C - Finance Receivables, Net

The Company originates installment sale contracts from the sale of used vehicles at its dealerships. These installment sale contracts, which carry an interest rate of

15%

16.5%

per annum (based on the Company’s contract interest rate in effect at the contract origination date), are collateralized by the vehicle sold and typically provide for payments over periods ranging from

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, 2017

and

2016

are as follows:

(In thousands)	April 30, 2017			April 30, 2016

Gross contract amount	$	545,916		$	504,149
Less unearned finance charges		(79,062	)		(66,871	)
Principal balance		466,854			437,278
Less allowance for credit losses		(109,693	)		(102,485	)

Finance receivables, net	$	357,161		$	334,793

Changes in the finance receivables, net for the years ended

April 30, 2017,

2016

and

2015

are as follows:

	Years Ended April 30,
(In thousands)	2017			2016			2015

Balance at beginning of period	$	334,793		$	324,144		$	293,299
Finance receivable originations		479,099			460,499			445,405
Finance receivable collections		(249,264	)		(248,166	)		(238,845	)
Provision for credit losses		(149,097	)		(144,397	)		(120,289	)
Losses on claims for payment protection plan		(15,627	)		(13,521	)		(10,588	)
Inventory acquired in repossession and payment protection plan claims		(42,743	)		(43,766	)		(44,838	)

Balance at end of period	$	357,161		$	334,793		$	324,144

Changes in the finance receivables allowance for credit losses for the years ended

April 30, 2017,

2016

and

2015

are as follows:

	Years Ended April 30,
(In thousands)	2017			2016			2015

Balance at beginning of period	$	102,485		$	93,224		$	86,033
Provision for credit losses		149,097			144,397			120,289
Charge-offs, net of recovered collateral		(141,889	)		(135,136	)		(113,098	)

Balance at end of period	$	109,693		$	102,485		$	93,224

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

30.5%

for fiscal

2017

as compared to

31.3%

for fiscal

2016.

The decrease in net charge-offs for fiscal

2017

resulted from a lower frequency of losses partially offset by an increase in severity due largely to higher principal balances at charge-off and lower wholesale values at time of repossession. The fiscal

2016

provision included 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

53.6%

for the year ended

April 30, 2017

compared to

57.5%

for the year ended

April 30, 2016.

days increased to

3.6%

for

April 30, 2017

compared to

3.0%

April 30, 2016.

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, 2017					April 30, 2016

	Principal Balance		Percent of Portfolio			Principal Balance		Percent of Portfolio
Current	$	397,341		85.12	%	$	378,631		86.59	%
3 - 29 days past due		52,869		11.32	%		45,631		10.43	%
30 - 60 days past due		11,658		2.50	%		8,429		1.93	%
61 - 90 days past due		3,516		0.75	%		3,498		0.80	%
> 90 days past due		1,470		0.31	%		1,089		0.25	%
Total	$	466,854		100.00	%	$	437,278		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.

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,
	2017			2016

Principal collected as a percent of average finance receivables		53.6	%		57.5	%
Average down-payment percentage		6.0	%		6.7	%

	April 30, 2017		April 30, 2016
Average originating contract term (in months )		29.5		28.9
Portfolio weighted average contract term, including modifications (in months )		32.5		31.6

The decrease in collections as a percentage of average finance receivables was primarily due to the longer overall contract term, higher levels of contract modifications related to a large extent to delays in income tax refunds, a lower level of early payoffs and the increase in the contract interest rate, offset by a slightly higher average age of receivables. 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