Finance Receivables

9 Months Ended

Sep. 30, 2024

Receivables [Abstract]

Finance Receivables

Finance Receivables

A summary of finance receivables included in the Consolidated Statements of Financial Position was as follows:

(Millions of dollars)	September 30, 2024		December 31, 2023
Retail loans(1)	$	17,314	$	16,501
Retail leases	6,591		6,554
Caterpillar purchased receivables	4,314		3,949
Wholesale loans(1)	1,184		1,069
Wholesale leases	2		4
Total finance receivables	29,405		28,077
Less: Allowance for credit losses	(255)		(331)
Total finance receivables, net	$	29,150	$	27,746

(1) Includes failed sale leasebacks.

Finance leases

Revenues from finance leases were $110 million and $106 million for the three months ended September 30, 2024 and 2023, respectively, and $323 million and $314 million for the nine months ended September 30, 2024 and 2023, respectively, and are included in retail and wholesale finance revenues in the Consolidated Statements of Profit.

A.Allowance for credit losses 

Portfolio segments

A portfolio segment is the level at which we develop a systematic methodology for determining our allowance for credit losses. Our portfolio segments and related methods for estimating expected credit losses are as follows:

Customer

We provide loans and finance leases to end-user customers primarily for the purpose of financing new and used Caterpillar machinery, engines and equipment for commercial use. We also provide financing for power generation facilities that, in most cases, incorporate Caterpillar products. The average original term of our customer finance receivable portfolio was approximately 51 months with an average remaining term of approximately 27 months as of September 30, 2024.

We typically maintain a security interest in financed equipment and generally require physical damage insurance coverage on the financed equipment, both of which provide us with certain rights and protections. If our collection efforts fail to bring a defaulted account current, we generally can repossess the financed equipment, after satisfying local legal requirements, and sell it within the Caterpillar dealer network or through third-party auctions.

We estimate the allowance for credit losses related to our customer finance receivables based on loss forecast models utilizing probabilities of default and our estimated loss given default based on past loss experience adjusted for current conditions and reasonable and supportable forecasts capturing country and industry-specific economic factors.

During the three and nine months ended September 30, 2024, our forecasts reflected a continuation of the trend of historically low unemployment rates as well as low delinquencies within our portfolio. However, industry delinquencies show an increasing trend as the central bank actions aimed at reducing inflation have weakened global economic growth. We believe the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.

Dealer

We provide financing to Caterpillar dealers in the form of wholesale financing plans. Our wholesale financing plans provide assistance to dealers by financing their mostly new Caterpillar equipment inventory and rental fleets on a secured and unsecured basis. In addition, we provide a variety of secured and unsecured loans to Caterpillar dealers.

We estimate the allowance for credit losses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

In general, our Dealer portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions due to our close working relationships with the dealers and their financial strength. Therefore, we made no adjustments to historical loss rates during the three and nine months ended September 30, 2024.

Caterpillar Purchased Receivables

We purchase receivables from Caterpillar, primarily related to the sale of equipment and parts to dealers. Caterpillar purchased receivables are non-interest-bearing short-term trade receivables that are purchased at a discount.

We estimate the allowance for credit losses for Caterpillar purchased receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

In general, our Caterpillar Purchased Receivables portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions due to the short-term maturities of the receivables, our close working relationships with the dealers and their financial strength. Therefore, we made no adjustments to historical loss rates during the three and nine months ended September 30, 2024.

Classes of finance receivables

We further evaluate our portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk. Our classes, which align with management reporting for credit losses, are as follows:

•North America - Finance receivables originated in the United States and Canada.

•EAME - Finance receivables originated in Europe, Africa, the Middle East and Eurasia.

•Asia/Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and India.

•Mining - Finance receivables related to large mining customers worldwide.

•Latin America - Finance receivables originated in Mexico and Central and South American countries.

•Power - Finance receivables originated worldwide related to Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.

An analysis of the allowance for credit losses was as follows:

(Millions of dollars)	Three Months Ended September 30, 2024								Three Months Ended September 30, 2023
	Customer		Dealer		Caterpillar Purchased Receivables		Total		Customer		Dealer		Caterpillar Purchased Receivables		Total
Beginning Balance	$	246	$	4	$	4	$	254	$	265	$	50	$	5	$	320
Write-offs	(42)		—		—		(42)		(22)		—		—		(22)
Recoveries	15		—		—		15		13		—		—		13
Provision for credit losses(1)	25		—		1		26		31		1		—		32
Other	2		—		—		2		(3)		—		—		(3)
Ending Balance	$	246	$	4	$	5	$	255	$	284	$	51	$	5	$	340
	Nine Months Ended September 30, 2024								Nine Months Ended September 30, 2023
	Customer		Dealer		Caterpillar Purchased Receivables		Total		Customer		Dealer		Caterpillar Purchased Receivables		Total
Beginning Balance	$	276	$	51	$	4	$	331	$	277	$	65	$	4	$	346
Write-offs	(98)		(47)		—		(145)		(63)		—		—		(63)
Recoveries	45		—		—		45		36		—		—		36
Provision for credit losses(1)	49		—		1		50		35		(14)		1		22
Other	(26)		—		—		(26)		(1)		—		—		(1)
Ending Balance	$	246	$	4	$	5	$	255	$	284	$	51	$	5	$	340
Finance Receivables	$	22,189	$	2,902	$	4,314	$	29,405	$	20,279	$	2,882	$	4,381	$	27,542

(1) Excludes provision for credit losses on unfunded commitments and other miscellaneous receivables.

Gross write-offs by origination year for our Customer portfolio segment were as follows:

(Millions of dollars)	Three Months Ended September 30, 2024
	2024		2023		2022		2021		2020		Prior		Revolving Finance Receivables		Total
North America	$	—	$	5	$	4	$	2	$	1	$	—	$	2	$	14
EAME	—		—		1		1		1		—		—		3
Asia/Pacific	—		2		1		—		—		1		—		4
Mining	8		3		3		—		—		—		—		14
Latin America	—		2		2		1		2		—		—		7
Total	$	8	$	12	$	11	$	4	$	4	$	1	$	2	$	42
	Three Months Ended September 30, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Finance Receivables		Total
North America	$	1	$	2	$	2	$	1	$	1	$	—	$	2	$	9
EAME	—		1		1		1		—		—		—		3
Asia/Pacific	—		2		3		1		—		—		—		6
Latin America	—		1		1		1		—		1		—		4
Total	$	1	$	6	$	7	$	4	$	1	$	1	$	2	$	22
	Nine Months Ended September 30, 2024
	2024		2023		2022		2021		2020		Prior		Revolving Finance Receivables		Total
North America	$	—	$	13	$	10	$	5	$	2	$	1	$	8	$	39
EAME	—		2		3		3		2		—		—		10
Asia/Pacific	—		4		4		3		1		1		—		13
Mining	8		3		3		—		—		—		—		14
Latin America	—		2		5		4		3		8		—		22
Total	$	8	$	24	$	25	$	15	$	8	$	10	$	8	$	98
	Nine Months Ended September 30, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Finance Receivables		Total
North America	$	1	$	7	$	7	$	2	$	2	$	1	$	9	$	29
EAME	—		2		3		3		—		1		—		9
Asia/Pacific	—		3		6		4		1		—		—		14
Latin America	—		3		3		3		1		1		—		11
Total	$	1	$	15	$	19	$	12	$	4	$	3	$	9	$	63

For the three months ended September 30, 2024, there were no gross write-offs in our Dealer portfolio segment. For the nine months ended September 30, 2024 there were $47 million of gross write-offs in our Dealer portfolio segment, all of which were in Latin America and originated prior to 2019.

B.Credit quality of finance receivables 

At origination, we evaluate credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, loan-to-value ratios, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, we monitor credit quality based on past-due status as there is a meaningful correlation between the past-due status of customers and the risk of loss. In determining past-due status, we consider the entire finance receivable past due when any installment is over 30 days past due.

Customer

The aging category of the amortized cost of finance receivables in our Customer portfolio segment by origination year were as follows:

(Millions of dollars)	September 30, 2024
	2024		2023		2022		2021		2020		Prior		Revolving Finance Receivables		Total Finance Receivables
North America
Current	$	3,959	$	3,389	$	1,821	$	1,210	$	347	$	63	$	360	$	11,149
31-60 days past due	24		43		36		23		8		2		3		139
61-90 days past due	6		13		10		5		2		1		1		38
91+ days past due	6		31		27		16		7		3		1		91
EAME
Current	998		1,040		646		351		130		103		—		3,268
31-60 days past due	7		16		12		6		2		—		—		43
61-90 days past due	2		7		3		2		1		—		—		15
91+ days past due	4		21		12		17		6		2		—		62
Asia/Pacific
Current	881		821		415		178		47		11		51		2,404
31-60 days past due	6		10		7		3		1		—		—		27
61-90 days past due	1		3		3		2		—		—		—		9
91+ days past due	1		2		3		2		1		—		—		9
Mining
Current	844		865		515		258		86		54		24		2,646
31-60 days past due	—		—		—		—		—		—		—		—
61-90 days past due	9		7		6		1		—		—		—		23
91+ days past due	—		1		1		1		—		5		—		8
Latin America
Current	680		468		290		89		14		6		—		1,547
31-60 days past due	3		7		6		2		—		—		—		18
61-90 days past due	—		2		2		1		—		1		—		6
91+ days past due	1		5		8		4		2		1		—		21
Power
Current	83		183		46		48		66		76		161		663
31-60 days past due	—		—		—		—		—		—		—		—
61-90 days past due	—		—		—		—		—		—		—		—
91+ days past due	—		—		—		—		—		3		—		3
Totals by Aging Category
Current	7,445		6,766		3,733		2,134		690		313		596		21,677
31-60 days past due	40		76		61		34		11		2		3		227
61-90 days past due	18		32		24		11		3		2		1		91
91+ days past due	12		60		51		40		16		14		1		194
Total	$	7,515	$	6,934	$	3,869	$	2,219	$	720	$	331	$	601	$	22,189

(Millions of dollars)	December 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Finance Receivables		Total Finance Receivables
North America
Current	$	4,430	$	2,628	$	2,000	$	745	$	220	$	32	$	312	$	10,367
31-60 days past due	28		31		24		14		7		1		4		109
61-90 days past due	10		11		8		4		1		—		2		36
91+ days past due	12		23		18		9		4		1		2		69
EAME
Current	1,336		895		588		258		111		105		—		3,293
31-60 days past due	10		9		7		3		1		—		—		30
61-90 days past due	4		3		3		1		1		—		—		12
91+ days past due	7		17		15		8		3		1		—		51
Asia/Pacific
Current	1,134		690		368		115		37		7		45		2,396
31-60 days past due	5		7		8		2		—		—		—		22
61-90 days past due	2		3		3		2		—		—		—		10
91+ days past due	1		5		3		3		1		—		—		13
Mining
Current	1,106		694		396		126		86		27		66		2,501
31-60 days past due	—		—		—		—		—		—		—		—
61-90 days past due	—		—		—		—		1		1		—		2
91+ days past due	—		—		1		—		—		1		—		2
Latin America
Current	750		520		219		59		23		6		—		1,577
31-60 days past due	9		10		6		1		—		—		—		26
61-90 days past due	2		4		1		—		—		—		—		7
91+ days past due	2		10		8		5		8		11		—		44
Power
Current	152		52		65		75		42		59		162		607
31-60 days past due	—		—		—		—		—		—		—		—
61-90 days past due	—		—		—		—		—		—		—		—
91+ days past due	—		—		—		—		—		3		—		3
Totals by Aging Category
Current	8,908		5,479		3,636		1,378		519		236		585		20,741
31-60 days past due	52		57		45		20		8		1		4		187
61-90 days past due	18		21		15		7		3		1		2		67
91+ days past due	22		55		45		25		16		17		2		182
Total	$	9,000	$	5,612	$	3,741	$	1,430	$	546	$	255	$	593	$	21,177

Finance receivables in our Customer portfolio segment are substantially secured by collateral, primarily in the form of Caterpillar and other equipment. For those contracts where the borrower is experiencing financial difficulty, repayment of the outstanding amounts is generally expected to be provided through the operation or repossession and sale of the equipment.

Dealer

As of September 30, 2024 the total amortized cost of finance receivables within our Dealer portfolio segment was current. As of December 31, 2023, the total amortized cost of finance receivables within our Dealer portfolio segment was current, with the exception of $47 million that was 91+ days past due in Latin America, all of which originated prior to 2019.

Caterpillar Purchased Receivables

The aging category of our amortized cost of finance receivables in the Caterpillar Purchased Receivables portfolio segment were as follows:

(Millions of dollars)	September 30, 2024
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables
North America	$	10	$	5	$	5	$	20	$	2,476	$	2,496
EAME	2		2		3		7		811		818
Asia/Pacific	—		—		—		—		600		600
Latin America	—		—		—		—		366		366
Power	5		1		—		6		28		34
Total	$	17	$	8	$	8	$	33	$	4,281	$	4,314

	December 31, 2023
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables
North America	$	15	$	5	$	4	$	24	$	2,212	$	2,236
EAME	3		1		1		5		732		737
Asia/Pacific	2		—		—		2		593		595
Latin America	1		4		18		23		348		371
Power	—		—		—		—		10		10
Total	$	21	$	10	$	23	$	54	$	3,895	$	3,949

Non-accrual finance receivables

In our Customer portfolio segment, finance receivables which were on non-accrual status and finance receivables over 90 days past due and still accruing income were as follows:

(Millions of dollars)	September 30, 2024				December 31, 2023
	Amortized Cost				Amortized Cost
	Non-accrual With an Allowance		91+ Still Accruing		Non-accrual With an Allowance		91+ Still Accruing
North America	$	78	$	15	$	52	$	20
EAME	62		3		34		18
Asia/Pacific	7		4		8		5
Mining	31		—		2		—
Latin America	25		—		48		1
Power	3		—		8		—
Total	$	206	$	22	$	152	$	44

There were no finance receivables in our Dealer portfolio segment on non-accrual status as of September 30, 2024. There were $47 million in finance receivables in our Dealer portfolio segment on non-accrual status as of December 31, 2023, all of which were in Latin America.

Modifications

We periodically modify the terms of our finance receivable agreements. Typically, the types of modifications granted are payment deferrals, interest only payment periods and/or term extensions. Many modifications we grant are for commercial reasons or for borrowers experiencing some form of short-term financial stress and may result in insignificant payment delays. We do not consider these borrowers to be experiencing financial difficulty. Modifications for borrowers we do consider to be experiencing financial difficulty typically result in payment deferrals and/or reduced payments for a period of four months or longer, term extension of six months or longer or a combination of both.

During the three and nine months ended September 30, 2024 and 2023, there were no finance receivable modifications granted to borrowers experiencing financial difficulty in the Dealer or Caterpillar Purchased Receivables portfolio segments. The amortized cost basis of finance receivables modified for borrowers experiencing financial difficulty in our Customer portfolio segment during the three months ended September 30, 2024 and 2023 was $6 million and $13 million, respectively. Total modifications with borrowers experiencing financial difficulty represented 0.03 percent and 0.05 percent of the Customer portfolio for the same periods, respectively. The amortized cost basis of finance receivables modified for borrowers experiencing financial difficulty in our Customer portfolio segment during the nine months ended September 30, 2024 and 2023 was $12 million and $38 million, respectively. Total modifications with borrowers experiencing financial difficulty represented 0.05 percent and 0.14 percent of the Customer portfolio for the same periods, respectively.

For the three months ended September 30, 2024 and 2023, the financial effects of term extensions for borrowers experiencing financial difficulty added a weighted average of 5 and 8 months, respectively, to the terms of modified contracts. For the nine months ended September 30, 2024 and 2023, the financial effects of term extensions for borrowers experiencing financial difficulty added a weighted average of 8 and 17 months, respectively, to the terms of modified contracts. For the three months ended September 30, 2024 and 2023, the financial effects of payment delays for borrowers experiencing financial difficulty resulted in weighted average payment deferral and/or interest only periods of 4 and 6 months, respectively. For the nine months ended September 30, 2024 and 2023, the financial effects of payment delays for borrowers experiencing financial difficulty resulted in weighted average payment deferral and/or interest only periods of 6 and 7 months, respectively.

After we modify a finance receivable, we continue to track its performance under its most recent modified terms. As of September 30, 2024 and 2023, defaults of loans modified in the prior twelve months were not significant.

The effect of most modifications made to finance receivables for borrowers experiencing financial difficulty is already included in the allowance for credit losses based on the methodologies used to estimate the allowance; therefore, a change to the allowance for credit losses is generally not recorded upon modification. On rare occasions when principal forgiveness is provided, the amount forgiven is written off against the allowance for credit losses.