3. CarMax Auto Finance Income


	Three Months Ended August 31								Six Months Ended August 31
(In millions)	2012			% ⁽¹⁾	2011			% ⁽¹⁾	2012			% ⁽¹⁾	2011			% ⁽¹⁾
Interest margin:
Interest and fee income		$	123.5	9.4		$	111.8	9.7		$	243.8	9.4		$	219.7	9.8
Interest expense			(23.9)	(1.8)			(26.2)	(2.3)			(49.0)	(1.9)			(54.7)	(2.4)
Total interest margin			99.6	7.6			85.6	7.5			194.8	7.5			165.0	7.3
Provision for loan losses			(12.9)	(1.0)			(10.8)	(0.9)			(22.1)	(0.9)			(9.8)	(0.4)
Total interest margin after
provision for loan losses			86.7	6.6			74.8	6.5			172.7	6.7			155.2	6.9

Other (loss) income			(0.2)	―			0.4	―			(0.2)	―			1.1	―

Direct expenses:
Payroll and fringe benefit
expense			(5.4)	(0.4)			(5.1)	(0.4)			(10.7)	(0.4)			(10.4)	(0.5)
Other direct expenses			(5.4)	(0.4)			(6.3)	(0.5)			(10.9)	(0.4)			(12.4)	(0.6)
Total direct expenses			(10.8)	(0.8)			(11.4)	(1.0)			(21.6)	(0.8)			(22.8)	(1.0)
CarMax Auto Finance income		$	75.7	5.8		$	63.8	5.6		$	150.9	5.8		$	133.5	5.9

Total average managed
receivables		$	5,245.4			$	4,596.6			$	5,160.3			$	4,492.2

⁽¹⁾ Annualized percent of total average managed receivables.

CAF provides financing for qualified customers at competitive market rates of interest. We securitize substantially all of the loans originated by CAF, as discussed in Note 2. CAF income primarily reflects the interest and fee income generated by the auto loan receivables less the interest expense associated with the debt issued to fund these receivables, a provision for estimated loan losses and direct CAF expenses.

CAF income does not include any allocation of indirect costs or income. We present this information on a direct basis to avoid making arbitrary decisions regarding the indirect benefits or costs that could be attributed to CAF. Examples of indirect costs not included are retail store expenses and corporate expenses such as human resources, administrative services, marketing, information systems, accounting, legal, treasury and executive payroll.