Fair Value

The Company assesses the inputs used to measure fair value using a three-tier hierarchy.

Level 1 inputs include quoted prices for identical instruments and are the most observable.

Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity prices, and yield curves. The Company uses the market approach to derive the fair value for its Level 2 fair value measurements. Forward contracts for foreign currency, commodities, and treasury rate locks are valued using quoted forward rates and prices; interest rate swaps are valued using quoted interest rates and yield curves; investments in marketable securities and cash equivalents are valued using quoted prices.

Level 3 inputs are not observable in the market and include management's judgments about the assumptions market participants would use in pricing the asset or liability.

Recurring Fair Value Measurements

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31 (in thousands):



	2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	998,601	$	728,800	$	269,801	$	—
Marketable securities	54,250		44,243		10,007		—
Derivatives	15,071		—		15,071		—
Total	$	1,067,922	$	773,043	$	294,879	$	—
Liabilities:
Derivatives	$	5,316	$	—	$	5,316	$	—



	2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	488,432	$	358,500	$	129,932	$	—
Marketable securities	48,006		48,006		—		—
Derivatives	1,769		—		1,769		—
Total	$	538,207	$	406,506	$	131,701	$	—
Liabilities:
Derivatives	$	21,308	$	—	$	21,308	$	—

Nonrecurring Fair Value Measurements

Repossessed inventory is recorded at the lower of cost or net realizable value through a nonrecurring fair value measurement. Repossessed inventory was $20.2 million and $19.6 million, for which the fair value adjustment was $9.7 million and $9.0 million, at December 31, 2018 and 2017, respectively. Fair value is estimated using Level 2 inputs based on the recent market values of repossessed inventory.

Fair Value of Financial Instruments Measured at Cost

The carrying value of the Company’s cash and cash equivalents and restricted cash approximates their fair values.

The following table summarizes the fair value and carrying value of the Company’s remaining financial instruments that are measured at cost or amortized cost at December 31 (in thousands):



	2018				2017
	Fair Value		Carrying Value		Fair Value		Carrying Value
Assets:
Finance receivables, net	$	7,304,334	$	7,221,931	$	7,021,549	$	6,965,086
Liabilities:
Unsecured commercial paper	$	1,135,810	$	1,135,810	$	1,273,482	$	1,273,482
Asset-backed U.S. commercial paper conduit facilities	$	582,717	$	582,717	$	279,457	$	279,457
Asset-backed Canadian commercial paper conduit facility	$	155,951	$	155,951	$	174,779	$	174,779
Medium-term notes	$	4,829,671	$	4,887,007	$	4,189,092	$	4,165,706
Senior unsecured notes	$	707,198	$	742,624	$	784,433	$	741,961
Asset-backed securitization debt	$	94,974	$	95,167	$	351,767	$	352,624

Finance Receivables, Net – The carrying value of retail and wholesale finance receivables in the financial statements is amortized cost less an allowance for credit losses. The fair value of retail finance receivables is generally calculated by discounting future cash flows using an estimated discount rate that reflects current credit, interest rate and prepayment risks associated with similar types of instruments. Fair value is determined based on Level 3 inputs. The amortized cost basis of wholesale finance receivables approximates fair value because they either are short-term or have interest rates that adjust with changes in market interest rates.

Debt – The carrying value of debt in the financial statements is generally amortized cost, net of discounts and debt issuance costs. The carrying value of unsecured commercial paper calculated using Level 2 inputs approximates fair value due to its short maturity. The carrying value of debt provided under the U.S. conduit facilities and Canadian conduit facility calculated using Level 2 inputs approximates fair value since the interest rates charged under the facility are tied directly to market rates and fluctuate as market rates change. The fair values of the medium-term notes and senior unsecured notes are estimated based upon rates currently available for debt with similar terms and remaining maturities (Level 2 inputs). The fair value of the debt related to on-balance sheet asset-backed securitization transactions is estimated based on pricing currently available for transactions with similar terms and maturities (Level 2 inputs).