4.Auto Loan Receivables

Auto loan receivables include amounts due from customers related to retail vehicle sales financed through CAF and are presented net of an allowance for estimated loan losses. We use warehouse facilities to fund auto loan receivables originated by CAF until we elect to fund them through a term securitization or alternative funding arrangement. The majority of the auto loan receivables serve as collateral for the related non-recourse notes payable of $8.18 billion as of November 30, 2014, and $7.25 billion as of February 28, 2014. See Notes 2 and 10 for additional information on securitizations and non-recourse notes payable.

Auto Loan Receivables, Net


	As of November 30		As of February 28
(In millions)		2014		2014
Warehouse facilities	$	959.0	$	879.0
Term securitizations		6,979.6		6,145.5
Other receivables (1)		247.9		159.9
Total ending managed receivables		8,186.5		7,184.4
Accrued interest and fees		32.7		26.3
Other		(0.5)		7.0
Less allowance for loan losses		(80.4)		(69.9)
Auto loan receivables, net	$	8,138.3	$	7,147.8

(1)Other receivables includes receivables not funded through the warehouse facilities or term securitizations.

Credit Quality. When customers apply for financing, CAF’s proprietary scoring models rely on the customers’ credit history and certain application information to evaluate and rank their risk. We obtain credit histories and other credit data that includes information such as number, age, type and payment history for prior or existing credit accounts. The application information that is used includes income, collateral value and down payment. The scoring models yield credit grades that represent the relative likelihood of repayment. Customers assigned a grade of “A” are determined to have the highest probability of repayment, and customers assigned a lower grade are determined to have a lower probability of repayment. For loans that are approved, the credit grade influences the terms of the agreement, such as the required loan-to-value ratio and interest rate.

CAF uses a combination of the initial credit grades and historical performance to monitor the credit quality of the auto loan receivables on an ongoing basis. We validate the accuracy of the scoring models periodically. Loan performance is reviewed on a recurring basis to identify whether the assigned grades adequately reflect the customers’ likelihood of repayment.

Ending Managed Receivables by Major Credit Grade


		As of November 30		As of February 28
(In millions)		2014 (1)	% (2)		2014 (1)	% (2)
A	$	4,020.4	49.1	$	3,506.0	48.8
B		2,969.7	36.3		2,658.5	37.0
C and other		1,196.4	14.6		1,019.9	14.2
Total ending managed receivables	$	8,186.5	100.0	$	7,184.4	100.0

(1)Classified based on credit grade assigned when customers were initially approved for financing.

(2)Percentage of total ending managed receivables.

Allowance for Loan Losses


	Three Months Ended November 30						Nine Months Ended November 30
(In millions)		2014	% (1)		2013	% (1)		2014	% (1)		2013	% (1)
Balance as of beginning of period	$	77.8	0.99	$	65.9	0.99	$	69.9	0.97	$	57.3	0.97
Charge-offs		(43.8)			(36.3)			(112.7)			(94.5)
Recoveries		22.3			18.6			62.9			56.1
Provision for loan losses		24.1			19.7			60.3			49.0
Balance as of end of period	$	80.4	0.98	$	67.9	0.98	$	80.4	0.98	$	67.9	0.98

(1)Percentage of total ending managed receivables as of the corresponding reporting date.

The allowance for loan losses represents an estimate of the amount of net losses inherent in our portfolio of managed receivables as of the applicable reporting date and anticipated to occur during the following 12 months. The allowance is primarily based on the credit quality of the underlying receivables, historical loss trends and forecasted forward loss curves. We also take into account recent trends in delinquencies and losses, recovery rates and the economic environment. The provision for loan losses is the periodic expense of maintaining an adequate allowance.

Past Due Receivables


		As of November 30		As of February 28
(In millions)		2014	% (1)	2014		% (1)
Total ending managed receivables	$	8,186.5	100.0	$	7,184.4	100.0

Delinquent loans:
31-60 days past due	$	173.6	2.2	$	126.6	1.8
61-90 days past due		60.0	0.7		42.6	0.6
Greater than 90 days past due		17.4	0.2		16.0	0.2
Total past due	$	251.0	3.1	$	185.2	2.6

(1)Percentage of total ending managed receivables.