Fair Value Of Financial Instruments

12 Months Ended

Dec. 31, 2013

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

3.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 TPPs 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 generally based on quoted market values in active markets.  For commercial paper and certificates of deposit, we use model-based valuation techniques for which all significant assumptions are observable in the market.

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.

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 millions)	As of December 31,
	2013				2012
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets
Cash and cash equivalents	$	4.2	$	4.2	$	9.0	$	9.0
Restricted cash and cash equivalents		111.3		111.3		92.4		92.4
Restricted securities available for sale		53.6		53.6		46.1		46.1
Net investment in Loans receivable		2,212.8		2,226.7		1,933.5		1,951.4
Liabilities
Revolving secured line of credit	$	102.8	$	102.8	$	43.5	$	43.5
Secured financing		935.6		938.9		853.0		863.0
Mortgage note		3.8		3.8		4.0		4.0
Senior notes		350.2		367.1		350.3		381.9

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 December 31, 2013 and 2012:

(In millions)
	As of December 31, 2013
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and cash equivalents	$	4.2	$	–	$	–	$	4.2
Restricted cash and cash equivalents		111.3		–		–		111.3
Restricted securities available for sale		25.1		28.5		–		53.6
Net investment in Loans receivable		–		–		2,226.7		2,226.7
Liabilities
Revolving secured line of credit	$	–	$	102.8	$	–	$	102.8
Secured financing		–		938.9		–		938.9
Mortgage note		–		3.8		–		3.8
Senior notes		367.1		–		–		367.1
(In millions)
	As of December 31, 2012
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and cash equivalents	$	9.0	$	–	$	–	$	9.0
Restricted cash and cash equivalents		92.4		–		–		92.4
Restricted securities available for sale (1)		24.0		22.1		–		46.1
Net investment in Loans receivable		–		–		1,951.4		1,951.4
Liabilities
Revolving secured line of credit	$	–	$	43.5	$	–	$	43.5
Secured financing		–		863.0		–		863.0
Mortgage note		–		4.0		–		4.0
Senior notes		381.9		–		–		381.9

(1) Certificates of deposit totaling $3.3 million were reclassified from Level 1 to Level 2 to agree with current year presentation.