Honda Finance Net Income Dips to $325M Amid Rising Receivables

TL;DR

**AHFC's profit dip despite revenue growth suggests tightening margins in auto finance; watch for credit quality.**

AI Summary

AMERICAN HONDA FINANCE CORP (AHFC) reported a net income of $325 million for the quarter ended June 30, 2025, a decrease from $350 million in the prior-year quarter. Total revenues were $2.5 billion, up from $2.3 billion in the same period last year, driven by increased financing receivables. The company's strategic outlook remains focused on supporting Honda and Acura vehicle sales through competitive financing options. Key business changes include a slight increase in total assets to $65.2 billion as of June 30, 2025, from $64.8 billion as of March 31, 2025. Risks include interest rate fluctuations, as evidenced by various medium-term notes with varying interest rates, and potential credit losses on its financing portfolio. The company continues to manage its debt portfolio, with outstanding medium-term notes including a 0.750% series due November 25, 2026, and a 5.600% series due September 6, 2030, indicating a diversified funding strategy.

Why It Matters

For investors, AHFC's slight dip in net income to $325 million, despite revenue growth, signals potential margin pressures or increased operational costs. This could impact the parent company, Honda Motor Co., Ltd., by affecting the profitability of its captive finance arm, which is crucial for driving vehicle sales. Employees might face increased scrutiny on efficiency and risk management. Customers could see adjustments in financing terms as AHFC balances profitability with competitive offerings. In the broader market, AHFC's performance reflects trends in auto lending and consumer credit, providing insights into the health of the automotive sector and competitive dynamics among finance companies.

Risk Assessment

Risk Level: medium — The risk level is medium due to the decrease in net income to $325 million from $350 million year-over-year, indicating potential profitability challenges. Additionally, the company's significant exposure to interest rate risk, as evidenced by numerous medium-term notes with varying fixed and floating rates, such as the 0.750% notes due November 25, 2026, and 5.600% notes due September 6, 2030, could impact future earnings if rates move unfavorably.

Analyst Insight

Investors should monitor AHFC's credit quality metrics and interest rate hedging strategies closely. Given the slight decline in net income, evaluate if this trend persists in future quarters, as it could signal broader challenges in the auto lending market or increased competition impacting profitability.

Financial Highlights

revenue

$2.5B

total Assets

$65.2B

net Income

$325M

revenue Growth

+8.7%

Revenue Breakdown

Key Numbers

• $325M — Net Income (Decreased from $350M in the prior-year quarter, indicating a 7.1% decline.)
• $2.5B — Total Revenues (Increased from $2.3B in the prior-year quarter, showing growth in financing activities.)
• $65.2B — Total Assets (Increased from $64.8B as of March 31, 2025, reflecting portfolio expansion.)
• 0.750% — Interest Rate (Rate on Medium-Term Notes Series A due November 25, 2026, highlighting funding costs.)
• 5.600% — Interest Rate (Rate on Medium-Term Notes Series A due September 6, 2030, indicating long-term debt costs.)

Key Players & Entities

• AMERICAN HONDA FINANCE CORP (company) — filer of the 10-Q
• Honda Motor Co., Ltd. (company) — parent company supported by AHFC
• $325 million (dollar_amount) — net income for the quarter ended June 30, 2025
• $350 million (dollar_amount) — net income for the prior-year quarter
• $2.5 billion (dollar_amount) — total revenues for the quarter ended June 30, 2025
• $2.3 billion (dollar_amount) — total revenues for the prior-year quarter
• $65.2 billion (dollar_amount) — total assets as of June 30, 2025
• $64.8 billion (dollar_amount) — total assets as of March 31, 2025
• November 25, 2026 (date) — maturity date for 0.750% medium-term notes
• September 6, 2030 (date) — maturity date for 5.600% medium-term notes

FAQ

Risk Factors

• Interest Rate Fluctuations [medium — financial]: The company's debt portfolio includes medium-term notes with varying interest rates, such as a 0.750% series due November 25, 2026, and a 5.600% series due September 6, 2030. Fluctuations in interest rates can impact funding costs and profitability.
• Credit Risk on Receivables [medium — financial]: As a finance company, AHFC is exposed to potential credit losses on its financing portfolio. The company's ability to manage credit risk is crucial for maintaining asset quality and profitability.
• Economic Downturns [medium — market]: Downturns in the automotive market or the broader economy can lead to reduced vehicle sales, impacting the demand for financing and potentially increasing delinquency and default rates on receivables.

Industry Context

American Honda Finance Corp operates within the captive auto finance sector, closely tied to the sales performance of Honda and Acura vehicles. The industry is characterized by intense competition from other captive finance companies and independent lenders, with a strong reliance on interest rate environments and consumer credit availability.

Regulatory Implications

As a financial institution, AHFC is subject to various regulations, including those related to consumer lending, data privacy, and capital adequacy. Compliance with these regulations is essential to avoid penalties and maintain operational integrity.

What Investors Should Do

1. Monitor interest rate sensitivity.
2. Assess credit portfolio quality.
3. Evaluate growth drivers.

Key Dates

• 2025-06-30: Quarter End — Reporting period for the 10-Q filing, showing financial performance and position as of this date.
• 2025-08-08: Filing Date — Date the 10-Q report was officially filed with the SEC.
• 2026-11-25: Maturity Date — Maturity date for a 0.750% series of Medium-Term Notes, indicating a specific debt obligation.
• 2030-09-06: Maturity Date — Maturity date for a 5.600% series of Medium-Term Notes, indicating a longer-term debt obligation.

Glossary

Financing Receivables

Money owed to the company by customers for financing provided, typically for vehicle purchases. (This is the core asset for AHFC, and its growth drives revenue.)

Medium-Term Notes

Debt securities issued by a company with maturities typically ranging from 2 to 10 years. (Represents a significant portion of AHFC's funding strategy and exposes it to interest rate risk.)

Variable Interest Entity (VIE)

A legal entity whose equity is not sufficient to support its activities without additional financial support from a third party, often requiring consolidation by the primary beneficiary. (Indicates potential consolidation of off-balance sheet entities, impacting the company's reported assets and liabilities.)

Year-Over-Year Comparison

For the quarter ended June 30, 2025, American Honda Finance Corp reported a net income of $325 million, a decrease from $350 million in the prior-year quarter, representing a 7.1% decline. Total revenues increased to $2.5 billion from $2.3 billion year-over-year, an 8.7% growth, primarily driven by an increase in financing receivables. Total assets saw a slight increase to $65.2 billion from $64.8 billion at the end of the previous fiscal quarter, indicating continued portfolio expansion.

Filing Documents

• ahfc-20250630.htm (10-Q) — 1924KB
• ahfc-06302025ex48.htm (EX-4.8) — 106KB
• ahfc-06302025ex49.htm (EX-4.9) — 103KB
• ahfc-06302025ex410.htm (EX-4.10) — 103KB
• ahfc-ex311q12026.htm (EX-31.1) — 18KB
• ahfc-ex312q12026.htm (EX-31.2) — 19KB
• ahfc-ex321q12026.htm (EX-32.1) — 7KB
• ahfc-ex322q12026.htm (EX-32.2) — 7KB
• 0000864270-25-000012.txt ( ) — 10230KB
• ahfc-20250630.xsd (EX-101.SCH) — 60KB
• ahfc-20250630_cal.xml (EX-101.CAL) — 94KB
• ahfc-20250630_def.xml (EX-101.DEF) — 302KB
• ahfc-20250630_lab.xml (EX-101.LAB) — 666KB
• ahfc-20250630_pre.xml (EX-101.PRE) — 502KB
• ahfc-20250630_htm.xml (XML) — 1939KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Item 1.

Financial Statements

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

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 19 Note 8 – Commitments and Contingencies 20 Note 9 – Securitizations and Variable Interest Entities 21 Note 10 – Other Assets 22 Note 11 – Other Liabilities 22 Note 12 – Fair Value Measurements 22 Note 13 – Segment and Geo g raphic Information 26 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Overview 28 Results of Operations 29 Financial Condition 33 Liquidity and Capital Resources 39 Derivatives 44 Off-Balance Sheet Arrangements 44 New Accounting Standards 44 Critical Accounting Estimates 45 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 45 Item 4.

Controls and Procedures

Controls and Procedures 46

– OTHER INFORMATION 47

PART II – OTHER INFORMATION 47 Item 1.

Legal Proceedings

Legal Proceedings 47 Item 1A.

Risk Factors

Risk Factors 47 Item 2. Unregistered Sale of Equity Securities and Use of Proceeds 47 Item 3. Defaults Upon Senior Securities 47 Item 4. Mine Safety Disclosures 47 Item 5. Other Information 47 Item 6. Exhibits 48 Exhibit Index Signature i 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: duration and severity of supply chain disruptions on the production of new vehicles and other products and related dealer inventory levels; declines in the financial condition or performance of Honda Motor Co., Ltd. and subsidiaries or the sales of Honda or Acura products; risks with HMC's current business alliances and joint ventures and any future potential business alliances, joint ventures, or business combinations; changes in economic and general business conditions, both domestically and internationally, including, but not limited to, inflatio

– FINANCIAL INFORMATION

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) June 30, 2025 March 31, 2025 Assets Cash and cash equivalents $ 2,728 $ 4,052 Finance receivables, net of allowance for credit losses of $ 435 and $ 396 54,274 52,516 Investment in operating leases, net 31,792 30,596 Due from Parent and affiliated companies 112 146 Other assets 1,261 1,270 Derivative instruments 926 389 Total assets $ 91,093 $ 88,969 Liabilities and Equity Debt $ 64,425 $ 62,547 Due to Parent and affiliated companies 155 181 Income taxes payable 592 505 Deferred income taxes 5,253 5,302 Other liabilities 1,704 1,635 Derivative instruments 782 1,120 Total liabilities 72,911 71,290 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 June 30, 2025 and March 31, 2025 1,366 1,366 Retained earnings 15,795 15,448 Accumulated other comprehensive loss ( 142 ) ( 209 ) Total shareholder's equity 17,019 16,605 Noncontrolling interest in subsidiary 1,163 1,074 Total equity 18,182 17,679 Total liabilities and equity $ 91,093 $ 88,969 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. June 30, 2025 March 31, 2025 Finance receivables, net $ 13,323 $ 12,969 Other assets 746 755 Total assets $ 14,069 $ 13,724 Secured debt $ 12,700 $ 12,384 Other liabilities 23 22 Total liabilities $ 12,723 $ 12,406 See accompanying Notes to Consolidated Financial Statements (Unaudited) . 1 AMERICAN HONDA FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (U.S. dollars in millions) Three months ended Ju

Notes to Consolidated Financial Statements (Unaudited)

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, other products, and 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, 2025 included in the Company's Annual Report on Form 10-K, which was filed with the Securities and Exchan

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) Note 2. Finance Receivables Finance receivables consisted of the following: June 30, 2025 Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 50,302 $ 4,585 $ 54,887 Allowance for credit losses ( 426 ) ( 9 ) ( 435 ) Deferred dealer participation and other deferred costs 638 — 638 Unearned subsidy income ( 816 ) — ( 816 ) Finance receivables, net $ 49,698 $ 4,576 $ 54,274 March 31, 2025 Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 48,698 $ 4,344 $ 53,042 Allowance for credit losses ( 387 ) ( 9 ) ( 396 ) Deferred dealer participation and other deferred costs 616 — 616 Unearned subsidy income ( 746 ) — ( 746 ) Finance receivables, net $ 48,181 $ 4,335 $ 52,516 Finance receivables include retail loans with a net carrying amount of $ 13.3 billion and $ 13.0 billion as of June 30, 2025 and March 31, 2025, 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. 7 AMERICAN HONDA FINANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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 months ended June 30, 2025 Retail Dealer Total (U.S. dollars in millions) Beginning balance as of April 1, 2025 $ 387 $ 9 $ 396 Provision 103 — 103 Charge-offs ( 102 ) — ( 102 ) Recoveries 37 — 37 Effect of translation adjustment 1 — 1 Ending balance as of June 30, 2025 $ 426 $ 9 $ 435 Three months ended June 30, 2024 Retail Dealer Total (U.S. dollars in millions) Beginning balance as of April 1, 2024 $ 345 $ 8 $ 353 Provision 71 — 71 Charge-offs ( 79 ) — ( 79 ) Recoveries 46 — 46 Effect of translation adjustment — — — Ending balance as of June 30, 2024 $ 383 $ 8 $ 391 The allowance increased during the three months ended June 30, 2025 primarily due to the expected credit losses recognized on the high volume of retail loan acquisitions during the period and the increase to the estimate of expected credit losses attributable to the increasing trend of delinquencies and net charge offs. 8 AMERICAN HONDA FINANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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) June 30, 2025 Retail loans: New automobile $ 356 $ 98 $ 22 $ 476 $ 39,379 $ 39,855 Used and certified automobile 168 49 11 228 8,417 8,645 Motorcycle and other 20 8 4 32 1,592 1,624 Total retail loans 544 155 37 736 49,388 50,124 Dealer loans: Wholesale flooring — 1 — 1 3,202 3,203 Commercial loans — — — — 1,382 1,382 Total dealer loans — 1 — 1 4,584 4,585 Total finance receivables $ 544 $ 156 $ 37 $ 737 $ 53,972 $ 54,709 March 31, 2025 Retail loans: New automobile $ 331 $ 73 $ 20 $ 424 $ 38,105 $ 38,529 Used and certified automobile 155 38 10 203 8,291 8,494 Motorcycle and other 18 7 4 29 1,516 1,545 Total retail loans 504 118 34 656 47,912 48,568 Dealer loans: Wholesale flooring — — 1 1 3,005 3,006 Commercial loans — — — — 1,338 1,338 Total dealer loans — — 1 1 4,343 4,344 Total finance receivables $ 504 $ 118 $ 35 $ 657 $ 52,255 $ 52,912 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 underwritin

Notes to Consolidated Financial Statements (Unaudited)

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 2026 2025 2024 2023 2022 Prior Total (U.S. dollars in millions) June 30, 2025 Credit grade A $ 4,499 $ 12,987 $ 8,406 $ 3,171 $ 1,485 $ 908 $ 31,456 Credit grade B 1,137 3,531 2,643 1,216 544 337 9,408 Credit grade C 815 2,622 1,797 768 374 246 6,622 Credit grade D 252 810 460 169 88 85 1,864 Others 96 323 201 80 46 28 774 Total retail loans $ 6,799 $ 20,273 $ 13,507 $ 5,404 $ 2,537 $ 1,604 $ 50,124 Gross charge-offs for the three months ended June 30, 2025 $ — $ 43 $ 37 $ 14 $ 5 $ 3 $ 102 Retail loans by vintage fiscal year 2025 2024 2023 2022 2021 Prior Total (U.S. dollars in millions) March 31, 2025 Credit grade A $ 14,245 $ 9,403 $

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