FINANCE RECEIVABLES

We segment our North America and International portfolio of finance receivables into "consumer" and "non-consumer" receivables. The receivables are secured by the vehicles, inventory, or other property being financed.

Consumer Segment. Receivables in this portfolio segment relate to products offered to individuals and businesses that finance the acquisition of Ford vehicles from dealers for personal or commercial use. The products include:


•	Retail financing – retail installment contracts for new and used vehicles


•	Direct financing leases – direct financing leases with retail customers, government entities, daily rental companies, and fleet customers

Non-Consumer Segment. Receivables in this portfolio segment relate to products offered to automotive dealers and purchased receivables. The products include:


•	Wholesale financing – loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing


•	Dealer loans – loans to dealers to finance working capital, and to finance the purchase of dealership real estate and/or make improvements to dealership facilities


•	Other financing – purchased receivables and other finance receivables from Ford and its affiliates, primarily related to the sale of parts and accessories to dealers and certain used vehicles from daily rental fleet companies

Notes and accounts receivable from affiliated companies are presented separately on the balance sheet. These receivables are based on intercompany relationships and the balances are settled regularly. We do not assess these receivables for potential credit losses, nor are they subjected to aging analysis, credit quality reviews, or other formal assessments. As a result, Notes and accounts receivable from affiliated companies are not subject to the following disclosures contained herein.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. FINANCE RECEIVABLES (Continued)

Finance Receivables, Net

Finance receivables, net were as follows (in millions):



	September 30, 2012									December 31, 2011
	North America			International			Total Finance Receivables			North America			International			Total Finance Receivables
Consumer
Retail, gross	$	39,279		$	8,072		$	47,351		$	38,406		$	8,124		$	46,530
Less: Unearned interest supplements (a)	(1,326		)	(214		)	(1,540		)	(1,407		)	(217		)	(1,624		)
Retail	37,953			7,858			45,811			36,999			7,907			44,906
Direct financing leases, gross	31			845			876			4			988			992
Less: Unearned interest supplements (a)	—			(17		)	(17		)	—			(19		)	(19		)
Direct financing leases	31			828			859			4			969			973
Consumer finance receivables (b)	$	37,984		$	8,686		$	46,670		$	37,003		$	8,876		$	45,879

Non-Consumer
Wholesale	$	15,583		$	7,022		$	22,605		$	15,480		$	8,516		$	23,996
Dealer loans	1,161			58			1,219			1,103			63			1,166
Other (c)	1,021			392			1,413			988			372			1,360
Non-Consumer finance receivables (b)(d)	17,765			7,472			25,237			17,571			8,951			26,522
Total recorded investment	$	55,749		$	16,158		$	71,907		$	54,574		$	17,827		$	72,401

Recorded investment in finance receivables (e)	$	55,749		$	16,158		$	71,907		$	54,574		$	17,827		$	72,401
Less: Allowance for credit losses	(298		)	(92		)	(390		)	(388		)	(106		)	(494		)
Finance receivables, net	$	55,451		$	16,066		$	71,517		$	54,186		$	17,721		$	71,907

Net finance receivables subject to fair value (f)							$	70,652								$	70,926
Fair value							72,560									72,466

__________


(a)	Ford-sponsored special-rate financing attributable to retail contracts and direct financing leases.

(b)

At September 30, 2012 and December 31, 2011, includes North America consumer receivables of $23.9 billion and $29.4 billion and non-consumer receivables of $14.2 billion and $14.2 billion, respectively, and International consumer receivables of $5.7 billion and $6.6 billion and non-consumer receivables of $4.3 billion and $5.6 billion, respectively, 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 and other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to receive the excess cash flows not needed to pay the debt and other obligations issued or arising in securitization transactions. See Note 5 for additional information.

(c)

At September 30, 2012 and December 31, 2011, other receivables includes $599 million and $590 million, respectively, of receivables purchased from certain divisions and affiliates of Ford in the U.S. where control is retained by the seller and $149 million and $265 million, respectively, of receivables related to certain used vehicles from daily rental fleet companies where we are serving as Ford's agent.

(d)

At September 30, 2012 and December 31, 2011, includes $66 million and $67 million, respectively, of North America wholesale receivables and $15 million and $16 million, respectively, of North America dealer loans with entities (primarily dealers) that are reported as consolidated subsidiaries of Ford. At September 30, 2012 and December 31, 2011, includes $362 million and $305 million, respectively, of International wholesale receivables with entities (primarily dealers) that are reported as consolidated subsidiaries of Ford. The associated vehicles that are being financed by us are reported as inventory on Ford's balance sheet.


(e)	At September 30, 2012 and December 31, 2011, excludes $173 million and $180 million, respectively, of accrued uncollected interest receivables, which we report in Other assets on our balance sheet.


(f)	At September 30, 2012 and December 31, 2011, excludes $877 million and $1.0 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements. All finance receivables are categorized within Level 3 of the fair value hierarchy. See Note 12 for additional information.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. FINANCE RECEIVABLES (Continued)

Aging. For all classes of finance receivables, we define "past due" as any payment, including principal and interest, that has not been collected and is at least 31 days past the contractual due date. The aging analysis of our finance receivables balances at September 30, 2012 was as follows (in millions):



	31-60 Days Past Due		61-90 Days Past Due		91-120 Days Past Due		Greater Than 120 Days Past Due		Total Past Due		Current		Total Finance Receivables
North America
Consumer
Retail	$	625	$	72	$	20	$	55	$	772	$	37,181	$	37,953
Direct financing leases	—		—		—		—		—		31		31
Non-Consumer
Wholesale	—		1		1		2		4		15,579		15,583
Dealer loans	3		4		4		11		22		1,139		1,161
Other	—		—		—		—		—		1,021		1,021
Total North America recorded investment	628		77		25		68		798		54,951		55,749

International
Consumer
Retail	33		18		10		28		89		7,769		7,858
Direct financing leases	4		2		1		3		10		818		828
Non-Consumer
Wholesale	1		—		—		4		5		7,017		7,022
Dealer loans	—		—		—		1		1		57		58
Other	—		—		—		2		2		390		392
Total International recorded investment	38		20		11		38		107		16,051		16,158
Total recorded investment	$	666	$	97	$	36	$	106	$	905	$	71,002	$	71,907

Credit Quality

Consumer. When originating all classes of consumer receivables, we use a proprietary scoring system that measures the credit quality of the receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g., FICO score), and customer and contract characteristics. In addition to our proprietary scoring system, we consider other individual consumer factors, such as employment history, financial stability, and capacity to pay.

Subsequent to origination, we review the credit quality of our retail and direct financing lease receivables based on customer payment activity. As each customer develops a payment history, we use an internally-developed behavioral scoring model to assist in determining the best collection strategies. Based on data from this scoring model, contracts are categorized by collection risk. Our collection models evaluate several factors, including origination characteristics, updated credit bureau data, and payment patterns. These models allow for more focused collection activity on higher-risk accounts and are used to refine our risk-based staffing model to ensure collection resources are aligned with portfolio risk.

Credit quality ratings for our consumer receivables are categorized as follows:


•	Pass – current to 60 days past due


•	Special Mention – 61 to 120 days past due and in intensified collection status


•	Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged-off, as measured using the fair value of collateral

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. FINANCE RECEIVABLES (Continued)

The credit quality analysis of our consumer receivables portfolio was as follows (in millions):



	September 30, 2012				December 31, 2011
	Retail		Direct Financing Leases		Retail		Direct Financing Leases
North America
Pass	$	37,806	$	31	$	36,839	$	4
Special Mention	92		—		90		—
Substandard	55		—		70		—
Total North America recorded investment	37,953		31		36,999		4

International
Pass	7,802		822		7,834		962
Special Mention	28		3		33		4
Substandard	28		3		40		3
Total International recorded investment	7,858		828		7,907		969
Total recorded investment	$	45,811	$	859	$	44,906	$	973

Non-Consumer. For all classes of non-consumer receivables, we extend commercial credit to dealers primarily in the form of approved lines of credit to purchase new Ford and Lincoln vehicles as well as used vehicles. Each commercial lending request is evaluated by taking into consideration the borrower's financial condition and the underlying collateral securing the loan. We use a proprietary model to assign each dealer a risk rating. This model uses historical performance data to identify key factors about a dealer that we consider significant in predicting a dealer's ability to meet its financial obligations. We also consider numerous other financial and qualitative factors including capitalization and leverage, liquidity and cash flow, profitability, and credit history with Ford Credit and other creditors. A dealer's risk rating does not reflect any guarantees or a dealer owner's net worth.

Dealers are assigned to one of four groups according to risk ratings as follows:


•	Group I – strong to superior financial metrics


•	Group II – fair to favorable financial metrics


•	Group III – marginal to weak financial metrics


•	Group IV – poor financial metrics, including dealers classified as uncollectible

We suspend credit lines and extend no further funding to dealers classified in Group IV.

We regularly review our model to confirm the continued business significance and statistical predictability of the factors and update the model to incorporate new factors or other information that improves its statistical predictability. In addition, we verify the existence of the assets collateralizing the receivables by physical audits of vehicle inventories, which are performed with increased frequency for higher-risk (i.e., Group III and Group IV) dealers. We perform a credit review of each dealer at least annually and adjust the dealer's risk rating, if necessary.

Performance of non-consumer receivables is evaluated based on our internal dealer risk rating analysis, as payment for wholesale receivables generally is not required until the dealer has sold the vehicle. Wholesale and dealer loan receivables with the same dealer share the same risk rating.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. FINANCE RECEIVABLES (Continued)

The credit quality analysis of our wholesale and dealer loan receivables was as follows (in millions):



	September 30, 2012				December 31, 2011
	Wholesale		Dealer Loan		Wholesale		Dealer Loan
North America
Group I	$	13,000	$	958	$	12,712	$	876
Group II	2,322		149		2,489		165
Group III	247		48		273		58
Group IV	14		6		6		4
Total North America recorded investment	15,583		1,161		15,480		1,103

International
Group I	4,611		38		5,277		42
Group II	1,329		10		1,912		10
Group III	1,078		9		1,318		10
Group IV	4		1		9		1
Total International recorded investment	7,022		58		8,516		63
Total recorded investment	$	22,605	$	1,219	$	23,996	$	1,166

Other non-consumer receivables consist primarily of purchased receivables from Ford that are excluded from our credit quality reporting since the performance of this group of receivables is generally guaranteed by Ford.

Non-Accrual Status

The accrual of revenue is discontinued at the earlier of the time a receivable is determined to be uncollectible, at bankruptcy status notification, or greater than 120 days past due. Finance receivable 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.

The recorded investment of consumer receivables in non-accrual status was $323 million, or 0.7% of our consumer receivables, at September 30, 2012, and $402 million, or 0.9% of our consumer receivables, at December 31, 2011.

The recorded investment of non-consumer receivables in non-accrual status was $28 million, or 0.1% of our non-consumer receivables, at September 30, 2012, and $27 million, or 0.1% of our non-consumer receivables, at December 31, 2011.

Finance receivables greater than 90 days past due and still accruing interest included $15 million and $14 million of non-bankrupt consumer accounts at September 30, 2012 and December 31, 2011, respectively, and were $14 million and de minimis for non-consumer loans at September 30, 2012 and December 31, 2011, respectively.

Impaired Receivables

Consumer. Finance receivables are evaluated both collectively and specifically for impairment. Impaired consumer receivables include accounts that have been re-written or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be Troubled Debt Restructurings ("TDRs"), as well as all accounts greater than 120 days past due. The recorded investment of consumer receivables that were impaired at September 30, 2012 and December 31, 2011 was $411 million, or 0.9% of consumer receivables, and $382 million, or 0.8% of consumer receivables, respectively.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. FINANCE RECEIVABLES (Continued)

Non-Consumer. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer loans that have been modified in TDRs. The following factors (not necessarily in order of importance or probability of occurrence) are considered in determining whether a non-consumer receivable is impaired:


•	Delinquency in contractual payments of principal or interest


•	Deterioration of the borrower's competitive position


•	Cash flow difficulties experienced by the borrower


•	Breach of loan covenants or conditions


•	Initiation of dealer bankruptcy or other insolvency proceedings


•	Fraud or criminal conviction

The recorded investment of non-consumer receivables that were impaired at September 30, 2012 and December 31, 2011, was $61 million, or 0.2% of non-consumer receivables, and $64 million, or 0.2% of non-consumer receivables, respectively.

Troubled Debt Restructurings

Effective July 1, 2011, we applied the requirements of the new accounting standard related to TDRs to restructurings occurring on or after January 1, 2011.

A restructuring of debt constitutes a TDR if we grant a concession to a customer or borrower for economic or legal reasons related to the debtor's financial difficulties that we otherwise would not consider.

Consumer. Payment extensions are granted to consumers in the normal course of business. Payment extensions result in a short-term deferral of the customer's normal monthly payment and do not constitute TDRs because payment concessions are not granted on the principal amount of the account or the interest rate charged and are not granted to consumers considered to be in financial difficulty.

Consumer receivable contracts may be modified to lower the customer's payment by extending the term of the contract or lowering the interest rate as a remedy to avoid or cure delinquency. We do not grant concessions on the principal balance for re-written contracts. Contracts that are modified at an interest rate that is below the market rate are considered to be TDRs. In addition, consumer receivables modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code are considered to be TDRs.

The outstanding recorded investment at time of modification for consumer receivables that are considered to be TDRs was $185 million, or 0.4% of our consumer receivables, during the period ended September 30, 2012 and $297 million, or 0.6% during the period ended September 30, 2011. A subsequent default occurs when contracts that were previously modified in TDRs within the last twelve months and subsequently had past due payments that resulted in repossession. The subsequent annualized default rate for consumer contracts was 5.7% of TDRs during the period ended September 30, 2012.

Consumer receivables involved in TDRs are specifically 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 or the fair value of any collateral adjusted for estimated costs to sell. For loans where foreclosure is probable, the fair value of collateral is used to estimate the specific impairment. The allowance for credit losses related to consumer TDRs was $18 million and $13 million at September 30, 2012 and at September 30, 2011, respectively.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. FINANCE RECEIVABLES (Continued)

Non-Consumer. Within our non-consumer receivables segment, only dealer loans subject to forbearance, moratoriums, extension agreements, or other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral are classified as TDRs. We do not grant concessions on the principal balance of dealer loans. The recorded investment of dealer loans modified as TDRs during the periods ended September 30, 2012 and September 30, 2011 were de minimis.

Dealer loans involved in TDRs are assessed for impairment and included in our allowance for credit losses based on either the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate, or the fair value of collateral adjusted for estimated costs to sell. For loans where foreclosure is probable, the fair value of collateral is used to estimate the specific impairment. An impairment charge is recorded as part of the provision to the allowance for credit losses for the amount by which the recorded investment of the receivable exceeds its estimated fair value. The allowance for credit losses related to non-consumer TDRs for the periods ended

September 30, 2012 and September 30, 2011 were de minimis.