The Company leases certain premises and equipment through operating leases. AHFC leases its premises and equipment from AHM and third parties, and HCFI leases its premises from HCI.

Many of the Company's leases contain renewal options, and generally have no residual value guarantees or material covenants. When it is reasonably certain that the Company will exercise the option to renew a lease, the Company will include the renewal option in the evaluation of the lease term. The Company has elected not to recognize right-of-use assets or lease liabilities for leases with a lease term of less than one year. As most of the Company's leases do not provide an implicit rate, the incremental borrowing rate is used in determining the present value of lease payments. The right-of-use assets in operating lease arrangements are reported in other assets on the Company's consolidated balance sheets.

Operating lease liabilities are reported in other liabilities on the Company's consolidated balance sheets. At March 31, 2025, maturities of operating lease liabilities were as follows:


Year ending March 31:	(U.S. dollars in millions)
2026	$	9
2027	10
2028	10
2029	7
2030	8
Thereafter	17
Total undiscounted future lease obligations	61
Less: imputed interest	(6)
Operating lease liabilities	$	55

Lease expense under operating leases was $9 million for the fiscal year ended March 31, 2025 and $10 million for both fiscal years ended March 31, 2024 and 2023. Lease expense is included within general and administrative expenses.

As of March 31, 2025, the weighted average remaining lease term for operating leases was 6.7 years and the weighted average remaining discount rate for operating leases was 3.0%.

The Company extends commercial revolving lines of credit to dealerships to support their business activities including facilities refurbishment and general working capital requirements. The amounts borrowed are generally secured by the assets of the borrowing entity. The unused balance of commercial revolving lines of credit was $671 million as of March 31, 2025. The Company also has commitments to finance the construction of automobile dealership facilities. The remaining unfunded balance for these construction loans was $3 million as of March 31, 2025.

The Company establishes accruals for legal and regulatory claims when payments associated with the claims become probable and the costs can be reasonably estimated. When able, the Company will determine estimates of reasonably possible loss or range of loss, whether in excess of any related accrued liability or where there is no accrued liability. Given the inherent uncertainty associated with legal and regulatory matters, the actual costs of resolving such claims and associated costs of defense may be substantially higher or lower than the amounts for which accruals have been established.

The Company is involved, in the ordinary course of business, in various legal proceedings including claims of individual customers and purported class action lawsuits. Certain of these actions are similar to suits filed against other financial institutions and captive finance companies concerning business practices and policies. The Company is also subject to regulation, supervision, and licensing under various federal, state, provincial, and local statutes, ordinances and regulations which involve governmental reviews and inquiries from time to time. Based on available information and established accruals, management does not believe it is reasonably possible that the results of these proceedings, in the aggregate, will have a material adverse effect on the Company’s consolidated financial statements.

In November 2023, the Company received a civil investigative demand issued by the Consumer Financial Protection Bureau (CFPB) in connection with the Company’s furnishing of credit reporting information on consumer credit accounts. In January 2025, in the interest of compliance and resolution of this matter, and without admitting or denying any wrongdoing, the Company voluntarily agreed to enter into a consent order (Consent Order) with the CFPB. The Consent Order, among other things, requires the Company to pay $10 million in consumer redress, pay a $3 million civil money penalty to the CFPB and implement a compliance plan.