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Finance Receivables, Net
 9 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
Finance Receivables, Net

Note 3 – Finance Receivables, Net

Finance receivables, net consists of the 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, net consisted of the following:

 

 

December 31,

 

 

March 31,

 

 

 

2023

 

 

2023

 

Retail receivables 1

 

$

85,975

 

 

$

79,515

 

Dealer financing

 

 

16,379

 

 

 

12,123

 

 

 

102,354

 

 

 

91,638

 

 

 

 

 

 

 

Deferred origination costs

 

 

1,417

 

 

 

1,315

 

Deferred income

 

 

(1,282

)

 

 

(1,184

)

Allowance for credit losses

 

 

 

 

 

 

Retail receivables

 

 

(1,533

)

 

 

(1,430

)

Dealer financing

 

 

(72

)

 

 

(59

)

Total allowance for credit losses

 

 

(1,605

)

 

 

(1,489

)

Finance receivables, net

 

$

100,884

 

 

$

90,280

 

1 Includes gross securitized retail receivables of $30.1 billion and $29.0 billion as of December 31, 2023 and March 31, 2023, respectively.

Accrued interest related to finance receivables is presented in Other assets on the Consolidated Balance Sheets and was $398 million and $284 million at December 31, 2023 and March 31, 2023, 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 December 31, 2023

 

 

 

 

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019 and Prior

 

 

Total

 

Aging of finance receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

27,968

 

 

$

24,650

 

 

$

16,640

 

 

$

9,777

 

 

$

3,279

 

 

$

1,098

 

 

$

83,412

 

30-59 days past due

 

 

253

 

 

 

582

 

 

 

537

 

 

 

319

 

 

 

120

 

 

 

78

 

 

 

1,889

 

60-89 days past due

 

 

62

 

 

 

168

 

 

 

159

 

 

 

91

 

 

 

35

 

 

 

27

 

 

 

542

 

90 days or greater past due

 

 

32

 

 

 

89

 

 

 

74

 

 

 

41

 

 

 

15

 

 

 

16

 

 

 

267

 

Total

 

$

28,315

 

 

$

25,489

 

 

$

17,410

 

 

$

10,228

 

 

$

3,449

 

 

$

1,219

 

 

$

86,110

 

Gross Charge-Offs

 

$

10

 

 

$

198

 

 

$

191

 

 

$

82

 

 

$

29

 

 

$

26

 

 

$

536

 

 

 

 

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

 

The amortized cost of retail loan portfolio excludes accrued interest of $319 million and $235 million at December 31, 2023 and March 31, 2023, 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 December 31, 2023

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019 and Prior

 

 

Revolving loans

 

 

Total

 

Wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

6,912

 

 

$

6,912

 

Credit Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

139

 

 

 

139

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

81

 

 

 

81

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11

 

 

 

11

 

Wholesale total

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

7,143

 

 

$

7,143

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

868

 

 

$

1,084

 

 

$

899

 

 

$

897

 

 

$

129

 

 

$

849

 

 

$

13

 

 

$

4,739

 

Credit Watch

 

 

26

 

 

 

5

 

 

 

4

 

 

 

8

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

43

 

At Risk

 

 

-

 

 

 

-

 

 

 

7

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

8

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24

 

Real estate total

 

$

894

 

 

$

1,089

 

 

$

910

 

 

$

929

 

 

$

129

 

 

$

850

 

 

$

13

 

 

$

4,814

 

Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

512

 

 

$

598

 

 

$

263

 

 

$

139

 

 

$

110

 

 

$

168

 

 

$

2,604

 

 

$

4,394

 

Credit Watch

 

 

11

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

14

 

At Risk

 

 

-

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13

 

Working capital total

 

$

523

 

 

$

600

 

 

$

264

 

 

$

152

 

 

$

110

 

 

$

168

 

 

$

2,605

 

 

$

4,422

 

Total

 

$

1,417

 

 

$

1,689

 

 

$

1,174

 

 

$

1,081

 

 

$

239

 

 

$

1,018

 

 

$

9,761

 

 

$

16,379

 

 

For the three and nine months ended December 31, 2023, there were no gross charge-offs in our dealer product portfolio.

Note 3 – Finance Receivables, Net (Continued)

 

 

 

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

 

The amortized cost of the dealer products portfolio excludes accrued interest of $79 million and $49 million at December 31, 2023 and March 31, 2023, respectively. As of December 31, 2023 and March 31, 2023, the amount of line-of-credit arrangements that are converted to term loans in each reporting period was not significant, 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 present the aging of the amortized cost basis of our finance receivables by class:

 

 

December 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

 

$

1,889

 

 

$

542

 

 

$

267

 

 

$

2,698

 

 

$

83,412

 

 

$

86,110

 

 

$

187

 

Wholesale

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,143

 

 

 

7,143

 

 

 

-

 

Real estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,814

 

 

 

4,814

 

 

 

-

 

Working capital

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,422

 

 

 

4,422

 

 

 

-

 

Total

 

$

1,889

 

 

$

542

 

 

$

267

 

 

$

2,698

 

 

$

99,791

 

 

$

102,489

 

 

$

187

 

 

 

 

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

 

 

Note 3 – Finance Receivables, Net (Continued)

Loan Modifications

Under certain circumstances, we may agree to modify the terms of an existing loan with a borrower for various reasons, including a borrower experiencing financial difficulties. We evaluate all loan modifications, which generally represent a continuation of the existing loan and not a new loan. For borrowers experiencing financial difficulties within the retail loan portfolio segment, we may provide contract term extensions. For borrowers experiencing financial difficulties within the dealer product portfolio segment, we may provide contract term extensions, interest rate adjustments, waivers of loan covenants, or any combination of the three. The effect of these modifications is already included in the allowance for credit losses because our estimated allowance represents currently expected credit losses.

The amortized cost at December 31, 2023 of the loans modified during the three and nine months ended December 31, 2023 was not significant. The unpaid principal balances, net of recoveries, of loans charged off during the reporting period that were modified within 12 months preceding default were not significant for the three and nine months ended December 31, 2023.

Troubled Debt Restructuring

For accounts not under bankruptcy protection, the amount of finance receivables modified as a troubled debt restructuring during the three and nine months ended December 31, 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 the three and nine months ended December 31, 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 the three and nine months ended December 31, 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.