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February 23, 2024

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A Look At Honda’s (AHFC) Internal Repossession Numbers

 

Third-Party Collections and Repossessions

 

AHFC conducts repossessions of automobiles between 30 and 120 days of delinquency. Efforts are made to collect and maintain the account in good standing prior to ordering repossession. However, when normal collection efforts fail, AHFC may resort to repossession. AHFC uses independent contractors/repossession agencies when repossessing automobiles.

 

Post-repossession and charged-off accounts are sent to AHFC’s centralized operation, the Recovery and Bankruptcy Center (the “RB Center”), for resolution. After repossession, each service center and the RB Center follow specific procedures conforming to both federal and state regulations pertaining to the sale and disposal of repossessed automobiles. Repossessed automobiles are normally sold at dealer auctions no later than 90 days after repossession, and typically 40 to 50 days after the legal redemption period mandated by applicable statute. The accounts are tracked and reported by a recovery management system created and installed by Fair Isaac Corporation.

 

The RB Center’s staff sends out a series of letters notifying the charged-off account holders of their deficient balance. According to our operating policy, if there is no response, the accounts generally are placed with outside collection agencies.

 

All prospective collection agencies submit an RFI (request for information) and are scored through the Kepner Tregoe assessment process. Agencies that meet the criteria are required to make a formal presentation to RB Center management. Those scoring highest on the Kepner Tregoe assessment, and considered qualified have site visits made by RB Center management. The agencies must execute a contract with AHFC and comply with mutually agreed upon service level agreements. The contractors/repossession agencies must provide current licenses and have active membership in one or more approved recovery associations. Agencies must be bonded and have an established code of ethics that conform to industry standards. The agencies must also produce adequate insurance coverage, usually in the form of a garage liability policy that protects AHFC from claims resulting from the repossessor’s acts during the repossession. Regular reporting on accounts and a scoring system, developed by AHFC, are also used to monitor effectiveness of the agency. Operational issues or important matters are discussed in monthly conference calls with RB Center management. Annual site audits are conducted to ensure compliance of the contract and service levels. If the primary agency is not successful with the recovery in 180 days of placement, responsibility for the account is transferred to a secondary collection agency. Tertiary and quaternary agencies may also be used.

 

 

DELINQUENCIES, REPOSSESSIONS AND LOAN LOSS INFORMATION

 

Set forth below is information concerning AHFC’s experience with respect to its entire portfolio of new and used Honda and Acura automobile retail installment sale contracts (excluding balloon contracts), which includes contracts sold by but still being serviced by AHFC. Credit losses are an expected cost of extending credit and are considered in AHFC’s rate-setting process. AHFC’s strategy is to minimize credit losses while providing financing support for the sale of new or used Honda and Acura automobiles.

 

Except in limited circumstances, AHFC establishes an allowance for expected credit losses and deducts amounts reflecting charge-offs. For retail financing, the account balance related to a retail installment sale contract is charged-off when the contract has been delinquent for 120 days, unless AHFC has repossessed the collateral associated with the contract. In these cases, the account balances are not charged-off until AHFC has either sold the repossessed automobile or held it in repossession inventory for more than 90 days. AHFC credits any recoveries from gross charge-offs related to a retail installment sale contract.

 

Delinquency, repossession and loss experience may be influenced by a variety of economic and geographic conditions and other factors beyond the control of AHFC. There is no assurance that AHFC’s delinquency, repossession and loss experience with respect to its retail installment sale contracts, or the experience of the trust with respect to the contracts, will be similar to that set forth below, particularly during periods of economic disruption or downturn. See “Risk Factors—The geographic concentration of the obligors and varying economic circumstances and other factors of the receivables in specific areas may increase the risk of loss on your investment”. Accordingly, the delinquency, repossession and net loss percentages would be expected to be higher than those shown if a group of receivables were isolated at a period in time and the delinquency, repossession and net loss data showed the activity only for that isolated group over the periods indicated.

 

 

Delinquency Experience(1)(5)
(Dollars In Thousands)

 

At March 31,
2023 2022 2021 2020 2019
Principal Amount Outstanding(2) $ 30,094,598 $ 30,678,359 $ 32,646,002 $ 29,791,265 $ 30,298,663
Delinquencies(3)
31 – 60 Days $ 292,386 $ 247,162 $ 176,868 $ 279,243 $ 248,391
61 – 90 Days $ 63,456 $ 65,682 $ 42,316 $ 62,100 $ 49,257
91 – 120 Days $ 14,752 $ 14,020 $ 8,320 $ 15,670 $ 11,873
121 Days or more $ 99 $ 137 $ 23 $ 143 $ 49
Repossessions(4) $ 31,799 $ 24,097 $ 36,007 $ 56,417 $ 48,640
Total Delinquencies and Repossessions $ 402,492 $ 351,098 $ 263,534 $ 413,574 $ 358,211
Total Delinquencies and Repossessions as a Percentage of Principal Amount Outstanding 1.34 % 1.14 % 0.81 % 1.39 % 1.18 %

 

At March 31,
2023 2022 2021 2020 2019
Units Outstanding 1,707,298 1,804,163 1,940,190 1,860,182 1,880,277
Delinquencies-Units
31 – 60 Days 16,310 14,010 10,029 16,108 14,136
61 – 90 Days 3,506 3,674 2,352 3,556 2,790
91 – 120 Days 821 825 551 959 777
121 Days or more 6 6 1 6 4
Repossessions-Units 1,293 1,084 1,577 2,485 2,154
Total Delinquencies and Repossessions-Units 21,936 19,599 14,510 23,114 19,861
Total Delinquencies and Repossessions as a Percentage of Units Outstanding 1.28 % 1.09 % 0.75 % 1.24 % 1.06 %

 

 

(1) Includes contracts that have been sold but are still being serviced by AHFC.
(2) Remaining principal balance and unearned finance charges for all outstanding contracts.
(3) For the purposes of determining whether a contract is delinquent, payment is generally considered to have been made upon receipt of 90% of the sum of the current monthly payment plus any overdue monthly payments. Delinquent amounts presented are the aggregated principal balances of delinquent finance receivables.
(4) Amounts shown represent the outstanding principal balance for contracts for which the related automobile had been repossessed and not yet liquidated.
(5) Totals may not add exactly due to rounding.

 

 

Net Credit Loss and Repossession Experience(1)(4)(6)
(Dollars in Thousands)

 

For the Fiscal Year Ended March 31,
2023 2022 2021 2020 2019
Principal Amount Outstanding(2) $ 30,094,598 $ 30,678,359 $ 32,646,002 $ 29,791,265 $ 30,298,663
Average Principal Amount Outstanding(3) $ 29,129,084 $ 32,844,749 $ 31,066,216 $ 30,422,586 $ 29,307,846
Number of Contracts Outstanding 1,707,298 1,804,163 1,940,190 1,860,182 1,880,277
Average Number of Contracts Outstanding(3) 1,712,092 1,906,840 1,896,957 1,877,319 1,860,116
Number of Repossessions 7,469 8,086 9,231 16,472 14,366
Number of Repossessions as a Percentage of the Average Number of Contracts Outstanding(A) 0.44 % 0.42 % 0.49 % 0.88 % 0.77 %
Gross Charge-Offs(4) $ 141,658 $ 108,677 $ 190,163 $ 237,761 $ 212,280
Recoveries(5) $ 77,252 $ 74,953 $ 101,690 $ 84,813 $ 77,482
Net Losses $ 64,406 $ 33,724 $ 88,472 $ 152,949 $ 134,799
Net Losses as a Percentage of Average Principal Amount Outstanding(A) 0.22 % 0.10 % 0.28 % 0.50 % 0.46 %

 

 

(A) Annualized.
(1) Includes contracts that have been sold but are still being serviced by AHFC.
(2) Remaining principal balance and unearned finance charges for all outstanding contracts.
(3) Average of the principal amounts or number of contracts, as the case may be, is calculated for a period by dividing the total monthly amounts by the number of months in the period.
(4) Amount charged-off is the remaining principal balance, excluding any expenses associated with collection, repossession or disposition of the related automobile, plus earned but not yet received finance charges, net of any proceeds collected prior to charge-off.
(5) Proceeds received on previously charged-off contracts.
(6) Totals may not add exactly due to rounding.

Excerpt take from AHFC’s Form 424B5. Read it in full here.

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