Consumer Portfolio. Receivables in this portfolio include products offered to individuals and businesses that finance the acquisition of Ford and Lincoln vehicles from dealers for personal or commercial use. Retail financing includes retail installment contracts for new and used vehicles and finance leases with retail customers, government entities, daily rental companies, and fleet customers.

Non-Consumer Portfolio. Receivables in this portfolio include products offered to automotive dealers. Dealer financing includes wholesale loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing, as well as loans to dealers to finance working capital and improvements to dealership facilities, finance the purchase of dealership real estate, and finance other dealer programs. Wholesale financing is approximately 97% of dealer financing.

Finance receivables are accounted for as held for investment (“HFI”) if Ford Credit has the intent and ability to hold the receivables for the foreseeable future or until maturity or payoff. The determination of intent and ability to hold for the foreseeable future is highly judgmental and requires Ford Credit to make good faith estimates based on all information available at the time of origination or purchase. If Ford Credit does not have the intent and ability to hold the receivables, then the receivables are classified as HFS.

Each quarter, Ford Credit makes a determination of whether it is probable that finance receivables originated or purchased during the quarter will be held for the foreseeable future based on historical receivables sale experience, internal forecasts and budgets, as well as other relevant, reliable information available through the date of evaluation. For purposes of this determination, probable means at least 70% likely and, consistent with the budgeting and forecasting period, the foreseeable future means twelve months. Ford Credit classifies receivables as HFI or HFS on a receivable-by-receivable basis. Specific receivables included in off-balance sheet sale transactions are generally not identified until the month in which the sale occurs.

Held-for-Investment. Finance receivables classified as HFI are recorded at the time of origination or purchase at fair value and are subsequently reported at amortized cost, net of any allowance for credit losses. Cash flows from finance receivables, excluding wholesale and other receivables, that were originally classified as HFI are recorded as an investing activity since GAAP requires the statement of cash flows presentation to be based on the original classification of the receivables. Cash flows from wholesale and other receivables are recorded as an operating activity.

Held-for-Sale. Finance receivables classified as HFS are carried at the lower of cost or fair value. Cash flows resulting from the origination or purchase and sale of HFS receivables are recorded as an operating activity in Decrease/(Increase) in finance receivables (wholesale and other). Once a decision has been made to sell receivables that were originally classified as HFI, the receivables are reclassified as HFS and carried at the lower of cost or fair value. The valuation adjustment, if applicable, is recorded in Other income/(loss), net to recognize the receivables at the lower of cost or fair value.

Ford Credit finance receivables, net at December 31 were as follows (in millions):


	2023		2024
Consumer
Retail installment contracts, gross	$	73,825	$	79,459
Finance leases, gross	7,793		8,357
Retail financing, gross	81,618		87,816
Unearned interest supplements	(3,344)		(4,598)
Consumer finance receivables	78,274		83,218
Non-Consumer
Dealer financing	24,683		29,282
Non-Consumer finance receivables	24,683		29,282
Total recorded investment	$	102,957	$	112,500

Recorded investment in finance receivables	$	102,957	$	112,500
Allowance for credit losses	(882)		(864)
Total finance receivables, net	$	102,075	$	111,636

Current portion	$	46,425	$	51,850
Non-current portion	55,650		59,786
Total finance receivables, net	$	102,075	$	111,636

Net finance receivables subject to fair value (a)	$	94,728	$	103,755
Fair value (b)	93,189		103,231

__________

Ford Credit’s finance leases are comprised of sales-type and direct financing leases. These financings include primarily lease plans for terms of 24 to 60 months. Financing revenue from finance leases for the years ended December 31, 2022, 2023, and 2024, was $303 million, $381 million, and $515 million, respectively, and is included in Ford Credit revenues on our consolidated income statements.

The reconciliation from finance lease receivables to finance leases, gross and finance leases, net at December 31 is as follows (in millions):


	2023		2024
Finance lease receivables	$	4,787	$	5,367
Unguaranteed residual assets	2,910		2,883
Initial direct costs	96		107
Finance leases, gross	7,793		8,357
Unearned interest supplements from Ford and affiliated companies	(408)		(437)
Allowance for credit losses	(38)		(39)
Finance leases, net	$	7,347	$	7,881

Included in the recorded investment in finance receivables at December 31, 2023 and 2024 were consumer receivables of $46.0 billion and $47.6 billion, respectively, and non-consumer receivables of $21.3 billion and $24.4 billion, respectively, (including Ford Blue, Ford Model e, and Ford Pro receivables sold to Ford Credit, which we report in Trade and other receivables) that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions (see Note 23).

When originating consumer receivables, Ford Credit uses a proprietary scoring system that measures credit quality using information in the credit application, proposed contract terms, credit bureau data, and other information. After a proprietary risk score is generated, Ford Credit decides whether to purchase a contract using a decision process based on a judgmental evaluation of the applicant, the credit application, the proposed contract terms, credit bureau information (e.g., FICO score), proprietary risk score, and other information. The evaluation emphasizes the applicant’s ability to pay and creditworthiness focusing on payment, affordability, applicant credit history, and stability as key considerations.

After origination, Ford Credit reviews the credit quality of retail financing based on customer payment activity. As each customer develops a payment history, an internally developed behavioral scoring model is used to assist in determining the best collection strategies, which allows Ford Credit to focus collection activity on higher-risk accounts. These models are used to refine Ford Credit’s risk-based staffing model to ensure collection resources are aligned with portfolio risk. Based on data from this scoring model, contracts are categorized by collection risk. Ford Credit’s collection models evaluate several factors, including origination characteristics, updated credit bureau data, and payment patterns.

The credit quality analysis of consumer receivables at December 31, 2023 was as follows (in millions):


	Amortized Cost Basis by Origination Year
	Prior to 2019		2019		2020		2021		2022		2023		Total		Percent
Consumer
31 - 60 days past due	$	40	$	49	$	130	$	125	$	187	$	159	$	690	0.9	%
61 - 120 days past due	9		11		30		37		58		50		195		0.2
Greater than 120 days past due	7		4		7		10		10		5		43		0.1
Total past due	56		64		167		172		255		214		928		1.2
Current	891		2,359		7,385		11,301		20,247		35,163		77,346		98.8
Total	$	947	$	2,423	$	7,552	$	11,473	$	20,502	$	35,377	$	78,274	100.0	%

Gross charge-offs	$	47	$	40	$	75	$	85	$	117	$	37	$	401

The credit quality analysis of consumer receivables at December 31, 2024 was as follows (in millions):


	Amortized Cost Basis by Origination Year
	Prior to 2020		2020		2021		2022		2023		2024		Total		Percent
Consumer
31 - 60 days past due	$	43	$	93	$	104	$	187	$	242	$	203	$	872	1.0	%
61 - 120 days past due	8		20		27		46		70		54		225		0.3
Greater than 120 days past due	7		7		8		11		12		5		50		0.1
Total past due	58		120		139		244		324		262		1,147		1.4
Current	788		3,162		5,458		12,275		24,153		36,235		82,071		98.6
Total	$	846	$	3,282	$	5,597	$	12,519	$	24,477	$	36,497	$	83,218	100.0	%

Gross charge-offs	$	46	$	58	$	71	$	152	$	191	$	50	$	568

Ford Credit extends credit to dealers primarily in the form of lines of credit to purchase new Ford and Lincoln vehicles as well as used vehicles. Payment is typically required when the dealer has sold the vehicle. Each non-consumer lending request is evaluated by considering the borrower’s financial condition and the underlying collateral securing the loan. Ford Credit uses a proprietary model to assign each dealer a risk rating. This model uses historical dealer performance data to identify key factors about a dealer that are considered most significant in predicting a dealer’s ability to meet its financial obligations. Ford Credit also considers numerous other financial and qualitative factors of the dealer’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with Ford Credit and other creditors.

Ford Credit regularly reviews the model to confirm the continued business significance and statistical predictability of the model and may make updates to improve the performance of the model. In addition, Ford Credit regularly audits dealer inventory and dealer sales records to verify that the dealer is in possession of the financed vehicles and is promptly paying each receivable following the sale of the financed vehicle. The frequency of on-site vehicle inventory audits depends primarily on the dealer’s risk rating. Under Ford Credit’s policies, on-site vehicle inventory audits of low-risk dealers are conducted only as circumstances warrant. On-site vehicle inventory audits of higher-risk dealers are conducted with increased frequency based primarily on the dealer’s risk rating, but also considering the results of electronic monitoring of the dealer’s performance, including daily payment verifications and monthly analyses of the dealer’s financial statements, payoffs, aged inventory, over credit line, and delinquency reports. Ford Credit typically performs a credit review of each dealer annually and more frequently reviews certain dealers based on the dealer’s risk rating and total exposure. Ford Credit adjusts the dealer’s risk rating, if necessary. The credit quality of dealer financing receivables is evaluated based on Ford Credit’s internal dealer risk rating analysis. A dealer has the same risk rating for its entire dealer financing regardless of the type of financing.

The credit quality analysis of dealer financing receivables at December 31, 2023 was as follows (in millions):


	Amortized Cost Basis by Origination Year														Wholesale Loans
	Dealer Loans
	Prior to 2019		2019		2020		2021		2022		2023		Total				Total		Percent
Group I	$	383	$	30	$	58	$	156	$	61	$	331	$	1,019	$	20,419	$	21,438	86.9	%
Group II	16		—		1		3		2		44		66		2,834		2,900		11.7
Group III	—		—		—		—		1		8		9		292		301		1.2
Group IV	—		1		—		—		—		2		3		41		44		0.2
Total (a)	$	399	$	31	$	59	$	159	$	64	$	385	$	1,097	$	23,586	$	24,683	100.0	%

Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	1	$	1	$	3	$	4

__________

The credit quality analysis of dealer financing receivables at December 31, 2024 was as follows (in millions):


	Amortized Cost Basis by Origination Year														Wholesale Loans
	Dealer Loans
	Prior to 2020		2020		2021		2022		2023		2024		Total				Total		Percent
Group I	$	270	$	63	$	97	$	47	$	217	$	245	$	939	$	25,257	$	26,196	89.4	%
Group II	13		—		3		1		28		31		76		2,494		2,570		8.8
Group III	—		—		2		—		1		4		7		462		469		1.6
Group IV	—		—		—		—		—		1		1		46		47		0.2
Total (a)	$	283	$	63	$	102	$	48	$	246	$	281	$	1,023	$	28,259	$	29,282	100.0	%

Gross charge-offs	$	1	$	—	$	—	$	—	$	—	$	—	$	1	$	6	$	7

__________

Non-Accrual of Revenue. The accrual of financing revenue is discontinued at the time a receivable is determined to be uncollectible or when it is 90 days past due. Accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

Loan Modifications. Consumer and non-consumer receivables that have a modified interest rate and/or a term extension (including receivables that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code) are typically considered to be loan modifications. Ford Credit does not grant modifications to the principal balance of the receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven.

The use of interest rate modifications and term extensions helps Ford Credit mitigate financial loss. Term extensions may assist in cases where Ford Credit believes the customer will recover from short-term financial difficulty and resume regularly scheduled payments. The effect of most loan modifications made to borrowers experiencing financial difficulty is included in the historical trends used to measure the allowance for credit losses. A loan modification that improves the delinquency status of a borrower reduces the probability of default, which results in a lower allowance for credit losses. At December 31, 2024, an insignificant portion of Ford Credit's total finance receivables portfolio had been granted a loan modification, and these modifications are generally treated as a continuation of the existing loan.

Adjustments to the allowance for credit losses are made by recording charges to Ford Credit interest, operating, and other expenses on our consolidated income statements. The uncollectible portion of a finance receivable is charged to the allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is 120 days delinquent, taking into consideration the financial condition of the customer or borrower, the value of the collateral, recourse to guarantors, and other factors.

Charge-offs on finance receivables include uncollected amounts related to principal, interest, late fees, and other allowable charges. Recoveries on finance receivables previously charged off as uncollectible are credited to the allowance for credit losses. In the event Ford Credit repossesses the collateral, the receivable is charged off and the collateral is recorded at its estimated fair value less costs to sell and reported in Other assets on our consolidated balance sheets.

For consumer receivables that share similar risk characteristics such as product type, initial credit risk, term, vintage, geography, and other relevant factors, Ford Credit estimates the lifetime expected credit loss allowance based on a collective assessment using measurement models and management judgment. The lifetime expected credit losses for the receivables is determined by applying probability of default and loss given default assumptions to monthly expected exposures, then discounting these cash flows to present value using the receivable’s original effective interest rate or the current effective interest rate for a variable rate receivable. Probability of default models are developed from internal risk scoring models taking into account the expected probability of payment and time to default, adjusted for macroeconomic outlook and recent performance. The models consider factors such as risk evaluation at the time of origination, historical trends in credit losses, and the composition and recent performance of the present portfolio (including vehicle brand, term, risk evaluation, and new/used vehicles). The loss given default is the percentage of the expected balance due at default that is not recoverable, taking into account the expected collateral value and trends in recoveries (including key metrics such as delinquencies, repossessions, and bankruptcies). Monthly exposures are equal to the receivables’ expected outstanding principal and interest balance.

The allowance for credit losses incorporates forward-looking macroeconomic conditions for baseline, upturn, and downturn scenarios. Three separate credit loss allowances are calculated from these scenarios. They are then probability-weighted to determine the quantitative estimate of the credit loss allowance recognized in the financial statements. Ford Credit uses forecasts from a third party that revert to a long-term historical average after a reasonable and supportable forecasting period, which is specific to the particular macroeconomic variable and which varies by market. Ford Credit updates the forward-looking macroeconomic forecasts quarterly.

Dealer financing is evaluated on an individual dealer basis by segmenting dealers by risk characteristics (such as the amount of the loans, the nature of the collateral, and the financial status of the dealer) to determine if an individual dealer requires a specific allowance for credit loss. If required, the allowance is based on the present value of the expected future cash flows of the dealer’s receivables discounted at the loans’ original effective interest rate or the fair value of the collateral adjusted for estimated costs to sell.

Wholesale Loans. Ford Credit estimates the allowance for credit losses for wholesale loans based on historical loss-to-receivable (“LTR”) ratios, expected future cash flows, and the fair value of collateral. The LTR model is based on the most recent years of history. An LTR ratio is calculated by dividing credit losses (i.e., charge-offs net of recoveries) by average net finance receivables, excluding allowance for credit losses. The average LTR ratio is multiplied by the end-of-period balances, representing the lifetime expected credit loss reserve.

Dealer Loans. Ford Credit uses a weighted-average remaining maturity method to estimate the lifetime expected credit loss reserve for dealer loans. The loss model is based on industrywide commercial real estate credit losses, adjusted to factor in the historical credit losses for the dealer loans portfolio. The expected credit loss is calculated under different macroeconomic scenarios that are weighted to provide the total lifetime expected credit loss.

After establishing the collective and specific allowance for credit losses, if management believes the allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other relevant forward-looking economic factors, an adjustment is made based on management judgment.

An analysis of the allowance for credit losses related to finance receivables for the years ended December 31 was as follows (in millions):


	2023
	Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	838	$	7	$	845
Charge-offs	(401)		(4)		(405)
Recoveries	151		2		153
Provision for credit losses	280		(2)		278
Other (a)	11		—		11
Ending balance	$	879	$	3	$	882