Sirius Satellite Radio's ( SIRI) big numbers have a funny new car smell.

Sirius added 359,000 new users in the third quarter, nearly doubling its year-ago increase. At first blush that looks far more impressive than the 48% subscriber growth at rival XM Satellite ( XMSR).

But it turns out that not all those new Sirius subscribers are actual people.

XM and Sirius both count on arrangements with big automakers like Ford ( F) and GM ( GM) to power subscriber gains. But where XM waits until a car buyer activates the service to add to its new-user tally, Sirius sometimes starts counting as soon as a car with a factory-installed radio arrives at the dealership.

So a number of those freshly minted Sirius subscribers could actually be Chrysler Concordes sitting on a dealer's lot somewhere. Observers say that kind of liberal math could be bolstering Sirius' growth -- especially now, as dealers are receiving a new crop of 2006 models.

Sirius' practice means the company can "call it a sub, even if it is sitting under water on a dealer's lot in New Orleans," says one investor who sold Sirius and holds XM.

Satellite radio has gone from a mere cult fascination a few years ago to a hotly contested two-player industry. XM and Sirius are battling head-to-head to capture the largest share of a potentially massive new consumer market.

Delivering growth is paramount. The faster the growth, the wider the doors are open to capital markets for future financing, factory installation deals with big automakers and technology partnerships with leading device makers.

Perhaps most important, routinely raising subscriber growth targets encourages satellite radio investors to tune out the heavy costs and massive losses associated with the business.

So it is a bit disconcerting to some industry observers that XM and Sirius differ in their definitions of subscribers.

Sirius CFO Dave Frear says he recognizes that the two companies have different policies when it comes to counting subscribers, but he downplays the significance.

Frear says Sirius' lot-counting practice doesn't apply to all cars with factory-installed radios. He adds that overall it represents less than 10% of total subscribers.

"There's a distinction without a difference," says Frear.

But an XM representative disagrees.

"It's important for people to understand that we have a different way of counting subscribers," says the XM rep. "We count people who have made an active effort to try the service, not by counting cars on the lots."

Of course, there are no federal guidelines governing how companies count subscribers. And it is not surprising to see companies put the best spin they can on the numbers they tally.

Counting cars, or even nonpaying users on promotional plans as XM does, doesn't just pump up subscriber growth numbers. It can also help spread the cost of acquiring customers -- a huge cost for these cash-burning companies -- across a broader base. To be fair, while XM includes promotional users in its subscriber total, it discloses its number of freeloaders in its quarterly filings.

Beyond growth, Wall Street tends to judge upstarts by subscriber acquisition costs, which reflect the amount of money it takes to reel in a new user. For big-buck bonfires like XM and Sirius, lowering acquisition costs can help soothe the Street.

Sirius finance chief Frear says the analysts he has briefed on the new car issue "have decided that it's a big yawn."

Frear says he counts the car as a subscriber because that's when the car company pays Sirius for the radio subscription. He says Sirius receives the one-year subscription money upfront from the carmaker and defers the revenue by booking it in monthly installments or amortizing it over the life of the service contract. Sirius also books the subscriber acquisition costs upfront.

"It makes sense for us to do it when we have two parts of the transaction together," says Frear. "It's more symmetrical to take in the cash and record the expenses at the same time."

Sean Butson of Legg Mason has been one of the first analysts to highlight the impact of new cars on Sirius' subscriber tallies. Butson says it's necessary for analysts to back out unsold cars from actual subscribers when comparing the two companies' growth rates.

The bigger issue, says Butson, is that if a car goes unsold or if a user doesn't activate the service after the yearlong free trial, they don't immediately come off the subscriber count.

"To show up as a Sirius disconnect, it could be as long as 17 months," says Butson, who has a buy rating on Sirius and XM.

Stretching definitions to fuel Wall Street's growth expectations can help give you an edge in a close race, but some observers say it undercuts a company's credibility.

"It may be legal," says the former Sirius investor, "but at the very least, it is slippery as hell."

More from Technology

Facebook CEO Mark Zuckerberg Deflects Tough Questions From European Parliament

Facebook CEO Mark Zuckerberg Deflects Tough Questions From European Parliament

These 5 Autonomous Driving Stocks Are Flashing Buy Signals

These 5 Autonomous Driving Stocks Are Flashing Buy Signals

10 Seconds To Genius: Facebook

10 Seconds To Genius: Facebook

10 Big Tech Companies Are Spending $100 Billion in 2018 to Dominate Even More

10 Big Tech Companies Are Spending $100 Billion in 2018 to Dominate Even More

ACLU Asks Amazon to Halt Sale of Facial Recognition Software

ACLU Asks Amazon to Halt Sale of Facial Recognition Software