Lithia Motors, Inc. Announces Proposed Convertible Debt Offering

MEDFORD, Ore.--April 26, 2004--Lithia Motors, Inc. today announced that it proposes to offer $85 million of senior subordinated convertible notes due 2014, through a Rule 144A offering to qualified institutional buyers. These notes will be senior subordinated obligations of the Company and will be convertible into Lithia Motors Class A common stock at a price to be determined. The Company has granted the initial purchasers of the notes an option to purchase an additional $15 million principal amount of the notes.

The notes are expected to be redeemable at the Company's option beginning on May 6, 2009 at a redemption price of 100% of the principal amount plus accrued interest, if any. Holders of the notes are expected to have the right to require the Company to repurchase all or some of their notes on May 1, 2009 and upon certain events constituting a fundamental change.

The Company intends to use the net proceeds from this offering to pay off amounts currently outstanding on its used vehicle and working capital line and to pay portions of its new vehicle flooring notes payable or for other corporate purposes. The Company's used vehicle and working capital line will remain available for future borrowings.

The notes and common stock issuable upon conversion of the notes have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws, and unless so registered, may not be offered or sold in the United States, except pursuant to an applicable exemption from the registration requirements of the Securities Act of 1933, as amended, and applicable state securities laws.

This press release does not constitute an offer to sell or the solicitation of an offer to buy securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act of 1933, as amended.

This press release includes forward looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to certain risk factors, including without limitation risk factors set forth from time to time in the Company's filings with the SEC. Specific risks in this press release include market and other conditions or events that may affect the Company's ability to complete the proposed financing or to use the net proceeds as intended.

Contact: Jeff DeBoer, Senior VP and Chief Financial Officer 541-776-6868 (E-mail: invest@lithia.com) or Dan Retzlaff, Director Investor Relations at 541-776-6819 (dretzlaff@lithia.com) or log-on to: www.lithia.com -- go to About Lithia -- Investor Relations.