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Auto Loan Receivables | 12 Months Ended
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Feb. 28, 2021
Loans and Leases Receivable, Net Amount [Abstract] |
Auto Loan Receivables | AUTO LOANS RECEIVABLE Auto loans receivable include amounts due from customers related to retail vehicle sales financed through CAF and are presented net of an allowance for estimated loan losses. These auto loans represent a large group of smaller-balance homogeneous loans, which we consider to be part of one class of financing receivable and one portfolio segment for purposes of determining our allowance for loan losses. We generally use warehouse facilities to fund auto loans receivable originated by CAF until we elect to fund them through an asset-backed term funding transaction. The majority of the auto loans receivable serve as collateral for the related non-recourse notes payable of $13.76 billion as of February 28, 2021, and $13.61 billion as of February 29, 2020. See Notes 1(F) and 11 for additional information on securitizations and non-recourse notes payable. Interest income and expenses related to auto loans are included in CAF income. Interest income on auto loans receivable is recognized when earned based on contractual loan terms. All loans continue to accrue interest until repayment or charge-off. When a charge-off occurs, accrued interest is written off by reversing interest income. Direct costs associated with loan originations are not considered material, and thus, are expensed as incurred. See Note 3 for additional information on CAF income. Auto Loans Receivable, Net
| As of February 28 or 29
(In millions) | 2021 |  | 2020
Asset-backed term funding | $ | 11,008.3 |  |  | $ | 11,007.1 |
Warehouse facilities | 2,314.1 |  |  | 2,181.7 |
Overcollateralization (1) | 345.2 |  |  | 289.0 |
Other managed receivables (2) | 179.6 |  |  | 140.0 |
Total ending managed receivables | 13,847.2 |  |  | 13,617.8 |
Accrued interest and fees | 57.4 |  |  | 56.2 |
Other | (3.7) |  |  | 35.5 |
Less: allowance for loan losses | (411.1) |  |  | (157.8) |
Auto loans receivable, net | $ | 13,489.8 |  |  | $ | 13,551.7 |
(1)Represents receivables restricted as excess collateral for the non-recourse funding vehicles. (2)Other managed receivables includes receivables not funded through the non-recourse funding vehicles. 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 of 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 with the highest probability of repayment are A-grade customers. 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. After origination, credit grades are generally not updated. CAF uses a combination of the initial credit grades and historical performance to monitor the credit quality of the auto loans receivable 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 February 28, 2021
| Fiscal Year of Origination (1) |  |  |  |
(In millions) | 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | Prior to 2017 |  | Total |  | % (2)
A | $ | 2,782.0 |  |  | $ | 2,146.5 |  |  | $ | 1,146.7 |  |  | $ | 568.9 |  |  | $ | 199.6 |  |  | $ | 30.4 |  |  | $ | 6,874.1 |  |  | 49.6 |
B | 1,993.6 |  |  | 1,424.5 |  |  | 870.1 |  |  | 476.0 |  |  | 195.5 |  |  | 49.2 |  |  | 5,008.9 |  |  | 36.2 |
C and other | 786.1 |  |  | 541.6 |  |  | 320.4 |  |  | 182.0 |  |  | 99.8 |  |  | 34.3 |  |  | 1,964.2 |  |  | 14.2 |
Total ending managed receivables | $ | 5,561.7 |  |  | $ | 4,112.6 |  |  | $ | 2,337.2 |  |  | $ | 1,226.9 |  |  | $ | 494.9 |  |  | $ | 113.9 |  |  | $ | 13,847.2 |  |  | 100.0 |
| As of February 29
(In millions) | 2020 (1) |  | % (2)
A | $ | 6,915.9 |  |  | 50.8 |
B | 4,841.2 |  |  | 35.6 |
C and other | 1,860.7 |  |  | 13.6 |
Total ending managed receivables | $ | 13,617.8 |  |  | 100.0 |
(1)Classified based on credit grade assigned when customers were initially approved for financing. (2)Percent of total ending managed receivables. Allowance for Loan Losses. The allowance for loan losses at February 28, 2021 represents the net credit losses expected over the remaining contractual life of our managed receivables. The allowance for loan losses is determined using a net loss timing curve, primarily based on the composition of the portfolio of managed receivables and historical gross loss and recovery trends. Due to the fact that losses for receivables with less than 18 months of performance history can be volatile, our net loss estimate weights both historical losses by credit grade at origination and actual loss data on the receivables to-date, along with forward loss curves, in estimating future performance. Once the receivables have 18 months of performance history, the net loss estimate reflects actual loss experience of those receivables to date, along with forward loss curves, to predict future performance. The forward loss curves are constructed using historical performance data and show the average timing of losses over the course of a receivable’s life. The net loss estimate is calculated by applying the loss rates developed using the methods described above to the amortized cost basis of the managed receivables. The output of the net loss timing curve is adjusted to take into account reasonable and supportable forecasts about the future. Specifically, the change in U.S. unemployment rates and the NADA used vehicle price index are used to predict changes in gross loss and recovery rate, respectively. An economic adjustment factor, based upon a single macroeconomic scenario, is developed to capture the relationship between changes in these forecasts and changes in gross loss and recovery rates. This factor is applied to the output of the net loss timing curve for the reasonable and supportable forecast period of two years. After the end of this two-year period, we revert to historical experience on a straight-line basis over a period of 12 months. We periodically consider whether the use of alternative metrics would result in improved model performance and revise the models when appropriate. We also consider whether qualitative adjustments are necessary for factors not reflected in the quantitative methods but impact the measurement of estimated credit losses. Such adjustments include the uncertainty of the impacts of recent economic trends on customer behavior. The change in the allowance for loan losses is recognized through an adjustment to the provision for loan losses. Allowance for Loan Losses
| As of February 28 or 29
(In millions) | 2021 |  | % (1) |  | 2020 (2) |  | % (1)
Balance as of beginning of year | $ | 157.8 |  |  | 1.16 |  |  | $ | 138.2 |  |  | 1.10 |
Adoption of ASU 2016-13 | 202.0 |  |  |  |  | — |  |  |
Adjusted balance as of beginning of period | 359.8 |  |  | 2.64 |  |  | 138.2 |  |  | 1.10 |
Charge-offs | (230.4) |  |  |  |  | (309.0) |  |  |
Recoveries (3) | 121.0 |  |  |  |  | 142.9 |  |  |
Provision for loan losses | 160.7 |  |  |  |  | 185.7 |  |  |
Balance as of end of year (4) | $ | 411.1 |  |  | 2.97 |  |  | $ | 157.8 |  |  | 1.16 |
(1)Percent of total ending managed receivables (2)The comparative information has not been restated and continues to be reported under the accounting guidance in effect during fiscal 2020. (3)Net of costs incurred to recover vehicle. (4)The allowance for loan losses primarily relates to estimated losses on CAF’s core receivables, noting that $31.8 million and $17.3 million of the total allowance related to the outstanding CAF Tier 3 loan balances as of February 28, 2021 and February 29, 2020, respectively. As discussed in Note 1(X), we adopted CECL during the first quarter of fiscal 2021. The adoption of this pronouncement resulted in the recognition of a $202.0 million increase in the allowance for loan losses as of March 1, 2020, with a corresponding net-of-tax decrease of $153.3 million in retained earnings. The remaining increase in the allowance for loan losses for the year ended February 28, 2021 reflects the uncertainty related to COVID-19, including its impact on the economic adjustment factors, and qualitative considerations applied to the ending allowance. In particular, we determined that the quantitative loss rates should be qualitatively adjusted to reflect future loss performance from expected customer hardship and to mitigate the quantitative impact of recent favorable loss performance, as we do not believe that recent favorable loss performance is consistent with our best estimate of expected future losses. The allowance for loan losses as of February 28, 2021 reflects both the positive customer payment behavior compared to historical experience recently observed as well as the unpredictability of the current environment and the uncertain consumer situation. Past Due Receivables. An account is considered delinquent when the related customer fails to make a substantial portion of a scheduled payment on or before the due date. In general, accounts are charged-off on the last business day of the month during which the earliest of the following occurs: the receivable is 120 days or more delinquent as of the last business day of the month, the related vehicle is repossessed and liquidated, or the receivable is otherwise deemed uncollectible. For purposes of determining impairment, auto loans are evaluated collectively, as they represent a large group of smaller-balance homogeneous loans, and therefore, are not individually evaluated for impairment. Past Due Receivables
| As of February 28, 2021
| Major Credit Grade |  |  |  |
(In millions) | A |  | B |  | C & Other |  | Total |  | % (1)
Current | $ | 6,847.2 |  |  | $ | 4,840.3 |  |  | $ | 1,767.2 |  |  | $ | 13,454.7 |  |  | 97.17 |
Delinquent loans: |  |  |  |  |  |  |  |  |
31-60 days past due | $ | 17.3 |  |  | $ | 108.9 |  |  | $ | 120.0 |  |  | $ | 246.2 |  |  | 1.78 |
61-90 days past due | $ | 7.0 |  |  | $ | 48.4 |  |  | $ | 64.5 |  |  | $ | 119.9 |  |  | 0.86 |
Greater than 90 days past due | $ | 2.6 |  |  | $ | 11.3 |  |  | $ | 12.5 |  |  | $ | 26.4 |  |  | 0.19 |
Total past due | $ | 26.9 |  |  | $ | 168.6 |  |  | $ | 197.0 |  |  | $ | 392.5 |  |  | 2.83 |
Total ending managed receivables | $ | 6,874.1 |  |  | $ | 5,008.9 |  |  | $ | 1,964.2 |  |  | $ | 13,847.2 |  |  | 100.00 |
| As of February 29
(In millions) | 2020 |  | % (1)
Total ending managed receivables | $ | 13,617.8 |  |  | 100.00 |
Delinquent loans: |  |  |
31-60 days past due | $ | 296.4 |  |  | 2.18 |
61-90 days past due | 138.3 |  |  | 1.01 |
Greater than 90 days past due | 34.2 |  |  | 0.25 |
Total past due | $ | 468.9 |  |  | 3.44 |
(1)Percent of total ending managed receivables.

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