Harley-Davidson details HDFS shift to fee-based model

Harley-Davidson is adopting a fee-based model for its finance arm following its transition to a capital-light model backed by asset management firms KKR & Co. and Pacific Investment Management . Under the new structure, Harley-Davidson Financial Services (HDFS) will still service all loans sold, earning fees of 1% on prime contracts and 2.5% on subprime, in addition to any gains or losses on each loan sale, Charles Do , senior vice president of HDFS, said during a Harley-Davidson investor call on April 16. Additionally, HDFS will move forward with a plan to sell about two-thirds of new retail loans to KKR and Pacific Investment Management (PIMCO) while retaining the rest on its balance sheet. The change marks a shift from the traditional captive model, in which earnings are driven primarily by interest income on held loans, Jonathon Root , chief financial officer at Harley-Davidson, said during the call. Instead, HDFS will rely more on: Servicing income; Loan-sale gains and losses; and Interest income on retained loans. These revenue streams will be non-lending income, changing the composition of HDFS’ earnings, Shawn Collins , head of investor relations at Harley-Davidson, said during the call. Forward-flow structure adds flexibility The company also offered details on its forward-flow agreement, with HDFS now selling loans to partners monthly, with pricing that can be revisited every six months, according to the presentation that accompanied the investor's call. If pricing cannot be agreed upon, a structured 12-month transition period allows either party to cancel the transaction, Do said, adding that the structure reduces reliance on capital markets while giving HDFS flexibility in how it funds originations. As of yearend 2025, HDFS serviced about $5.1 billion in off-balance-sheet loans, highlighting its growing role as an originator and servicer rather than a balance sheet lender, according to the presentation. Growth tied to originations, fees Harley-Davidson expects HDFS to generate $45 million to $60 million in operating income in 2026, with a path to roughly three times that by 2029, Root said. HDFS also intends to provide retail loans with terms up to 96 months as well as dealer floorplan, working capital financing, insurance, protection plans and branded licensing services. “We are able to work closely with Harley-Davidson dealers and respond to market conditions and opportunities in a coordinated, cost-efficient and timely manner,” he said. Growth will be driven by: Originating loans; Expanding serviced assets; and Scaling of fee-based income from servicing. The company expects the lower capital intensity to support strong returns on equity over time, Root said. “While the HDFS transaction was transformative and freed up significant numbers of cash, we still note that HDFS is doing everything largely the same as it did pre-transaction, but has changed one simple but very important facet of the business: HDFS is now selling a portion of its retail balance sheet to its strategic partners,” he said. “Also, HDFS has retained 100% of strategic touch points with Harley-Davidson dealers and riders .” Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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Harley-Davidson details HDFS shift to fee-based model

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