C - Finance Receivables, Net

The Company originates installment sale contracts from the sale of used vehicles at its dealerships. These installment sale contracts typically carry an interest rate of 15% per annum, are collateralized by the vehicle sold and typically provide for payments over periods ranging from 18 to 42 months. The Company’s finance receivables are defined as one segment and one class of loans, which is sub-prime consumer automobile contracts. The level of risks inherent in our financing receivables is managed as one homogeneous pool. The components of finance receivables as of April 30, 2016 and 2015 are as follows:

(In thousands)	April 30, 2016			April 30, 2015

Gross contract amount	$	504,149		$	477,305
Less unearned finance charges		(66,871	)		(59,937	)
Principal balance		437,278			417,368
Less allowance for credit losses		(102,485	)		(93,224	)

Finance receivables, net	$	334,793		$	324,144

Changes in the finance receivables, net for the years ended April 30, 2016, 2015 and 2014 are as follows:

	Years Ended April 30,
(In thousands)	2016			2015			2014

Balance at beginning of period	$	324,144		$	293,299		$	288,049
Finance receivable originations		460,499			445,405			404,918
Finance receivable collections		(248,166	)		(238,845	)		(223,538	)
Provision for credit losses		(144,397	)		(120,289	)		(119,247	)
Losses on claims for payment protection plan		(13,521	)		(10,588	)		(9,586	)
Inventory acquired in repossession and payment protection plan claims		(43,766	)		(44,838	)		(47,297	)

Balance at end of period	$	334,793		$	324,144		$	293,299

Changes in the finance receivables allowance for credit losses for the years ended April 30, 2016, 2015 and 2014 are as follows:

	Years Ended April 30,
(In thousands)	2016			2015			2014

Balance at beginning of period	$	93,224		$	86,033		$	75,345
Provision for credit losses		144,397			120,289			119,247
Charge-offs, net of recovered collateral		(135,136	)		(113,098	)		(108,559	)

Balance at end of period	$	102,485		$	93,224		$	86,033

The factors which influenced management’s judgment in determining the amount of the additions to the allowance charged to provision for credit losses are described below:

The level of actual charge-offs, net of recovered collateral, is the most important factor in determining the charges to the provision for credit losses. This is due to the fact that once a contract becomes delinquent the account is either made current by the customer, the vehicle is repossessed or the account is written off if the collateral cannot be recovered. Net charge-offs as a percentage of average finance receivables was 31.3% for fiscal 2016 as compared to 27.8% for fiscal 2015. The increase in net charge-offs for fiscal 2016 resulted from a higher frequency of losses and an increase in severity due largely to lower wholesale values at time of repossession. The fiscal 2016 provision includes a $4.8 million increase in the provision as a result of the increase in our provision percentage applied to the growth in finance receivables during the second quarter of fiscal 2016.

Collections and delinquency levels can have a significant effect on additions to the allowance and are reviewed frequently. Collections as a percentage of average finance receivables were 57.5% for the year ended April 30, 2016 compared to 58.7% for the year ended April 30, 2015. The decrease in collections as a percentage of average finance receivables was primarily due to the longer overall contract term, partially offset by lower delinquencies. Delinquencies greater than 30 days decreased to 3.0% for April 30, 2016 compared to 5.8% at April 30, 2015.

Macro-economic factors, and more importantly, proper execution of operational policies and procedures have a significant effect on additions to the allowance charged to the provision. Higher unemployment levels, higher gasoline prices and higher prices for staple items can potentially have a significant effect. The Company continues to focus on operational improvements within the collections area such as credit reporting for customers and further implementation of GPS technology on vehicles sold.

Credit quality information for finance receivables is as follows:

(Dollars in thousands)	April 30, 2016					April 30, 2015

	Principal		Percent of			Principal		Percent of
	Balance		Portfolio			Balance		Portfolio
Current	$	378,631		86.59	%	$	329,329		78.91	%
3 - 29 days past due		45,631		10.43	%		64,004		15.33	%
30 - 60 days past due		8,429		1.93	%		12,777		3.06	%
61 - 90 days past due		3,498		0.80	%		8,463		2.03	%
> 90 days past due		1,089		0.25	%		2,795		0.67	%
Total	$	437,278		100.00	%	$	417,368		100.00	%

Accounts one and two days past due are considered current for this analysis, due to the varying payment dates and variation in the day of the week at each period end. Delinquencies may vary from period to period based on the average age of the portfolio, seasonality within the calendar year, the day of the week and overall economic factors. The above categories are consistent with internal operational measures used by the Company to monitor credit results. The Company believes that the improvement in the past due percentages can be attributed in part to the proper execution of best collections efforts at all dealerships during fiscal 2016, and partially to year-end falling on a Saturday.

Substantially all of the Company’s automobile contracts involve contracts made to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit. The Company monitors contract term length, down payment percentages, and collections for credit quality indicators.

	Twelve Months Ended April 30,
	2016			2015

Principal collected as a percent of average finance receivables		57.5	%		58.7	%
Average down-payment percentage		6.7	%		6.9	%

		April 30, 2016			April 30, 2015
Average originating contract term (in months )		28.9			27.7
Portfolio weighted average contract term, including modifications (in months )		31.6			30.2

The decrease in collections as a percentage of average finance receivables was primarily due to the longer overall contract term, partially offset by the lower delinquencies. The increases in contract term are primarily related to efforts to keep payments affordable, for competitive reasons and to continue to work more with our customers when they experience financial difficulties. In order to remain competitive, term lengths may continue to increase