HDFS Share Down 100 Basis Points in 2Q Amid Subprime Tightening

Harley-Davidson Financial Services’ marketshare of new retail motorcycles financed was down 100 basis points year over year — to 62.4% — in the second quarter, amid tightening of subprime underwriting, John Olin, Harley-Davidson Inc.’s senior vice president and chief financial officer, said during the company’s earnings call.

“We did not do anything in the second quarter with regards to tightening, but we have tightened subprime credit over the previous four quarters and you are seeing some of that in the marketshare,” Olin said.

HDFS stopped tightening credit at the end of the first quarter. “At this time, we feel comfortable with where we are at with underwriting both in prime and subprime,” he said.

The captive originated $987 million in motorcycle loans — down 4.4% year over year — in 2Q.

Net losses for the quarter reached 1.7% of the portfolio, compared with 1.5% in 2Q16. Additionally, delinquencies 30 days or more past due were up slightly on a year-over-year basis to 3.3% from 3.2%.

While both losses and delinquencies are up, the rate of increase continues to “temper” from last last year, Olin said.

“We’re seeing that improvement due in part to the fact that used-bike prices are rising, so when we repossess a motorcycle we fare better with that transaction,” he said. “We feel very good about the trends at HDFS and its business model at this time, but we are going to have some headwinds on retail sales because of tightening of subprime credit over the last several quarters.”

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