts, service and collision repair............ 3,939,295 7,969,924 3,337,725 9,107,226
Finance and insurance.......................... 1,843,590 2,337,303 1,107,834 1,496,912
Total revenues............................ 73,101,740 101,489,810 41,579,099 74,554,142
COST OF SALES.................................... 63,581,225 87,756,814 35,532,069 63,945,021
GROSS PROFIT..................................... 9,520,515 13,732,996 6,047,030 10,609,121
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..... 8,004,120 11,807,108 5,080,153 8,293,720
DEPRECIATION AND AMORTIZATION.................... 186,545 364,958 137,879 309,048
OPERATING INCOME................................. 1,329,850 1,560,930 828,998 2,006,353
OTHER INCOME AND EXPENSE:
Interest expense, floor plan................... 964,399 1,177,603 569,072 880,676
Interest expense, other........................ 75,365 195,954 64,374 118,666
Other income (expense)......................... (29,827) 120,511 21,714 421,730
Total other expense....................... 1,069,591 1,253,046 611,732 577,612
INCOME BEFORE INCOME TAXES (Note 1).............. 260,259 307,884 217,266 1,428,741
PROVISION FOR INCOME TAXES....................... 41,879 60,851 60,215 30,927
NET INCOME....................................... $ 218,380 $ 247,033 $ 157,051 $ 1,397,814
PRO FORMA PROVISION FOR INCOME TAXES (Note 1).... $ 101,709 $ 120,321 $ 84,907 $ 558,352
PRO FORMA NET INCOME (Note 1).................... $ 158,550 $ 187,563 $ 132,359 $ 870,389
</TABLE>

See notes to combined financial statements

F-28

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF EQUITY

YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
RETAINED
EARNINGS
AND
COMMON MEMBERS'
STOCK OF AND
COMBINED PARTNERS' DUE FROM TOTAL
COMPANIES EQUITY AFFILIATE EQUITY
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994........................................ $ 300,000 $ 1,032,746 $ -- $ 1,332,746
Capital contribution.............................................. -- 1,787,842 -- 1,787,842
Net income........................................................ -- 218,380 -- 218,380
Advances to affiliates............................................ -- -- (403,415) (403,415)
BALANCE AT DECEMBER 31, 1995........................................ 300,000 3,038,968 (403,415) 2,935,553
Capital contribution.............................................. -- 7,700,000 -- 7,700,000
Net income........................................................ -- 247,033 -- 247,033
BALANCE AT DECEMBER 31, 1996........................................ 300,000 10,986,001 (403,415) 10,882,586
Capital contribution (unaudited).................................. -- 5,500,000 -- 5,500,000
Net income (unaudited)............................................ -- 1,397,814 -- 1,397,814
BALANCE AT JUNE 30, 1997 (unaudited)................................ $ 300,000 $17,883,815 $(403,415) $17,780,400
</TABLE>

See notes to combined financial statements.

F-29

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1995 AND 1996 AND
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
1995 1996 1996 1997
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 218,380 $ 247,033 $ 157,051 $1,397,814
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization.................................. 186,545 364,958 137,879 309,048
Changes in assets and liabilities that relate to operations:
(Increase) decrease in receivables........................... 479,709 (1,465,463) 492,538 439,590
(Increase) decrease in inventories........................... 149,322 (2,990,886) (129,128) (8,623,984)
Increase in other current assets............................. (231,440) (1,072,526) (538,493) (711,698)
Increase in other non-current assets......................... (47,388) (3,511) (135,291) (94,289)
Increase (decrease) in notes payable -- floor plan........... (198,815) 6,507,915 2,301,244 10,076,150
Increase (decrease) in accounts payable and accrued
expenses.................................................. (1,151,902) 1,679,663 1,073,370 276,524
Total adjustments......................................... (813,969) 3,020,150 3,202,119 1,671,341
Net cash provided by (used in) operating activities.......... (595,589) 3,267,183 3,359,170 3,069,155
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business, net of cash received........................ -- (9,840,438) (4,790,970) (6,718,465)
Additions to property and equipment............................... (263,811) (2,737,742) (2,850,697) (500,528)
Net cash used in investing activities........................ (263,811) (12,578,180) (7,641,667) (7,218,993)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions............................................. 1,787,842 7,700,000 2,700,000 5,500,000
Due from affiliate................................................ (403,415) -- -- --
Proceeds from long-term debt...................................... 272,084 1,872,169 1,872,169 500,000
Payments of long-term debt........................................ (797,363) (394,129) (114,690) (250,448)
Proceeds from notes payable -- other.............................. 1,410,025 1,486,382 1,600,994 539,000
Payments of notes payable -- other................................ (220,000) -- -- (110,538)
Net cash provided by financing activities.................... 2,049,173 10,664,422 6,058,473 6,178,014
NET INCREASE IN CASH................................................ 1,189,773 1,353,425 1,775,976 2,028,176
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...................... 195,234 1,385,007 1,385,007 2,738,432
CASH AND CASH EQUIVALENTS, END OF PERIOD............................ $1,385,007 $ 2,738,432 $3,160,983 $4,766,608
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Interest.......................................................... $1,021,118 $ 1,337,216 $ 649,259 $ 926,704
Income taxes...................................................... $ 96,391 $ 76,081 $ 35,636 $ 27,620
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Net liabilities recorded from combining affiliated companies...... $ 372,533 $ -- $ -- $ --
</TABLE>

See notes to combined financial statements.

F-30

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Bowers Dealerships and Affiliated Companies
(the "Company") operates automobile dealerships in the Chattanooga and
Nashville, Tennessee areas. The Company sells new and used cars and light
trucks, sells replacement parts, provides vehicle maintenance, warranty, paint
and repair services and arranges financing and insurance. As of December 31,
1996, the Company had eight dealership locations selling new vehicles
manufactured by BMW, Chrysler, Ford, Honda, Infiniti, Jaguar, and Volkswagen.
Subsequent to December 31, 1996 the Company acquired a Dodge dealership. (see
Note 2).

The accompanying combined financial statements include the accounts of the
following entities:

<TABLE>
<CAPTION>
NAME LOCATION STRUCTURE
<S> <C> <C>
Cleveland Village Imports, Inc.......................... Chattanooga C Corporation
Nelson Bowers Ford, L.P................................. Chattanooga Limited Partnership
Infiniti of Chattanooga, Inc............................ Chattanooga C Corporation
Cleveland Chrysler Plymouth Jeep Eagle, LLC............. Chattanooga Limited Liability Company
Jaguar of Chattanooga, LLC.............................. Chattanooga Limited Liability Company
KIA of Chattanooga...................................... Chattanooga Limited Liability Company
European Motors of Nashville LLC........................ Nashville Limited Liability Company
European Motors LLC..................................... Chattanooga Limited Liability Company
</TABLE>

The combined financial statements have been prepared in connection with a
planned acquisition of the net assets of these entities and the aforementioned
Dodge dealership by Sonic Automotive ("Sonic"). In June 1997, the Company signed
a definitive purchase agreement whereby substantially all of its net assets
would be acquired by Sonic for $33,500,000, including $28,500,000 in cash and a
$5,000,000 note payable. The original definitive purchase agreement included the
acquisition of a Saturn dealership which has subsequently been eliminated from
the group being acquired. The $35,500,000 purchase price is subject to downward
adjustment pending the conclusion of the renegotiation of this purchase price.
This acquisition is to be effective prior to the completion of an anticipated
public offering of common stock by Sonic in 1997. The accompanying combined
financial statements reflect the financial position, results of operations, and
cash flows of each of the above listed dealerships. The combination of these
entities has been accounted for at historical cost in a manner similar to a
pooling-of-interest because the entities are under common management and
control. All material intercompany transactions have been eliminated.

Each dealership operates under a dealer agreement with the manufacturer
except Volkswagen of Nashville which operates under a management agreement which
generally restricts the location, management and ownership of the respective
dealership. The ability of the Company to acquire additional franchises from a
particular manufacturer may be limited due to certain restrictions imposed by
manufacturers. Additionally, the Company's ability to enter into significant
acquisitions may be restricted and the acquisition of the Company's stock by
third parties may be limited by the terms of the franchise agreement.

CASH AND CASH EQUIVALENTS -- The Company considers contracts in transit and
all highly liquid debt instruments with an initial maturity of three months or
less to be cash equivalents. Contracts in transit represent cash in transit to
the Company from finance companies related to a vehicle purchase, and was
$654,165 and $1,702,294 at December 31, 1995 and 1996, respectively.

F-31

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
INVENTORIES -- Inventories of new and used vehicles, including
demonstrators, are valued at the lower of first-in, first-out ("FIFO") cost or
market, and parts and accessories are stated at the lower of specific cost or
market.

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Building..................................................................... 31.5-39
Office equipment and fixtures................................................ 5-7
Parts, service equipment and vehicles........................................ 7
</TABLE>

Leasehold improvements are amortized over the lesser of the terms of their
respective leases or the estimated useful lives of the related assets.

Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.

The Company periodically reviews goodwill for impairment by comparing the
carrying amount of goodwill with the estimated undiscounted future cash flows
from operations of the acquired business.

INCOME TAXES -- With the exception of Infiniti of Chattanooga, Inc. and
Cleveland Village Imports, Inc., all entities included in the accompanying
combined financial statements are either S Corporations, Limited Partnerships or
Limited Liability Companies (LLC). As such, these entities do not pay Federal
corporate income taxes on their taxable income. In addition, the Limited
Partnerships and LLC's are not subject to state income taxes. The stockholders
or partners are liable for individual income taxes on their respective shares of
the Company's taxable income.

Because Infiniti of Chattanooga, Inc. and Cleveland Village Imports, Inc.
is a C Corporation, federal and state income taxes are provided for in the
financial statements and consist of taxes currently due plus deferred taxes. In
addition, the S Corporations are subject to Tennessee income taxes which are
provided for in the financial statements. Income taxes are provided for income
taxes using the balance sheet method. Deferred taxes result primarily from
warranty accruals and the accelerated depreciation method used for income tax
purposes. The deferred tax assets and liabilities represent the future tax
return consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled. In
addition, deferred tax assets are recognized for state operating losses that are
available to offset future taxable income.

The pro forma provision for income taxes and the pro forma net income for
the years ended December 31, 1995 and 1996, and for the six months ended June
30, 1996 and 1997 reflect amounts that would have been recorded had the
Company's income been taxed for federal and state purposes as if it was a C
Corporation.

CONCENTRATIONS OF CREDIT RISK -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash
deposits. At times, amounts invested with financial institutions may exceed FDIC
insurance limits.

F-32

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and 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.

ADVERTISING -- The Company expenses advertising costs in the period
incurred. Advertising expense amounted to $744,674 and $1,132,263 for 1995 and
1996, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS -- Effective January 1, 1996, the Company
adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may be
impaired. Adoption of SFAS No. 121 did not have a material impact on the
Company's results of operations or financial position.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the six months ended June 30, 1997 has been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein. The results
of interim periods are not necessarily indicative of results to be expected for
the entire fiscal year.

2. BUSINESS ACQUISITIONS

EUROPEAN MOTORS LLC -- In May 1996, the Company acquired European Motors
LLC for a total purchase price of $4,790,970. The acquisition has been accounted
for as a purchase and the results of operations of European Motors LLC have been
included in the accompanying combined financial statements from the date of
acquisition. The total purchase price has been allocated to the assets and
liabilities acquired at their estiamted fair market value at acquisition date as
follows:

<TABLE>
<S> <C>
Inventory................................................................... $3,840,970
Property and equipment...................................................... 250,000
Goodwill.................................................................... 700,000
Total....................................................................... $4,790,970
</TABLE>

EUROPEAN MOTORS OF NASHVILLE, INC. -- In October 1996, the Company acquired
European Motors of Nashville, Inc. The total purchase price was $5,049,468. The
acquisition has been accounted for using purchase accounting and the results of
operations of this dealership has been included in the accompanying combined
financial statements from the date of acquisition. The total purchase price has
been allocated to the assets and liabilities acquired at their estimated fair
market value at acquisition date as follows:

<TABLE>
<S> <C>
Inventory................................................................... $2,003,086
Property and equipment...................................................... 296,382
Goodwill.................................................................... 2,750,000
Total....................................................................... $5,049,468
</TABLE>

DODGE OF CHATTANOOGA -- On March 1, 1997, the Company acquired Dodge of
Chattanooga for a total purchase price of $6,718,465. The acquisition has been
accounted for as a purchase and the results of operations of Dodge of
Chattanooga have been included in the accompanying unaudited combined financial
statements from the date of acquisition through June 30, 1997. The purchase
price has been allocated to the assets and liabilities acquired at their
estimated fair market value at acquisition date as follows:

<TABLE>
<S> <C>
Inventory................................................................... $2,718,465
Goodwill.................................................................... 4,000,000
Total....................................................................... $6,718,465
</TABLE>

F-33

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

2. BUSINESS ACQUISITIONS -- Continued

The following unaudited pro forma financial data is presented as if
European Motors of Nashville, Inc. and European Motors LLC were acquired on
January 1, 1995 and January 1, 1996, respectively, and Dodge of Chattanooga on
January 1, 1996.

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Revenues....................................................... $130,223,683 $164,391,810
Net income..................................................... $ 694,050 $ 1,412,033
</TABLE>

The pro forma information presented above is not necessarily indicative of
the operating results that would have occurred had European Motors of Nashville,
Inc. and European Motors LLC been acquired on January 1, 1995 and 1996,
respectively and Dodge of Chattanooga on January 1, 1996. These results are also
not necessarily indicative of the results of future operations.

3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
New vehicles.................................................................... $ 8,261,122 $13,622,029 $19,572,873
Used vehicles................................................................... 1,911,689 4,178,998 9,235,162
Parts and accessories........................................................... 564,263 1,707,880 1,837,802
Other........................................................................... 15,042 96,650 302,170
Total........................................................................... $10,752,116 $19,605,557 $30,948,007
</TABLE>

All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $10,187,565 and
$16,695,482 at December 31, 1995 and 1996, respectively. The floor plan notes
bear interest, that fluctuates with prime and are payable monthly on the
outstanding balance, ranging from 6.25% to 9.75% at December 31, 1996. Total
floor plan interest expense amounted to $964,399 and $1,177,603 in 1995 and
1996, respectively. The notes payable are due when the related vehicle is sold.
As such, these floor plan notes payable are shown as a current liability in the
accompanying combined balance sheets.

4. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Land............................................................................ $ -- $ 608,307 $ 638,557
Buildings and improvements...................................................... 22,149 1,723,644 1,723,644
Office equipment and fixtures................................................... 844,823 1,208,546 1,422,551
Parts and service equipment..................................................... 630,827 1,200,983 1,491,388
Leasehold improvements.......................................................... 254,693 262,260 262,261
1,752,492 5,003,740 5,538,401
Less accumulated depreciation................................................... 882,092 1,178,511 1,432,579
Property and equipment, net..................................................... $ 870,400 $ 3,825,229 $ 4,105,822
</TABLE>

F-34

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

5. OPERATING LEASES

The Company leases its business premises under noncancelable operating
leases for one to twenty-six year terms. Future minimum rental payments required
under nonconcealable leases at December 31, 1996 are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1997........................................................................ $ 929,765
1998........................................................................ 687,431
1999........................................................................ 387,120
2000........................................................................ 387,120
2001........................................................................ 387,120
Thereafter.................................................................. 4,994,184
Total....................................................................... $7,772,740
</TABLE>

Rent expense under these noncancelable leases amounted to $458,999 and
$740,187 during 1995 and 1996, respectively.

6. FINANCING ARRANGEMENTS

Notes payable-other consists of a demand note to a bank and advances
principally from a stockholder. The stockholder advances are restricted to
investment in a cash management fund sponsored by finance companies. Other
current assets at December 31, 1995 and 1996 include $797,000 and $1,041,000,
respectively, of restricted cash in the cash management fund.

Notes payable-other consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Unsecured stockholder advances restricted for investment -- due on
demand, interest ranging from 8.5% to 9.25%......................... $ 552,000 $1,041,000 $ 1,580,000
Other unsecured non-interest bearing stockholder advances due on
demand.............................................................. 1,218,025 2,215,407 2,104,869
Notes payable -- other................................................ $1,770,025 $3,256,407 $ 3,684,869
</TABLE>

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Mortgage note payable on land and building with a carrying value of
$2,302,487, interest payable at 8.9%, due June 1, 2001.............. $ -- $1,799,152 $ 1,767,753
Note payable due to stockholder, interest payable at 9.5%, due
December 31, 2001................................................... 564,000 564,000 564,000
Note payable related to purchase of dealership, due February 28,
1999................................................................ -- -- 333,333
Notes payable for equipment with a carrying value of $76,608, interest
payable ranging from 9.6% to 11.18%, payable in full November 15,
1997................................................................ 109,380 76,199 45,332
Note payable on company owned vehicles, with a carrying value of
approximately $20,253, bearing interest at 9.5%..................... 298,861 20,253 --
Note payable to an unrelated car dealership, due December 3, 1999..... 60,000 45,000 45,000
Note payable -- other................................................. -- 5,678 4,415
1,032,241 2,510,282 2,759,833
Less current maturities............................................... (363,851) (285,469) (427,557)
Long-term debt........................................................ $ 668,390 $2,224,813 $ 2,332,276
</TABLE>

F-35

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

6. FINANCING ARRANGEMENTS -- Continued
Future maturities of the above debt at December 31, 1996 are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1997........................................................................ $ 285,469
1998........................................................................ 259,650
1999........................................................................ 372,930
2000........................................................................ 89,829
2001........................................................................ 1,502,403
Total....................................................................... $2,510,281
</TABLE>

7. RELATED PARTIES

The Company operates certain dealerships at facilities leased from
affiliated companies. The leases are classified as operating leases. Future
minimum rent payments are $483,390 in 1997, $387,390 annually through 2001 and
$4,994,184 thereafter. Rent expense in 1995 and 1996 for these leases amounted
to $315,390 and $441,390, respectively.

The Company has made non-interest bearing advances to stockholders totaling
$403,415, which was outstanding as of December 31, 1995 and 1996 and June 30,
1997, respectively. Since no specific repayment terms exist, and Company
management believes that it is possible these amounts will be cancelled in the
future pursuant to stockholder distributions, these amounts are reflected as a
reduction from stockholders' equity in the accompanying combined balance sheets.

The Company also made advances to stockholders totaling $459,818, which
primarily relates to the purchase of real estate and the construction of a
facility owned by an entity affiliated through common ownership. This amount is
included in other current assets, as it is the opinion of Company management
that this amount will be collected in full by December 31, 1997.

The Company purchases advertising services from an entity affiliated
through common ownership. Advertising expenses from services received from this
entity included in the accompanying statements of operations for the years ended
December 31, 1995 and 1996 was $422,777 and $412,982, respectively.

The Company sells extended warranty contracts to customers related to
vehicle sales through warranty contracts procured from an entity affiliated
through common ownership. Total premiums paid to this affiliated entity for
these contracts totaled $389,620 and $453,850 for the years ended December 31,
1995 and 1996, respectively.

The Company purchases products and services from an entity affiliated
through common ownership relative to automobile etching and automobile pack
products sold to customers. Total products and services purchased for the years
ended December 31, 1995 and 1996 was $69,733 and $97,164 respectively.

For the year ended December 31, 1996, the Company paid $23,760 for services
provided to an automobile auction entity which is related through common
ownership.

F-36

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

8. EQUITY

During 1997, an entity affiliated through common ownership began paying the
salaries of certain executive officers and other selling, general and
administrative expenses relating to the Company. The affiliated company charged
the Company management fees during the six months ended June 30, 1997 totaling
$864,000 for the reimbursement of amounts paid by the affiliate on behalf of the
Company.

The capital structure of the entities included in the combined financial
statements of the Company at December 31, 1995 is as follows:

<TABLE>
<CAPTION>
COMMON STOCK
SHARES RETAINED EARNINGS
PAR SHARES ISSUED AND AND MEMBERS' AND
VALUE AUTHORIZED OUTSTANDING AMOUNT PARTNERS' EQUITY
<S> <C> <C> <C> <C> <C>
Cleveland Village Imports, Inc.......................... No par 2,000 2,000 $ 300,000 $ 552,817
Nelson Bowers Ford, L.P................................. -- 759,039
Cleveland Chrysler Plymouth Jeep Eagle, LLC............. -- 562,328
Jaguar of Chattanooga, LLC.............................. -- 1,164,784
$ 300,000 $ 3,038,968
</TABLE>

The capital structure of the entities included in the combined financial
statements of the Company at December 31, 1996 is as follows:

<TABLE>
<CAPTION>
RETAINED EARNINGS
COMMON STOCK AND
SHARES PARTNERS'
PAR SHARES ISSUED AND AND MEMBERS'
VALUE AUTHORIZED OUTSTANDING AMOUNT EQUITY
<S> <C> <C> <C> <C> <C>
Cleveland Village Imports, Inc.......................... No par 2,000 2,000 $ 300,000 $ 563,672
Nelson Bowers Ford, L.P................................. -- 699,958
Cleveland Chrysler Plymouth Jeep Eagle, LLC............. -- 417,300
Jaguar of Chattanooga, LLC.............................. -- 1,141,782
European Motors of Nashville, LLC....................... -- 5,014,936
European Motors LLC..................................... -- 3,148,353
$ 300,000 $10,986,001
</TABLE>

9. EMPLOYEE BENEFIT PLANS

In April 1997, the Company established a 401(k) plan, whereby substantially
all of the employees of the company meeting certain service requirements are
eligible to participate. Contributions by the Company to the plan were not
significant in any period presented.

10. CONTINGENCIES

F-37

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
LAKE NORMAN DODGE, INC.
Cornelius, North Carolina

We have audited the accompanying combined balance sheet of Lake Norman
Dodge, Inc. and Affiliated Companies (the "Company"), which are under common
ownership and management, as of December 31, 1996, and the related combined
statements of income, stockholders' equity, and cash flows for the year then
ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined 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 financial statements referred to above present fairly,
in all material respects, the combined financial position of Lake Norman Dodge,
Inc. and Affiliated Companies as of December 31, 1996, and the combined results
of their operations and their combined cash flows for the year then ended in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina

August 7, 1997
(September 29, 1997 as to Note 1)

F-38

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

COMBINED BALANCE SHEETS

DECEMBER 31, 1996 AND JUNE 30, 1997

<TABLE>
<CAPTION>
DECEMBER
31, JUNE 30,
1996 1997
<S> <C> <C>
(UNAUDITED)
ASSETS (NOTE 4)
CURRENT ASSETS:
Cash and cash equivalents.................................................................... $ 3,491,358 $ 3,466,789
Receivables.................................................................................. 1,998,315 2,535,247
Inventories (Note 2)......................................................................... 23,603,843 22,778,488
Prepaid expenses............................................................................. -- 243,870
Total current assets...................................................................... 29,093,516 29,024,394
PROPERTY AND EQUIPMENT, NET (Note 3)........................................................... 485,880 566,875
OTHER ASSETS (NOTE 6):
Due from employees........................................................................... 281,497 302,628
Due from related partnership................................................................. 159,554 159,554
Total other assets........................................................................ 441,051 462,182
TOTAL ASSETS................................................................................... $30,020,447 $30,053,451
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-floor plan (Note 2)............................................................ $25,957,314 $25,865,010
Trade accounts payable....................................................................... 1,364,121 1,351,664
Note payable to bank (Note 4)................................................................ 68,168 27,644
Other accrued liabilities.................................................................... 765,620 472,485
Current maturities of long-term debt......................................................... 142,857 71,429
Total current liabilities................................................................. 28,298,080 27,788,232
LONG-TERM DEBT (Note 4)........................................................................ 785,715 785,714
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY:
Common stock of combined companies........................................................... 75,000 75,000
Paid-in capital.............................................................................. 600,009 600,009
Retained earnings............................................................................ 261,643 804,496
Total stockholders' equity................................................................ 936,652 1,479,505
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................... $30,020,447 $30,053,451
</TABLE>

See notes to combined financial statements.

F-39

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31, 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1996 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales................................................................ $124,538,878 $55,071,168 $69,798,274
Finance and insurance........................................................ 3,617,296 1,773,355 1,949,987
Parts and service............................................................ 9,543,187 4,371,529 5,321,329
Total revenues............................................................ 137,699,361 61,216,052 77,069,590
COST OF SALES.................................................................. 121,806,212 53,845,015 68,272,355
GROSS PROFIT................................................................... 15,893,149 7,371,037 8,797,235
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................................... 14,215,002 6,736,729 6,937,071
DEPRECIATION AND AMORTIZATION.................................................. 88,987 37,414 46,900
OPERATING INCOME............................................................... 1,589,160 596,894 1,813,264
OTHER INCOME AND EXPENSE:
Interest expense, floor plan................................................. 1,552,250 588,951 1,185,518
Interest expense, other...................................................... 49,540 2,880 67,647
Other income................................................................. 257,747 113,277 176,322
Total other expense....................................................... 1,344,043 478,554 1,076,843
NET INCOME..................................................................... $ 245,117 $ 118,340 $ 736,421
PRO FORMA INCOME TAX PROVISION
(Note 1)..................................................................... $ 97,213 $ 46,934 $ 292,138
PRO FORMA NET INCOME
(Note 1)..................................................................... $ 147,904 $ 71,406 $ 444,283
</TABLE>

See notes to combined financial statements.

F-40

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

YEAR ENDED DECEMBER 31, 1996 AND SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.................................. 75 $75,000 $475,009 $728,963 $1,278,972
Capital contribution........................................ -- -- 125,000 -- 125,000
Net income.................................................. -- -- -- 245,117 245,117
Distributions to owners..................................... -- -- -- (712,437) (712,437)
BALANCE AT DECEMBER 31, 1996.................................. 75 75,000 600,009 261,643 936,652
Net income (unaudited)...................................... -- -- -- 736,421 736,421
Distributions to owners (unaudited)......................... -- -- -- (193,568) (193,568)
BALANCE AT JUNE 30, 1997 (unaudited).......................... 75 $75,000 $600,009 $804,496 $1,479,505
</TABLE>

See notes to combined financial statements.

F-41

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, 1996 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................... $ 245,117 $ 118,340 $ 736,421
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Bad debts and repossessions........................................... 44,523 -- 9,910
Depreciation and amortization expense................................. 88,987 37,414 46,900
Increase in LIFO reserve.............................................. 169,316 177,898 324,486
Changes in assets and liabilities that relate to operations:
Increase in receivable.............................................. (533,128) (417,366) (546,842)
Increase (decrease) in inventories.................................. (10,887,995) 1,039,475 500,867
Increase (decrease) in prepaid expenses............................. 15,895 (271,689) (243,870)
(Increase) decrease in accounts payable............................. 109,802 (240,517) (12,456)
(Increase) decrease in notes payable floor plan..................... 13,226,616 547,291 (92,304)
(Increase) decrease in other accrued liabilities.................... 488,012 1,281,747 (293,135)
Total adjustments................................................ 2,722,028 2,154,253 (306,444)
Net cash provided by operating activities........................ 2,967,145 2,272,593 429,977
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment...................................... (282,711) (141,084) (127,895)
Advances to employees -- net............................................. (86,179) (87,558) (21,131)
Advances to related partnership -- net................................... (159,553) -- --
Net cash used in investing activities............................ (528,443) (228,642) (149,026)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank note.................................................. 100,000 100,000 --
Payments on bank note.................................................... (69,331) (30,214) (40,524)
Proceeds from long-term debt............................................. 1,000,000 1,000,000 --
Payments on long-term debt............................................... (71,429) -- (71,428)
Capital contribution..................................................... 125,000 -- --
Distributions to owners.................................................. (712,437) (540,205) (193,568)
Net cash provided by (used in) financing activities.............. 371,803 529,581 (305,520)
NET INCREASE (DECREASE) IN CASH............................................ 2,810,505 2,573,532 (24,569)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................. 680,853 680,853 3,491,358
CASH AND CASH EQUIVALENTS, END OF PERIOD................................... $ 3,491,358 $ 3,254,385 $ 3,466,789
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest................................. $ 1,601,790 $ 591,831 $ 1,253,165
</TABLE>

See notes to combined financial statements.

F-42

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Lake Norman Dodge, Inc. and Affiliated
Companies' (the "Company") operates two automobile dealerships in the Charlotte,
North Carolina area. The Company sells new and used cars and light trucks, sells
replacement parts, provides vehicle maintenance, warranty, paint and repair
services and arranges related financing and insurance.

The combined financial statements include the accounts of Lake Norman
Dodge, Inc. ("LND") and its subsidiary, Lake Norman
Chrysler-Plymouth-Jeep-Eagle, LLC ("LNCPJE") and certain proprietorships of Phil
Gandy and Quinton Gandy. LND is 100% owned by Phil Gandy and Quinton Gandy. All
significant intercompany balances and planned transactions have been eliminated
in combination.

The combined financial statements have been prepared in connection with a
planned acquisition of the net assets of these entities by Sonic Automotive,
Inc. ("Sonic"). In May 1997, the Company signed a definitive purchase agreement
whereby its outstanding capital stock would be acquired by Sonic for
$18,200,000. This acquisition was consummated on September 29, 1997, and is
being done in contemplation of an anticipated public offering of common stock by
Sonic in 1997.

The accompanying combined financial statements reflect the financial
position, results of operations, and cash flows of each of the above listed
entities. The combination of these entities has been accounted for at historical
cost in a manner similar to a pooling-of-interest because the entities are under
common management and control. All material intercompany transactions have been
eliminated.

LNCPJE was organized on March 18, 1996, as a North Carolina limited
liability company and commenced operations on July 1, 1996. The certain
proprietorships of Phil Gandy and Quinton Gandy include commissions earned
related to sales of extended warranty contracts through LND and LNCPJE, which
were paid directly to Phil Gandy and Quinton Gandy at the option of LND and
LNCPJE. Earned commissions relating to the sales of these contracts reflect a
recurring transaction relating to the dealerships and therefore these
proprietorships have been included in the accompanying combined financial
statements.

Each dealership operates under a dealer agreement with the manufacturer
which generally restricts the location, management and ownership of the
respective dealership. The ability of the Company to acquire additional
franchises from a particular manufacturer may be limited due to certain
restrictions imposed by manufacturers. Additionally, the Company's ability to
enter into significant acquisitions may be restricted and the acquisition of the
Company's stock by third parties may be limited by the terms of the franchise
agreement.

INVENTORIES -- Inventories of new vehicles, including demonstrators, are
valued at the lower of last-in, first-out ("LIFO") cost or market. Inventories
of used vehicles are stated at the lower of first-in, first-out ("FIFO") cost or
market, and parts and accessories are stated at the lower of specific cost or
market.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation is computed over the estimated useful lives of the assets using
primarily accelerated methods. The range of estimated useful lives is as
follows:

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Parts and service equipment................................................... 5 years
Office equipment and fixtures................................................. 5-7 years
Company vehicles.............................................................. 5 years
</TABLE>

F-43

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Leasehold improvements are amortized over the lesser of the terms of their
respective leases or the estimated useful lives of the related assets.

Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.

INCOME TAXES -- LND has elected to be treated as an S Corporation for
federal and state income tax purposes, and LNCPJE is a limited liability company
(LLC). As such the stockholders and members, respectively, include their pro
rata share of the Company's taxable income for the year in their individual
income tax returns. The proprietorship income of Phil and Quinton Gandy combined
herein is also included in their personal income tax returns. Accordingly, no
provision for federal or state income taxes has been included in the
accompanying combined statement of income.

The pro forma provision for income taxes and the pro forma net income for
the year ended December 31, 1996 and for the six months ended June 30, 1996 and
1997 reflect amounts that would have been recorded had the Company's income been
taxed for federal and state purposes as if it was a C Corporation.

ADVERTISING COSTS -- The Company expenses all costs of advertising when
incurred. Advertising costs of $1,828,534 are included in operating expenses for
1996.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the six months ended June 30, 1997 has been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein. The results
for interim periods are not necessarily indicative of the results to be expected
for the entire fiscal year.

The combined statement of income for the year ended December 31, 1996
includes expenses approximating $1,200,000 for discretionary bonuses to
stockholders determined at year end. Of this amount approximately $565,000 was
incurred through June 30, 1996. Given the planned acquisition by Sonic, it is
uncertain if a similar discretionary bonus will be awarded in 1997. As such, no
bonus has been accrued through June 30, 1997.

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOORPLAN

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
<S> <C> <C>
(UNAUDITED)
New vehicles................................................................................... $ 16,617,268 $18,626,219
Used vehicles.................................................................................. 6,437,598 3,720,437
Parts and accessories.......................................................................... 548,977 431,832
Total.......................................................................................... $ 23,603,843 $22,778,488
</TABLE>

Had the Company used the FIFO method of valuing new vehicle inventory,
inventories would have been $1,564,142 higher and net income would have been
$414,432 as of and for the year ended December 31, 1996.

F-44

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOORPLAN -- Continued
All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $25,957,314 at December
31, 1996. The floor plan notes bear interest, payable monthly on the outstanding
balance, at the prime rate plus 0.5% (8.75% at December 31, 1996). Total floor
plan interest expense amounted to $1,552,250 in 1996. The notes payable are due
when the related vehicle is sold. As such, these floor plan notes payable are
shown as a current liability in the accompanying balance sheet.

3. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
<S> <C> <C>
(UNAUDITED)
Service equipment........................................................ $ 309,944 $ 373,652
Parts and accessory equipment............................................ 35,480 38,876
Vehicles................................................................. 11,809 53,898
Furniture and fixtures................................................... 212,155 278,479
Leasehold improvements................................................... 460,097 497,345
1,029,485 1,242,250
Less accumulated depreciation............................................ (543,605) (675,375)
Property and equipment, net.............................................. $ 485,880 $ 566,875
</TABLE>

4. NOTE PAYABLE TO BANK AND LONG-TERM DEBT

The note payable with a balance of $68,168 at December 31, 1996 is due in
monthly installments of $7,172, including interest at 8.25%, through October,
1997. The note is collateralized by modular buildings used in Company
operations.

In July, 1996, the Company borrowed $1,000,000 from Chrysler Financial
Corporation. Payments of $11,905 plus interest at prime plus .5% (8.75% at
December 31, 1996) are due monthly, through July, 2003. The loan is
collateralized by a security interest in all assets of LNCPJE. Principal is due
as follows:

<TABLE>
<S> <C>
Year ending December 31:
1997.......................................................................... $142,857
1998.......................................................................... 142,857
1999.......................................................................... 142,857
2000.......................................................................... 142,857
2001.......................................................................... 142,857
2002.......................................................................... 142,857
Thereafter.................................................................... 71,430
928,572
Less current maturities....................................................... 142,857
Long-term debt................................................................ $785,715
</TABLE>

5. OPERATING LEASES

The Company leases its operating facilities from its shareholders under
three separate leases expiring March, 2000 and June, 2001. Monthly payments
under these leases at December 31, 1996, total $83,000. One of these leases has
an option for renewal for two additional five year terms. The Company pays all
operating costs such as utilities, repairs, maintenance and insurance relating
to these facilities. Total payments made to related parties under these leases
in 1996 were $786,000 exclusive of operating costs.

F-45

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

5. OPERATING LEASES -- Continued
At December 31, 1996 future minimum rental payments under these operating
leases are as follows:

<TABLE>
<CAPTION>
YEAR
<S> <C>
1997........................................................................ $ 996,000
1998........................................................................ 996,000
1999........................................................................ 996,000
2000........................................................................ 564,000
2001........................................................................ 210,000
Total................................................................ $3,762,000
</TABLE>

The Company leases automobiles through Chrysler Finance under twenty-four
and thirty-six month agreements expiring at various dates. The Company pays
monthly rental of varying amounts. In addition, the Company pays all operating
costs, including insurance, repairs, and maintenance. Payments under automobile
leases were $170,800 in 1996.

At December 31, 1996, minimum future lease payments under these leases are
as follows:

<TABLE>
<S> <C>
1997.......................................................................... $216,000
1998.......................................................................... 81,000
Total.................................................................. $297,000
</TABLE>

6. RELATED PARTIES

DUE FROM RELATED PARTIES -- Due from employees includes $219,878 due from
shareholders. These amounts bear interest at the prevailing U. S. Treasury rates
for short-term debt, are noncollateralized and have no specific repayment terms.

Amounts due from related partnership are noninterest bearing,
noncollateralized and have no specific repayment terms.

7. EMPLOYEE SAVINGS PLAN

The Company operates a savings plan under Section 401(k) of the Internal
Revenue Code. This plan allows employees to defer a portion of their income on a
pre-tax basis through plan contributions. The Company makes matching
contributions up to 2% of employee salary. Company contributions to the plan in
1996 totaled $56,800. The Company also paid plan expenses of $1,312.

F-46

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
KEN MARKS FORD, INC.
Clearwater, Florida

We have audited the accompanying balance sheet of Ken Marks Ford, Inc. (the
"Company") as of April 30, 1997, and the related statements of income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Ken Marks Ford, Inc. as of
April 30, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina

August 26, 1997

F-47

<PAGE>
KEN MARKS FORD, INC.

BALANCE SHEETS

APRIL 30, 1997 AND JULY 31, 1997

<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1997 1997
<S> <C> <C>
(UNAUDITED)
ASSETS (NOTE 4)
CURRENT ASSETS:
Cash and cash equivalents.................................................................... $ 2,504,102 $ 2,937,429
Receivables.................................................................................. 2,374,483 1,558,416
Inventories (Note 2)......................................................................... 11,216,499 11,809,574
Prepaid expenses and other current assets.................................................... 529,633 265,122
Deferred income taxes (Note 5)............................................................... 91,742 91,742
TOTAL CURRENT ASSETS...................................................................... 16,716,459 16,662,283
PROPERTY AND EQUIPMENT (Note 3)................................................................ 470,738 530,257
OTHER ASSETS................................................................................... 14,000 14,000
TOTAL ASSETS................................................................................... $17,201,197 $17,206,540
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable -- floor plan (Note 2)......................................................... $12,557,574 $12,720,185
Trade accounts payable....................................................................... 678,252 691,537
Accrued payroll and bonuses.................................................................. 836,425 718,767
Other accrued liabilities (Note 7)........................................................... 777,388 541,500
Allowance for insurance, service contract and finance income chargebacks..................... 224,544 224,544
Income tax payable (Note 5).................................................................. 15,161 0
TOTAL CURRENT LIABILITIES................................................................. 15,089,344 14,896,533
DEFERRED INCOME TAXES (Note 5)................................................................. 17,705 17,705
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 500 shares authorized and issued.............................. 500 500
Paid-in capital.............................................................................. 423,800 423,800
Retained earnings............................................................................ 1,669,848 1,868,002
Total stockholders' equity................................................................ 2,094,148 2,292,302
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................... $17,201,197 $17,206,540
</TABLE>

See notes to financial statements.

F-48

<PAGE>
KEN MARKS FORD, INC.

STATEMENTS OF INCOME

YEAR ENDED APRIL 30, 1997 AND THREE MONTHS ENDED JULY 31, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED JULY
APRIL 30, 31,
1997 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales................................................................ $130,045,246 $33,823,641 $33,167,639
Parts, service and collision repairs......................................... 13,116,124 3,660,782 2,930,561
Finance and insurance........................................................ 2,188,071 596,854 529,109
Total revenues............................................................ 145,349,441 38,081,277 36,627,309
COST OF SALES.................................................................. 126,870,910 33,111,680 32,195,397
GROSS PROFIT................................................................... 18,478,531 4,969,597 4,431,912
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 7).......................... 15,743,940 4,034,940 3,644,179
DEPRECIATION AND AMORTIZATION.................................................. 100,771 20,846 20,302
OPERATING INCOME............................................................... 2,633,820 913,811 767,431
OTHER INCOME AND EXPENSE:
Interest expense, floor plan (Note 2)........................................ 2,008,468 480,132 485,358
Other income................................................................. 140,916 16,189 40,654
Total other income and expense............................................ 1,867,552 463,943 444,704
INCOME BEFORE INCOME TAXES..................................................... 766,268 449,868 322,727
PROVISION FOR INCOME TAXES (Note 5)............................................ 295,988 173,649 124,573
NET INCOME..................................................................... $ 470,280 $ 276,219 $ 198,154
</TABLE>

See notes to financial statements.

F-49

<PAGE>
KEN MARKS FORD, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

YEAR ENDED APRIL 30, 1997 AND THREE MONTHS ENDED JULY 31, 1997

<TABLE>
<CAPTION>
TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C>
BALANCE
APRIL 30, 1996.......................................................... $ 500 $423,800 $1,219,568 $ 1,643,868
Dividends............................................................... -- -- (20,000) (20,000)
Net income.............................................................. -- -- 470,280 470,280
BALANCE
APRIL 30, 1997.......................................................... $ 500 $423,800 $1,669,848 $ 2,094,148
Net income (unaudited).................................................. -- -- 198,154 198,154
BALANCE
JULY 31, 1997 (unaudited)............................................... $ 500 $423,800 $1,868,002 $ 2,292,302
</TABLE>

See notes to financial statements.

F-50

<PAGE>
KEN MARKS FORD, INC.

STATEMENTS OF CASH FLOWS

YEAR ENDED APRIL 30, 1997 AND THREE MONTHS ENDED
JULY 31, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED JULY 31,
APRIL 30, 1997 1996
<S> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 470,280 $ 276,219
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.............................................. 100,771 20,846
Deferred income taxes...................................................... 13,763 6,600
Loss on disposal of property and equipment................................. 45,192 --
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable............................... (1,033,143) 323,213
(Increase) decrease in inventories....................................... 5,197,288 1,129,058
(Increase) decrease in prepaid expenses.................................. 429,467 (595,810)
Decrease in due from related parties..................................... 134,141 --
Increase (decrease) in notes payable, floor plan......................... (3,401,971) (663,355)
Increase in trade accounts payable....................................... 322,319 219,902
Decrease in accrued payroll and bonuses.................................. (284,875) (400,442)
Increase (decrease) in accrued expenses and other payables............... (848,544) 484,719
Decrease in allowance for insurance, service contract and finance income
chargebacks........................................................... (85,107) --
Increase (decrease) in income tax payable................................ (39,839) 112,049
Total adjustments..................................................... 549,462 636,780
Net cash provided by operating activities.................................. 1,019,742 912,999
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........................................... (183,674) (5,060)
Net cash used in investing activities...................................... (183,674) (5,060)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to stockholders................................................ (20,000) --
Net cash used in financing activities...................................... (20,000) --
NET INCREASE IN CASH............................................................ 816,068 907,939
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................... 1,688,034 1,688,034
CASH AND CASH EQUIVALENTS, END OF YEAR.......................................... $ 2,504,102 $ 2,595,973
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................................... $ 2,008,468 $ 480,132
Income taxes............................................................... $ 322,064 $ 55,000

1997

<S> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 198,154

Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.............................................. 20,302

Deferred income taxes...................................................... --

Loss on disposal of property and equipment................................. --

Change in operating assets and liabilities:
(Increase) decrease in accounts receivable............................... 816,067

(Increase) decrease in inventories....................................... (593,075)

(Increase) decrease in prepaid expenses.................................. 264,511

Decrease in due from related parties..................................... --

Increase (decrease) in notes payable, floor plan......................... 162,611

Increase in trade accounts payable....................................... 13,285

Decrease in accrued payroll and bonuses.................................. (117,658)

Increase (decrease) in accrued expenses and other payables............... (235,888)

Decrease in allowance for insurance, service contract and finance income
chargebacks........................................................... --

Increase (decrease) in income tax payable................................ (15,161)

Total adjustments..................................................... 314,994

Net cash provided by operating activities.................................. 513,148

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........................................... (79,821)

Net cash used in investing activities...................................... (79,821)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to stockholders................................................ --

Net cash used in financing activities...................................... --

NET INCREASE IN CASH............................................................ 433,327

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................... 2,504,102

CASH AND CASH EQUIVALENTS, END OF YEAR.......................................... $ 2,937,429

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................................... $ 485,358

Income taxes............................................................... $ 144,000

</TABLE>

See notes to financial statements.

F-51

<PAGE>
KEN MARKS FORD, INC.

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Ken Marks Ford, Inc. (the "Company") operates
an automobile dealership in the Tampa-Clearwater areas in Florida. The Company
sells new and used cars, sells replacement parts, provides vehicle maintenance,
warranty, paint and repair services and arranges related financing and
insurance.

In July 1997, the Company signed a definitive purchase agreement whereby
its outstanding capital stock would be acquired by Sonic Automotive, Inc. for
$24,982,500. This acquisition is to be effective prior to the completion of an
anticipated public offering of common stock by Sonic Automotive, Inc. in 1997.

DEALER AGREEMENTS -- The Company purchases substantially all of its new
vehicles from manufacturers at the prevailing prices charged by the manufacturer
to its franchised dealers. The Company's sales could be unfavorably impacted by
the manufacturer's unwillingness or inability to supply the dealership with an
adequate supply of new car inventory. Each dealership operates under a dealer
agreement with the manufacturer. These agreements generally restrict the
location, management and ownership of the respective dealership.

INVENTORIES -- Inventories of new vehicles, including demonstrators, are
valued at the lower of last-in, first-out ("LIFO") cost or market. Inventories
of parts and accessories are valued on a LIFO basis using the Current Year Parts
Price Index. Inventories of used vehicles are valued on a specific
identification basis.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.

Depreciation is computed using straight-line and accelerated methods over
the estimated useful lives of the assets. The range of estimated useful lives is
as follows:

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Leasehold improvements.................................................................. 18-31 years
Machinery and equipment................................................................. 5-7 years
Furniture and fixtures.................................................................. 5-7 years
</TABLE>

INCOME TAXES -- Deferred income tax assets and liabilities are determined
based on the difference between financial reporting and tax basis of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the large
number of customers comprising the trade receivables balance. Trade receivables
are concentrated in the Tampa-Clearwater metropolitan area.

F-52

<PAGE>
KEN MARKS FORD, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued

Advertising -- The Company expenses advertising costs in the period
incurred. Advertising expenses approximated $991,000 for the year ended April
30, 1997.

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN

Inventories consist of the following:

<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1997 1997
<S> <C> <C>
(UNAUDITED)
New vehicles........................................................... $ 8,477,840 $ 9,270,932
Used vehicles.......................................................... 2,341,929 2,193,166
Parts and accessories.................................................. 396,730 345,476
Total.................................................................. $11,216,499 $11,809,574
</TABLE>

At April 30, 1997, the excess of current replacement cost over the stated
LIFO valuation of new vehicles, parts and accessories amounts to $2,749,237.

Had the Company used the FIFO method of valuing new vehicle, parts and
accessories inventory, pretax earnings would have been $949,454 for the year
ended April 30, 1997.

All new vehicles are pledged to collateralize floor plan notes payable to
financial institutions in the amount of $12,557,574 at April 30, 1997. The floor
plan notes bear interest, payable monthly on the outstanding balance, at the
prime rate plus 1% (9.5% at April 30, 1997). Total floor plan interest expense
amounted to $2,008,468 during the year ended April 30, 1997. The notes payable
become due when the related vehicle is sold. As such, these floor plan notes
payable are shown as a current liability in the accompanying balance sheet.

Certain inventory items collateralize the revolving line of credit
described in Note 4. All new vehicles and demonstrators and substantially all
parts and accessories are purchased from Ford Motor Company.

3. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1997 1997
<S> <C> <C>
(UNAUDITED)
Parts and service equipment............................................... $ 333,063 $ 340,284
Furniture and fixtures.................................................... 400,152 409,991
Leasehold improvements.................................................... 481,815 544,576
1,215,030 1,294,851
Less accumulated depreciation............................................. (744,292) (764,594)
Property and equipment, net............................................... $ 470,738 $ 530,257
</TABLE>

4. FINANCING ARRANGEMENT

The Company has a revolving line of credit with Ford Motor Credit
Corporation in the amount of $2,500,000. At April 30, 1997, no amount was
outstanding relating to this line of credit, which is collateralized by personal
guarantees from the stockholders and the net assets of the Company.

F-53

<PAGE>
KEN MARKS FORD, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

5. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
APRIL 30,
1997
<S> <C>
Current taxes............................................................................. $ 282,225
Deferred taxes............................................................................ 13,763
Provision for income taxes................................................................ $ 295,988
</TABLE>

Deferred income tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>
APRIL 30,
1997
<S> <C>
Deferred tax asset -- current, primarily from differences relating to finance and insurance
reserves and allowance for bad debts..................................................... $ 91,742
Deferred tax liability -- long-term, primarily from differences relating to depreciation... (17,705)
Net deferred tax asset..................................................................... $ 74,037
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

Ford Motor Company (FMC) owns vehicles which are used as short-term rentals
for which the Company pays FMC monthly fees. A portion of the fees are applied
against the purchase price the Company must pay for the vehicles when they are
no longer used for rental. The contingent liability to FMC to purchase the
vehicles under this program was approximately $1,771,000 at April 30, 1997.

The Company is a defendant in various legal proceedings incurred in the
normal course of business. Management believes that the outcome of such
proceedings will not have a materially adverse effect on the Company's financial
position or future operations and cashflows.

7. RELATED PARTY TRANSACTIONS

The Company leases its operating facility from a corporation which is owned
by the Company's stockholders. The lease is currently on a month-to-month basis.
Rent charged to expense under this lease was $359,630 for the year ended April
30, 1997. In addition, management fees of $675,000 for the year ended April 30,
1997 were paid by the Company to the above corporation and are included in
selling, general and administrative expenses. In addition, related party
payables of $270,000 were included in other accrued liabilities at April 30,
1997.

F-54

<PAGE>

NO DEALER, SALESPERSON, OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE CLASS A
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................................... 3
The Offering......................................... 6
Summary Historical and Pro Forma Combined and
Consolidated Financial Data........................ 7
Risk Factors......................................... 9
The Reorganization................................... 18
The Acquisitions..................................... 18
Use of Proceeds...................................... 21
Dividend Policy...................................... 21
Capitalization....................................... 22
Dilution............................................. 23
Selected Combined And Consolidated Financial Data.... 24
Pro Forma Combined and Consolidated Financial Data... 26
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 34
Business............................................. 41
Management........................................... 56
Certain Transactions................................. 62
Principal Stockholders............................... 66
Description of Capital Stock......................... 66
Shares Eligible for Future Sale...................... 70
Underwriting......................................... 71
Legal Matters........................................ 72
Experts.............................................. 73
Additional Information............................... 73
Index to Financial Statements........................ F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

(Sonic logo appears here)

SONIC AUTOMOTIVE, INC.
CLASS A COMMON STOCK

PROSPECTUS

MERRILL LYNCH & CO.

MONTGOMERY SECURITIES

WHEAT FIRST BUTCHER SINGER

, 1997

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses to be borne by the Registrant
in connection with the issuance and distribution of the securities being
registered hereby other than underwriting discounts and commissions. All the
amounts shown are estimates, except for the registration fee with the Securities
and Exchange Commission, the NASD filing fee and the NYSE fees.

<TABLE>
<S> <C>
SEC Registration fee...................................................................... $ 31,516
NASD filing fee........................................................................... 10,900
NYSE fees.................................................................................
Transfer agent and registrar fees.........................................................
Accounting fees and expenses..............................................................
Legal fees and expenses...................................................................
"Blue Sky" fees and expenses (including legal fees).......................................
Costs of printing and engraving...........................................................
Miscellaneous.............................................................................
Total..................................................................................... $
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Bylaws effectively provide that the Registrant shall, to
the full extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as amended from time to time ("Section 145"), indemnify all
persons whom it may indemnify pursuant thereto. In addition, the Registrant's
Amended and Restated Certificate of Incorporation eliminates personal liability
of its directors to the full extent permitted by Section 102(b)(7) of the
General Corporation Law of the State of Delaware, as amended from time to time
("Section 102(b)(7)").

Section 145 permits a corporation to indemnify its directors and officers
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by a third party if such directors or
officers acted in good faith and in a manner they 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 reason to believe their conduct was
unlawful. In a derivative action, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit and only with respect to matter
as to which they shall have acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interest of the corporation, except
that no indemnification shall be made if such person shall have been adjudged
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine upon application that the
defendant officers or directors are reasonably entitled to indemnify for such
expenses despite such adjudication of liability.

Section 102(b)(7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for reach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provisions shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.

The Company intends to obtain, prior to the effective date of the
Registration Statement, insurance against liabilities under the Securities Act
of 1933 for the benefit of its officers and directors.

Section 7 of the Underwriting Agreement (to be filed as Exhibit 1.1 to this
Registration Statement) provides that the Underwriters severally and not jointly
will indemnify and hold harmless the Registrant and each director, officer or
controlling person of the Registrant from and against any liability caused by
any statement or omission in the Registration Statement or Prospectus based upon
information furnished to the Registrant by the Underwriters for use therein.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Except as hereinafter set forth, there have been no sales of unregistered
securities by the Registrant within the past there years.

As of January 30, 1997, as part of the original organization of the
Company, the Registrant issued to Sonic Financial Corporation 100 shares of
Common Stock of the Company (the "Original Shares") in exchange for $500 in
cash.

II-1

<PAGE>
As of June 30, 1997, as part of the Reorganization, the Registrant issued
to (i) its Chief Executive Officer, Bruton Smith, 1,657 shares of the
Registrant's Class B Common Stock in exchange for all his interests in Town &
Country Toyota and Fort Mill Ford, (ii) Sonic Financial Corporation 7,105 shares
of its Class B Common Stock in exchange for all its interests in the Original
Shares, Town & Country Ford, Fort Mill Ford, Lone Star Ford and Frontier
Plymouth-Oldsmobile-Cadillac, (iii) William S. Egan 473 shares of its Class B
Common Stock in exchange for all his interest in Town & Country Toyota, and (iv)
Bryan Scott Smith 765 shares of its Class B Common Stock in exchange for all his
interests in Town & Country Ford and Fort Mill Ford. Also, in connection with
the Dyer Acquisition, the Company will issue the Dyer Warrant. In each such
transaction, the securities were not or will not be registered under the
Securities Act, in reliance upon the exemption from registration provided by
Section 4(2) of said Act in view of the sophistication of the foregoing
purchasers, their access to material information, the disclosures actually made
to them by the Registrant and the absence of any general solicitation or
advertising.

On or before the consummation of the Offering, the Registrant will issue to
nine of its officers and employees, pursuant to the Registrant's Stock Option
Plan, options to purchase shares of Class A Common Stock in the aggregate.
Such securities will not be registered under the Securities Act because such
grants will be made without consideration to the Registrant and, consequently,
do not constitute offers or sales within the meaning of Section 5 of the
Securities Act.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
1.1** Form of Purchase Agreement
3.1* Amended and Restated Certificate of Incorporation of the Company
3.2* Bylaws of the Company
4.1** Form of Class A Common Stock Certificate
4.2* Registration Rights Agreement dated as of June 30, 1997 among the Company, O. Bruton Smith, Bryan Scott
Smith, William S. Egan and Sonic Financial Corporation
5.1** Opinion letter of Parker, Poe, Adams & Bernstein, L.L.P. regarding the legality of the securities to be
registered
10.1* Form of Lease Agreement to be entered into between the Company (or its subsidiaries) and Nelson E. Bowers,
II or his affiliates
10.2* Form of Lease Agreement to be entered into between the Company (or its subsidiaries) and Marks Holding
Company, Inc.
10.3* Lease Agreement dated as of January 1, 1995 between Lone Star Ford, Inc. and Viking Investment Associates
10.4* Lease Agreement dated as of October 23, 1979 between O. Bruton Smith, Bonnie Smith and Town and Country
Ford, Inc.
10.5* North Carolina Warranty Deed dated as of April 24, 1987 between O. Bruton Smith and Bonnie Smith, as
Grantors and STC Properties, as Grantee
10.6* Lease dated January 13, 1995 between JAG Properties LLC and Jaguar of Chattanooga LLC
10.7* Lease dated October 18, 1991 by and between Nelson E. Bowers II, Thomas M. Green, Jr., and Infiniti of
Chattanooga, Inc.
10.8* Amendment to Lease Agreement dated as of January 13, 1995 among Nelson E. Bowers II, Thomas M. Green, Jr.,
JAG Properties LLC and Infiniti of Chattanooga, Inc.
10.9* Lease dated March 15, 1996 between Cleveland Properties LLC and Cleveland Chrysler-Plymouth-Jeep-Eagle LLC
10.10* Lease Agreement dated January 2, 1993 among Nelson E. Bowers II, Thomas M. Green, Jr. and Cleveland
Village Imports, Inc.
10.11* Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing dated August 10,
1972 by Lone Star Ford, Inc.
10.12* Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing and Security
Agreement dated August 22, 1984 by Town and Country Ford, Inc.
10.13 Wholesale Floor Plan Security Agreement dated October 5, 1990 between Marcus David Corporation (d/b/a Town
& Country Toyota) and World Omni Financial Corp.
10.14* Demand Promissory Note dated October 5, 1990 of Marcus David Corporation (d/b/a Town & Country Toyota) in
favor of World Omni Financial Corp.
10.15* Security Agreement & Master Credit Agreement (Non-Chrysler Corporation Dealer) dated April 21, 1995
between Cleveland Chrysler-Plymouth-Jeep-Eagle LLC and Chrysler Credit Corporation
10.15a* Promissory Note dated April 21, 1995 in favor of Chrysler Credit Corporation by Cleveland Chrysler
Plymouth Jeep Eagle, LLC
</TABLE>

II-2

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
10.16* Security Agreement & Master Credit Agreement dated April 21, 1995 between Saturn of Chattanooga, Inc. and
Chrysler Credit Corporation
10.16a* Promissory Note dated April 21, 1995 in favor of Chrysler Credit Corporation by Saturn of Chattanooga,
Inc.
10.17* Security Agreement & Master Credit Agreement (Non-Chrysler Corporation Dealer) dated April 24, 1995
between Nelson Bowers Ford, L.P. and Chrysler Credit Corporation
10.17a* Promissory Note dated April 21, 1995 in favor of Chrysler Credit Corporation by Nelson Bowers Ford L.P.
10.18* Floor Plan Agreement dated May 6, 1996 between European Motors, LLC and NationsBank, N.A.
10.19* Floor Plan Agreement dated April 11, 1996 between KIA of Chattanooga, LLC and NationsBank, N.A.
10.19a* Security Agreement dated April 11, 1996 between KIA of Chattanooga, LLC and NationsBank, N.A.
10.20* Floor Plan Agreement dated October 17, 1996 between European Motors of Nashville, LLC and NationsBank,
N.A.
10.20a* Security Agreement dated October 17, 1996 between European Motors of Nashville, LLC and NationsBank, N.A.
10.21* Floor Plan Agreement dated March 5, 1997 between Nelson Bowers Dodge, LLC (d/b/a Dodge of Chattanooga) and
NationsBank, N.A.
10.22* Security Agreement and Master Credit Agreement dated May 15, 1996 between Lake Norman Chrysler Plymouth
Jeep Eagle, LLC and Chrysler Financial Corporation
10.22a* Promissory Note dated May 15, 1996 in favor of Chrysler Financial Corporation by Lake Norman Chrysler
Plymouth Jeep Eagle, LLC
10.23* Security Agreement & Capital Loan Agreement dated May 15, 1996 between Lake Norman Dodge, Inc and Chrysler
Financial Corp.
10.23a* Promissory Note dated May 15, 1996 in favor of Chrysler Financial Corporation by Lake Norman Dodge, Inc.
10.23b* Promissory Note dated May 15, 1996 in favor of Chrysler Financial Corporation by Lake Norman Dodge, Inc.
10.24* Security Agreement and Master Credit Agreement (Non-Chrysler Corporation Dealer) dated May 15, 1996
between Lake Norman Chrysler Plymouth Jeep Eagle, LLC and Chrysler Financial Corporation
10.24a* Promissory Note dated May 15, 1996 in favor of Chrysler Financial Corporation by Lake Norman Chrysler
Plymouth Jeep Eagle, LLC
10.25* Floor Plan Agreement dated September 1, 1996 between NationsBank, N.A. and Dyer & Dyer, Inc.
10.25a* Security Agreement dated September 1, 1996 between NationsBank, N.A. and Dyer & Dyer, Inc.
10.26* Security Agreement and Master Credit Agreement (Non-Chrysler Corporation Dealer) dated April 21, 1995
between Cleveland Village Imports, Inc. (d/b/a Cleveland Village Honda, Inc.) and Chrysler Credit
Corporation
10.27* Jaguar Credit Corporation Automotive Wholesale Plan Application for Wholesale Financing and Security
Agreement dated March 14, 1995 by Jaguar of Chattanooga LLC
10.28* Assignment of Joint Venturer Interest in Chartown dated as of June 30, 1997 among Town and Country Ford,
Inc., SMDA LLC and Sonic Financial Corporation
10.29* Form of Employment Agreement between the Company and O. Bruton Smith
10.30* Form of Employment Agreement between the Company and Bryan Scott Smith
10.31* Form of Employment Agreement between the Company and Theodore M. Wright
10.32* Form of Employment Agreement between the Company and Nelson E. Bowers, II
10.33* Tax Allocation Agreement dated as of June 30, 1997 between the Company and Sonic Financial Corporation
10.34* Form of Sonic Automotive, Inc. Stock Option Plan
10.35* Form of Sonic Automotive, Inc. Employee Stock Purchase Plan
10.36* Subscription Agreement dated as of June 30, 1997 between O. Bruton Smith and the Company
10.37* Subscription Agreement dated as of June 30, 1997 between Sonic Financial Corporation and the Company
10.38* Subscription Agreement dated as of June 30, 1997 between Bryan Scott Smith and the Company
10.39* Subscription Agreement dated as of June 30, 1997 between William S. Egan and the Company
10.40* Asset Purchase Agreement dated as of May 27, 1997 by and among Sonic Auto World, Inc., Lake Norman Dodge,
Inc., Lake Norman Chrysler-Plymouth-Jeep-Eagle LLC, Quinton M. Gandy and Phil M. Gandy, Jr. (confidential
portions omitted and filed separately with the SEC)
</TABLE>

II-3

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
10.41* Asset Purchase Agreement dated as of June 24, 1997 by and among Sonic Auto World, Inc., Kia of
Chattanooga, LLC, European Motors of Nashville, LLC, European Motors, LLC, Jaguar of Chattanooga LLC,
Cleveland Chrysler-Plymouth-Jeep-Eagle LLC, Nelson Bowers Dodge, LLC, Cleveland Village Imports, Inc.,
Saturn of Chattanooga, Inc., Nelson Bowers Ford, L.P., Nelson E. Bowers II, Jeffrey C. Rachor, and the
other shareholders named herein (confidential portions omitted and filed separately with the SEC)
10.42* Stock Purchase Agreement dated as of July 29, 1997 between Sonic Auto World, Inc. and Ken Marks, Jr., O.K.
Marks, Sr. and Michael J. Marks (confidential portions omitted and filed separately with the SEC)
10.43* Asset Purchase Agreement dated as of August 1997 by and among Sonic Automotive, Inc., Dyer & Dyer, Inc.
and Richard Dyer (confidential portions omitted and filed separately with the SEC)
10.44* Security Agreement and Master Credit Agreement dated April 21, 1995 between Cleveland Chrysler Plymouth
Jeep Eagle and Chrysler Credit Corporation
10.45 Promissory Noted dated as of August 28, 1997 by Sonic Automotive, Inc. in favor of NationsBank, N.A.
21.1* Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2** Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 to this Registration Statement)
24* Power of Attorney (included on the signature page to this Registration Statement)
27* Financial Data Schedule
99.1* Consent of Nelson E. Bowers, II
</TABLE>

* Filed previously.

** To be furnished by Amendment.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing or closings specified in the Purchase Agreement,
certificates in such denominations and registered in such names as may be
required by the Underwriters in order to permit prompt delivery to each
purchaser.

The undersigned Registrant hereby further undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed part of this Registration Statement as
of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-4

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Charlotte, North
Carolina on October 3, 1997.

SONIC AUTOMOTIVE, INC.

By: /s/ THEODORE M. WRIGHT
THEODORE M. WRIGHT
VICE PRESIDENT, TREASURER AND
CHIEF FINANCIAL OFFICER

Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities and on the date indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE

<S> <C> <C>
/s/ * Chairman and Chief Executive Officer October 3, 1997
O. BRUTON SMITH (principal executive officer)

/s/ * President, Chief Operating Officer October 3, 1997
BRYAN SCOTT SMITH and Director

/s/ THEODORE M. WRIGHT Vice President, Treasurer, October 3, 1997
THEODORE M. WRIGHT Chief Financial Officer
(principal financial and
accounting officer) and
Director

/s/ * Director October 3, 1997
WILLIAM R. BROOKS

*By: /s/ THEODORE M. WRIGHT
THEODORE M. WRIGHT
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
</TABLE>

II-5

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
1.1** Form of Purchase Agreement
3.1* Amended and Restated Certificate of Incorporation of the Company
3.2* Bylaws of the Company
4.1** Form of Class A Common Stock Certificate
4.2* Registration Rights Agreement dated as of June 30, 1997 among the Company, O. Bruton Smith,
Bryan Scott Smith, William S. Egan and Sonic Financial Corporation
5.1** Opinion letter of Parker, Poe, Adams & Bernstein, L.L.P. regarding the legality of the
securities to be registered
10.1* Form of Lease Agreement to be entered into between the Company (or its subsidiaries) and
Nelson E. Bowers, II or his affiliates
10.2* Form of Lease Agreement to be entered into between the Company (or its subsidiaries) and Marks
Holding Company, Inc.
10.3* Lease Agreement dated as of January 1, 1995 between Lone Star Ford, Inc. and Viking Investment
Associates
10.4* Lease Agreement dated as of October 23, 1979 between O. Bruton Smith, Bonnie Smith and Town
and Country Ford, Inc.
10.5* North Carolina Warranty Deed dated as of April 24, 1987 between O. Bruton Smith and Bonnie
Smith, as Grantors and STC Properties, as Grantee
10.6* Lease dated January 13, 1995 between JAG Properties LLC and Jaguar of Chattanooga LLC
10.7* Lease dated October 18, 1991 by and between Nelson E. Bowers II, Thomas M. Green, Jr., and
Infiniti of Chattanooga, Inc.
10.8* Amendment to Lease Agreement dated as of January 13, 1995 among Nelson E. Bowers II, Thomas M.
Green, Jr., JAG Properties LLC and Infiniti of Chattanooga, Inc.
10.9* Lease dated March 15, 1996 between Cleveland Properties LLC and Cleveland Chrysler-
Plymouth-Jeep-Eagle LLC
10.10* Lease Agreement dated January 2, 1993 among Nelson E. Bowers II, Thomas M. Green, Jr. and
Cleveland Village Imports, Inc.
10.11* Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing dated
August 10, 1972 by Lone Star Ford, Inc.
10.12* Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing and
Security Agreement dated August 22, 1984 by Town and Country Ford, Inc.
10.13 Wholesale Floor Plan Security Agreement dated October 5, 1990 between Marcus David Corporation
(d/b/a Town & Country Toyota) and World Omni Financial Corp.
10.14* Demand Promissory Note dated October 5, 1990 of Marcus David Corporation (d/b/a Town & Country
Toyota) in favor of World Omni Financial Corp.
10.15* Security Agreement & Master Credit Agreement (Non-Chrysler Corporation Dealer) dated April 21,
1995 between Cleveland Chrysler-Plymouth-Jeep-Eagle LLC and Chrysler Credit Corporation
10.15a* Promissory Note dated April 21, 1995 in favor of Chrysler Credit Corporation by Cleveland
Chrysler Plymouth Jeep Eagle, LLC
10.16* Security Agreement & Master Credit Agreement dated April 21, 1995 between Saturn of
Chattanooga, Inc. and Chrysler Credit Corporation
10.16a* Promissory Note dated April 21, 1995 in favor of Chrysler Credit Corporation by Saturn of
Chattanooga, Inc.
10.17* Security Agreement & Master Credit Agreement (Non-Chrysler Corporation Dealer) dated April 24,
1995 between Nelson Bowers Ford, L.P. and Chrysler Credit Corporation
10.17a* Promissory Note dated April 21, 1995 in favor of Chrysler Credit Corporation by Nelson Bowers
Ford L.P.
10.18* Floor Plan Agreement dated May 6, 1996 between European Motors, LLC and NationsBank, N.A.
10.19* Floor Plan Agreement dated April 11, 1996 between KIA of Chattanooga, LLC and NationsBank,
N.A.
10.19a* Security Agreement dated April 11, 1996 between KIA of Chattanooga, LLC and NationsBank, N.A.
10.20* Floor Plan Agreement dated October 17, 1996 between European Motors of Nashville, LLC and
NationsBank, N.A.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
10.20a* Security Agreement dated October 17, 1996 between European Motors of Nashville, LLC and
NationsBank, N.A.
10.21* Floor Plan Agreement dated March 5, 1997 between Nelson Bowers Dodge, LLC (d/b/a Dodge of
Chattanooga) and NationsBank, N.A.
10.22* Security Agreement and Master Credit Agreement dated May 15, 1996 between Lake Norman Chrysler
Plymouth Jeep Eagle, LLC and Chrysler Financial Corporation
10.22a* Promissory Note dated May 15, 1996 in favor of Chrysler Financial Corporation by Lake Norman
Chrysler Plymouth Jeep Eagle, LLC
10.23* Security Agreement & Capital Loan Agreement dated May 15, 1996 between Lake Norman Dodge, Inc
and Chrysler Financial Corp.
10.23a* Promissory Note dated May 15, 1996 in favor of Chrysler Financial Corporation by Lake Norman
Dodge, Inc.
10.23b* Promissory Note dated May 15, 1996 in favor of Chrysler Financial Corporation by Lake Norman
Dodge, Inc.
10.24* Security Agreement and Master Credit Agreement (Non-Chrysler Corporation Dealer) dated May 15,
1996 between Lake Norman Chrysler Plymouth Jeep Eagle, LLC and Chrysler Financial Corporation
10.24a* Promissory Note dated May 15, 1996 in favor of Chrysler Financial Corporation by Lake Norman
Chrysler Plymouth Jeep Eagle, LLC
10.25* Floor Plan Agreement dated September 1, 1996 between NationsBank, N.A. and Dyer & Dyer, Inc.
10.25a* Security Agreement dated September 1, 1996 between NationsBank, N.A. and Dyer & Dyer, Inc.
10.26* Security Agreement and Master Credit Agreement (Non-Chrysler Corporation Dealer) dated April
21, 1995 between Cleveland Village Imports, Inc. (d/b/a Cleveland Village Honda, Inc.) and
Chrysler Credit Corporation
10.27* Jaguar Credit Corporation Automotive Wholesale Plan Application for Wholesale Financing and
Security Agreement dated March 14, 1995 by Jaguar of Chattanooga LLC
10.28* Assignment of Joint Venturer Interest in Chartown dated as of June 30, 1997 among Town and
Country Ford, Inc., SMDA LLC and Sonic Financial Corporation
10.29* Form of Employment Agreement between the Company and O. Bruton Smith
10.30* Form of Employment Agreement between the Company and Bryan Scott Smith
10.31* Form of Employment Agreement between the Company and Theodore M. Wright
10.32* Form of Employment Agreement between the Company and Nelson E. Bowers, II
10.33* Tax Allocation Agreement dated as of June 30, 1997 between the Company and Sonic Financial
Corporation
10.34* Form of Sonic Automotive, Inc. Stock Option Plan
10.35* Form of Sonic Automotive, Inc. Employee Stock Purchase Plan
10.36* Subscription Agreement dated as of June 30, 1997 between O. Bruton Smith and the Company
10.37* Subscription Agreement dated as of June 30, 1997 between Sonic Financial Corporation and the
Company
10.38* Subscription Agreement dated as of June 30, 1997 between Bryan Scott Smith and the Company
10.39* Subscription Agreement dated as of June 30, 1997 between William S. Egan and the Company
10.40* Asset Purchase Agreement dated as of May 27, 1997 by and among Sonic Auto World, Inc., Lake
Norman Dodge, Inc., Lake Norman Chrysler-Plymouth-Jeep-Eagle LLC, Quinton M. Gandy and Phil M.
Gandy, Jr. (confidential portions omitted and filed separately with the SEC)
10.41* Asset Purchase Agreement dated as of June 24, 1997 by and among Sonic Auto World, Inc., Kia of
Chattanooga, LLC, European Motors of Nashville, LLC, European Motors, LLC, Jaguar of
Chattanooga LLC, Cleveland Chrysler-Plymouth-Jeep-Eagle LLC, Nelson Bowers Dodge, LLC,
Cleveland Village Imports, Inc., Saturn of Chattanooga, Inc., Nelson Bowers Ford, L.P., Nelson
E. Bowers II, Jeffrey C. Rachor, and the other shareholders named herein (confidential
portions omitted and filed separately with the SEC)
10.42* Stock Purchase Agreement dated as of July 29, 1997 between Sonic Auto World, Inc. and Ken
Marks, Jr., O.K. Marks, Sr. and Michael J. Marks (confidential portions omitted and filed
separately with the SEC)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
10.43* Asset Purchase Agreement dated as of August 1997 by and among Sonic Automotive, Inc., Dyer &
Dyer, Inc. and Richard Dyer (confidential portions omitted and filed separately with the SEC)
10.44* Security Agreement and Master Credit Agreement dated April 21, 1995 between Cleveland Chrysler
Plymouth Jeep Eagle and Chrysler Credit Corporation
10.45 Promissory Noted dated as of August 28, 1997 by Sonic Automotive, Inc. in favor of
NationsBank, N.A.
21.1* Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2** Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 to this Registration
Statement)
24* Power of Attorney (included on the signature page to this Registration Statement)
27* Financial Data Schedule
99.1* Consent of Nelson E. Bowers, II
</TABLE>

* Filed Previously

** To be furnished by Amendment.

WORLD OMNI
FINANCIAL CORP.

(Segment of globe showing North, Central and South America)

WHOLESALE FLOOR PLAN
SECURITY AGREEMENT

<PAGE>

In the course of business, Marcus David Corp. d/b/a Town & Country Toyota,
a North Carolina corporation, ("Dealer"), acquires new and used cars, trucks and
chassis, including trailers and semi-trailers, motor homes, campers, camping
trailers, as well as equipment and accessories thereto ("Vehicles"), from
manufacturers, distributors and other sellers. Dealer requests that World
Omni Financial Corp. ("WOFCO") finance the acquisition of such Vehicles and pay
the manufacturers, distributors or sellers therefor. In consideration of WOFCO's
financing of Dealer's acquisition of the Vehicles, and in further consideration
of the inducement to WOFCO to make loans and advances to, to purchase from or
otherwise acquire retail installment contracts, conditional sales contracts or
other security instruments from, and to otherwise extend credit or to do
business with Dealer, which loans, advances, purchases, acquisitions, or
extension of credit would not have been made by, or the execution of this
Wholesale Floor Plan Security Agreement (this "Agreement"), this Agreement is
entered into between WOFCO and Dealer. Dealer and WOFCO agree to the extension
of a line of credit in the amount of Five Million Five Hundred Thousand
DOLLARS ($5,500,000.00) from WOFCO to Dealer.

As evidence of the above line of credit, Dealer agrees to execute and
deliver to WOFCO WOFCO's standard form of demand promissory note ("Demand
Promissory Note") of even date in the amount set forth above with documentary
tax statement attached thereto, if applicable. In addition thereto, all other
taxes due upon the execution of this Agreement or the Demand Promissory Note or
arising out of the transactions evidenced by such documents, if any, will be
paid by Dealer. If the line of credit is increased at any time, Dealer will
deliver to WOFCO additional Demand Promissory Notes in the amounts of such
increases which will bear interest in accordance with their terms. All the
provisions of this Agreement shall apply to the total line of credit to include
any and all increases. Failure on Dealer's part to deliver additional Demand
Promissory Notes shall not impair WOFCO's secured status as to future advances
even though the line of credit set forth above is exceeded.

Dealer agrees to pay WOFCO upon demand the amount WOFCO advances or is
obligated to advance to the manufacturer, distributor or seller for each Vehicle
with interest at the rate per annum stated in the above described Demand
Promissory Notes. If WOFCO has not made demand upon Dealer for payment of the
amount of any advance made by WOFCO to Dealer and Dealer has not sold or leased
any Vehicle for which any advance was made, the term of payment of the advance
made for Dealer's purchase of any Vehicle pursuant to this Agreement or the
Demand Promissory Notes shall be 12 months or until March 31st of the year
following the model year of the Vehicle for which the advance was made,
whichever is earlier. On those advances that have been made to enable Dealer
to purchase a Vehicle that has been used as a "demonstrator" and unless
otherwise agreed upon in writing, a monthly principal payment of 1-1/2% of
the unpaid principal balance of any such advance shall be paid by Dealer
to WOFCO beginning with the first monthly statement received by Dealer after
Dealer began using such Vehicle as a "demonstrator", with the entire
outstanding balance of such advance being due 12 months from the date such
advance was made or on March 31st of the year following the model year of
the Vehicle for which the advance was made, whichever is earlier. Dealer
understands that WOFCO, in its sole discretion, may in writing extend the
term of payment of any advance beyond 12 months or March 31st of the year
following the model year of the Vehicle for which the advance was made, but any
such extension shall not affect WOFCO's right to make demand upon Dealer for the
payment of any advance for which the payment thereof has been extended. On those
advances whose terms have been so extended, whether such advances have been made
to enable Dealer to purchase a Vehicle which has been used as a "demonstrator"
or otherwise and unless otherwise agreed upon in writing, a monthly principal
payment of 10% of the unpaid principal balance of any advance so extended shall
be paid by Dealer to WOFCO with the entire unpaid principal balance being due
and payable within 4 months from the last day of the original term of payment
of the advance as set forth hereinabove. Dealer understands that is it may sell
and lease at retail in the ordinary course of business that part of the
Collateral (as hereinafter defined) which consists of inventory. Dealer further
agrees that on or before the date on which each Vehicle is sold or leased,
Dealer will faithfully and promptly remit to WOFCO the amount WOFCO advanced or
has become obligated to advance on Dealer's behalf to the manufacturer,
distributor or seller for the purchase of the sold or leased Vehicle. Upon
WOFCO's receipt of the amount advanced by WOFCO on Dealer's behalf for the
purchase of the sold or leased Vehicle, WOFCO's security interest in the
Vehicle shall cease and shall no longer exist.

Dealer acknowledges and agrees that the relationship between Dealer and
WOFCO created by this Agreement and the Demand Promissory Note is that of
debtor-creditor and not that of joint venturers, that WOFCO is not a joint
venturer of Dealer pursuant to any other Agreement with Dealer and that Dealer
will make no representations to the contrary.

Dealer also agrees that to secure collectively the payment by Dealer of the
amounts of all advances made and obligations to advance incurred by WOFCO
pursuant to this Agreement or the Demand Promissory Notes, and the interest
due thereon any late fees, costs, attorneys' fees and any other legal
expenses charged hereunder or thereunder, and any other Obligations (as
hereinafter defined), WOFCO is hereby granted a security interest in the
Collateral (as hereinafter defined). WOFCO's security interest in the
Collateral shall attach to the proceeds, in whatever form, including the
proceeds of any retail slae or lease of Vehicles by Dealer and to the proceeds
of any other disposition of said Vehicles or any part thereof, to the fullest
extent provided or permitted by law. This security interest is given not only to
secure the payment by Dealer of such advances and obligations to advance,
including those payment and performance obligations evidenced by the above
described Demand Promissory Notes, but also to secure the payment and
performance of any other obligations Dealer has to WOFCO, whether primary,
secondary, direct, indirect, contingent, sole, joint or several, whether
presently existing or hereafter arising under present or future advances by
by WOFCO to Dealer, pursuant to this Agreement or pursuant to any other
agreement between WOFCO and Dealer whether presently existing or hereafter
executed, and also any obligations Dealer may have to third parties which may
now or hereafter be purchased by WOFCO, and any and all extensions or renewals
thereof, and also to secure the performance by Dealer of the promises,
warranties and agreements set forth herein (all of the foregoing hereinafter
called "Obligations").

-2-

<PAGE>

If, for any reason, total payments which may be deemed interest under
any of the Obligations shall be greater than the limit imposed by the usury laws
under applicable law for any interest payment period, then all sums in excess of
those lawfully collectable as interest for that period shall be applied, without
further agreement or notice, first to the reduction of principal until paid in
full with the excess, if any, being then repaid to any Obligor (as hereinafter
defined).

The Collateral subject to this Agreement is all inventory, equipment,
documents and all other property of the Dealer, whether now owned or hereafter
acquired by Dealer, including, but not limited to, all new and used Vehicles
(whether held for sale or lease, including used Vehicles which are received as
"trade-ins"), parts inventory, furniture and fixtures; all tools, parts and
equipment used with, or intended for use with, any of the foregoing; all
additions, accessories and accessions to any of the foregoing; all general
intangibles, instruments, chattel paper, accounts, books and records, contract
rights and accounts receivable of the Dealer, whether now owned or hereafter
acquired by Dealer and whether arising out of the sale or lease of any of the
foregoing or otherwise; all substitutions for any of the foregoing and all
returned and repossessed items; and all proceeds of any of the foregoing,
including insurance proceeds (all of the foregoing herein defined as the
"Collateral").

Dealer's possession of the Vehicles shall be for the purpose of
storing and exhibiting same for retail sale or lease in the regular course
of business. With the exception of used Vehicles, Dealer shall keep the
Vehicles brand new and Dealer shall not use the Vehicles, new or used,
illegally, improperly or for hire. WOFCO shall at all times have the right
of access to and inspection of the Vehicles and the right to examine Dealer's
books and records in any way relating to its business, including those
pertaining to the Vehicles. It is agreed that certain Vehicles financed
hereunder may be used as demonstrators for the purpose of promoting the sale
of these and other Vehicles. Mutually, WOFCO and Dealer will establish in
writing the number of new units to be outstanding as demonstrators at any
one time.

Dealer shall, at all times during the shipment of Vehicles, cause them
to be fully insured at Dealer's or the shipper's expense, as the case may be, in
WOFCO's favor and to WOFCO's satisfaction, and, at Dealer's own expense, to
insure the vehicles at all times thereafter for no less than the actual cash
value of the Vehicles against at least the perils of collision, fire, theft and
the perils contemplated in combined additional coverage and further agree to
maintain liability insurance, all with a financially sound and reputable insurer
acceptable to WOFCO. The insurance policy will name WOFCO as loss payee and as
an additional insured and will include a clause providing for 30 days prior
written notice to WOFCO of cancellation, material change or non-renewal. At all
times WOFCO will be provided written evidence that the insurance is in force and
WOFCO will be furnished a copy of each current policy in a timely manner. Dealer
agrees to pay promptly when due all taxes, assessments and governmental charges
upon or against Dealer or upon the Collateral or upon Dealer's property or
operations, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith by appropriate proceedings, and Dealer shall take appropriate actions
to assure that the Collateral remains free of any lien. In the event Dealer
shall fail to maintain insurance, pay taxes, assessments, costs and expenses
which Dealer is required to pay under any of the terms hereof, or fail to keep
the Collateral free from other security interests, liens or encumbrances, WOFCO
may make expenditures for any or all such purposes and the amount so expended
together with interest thereon at the rate of 18% per annum shall become
immediately due and payable by Dealer to WOFCO as an additional part of the
Obligations and shall have the benefit of and be secured by the security
interest herein granted and agreed to. Prior to default by Dealer hereunder,
payments for losses made under any policy of hazard insurance shall be applied,
at Dealer's option, to either replace Collateral or to reduce the Obligations.
After default, payments under any insurance policy shall be first applied to
the Obligations due and owing to WOFCO. After the Obligations are paid in full,
any remainder may be paid to Dealer. WOFCO is hereby granted a security interest
in unearned premiums rebated or returned upon cancellation of any insurance
policy. Dealer hereby grants WOFCO an irrevocable power of attorney, which power
of attorney shall be coupled with an interest in the Collateral, and hereby
appoints WOFCO to act as Dealer's attorney-in-fact for Dealer in obtaining,
adjusting, settling and cancelling such insurance and endorsing any draft issued
by any insurer in payment of claims. WOFCO may apply any proceeds of such
insurance which may be received by WOFCO for payment of the Obligations, whether
due or not due, on such order of applications as WOFCO may determine.

Dealer represents and warrants that the Collateral is free and clear of
all liens, security interests and other encumbrances at the time of execution of
this Agreement, except for the lien and security interest granted to WOFCO
hereunder, and that the lien and security interest granted to WOFCO hereunder is
a first priority lien on and security interest in the Collateral. Dealer further
covenants that as of the time of each advance made under any Demand Promissory
Note, WOFCO's lien on and security interest in the Collateral shall be a first
priority lien and security interest. Dealer shall not mortgage, pledge or loan
the Collateral and shall not transfer or otherwise dispose of it except as
provided herein. Dealer shall execute in favor of WOFCO any forms or documents
which may be required for the amounts advanced pursuant to this Agreement, and
shall execute such additional documents as WOFCO may at any time request in
order to confirm or perfect title or a security interest in the Collateral.
Execution by Dealer of any instrument for the amount advanced shall be deemed
evidence of Dealer's obligation and not payment therefor. Dealer hereby grants
to WOFCO an irrevocable power of attorney, which power of attorney shall be
coupled with an interest in the Collateral, and hereby appoints WOFCO or any of
WOFCO's officers as Dealer's attorney-in-fact to execute documents, promissory
notes or other instruments on Dealer's behalf and to supply any omitted
information and correct patent errors in any documents executed by Dealer or on
its behalf pursuant to or in furtherance of this Agreement.

Dealer certifies that any information concerning its business
organization or financial condition furnished or that may be furnished in the
future to WOFCO is true and correct and fairly presents the financial condition
of Dealer in accordance with generally accepted accounting principles. Dealer
agrees to furnish such information to WOFCO at such times (on at least a
monthly basis) and in such form as WOFCO may request.

-3-

<PAGE>

Except as otherwise specifically set forth herein or agreed to in
writing by WOFCO and Dealer, any action, dispute, claim or controversy between
or among the parties, whether sounding in contract, tort, or otherwise
("Dispute"), shall be resolved by arbitration as set forth below, and shall
include any Dispute arising out of or in connection with (1) this Agreement, any
Demand Promissory Note, or any related agreements or instruments, (2) all past,
present, and future agreements involving the parties, (3) any transaction
contemplated hereby and all past, present, and future transactions involving the
parties, and (4) any aspect of the past, present, or future relationships of
the parties. Such disputes shall be resolved by binding arbitration in
accordance with Title 9 of the United States Code and the Commercial Arbitration
Rules of the American Arbitration Association. In the event of any inconsistency
between such Rules and these arbitration provisions, these provisions shall
supersede such Rules. All statutes of limitations which would otherwise be
applicable shall apply to any arbitration proceeding described herein. In any
arbitration proceeding subject to these provisions, the arbitrators are
specifically empowered to decide (by documents only, or with a hearing, at the
arbitrators' sole discretion) pre-hearing motions which are substantially
similar to pre-hearing notions to dismiss and motions for summary adjudication.
Any arbitration proceeding subject to these provisions shall be conducted in
the state in which the Dealer's place of business for the sale of Vehicles is
located and in the county in such state in which WOFCO's principal place of
business in that state is located. Judgment upon the award rendered may be
entered in any court of appropriate subject matter jurisdiction, which judgment
may be domesticated in any jurisdiction for purposes of enforcement. The parties
to this Agreement expressly subject themselves to the personal jurisdiction of
any such court for the entry of any such judgement and for the resolution of
any dispute, action, or suit arising in connection with the entry of such
judgement. Any Dispute subject to arbitration proceedings in accordance with
this Agreement shall be decided by a majority vote of three arbitrators. The
arbitrators shall have the power to award recovery of all costs and fees
(including attorneys' fees, administrative fees, arbitrator's fees and court
costs) to the prevailing party.

No provision of, nor the exercise of any rights under the preceding
paragraph, shall limit the right of WOFCO (1) to foreclose against Collateral by
the exercise of a power of sale under this Agreement or applicable law, (2) to
exercise self-help remedies including, without limitation, setoff and
repossession, (3) to obtain provisional or ancillary remedies such as injunctive
relief, attachment, or the appointment of a receiver from a court having
jurisdiction before, during, or after the pendency of any arbitration
proceeding, or (4) to otherwise exercise its rights in and to the Collateral or
its remedies as a secured creditor under Article 9 of the Uniform Commercial
Code (as adopted in the state which laws govern the construction and
enforceability of this Agreement, as set forth below) or as set forth in this
Agreement. The institution and maintenance of an action for judicial relief or
pursuit of provisional or ancillary remedies or exercise of self-help remedies
shall not constitute a waiver of the right of any party to submit the Dispute
to arbitration.

In the event it shall be determined for any reason that any Dispute
shall not be subject to arbitration as set forth herein, DEALER HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY in
respect to any litigation arising out of or in connection with (1) this
Agreement, any Demand Promissory Note, or any related agreements or instruments,
(2) all past, present, and future agreements involving the parties, (3) any
transaction contemplated hereby, and all past, present, and future transactions
involving the parties, and (4) any aspect of the past, present, or future
relationships of the parties. This waiver of trial by provision is a material
inducement for WOFCO to enter into this Agreement.

This Agreement shall be governed by and construed and enforced under the
laws of the State of North Carolina without regard to its conflict of laws
principles.

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed under its hand and seal by its duly authorized representative this 5th
day of October, 1990.

WORLD OMNI FINANCIAL CORP. Marcus David Corp. d/b/a Town & Country
Toyota
(Dealer's Name)

By: /s/ (Signature Illegible) (SEAL) 9101 South Blvd.

Charlotte, NC 28217

(CORPORATE SEAL) ________________________________________
(Address of current principal place of
business, or if more than one, current
chief executive officer, or Dealer)

By: /s/ Ollen Bruton Smith (SEAL)
Ollen Bruton Smith, President

Attest: /s/ William R. Brooks (SEAL)
William R. Brooks, Secretary

(CORPORATE SEAL)

Other corporate and trade names of Dealer (or any predecessor in interest
thereto) and locations of its principal place of business and chief executive
office of Dealer (or any predecessor in interest thereto) during the past seven
years.

__________________________________ ________________________________________
(Name) (Name)

__________________________________ ________________________________________

__________________________________ ________________________________________
(Address) (Address)

-6-

<PAGE>

Exhibit 10.45

NationsBank, N.A.

Promissory Note
Customer # 96-4881

Date August 28, 1997 [X] New [ ] Renewal Amount $20,000,000.00 Maturity Date
February 15, 1998

Bank: Borrower:

NationsBank, N.A.
Banking Center:

Private Client Group Sonic Automotive, Inc.
101 So. Tryon Street 5401 E. Independence Blvd.
Charlotte, NC 28255-0001 Charlotte, NC 28218

County: Mecklenburg County: Mecklenburg

FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of Twenty Million and 00/100---Dollars($20,000,000.00), or so
much thereof as may be advanced from time to time in immediately available
funds, together with interest computed daily on the outstanding principal
balance hereunder, at an annual interest rate, and in accordance with the
payment schedule, indicated below.

[THIS NOTE CONTAINS SOME PROVISIONS PRECEDED BY BOXES. IF A BOX IS MARKED, THE
PROVISION APPLIES TO THIS TRANSACTION; IF IT IS NOT MARKED, THE PROVISION DOES
NOT APPLY TO THIS TRANSACTION.]

1. RATE.

FIXED RATE. The Rate shall be fixed at 7.75 percent per annum.

Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of the State of North
Carolina; if any higher rate ceiling is lawful, then that higher rate ceiling
shall apply. Any payment in excess of such maximum shall be refunded to Borrower
or credited against principal, at the option of Bank.

2. ACCRUAL METHOD. Unless otherwise indicated, interest at the Rate set forth
above will be calculated by the 365/360 day method (a daily amount of interest
is computed for a hypothetical year of 360 days; that amount is multiplied by
the actual number of days for which any principal is outstanding hereunder). If
interest is not to be computed using this method, the method shall be: N/A.

3. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the index
or base rate changes. If the Rate is to change on any other date or at any other
interval, the change shall be: N/A. In the event any index is discontinued, Bank
shall substitute an index determined by Bank to be comparable, in its sole
discretion.

4. PAYMENT SCHEDULE. All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or under any other loan
documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.

SINGLE PRINCIPAL PAYMENT. Principal shall be paid in full in a single payment on
February 15, 1998. Interest thereon shall be paid monthly, commencing on
September 28, 1997, and continuing on the same day of each successive month,
quarter or other period (as applicable) thereafter, with a final payment of all
unpaid interest at the stated maturity of this Note.

5. REVOLVING FEATURE.

[X] Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate amount outstanding at any one time equal to the principal
amount of this Note, provided, that Borrower is not in default under any
provision of this Note, any other documents executed in connection with this
Note, or any other note or other loan documents now or hereafter executed in
connection with any other obligation of Borrower to Bank, and provided that the
borrowings hereunder do not exceed any borrowing base or other limitation on
borrowings by Borrower. Bank shall incur no liability for its refusal to
advance funds based upon its determination that any conditions of such further
advances have not been met. Bank records of the amounts borrowed from time to
time shall be conclusive proof thereof.

[ ] UNCOMMITTED FACILITY. Borrower acknowledges and agrees that,
notwithstanding any provisions of this Note or any other documents executed
in connection with this Note, Bank has no obligation to make any advance,
and that all advances are at the sole discretion of Bank.

[ ] OUT-OF-DEBT PERIOD. For a period of at least __ consecutive days during
[ ] each fiscal year, [ ] any consecutive 12-month period, Borrower shall
fully pay down the balance of this Note, so that no amount of principal or
interest and no other obligation under this Note remains outstanding.

6. AUTOMATIC PAYMENT.

[ ] Borrower has elected to authorize Bank to effect payment of sums due under
this Note by means of debiting

1 Approved: 09-21-95
Revised: 06-21-96
NC041

<PAGE>

Borrower's account number ____________________. This authorization shall not
affect the obligation of Borrower to pay such sums when due, without notice, if
there are insufficient funds in such account to make such payment in full on the
due date thereof, or if Bank fails to debit the account.

7. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser, or guarantor hereof
or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any indorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors, or
release, substitution or exchange of any security for the payment hereof, or the
failure to act on the part of Bank, or any indulgence shown by Bank (without
notice to or further assent from any of Obligors), and agree that no such
action, failure to act or failure to exercise any right or remedy by Bank shall
in any way affect or impair the obligations of any Obligors or be construed as a
waiver by Bank of, or otherwise affect, any of Bank's rights under this Note,
under any indorsement or guaranty of this Note or under any of the Loan
Documents; and (c) agree to pay, on demand, all costs and expenses of collection
or defense of this Note or of any indorsement or guaranty hereof and/or the
enforcement or defense of Bank's rights with respect to, or the administration,
supervision, preservation, protection of, or realization upon, any property
securing payment hereof, including, without limitation, reasonable attorney's
fees, including fees related to any suit, mediation or arbitration proceeding,
out of court payment agreement, trial, appeal, bankruptcy proceedings or other
proceeding, in the amount of 15% of the outstanding balance due under this Note.

8. PREPAYMENTS. Prepayments may be made in whole or in part at any time on any
loan for which the Rate is based on the Prime Rate. All prepayments of principal
shall be applied in the inverse order of maturity, or in such other order as
Bank shall determine in its sole discretion. Except as may be prohibited by
applicable law, no prepayment of any other loan shall be permitted without the
prior written consent of Bank. Notwithstanding such prepayment prohibition, if
there is a prepayment of any such loan, whether by consent of Bank, or because
of acceleration or otherwise, Borrower shall, within 15 days of any request by
Bank, pay to Bank, unless prohibited by applicable law, any loss or expense
which Bank may incur or sustain as a result of such prepayment. For the purposes
of calculating the amounts owed only, it shall be assumed that Bank actually
funded or committed to fund the loan through the purchase of an underlying
deposit in an amount and for a term comparable to the loan, and such
determination by Bank shall be conclusive, absent a manifest error in
computation.

9. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four percent (4%) of the unpaid portion of
any payment that is more than fifteen days late. Unless the terms of this Note
call for repayment of the entire balance of this Note (both principal and
interest) in a single payment and not for installments of interest or principal
and interest, the 4% delinquency charge may be imposed not only with respect to
regular installments of principal or interest or principal and interest, but
also with respect to any other payment in default under this Note (other than a
previous delinquency charge), including without limitation a single payment of
principal due at the maturity of this Note. In the event any installment, or
portion thereof, is not paid in a timely manner, subsequent payments will be
applied first to the past due balance (which shall not include any previous
delinquency charges), specifically to the oldest maturing installment, and a
separate delinquency charge will be imposed for each payment that becomes due
until the default is cured.

10. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to any other party;
(c) the death of any Obligor (if an individual); (d) the resignation or
withdrawal of any partner or a material owner/Guarantor of Borrower, as
determined by Bank in its sole discretion; (e) the commencement of a proceeding
against any Obligor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Obligor or the merger or consolidation of any
Obligor with or into another entity; (f) the insolvency of, the business failure
of, the appointment of a custodian, trustee, liquidator or receiver for or for
any of the property of, the assignment for the benefit of creditors by, or the
filing of a petition under bankruptcy, insolvency or debtor's relief law or the
filing of a petition for any adjustment of indebtedness, composition or
extension by or against any Obligor; (g) the determination by Bank that any
representation or warranty made to Bank by any Obligor in any Loan Documents or
otherwise is or was, when it was made, untrue or materially misleading; (h) the
failure of any Obligor to timely deliver such financial statements, including
tax returns, other statements of condition or other information, as Bank shall
request from time to time; (i) the entry of a judgment against any Obligor which
Bank deems to be of a material nature, in Bank's sole discretion; (j) the
seizure or forfeiture of, or the issuance of any writ of possession, garnishment
or attachment, or any turnover order for any property of any Obligor; (k) the
determination by Bank that it is insecure for any reason; (l) the determination
by Bank that a material adverse change has occurred in the financial condition
of any Obligor; or (m) the failure of Borrower's business to comply with any
law or regulation controlling its operation.

11. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor
to Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the maximum rate allowed by law, or if
none, 25% per annum (the "Default Rate"). The provisions herein for a Default
Rate and a delinquency charge shall not be deemed to extend the time for any
payment hereunder or to constitute a "grace period" giving Obligors a right to
cure any default. At Bank's option, any accrued and unpaid interest, fees or
charges may, for purposes of computing and accruing interest on a daily basis
after the due date of the Note or any installment thereof, be deemed to be a
part of the principal balance, and interest shall accrue on a daily compounded
basis after such date at the Default Rate provided in this Note until the entire
outstanding balance of principal and interest is paid in full. Bank is hereby
authorized at any time to set off and charge against any deposit accounts of any
Obligor, as well as any money, instruments, securities, documents, chattel
paper, credits, claims, demands, income and any other property, rights and
interests of any Obligor which at any time shall come into the possession or
custody or under the control of Bank or any of its agents, affiliates or
correspondents, without notice or demand, any and all obligations due hereunder.
Additionally, Bank shall have all rights and remedies available under each of
the Loan Documents, as well as all rights and remedies available at law or in
equity.

12. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of

NC041 2 Approved: 09-21-95
Revised: 06-21-96

<PAGE>

Bank's rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligor to
Bank in any other respect at any other time.

13. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of North Carolina. In any litigation in
connection with or to enforce this Note or any indorsement or guaranty of this
Note or any Loan Documents, Obligors, and each of them, irrevocably consent to
and confer personal jurisdiction on the courts of the State of North Carolina
or the United States located within the State of North Carolina and expressly
waive any objections as to venue in any such courts. Nothing contained herein
shall, however, prevent Bank from bringing any action or exercising any rights
within any other state or jurisdiction or from obtaining personal jurisdiction
by any other means available under applicable law.

14. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of
this Note or of the Loan Documents to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to
other persons or circumstances.

15. BINDING EFFECT. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without prior written consent of Bank.

16. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is in
any way incompatible with any other Loan Document concerning this obligation,
the Note shall control over any other document, and if the Note does not
address an issue, then each other document shall control to the extent that it
deals most specifically with an issue.

17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING
A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER
SUCH ACTION.

A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION,
THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS
WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.

B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT
OR DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY
12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT
THE RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES
SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE
APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE
UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE,
DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO
THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF
THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.

Borrower represents to Bank that the proceeds of this loan are to be used
primarily for business, commercial or agricultural purposes. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.

NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Borrower Corporate or Partnership Borrower

____________________________ (Seal) Sonic Automotive, Inc.

____________________________ (Seal) By: /s/ O. Bruton Smith
------------------------- (Seal)
Name: O. Bruton Smith

Title: President & CEO

???
------------------------------------
Attest (If Applicable)

(Corporate Seal of Delaware Sonic
Automotive, Inc.)

<PAGE>

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and Stockholders
Sonic Automotive, Inc.

We consent to the use in this Amendment No. 2 to the Registration Statement
relating to shares of Class A Common Stock of Sonic Automotive, Inc. on Form S-1
of (i) our report dated September 23, 1997 on the combined financial statements
of Sonic Automotive, Inc. and Affiliated Companies as of December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996; (ii)
our report dated August 7, 1997 on the financial statements of Dyer & Dyer, Inc.
as of December 31, 1995 and 1996 and for each of the three years in the period
ended December 31, 1996; (iii) our report dated August 7, 1997 on the combined
financial statements of Bowers Dealerships and Affiliated Companies as of
December 31, 1995 and 1996 and for the years then ended; (iv) our report dated
August 7, 1997 (September 29, 1997 as to Note 1) on the combined financial
statements of Lake Norman Dodge, Inc. and Affiliated Companies as of and for the
year ended December 31, 1996; and (v) our report dated August 26, 1997 on the
financial statements of Ken Marks Ford, Inc. as of and for the year ended April
30, 1997 appearing in the Prospectus, which is a part of this Amendment No. 2 to
the Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.

DELOITTE & TOUCHE LLP

Charlotte, North Carolina
October 3, 1997