Harley Davidson Motorcycle Trust 2025-A Annual Report - How They Did This Year

I’ve put together this guide to help you understand how the Harley Davidson Motorcycle Trust 2025-A performed this year. Think of this as a cheat sheet to help you decide if this fits your goals, without the confusing Wall Street jargon.

1. What does this trust do?

This Trust is a financial tool—a pool of motorcycle loans. When people buy a Harley on credit, those loans are bundled together and sold into this Trust. The Trust issued about $800 million in securities to investors, divided into groups (Class A, B, and C). Class A notes have the highest credit rating and get paid first. As an investor, you collect the interest payments made by motorcycle buyers, which are sent to you monthly.

2. Financial performance

The results are a bit of a yellow flag. The loans in this pool are showing stress as they age:

• Loan Losses: The percentage of loans that couldn't be recovered after repossession rose to 3.44% in 2025, up from 3.31% in 2024.
• Late Payments: Loans at least 30 days behind on payments climbed to 5.77%, up from 5.34% last year. More borrowers are struggling to keep up with their monthly bills.

3. Major wins and challenges

The economy is the biggest hurdle. Borrowers feel the squeeze from inflation and higher debt costs. Additionally, when the Trust repossesses a bike and sells it at auction, they get less money back than before. Recovery values dropped about 4% this year, meaning when a loan fails, the Trust loses more money because the bike is worth less than the remaining loan balance.

4. Financial health

Internal systems are working well. Independent auditors confirmed that the companies collecting the payments, such as Harley-Davidson Credit Corp, are following the rules with a 99.8% accuracy rate. The Trust also maintains a reserve account—a cash buffer—equal to 1.50% of the initial pool to cover temporary payment gaps.

5. Key risks

Your main risk is the credit quality of the borrowers. Harley-Davidson is approving more loans for "sub-prime" borrowers—those with lower credit scores—to boost bike sales. While this helps the motorcycle company, it makes the Trust riskier for you, as these borrowers are more likely to stop paying. Also, these loans are now 14 months old on average; the "honeymoon period" is over, and the risk of default usually rises as loans age. If the economy stays tough, losses could climb, shrinking the safety cushion for lower-rated investments.

6. Future outlook

The Trust is in "wait and see" mode. Success depends on whether inflation cools and used motorcycle prices stabilize. Managers are watching the "excess spread"—the gap between interest earned on loans and interest paid to investors. This gap narrowed from 4.2% to 3.8% this year. If it shrinks further, the Trust may need to use its reserve account to keep paying investors on time.

Bottom Line for Investors: This investment is currently facing headwinds due to rising loan defaults and lower resale values for motorcycles. If you are considering this, look closely at the "excess spread" in future reports; as long as that gap remains positive, the Trust has a buffer. However, if you are risk-averse, the current trend of rising late payments and the reliance on sub-prime borrowers suggests a more cautious approach.