Finance Receivables



	September 30, 2018			December 31, 2017
Retail finance receivables
Retail finance receivables, collectively evaluated for impairment, net of fees	$	35,567		$	30,574
Retail finance receivables, individually evaluated for impairment, net of fees	2,308			2,228
Total retail finance receivables, net of fees^(a)	37,875			32,802
Less: allowance for loan losses - collective	(522		)	(561		)
Less: allowance for loan losses - specific	(317		)	(328		)
Total retail finance receivables, net	37,036			31,913
Commercial finance receivables
Commercial finance receivables, collectively evaluated for impairment, net of fees	11,038			10,290
Commercial finance receivables, individually evaluated for impairment, net of fees	67			22
Total commercial finance receivables, net of fees	11,105			10,312
Less: allowance for loan losses - collective	(53		)	(50		)
Less: allowance for loan losses - specific	(8		)	(3		)
Total commercial finance receivables, net	11,044			10,259
Total finance receivables, net	$	48,080		$	42,172
Fair value utilizing Level 2 inputs	$	11,044		10,259
Fair value utilizing Level 3 inputs	$	36,676		$	31,919

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(a) Net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $104 million and $228 million at September 30, 2018 and December 31, 2017.



Retail Finance Receivables	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Allowance for retail loan losses beginning balance	$	815		$	844		$	889		$	765
Provision for loan losses	176			204			434			563
Charge-offs	(285		)	(286		)	(878		)	(856		)
Recoveries	130			135			398			420
Foreign currency translation	3			2			(4		)	7
Allowance for retail loan losses ending balance	$	839		$	899		$	839		$	899

Retail Credit Quality Our retail finance receivables portfolio includes loans made to consumers and businesses to finance the purchase of vehicles for personal and commercial use. We use proprietary scoring systems in the underwriting process that measure the credit quality of the receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO score or its equivalent), and contract characteristics. We also consider other factors, such as employment history, financial stability and capacity to pay. A summary of the credit risk profile by FICO or equivalent scores, determined at origination, of the retail finance receivables is as follows:



	September 30, 2018				December 31, 2017
	Amount		Percent		Amount		Percent
Prime - FICO Score 680 and greater	$	21,765	57.5	%	$	16,892	51.5	%
Near-prime - FICO Score 620 to 679	5,879		15.5		5,226		15.9
Sub-prime - FICO Score less than 620	10,231		27.0		10,684		32.6
Balance at end of period	$	37,875	100.0	%	$	32,802	100.0	%

In addition, we review the credit quality of our retail finance receivables based on customer payment activity. A retail account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Retail finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the customer defaults on the payment terms of the contract. The following is a consolidated summary of the contractual amounts of delinquent retail finance receivables, which is not significantly different than the recorded investment for such receivables.



	September 30, 2018				September 30, 2017
	Amount		Percent of Contractual Amount Due		Amount		Percent of Contractual Amount Due
31 - 60 days	$	1,302	3.4	%	$	1,176	3.6	%
Greater than 60 days	498		1.3		521		1.6
Total finance receivables more than 30 days delinquent	1,800		4.7		1,697		5.2
In repossession	53		0.2		55		0.2
Total finance receivables more than 30 days delinquent or in repossession	$	1,853	4.9	%	$	1,752	5.4	%

At September 30, 2018 and December 31, 2017, the accrual of finance charge income had been suspended on retail finance receivables with contractual amounts due of $847 million and $778 million.

Impaired Retail Finance Receivables - TDRs Retail finance receivables that become classified as troubled debt restructurings (TDRs) are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. Accounts that become classified as TDRs because of a payment deferral accrue interest at the contractual rate and an additional fee is collected (where permitted) at each time of deferral and recorded as a reduction of accrued interest. No interest or fees are forgiven on a payment deferral to a customer; therefore, there are no additional financial effects of deferred loans becoming classified as TDRs. Accounts in the U.S. in Chapter 13 bankruptcy would have already been placed on non-accrual; therefore, there are no additional financial effects from these loans becoming classified as TDRs. Finance charge income from loans classified as TDRs is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not classified as TDRs.

The outstanding recorded investment for retail finance receivables that are considered to be TDRs and the related allowance is presented below:



	September 30, 2018			December 31, 2017
Outstanding recorded investment	$	2,308		$	2,228
Less: allowance for loan losses	(317		)	(328		)
Outstanding recorded investment, net of allowance	$	1,991		$	1,900
Unpaid principal balance	$	2,341		$	2,266

Additional information about loans classified as TDRs is presented below:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Average outstanding recorded investment	$	2,293	$	2,091	$	2,268	$	2,045
Finance charge income recognized	$	59	$	56	$	185	$	173
Number of loans classified as TDRs during the period	17,924		23,015		51,020		56,853
Recorded investment of loans classified as TDRs during the period	$	319	$	407	$	932	$	997

The unpaid principal balances, net of recoveries, of loans that were charged off during the reporting period and were within 12 months of being modified as a TDR were insignificant for the three and nine months ended September 30, 2018 and 2017.

Commercial Finance Receivables

Commercial Credit Quality Our commercial finance receivables consist of dealer financings, primarily for inventory purchases. Proprietary models are used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary. Dealers in Group VI are subject to additional restrictions on funding, including suspension of lines of credit and liquidation of assets. The following table summarizes the credit risk profile by dealer risk rating of commercial finance receivables:



			September 30, 2018				December 31, 2017
			Amount		Percent		Amount		Percent
Group I	-	Dealers with superior financial metrics	$	2,109	19.0	%	$	1,915	18.6	%
Group II	-	Dealers with strong financial metrics	3,989		35.9		3,584		34.7
Group III	-	Dealers with fair financial metrics	3,413		30.7		3,424		33.2
Group IV	-	Dealers with weak financial metrics	1,021		9.2		1,048		10.2
Group V	-	Dealers warranting special mention due to elevated risks	466		4.2		260		2.5
Group VI	-	Dealers with loans classified as substandard, doubtful or impaired	107		1.0		81		0.8
Balance at end of period			$	11,105	100.0	%	$	10,312	100.0	%

At September 30, 2018 and December 31, 2017, substantially all of our commercial finance receivables were current with respect to payment status. Commercial finance receivables on non-accrual status were insignificant, and none were classified as TDRs. Activity in the allowance for commercial loan losses was insignificant for the three and nine months ended September 30, 2018 and 2017.