Ford Credit Auto Owner Trust 2025-C

Ford Credit Auto Owner Trust 2025-C Annual Report - Your Investment Snapshot

Unlock the details of your investment. This report provides a clear, jargon-free summary of Ford Credit Auto Owner Trust 2025-C's performance for the fiscal year ending December 31, 2025. We focus on the key insights investors in its asset-backed securities need to understand how their investment is performing.

Business Overview: Understanding Ford Credit Auto Owner Trust 2025-C

Unlike a traditional company with a stock price, Ford Credit Auto Owner Trust 2025-C is a specialized financial entity. We call it an "Owner Trust." Its sole purpose is to hold a pool of auto loans. Ford Motor Credit Company LLC ("Ford Credit") originated these loans and acts as both the "sponsor" (creating the trust) and the "servicer" (managing the loans).

When you invest in this trust, you typically buy bonds, known as asset-backed securities. These bonds receive repayment from the principal and interest payments generated by the underlying auto loans.

Key parties involved in the trust's operation include:

• U.S. Bank Trust National Association: Serves as the Owner Trustee, overseeing the trust's overall operations.
• The Bank of New York Mellon: Acts as the Indenture Trustee, representing the interests of the bondholders.

The trust's establishment allows investors to participate in the cash flows from these auto loan receivables, effectively turning a pool of loans into marketable securities.

Financial Performance

For a trust like this, "performance" primarily reflects how well the underlying auto loans are performing and the trust's ability to meet its financial obligations. For the fiscal year ended December 31, 2025, the trust demonstrated the following:

• Loan Portfolio Quality: The trust's auto loan portfolio performed stably.
  • Delinquency rates (loans 30-89 days past due) remained within expected ranges of the outstanding principal balance.
  • Net default rates (loans charged off after recoveries) were also manageable of the average principal balance.
• Cash Flow & Distributions: The trust successfully generated ample cash flow from collecting principal and interest payments on the auto loans. It made all scheduled principal and interest distributions to bondholders on time throughout the year.
• Overcollateralization: The trust maintained its required overcollateralization levels. This means the value of the underlying loans exceeded the value of the securities issued, providing an important credit enhancement buffer to protect bondholders against potential losses from loan defaults.
• Servicing Excellence: Independent auditors confirmed that Ford Credit, as the servicer, and The Bank of New York Mellon, as the indenture trustee, complied with all material aspects of their servicing agreements and trust documents. This operational integrity is vital for the trust's consistent performance.

Risk Factors

While the trust's structure aims to reduce risks, investors should understand the following potential challenges:

• Credit Risk: The primary risk remains the possibility that borrowers may default on their auto loan payments. While current default rates are stable, an economic downturn or rising unemployment could increase this risk.
• Prepayment Risk: Borrowers may pay off their loans early (for example, by refinancing or selling their vehicle). This can affect the yield for bondholders, especially those holding premium bonds.
• Economic Conditions: Broader economic factors, such as interest rate fluctuations, consumer spending habits, and used vehicle values, can indirectly impact loan performance and recovery rates on defaulted loans.
• Servicer Performance: Although audited as compliant, any future operational issues with Ford Credit as the servicer could potentially affect collections and distributions.
• Interest Rate Risk: The trust's assets (fixed-rate auto loans) and liabilities (fixed-rate asset-backed securities) generally match. However, significant changes in market interest rates could affect the value of the securities in the secondary market.
• Regulatory and Legal Risk: Changes in consumer protection laws, bankruptcy laws, or other regulations could impact the ability to collect on loans or the trust's rights.

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

For the fiscal year ended December 31, 2025, the trust's operations primarily reflected the performance of its underlying pool of auto loan receivables. Cash collections from these receivables sufficiently covered all scheduled principal and interest payments to bondholders, demonstrating the collateral's stable credit quality.

Delinquency and net default rates remained within expected ranges, indicating Ford Credit's effective underwriting and servicing practices. Prepayment speeds were a normal characteristic of auto loan portfolios that the trust managed within its structural parameters.

The trust's financial condition remains robust, supported by ongoing cash flow from the auto loan portfolio and maintained credit enhancements. The trust consistently met its overcollateralization levels, providing a buffer against potential future losses. The outstanding principal balance of the asset-backed securities decreased as scheduled, reflecting the trust's pass-through nature where loan repayments directly reduce the bond principal.

Consistent collection of principal and interest on the underlying loans ensured the trust maintained liquidity and made timely distributions. No material changes in the trust's financial condition adversely impacted its ability to meet its obligations. Management continues to monitor economic indicators and portfolio performance to identify any emerging trends that could affect the trust's future cash flows.

Financial Health

The financial health of Ford Credit Auto Owner Trust 2025-C directly depends on its asset pool's performance and the strength of its structural enhancements.

• Debt (Securities Outstanding): The trust's primary liabilities are the asset-backed securities it issued to investors. The outstanding principal balance of these securities reduced as scheduled throughout the year, reflecting the repayment of the underlying auto loans.
• Cash and Liquidity: The trust generates its liquidity from the consistent collection of principal and interest payments on the auto loan receivables. These cash flows sufficiently covered all operational expenses and enabled timely distributions to bondholders. The trust experienced no liquidity shortfalls during the reporting period.
• Credit Enhancements: Key credit enhancements, including overcollateralization and any applicable reserve accounts, remained at required levels. These features provide structural protection to bondholders against potential losses from loan defaults.
• Asset Quality: As detailed under Financial Performance, the loan portfolio quality remained stable, with delinquency and default rates within expected parameters, underpinning the trust's financial stability.

Future Outlook

The trust operates under a defined structure. No significant changes occurred during the fiscal year regarding its leadership, operational strategy, or the roles of its key parties (Ford Credit, U.S. Bank Trust, BNY Mellon).

Looking ahead, the trust's performance will continue to reflect the health of the U.S. economy, particularly consumer credit quality, employment levels, and the automotive market. While the trust's established structure and credit enhancements provide stability, monitoring these broader trends remains essential. No regulatory changes materially altered its operational framework during the reporting period, and none are anticipated to do so in the near term. The trust expects to continue its scheduled repayment of principal as the underlying auto loans are repaid.

Competitive Position

An Owner Trust, such as Ford Credit Auto Owner Trust 2025-C, is a special purpose entity established solely to hold assets and issue securities backed by those assets. It does not engage in competitive business activities, nor does it have a "competitive position" in the traditional sense of an operating company. Therefore, this section is not applicable to the trust.