Finance Receivables



	December 31, 2018			December 31, 2017
Retail finance receivables
Retail finance receivables, collectively evaluated for impairment, net of fees	$	38,354		$	30,574
Retail finance receivables, individually evaluated for impairment, net of fees	2,348			2,228
Total retail finance receivables, net of fees^(a)	40,702			32,802
Less: allowance for loan losses - collective	(523		)	(561		)
Less: allowance for loan losses - specific	(321		)	(328		)
Total retail finance receivables, net	39,858			31,913
Commercial finance receivables
Commercial finance receivables, collectively evaluated for impairment, net of fees	12,680			10,290
Commercial finance receivables, individually evaluated for impairment, net of fees	41			22
Total commercial finance receivables, net of fees^(b)	12,721			10,312
Less: allowance for loan losses - collective	(63		)	(50		)
Less: allowance for loan losses - specific	(4		)	(3		)
Total commercial finance receivables, net	12,654			10,259
Total finance receivables, net	$	52,512		$	42,172
Fair value utilizing Level 2 inputs	$	12,654		$	10,259
Fair value utilizing Level 3 inputs	$	39,564		$	31,919

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(a)	Net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $53 million and $228 million at December 31, 2018 and 2017.


(b)	Net of dealer cash management balances of $922 million and $536 million at December 31, 2018 and 2017.



Retail Finance Receivables	Years ended December 31,
	2018			2017			2016
Allowance for retail loan losses beginning balance	$	889		$	765		$	713
Provision for loan losses	624			742			640
Charge-offs	(1,196		)	(1,171		)	(1,136		)
Recoveries	536			552			542
Foreign currency translation	(9		)	1			6
Allowance for retail loan losses ending balance	$	844		$	889		$	765

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 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.



	December 31, 2018				December 31, 2017
	Amount		Percent of Contractual Amount Due		Amount		Percent of Contractual Amount Due
31 - 60 days	$	1,349	3.3	%	$	1,334	4.1	%
Greater than 60 days	547		1.4		559		1.7
Total finance receivables more than 30 days delinquent	1,896		4.7		1,893		5.8
In repossession	44		0.1		27		—
Total finance receivables more than 30 days delinquent or in repossession	$	1,940	4.8	%	$	1,920	5.8	%

At December 31, 2018 and 2017, the accrual of finance charge income had been suspended on retail finance receivables with contractual amounts due of $888 million and $778 million.

Impaired Retail Finance Receivables - TDRs Retail finance receivables that become classified as 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:



	December 31, 2018			December 31, 2017
Outstanding recorded investment	$	2,348		$	2,228
Less: allowance for loan losses	(321		)	(328		)
Outstanding recorded investment, net of allowance	$	2,027		$	1,900
Unpaid principal balance	$	2,379		$	2,266

Additional information about loans classified as TDRs is presented below:



	Years Ended December 31,
	2018		2017		2016
Average outstanding recorded investment	$	2,288	$	2,074	$	1,766
Finance charge income recognized	$	239	$	228	$	205
Number of loans classified as TDRs during the period	69,298		74,784		66,926
Recorded investment of loans classified as TDRs during the period	$	1,267	$	1,309	$	1,148

The unpaid principal balance, 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 $38 million, $27 million and $26 million for 2018, 2017 and 2016.

Commercial Finance Receivables

Commercial Credit Quality Our commercial finance receivables consist of dealer financings, primarily for dealer 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:



			December 31, 2018				December 31, 2017
			Amount		Percent		Amount		Percent
Group I	-	Dealers with superior financial metrics	$	2,192	17.2	%	$	1,915	18.6	%
Group II	-	Dealers with strong financial metrics	4,500		35.4		3,584		34.7
Group III	-	Dealers with fair financial metrics	4,292		33.7		3,424		33.2
Group IV	-	Dealers with weak financial metrics	1,205		9.5		1,048		10.2
Group V	-	Dealers warranting special mention due to elevated risks	449		3.5		260		2.5
Group VI	-	Dealers with loans classified as substandard, doubtful or impaired	83		0.7		81		0.8
Balance at end of period			$	12,721	100.0	%	$	10,312	100.0	%

At December 31, 2018 and 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 2018, 2017 and 2016.