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Fair Value of Financial Instruments | 9 Months Ended
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Sep. 30, 2016
Fair Value Disclosures [Abstract] |
Fair Value of Financial Instruments | 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. The fair value of U.S. Government and agency securities and corporate bonds is based on quoted market values in active markets. For asset-backed securities, mortgage-backed securities and commercial paper 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 a lower trading volume. For our revolving secured line of credit and our Warehouse facilities, 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 September 30, 2016 |  | As of December 31, 2015
| Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 5.7 |  |  | $ | 5.7 |  |  | $ | 6.3 |  |  | $ | 6.3 |
Restricted cash and cash equivalents | 232.8 |  |  | 232.8 |  |  | 167.4 |  |  | 167.4 |
Restricted securities available for sale | 47.0 |  |  | 47.0 |  |  | 48.3 |  |  | 48.3 |
Net investment in Loans receivable | 3,764.4 |  |  | 3,820.8 |  |  | 3,101.5 |  |  | 3,126.3 |
Liabilities |  |  |  |  |  |  |
Revolving secured line of credit | $ | 85.2 |  |  | $ | 85.2 |  |  | $ | 57.7 |  |  | $ | 57.7 |
Secured financing (1) | 1,884.2 |  |  | 1,901.0 |  |  | 1,470.1 |  |  | 1,471.9 |
Senior notes (1) | 541.0 |  |  | 559.4 |  |  | 540.0 |  |  | 549.6 |
(1) | Prior year carrying amounts have been reclassified to reflect the adoption of ASU 2015-03, as amended by ASU No. 2015-15, which resulted in a reclassification of certain deferred debt issuance costs from other assets to secured financing and senior notes.
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 1 | Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 | Valuation 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 3 | Valuation 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, 2016 and December 31, 2015:
(In millions) |  |  |  |  |  |  |
| As of September 30, 2016
| Level 1 |  | Level 2 |  | Level 3 |  | Total Fair Value
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 5.7 |  |  | $ | — |  |  | $ | — |  |  | $ | 5.7 |
Restricted cash and cash equivalents | 232.8 |  |  | — |  |  | — |  |  | 232.8 |
Restricted securities available for sale | 37.2 |  |  | 9.8 |  |  | — |  |  | 47.0 |
Net investment in Loans receivable | — |  |  | — |  |  | 3,820.8 |  |  | 3,820.8 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Revolving secured line of credit | $ | — |  |  | $ | 85.2 |  |  | $ | — |  |  | $ | 85.2 |
Secured financing | — |  |  | 1,901.0 |  |  | — |  |  | 1,901.0 |
Senior notes | 559.4 |  |  | — |  |  | — |  |  | 559.4 |
(In millions) |  |  |  |  |  |  |
| As of December 31, 2015
| Level 1 |  | Level 2 |  | Level 3 |  | Total Fair Value
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 6.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 6.3 |
Restricted cash and cash equivalents | 167.4 |  |  | — |  |  | — |  |  | 167.4 |
Restricted securities available for sale | 38.7 |  |  | 9.6 |  |  | — |  |  | 48.3 |
Net investment in Loans receivable | — |  |  | — |  |  | 3,126.3 |  |  | 3,126.3 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Revolving secured line of credit | $ | — |  |  | $ | 57.7 |  |  | $ | — |  |  | $ | 57.7 |
Secured financing | — |  |  | 1,471.9 |  |  | — |  |  | 1,471.9 |
Senior notes | 549.6 |  |  | — |  |  | — |  |  | 549.6 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13433-108611 + Details
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