Fair Value Of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

7.           FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate their value.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents.  The carrying amount of cash and cash equivalents and restricted cash and cash equivalents approximate their fair value due to the short maturity of these instruments.

Restricted Securities Available for Sale.  Restricted securities consist of amounts held in trusts by TPAs to pay claims on vehicle service contracts.  Securities for which we do not have the intent or ability to hold to maturity are classified as available for sale and stated at fair value.  The fair value of restricted securities are based on quoted market values.

Net Investment in Loans Receivable.  Loans receivable, net represents our net investment in Loans.  The fair value is determined by calculating the present value of future Loan payment inflows and Dealer Holdback outflows estimated by us utilizing a discount rate comparable with the rate used to calculate our allowance for credit losses.

Derivative Instruments.  The fair value of interest rate caps and interest rate swaps are based on quoted prices for similar instruments in active markets, which are influenced by a number of factors, including interest rates, notional amount of the derivative, and number of months until maturity.

Liabilities.  The fair value of our Senior Notes is determined using quoted market prices in an active market.  The fair value of our Term ABS financings is also determined using quoted market prices, however, these instruments trade in a market with much lower trading volume.  For our Revolving Secured Line of Credit, our Warehouse Facilities and our mortgage note, the fair values are calculated using the estimated value of each debt instrument based on current rates for debt with similar risk profiles and maturities.

A comparison of the carrying value and estimated fair value of these financial instruments is as follows:

(In thousands)
	As of September 30, 2012				As of December 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets
Cash and cash equivalents	$	5,725	$	5,725	$	4,657	$	4,657
Restricted cash and cash equivalents		167,706		167,706		104,679		104,679
Restricted securities available for sale		0		0		810		810
Net investment in Loans receivable		1,876,718		1,895,056		1,598,573		1,615,009
Derivative instruments		18		18		16		16
Liabilities
Revolving secured line of credit	$	115,800	$	115,800	$	43,900	$	43,900
Secured financing		791,850		801,226		599,281		598,622
Mortgage note		4,104		4,104		4,288		4,288
Senior notes		350,307		385,875		350,378		365,500

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.  We group assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates or assumptions that market participants would use in pricing the asset or liability.

The following table provides the level of measurement used to determine the fair value for each of our financial instruments on a recurring basis, as of September 30, 2012 and December 31, 2011:

(In thousands)
	As of September 30, 2012
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and cash equivalents	$	5,725	$	–	$	–	$	5,725
Restricted cash and cash equivalents		167,706		–		–		167,706
Restricted securities available for sale		0		–		–		0
Net investment in Loans receivable		–		–		1,895,056		1,895,056
Derivative instruments		–		18		–		18
Liabilities
Revolving secured line of credit	$	–	$	115,800	$	–	$	115,800
Secured financing		–		801,226		–		801,226
Mortgage note		–		4,104		–		4,104
Senior notes		385,875		–		–		385,875
(In thousands)
	As of December 31, 2011
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and cash equivalents	$	4,657	$	–	$	–	$	4,657
Restricted cash and cash equivalents		104,679		–		–		104,679
Restricted securities available for sale		810		–		–		810
Net investment in Loans receivable		–		–		1,615,009		1,615,009
Derivative instruments		–		16		–		16
Liabilities
Revolving secured line of credit	$	–	$	43,900	$	–	$	43,900
Secured financing		–		598,622		–		598,622
Mortgage note		–		4,288		–		4,288
Senior notes		365,500		–		–		365,500