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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 001-36111

AMERICAN HONDA FINANCE CORPORATION

(Exact name of registrant as specified in its charter)



California			95-3472715
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

1919 Torrance Blvd., Torrance, California			90501
(Address of principal executive offices)			(Zip Code)

(310) 972-2288

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of exchange on which registered
0.750% Medium-Term Notes, Series A Due November 25, 2026	HMC/26A	New York Stock Exchange
3.500% Medium-Term Notes, Series A Due April 24, 2026	HMC/26F	New York Stock Exchange
Floating Rate Medium-Term Notes, Series A Due April 29, 2026	HMC/26G	New York Stock Exchange
Floating Rate Medium-Term Notes, Series A Due May 29, 2026	HMC/26H	New York Stock Exchange
1.500% Medium-Term Notes, Series A Due October 19, 2027	HMC/27A	New York Stock Exchange
3.750% Medium-Term Notes, Series A Due October 25, 2027	HMC/27B	New York Stock Exchange
0.300% Medium-Term Notes, Series A Due July 7, 2028	HMC/28A	New York Stock Exchange
5.600% Medium-Term Notes, Series A Due September 6, 2030	HMC/30A	New York Stock Exchange
3.650% Medium-Term Notes, Series A Due April 23, 2031	HMC/31B	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of January 31, 2025, the number of outstanding shares of common stock of the registrant was 13,660,000 all of which shares were held by American Honda Motor Co., Inc. None of the shares are publicly traded.

REDUCED DISCLOSURE FORMAT

American Honda Finance Corporation, a wholly-owned subsidiary of American Honda Motor Co., Inc., which in turn is a wholly-owned subsidiary of Honda Motor Co., Ltd., meets the requirements set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.

AMERICAN HONDA FINANCE CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended December 31, 2024

Table of Contents


		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	2
	Consolidated Statements of Changes in Equity	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	6
	Note 1 – Summary of Business and Significant Accounting Policies	6
	Note 2 – Finance Receivables	7
	Note 3 – Investment in Operating Leases	12
	Note 4 – Debt	14
	Note 5 – Derivative Instruments	16
	Note 6 – Transactions Involving Related Parties	17
	Note 7 – Income Taxes	18
	Note 8 – Commitments and Contingencies	20
	Note 9 – Securitizations and Variable Interest Entities	21
	Note 10 – Other Assets	22
	Note 11 – Other Liabilities	23
	Note 12 – Fair Value Measurements	23
	Note 13 – Segment Information	27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Overview	30
	Results of Operations	32
	Financial Condition	38
	Liquidity and Capital Resources	44
	Derivatives	49
	Off-Balance Sheet Arrangements	49
	New Accounting Standards	49
	Critical Accounting Estimates	50
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	51
PART II – OTHER INFORMATION		52
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
Exhibit Index
Signature

Cautionary Statement Regarding Forward-Looking Statements

Certain statements included herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. Certain such forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “scheduled,” or “anticipates” or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans, or intentions. In addition, all information included herein with respect to projected or future results of operations, cash flows, financial condition, financial performance, or other financial or statistical matters constitute forward-looking statements. Such forward-looking statements are necessarily dependent on assumptions, data, or methods that may be incorrect or imprecise and that may be incapable of being realized. The following factors, among others, could cause actual results and other matters to differ materially from those in such forward-looking statements:

•the duration and severity of supply chain disruptions on the production of new vehicles and dealer inventory levels;

•declines in the financial condition or performance of Honda Motor Co., Ltd. or the sales of Honda or Acura products;

•changes in economic and general business conditions, both domestically and internationally, including inflationary pressures, changes in interest rates and changes in international trade policy;

•fluctuations in interest rates and currency exchange rates;

•the failure of our customers, dealers or counterparties to meet the terms of any contracts with us, or otherwise fail to perform as agreed;

•our inability to recover the estimated residual value of leased vehicles at the end of their lease terms;

•changes or disruption in our funding sources or access to the capital markets;

•changes in the ownership and structure of our parent entity;

•changes in our, or Honda Motor Co., Ltd.’s, credit ratings;

•increases in competition from other financial institutions seeking to increase their share of financing of Honda and Acura products;

•the impact of pandemics, epidemics, and other public health crises, and efforts to contain them on our operations, liquidity and financial condition;

•changes in laws and regulations, including the result of financial services legislation, and related costs;

•changes in accounting standards;

•a failure or interruption in our operations; and

•a security breach or cyber attack.

Additional information regarding these and other risks and uncertainties to which our business is subject is contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 filed with the Securities and Exchange Commission (SEC) on June 20, 2024. Readers of this Quarterly Report should review the information contained in that report, and in any subsequent reports that we file with the SEC as such risks and uncertainties may be amended, supplemented or superseded from time to time. We do not intend, and undertake no obligation to, update any forward-looking information to reflect actual results or future events or circumstances, except as required by applicable law.

PART I – FINANCIAL INFORMATION

Item1. Financial Statements

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(U.S. dollars in millions, except share data)


	December 31, 2024		March 31, 2024
Assets
Cash and cash equivalents	$	1,591	$	1,670
Finance receivables, net of allowance for credit losses of $402 and $353	51,966		47,248
Investment in operating leases, net	29,598		27,378
Due from Parent and affiliated companies	179		137
Income taxes receivable	169		79
Other assets	1,269		1,214
Derivative instruments	414		743
Total assets	$	85,186	$	78,469
Liabilities and Equity
Debt	$	57,555	$	50,917
Due to Parent and affiliated companies	136		153
Income taxes payable	169		148
Deferred income taxes	5,645		5,701
Other liabilities	1,562		1,455
Derivative instruments	1,361		1,472
Total liabilities	66,428		59,846
Commitments and contingencies (Note 8)
Shareholder’s equity:
Common stock, $100 par value. Authorized 15,000,000 shares; issued and outstanding 13,660,000 shares as of December 31, 2024 and March 31, 2024	1,366		1,366
Retained earnings	16,544		16,254
Accumulated other comprehensive loss	(209)		(137)
Total shareholder’s equity	17,701		17,483
Noncontrolling interest in subsidiary	1,057		1,140
Total equity	18,758		18,623
Total liabilities and equity	$	85,186	$	78,469

The following table presents the assets and liabilities of consolidated variable interest entities. These assets and liabilities are included in the consolidated balance sheets presented above. Refer to Note 9 for additional information.


	December 31, 2024		March 31, 2024
Finance receivables, net	$	11,513	$	9,796

Other assets	754		740
Total assets	$	12,267	$	10,536

Secured debt	$	11,007	$	9,351
Other liabilities	21		17
Total liabilities	$	11,028	$	9,368

See accompanying Notes to Consolidated Financial Statements (Unaudited).

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(U.S. dollars in millions)


	Three months ended December 31,				Nine months ended December 31,
	2024		2023		2024		2023
Revenues:
Retail	$	713	$	553	$	2,027	$	1,487
Dealer	74		60		222		162
Operating leases	1,625		1,504		4,751		4,571
Total revenues	2,412		2,117		7,000		6,220
Leased vehicle expenses	1,105		1,066		3,244		3,286
Interest expense	632		466		1,799		1,185
Net revenues	675		585		1,957		1,749

Other income, net	37		30		117		85
Total net revenues	712		615		2,074		1,834
Expenses:
General and administrative expenses	152		121		428		377
Provision for credit losses	70		74		228		222
Early termination loss on operating leases	40		30		95		70

(Gain)/Loss on derivative instruments	551		(308)		351		(132)
(Gain)/Loss on foreign currency revaluation of debt	(489)		235		(230)		77
Total expenses	324		152		872		614
Income before income taxes	388		463		1,202		1,220
Income tax expense	95		124		326		345
Net income	293		339		876		875
Less: Net income attributable to noncontrolling interest	15		7		50		50
Net income attributable to American Honda Finance Corporation	$	278	$	332	$	826	$	825

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(U.S. dollars in millions)


	Three months ended December 31,				Nine months ended December 31,
	2024		2023		2024		2023
Net income	$	293	$	339	$	876	$	875
Other comprehensive income:
Foreign currency translation adjustment	(137)		58		(137)		48
Comprehensive income	156		397		739		923
Less: Comprehensive (loss)/income attributable to noncontrolling interest	(50)		35		(15)		73
Comprehensive income attributable to American Honda Finance Corporation	$	206	$	362	$	754	$	850

See accompanying Notes to Consolidated Financial Statements (Unaudited).

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(U.S. dollars in millions)


	Total		Retained earnings		Accumulated other comprehensive income/(loss)		Common stock		Noncontrolling interest
Balance at March 31, 2023	$	19,025	$	16,688	$	(135)	$	1,366	$	1,106
Net income	290		265		—		—		25
Other comprehensive income	48		—		25		—		23

Balance at June 30, 2023	$	19,363	$	16,953	$	(110)	$	1,366	$	1,154
Net income	246		228		—		—		18
Other comprehensive loss	(58)		—		(30)		—		(28)
Dividends declared	(587)		(553)		—		—		(34)
Balance at September 30, 2023	$	18,964	$	16,628	$	(140)	$	1,366	$	1,110
Net income	339		332		—		—		7
Other comprehensive income	58		—		30		—		28
Dividends declared	(417)		(417)		—		—		—
Balance at December 31, 2023	$	18,944	$	16,543	$	(110)	$	1,366	$	1,145

Balance at March 31, 2024	$	18,623	$	16,254	$	(137)	$	1,366	$	1,140
Net income	267		250		—		—		17
Other comprehensive loss	(24)		—		(13)		—		(11)

Balance at June 30, 2024	$	18,866	$	16,504	$	(150)	$	1,366	$	1,146
Net income	316		298		—		—		18
Other comprehensive income	24		—		13		—		11
Dividends declared	(604)		(536)		—		—		(68)
Balance at September 30, 2024	$	18,602	$	16,266	$	(137)	$	1,366	$	1,107
Net income	293		278		—		—		15
Other comprehensive loss	(137)		—		(72)		—		(65)

Balance at December 31, 2024	$	18,758	$	16,544	$	(209)	$	1,366	$	1,057

See accompanying Notes to Consolidated Financial Statements (Unaudited).

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollars in millions)


	Nine months ended December 31,
	2024		2023
Cash flows from operating activities:
Net income	$	876	$	875
Adjustments to reconcile net income to net cash provided by operating activities:
Debt and derivative instrument valuation adjustments	43		79
Provision for credit losses	228		222
Early termination loss on operating leases	95		70
Depreciation on leased vehicles	3,221		3,283
Accretion of unearned subsidy income	(819)		(695)
Amortization of deferred dealer participation and other deferred costs	308		270
Gain on disposition of leased vehicles	(66)		(87)
Deferred income taxes	(23)		(496)
Changes in operating assets and liabilities:
Income taxes receivable/payable	174		149
Other assets	(48)		(47)
Accrued interest/discounts on debt	117		161
Other liabilities	18		89
Due to/from Parent and affiliated companies	24		(92)
Net cash provided by operating activities	4,148		3,781
Cash flows from investing activities:
Finance receivables acquired	(21,779)		(21,530)
Principal collected on finance receivables	16,484		13,654
Net change in wholesale loans	(387)		(429)
Purchase of operating lease vehicles	(14,139)		(10,673)
Disposal of operating lease vehicles	7,737		7,838
Cash received for unearned subsidy income	1,303		757
Other investing activities, net	(4)		(4)
Net cash used in investing activities	(10,785)		(10,387)

Statement continues on the next page.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollars in millions)


	Nine months ended December 31,
	2024		2023
Cash flows from financing activities:
Proceeds from issuance of commercial paper	$	24,222	$	31,684
Paydown of commercial paper	(22,761)		(31,943)
Proceeds from issuance of short-term debt	1,099		600
Paydown of short-term debt	(600)		(74)
Proceeds from issuance of medium-term notes and other debt	9,585		10,854
Paydown of medium-term notes and other debt	(6,056)		(5,558)
Proceeds from issuance of secured debt	6,353		5,363
Paydown of secured debt	(4,665)		(3,591)
Dividends paid	(604)		(587)
Net cash provided by financing activities	6,573		6,748
Effect of exchange rate changes on cash and cash equivalents	(10)		4
Net (decrease)/increase in cash and cash equivalents	(74)		146
Cash and cash equivalents and restricted cash at beginning of period	2,385		1,964
Cash and cash equivalents and restricted cash at end of period	$	2,311	$	2,110
Supplemental disclosures of cash flow information:
Interest paid	$	1,636	$	971
Income taxes paid	$	169	$	687

The following table provides a reconciliation of cash and cash equivalents and restricted cash from the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows.


	December 31,
	2024		2023
Cash and cash equivalents	$	1,591	$	1,439
Restricted cash included in other assets (1)	720		671
Total	$	2,311	$	2,110

________________________

(1)Restricted cash balances relate to securitization arrangements (Note 9).

See accompanying Notes to Consolidated Financial Statements (Unaudited).

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1. Summary of Business and Significant Accounting Policies

Organizational Structure

American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Noncontrolling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). AHM and HCI are the sole authorized distributors of Honda and Acura products, including motor vehicles, parts and accessories in the United States and Canada.

Unless otherwise indicated by the context, all references to the “Company”, “we”, “us”, and “our” in this report include AHFC and its consolidated subsidiaries, and references to “AHFC” refer solely to American Honda Finance Corporation (excluding AHFC’s subsidiaries).

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. Results for interim periods should not be considered indicative of results for the full year or for any other interim period. These unaudited interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements, significant accounting policies, and the other notes to the consolidated financial statements for the fiscal year ended March 31, 2024 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (SEC) on June 20, 2024. All significant intercompany balances and transactions have been eliminated upon consolidation.

The presentation of consolidated statements of changes in equity has been revised to include subtotals for interim quarters for the current fiscal year and comparative periods.

Recently Issued Accounting Standards

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments are effective for the Company for fiscal years beginning April 1, 2024 and for interim periods beginning April 1, 2025. The Company is currently assessing the impact of this standard on the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments enhance the transparency and decision usefulness of income tax disclosures, including jurisdictional information, by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. The amendments also eliminate certain disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The amendments are effective for the Company for fiscal years beginning April 1, 2025. The Company is currently assessing the impact of this standard on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments address investor requests for more transparent information. The primary goal is to improve the decision usefulness of expense information on public business entities’ income statements through the disaggregation of relevant expense captions in the notes to the financial statements. The amendments are effective for the Company for fiscal years beginning April 1, 2027 and for interim periods beginning April 1, 2028. The Company is currently assessing the impact of this standard on the consolidated financial statements.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 2. Finance Receivables

Finance receivables consisted of the following:


		December 31, 2024
		Retail		Dealer		Total

	(U.S. dollars in millions)
Finance receivables		$	47,982	$	4,444	$	52,426
Allowance for credit losses		(393)		(9)		(402)
Deferred dealer participation and other deferred costs		614		—		614
Unearned subsidy income		(672)		—		(672)
Finance receivables, net		$	47,531	$	4,435	$	51,966

		March 31, 2024
		Retail		Dealer		Total

	(U.S. dollars in millions)
Finance receivables		$	43,492	$	4,060	$	47,552
Allowance for credit losses		(345)		(8)		(353)
Deferred dealer participation and other deferred costs		600		—		600
Unearned subsidy income		(551)		—		(551)
Finance receivables, net		$	43,196	$	4,052	$	47,248

Finance receivables include retail loans with a net carrying amount of $11.5 billion and $9.8 billion as of December 31, 2024 and March 31, 2024, respectively, which have been transferred to bankruptcy-remote Special Purpose Entities (SPEs) and are considered to be legally isolated but do not qualify for sale accounting treatment. These retail loans are restricted and serve as collateral for the payment of the related secured debt obligations. Refer to Note 9 for additional information.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Allowance for Credit Losses

The following is a summary of the activity in the allowance for credit losses of finance receivables:


		Three and nine months ended December 31, 2024
		Retail		Dealer		Total

	(U.S. dollars in millions)
Beginning balance as of October 1, 2024		$	404	$	8	$	412
Provision		69		1		70
Charge-offs		(111)		—		(111)
Recoveries		32		—		32
Effect of translation adjustment		(1)		—		(1)
Ending balance as of December 31, 2024		$	393	$	9	$	402

Beginning balance as of April 1, 2024		$	345	$	8	$	353
Provision		227		1		228
Charge-offs		(287)		—		(287)
Recoveries		109		—		109
Effect of translation adjustment		(1)		—		(1)
Ending balance as of December 31, 2024		$	393	$	9	$	402

		Three and nine months ended December 31, 2023
		Retail		Dealer		Total

	(U.S. dollars in millions)
Beginning balance as of October 1, 2023		$	327	$	5	$	332
Provision		72		2		74
Charge-offs		(87)		—		(87)
Recoveries		24		—		24
Effect of translation adjustment		—		—		—
Ending balance as of December 31, 2023		$	336	$	7	$	343

Beginning balance as of April 1, 2023		$	248	$	5	$	253
Provision		220		2		222
Charge-offs		(202)		—		(202)
Recoveries		70		—		70
Effect of translation adjustment		—		—		—
Ending balance as of December 31, 2023		$	336	$	7	$	343

The allowance increased during the nine months ended December 31, 2024 primarily due to the expected credit losses recognized on the high volume of retail loan acquisitions during the period. The increase was also attributable to the increasing trend of delinquencies and net charge offs.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Delinquencies

Collection experience provides an indication of the credit quality of finance receivables. For retail loans, delinquencies are a good predictor of charge-offs in the near term. The likelihood of accounts charging off is significantly higher once an account becomes 60 days delinquent. Retail loans are considered delinquent if more than 10% of a scheduled payment is contractually past due on a cumulative basis. Dealer loans are considered delinquent when any payment is contractually past due. The following is an aging analysis of past due finance receivables:


	30 – 59 days past due		60 – 89 days past due		90 days or greater past due		Total past due		Current or less than 30 days past due		Total finance receivables

	(U.S. dollars in millions)
December 31, 2024
Retail loans:
New automobile	$	359	$	101	$	28	$	488	$	37,417	$	37,905
Used and certified automobile	177		56		16		249		8,216		8,465
Motorcycle and other	22		10		5		37		1,517		1,554
Total retail loans	558		167		49		774		47,150		47,924
Dealer loans:
Wholesale flooring	—		—		1		1		3,131		3,132
Commercial loans	—		—		—		—		1,312		1,312
Total dealer loans	—		—		1		1		4,443		4,444
Total finance receivables	$	558	$	167	$	50	$	775	$	51,593	$	52,368

March 31, 2024
Retail loans:
New automobile	$	253	$	59	$	15	$	327	$	33,858	$	34,185
Used and certified automobile	134		33		9		176		7,815		7,991
Motorcycle and other	15		6		3		24		1,341		1,365
Total retail loans	402		98		27		527		43,014		43,541
Dealer loans:
Wholesale flooring	1		—		—		1		2,785		2,786
Commercial loans	—		—		—		—		1,274		1,274
Total dealer loans	1		—		—		1		4,059		4,060
Total finance receivables	$	403	$	98	$	27	$	528	$	47,073	$	47,601

Credit Quality Indicators

Credit losses are an expected cost of extending credit. The majority of our credit risk is with consumer financing and to a lesser extent with dealer financing. Exposure to credit risk in retail loans is managed through regular monitoring and periodic adjusting of underwriting standards, pricing of contracts for expected losses, and focusing collection efforts to minimize losses. Exposure to credit risk for dealers is managed through ongoing review of their financial condition and payment performance.

Retail Loan Segment

The Company utilizes proprietary credit scoring systems to evaluate the credit risk of applicants and assign internal credit grades at origination. Factors used to develop a customer’s credit grade include the terms of the contract, the loan-to-value ratio, the customer’s debt ratios, and credit bureau attributes such as the number of trade lines, utilization ratio, and number of credit inquiries. Different scorecards are utilized depending on the type of product financed. The Company regularly reviews and analyzes the performance of the consumer-financing portfolio to ensure the effectiveness of its underwriting guidelines, purchasing criteria and scorecard predictability of customers. Internal credit grades are determined only at the time of origination and are not reassessed during the life of the contract. The following describes the internal credit grade ratings.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

A - Borrowers classified as very low credit risks. Based on their application and credit bureau report, they have the ability to pay and have shown a willingness to pay. Generally, A credit borrowers have an extensive credit history, an excellent payment record and extensive financial resources.

B - Borrowers classified as relatively low credit risks. Based on their application and credit bureau report, they have the ability to pay and have shown a willingness to pay. Generally, B credit borrowers may have one or more conditions that could reduce the internal credit score, such as a shorter credit history or a minor credit weakness.

C - Borrowers classified as moderate credit risks. Based on their application and credit bureau report, they may have limited financial resources, limited credit history, or a weakness in credit history.

D - Borrowers classified as relatively higher credit risks. Based on their application and credit bureau report, they may have very limited financial resources, very limited or no credit history, or a poor credit history.

Others - Borrowers, including businesses, without credit bureau reports.

The following table summarizes the amortized cost of retail loans by internal credit grade:


	Retail loans by vintage fiscal year

	2025		2024		2023		2022		2021		Prior		Total

	(U.S. dollars in millions)
December 31, 2024
Credit grade A	$	11,415	$	10,496	$	4,120	$	2,248	$	1,523	$	214	$	30,016
Credit grade B	3,032		3,209		1,529		746		462		111		9,089
Credit grade C	2,214		2,222		979		509		318		101		6,343
Credit grade D	671		580		216		120		90		56		1,733
Others	286		247		100		63		32		15		743
Total retail loans	$	17,618	$	16,754	$	6,944	$	3,686	$	2,425	$	497	$	47,924
Gross charge-offs for the nine months ended December 31, 2024	$	25	$	139	$	68	$	30	$	15	$	10	$	287


	Retail loans by vintage fiscal year

	2024		2023		2022		2021		2020		Prior		Total

	(U.S. dollars in millions)
March 31, 2024
Credit grade A	$	14,094	$	5,788	$	3,713	$	2,907	$	597	$	121	$	27,220
Credit grade B	4,110		2,065		1,113		778		237		66		8,369
Credit grade C	2,853		1,338		758		526		200		61		5,736
Credit grade D	779		306		182		149		97		36		1,549
Others	338		142		96		57		22		12		667
Total retail loans	$	22,174	$	9,639	$	5,862	$	4,417	$	1,153	$	296	$	43,541
Gross charge-offs for the fiscal year ended March 31, 2024	$	58	$	109	$	61	$	34	$	19	$	12	$	293

Dealer Loan Segment

The Company utilizes an internal risk rating system to evaluate dealer credit risk. Dealerships are assigned an internal risk rating based on an assessment of their financial condition and other factors. Factors including liquidity, financial strength, management effectiveness, and operating efficiency are evaluated when assessing their financial condition. Financing limits and interest rates are based upon these risk ratings. Monitoring activities including financial reviews and inventory inspections are performed more frequently for dealerships with weaker risk ratings. The financial conditions of dealerships are reviewed and their risk ratings are updated at least annually.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Dealerships have been divided into the following groups:

Group I - Dealerships in the strongest internal risk rating tier

Group II - Dealerships with internal risk ratings below the strongest tier

Group III - Dealerships with impaired loans

The following table summarizes the amortized cost of dealer loans by risk rating groups:


	Commercial loans by vintage fiscal year

	2025		2024		2023		2022		2021		Prior		Revolving loans		Wholesale Flooring		Total

	(U.S. dollars in millions)
December 31, 2024
Group I	$	137	$	111	$	52	$	13	$	110	$	57	$	731	$	1,963	$	3,174
Group II	5		70		3		—		—		23		—		1,168		1,269
Group III	—		—		—		—		—		—		—		1		1
Total dealer loans	$	142	$	181	$	55	$	13	$	110	$	80	$	731	$	3,132	$	4,444
Gross charge-offs for the nine months ended December 31, 2024	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


	Commercial loans by vintage fiscal year

	2024		2023		2022		2021		2020		Prior		Revolving loans		Wholesale Flooring		Total

	(U.S. dollars in millions)
March 31, 2024
Group I	$	146	$	55	$	9	$	114	$	45	$	84	$	748	$	1,874	$	3,075
Group II	44		3		5		1		—		20		—		911		984
Group III	—		—		—		—		—		—		—		1		1
Total dealer loans	$	190	$	58	$	14	$	115	$	45	$	104	$	748	$	2,786	$	4,060
Gross charge-offs for the fiscal year ended March 31, 2024	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loan Modifications

The contractual terms of loans may be modified when borrowers are experiencing financial difficulties in an effort to mitigate losses. There were no dealer loans that were modified for dealers experiencing financial difficulties during the nine months ended December 31, 2024. Payment deferrals are granted on retail loans, however the delays in payments are considered insignificant since the number of deferred payments are limited and interest continues to accrue during the deferral period. In certain situations, the Company may grant term extensions on retail loans in the United States. Term extensions extend the maturity date of the loan which reduces the monthly payments over the remaining extended term of the loan. Term extensions do not change the contractual interest rates or reduce the outstanding principal balances. During the nine months ended December 31, 2024, term extensions were not material to the Company’s consolidated financial statements. Retail loans may also be modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, which may include interest rate adjustments, term extensions, and principal forgiveness. Retail loans modified under bankruptcy protection were not material to the Company’s consolidated financial statements during the nine months ended December 31, 2024.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 3. Investment in Operating Leases

Investment in operating leases consisted of the following:


	December 31, 2024		March 31, 2024

	(U.S. dollars in millions)
Operating lease vehicles (1)	$	36,513	$	34,840
Accumulated depreciation	(5,642)		(6,616)
Deferred dealer participation and initial direct costs	120		103
Unearned subsidy income	(1,278)		(854)
Estimated early termination losses	(115)		(95)
Investment in operating leases, net	$	29,598	$	27,378

________________________

(1)Net of investment tax credits.

Operating lease revenue consisted of the following:


	Three months ended December 31,				Nine months ended December 31,
	2024		2023		2024		2023

	(U.S. dollars in millions)
Lease payments	$	1,447	$	1,371	$	4,248	$	4,155
Subsidy income and dealer rate participation, net	172		125		464		376
Reimbursed lessor costs	6		8		39		40
Total operating lease revenue, net	$	1,625	$	1,504	$	4,751	$	4,571

Leased vehicle expenses consisted of the following:


	Three months ended December 31,				Nine months ended December 31,
	2024		2023		2024		2023

	(U.S. dollars in millions)
Depreciation expense	$	1,095	$	1,069	$	3,221	$	3,283
Initial direct costs and other lessor costs	24		25		89		90
Gain on disposition of leased vehicles (1)	(14)		(28)		(66)		(87)
Total leased vehicle expenses, net	$	1,105	$	1,066	$	3,244	$	3,286

________________________

(1)Included in the gain on disposition of leased vehicles are end of term charges of less than $1 million and $1 million for the three months ended December 31, 2024, and 2023, respectively, and $7 million and $3 million for the nine months ended December 31, 2024 and 2023, respectively.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Contractual operating lease payments due as of December 31, 2024 are summarized below. Based on the Company's experience, it is expected that a portion of the Company's operating leases will terminate prior to the scheduled lease term. The summary below should not be regarded as a forecast of future cash collections.


Twelve-month periods ending December 31,	(U.S. dollars in millions)

2025	$	5,279
2026	3,916
2027	1,766
2028	303
2029	48
Total	$	11,312

The Company recognized early termination losses on operating leases of $40 million and of $30 million during the three months ended December 31, 2024 and 2023, respectively, and $95 million and $70 million during the nine months ended December 31, 2024 and 2023, respectively. Net realized losses totaled $34 million and $29 million during the three months ended December 31, 2024 and 2023, respectively, and $75 million and $52 million during the nine months ended December 31, 2024 and 2023, respectively.

The general allowance for uncollectible operating lease receivables was recorded through a reduction to revenue of $8 million and $6 million for the three months ended December 31, 2024 and 2023, respectively, and $20 million and $13 million for nine months ended December 31, 2024 and 2023, respectively.

No impairment losses due to declines in estimated residual values were recognized during both the three and nine months ended December 31, 2024 and 2023.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 4. Debt

The Company issues debt in various currencies with both floating and fixed interest rates. Outstanding debt net of discounts and fees, weighted average contractual interest rates and range of contractual interest rates were as follows:


					Weighted average contractual interest rate (1)				Contractual interest rate ranges
	December 31, 2024		March 31, 2024		December 31, 2024		March 31, 2024		December 31, 2024	March 31, 2024

	(U.S. dollars in millions)
Unsecured debt:
Commercial paper	$	6,691	$	5,293	4.64	%	5.64	%	3.25 - 4.86%	5.02 - 5.70%
Bank loans	1,550		1,804		4.75	%	6.05	%	4.15 - 5.58%	5.68 - 6.57%
Public MTN program	35,219		31,151		4.01	%	3.58	%	0.30 - 5.85%	0.30 - 6.06%
Other debt	3,088		3,318		3.61	%	3.59	%	1.34 - 5.73%	1.34 - 6.40%
Total unsecured debt	46,548		41,566
Secured debt	11,007		9,351		4.80	%	4.56	%	0.41 - 5.87%	0.27 - 5.94%
Total debt	$	57,555	$	50,917

_______________________

(1)Weighted average contractual interest rates for commercial paper are bond equivalent yields. Contractual interest rates approximate effective yields.

As of December 31, 2024, the outstanding principal balance of long-term debt with floating interest rates totaled $10.3 billion, long-term debt with fixed interest rates totaled $39.1 billion, and short-term debt with floating or fixed interest rates totaled $8.2 billion. As of March 31, 2024, the outstanding principal balance of long-term debt with floating interest rates totaled $7.7 billion, long-term debt with fixed interest rates totaled $36.9 billion, and short-term debt with floating or fixed interest rates totaled $6.3 billion.

Commercial Paper

As of December 31, 2024 and March 31, 2024, the Company had commercial paper programs that provide the Company with available funds of up to $8.7 billion and $8.8 billion, respectively, at prevailing market interest rates for terms up to one year. The commercial paper programs are supported by the Keep Well Agreements with HMC described in Note 6.

Outstanding commercial paper averaged $5.6 billion and $6.7 billion during the nine months ended December 31, 2024 and 2023, respectively. The maximum balance outstanding at any month-end during the nine months ended December 31, 2024 and 2023 was $6.7 billion and $7.2 billion, respectively.

Bank Loans

Outstanding bank loans at December 31, 2024 were long-term, with floating interest rates, and denominated in U.S. dollars or Canadian dollars. Outstanding bank loans have prepayment options. No outstanding bank loans as of December 31, 2024 were supported by the Keep Well Agreements with HMC described in Note 6. Outstanding bank loans contain certain covenants, including limitations on liens, mergers, consolidations and asset sales.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Public Medium-Term Note (MTN) Program

In August 2024, AHFC renewed its Public MTN program by filing a new prospectus supplement with the SEC under which it may issue from time to time up to $45.0 billion aggregate principal amount of Public MTNs pursuant to the Public MTN program. The aggregate principal amount of MTNs offered under this program may be increased from time to time. Notes outstanding under the Public MTN program as of December 31, 2024 were short-term and long-term, with either fixed or floating interest rates, and denominated in U.S. dollars, Euro or Sterling. Notes under this program are issued pursuant to an indenture which contains certain covenants, including negative pledge provisions and limitations on mergers, consolidations and asset sales.

The Public MTN program is supported by the Keep Well Agreement with HMC described in Note 6.

Other Debt

The outstanding balances as of December 31, 2024 consisted of private placement debt issued by HCFI which are long-term, with either fixed or floating interest rates, and denominated in Canadian dollars. Private placement debt is supported by the Keep Well Agreement with HMC described in Note 6. The notes are issued pursuant to the terms of an indenture which contain certain covenants, including negative pledge provisions.

Secured Debt

The Company issues notes through financing transactions that are secured by assets held by issuing SPEs. Notes outstanding as of December 31, 2024 were long-term and short-term with either fixed or floating interest rates, and denominated in U.S. dollars or Canadian dollars. Repayment of the notes is dependent on the performance of the underlying retail loans. Refer to Note 9 for additional information on the Company’s secured financing transactions.

Credit Agreements

Syndicated Bank Credit Facilities

AHFC maintains a $7.0 billion syndicated bank credit facility that includes a $3.5 billion credit agreement, which expires on February 21, 2025, a $2.1 billion credit agreement, which expires on February 25, 2026, and a $1.4 billion credit agreement, which expires on February 25, 2028. As of December 31, 2024, no amounts were drawn upon under the AHFC credit agreements. AHFC intends to renew or replace these credit agreements prior to or on their respective expiration dates.

HCFI maintains a $1.4 billion syndicated bank credit facility that includes a $695 million credit agreement, which expires on March 25, 2025 and a $695 million credit agreement, which expires on March 25, 2027. As of December 31, 2024, no amounts were drawn upon under the HCFI credit agreements. HCFI intends to renew or replace the credit agreements prior to or on the expiration dates.

The credit agreements contain customary covenants, including limitations on liens, mergers, consolidations and asset sales and affiliate transactions. Loans, if any, under the credit agreements will be supported by the Keep Well Agreement described in Note 6.

Other Credit Agreements

AHFC maintains other committed lines of credit that allow the Company access to an additional $1.0 billion in unsecured funding with two banks. The credit agreements contain customary covenants, including limitations on liens, mergers, consolidations and asset sales. As of December 31, 2024, no amounts were drawn upon under these agreements. These agreements expire in September 2025. The Company intends to renew or replace these credit agreements prior to or on their respective expiration dates.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 5. Derivative Instruments

The notional balances and fair values of the Company’s derivatives are presented below. The derivative instruments are presented on a gross basis in the Company’s consolidated balance sheets. Refer to Note 12 regarding the valuation of derivative instruments.


	December 31, 2024						March 31, 2024
	Notional balances		Assets		Liabilities		Notional balances		Assets		Liabilities

	(U.S. dollars in millions)
Interest rate swaps	$	73,318	$	410	$	674	$	64,146	$	714	$	881
Cross currency swaps	6,695		4		687		5,755		29		591
Gross derivative assets/liabilities			414		1,361				743		1,472
Collateral posted/held			24		1				1		9
Counterparty netting adjustment			(433)		(433)				(701)		(701)
Net derivative assets/liabilities			$	5	$	929			$	43	$	780

The income statement impact of derivative instruments is presented below. There were no derivative instruments designated as part of a hedge accounting relationship during the periods presented.


	Three months ended December 31,				Nine months ended December 31,
	2024		2023		2024		2023

	(U.S. dollars in millions)
Interest rate swaps	$	7	$	(24)	$	(26)	$	82
Cross currency swaps	(558)		332		(325)		50
Total gain/(loss) on derivative instruments	$	(551)	$	308	$	(351)	$	132

The fair value of derivative instruments is subject to the fluctuations in market interest rates and foreign currency exchange rates. Since the Company has elected not to apply hedge accounting, the volatility in the changes in fair value of these derivative instruments is recognized in earnings. All periodic interest settlements of derivative instruments are presented within cash flows from operating activities in the consolidated statements of cash flows. The final notional exchange of cross currency swaps are presented within cash flows from financing activities along with the paydowns of the related foreign currency denominated debt.

These derivative instruments also contain an element of credit risk in the event the counterparties are unable to meet the terms of the agreements. However, the Company minimizes the risk exposure by limiting the counterparties to major financial institutions that meet established credit guidelines. In the event of default, all counterparties are subject to legally enforceable master netting agreements. In Canada, HCFI is a party to a reciprocal credit support annex that requires posting of cash collateral to mitigate counterparty credit risk on derivative positions. Posted collateral is recognized in other assets and held collateral is recognized in other liabilities.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 6. Transactions Involving Related Parties

The following tables summarize the income statement and balance sheet impact of transactions with the Parent and affiliated companies:


	Three months ended December 31,				Nine months ended December 31,
Income Statement	2024		2023		2024		2023

	(U.S. dollars in millions)
Revenue:
Subsidy income	$	293	$	228	$	812	$	690
General and administrative expenses:
Support Compensation Agreement fees	21		17		62		48
Benefit plan expenses	1		2		4		5
Shared services	19		18		58		55
Lease expense	1		1		3		3


Balance Sheet	December 31, 2024		March 31, 2024

	(U.S. dollars in millions)
Assets:
Finance receivables, net:
Unearned subsidy income	$	(657)	$	(542)
Investment in operating leases, net:
Unearned subsidy income	(1,276)		(853)
Due from Parent and affiliated companies	179		137
Liabilities:
Due to Parent and affiliated companies	136		153
Other liabilities:
Accrued benefit expenses	64		64

Operating lease liabilities	9		11

Support Agreements

HMC and AHFC are parties to a Keep Well Agreement, effective as of September 9, 2005. This Keep Well Agreement provides that HMC will (1) maintain (directly or indirectly) at least 80% ownership in AHFC’s voting stock and not pledge (directly or indirectly), or in any way encumber or otherwise dispose of, any such stock of AHFC that it is required to hold (or permit any of HMC’s subsidiaries to do so), (2) cause AHFC to have a positive consolidated tangible net worth with tangible net worth defined as (a) stockholder’s equity less (b) any intangible assets, determined on a consolidated basis in accordance with GAAP, and (3) ensure that AHFC has sufficient liquidity to meet its payment obligations for debt HMC has confirmed in writing is covered by this Keep Well Agreement, in accordance with its terms, or where necessary make available to AHFC, or HMC shall procure for AHFC, sufficient funds to enable AHFC to meet such obligations in accordance with such terms. This Keep Well Agreement is not a guarantee by HMC.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

HMC and HCFI are parties to a Keep Well Agreement effective as of September 26, 2005. This Keep Well Agreement provides that HMC will (1) maintain (directly or indirectly) at least 80% ownership in HCFI’s voting stock and not pledge (directly or indirectly), or in any way encumber or otherwise dispose of, any such stock of HCFI that it is required to hold (or permit any of HMC’s subsidiaries to do so), (2) cause HCFI to have a positive consolidated tangible net worth with tangible net worth defined as (a) stockholder’s equity less (b) any intangible assets, determined on a consolidated basis in accordance with generally accepted accounting principles in Canada, and (3) ensure that HCFI has sufficient liquidity to meet its payment obligations for debt HMC has confirmed in writing is covered by this Keep Well Agreement, in accordance with its terms, or where necessary make available to HCFI, or HMC shall procure for HCFI, sufficient funds to enable HCFI to meet such obligations in accordance with such terms. This Keep Well Agreement is not a guarantee by HMC.

Debt programs supported by the Keep Well Agreements consist of the Company’s commercial paper programs, Public MTN Program, and HCFI’s private placement debt and loans, if any, under AHFC's and HCFI's syndicated bank credit facilities. In connection with the above agreements, AHFC and HCFI have entered into separate Support Compensation Agreements, where each has agreed to pay HMC a quarterly fee based on the amount of outstanding debt that benefit from the Keep Well Agreements. Support Compensation Agreement fees are recognized in general and administrative expenses.

Incentive Financing Programs

The Company receives subsidy payments from AHM and HCI, which supplement the revenues on financing products offered under incentive programs. Subsidy payments received on retail loans and leases are deferred and recognized as revenue over the term of the related contracts. The unearned balance is recognized as reductions to the carrying value of finance receivables and investment in operating leases. Subsidy payments on dealer loans are received as earned.

Shared Services

The Company shares certain common expenditures with AHM and HCI, including information technology services and facilities. The allocated costs for shared services are included in general and administrative expenses.

Benefit Plans

The Company participates in various employee benefit plans that are sponsored by AHM and HCI. The allocated benefit plan expenses are included in general and administrative expenses.

Income taxes

The Company’s U.S. income taxes are recognized on a modified separate return basis pursuant to an intercompany income tax allocation agreement with AHM. Income tax related items are not included in the tables above. Refer to Note 7 for additional information.

Other

The majority of the amounts due from the Parent and affiliated companies at December 31, 2024 and March 31, 2024 were related to incentive financing program subsidies. The majority of the amounts due to the Parent and affiliated companies at December 31, 2024 and March 31, 2024 were related to wholesale flooring payable to the Parent. These receivable and payable accounts are non-interest-bearing and short-term in nature and are expected to be settled in the normal course of business.

AHFC leases its premises from AHM and HCFI leases its premises from HCI.

AHFC declared cash dividends to its parent, AHM, of $536 million and $970 million during the nine months ended December 31, 2024 and 2023, respectively.

HCFI declared cash dividends to AHFC and HCI of $74 million and $68 million, respectively, during the nine months ended December 31, 2024. HCFI declared cash dividends to AHFC and HCI of $37 million and $34 million, respectively, during the nine months ended December 31, 2023.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 7. Income Taxes

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was enacted into law. The IRA includes tax provisions for new corporate alternative minimum tax (CAMT) of 15% on adjusted financial statement income of corporations with profits greater than $1.0 billion, effective for taxable years beginning after December 31, 2022, in addition to a new tax credit for qualified commercial clean vehicles (QCCV) that applies to vehicles acquired after December 31, 2022. At December 31, 2024, based on proposed guidance and regulations issued to date, the Company does not expect to incur CAMT liability for fiscal year 2025 and expects to generate and utilize material QCCV tax credits during fiscal year 2025. The Company accounts for the QCCV tax credits using the deferral method. QCCV tax credits are initially deferred as reductions to the acquisition cost of the related operating lease assets and subsequently recognized over the lease terms as reductions to depreciation expense. QCCV tax credits totaling $243 million were deferred during the nine months ended December 31, 2024. The Company will continue to evaluate the effects of IRA as additional guidance and regulations are issued.

During fiscal years 2024 and 2025, several countries, including Japan and Canada, enacted tax laws to adopt various aspects of the Organization for Economic Cooperation and Development (OECD) Global Anti-Base Erosion Model Rules (GloBE Rules). The GloBE Rules are designed to ensure large multinational enterprises (MNEs) pay a minimum level of tax (“Minimum Tax”) on income in each of the jurisdictions in which they operate. These rules generally apply to MNE groups with annual revenue of €750 million or more. The Company is in scope of the GloBE Rules, effective as of April 1, 2024, as a result of our affiliation with HMC. On June 20, 2024, Canada, where the Company’s Canadian subsidiary HCFI is incorporated, enacted the Global Minimum Tax Act, which implemented the Income Inclusion Rule and Qualified Domestic Minimum Top-up tax under the GloBE Rules, effective from April 1, 2024. Since HCFI is expected to have an effective tax rate that exceeds the 15% minimum rate, the Company has no related current tax expense associated with the Minimum Tax as of December 31, 2024. To date, the U.S., where we have operations and conduct business, has not enacted laws to adopt the GloBE Rules. Based on preliminary analysis, we do not expect a material tax impact as a result of the GloBE Rules. The Company will continue to monitor legislative developments and changes in business for potential impacts of the GloBE Rules on future periods.

The Company’s effective tax rate was 24.5% and 26.7% for the three months ended December 31, 2024 and 2023, respectively, and 27.2% and 28.3% for the nine months ended December 31, 2024 and 2023, respectively. The decrease in effective tax rates for the three and nine months ended December 31, 2024 was primarily due to a decrease in state taxes. The Company's effective tax rates for the three and nine months ended December 31, 2024, differ from the U.S. federal statutory tax rate primarily as a result of U.S. state taxes.

The Company does not provide for income taxes on its share of the undistributed earnings of HCFI which are intended to be indefinitely reinvested outside the United States. At December 31, 2024, $983 million of accumulated undistributed earnings of HCFI were intended to be so reinvested. If the undistributed earnings as of December 31, 2024 were to be distributed, the tax liability associated with these earnings would be $126 million, inclusive of currency translation adjustments.

As of December 31, 2024, the Company is subject to examination for U.S. federal returns filed for the taxable years ended March 31, 2014 through 2023, and for various U.S. state returns filed for the taxable years ended March 31, 2008 through 2023. The Company’s Canadian subsidiary, HCFI, is subject to examination for federal returns filed for the taxable years ended March 31, 2018 through 2024, and for provincial returns filed for the taxable years ended March 31, 2017 through 2024. The Company believes appropriate provision has been made for all outstanding issues for all open years and does not expect any material changes in the amounts of unrecognized tax benefits during the fiscal year ending March 31, 2025.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 8. Commitments and Contingencies

Operating Leases

The Company leases certain premises and equipment through operating leases. AHFC leases its premises and equipment from AHM and third parties, and HCFI leases its premises from HCI.

Many of the Company's leases contain renewal options, and generally have no residual value guarantees or material covenants. When it is reasonably certain that the Company will exercise the option to renew a lease, the Company will include the renewal option in the evaluation of the lease term. The Company has elected not to recognize right-of-use assets or lease liabilities for leases with a lease term of less than one year. As most of the Company's leases do not provide an implicit rate, the incremental borrowing rate is used in determining the present value of lease payments. The right-of-use assets in operating lease arrangements are reported in other assets on the Company's consolidated balance sheets.

Operating lease liabilities are reported in other liabilities on the Company's consolidated balance sheets. At December 31, 2024, maturities of operating lease liabilities were as follows:


Twelve-month periods ending December 31,	(U.S. dollars in millions)

2025	$	9
2026	10
2027	10
2028	9
2029	6
Thereafter	20
Total undiscounted future lease obligations	64
Less: imputed interest	(7)
Operating lease liabilities	$	57

Lease expense under operating leases was $2 million for both the three months ended December 31, 2024 and 2023, and $7 million for both the nine months ended December 31, 2024 and 2023. Lease expense is included within general and administrative expenses.

As of December 31, 2024, the weighted average remaining lease term for operating leases was 6.9 years and the weighted average remaining discount rate for operating leases was 3%.

Revolving Lines of Credit to Dealerships

The Company extends commercial revolving lines of credit to dealerships to support their business activities including facilities refurbishment and general working capital requirements. The amounts borrowed are generally secured by the assets of the borrowing entity. The unused balance of commercial revolving lines of credit was $702 million as of December 31, 2024. The Company also has commitments to finance the construction of automobile dealership facilities. The remaining unfunded balance for these construction loans was $5 million as of December 31, 2024.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Legal Proceedings and Regulatory Matters

The Company establishes accruals for legal and regulatory claims when payments associated with the claims become probable and the costs can be reasonably estimated. When able, the Company will determine estimates of reasonably possible loss or range of loss, whether in excess of any related accrued liability or where there is no accrued liability. Given the inherent uncertainty associated with legal and regulatory matters, the actual costs of resolving such claims and associated costs of defense may be substantially higher or lower than the amounts for which accruals have been established.

The Company is involved, in the ordinary course of business, in various legal proceedings including claims of individual customers and purported class action lawsuits. Certain of these actions are similar to suits filed against other financial institutions and captive finance companies concerning business practices and policies. The Company is also subject to regulation, supervision, and licensing under various federal, state, provincial, and local statutes, ordinances and regulations which involve governmental reviews and inquiries from time to time. Based on available information and established accruals, management does not believe it is reasonably possible that the results of these proceedings, in the aggregate, will have a material adverse effect on the Company’s consolidated financial statements.

In November 2023, the Company received a civil investigative demand issued by the Consumer Financial Protection Bureau (CFPB) in connection with the Company’s furnishing of credit reporting information on consumer credit accounts. In January 2025, in the interest of compliance and resolution of this matter, and without admitting or denying any wrongdoing, the Company voluntarily agreed to enter into a consent order (Consent Order) with the CFPB. The Consent Order, among other things, requires the Company to pay $10 million in consumer redress, pay a $3 million civil money penalty to the CFPB and implement a compliance plan.

Note 9. Securitizations and Variable Interest Entities (VIE)

The Company utilizes SPEs for its asset-backed securitizations and these SPEs are considered VIEs, which are required to be consolidated by their primary beneficiary. The Company is considered to be the primary beneficiary of these SPEs due to (i) the power to direct the activities of the SPEs that most significantly impact the SPEs’ economic performance through the Company's role as servicer, and (ii) the obligation to absorb losses or the right to receive residual returns that could potentially be significant to the SPEs through the subordinated certificates and residual interest retained. The debt securities issued by the SPEs to third-party investors along with the assets of the SPEs are included in the Company’s consolidated financial statements.

During the nine months ended December 31, 2024 and 2023, the Company issued notes through asset-backed securitizations, which were accounted for as secured financing transactions totaling $6.4 billion and $5.4 billion, respectively. The notes were secured by assets with an initial balance of $6.9 billion and $5.8 billion, respectively.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The table below presents the carrying amounts of assets and liabilities of consolidated SPEs as they are reported in the Company’s consolidated balance sheets. All amounts exclude intercompany balances, which have been eliminated upon consolidation. Investors in notes issued by a SPE only have recourse to the assets of such SPE and do not have recourse to the assets of AHFC, HCFI, or its other subsidiaries or to other SPEs. The assets of SPEs are the only source of funds for repayment on the notes. There were no outstanding operating lease securitizations as of December 31, 2024.


	December 31, 2024

	Assets						Liabilities

	(U.S. dollars in millions)
	Securitized assets		Restricted cash (1)		Other		Secured debt		Other
Retail loan securitizations	$	11,513	$	720	$	34	$	11,007	$	21

	March 31, 2024

	Assets						Liabilities

	(U.S. dollars in millions)
	Securitized assets		Restricted cash (1)		Other		Secured debt		Other
Retail loan securitizations	$	9,796	$	715	$	25	$	9,351	$	17

________________________

(1)Included with other assets in the Company’s consolidated balance sheets (Note 10).

In their role as servicers, AHFC and HCFI collect payments on the underlying securitized assets on behalf of the SPEs. Cash collected during a calendar month is required to be remitted to the SPEs in the following month. AHFC and HCFI are not restricted from using the cash collected for their general purposes prior to the remittance to the SPEs. As of December 31, 2024 and March 31, 2024, AHFC and HCFI had combined cash collections of $588 million and $476 million, respectively, which were required to be remitted to the SPEs.

Note 10. Other Assets

Other assets consisted of the following:


	December 31, 2024		March 31, 2024

	(U.S. dollars in millions)
Accrued interest and fees on finance receivables	$	191	$	163
Accrued lease payments and fees on operating leases	68		64
Vehicles held for disposition	142		138
Restricted cash	720		715
Operating lease right-of-use assets	48		54
Other miscellaneous assets	100		80
Total	$	1,269	$	1,214

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 11. Other Liabilities

Other liabilities consisted of the following:


	December 31, 2024		March 31, 2024

	(U.S. dollars in millions)
Dealer payables	$	251	$	288
Accrued interest expense	455		317
Accounts payable and accrued expenses	321		334
Lease security deposits	45		50
Unearned income, operating leases	270		250
Operating lease liabilities	57		62
Uncertain tax positions	112		105

Other liabilities	51		49
Total	$	1,562	$	1,455

Note 12. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Nonperformance risk is also required to be reflected in the fair value measurement, including an entity’s own credit standing when measuring the fair value of a liability.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Recurring Fair Value Measurements

The following tables summarize the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis:


	December 31, 2024
	Level 1		Level 2		Level 3		Total

	(U.S. dollars in millions)
Assets:
Derivative instruments:
Interest rate swaps	$	—	$	410	$	—	$	410
Cross currency swaps	—		4		—		4
Total assets	$	—	$	414	$	—	$	414
Liabilities:
Derivative instruments:
Interest rate swaps	$	—	$	674	$	—	$	674
Cross currency swaps	—		687		—		687
Total liabilities	$	—	$	1,361	$	—	$	1,361

	March 31, 2024
	Level 1		Level 2		Level 3		Total

	(U.S. dollars in millions)
Assets:
Derivative instruments:
Interest rate swaps	$	—	$	714	$	—	$	714
Cross currency swaps	—		29		—		29
Total assets	$	—	$	743	$	—	$	743
Liabilities:
Derivative instruments:
Interest rate swaps	$	—	$	881	$	—	$	881
Cross currency swaps	—		591		—		591
Total liabilities	$	—	$	1,472	$	—	$	1,472

The valuation techniques used in measuring assets and liabilities at fair value on a recurring basis are described below:

Derivative Instruments

The Company’s derivatives are transacted in over-the-counter markets and quoted market prices are not readily available. The Company uses third-party developed valuation models to value derivative instruments. These models estimate fair values using discounted cash flow modeling techniques, which utilize the contractual terms of the derivative instruments and market-based inputs, including interest rates and foreign exchange rates. Discount rates incorporate counterparty and HMC specific credit default spreads to reflect nonperformance risk.

The Company’s derivative instruments are classified as Level 2 since all significant inputs are observable and do not require management judgment. There were no transfers between fair value hierarchy levels during the nine months ended December 31, 2024 and 2023. Refer to Note 5 for additional information on derivative instruments.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Nonrecurring Fair Value Measurements

The following tables summarize nonrecurring fair value measurements recognized for assets still held at the end of the reporting periods presented:


	Level 1		Level 2		Level 3		Total		Lower-of-cost or fair value adjustment

	(U.S. dollars in millions)
December 31, 2024
Vehicles held for disposition	$	—	$	—	$	128	$	128	$	51
December 31, 2023
Vehicles held for disposition	$	—	$	—	$	66	$	66	$	22

The following describes the methodologies and assumptions used in nonrecurring fair value measurements, which relate to the application of lower of cost or fair value accounting on long-lived assets.

Vehicles Held for Disposition

Vehicles held for disposition consist of returned and repossessed vehicles. They are valued at the lower of their carrying value or estimated fair value, less estimated disposition costs. The fair value is based on current average selling prices of like vehicles at wholesale used vehicle auctions.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Fair Value of Financial Instruments

The following tables summarize the carrying values and fair values of the Company’s financial instruments except for those measured at fair value on a recurring basis. Certain financial instruments and all nonfinancial assets and liabilities are excluded from fair value disclosure requirements including the Company’s investment in operating leases. The carrying values of cash and cash equivalents, restricted cash, and short-term investments approximate fair values due to the short-term nature and limited credit risk of the instruments.


	December 31, 2024
	Carrying		Fair value
	value		Level 1	Level 2		Level 3		Total

	(U.S. dollars in millions)
Assets:
Dealer loans, net	$	4,435	—	—		$	4,099	$	4,099
Retail loans, net	47,531		—	—		47,263		47,263
Liabilities:
Commercial paper	$	6,691	—	$	6,692	—		$	6,692
Bank loans	1,550		—	1,552		—		1,552
Medium-term note program	35,219		—	34,703		—		34,703
Other debt	3,088		—	3,113		—		3,113
Secured debt	11,007		—	11,073		—		11,073

	March 31, 2024
	Carrying		Fair value
	value		Level 1	Level 2		Level 3		Total

	(U.S. dollars in millions)
Assets:
Dealer loans, net	$	4,052	—	—		$	3,700	$	3,700
Retail loans, net	43,196		—	—		42,280		42,280
Liabilities:
Commercial paper	$	5,293	—	$	5,293	—		$	5,293
Bank loans	1,804		—	1,811		—		1,811
Medium-term note program	31,151		—	30,387		—		30,387
Other debt	3,318		—	3,251		—		3,251
Secured debt	9,351		—	9,333		—		9,333

Fair value information presented in the tables above is based on information available at December 31, 2024 and March 31, 2024. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been updated since those dates, and therefore, the current estimates of fair value at dates subsequent to those dates may differ significantly from the amounts presented herein.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 13. Segment Information

The Company’s reportable segments are based on the two geographic regions where operating results are measured and evaluated by management: the United States and Canada.

Segment performance is evaluated using an internal measurement basis, which differs from the Company’s consolidated results prepared in accordance with GAAP. Segment performance is evaluated on a pre-tax basis before the effect of valuation adjustments on derivative instruments and revaluations of foreign currency denominated debt. Since the Company does not elect to apply hedge accounting, the impact to earnings resulting from these valuation adjustments as reported under GAAP is not representative of segment performance as evaluated by management. Realized gains and losses on derivative instruments, net of realized gains and losses on foreign currency denominated debt, are included in the measure of net revenues when evaluating segment performance.

No adjustments are made to segment performance to allocate any revenues or expenses. Financing products offered throughout the United States and Canada are substantially similar. Segment revenues from the various financing products are reported on the same basis as GAAP consolidated results.

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Financial information for the three and nine months ended December 31, 2024 and 2023 is summarized in the following tables:


	United States		Canada		Valuation adjustments and reclassifications		Consolidated Total

	(U.S. dollars in millions)
Three months ended December 31, 2024
Revenues:
Retail	$	642	$	71	$	—	$	713
Dealer	68		6		—		74
Operating leases	1,424		201		—		1,625
Total revenues	2,134		278		—		2,412
Leased vehicle expenses	956		149		—		1,105
Interest expense	573		59		—		632
Realized (gains)/losses on derivatives and foreign currency denominated debt	34		(1)		(33)		—
Net revenues	571		71		33		675
Other income, net	33		4		—		37
Total net revenues	604		75		33		712
Expenses:
General and administrative expenses	138		14		—		152
Provision for credit losses	67		3		—		70
Early termination loss on operating leases	39		1		—		40
Loss on derivative instruments	—		—		551		551
Gain on foreign currency revaluation of debt	—		—		(489)		(489)
Income before income taxes	$	360	$	57	$	(29)	$	388

Nine months ended December 31, 2024
Revenues:
Retail	$	1,823	$	204	$	—	$	2,027
Dealer	203		19		—		222
Operating leases	4,129		622		—		4,751
Total revenues	6,155		845		—		7,000
Leased vehicle expenses	2,779		465		—		3,244
Interest expense	1,615		184		—		1,799
Realized (gains)/losses on derivatives and foreign currency denominated debt	94		(16)		(78)		—
Net revenues	1,667		212		78		1,957
Other income, net	105		12		—		117
Total net revenues	1,772		224		78		2,074
Expenses:
General and administrative expenses	386		42		—		428
Provision for credit losses	218		10		—		228
Early termination loss on operating leases	94		1		—		95
Loss on derivative instruments	—		—		351		351
Gain on foreign currency revaluation of debt	—		—		(230)		(230)
Income before income taxes	$	1,074	$	171	$	(43)	$	1,202

December 31, 2024
Finance receivables, net	$	47,061	$	4,905	$	—	$	51,966
Investment in operating leases, net	26,294		3,304		—		29,598
Total assets	76,691		8,495		—		85,186

AMERICAN HONDA FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)


	United States		Canada		Valuation adjustments and reclassifications		Consolidated Total

	(U.S. dollars in millions)
Three months ended December 31, 2023
Revenues:
Retail	$	495	$	58	$	—	$	553
Dealer	54		6		—		60
Operating leases	1,285		219		—		1,504
Total revenues	1,834		283		—		2,117
Leased vehicle expenses	898		168		—		1,066
Interest expense	404		62		—		466
Realized (gains)/losses on derivatives and foreign currency denominated debt	(13)		(15)		28		—
Net revenues	545		68		(28)		585
Other income, net	27		3		—		30
Total net revenues	572		71		(28)		615
Expenses:
General and administrative expenses	109		12		—		121
Provision for credit losses	71		3		—		74
Early termination loss on operating leases	29		1		—		30
Gain on derivative instruments	—		—		(308)		(308)
Loss on foreign currency revaluation of debt	—		—		235		235
Income before income taxes	$	363	$	55	$	45	$	463

Nine months ended December 31, 2023
Revenues:
Retail	$	1,327	$	160	$	—	$	1,487
Dealer	145		17		—		162
Operating leases	3,881		690		—		4,571
Total revenues	5,353		867		—		6,220
Leased vehicle expenses	2,753		533		—		3,286
Interest expense	1,009		176		—		1,185
Realized (gains)/losses on derivatives and foreign currency denominated debt	(86)		(48)		134		—
Net revenues	1,677		206		(134)		1,749
Other income, net	74		11		—		85
Total net revenues	1,751		217		(134)		1,834
Expenses:
General and administrative expenses	339		38		—		377
Provision for credit losses	214		8		—		222
Early termination loss on operating leases	69		1		—		70
Gain on derivative instruments	—		—		(132)		(132)
Loss on foreign currency revaluation of debt	—		—		77		77
Income before income taxes	$	1,129	$	170	$	(79)	$	1,220

December 31, 2023
Finance receivables, net	$	40,691	$	4,844	$	—	$	45,535
Investment in operating leases, net	23,543		3,703		—		27,246
Total assets	67,425		8,892		—		76,317

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our primary focus, in collaboration with AHM and HCI, is to provide support for the sale of Honda and Acura products and maintain customer and dealer satisfaction and loyalty. To deliver this support effectively, we seek to maintain competitive cost of funds, efficient operations, and effective risk and compliance management. The primary factors influencing our results of operations, cash flows, and financial condition include the volume of Honda and Acura sales and the portion of those sales that we finance, our cost of funds, competition from other financial institutions, consumer credit defaults, and used motor vehicle prices.

A substantial portion of our consumer financing business is acquired through incentive financing programs sponsored by AHM and HCI. The volume of these incentive financing programs and the allocation of those programs between retail loans and leases may vary from fiscal period to fiscal period depending upon the respective marketing strategies of AHM and HCI. AHM and HCI’s marketing strategies are based in part on their business planning and control, in which we do not participate. Therefore, we cannot predict the level of incentive financing programs AHM and HCI may sponsor in the future. Our consumer financing acquisition volumes are substantially dependent on the extent to which incentive financing programs are offered. Increases in incentive financing programs generally increase our financing penetration rates, which typically results in increased financing acquisition volumes for us. The amount of subsidy payments we receive from AHM and HCI is dependent on the terms of the incentive financing programs and the interest rate environment. Subsidy payments are received upon acquisition and recognized in revenue throughout the life of the loan or lease; therefore, a significant change in the level of incentive financing programs in a fiscal period typically only has a limited impact on our results of operations for that period. The amount of subsidy income we recognize in a fiscal period is dependent on the cumulative level of subsidized contracts outstanding that were acquired through incentive financing programs.

We seek to maintain high quality consumer and dealer account portfolios, which we support with strong underwriting standards, risk-based pricing, and effective collection practices. Our cost of funds is facilitated by the diversity of our funding sources, and effective interest rate and foreign currency exchange risk management. We manage expenses to support our profitability, including adjusting staffing needs based upon our business volumes and centralizing certain functions. Additionally, we use risk and compliance management practices to optimize credit and residual value risk levels and maintain compliance with our pricing, underwriting and servicing policies at the United States, Canadian, state and provincial levels.

In our business operations, we incur costs related to funding, credit loss, residual value loss, and general and administrative expenses, among other expenses.

We analyze our operations in two business segments defined by geography: the United States and Canada. We measure the performance of our United States and Canada segments on a pre-tax basis before the effect of valuation adjustments on derivative instruments and revaluations of foreign currency denominated debt. For additional information regarding our segments, see Note 13—Segment Information of Notes to Consolidated Financial Statements (Unaudited). The following tables and the related discussion are presented based on our geographically segmented consolidated financial statements.

References in this report to our “fiscal year 2025” and “fiscal year 2024” refer to our fiscal year ending March 31, 2025 and our fiscal year ended March 31, 2024, respectively.

Recent Developments

HMC Notice of Execution of Memorandum of Understanding

On December 23, 2024, HMC filed a Report on Form 6-K with the SEC disclosing a Notice of Execution of Memorandum of Understanding regarding, among other things, the Consideration of a Business Integration through the Establishment of a Joint Holding Company between HMC and Nissan Motor Co., Ltd. (Nissan). HMC further disclosed Nissan, HMC, and Mitsubishi Motors Corporation (Mitsubishi Motors) signed a memorandum of understanding to explore the possibility of Mitsubishi Motors’ participation, involvement, and synergy sharing in relation to the memorandum of understanding between HMC and Nissan.

On February 13, 2025, HMC filed a Report on Form 6-K with the SEC disclosing that HMC and Nissan have agreed to terminate the memorandum of understanding signed on December 23, 2024 for consideration of a business integration between the two companies. HMC further disclosed that Nissan, HMC, and Mitsubishi Motors have agreed to terminate their memorandum of understanding regarding the consideration of the structure for a tripartite collaboration, in light of the termination of the memorandum of understanding between Nissan and HMC.

Proposed Tariffs

Certain tariffs recently proposed by the Trump Administration, potential subsequent foreign retaliatory measures, and uncertainty surrounding U.S. trade policy may adversely impact vehicle production volumes and cost. The ultimate impact of tariffs will depend on various factors, including the scope, timing, amount and nature, but such tariffs would likely have a negative impact on our overall business, including but not limited to dealer inventory levels, new vehicle sales, and ultimately consumer financing acquisition volumes.

Results of Operations

Operating Environment Overview

New vehicle production and dealer inventory levels have normalized since the lows we experienced during the first half of fiscal year 2023. Total consumer financing acquisition volumes remained strong with the support of incentive programs and our total outstanding asset balances continued to increase during the first nine months of fiscal year 2025. Although benchmark interest rates declined during the second quarter of fiscal year 2025, the returns on our assets and effective interest rates on our debt remained higher during the first nine months of fiscal year 2025 relative to the comparable period during fiscal 2024.

The trend in delinquencies and charge-offs continued to increase which may be attributable to the negative effects of higher monthly loan and lease payments due to higher transaction prices, inflationary pressures, high interest rates, and other factors affecting consumers’ ability to perform on their obligations. Used vehicle prices have softened but remain relatively strong with return rates on leased vehicles remaining at low levels.

Segment Results—Comparison of the Three months ended December 31, 2024 and 2023

Results of operations for the United States segment and the Canada segment are summarized below:


	United States Segment								Canada Segment								Consolidated
	Three months ended December 31,				Difference				Three months ended December 31,				Difference				Three months ended December 31,
	2024		2023		Amount		%		2024		2023		Amount		%		2024		2023

	(U.S. dollars in millions)
Revenues:
Retail	$	642	$	495	$	147	30	%	$	71	$	58	$	13	22	%	$	713	$	553
Dealer	68		54		14		26	%	6		6		—		—	%	74		60
Operating leases	1,424		1,285		139		11	%	201		219		(18)		(8)	%	1,625		1,504
Total revenues	2,134		1,834		300		16	%	278		283		(5)		(2)	%	2,412		2,117
Leased vehicle expenses	956		898		58		6	%	149		168		(19)		(11)	%	1,105		1,066
Interest expense	573		404		169		42	%	59		62		(3)		(5)	%	632		466
Realized losses/(gains) on derivatives and foreign currency debt	34		(13)		47		n/m		(1)		(15)		14		(93)	%	33		(28)
Net revenues	571		545		26		5	%	71		68		3		4	%	642		613
Other income	33		27		6		22	%	4		3		1		33	%	37		30
Total net revenues	604		572		32		6	%	75		71		4		6	%	679		643
Expenses:
General and administrative expenses	138		109		29		27	%	14		12		2		17	%	152		121
Provision for credit losses	67		71		(4)		(6)	%	3		3		—		—	%	70		74
Early termination loss on operating leases	39		29		10		34	%	1		1		—		—	%	40		30
Income before income taxes	$	360	$	363	$	(3)	(1)	%	$	57	$	55	$	2	4	%	$	417	$	418

_______________________

n/m = not meaningful

The following table summarizes average outstanding asset balances, units, and yields and average outstanding debt and interest rates.


	United States Segment										Canada Segment
	Three months ended December 31,						Difference				Three months ended December 31,						Difference
	2024			2023			Amount		%		2024			2023			Amount		%

	(U.S. dollars in millions except as noted, units in thousands) (1)
Retail loans:
Average outstanding balance	$	42,780		$	36,800		$	5,980	16	%	$	4,667		$	4,355		$	312	7	%
Average outstanding units	2,235			2,027			208		10	%	287			276			11		4	%
Effective yield	6.0		%	5.4		%					6.1		%	5.4		%

Dealer loans:
Average outstanding balance	$	4,079		$	2,930		$	1,149	39	%	$	366		$	334		$	32	10	%
Effective yield	6.8		%	7.3		%					6.0		%	7.1		%

Operating leases:
Average outstanding balance	$	25,733		$	23,508		$	2,225	9	%	$	3,393		$	3,658		$	(265)	(7)	%
Average outstanding units	860			878			(18)		(2)	%	161			183			(22)		(12)	%
Average monthly revenue(2)	$	552		$	488		$	64	13	%	$	419		$	398		$	21	5	%
Average monthly depreciation(2),(3)	$	374		$	351		$	23	7	%	$	316		$	311		$	5	2	%

Debt:
Average outstanding balance	$	51,707		$	40,876		$	10,831	26	%	$	5,656		$	5,515		$	141	3	%
Effective interest rate	4.4		%	3.9		%					4.2		%	4.6		%

_______________________

(1)Average outstanding balances and units based on month end amounts during respective periods. Effective yields and interest rates based on average outstanding month end balances.

(2)U.S. dollars per unit. Average monthly revenue and depreciation based on average outstanding month end units.

(3)Excludes gains on disposition of leased vehicles.

United States Segment

Revenues

–Revenue from retail loans increased due to higher average outstanding balances and higher yields.

–Revenue from dealer loans increased due to higher average outstanding balances primarily of wholesale flooring loans as a result of higher dealer inventory levels.

–Operating lease revenue increased due to the increase in average revenue per unit which was partially offset by lower average outstanding units.

Leased vehicle expenses

Leased vehicle expenses increased due to higher average depreciation expense per unit, which was partially offset by lower average outstanding units.

Interest expense

Interest expense increased due to higher average outstanding debt and higher average interest rates. See “—Liquidity and Capital Resources” below for more information.

Realized (gains)/losses on derivatives and foreign currency debt

Net realized losses during the third quarter of fiscal year 2025 consisted of losses on pay float interest rate swaps of $95 million and losses on cross currency interest rate swaps of $59 million which were partially offset by gains on pay fixed interest rate swaps of $116 million and gains on foreign currency revaluation of debt of $4 million.

Provision for credit losses

Provision for credit losses decreased due to a smaller increase in the allowance for credit losses, which was partially offset by an increase in net charge-offs. See “—Financial Condition—Credit Risk” below for more information.

Early termination loss on operating leases

Early termination losses on operating leases increased due to the increases in realized losses, our estimate of early termination losses, and acquisition volumes. See "—Financial Condition—Credit Risk” below for more information.

Canada Segment

Revenues

–Revenue from retail loans increased due to higher yields and higher average outstanding balances.

–Revenue from dealer loans were consistent.

–Operating lease revenue decreased primarily due to lower average outstanding units and the effect of foreign currency translation adjustments.

Leased vehicle expenses

Leased vehicle expenses decreased due to lower average outstanding units and the effect of foreign currency translation adjustments.

Interest expense

Interest expense decreased due to lower average interest rates which were partially offset by higher average outstanding debt and the effect of foreign currency translation adjustments. See “—Liquidity and Capital Resources” below for more information.

Realized (gains)/losses on derivative instruments

Net realized gains on interest rate swaps during the third quarter of fiscal year 2025 were attributable to realized gains on pay fixed interest rate swaps of $12 million which were partially offset by realized losses on pay float interest rate swaps of $11 million.

Provision for credit losses

We recognized provision for credit losses of $3 million during both the third quarter of fiscal years 2025 and 2024. See “—Financial Condition—Credit Risk” below for more information.

Early termination loss on operating leases

We recognized early termination losses on operating leases of less than $1 million during both the third quarter of fiscal years 2025 and 2024. See "—Financial Condition—Credit Risk” below for more information.

Income tax expense

The consolidated effective tax rate was 24.5% for the third quarter of fiscal year 2025 compared to 26.7% for the same period in fiscal year 2024. The decrease in the effective tax rate was primarily due to a decrease in state taxes. The Company's effective tax rate for the three months ended December 31, 2024 differs from the U.S. federal statutory tax rate primarily as a result of U.S. state taxes. For additional information regarding income taxes, see Note 7—Income Taxes of Notes to Consolidated Financial Statements (Unaudited).

Segment Results—Comparison of the Nine months ended December 31, 2024 and 2023

Results of operations for the United States segment and the Canada segment are summarized below:


	United States Segment								Canada Segment								Consolidated
	Nine months ended December 31,				Difference				Nine months ended December 31,				Difference				Nine months ended December 31,
	2024		2023		Amount		%		2024		2023		Amount		%		2024		2023

	(U.S. dollars in millions)
Revenues:
Retail	$	1,823	$	1,327	$	496	37	%	$	204	$	160	$	44	28	%	$	2,027	$	1,487
Dealer	203		145		58		40	%	19		17		2		12	%	222		162
Operating leases	4,129		3,881		248		6	%	622		690		(68)		(10)	%	4,751		4,571
Total revenues	6,155		5,353		802		15	%	845		867		(22)		(3)	%	7,000		6,220
Leased vehicle expenses	2,779		2,753		26		1	%	465		533		(68)		(13)	%	3,244		3,286
Interest expense	1,615		1,009		606		60	%	184		176		8		5	%	1,799		1,185
Realized losses (gains) on derivatives and foreign currency debt	94		(86)		180		n/m		(16)		(48)		32		(67)	%	78		(134)
Net revenues	1,667		1,677		(10)		(1)	%	212		206		6		3	%	1,879		1,883
Other income	105		74		31		42	%	12		11		1		9	%	117

AMERICAN HONDA FINANCE CORP 10-Q