Finance Receivables

3 Months Ended

Mar. 31, 2023

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Finance Receivables

Finance Receivables

	March 31, 2023		December 31, 2022
Retail finance receivables
Retail finance receivables, net of fees(a)	$	67,704	$	65,322
Less: allowance for loan losses	(2,123)		(2,062)
Total retail finance receivables, net	65,581		63,260
Commercial finance receivables
Commercial finance receivables, net of fees(b)	10,627		11,288
Less: allowance for loan losses	(29)		(34)
Total commercial finance receivables, net	10,597		11,254
Total finance receivables, net	$	76,178	$	74,514
Fair value utilizing Level 2 inputs	$	10,597	$	11,254
Fair value utilizing Level 3 inputs	$	65,165	$	62,150

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(a) Net of unearned income, unamortized premiums and discounts, and deferred fees and costs.

(b) Net of dealer cash management balances of $2.2 billion and $1.9 billion at March 31, 2023 and December 31, 2022.

Rollforward of Allowance for Retail Loan Losses A summary of the activity in the allowance for retail loan losses is as follows:

	Three Months Ended March 31,
	2023		2022
Allowance for retail loan losses beginning balance	$	2,062	$	1,839
Provision for loan losses	137		126
Charge-offs	(322)		(275)
Recoveries	186		177
Foreign currency translation and other	60		18
Allowance for retail loan losses ending balance	$	2,123	$	1,884

The allowance for retail loan losses as of percentage of retail finance receivables, net was 3.1% at March 31, 2023 and 3.2% at December 31, 2022.

Retail Credit Quality Our retail finance receivables portfolio includes loans made to consumers and businesses to finance the purchase of vehicles for personal and commercial use. The following tables are consolidated summaries of the amortized cost of the retail finance receivables by FICO score or its equivalent, determined at origination, for each vintage of the portfolio at March 31, 2023 and December 31, 2022:

	Year of Origination												March 31, 2023
	2023		2022		2021		2020		2019		Prior		Total		Percent
Prime - FICO Score 680 and greater	$	6,996	$	20,633	$	12,223	$	7,149	$	1,915	$	914	$	49,829	73.6	%
Near-prime - FICO Score 620 to 679	832		3,012		2,389		1,345		599		322		8,498		12.6
Sub-prime - FICO Score less than 620	835		3,054		2,525		1,443		916		603		9,377		13.8
Retail finance receivables, net of fees	$	8,663	$	26,699	$	17,138	$	9,936	$	3,429	$	1,839	$	67,704	100.0	%

	Year of Origination												December 31, 2022
	2022		2021		2020		2019		2018		Prior		Total		Percent
Prime - FICO Score 680 and greater	$	22,677	$	13,399	$	7,991	$	2,254	$	1,019	$	205	$	47,543	72.8	%
Near-prime - FICO Score 620 to 679	3,202		2,601		1,487		688		310		104		8,392		12.8
Sub-prime - FICO Score less than 620	3,211		2,746		1,604		1,051		496		280		9,388		14.4
Retail finance receivables, net of fees	$	29,090	$	18,745	$	11,081	$	3,992	$	1,824	$	589	$	65,322	100.0	%

We review the ongoing credit quality of our retail finance receivables based on customer payment activity. A retail account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. Retail finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the customer defaults on the payment terms of the contract. The following tables are consolidated summaries of the amortized cost of retail finance receivables by delinquency status, for each vintage of the portfolio at March 31, 2023 and December 31, 2022, as well as summary totals for March 31, 2022. The first table also presents our current period charge-offs by vintage:

	Year of Origination												March 31, 2023				March 31, 2022
	2023		2022		2021		2020		2019		Prior		Total		Percent		Total		Percent
0 - 30 days	$	8,646	$	26,262	$	16,648	$	9,640	$	3,236	$	1,676	$	66,109	97.6	%	$	58,179	97.8	%
31 - 60 days	17		316		363		222		146		124		1,188		1.8		983		1.7
Greater than 60 days	1		104		112		68		43		36		363		0.5		302		0.5
Finance receivables more than 30 days delinquent	17		420		475		290		190		160		1,551		2.3		1,285		2.2
In repossession	—		17		15		6		3		2		44		0.1		39		0.1
Finance receivables more than 30 days delinquent or in repossession	17		437		489		296		193		162		1,595		2.4		1,324		2.2
Retail finance receivables, net of fees	$	8,663	$	26,699	$	17,138	$	9,936	$	3,429	$	1,839	$	67,704	100.0	%	$	59,503	100.0	%
Charge-offs for the three months ended March 31, 2023	$	—	$	102	$	108	$	52	$	32	$	28	$	322

	Year of Origination												December 31, 2022
	2022		2021		2020		2019		2018		Prior		Total		Percent
0 - 30 days	$	28,676	$	18,128	$	10,702	$	3,743	$	1,685	$	493	$	63,426	97.1	%
31 - 60 days	310		452		275		184		103		69		1,393		2.1
Greater than 60 days	93		150		98		62		35		26		465		0.7
Finance receivables more than 30 days delinquent	403		603		373		246		138		95		1,857		2.8
In repossession	11		14		6		4		2		1		39		0.1
Finance receivables more than 30 days delinquent or in repossession	414		617		380		249		140		96		1,896		2.9
Retail finance receivables, net of fees	$	29,090	$	18,745	$	11,081	$	3,992	$	1,824	$	589	$	65,322	100.0	%

The accrual of finance charge income had been suspended on retail finance receivables with contractual amounts due of $585 million and $685 million at March 31, 2023 and December 31, 2022. Accrual of finance charge income on retail finance receivables is generally suspended on accounts that are more than 60 days delinquent, accounts in bankruptcy and accounts in repossession.

Loan Modifications Under certain circumstances, we may agree to modify the terms of an existing loan with a borrower for various reasons, including financial difficulties. For those borrowers experiencing financial difficulties, we may provide payment deferments, term extensions or a combination thereof. A loan that is deferred greater than six months in the preceding twelve months would be considered to be other-than-insignificantly delayed. In such circumstances, we must determine whether the modification should be accounted for as an extinguishment of the original loan and a creation of a new loan, or the continuation of the original loan with modifications.

The effect of these modifications is already included in the allowance for credit losses because our estimated allowance represents currently expected credit losses. A change to the allowance for credit losses is generally not recorded upon modification.

The amortized cost at March 31, 2023 of the loans modified during the three months ended March 31, 2023 was insignificant. The unpaid principal balances, net of recoveries, of loans charged off during the reporting period that were modified within 12 months preceding default were insignificant for the three months ended March 31, 2023.

Commercial Credit Quality Our commercial finance receivables consist of dealer financings, primarily for dealer inventory purchases. Proprietary models are used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary.

Our commercial risk model and risk rating categories are as follows:

Dealer Risk Rating	Description
I	Performing accounts with strong to acceptable financial metrics with at least satisfactory capacity to meet financial commitments.
II	Performing accounts experiencing potential weakness in financial metrics and repayment prospects resulting in increased monitoring.
III	Non-Performing accounts with inadequate paying capacity for current obligations and that have the distinct possibility of creating a loss if deficiencies are not corrected.
IV	Non-Performing accounts with inadequate paying capacity for current obligations and inherent weaknesses that make collection or liquidation in full highly questionable or improbable.

Dealers with III and IV risk ratings are subject to additional monitoring and restrictions on funding, including suspension of lines of credit and liquidation of assets. The following tables summarize the credit risk profile by dealer risk rating of commercial finance receivables at March 31, 2023 and December 31, 2022:

	Year of Origination														March 31, 2023
Dealer Risk Rating	Revolving		2023		2022		2021		2020		2019		Prior		Total		Percent
I	$	8,936	$	116	$	562	$	341	$	345	$	98	$	49	$	10,446	98.3	%
II	94		—		—		1		—		—		—		96		0.9
III	59		—		15		—		—		10		—		84		0.8
IV	—		—		—		—		—		—		—		—		—
Balance at end of period	$	9,089	$	116	$	578	$	343	$	345	$	108	$	49	$	10,627	100.0	%

	Year of Origination														December 31, 2022
Dealer Risk Rating	Revolving		2022		2021		2020		2019		2018		Prior		Total		Percent
I	$	9,624	$	566	$	361	$	372	$	102	$	45	$	24	$	11,094	98.3	%
II	89		—		1		—		—		—		—		91		0.8
III	78		15		—		—		10		—		—		104		0.9
IV	—		—		—		—		—		—		—		—		—
Balance at end of period	$	9,791	$	581	$	363	$	372	$	112	$	45	$	25	$	11,288	100.0	%

Floorplan advances comprise 96% and 97% of the total revolving balances at March 31, 2023 and December 31, 2022. Dealer term loans are presented by year of origination.

At March 31, 2023 and December 31, 2022, substantially all of our commercial finance receivables were current with respect to payment status, and activity in the allowance for commercial loan losses was insignificant for the three months ended March 31, 2023 and 2022. There were no commercial finance receivables on nonaccrual status at March 31, 2023 and December 31, 2022. There were no charge-offs, and no loan modifications were extended to borrowers experiencing financial difficulty for the three months ended March 31, 2023.