Form 10-K
     

PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tables in millions, except per share data)
14. FAIR VALUE OF FINANCIAL INSTRUMENTS

    The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. The assumptions used have a significant effect on the estimated amounts reported.

    The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

  • Cash and cash equivalents, trade and manufacturer receivables, other current assets, accounts payable, accrued liabilities, other current liabilities and variable rate debt: the amounts reported in the accompanying Consolidated Balance Sheets approximate fair value.
  • Installment loans receivable and retained interests in securitized receivables: The fair value of installment loans receivable and retained interests in securitized receivables are estimated based upon the discounted value of the future cash flows expected to be received. Significant assumptions used to estimate the fair value at December 31, 2000 and 1999 are as follows: discount rate -- 9.51% and 9.64%; cumulative loss rate -- 2.39% and 1.93%; and prepayment rate -- 1.16% and 1.50%.
  • Interest rate swaps, caps and floors: the fair value of interest rate swaps, caps and floors is determined from dealer quotations and represents the discounted future cash flows through maturity or expiration using current rates, and is effectively the amount the Company would pay or receive to terminate the agreements.
    The following table sets forth the carrying amounts and fair values of the Company's financial instruments, except for those noted above for which carrying amounts approximate fair value, as of December 31: 


                                                            2000                       1999
                                                  ------------------------   ------------------------
                                                   Carrying        Fair       Carrying        Fair
Assets (Liabilities)                                Amount        Value        Amount        Value
-----------------------------------------------   ----------   -----------   ----------   -----------
                                                                              
 Installment loans receivable .................    $  50.3      $   53.9     $   83.8      $   84.8
 Retained interests in securitized receivables:
   Principal ..................................    $  76.1      $   76.7     $  101.4      $  101.3
   Interest-only strips .......................    $  68.5      $   68.5     $   51.8      $   51.8
   Servicing assets ...........................    $   7.5      $    7.9     $    8.2      $    8.2
 Interest rate caps ...........................         --      $    2.6           --      $   18.5
 Interest rate floors .........................         --      $  (14.3)          --      $   (7.7)
 Interest rate swaps ..........................         --            --           --      $     .1