4. Auto Loan Receivables

Auto loan receivables include amounts due from customers primarily related to used retail vehicle sales financed through CAF and are presented net of an allowance for estimated loan losses. We use warehouse facilities to fund auto loan receivables originated by CAF until they are funded through a term securitization or alternative funding arrangement. The majority of these amounts serve as collateral for the related non-recourse notes payable of $5.08 billion as of August 31, 2012, and $4.68 billion as of February 29, 2012. See Notes 2 and 9 for additional information on securitizations and non-recourse notes payable.

Auto Loan Receivables, Net


		As of August 31			As of February 29 or 28
(In millions)		2012		2011		2012		2011
Warehouse facilities	$	1,066.0	$	1,559.0	$	553.0	$	943.0
Term securitizations		4,029.7		2,865.0		4,211.8		3,193.1
Other receivables⁽¹⁾		246.4		283.7		217.0		198.5
Total ending managed receivables		5,342.1		4,707.7		4,981.8		4,334.6
Accrued interest and fees		25.7		24.7		23.1		20.9
Other		(3.1)		2.9		(1.8)		4.0
Less allowance for loan losses		(49.5)		(36.2)		(43.3)		(38.9)
Auto loan receivables, net	$	5,315.2	$	4,699.1	$	4,959.8	$	4,320.6

⁽¹⁾ Other receivables includes receivables not funded through the warehouse facilities or term securitizations.

Credit Quality. When customers apply for financing, CAF uses proprietary scoring models that rely on the customers’ credit history and certain application information to evaluate and rank their risk. Credit histories are obtained from credit bureau reporting agencies and include 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. Our scoring models yield credit grades that represent the relative likelihood of repayment. Customers assigned a grade of “A” are determined to have the highest probability of repayment, and 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.

CAF uses a combination of the initial credit grades and historical performance to monitor the credit quality of the auto loan receivables 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 August 31						As of February 29 or 28
(In millions)	2012 ⁽¹⁾			% ⁽²⁾	2011 ⁽¹⁾			% ⁽²⁾	2012 ⁽¹⁾			% ⁽²⁾	2011 ⁽¹⁾			% ⁽²⁾
A		$	2,548.5	47.7		$	2,385.9	50.7		$	2,452.8	49.2		$	2,234.1	51.5
B			2,088.9	39.1			1,838.3	39.0			1,923.6	38.6			1,668.0	38.5
C and other			704.7	13.2			483.5	10.3			605.4	12.2			432.5	10.0
Total ending managed receivables		$	5,342.1	100.0		$	4,707.7	100.0		$	4,981.8	100.0		$	4,334.6	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


		Three Months Ended August 31						Six Months Ended August 31
(In millions)		2012	% ⁽¹⁾		2011	% ⁽¹⁾		2012	% ⁽¹⁾		2011	% ⁽¹⁾
Balance as of beginning of period	$	46.6	0.9	$	34.3	0.8	$	43.3	0.9	$	38.9	0.9
Charge-offs		(24.3)			(23.2)			(44.9)			(42.5)
Recoveries		14.3			14.3			29.0			30.0
Provision for loan losses		12.9			10.8			22.1			9.8
Balance as of end of period	$	49.5	0.9	$	36.2	0.8	$	49.5	0.9	$	36.2	0.8

⁽¹⁾ Percent of total ending managed receivables as of the corresponding reporting date.

The allowance for loan losses represents an estimate of the amount of net losses inherent in our portfolio of managed receivables as of the applicable reporting date and anticipated to occur during the following 12 months. The allowance is primarily based on the credit quality of the underlying receivables, historical loss trends and forecasted forward loss curves. We also take into account recent trends in delinquencies and losses, recovery rates and the economic environment. The provision for loan losses is the periodic expense of maintaining an adequate allowance.

Past Due Receivables


	As of August 31								As of February 29 or 28
(In millions)	2012			% ⁽¹⁾	2011			% ⁽¹⁾	2012			% ⁽¹⁾	2011			% ⁽¹⁾
Total ending managed receivables		$	5,342.1	100.0		$	4,707.7	100.0		$	4,981.8	100.0		$	4,334.6	100.0

Delinquent loans:
31-60 days past due		$	103.9	1.9		$	95.4	2.0		$	85.1	1.7		$	86.6	2.0
61-90 days past due			31.3	0.6			27.5	0.6			21.8	0.4			24.2	0.6
Greater than 90 days past due			10.5	0.2			10.7	0.2			9.6	0.2			10.5	0.2
Total past due		$	145.7	2.7		$	133.6	2.8		$	116.5	2.3		$	121.3	2.8

⁽¹⁾ Percent of total ending managed receivables.