The Company provides retail financial services to customers of the Company’s independent dealers in the United States and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to sales of motorcycles to the dealers' customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts.

The Company offers wholesale financing to the Company’s independent dealers. Wholesale loans to dealers are generally secured by financed inventory or property and are originated in the U.S. and Canada. Wholesale finance receivables are related primarily to sales of motorcycles and related parts and accessories to dealers.



	June 30, 2019			December 31, 2018			July 1, 2018
Retail	$	6,549,707		$	6,328,201		$	6,373,926
Wholesale	1,239,694			1,083,615			1,133,206
Total finance receivables	7,789,401			7,411,816			7,507,132
Allowance for credit losses	(194,996		)	(189,885		)	(193,930		)
Finance receivables, net	$	7,594,405		$	7,221,931		$	7,313,202

A provision for credit losses on finance receivables is charged or credited to earnings in amounts that the Company believes are sufficient to maintain the allowance for credit losses at a level that is adequate to cover losses inherent in the existing portfolio. The allowance for credit losses represents management’s estimate of probable losses inherent in the finance receivable portfolio as of the balance sheet date. However, due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company could differ from the amounts estimated.



	Three months ended June 30, 2019
	Retail			Wholesale			Total
Balance, beginning of period	$	181,426		$	9,446		$	190,872
Provision for credit losses	27,555			(1,172		)	26,383
Charge-offs	(35,741		)	—			(35,741		)
Recoveries	13,482			—			13,482
Balance, end of period	$	186,722		$	8,274		$	194,996

	Three months ended July 1, 2018
	Retail			Wholesale			Total
Balance, beginning of period	$	182,150		$	8,200		$	190,350
Provision for credit losses	20,652			(1,772		)	18,880
Charge-offs	(28,947		)	—			(28,947		)
Recoveries	13,647			—			13,647
Balance, end of period	$	187,502		$	6,428		$	193,930

	Six months ended June 30, 2019
	Retail			Wholesale			Total
Balance, beginning of period	$	182,098		$	7,787		$	189,885
Provision for credit losses	60,387			487			60,874
Charge-offs	(80,462		)	—			(80,462		)
Recoveries	24,699			—			24,699
Balance, end of period	$	186,722		$	8,274		$	194,996

	Six months ended July 1, 2018
	Retail			Wholesale			Total
Balance, beginning of period	$	186,254		$	6,217		$	192,471
Provision for credit losses	48,721			211			48,932
Charge-offs	(74,028		)	—			(74,028		)
Recoveries	26,555			—			26,555
Balance, end of period	$	187,502		$	6,428		$	193,930

Finance receivables are considered impaired when management determines it is probable that the Company will be unable to collect all amounts due according to the terms of the loan agreement. Portions of the allowance for credit losses are established to cover estimated losses on finance receivables specifically identified for impairment. The unspecified portion of the allowance for credit losses covers estimated losses on finance receivables which are collectively reviewed for impairment.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a periodic and systematic collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes loss forecast models which consider a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, the value of the underlying collateral, recovery rates, and current economic conditions including items such as unemployment rates. Retail finance receivables are not evaluated individually for impairment prior to charge-off and, therefore, are not reported as impaired loans.

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review. A specific allowance for credit losses is established for wholesale finance receivables determined to be individually impaired when management concludes that the borrower will not be able to make full payment of the contractual amounts due based on the original terms of the loan agreement. The impairment is determined based on the cash that the Company expects to receive discounted at the loan’s original interest rate or the fair value of the collateral, if the loan is collateral-dependent. Finance receivables in the wholesale portfolio that are not considered impaired on an individual basis are segregated, based on similar risk characteristics, according to the Company’s internal risk rating system and collectively evaluated for impairment. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past loan loss experience, current economic conditions, and the value of the underlying collateral.



	June 30, 2019
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	186,722		8,274		194,996
Total allowance for credit losses	$	186,722	$	8,274	$	194,996
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	6,549,707		1,239,694		7,789,401
Total finance receivables	$	6,549,707	$	1,239,694	$	7,789,401

	December 31, 2018
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	182,098		7,787		189,885
Total allowance for credit losses	$	182,098	$	7,787	$	189,885
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	6,328,201		1,083,615		7,411,816
Total finance receivables	$	6,328,201	$	1,083,615	$	7,411,816

	July 1, 2018
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	184	$	184
Collectively evaluated for impairment	187,502		6,244		193,746
Total allowance for credit losses	$	187,502	$	6,428	$	193,930
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	220	$	220
Collectively evaluated for impairment	6,373,926		1,132,986		7,506,912
Total finance receivables	$	6,373,926	$	1,133,206	$	7,507,132

There were no wholesale finance receivables at June 30, 2019 or December 31, 2018 that were individually deemed to be impaired under ASC Topic 310, "Receivables". Additional information related to the wholesale finance receivables that were individually deemed to be impaired at July 1, 2018 includes (in thousands):



	July 1, 2018						Three months ended July 1, 2018				Six months ended July 1, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Wholesale:
No related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Related allowance recorded	251		220		184		251		—		251		—
Total	$	251	$	220	$	184	$	251	$	—	$	251	$	—

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. All retail finance receivables accrue interest until either collected or charged-off. Accordingly, as of June 30, 2019, December 31, 2018 and July 1, 2018, all retail finance receivables were accounted for as interest-earning receivables, of which $30.4 million, $41.2 million and $22.4 million, respectively, were 90 days or more past due.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once management determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the finance receivable becomes uncollectible and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. There were no wholesale receivables on non-accrual status at June 30, 2019 or December 31, 2018. The recorded investment in non-accrual status wholesale finance receivables at July 1, 2018 was $0.2 million. At June 30, 2019, December 31, 2018 and July 1, 2018, $2.1 million, $1.1 million, and $0.1 million of wholesale finance receivables were 90 days or more past due and accruing interest, respectively.



	June 30, 2019
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	6,359,499	$	119,770	$	40,015	$	30,423	$	190,208	$	6,549,707
Wholesale	1,236,747		577		320		2,050		2,947		1,239,694
Total	$	7,596,246	$	120,347	$	40,335	$	32,473	$	193,155	$	7,789,401

	December 31, 2018
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	6,100,186	$	136,945	$	49,825	$	41,245	$	228,015	$	6,328,201
Wholesale	1,081,729		522		273		1,091		1,886		1,083,615
Total	$	7,181,915	$	137,467	$	50,098	$	42,336	$	229,901	$	7,411,816

	July 1, 2018
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	6,198,906	$	116,828	$	35,763	$	22,429	$	175,020	$	6,373,926
Wholesale	1,132,472		516		134		84		734		1,133,206
Total	$	7,331,378	$	117,344	$	35,897	$	22,513	$	175,754	$	7,507,132

The Company manages retail credit risk through its credit approval policy and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. Retail loans with a FICO score of 640 or above at origination are generally considered prime, and loans with a FICO score below 640 are generally considered sub-prime. These credit quality indicators are determined at the time of loan origination and are not updated subsequent to the loan origination date.

The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon management’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated on a quarterly basis.