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B. Dealer Finance Income
"Dealer finance income", "dealer allowance credit", and
"dealer participation" are terms used to describe certain amounts
paid or credited by GMAC to independent GM dealers in connection
with the assignment of an RISC by an independent GM dealer to
GMAC.4 Dealer finance income was produced when an independent GM
dealer assigned to GMAC an RISC bearing an interest rate that is
higher than the GMAC buy rate.
When GMAC acquired an RISC from an independent GM dealer,
GMAC paid or credited the independent GM dealer the fair market
value of the assigned RISC at the time of purchase. The fair
market value was computed using the GMAC buy rate (i.e., the RISC
was discounted to present value based on the GMAC buy rate).
When a retail customer's RISC carried an interest rate greater
than the GMAC buy rate, the fair market value was higher than the
face amount of the RISC, and the amount GMAC paid in excess of
the face amount of the RISC was dealer finance income.5 If the
retail customer paid off its RISC early, the independent GM
4 For convenience, we shall hereinafter refer to these
terms as dealer finance income.
5 The opinion, infra pp. 32-38, contains examples
calculating dealer finance income and rate support payments and
explaining GM's and GMAC's accounting for rate support. For an
example of dealer finance income, see infra p. 32.
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