We manage finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables 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.

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date.


	December 31, 2021		September 30, 2022
Consumer
Retail installment contracts, gross	$	69,247	$	64,613
Finance leases, gross	7,318		6,196
Retail financing, gross	76,565		70,809
Unearned interest supplements from Ford and affiliated companies	(3,020)		(2,311)
Consumer finance receivables	73,545		68,498

Non-Consumer
Dealer financing	18,197		23,636
Other financing	1,533		1,620
Non-Consumer finance receivables	19,730		25,256
Total recorded investment	$	93,275	$	93,754

Recorded investment in finance receivables	$	93,275	$	93,754
Allowance for credit losses	(925)		(760)
Total finance receivables, net	$	92,350	$	92,994

Net finance receivables subject to fair value (a)	$	85,347	$	87,083
Fair value (b)	86,199		84,625

Finance leases are comprised of sales-type and direct financing leases. Financing revenue from finance leases for the third quarter of 2021 and 2022 was $86 million and $73 million, respectively, and for the first nine months of 2021 and 2022 was $264 million and $223 million, respectively, and is included in Retail financing on our consolidated income statements.

At December 31, 2021 and September 30, 2022, accrued interest was $125 million and $132 million, respectively, which we report in Other assets on our consolidated balance sheets.

Included in the recorded investment in finance receivables were consumer and non-consumer receivables that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. See Note 6 for additional information.

Consumer Portfolio. Credit quality ratings for consumer receivables are based on our aging analysis. Consumer receivables credit quality ratings are as follows:

•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 less costs to sell.


	Amortized Cost Basis by Origination Year
	Prior to 2017		2017		2018		2019		2020		2021		Total		Percent
Consumer
31-60 days past due	$	39	$	52	$	98	$	120	$	186	$	91	$	586	0.8	%
61-120 days past due	7		10		20		29		40		21		127		0.2	%
Greater than 120 days past due	10		6		6		9		11		1		43		—	%
Total past due	56		68		124		158		237		113		756		1.0	%
Current	812		2,608		6,568		12,717		22,730		27,354		72,789		99.0	%
Total	$	868	$	2,676	$	6,692	$	12,875	$	22,967	$	27,467	$	73,545	100.0	%


	Amortized Cost Basis by Origination Year
	Prior to 2018		2018		2019		2020		2021		2022		Total		Percent
Consumer
31-60 days past due	$	46	$	60	$	85	$	165	$	120	$	63	$	539	0.8	%
61-120 days past due	9		12		19		34		30		14		118		0.2	%
Greater than 120 days past due	10		5		6		7		7		2		37		—	%
Total past due	65		77		110		206		157		79		694		1.0	%
Current	1,273		3,322		7,297		15,423		19,979		20,510		67,804		99.0	%
Total	$	1,338	$	3,399	$	7,407	$	15,629	$	20,136	$	20,589	$	68,498	100.0	%

Non-Consumer Portfolio. The credit quality of dealer financing receivables is evaluated based on our internal dealer risk rating analysis. We use 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 we consider most significant in predicting a dealer’s ability to meet its financial obligations. We also consider numerous other financial and qualitative factors of the dealer’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with ourselves and other creditors.


	Amortized Cost Basis by Origination Year
	Dealer Loans
	Prior to 2017		2017		2018		2019		2020		2021		Total		Wholesale Loans		Total		Percent
Group I	$	391	$	68	$	151	$	45	$	109	$	345	$	1,109	$	13,670	$	14,779	81.2	%
Group II	11		7		26		2		4		54		104		2,689		2,793		15.3	%
Group III	8		—		1		—		1		20		30		529		559		3.1	%
Group IV	—		—		4		—		—		6		10		56		66		0.4	%
Total (a)	$	410	$	75	$	182	$	47	$	114	$	425	$	1,253	$	16,944	$	18,197	100.0	%


	Amortized Cost Basis by Origination Year
	Dealer Loans
	Prior to 2018		2018		2019		2020		2021		2022		Total		Wholesale Loans		Total		Percent
Group I	$	418	$	153	$	37	$	65	$	196	$	209	$	1,078	$	19,597	$	20,675	87.5	%
Group II	2		22		1		5		—		39		69		2,596		2,665		11.3	%
Group III	—		—		—		—		—		10		10		250		260		1.1	%
Group IV	—		—		1		—		—		3		4		32		36		0.1	%
Total (a)	$	420	$	175	$	39	$	70	$	196	$	261	$	1,161	$	22,475	$	23,636	100.0	%

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.

Troubled Debt Restructuring (“TDR”). A restructuring of debt constitutes a TDR if we grant a concession to a debtor for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. We do not grant concessions on 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 allowance for credit losses represents our estimate of the lifetime expected credit losses inherent in finance receivables as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly.

Adjustments to the allowance for credit losses are made by recording charges to the Provision for/(Benefit from) credit losses 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 we repossess 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.


	Third Quarter 2021						First Nine Months 2021
	Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	1,022	$	39	$	1,061	$	1,245	$	60	$	1,305
Charge-offs	(58)		(2)		(60)		(210)		(5)		(215)
Recoveries	50		1		51		158		6		164
Provision for/(Benefit from) credit losses	(58)		(1)		(59)		(242)		(23)		(265)
Other (a)	(9)		—		(9)		(4)		(1)		(5)
Ending balance	$	947	$	37	$	984	$	947	$	37	$	984


	Third Quarter 2022						First Nine Months 2022
	Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	754	$	9	$	763	$	903	$	22	$	925
Charge-offs	(73)		—		(73)		(196)		(1)		(197)
Recoveries	39		1		40		126		3		129
Provision for/(Benefit from) credit losses	40		(1)		39		(67)		(14)		(81)
Other (a)	(9)		—		(9)		(15)		(1)		(16)
Ending balance	$	751	$	9	$	760	$	751	$	9	$	760

During the third quarter and first nine months of 2022, the allowance for credit losses decreased $3 million and $165 million, respectively, primarily due to our current expectation that COVID-related losses have been avoided. Although net charge-offs remained low in the third quarter and first nine months of 2022, due, in part, to high vehicle auction values, the impact of rising inflation, high energy prices, and higher interest rates on future credit losses remains uncertain. We will continue to monitor economic trends and conditions and portfolio performance and will adjust the reserve accordingly.