Source: GlobeNewswire (MIL-OSI)

Southfield, Michigan, July 31, 2025 (GLOBE NEWSWIRE) — Credit Acceptance Corporation (Nasdaq: CACC) (referred to as the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) today announced consolidated net income of $87.4 million, or $7.42 per diluted share, for the three months ended June 30, 2025. Adjusted net income, a non-GAAP financial measure, for the three months ended June 30, 2025 was $100.8 million, or $8.56 per diluted share. The following table summarizes our financial results:

Our results and achievements for the second quarter of 2025 included the following:

• A decline in forecasted collection rates, which decreased forecasted net cash flows from our loan portfolio by $55.8 million, or 0.5%, and slower forecasted net cash flow timing.
• A 6.8% increase in the average balance of our loan portfolio from the second quarter of 2024 to $8.0 billion, which is our largest ever.
• A decline in Consumer Loan assignment unit and dollar volumes of 14.6% and 18.8%, respectively, as compared to the second quarter of 2024.
• The repurchase of approximately 530,000 shares, or 4.5% of the shares outstanding at the beginning of the quarter.
• The enrollment of 1,560 new dealers with 10,655 active dealers during the quarter.
• $63.3 million in dealer holdback and accelerated dealer holdback payments to dealers.
• $23.4 million contingent loss related to previously disclosed legal matters.
• An increase in our estimated long-term effective income tax rate from 23% to 25%.
• Named one of the 100 Best Companies to Work For^® by Great Place to Work^® and Fortune magazine for the eleventh time, with a #34 ranking, and a Spring 2025 Top Workplaces Culture Excellence award winner in the following five categories: Work-Life Flexibility, Leadership, Innovation, Purpose & Values, and Compensation & Benefits.

Consumer Loan Metrics

Dealers assign retail installment contracts (referred to as “Consumer Loans”) to Credit Acceptance. At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on the amount and timing of these forecasts and expected expense levels, an advance or one-time purchase payment is made to the related dealer at a price designed to maximize economic profit, a non-GAAP financial measure that considers our return on capital, our cost of capital, and the amount of capital invested. 

We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate for each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast. By comparing our current expected collection rate for each Consumer Loan with the rate we projected at the time of assignment, we are able to assess the accuracy of our initial forecast. The following table compares our aggregated forecast of Consumer Loan collection rates as of June 30, 2025, with the aggregated forecasts as of March 31, 2025 and at the time of assignment, segmented by year of assignment:

^{(1)   Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment. Contractual repayments include both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates.
(2)   The forecasted collection rate for 2025 Consumer Loans as of June 30, 2025 includes both Consumer Loans that were in our portfolio as of March 31, 2025 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates for each of these segments}

For the three months ended June 30, 2025, forecasted collection rates improved for Consumer Loans assigned in 2025, declined for Consumer Loans assigned in 2022 through 2024, and were generally consistent with expectations at the start of the period for all other assignment years presented.

The changes to our forecast of future net cash flows from our Loan portfolio (forecasted collections less forecasted dealer holdback payments) for each of the last eight quarters are shown in the following table:

During the second quarter of 2025, we applied an adjustment to our methodology for forecasting the amount of future net cash flows from our loan portfolio, which reduced the forecasted collection rates for Consumer Loans assigned in 2024. Consumer Loans assigned in 2024 prior to the implementation of our scorecard adjustment during the third quarter of 2024 had underperformed relative to the forecast adjustment we implemented during the second quarter of 2024. Accordingly, in the second quarter of 2025, we applied an adjustment to that segment of the Consumer Loans assigned in 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends. Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses. The implementation of this forecast adjustment during the second quarter of 2025 reduced forecasted net cash flows by $18.6 million, or 0.2%, and increased provision for credit losses by $16.5 million.

The following table presents information on Consumer Loan assignments for each of the last 10 years:

^{(1)   Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.
(2)   Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.
(3)   Represents activity for the six months ended June 30, 2025. Information in this table for each of the years prior to 2025 represents activity for all 12 months of that year.
(4)   The averages for 2025 Consumer Loans include both Consumer Loans that were in our portfolio as of March 31, 2025 and Consumer Loans assigned during the most recent quarter. The following table provides averages for each of these segments:}

The profitability of our loans is primarily driven by the amount and timing of the net cash flows we receive from the spread between the forecasted collection rate and the advance rate, less operating expenses and the cost of capital. Forecasting collection rates accurately at loan inception is difficult. With this in mind, we establish advance rates that are intended to allow us to achieve acceptable levels of profitability across our portfolio, even if collection rates are less than we initially forecast.
The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of June 30, 2025, as well as forecasted collection rates and spreads at the time of assignment. All amounts, unless otherwise noted, are presented as a percentage of the initial balance of the Consumer Loan (principal + interest). The table includes both dealer loans and purchased loans.

^{(1)   Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program as a percentage of the initial balance of the Consumer Loans.  Payments of dealer holdback and accelerated dealer holdback are not included.
(2)   Presented as a percentage of total forecasted collections
(3)   The forecasted collection rate, advance rate and spread for 2025 Consumer Loans as of June 30, 2025 include both Consumer Loans that were in our portfolio as of March 31, 2025 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates, advance rates, and spreads for each of these segments:}

The risk of a material change in our forecasted collection rate declines as the Consumer Loans age. For 2020 and prior Consumer Loan assignments, the risk of a material forecast variance is modest, as we have currently realized in excess of 90% of the expected collections. Conversely, the forecasted collection rates for more recent Consumer Loan assignments are less certain as a significant portion of our forecast has not been realized.

The spread between the forecasted collection rate as of June 30, 2025 and the advance rate ranges from 12.3% to 24.1%, on an annual basis, for Consumer Loans assigned over the last 10 years. The spreads with respect to 2019 and 2020 Consumer Loans have been positively impacted by Consumer Loan performance, which has exceeded our initial estimates by a greater margin than the other years presented. The spreads with respect to 2021 through 2024 Consumer Loans have been negatively impacted by Consumer Loan performance, which has been lower than our initial estimates by a greater margin than the other years presented. The higher spread for 2025 Consumer Loans relative to 2024 Consumer Loans as of June 30, 2025 was primarily a result of Consumer Loan performance, as the performance of 2024 Consumer Loans has been lower than our initial estimates.

The following table compares our forecast of aggregate Consumer Loan collection rates as of June 30, 2025 with the forecasts at the time of assignment, for dealer loans and purchased loans separately:

^{(1)   The forecasted collection rates presented for dealer loans and purchased loans reflect the Consumer Loan classification at the time of assignment. The forecasted collection rates represent the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment. Contractual repayments include both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates.}

The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate) as of June 30, 2025 for dealer loans and purchased loans separately.  All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).

^{(1)   The forecasted collection rates and advance rates presented for dealer loans and purchased loans reflect the Consumer Loan classification at the time of assignment.
(2)   Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program as a percentage of the initial balance of the Consumer Loans.  Payments of dealer holdback and accelerated dealer holdback are not included.}

Although the advance rate on purchased loans is higher as compared to the advance rate on dealer loans, purchased loans do not require us to pay dealer holdback.

The spread as of June 30, 2025 on 2025 dealer loans was 22.3%, as compared to a spread of 20.4% on 2024 dealer loans. The increase was primarily a result of Consumer Loan performance, as the performance of 2024 dealer loans has been lower than our initial estimates.

The spread as of June 30, 2025 on 2025 purchased loans was 21.2%, as compared to a spread of 21.1% on 2024 purchased loans, reflecting the net impact of two offsetting factors. Consumer Loan performance increased the spread from 2024 to 2025, as the performance of 2024 purchased loans has been lower than our initial estimates. This impact of Consumer Loan performance was partially offset by the impact of a lower initial spread on 2025 purchased loans, due to the advance rate increasing by a greater margin than the initial forecast in our purchased loan portfolio.

Consumer Loan Volume

The following table summarizes changes in Consumer Loan assignment volume in each of the last eight quarters as compared to the same period in the previous year:

^{(1)   Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program.  Payments of dealer holdback and accelerated dealer holdback are not included.}

Consumer Loan assignment volumes depend on a number of factors including (1) the overall demand for our financing programs and (2) the amount of capital available to fund new loans. Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital constraints.

Unit and dollar volumes declined 14.6% and 18.8%, respectively, during the second quarter of 2025 as the number of active dealers declined 0.8% and the average unit volume per active dealer declined 14.0%. Dollar volume declined by more than unit volume during the second quarter of 2025 due to a decrease in the average advance paid, primarily resulting from a decrease in the average size of Consumer Loans assigned. Unit volume for the 28-day period ended July 28, 2025 decreased 19.4% compared to the same period in 2024.

The following table summarizes the changes in Consumer Loan unit volume and active dealers:

^{(1)   Active dealers are dealers who have received funding for at least one Consumer Loan during the period.}

The following table provides additional information on the changes in Consumer Loan unit volume and active dealers: 

^{(1)   New active dealers are dealers who enrolled in our program and have received funding for their first dealer loan or purchased loan from us during the period.
(2)   Attrition is measured according to the following formula:  decrease in Consumer Loan unit volume from dealers who have received funding for at least one dealer loan or purchased loan during the comparable period of the prior year but did not receive funding for any dealer loans or purchased loans during the current period divided by prior year comparable period Consumer Loan unit volume.}

The following table shows the percentage of Consumer Loans assigned to us as dealer loans and purchased loans for each of the last eight quarters:

^{(1)   Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program.  Payments of dealer holdback and accelerated dealer holdback are not included.}

As of both June 30, 2025 and December 31, 2024, the net dealer loans receivable balance was 72.3% of the total net loans receivable balance. In 2025, we expanded dealer access to the purchase program for Consumer Loans to consumers with higher credit ratings. The increase in the percentage of purchased loans in 2025 Consumer Loan assignment volume was primarily related to Consumer Loans assigned under this expanded dealer access.

Financial Results

The increase in GAAP net income for the three months ended June 30, 2025, as compared to the same period in 2024, was primarily a result of the following:

• A decrease in provision for credit losses of 46.2% ($148.0 million), due to:
  • A decrease in provision for credit losses on forecast changes of $136.5 million, due to a smaller decline in Consumer Loan performance, which was primarily the result of a smaller downward forecast adjustment applied to our forecasting methodology during the second quarter of 2025 compared to the downward forecast adjustment applied in the second quarter of 2024. The implementation of the forecast adjustment during the second quarter of 2025 reduced forecasted net cash flows by $18.6 million, or 0.2%, and increased provision for credit losses by $16.5 million, whereas the implementation of the forecast adjustment during the second quarter of 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased our provision for credit losses by $127.5 million.
  • A decrease in provision for credit losses on new Consumer Loan assignments of $11.5 million, primarily due to a 14.6% decrease in Consumer Loan assignment unit volume.
• An increase in finance charges of 8.6% ($43.0 million), primarily due to an increase in the average balance of our loan portfolio.
• A loss on sale of a building of $23.7 million recognized during the three months ended June 30, 2024.
• An increase in interest expense of 13.0% ($13.6 million), primarily due to an increase in our average outstanding debt balance, primarily due to borrowings used to fund the growth of our loan portfolio and stock repurchases.
• An increase in operating expenses of 25.0% ($31.1 million), primarily due to:
  • An increase in general and administrative expense of 94.8% ($22.0 million), primarily due to an increase in legal expenses, which included the recognition of a $23.4 million contingent loss during the second quarter of 2025 related to previously disclosed legal matters.
  • An increase in salaries and wages expense of 10.4% ($7.9 million), primarily due to increases in (i) the number of team members, as we are investing in our business with the goal of increasing the speed at which we enhance our product for dealers and consumers, and (ii) stock-based compensation expense, primarily due to equity awards granted to our executive officers and senior leaders.
• An increase in provision for income taxes of 470.7% ($38.6 million), primarily due to an increase in pre-tax income.

Adjusted financial results are provided to help shareholders understand our financial performance. The financial data below is non-GAAP, unless labeled otherwise. We use adjusted financial information internally to measure financial performance and to determine certain incentive compensation. We also use economic profit as a framework to evaluate business decisions and strategies, with the objective to maximize economic profit over the long term. In addition, certain debt facilities utilize adjusted financial information for the determination of loan collateral values and to measure financial covenants. The table below shows our results following adjustments to reflect non-GAAP accounting methods. Material adjustments are explained in the table footnotes and the subsequent “Floating Yield Adjustment” and “Senior Notes Adjustment” sections. Measures such as adjusted average capital, adjusted net income, adjusted net income per diluted share, adjusted interest expense (after-tax), adjusted net income plus adjusted interest expense (after-tax), adjusted return on capital, adjusted revenue, operating expenses, adjusted loans receivable, adjusted finance charges, adjusted average loans receivable, economic profit, and economic profit per diluted share are non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.

Adjusted financial results for the three months ended June 30, 2025, compared to the same period in 2024, include the following:

Economic profit decreased 56.6% for the three months ended June 30, 2025, as compared to the same period in 2024. Economic profit is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business. The following table summarizes the impact each of these components had on the changes in economic profit for the three months ended June 30, 2025, as compared to the same period in 2024:

The decrease in economic profit for the three months ended June 30, 2025, as compared to the same period in 2024, was primarily a result of the following:

• A decrease in our adjusted return on capital of 180 basis points, primarily due to:
  • A decrease in the yield used to recognize adjusted finance charges on our loan portfolio decreased our adjusted return on capital by 100 basis points, primarily due to both a decline in forecasted collection rates and slower forecasted net cash flow timing throughout 2024 and 2025. The slower forecasted net cash flow timing was primarily due to lower-than-expected Consumer Loan prepayments, which remain below historical averages.
  • An increase in operating expenses decreased our adjusted return on capital by 60 basis points as operating expenses increased by 25.0% while adjusted average capital increased by 11.2%. The increase in operating expenses was primarily due to an increase in legal expenses, which included the recognition of a $23.4 million contingent loss during the second quarter of 2025 related to previously disclosed legal matters.
  • An increase in our estimated long-term effective income tax rate decreased our adjusted return on capital by 20 basis points as the rate increased from 23% to 25% for the second quarter of 2025 and future periods. The increase in our long-term estimate was due to higher state and local income taxes in certain jurisdictions and lower excess tax benefits from stock-based compensation.
• An increase in adjusted average capital of 11.2%, primarily due to an increase in the average balance of our loan portfolio.

The following table shows adjusted revenue and operating expenses as a percentage of adjusted average capital, the adjusted return on capital, and the percentage change in adjusted average capital for each of the last eight quarters, compared to the same period in the prior year:

^{(1)   Annualized.}

The decrease in adjusted return on capital for the three months ended June 30, 2025, as compared to the three months ended March 31, 2025, was primarily due to faster growth in operating expenses, which decreased the adjusted return on capital by 70 basis points, as operating expenses increased by 14.8% while adjusted average capital grew 0.6%. The $20.0 million increase in operating expenses was primarily due to an increase in legal expenses, which included the recognition of a $23.4 million contingent loss during the second quarter of 2025 related to previously disclosed legal matters. The decrease was partially offset by an increase in the yield used to recognize adjusted finance charges on our loan portfolio, which increased our adjusted return on capital by 40 basis points, due to higher yields on more recent Consumer Loan assignments, partially offset by a decline in Consumer Loan performance in the first and second quarters of 2025.

The following tables provide a reconciliation of non-GAAP measures to GAAP measures.  Certain amounts do not recalculate due to rounding.