VEHICLE SERVICE AGREEMENT LIABILITY

Vehicle service agreement fees include the fees collected to cover the costs of future automobile mechanical breakdown claims and the associated administration of those claims. Vehicle service agreement fees are initially recorded as deferred service fees. On a quarterly basis, the Company compares the remaining deferred service fees balance to the estimated amount of expected future claims under the vehicle service agreement contracts and records an additional accrual when the deferred service fees balance is less than expected future claims costs.

A reconciliation of the changes in the vehicle service agreement liability, including deferred service fees related to vehicle service agreements, as of June 30, 2018 and June 30, 2017, were as follows:



(in thousands)	June 30, 2018			June 30, 2017
Balance at January 1, net	$	40,794		$	38,713
Gross service fees for vehicle service agreements sold	11,166			10,015
Recognition of service fees on vehicle service agreements	(9,588		)	(8,848		)
Liability for claims authorized on vehicle service agreements	2,764			2,679
Payments of claims authorized on vehicle service agreements	(2,950		)	(2,716		)
Re-estimation of deferred service fees	(165		)	(122		)
Balance at June 30, net	$	42,021		$	39,721

The vehicle service agreement liability is presented as components of deferred services fees and accrued expenses and other liabilities in the consolidated balance sheets as follows at June 30, 2018 and December 31, 2017:



(in thousands)	June 30,		December 31,
	2018		2017
Deferred service fees	$	41,758	$	40,531
Accrued expenses and other liabilities	263		263
Balance at June 30, net	$	42,021	$	40,794