The Company provides retail financial services to customers of its dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to dealer sales of motorcycles to retail customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts. As of December 31, 2024, approximately 11% of gross outstanding retail finance receivables were originated in Texas. As of December 31, 2023, approximately 11% and 10% of gross outstanding retail finance receivables were originated in Texas and California, respectively. There were no other states that accounted for more than 10% of gross outstanding retail finance receivables.

The Company offers wholesale financing to its dealers in the U.S. and Canada. Wholesale finance receivables are related primarily to the Company's sale of motorcycles, related parts and accessories, and apparel to dealers. Wholesale loans to dealers are generally secured by financed inventory or property.


	2024		2023
Retail finance receivables:
United States	$	6,548,550	$	6,657,998
Canada	132,556		160,701
	6,681,106		6,818,699
Wholesale finance receivables:
United States	952,301		1,016,815
Canada	56,070		44,717
	1,008,371		1,061,532
	7,689,477		7,880,231
Allowance for credit losses	(401,183)		(381,966)


	$	7,288,294	$	7,498,265

Wholesale finance receivables are generally contractually due within one year. As of December 31, 2024, contractual maturities of total finance receivables were as follows (in thousands):


	United States		Canada		Total
2025	$	2,019,862	$	83,878	$	2,103,740
2026	1,235,417		29,648		1,265,065
2027	1,412,167		32,672		1,444,839
2028	1,552,946		36,006		1,588,952
2029	886,588		6,422		893,010
Thereafter	393,871		—		393,871
	$	7,500,851	$	188,626	$	7,689,477

The Company’s finance receivables are reported at amortized cost, net of the allowance for credit losses. Amortized cost includes the principal outstanding, accrued interest, and deferred loan fees and costs. The allowance for credit losses represents the Company’s estimate of lifetime losses for its finance receivables. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for credit losses, the Company segments its finance receivables into the retail and wholesale portfolios. The Company further disaggregates each portfolio by credit quality indicators. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit quality indicators for each portfolio.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past credit loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries.

The Company considers various third-party economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. Each quarter, the Company's outlook on economic conditions impacts the Company's retail and wholesale estimates for expected credit losses. At the end of 2024, the Company's probability weighting of its economic forecast scenarios was weighted towards more pessimistic scenarios given continued challenging macro-economic conditions including a persistently high interest rate environment, ongoing elevated inflation levels and muted consumer confidence.

Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance for credit losses balance. These factors include motorcycle recovery value considerations, delinquency adjustments, specific problem loan trends, and changes in other portfolio-specific loan characteristics as well as current loss experience. During the year ended December 31, 2024, the Company experienced increased retail credit losses driven by several factors connected to the macro-economic environment and the related customer and industry dynamics, including the impact of higher motorcycle payments and general inflationary pressures on customers. Additionally, the Company experienced downward pressure on recovery values at auction during the year-ended December 31, 2024.

Due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and management’s expectations surrounding the economic forecasts. The Company will continue to monitor future economic trends and conditions. Expectations surrounding the Company's economic forecasts may change in future periods as additional information becomes available.

The Company manages retail credit risk through its credit approval process and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. For the Company’s U.S. and Canadian retail finance receivables, the Company determines the credit quality indicator for each loan at origination and does not update the credit quality indicator subsequent to the loan origination date.

As loan performance by credit quality indicator differs between the U.S. and Canadian retail loans, the Company’s credit quality indicators vary for the two portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.

The amortized cost of the Company's U.S. and Canadian retail finance receivables by vintage and credit quality indicator was as follows (in thousands):


	December 31, 2024
	2024		2023		2022		2021		2020		2019 & Prior		Total
U.S. Retail:
Super prime	$	1,040,491	$	694,941	$	449,697	$	206,974	$	67,668	$	28,606	$	2,488,377
Prime	1,042,910		821,719		659,000		363,507		141,495		82,771		3,111,402
Sub-prime	318,689		224,656		180,048		119,457		58,297		47,624		948,771
	2,402,090		1,741,316		1,288,745		689,938		267,460		159,001		6,548,550
Canadian Retail:
Super prime	36,011		29,098		17,468		8,330		3,179		1,096		95,182
Prime	9,111		8,687		6,724		4,033		2,212		1,524		32,291
Sub-prime	1,701		1,229		972		435		462		284		5,083
	46,823		39,014		25,164		12,798		5,853		2,904		132,556
	$	2,448,913	$	1,780,330	$	1,313,909	$	702,736	$	273,313	$	161,905	$	6,681,106
Gross charge-offs for the year ended December 31, 2024:
US Retail	$	18,322	$	92,489	$	90,023	$	47,678	$	19,628	$	17,143	$	285,283
Canadian Retail	241		1,474		1,398		755		391		464		4,723
	$	18,563	$	93,963	$	91,421	$	48,433	$	20,019	$	17,607	$	290,006


	December 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
U.S. Retail:
Super prime	$	1,066,321	$	729,339	$	376,474	$	151,004	$	70,627	$	27,013	$	2,420,778
Prime	1,173,463		993,417		584,305		259,995		139,011		78,880		3,229,071
Sub-prime	333,099		275,964		189,688		101,437		63,393		44,568		1,008,149
	2,572,883		1,998,720		1,150,467		512,436		273,031		150,461		6,657,998
Canadian Retail:
Super prime	48,705		31,733		17,744		9,241		4,521		1,524		113,468
Prime	13,764		11,434		7,336		4,390		2,728		1,838		41,490
Sub-prime	1,846		1,546		739		817		525		270		5,743
	64,315		44,713		25,819		14,448		7,774		3,632		160,701
	$	2,637,198	$	2,043,433	$	1,176,286	$	526,884	$	280,805	$	154,093	$	6,818,699
Gross charge-offs for the year ended December 31, 2023:
US Retail	$	20,047	$	102,387	$	74,212	$	30,896	$	18,088	$	14,655	$	260,285
Canadian Retail	527		1,004		866		472		278		483		3,630
	$	20,574	$	103,391	$	75,078	$	31,368	$	18,366	$	15,138	$	263,915

The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon the Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated on a quarterly basis.

The amortized cost of wholesale finance receivables, by vintage and credit quality indicator, was as follows (in thousands):


	December 31, 2024
	2024		2023		2022		2021		2020		2019 & Prior		Total
Non-Performing	$	6,430	$	4,702	$	129	$	—	$	—	$	2	$	11,263
Doubtful	25,827		3,869		139		—		—		8,196		38,031
Substandard	14,470		2,928		—		—		—		—		17,398
Special Mention	3,162		362		19		—		—		—		3,543
Medium Risk	1,471		271		—		—		—		—		1,742
Low Risk	808,771		83,611		38,815		1,702		3,358		137		936,394
	$	860,131	$	95,743	$	39,102	$	1,702	$	3,358	$	8,335	$	1,008,371
Gross charge-offs for the year ended December 31, 2024:
Wholesale	$	709	$	710	$	42	$	—	$	—	$	1	$	1,462


	December 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	10,934		258		—		—		5		—		11,197
Special Mention	641		30		—		—		—		—		671
Medium Risk	2,905		—		—		—		—		—		2,905
Low Risk	961,519		66,757		5,107		4,962		7,786		628		1,046,759
	$	975,999	$	67,045	$	5,107	$	4,962	$	7,791	$	628	$	1,061,532

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables at amortized cost, excluding accrued interest, are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. All retail finance receivables accrue interest until either collected or charged-off. The Company reverses accrued interest related to charged-off accounts against HDFS interest income when the account is charged-off. The Company reversed $33.0 million and $27.5 million of accrued interest against HDFS interest income during the years ended December 31, 2024 and 2023, respectively. Due to the timely write-off of accrued interest, the Company made the election provided under ASC Topic 326, Financial Instruments - Credit Losses to exclude accrued interest from its allowance for credit losses. Accordingly, as of December 31, 2024 and 2023, all retail finance receivables were accounted for as interest-earning receivables, of which $64.7 million and $67.3 million, respectively, were 90 days or more past due.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against HDFS interest income. As the Company follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio. The Company reversed $0.2 million of accrued interest related to the charge-off of Non-Performing dealer loans during the year ended December, 31 2024. There were no charged-off accounts during 2023. As such, the Company did not reverse any wholesale accrued interest during the year ended December 31, 2023. At December 31, 2024, $0.5 million of wholesale finance receivables were over 90 days or more past due and on non-accrual status. There were no dealers on non-accrual status at December 31, 2023.


	2024
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail finance receivables	$	6,368,447	$	178,752	$	69,257	$	64,650	$	312,659	$	6,681,106
Wholesale finance receivables	1,002,584		3,463		718		1,606		5,787		1,008,371
	$	7,371,031	$	182,215	$	69,975	$	66,256	$	318,446	$	7,689,477


	2023
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail finance receivables	$	6,516,342	$	168,027	$	67,033	$	67,297	$	302,357	$	6,818,699
Wholesale finance receivables	1,060,561		763		25		183		971		1,061,532
	$	7,576,903	$	168,790	$	67,058	$	67,480	$	303,328	$	7,880,231