Ford Motor Credit Company LLC was incorporated in Delaware in 1959 and converted
to a limited liability company in 2007. We are an indirect, wholly owned subsidiary
of Ford Motor Company (“Ford”). Our principal executive offices are
located at One American Road, Dearborn, Michigan 48126, and our telephone number
is (313) 322-3000.
Products and Services. We offer a wide variety of automotive financing products
to and through automotive dealers throughout the world. The predominant share
of our business consists of financing Ford and Lincoln vehicles and supporting
the dealers of those brands. We earn our revenue primarily from:
Payments made under retail installment sale and lease contracts that we originate
and purchase;
Interest rate supplements and other support payments from Ford and affiliated
companies; and
Payments made under dealer financing programs.
As a result of our financing activities, we have a large portfolio of finance
receivables and operating leases which we classify into two segments: “consumer”
and “non-consumer.”
Finance receivables and operating leases in the consumer segment include products
offered to individuals and businesses that finance the acquisition of Ford and
Lincoln vehicles from dealers for personal and commercial use. Retail financing
includes retail installment sale contracts for new and used vehicles and direct
financing leases for new vehicles to retail and commercial customers including
leasing companies, government entities, daily rental companies, and fleet customers.
Finance receivables in the non-consumer segment include products offered to
automotive dealers, and receivables purchased from Ford and its affiliates.
We make wholesale loans to dealers to finance the purchase of vehicle inventory
(floorplan financing), as well as loans to dealers to finance working capital
and improvements to dealership facilities, finance the purchase of dealership
real estate, and finance other dealer vehicle programs. We also purchase receivables
from Ford and its affiliates, primarily related to the sale of parts and accessories
to dealers, receivables from Ford-related loans, and certain used vehicles from
daily rental fleet companies.
We also service the finance receivables and leases we originate and purchase,
make loans to Ford affiliates, and provide insurance services related to our
financing programs.
Geographic Scope of Operations and Segment Information. We conduct our financing
operations directly and indirectly through our subsidiaries and affiliates.
We offer substantially similar products and services throughout many different
regions, subject to local legal restrictions and market conditions. We divide
our business segments based on geographic regions: North America (“North
America Segment”) and International (“International Segment”).
The North America Segment includes our operations in the United States and Canada.
The International Segment includes our operations in all other countries in
which we do business directly and indirectly.
Overview and Purchasing Process
We provide financing services to customers for personal and commercial use
through automotive dealers that have established relationships with us. Our
primary business consists of originating and purchasing retail installment sale
and lease contracts for new and used vehicles from Ford and Lincoln dealers.
We report in our financial statements the receivables from customers under installment
sale contracts and certain leases with fleet customers as finance receivables.
We report in our financial statements most of our retail leases as net investment
in operating leases with the capitalized cost of the vehicles recorded as depreciable
assets.
In general, we purchase from dealers retail installment sale contracts and
lease contracts that meet our purchase standards. These contracts primarily
relate to the purchase or lease of new vehicles, but some are for used vehicles.
Dealers typically submit customer applications electronically. We automatically
obtain information on the applicant including a credit bureau score, if available.
We evaluate each credit application, the applicant, the terms of the proposed
contract, credit bureau information, proprietary risk score, and other information
and decide whether to purchase the contract. Purchase decisions are made within
a framework of Ford Credit’s purchase quality guidelines and risk factor
guidelines. Credit applications are typically evaluated by our electronic decisioning
process, which may approve or reject applications.
Retail Financing
The amount we pay for a retail installment sale contract is based on a negotiated
vehicle purchase price agreed to between the dealer and the retail customer,
less vehicle trade-in allowance or down payment from the customer and special
marketing cash payments offered by Ford Credit and Ford, plus any additional
products, such as insurance and extended service plans, that are included in
the contract. The net purchase price owed by the customer typically is paid
over a specified number of months with interest at a fixed rate negotiated between
the dealer and the retail customer. The dealer may retain a limited portion
of the finance charge.
We offer a variety of retail installment sale financing products. In the United
States, retail installment sale contract terms for new vehicles range primarily
from 24 to 75 months. The average original term of our retail installment sale
contracts in the United States was 64 months and 62 months for contracts purchased
in 2015 and 2014, respectively. A small portion of our retail installment sale
contracts have non-uniform payment periods and payment amounts to accommodate
special cash flow situations. We also offer a retail balloon product in Europe
under which the retail customer may finance a vehicle with an installment sale
contract with a series of monthly payments followed by paying the amount remaining
in a single balloon payment. The customer can satisfy the balloon payment obligation
by payment in full of the amount owed, by refinancing the amount owed, or by
returning the vehicle to us and paying additional charges for excess mileage
as well as excess wear and use, if any. Generally, we sell vehicles returned
to us to Ford dealers and non-Ford dealers through auctions.
In most markets, we hold a security interest in the vehicles purchased through
retail installment sale contracts. This security interest provides us certain
rights and protections. As a result, if our collection efforts fail to bring
a delinquent customer’s payments current, we generally can repossess the
customer’s vehicle, after satisfying local legal requirements, and sell
it at auction. The customer typically remains liable for any deficiency between
net auction proceeds and the defaulted contract obligations, including any repossession-related
expenses. We generally require retail customers to carry fire, theft, and collision
insurance on financed vehicles.
We offer leasing plans to retail customers through our dealers. Our highest
volume retail-leasing plan is called Red Carpet Lease, which is offered in the
United States and Canada through dealers of Ford and Lincoln brands. Under these
plans, dealers originate the leases and offer them to us for purchase. Upon
our purchase of a lease, we take ownership of the lease and title to the leased
vehicle from the dealer. After we purchase a lease from a dealer, the dealer
generally has no further obligation to us in connection with the lease. The
customer is responsible for properly maintaining the vehicle and is obligated
to pay for excess wear and use as well as excess mileage, if any. At the end
of the lease, the customer has the option to purchase the vehicle for the price
specified in the lease contract, or return the vehicle to the dealer. If the
customer returns the vehicle to the dealer, the dealer may buy the vehicle from
us or return it to us. We sell vehicles returned to us to Ford and non-Ford
dealers through auctions.
The amount we pay to a dealer for a retail lease, also called the acquisition
cost, is based on the negotiated vehicle price agreed to by the dealer and the
retail customer, less any vehicle trade-in allowance or down payment from the
customer and special marketing cash payments offered by Ford Credit and Ford,
plus any additional products, such as insurance and extended service plans,
that are included in the contract. The customer makes monthly lease payments
based on the purchase price less the contractual residual value of the vehicle,
plus lease charges. Some of our lease programs, such as our Red Carpet Lease
Advance Payment Plan, provide certain pricing advantages to customers who make
all or some monthly payments at lease inception or purchase refundable higher
mileage allowances. We require lease customers to carry fire, theft, liability,
and collision insurance on leased vehicles. In the case of a contract default
and repossession, the customer typically remains liable for any deficiency between
net auction proceeds and the defaulted contract obligations, including any repossession-related
expenses.
We conduct insurance underwriting operations primarily through TARIC in the
United States and Canada and through various other insurance subsidiaries outside
the United States and Canada. TARIC offers a variety of products and services,
including:
Physical damage insurance coverage for Ford Credit financed vehicles at dealer
locations;
Physical damage insurance coverage for Ford and Lincoln vehicles in transit
between final assembly plants and dealer locations;
Contractual liability insurance on extended service contracts for Ford and its
affiliates; and
Commercial automobile and general liability insurance and surety bonds for Ford
in the United States.