HDFS Originations Decline 7.5% as Losses Continue to Stabilize

Harley-Davidson Financial Services originated $817.5 million in motorcycle loans — down 7.5% year over year — in the third quarter, according to the OEM’s earnings call today.

Originations were also down 3.3% year-to-date to $2.5 billion, as compared to the prior-year period.

Meanwhile, retail and wholesale third-quarter outstandings were nearly in line with last year — at $7.3 billion — down three basis points year over year.

Net losses for the quarter reached 1.7%, compared with 1.6% in 3Q16. Additionally, delinquencies 30 days or more past due were up slightly on a year-over-year basis to 3.7%, from 3.6%.

“Credit losses continue to be higher consistent with vehicle financing industry trends,” Harley-Davidson Inc.‘s Chief Financial Officer John Olin said on the call, noting that the recent hurricanes partially impacted losses.

While both losses and delinquencies are up, the rate of increase continues to “temper” from last last year, he added. In comparison, during the third quarter of 2016, net losses rose 40 basis points from 3Q15, and 30-day delinquencies were up 45 basis points year over year.

“HDFS is having a very good year and providing a lot of opportunities to sell motorcycles for us,” Olin said. “We are not going to project what we think [losses and delinquencies] will do going forward, but we are pleased to see it is mitigating. The HDFS team is doing a fantastic job. We tightened some substandard underwriting that we’ve had and we are pleased with where we are at and with the momentum.”

Beginning in the second quarter of last year, HDFS began tightening subprime underwriting and settled on standard in the first quarter of 2017. “At this time, we feel comfortable with where we are at with underwriting both in prime and subprime,” Olin said during the OEM’s 2Q17 earnings call.

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