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Finance Receivables, Net
 12 Months Ended
Mar. 31, 2023
Receivables [Abstract]  
Finance Receivables, Net

Note 3 – Finance Receivables, Net

Finance receivables, net consists of retail loan and dealer products portfolio segments, and includes deferred origination costs, deferred income, and allowance for credit losses. Finance receivables, net also includes securitized retail receivables, which represent retail receivables that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements, as discussed further in Note 8 – Variable Interest Entities. Cash flows from these securitized retail receivables are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions. They are not available for payment of our other obligations or to satisfy claims of our other creditors.

Finance receivables are classified as held-for-investment if the Company has the intent and ability to hold the receivables for the foreseeable future or until maturity or payoff. As of March 31, 2023 and 2022, all finance receivables were classified as held-for-investment.

Revenues associated with retail and dealer financing are recognized to approximate a constant effective yield over the contract term. Incremental direct fees and costs incurred in connection with the acquisition of retail contracts and dealer financing receivables, including incentive and rate participation payments made to dealers, are capitalized and amortized to approximate a constant effective yield over the term of the related contracts. Payments received on subvention and other consumer incentives are deferred and recognized to approximate a constant effective yield over the term of the related contracts.

For both retail loan and dealer products portfolio segments, accrued interest, deferred income, and deferred origination costs, if any, are written off within Provision for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is greater than 120 days past due.

Finance receivables, net consisted of the following:

 

 

 

March 31,

 

 

March 31,

 

 

 

2023

 

 

2022

 

Retail receivables 1

 

$

79,515

 

 

$

73,152

 

Dealer financing

 

 

12,123

 

 

 

10,298

 

 

 

91,638

 

 

 

83,450

 

 

 

 

 

 

 

Deferred origination costs

 

 

1,315

 

 

 

1,330

 

Deferred income

 

 

(1,184

)

 

 

(1,102

)

Allowance for credit losses

 

 

 

 

 

 

Retail receivables

 

 

(1,430

)

 

 

(1,195

)

Dealer financing

 

 

(59

)

 

 

(51

)

Total allowance for credit losses

 

 

(1,489

)

 

 

(1,246

)

Finance receivables, net

 

$

90,280

 

 

$

82,432

 

 

1.
Includes securitized retail receivables of $29.0 billion and $21.2 billion as of March 31, 2023 and 2022, respectively.

Accrued interest related to finance receivables are presented within Other assets on the Consolidated Balance Sheet and was $284 million and $214 million at March 31, 2023 and 2022, respectively.

 

Note 3 – Finance Receivables, Net (Continued)

Credit Quality Indicators

We are exposed to credit risk on our finance receivables. Credit risk is the risk of loss arising from the failure of customers or dealers to meet the terms of their contracts with us or otherwise fail to perform as agreed.

Retail Loan Portfolio Segment

The retail loan portfolio segment consists of one class of finance receivables. While we use various credit quality metrics to develop our allowance for credit losses on the retail loan portfolio segment, we primarily utilize the aging of the individual accounts to monitor the credit quality of these finance receivables. Based on our experience, the payment status of borrowers is the strongest indicator of the credit quality of the underlying receivables. Payment status also impacts charge-offs.

Individual borrower accounts within the retail loan portfolio segment are segregated into aging categories based on the number of days past due. The aging of finance receivables is updated monthly.

The following tables present the amortized cost basis of our retail loan portfolio by origination fiscal year by credit quality indicator based on number of days past due:

 

 

 

Amortized Cost Basis by Origination Fiscal Year at March 31, 2023

 

 

 

 

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018 and Prior

 

 

Total

 

Aging of finance receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

32,377

 

 

$

22,585

 

 

$

14,278

 

 

$

5,555

 

 

$

2,178

 

 

$

846

 

 

$

77,819

 

30-59 days past due

 

 

306

 

 

 

439

 

 

 

285

 

 

 

125

 

 

 

71

 

 

 

44

 

 

 

1,270

 

60-89 days past due

 

 

90

 

 

 

135

 

 

 

82

 

 

 

35

 

 

 

21

 

 

 

15

 

 

 

378

 

90 days or greater past due

 

 

47

 

 

 

63

 

 

 

33

 

 

 

16

 

 

 

9

 

 

 

11

 

 

 

179

 

Total

 

$

32,820

 

 

$

23,222

 

 

$

14,678

 

 

$

5,731

 

 

$

2,279

 

 

$

916

 

 

$

79,646

 

 

 

 

Amortized Cost Basis by Origination Fiscal Year at March 31, 2022

 

 

 

 

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017 and Prior

 

 

Total

 

Aging of finance receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

32,382

 

 

$

21,917

 

 

$

9,624

 

 

$

4,774

 

 

$

2,674

 

 

$

718

 

 

$

72,089

 

30-59 days past due

 

 

275

 

 

 

304

 

 

 

153

 

 

 

101

 

 

 

63

 

 

 

36

 

 

 

932

 

60-89 days past due

 

 

68

 

 

 

82

 

 

 

40

 

 

 

25

 

 

 

16

 

 

 

11

 

 

 

242

 

90 days or greater past due

 

 

33

 

 

 

39

 

 

 

17

 

 

 

13

 

 

 

8

 

 

 

7

 

 

 

117

 

Total

 

$

32,758

 

 

$

22,342

 

 

$

9,834

 

 

$

4,913

 

 

$

2,761

 

 

$

772

 

 

$

73,380

 

The amortized cost of retail loan portfolio excludes accrued interest of $235 million and $192 million at March 31, 2023 and 2022, respectively. The previous tables include contracts greater than 120 days past due, which are recorded at the fair value of collateral less estimated costs to sell, and contracts in bankruptcy.

Note 3 – Finance Receivables, Net (Continued)

Dealer Products Portfolio Segment

The dealer products portfolio segment consists of three classes of finance receivables: wholesale, real estate, and working capital (includes both working capital and revolving lines of credit). All loans outstanding for an individual dealer or dealer group, which includes affiliated entities, are aggregated and evaluated collectively by dealer or dealer group. This reflects the interconnected nature of financing provided to our individual dealer and dealer group customers, and their affiliated entities.

When assessing the credit quality of the finance receivables within the dealer products portfolio segment, we segregate the finance receivables account balances into four categories representing distinct credit quality indicators based on internal risk assessments. The internal risk assessments for all finance receivables within the dealer products portfolio segment are updated on a monthly basis.

The four credit quality indicators are:

•
Performing – Account not classified as either Credit Watch, At Risk or Default;
•
Credit Watch – Account designated for elevated attention;
•
At Risk – Account where there is an increased likelihood that default may exist based on qualitative and quantitative factors; and
•
Default – Account is not currently meeting contractual obligations or we have temporarily waived certain contractual requirements

 

The following tables present the amortized cost basis of our dealer products portfolio by credit quality indicator based on internal risk assessments by origination fiscal year:

 

 

Amortized Cost Basis by Origination Fiscal Year at March 31, 2023

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018 and Prior

 

 

Revolving loans

 

 

Total

 

Wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

3,859

 

 

$

3,859

 

Credit Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

54

 

 

 

54

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

51

 

 

 

51

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Wholesale total

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

3,964

 

 

$

3,964

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

1,378

 

 

$

1,024

 

 

$

1,057

 

 

$

133

 

 

$

300

 

 

$

850

 

 

$

209

 

 

$

4,951

 

Credit Watch

 

 

5

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7

 

At Risk

 

 

8

 

 

 

7

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

17

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Real estate total

 

$

1,391

 

 

$

1,031

 

 

$

1,059

 

 

$

133

 

 

$

300

 

 

$

852

 

 

$

209

 

 

$

4,975

 

Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

789

 

 

$

317

 

 

$

182

 

 

$

131

 

 

$

124

 

 

$

88

 

 

$

1,552

 

 

$

3,183

 

Credit Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

At Risk

 

 

-

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Working capital total

 

$

789

 

 

$

318

 

 

$

182

 

 

$

131

 

 

$

124

 

 

$

88

 

 

$

1,552

 

 

$

3,184

 

Total

 

$

2,180

 

 

$

1,349

 

 

$

1,241

 

 

$

264

 

 

$

424

 

 

$

940

 

 

$

5,725

 

 

$

12,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 3 – Finance Receivables, Net (Continued)

 

 

 

Amortized Cost Basis by Origination Fiscal Year at March 31, 2022

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017 and Prior

 

 

Revolving loans

 

 

Total

 

Wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

2,927

 

 

$

2,927

 

Credit Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16

 

 

 

16

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Wholesale total

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

2,943

 

 

$

2,943

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

1,614

 

 

$

1,245

 

 

$

264

 

 

$

384

 

 

$

260

 

 

$

1,245

 

 

$

-

 

 

$

5,012

 

Credit Watch

 

 

2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5

 

 

 

-

 

 

 

7

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Real estate total

 

$

1,616

 

 

$

1,245

 

 

$

264

 

 

$

384

 

 

$

260

 

 

$

1,250

 

 

$

-

 

 

$

5,019

 

Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

662

 

 

$

321

 

 

$

209

 

 

$

158

 

 

$

37

 

 

$

173

 

 

$

774

 

 

$

2,334

 

Credit Watch

 

 

1

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Working capital total

 

$

663

 

 

$

322

 

 

$

209

 

 

$

158

 

 

$

37

 

 

$

173

 

 

$

774

 

 

$

2,336

 

Total

 

$

2,279

 

 

$

1,567

 

 

$

473

 

 

$

542

 

 

$

297

 

 

$

1,423

 

 

$

3,717

 

 

$

10,298

 

The amortized cost of the dealer products portfolio excludes accrued interest of $49 million and $22 million at March 31, 2023 and 2022, respectively. As of March 31, 2023 and 2022, the amount of line-of-credit arrangements that are converted to term loans in each reporting period was insignificant, respectively.

Note 3 – Finance Receivables, Net (Continued)

Past Due Finance Receivables by Class

Substantially all finance receivables do not involve recourse to the dealer in the event of customer default. Finance receivables include contracts greater than 120 days past due, which are recorded at the fair value of collateral less estimated costs to sell, and contracts in bankruptcy. Contracts for which vehicles have been repossessed are excluded. For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 30 days past the contractual due date. For any customer who is granted a payment extension under an extension program, the aging of the receivable is adjusted for the number of days of the extension granted.

The following tables presents the aging of the amortized cost basis of our finance receivables by class:

 

 

 

March 31, 2023

 

 

 

30 - 59 Days
past due

 

 

60 - 89 Days
past due

 

 

90 Days or
greater
past due

 

 

Total Past
due

 

 

Current

 

 

Total Finance
receivables

 

 

90 Days or
greater 
past due and
accruing

 

Retail loan

 

$

1,270

 

 

$

378

 

 

$

179

 

 

$

1,827

 

 

$

77,819

 

 

$

79,646

 

 

$

111

 

Wholesale

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,964

 

 

 

3,964

 

 

 

-

 

Real estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,975

 

 

 

4,975

 

 

 

-

 

Working capital

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,184

 

 

 

3,184

 

 

 

-

 

Total

 

$

1,270

 

 

$

378

 

 

$

179

 

 

$

1,827

 

 

$

89,942

 

 

$

91,769

 

 

$

111

 

 

 

 

March 31, 2022

 

 

 

30 - 59 Days
 past due

 

 

60 - 89 Days
past due

 

 

90 Days or
greater
past due

 

 

Total Past
due

 

 

Current

 

 

Total Finance
receivables

 

 

90 Days or
 greater 
past due and
 accruing

 

Retail loan

 

$

932

 

 

$

242

 

 

$

117

 

 

$

1,291

 

 

$

72,089

 

 

$

73,380

 

 

$

65

 

Wholesale

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,943

 

 

 

2,943

 

 

 

-

 

Real estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,019

 

 

 

5,019

 

 

 

-

 

Working capital

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,336

 

 

 

2,336

 

 

 

-

 

Total

 

$

932

 

 

$

242

 

 

$

117

 

 

$

1,291

 

 

$

82,387

 

 

$

83,678

 

 

$

65

 

 

Note 3 – Finance Receivables, Net (Continued)

Troubled Debt Restructuring

A troubled debt restructuring occurs when a finance receivable is modified through a concession to a borrower experiencing financial difficulty. A finance receivable modified under a troubled debt restructuring is considered to be impaired. In addition, troubled debt restructurings include finance receivables for which the customer has filed for bankruptcy protection. For such finance receivables, we no longer have the ability to modify the terms of the agreement without the approval of the bankruptcy court and the court may impose term modifications that we are obligated to accept.

For accounts not under bankruptcy protection, the amount of finance receivables modified as a troubled debt restructuring during fiscal 2023 and 2022 was not significant for each class of finance receivables. Troubled debt restructurings for accounts not under bankruptcy protection within the retail loan class of finance receivables are comprised exclusively of contract term extensions that reduce the monthly payment due from the customer. For the three classes of finance receivables within the dealer products portfolio segment, troubled debt restructurings include contract term extensions, interest rate adjustments, waivers of loan covenants, or any combination of the three. Troubled debt restructurings of accounts not under bankruptcy protection did not include forgiveness of principal or interest rate adjustments during fiscal 2023 and 2022.

We consider finance receivables under bankruptcy protection within the retail loan class to be troubled debt restructurings as of the date we receive notice of a customer filing for bankruptcy protection, regardless of the ultimate outcome of the bankruptcy proceedings. The bankruptcy court may impose modifications as part of the proceedings, including interest rate adjustments and forgiveness of principal. For fiscal 2023 and 2022, the financial impact of troubled debt restructurings related to finance receivables under bankruptcy protection was not significant to our Consolidated Statements of Income and Consolidated Balance Sheets.