2024
Annual Report
We make vehicle ownership
possible by providing
innovative financing solutions
that enable automobile
dealers to sell vehicles to
consumers regardless of their
credit history.
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2024 Annual Report | Shareholder Letter
Former Credit Acceptance
customer Vivien described
the moment she was
approved for financing as
“awesome” and a turning
point in her life. With
a reliable vehicle, she
regained her independence.
With increased sales
and stable cash flow
from Credit Acceptance,
Integrity Auto opened a
second, larger location
and continued to grow
through repeat customers
and referrals.
Nicole, a Credit Acceptance
Workplace hero, loves her role
training team members on
the importance of accurately
reporting to the three major
credit bureaus. Our credit
reporting provides consumers
the opportunity to build or
rebuild their credit.
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2024 Annual Report | Shareholder Letter
A message from our Chief Executive Officer
Background
For more than 50 years, Credit Acceptance Corporation1 has made vehicle ownership possible by
providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers
regardless of their credit history. We provide our nationwide network of dealers the ability to sell a
vehicle to a consumer who, without us, they might otherwise have had to turn away.
The auto finance market is large and fragmented, with $1.5 trillion in outstanding loan balances as
of December 31, 2024. We compete with banks, credit unions, auto finance companies affiliated
with auto manufacturers, independent auto finance companies, and “buy here, pay here” dealers.
Our value proposition in the market is unique for two reasons. First, consumers are not denied the
opportunity to purchase a vehicle based on their credit history. Vehicles are necessary in most areas
of the country. By providing access to credit,2 we make it possible for consumers to purchase vehicles
needed to maintain or find better employment, attend school, access health care, and buy more
affordable groceries and other necessities. Second, for most of the vehicle sales we finance, the
dealer shares in the cash flows from the loan after the loan is assigned to us.3 Dealers receive 80% of
collections throughout the life of a loan. This compensation plan is a critical element of our success
as it creates an alignment of interests between Credit Acceptance, the dealer, and the consumer.
Through Credit Acceptance, the dealer directly benefits if the consumer’s loan is repaid and the
consumer builds or rebuilds their credit. Our program incentivizes the dealer to sell a quality vehicle at
a price the customer can afford and that will last at least the term of the loan.
Our customers are individuals like Vivien H. from Dundalk, Maryland. Vivien is an elementary school
assistant, a role that requires her to consistently and timely show up for children with disabilities and
special needs. After totaling her vehicle in an accident, she was left without reliable transportation.
She initially relied on others for rides to work, a situation that quickly became unreliable and
stressful. She needed a new vehicle, but worried about her ability to secure financing due to her
poor credit history. Her fears were confirmed when she was turned down for financing multiple
times. Discouraged but not defeated, she found a dealership who approved her to finance a vehicle
through Credit Acceptance. Vivien described the moment she was approved for financing as
“awesome” and a turning point in her life. With a reliable vehicle, she regained her independence.
Shareholder letter
I also refer to Credit Acceptance Corporation as “Credit Acceptance”, “the Company”, “we”, or “us” throughout this letter.
Our company, like most of our competitors, is an indirect auto finance company, which means the financing contract is originated by the
auto dealer and immediately assigned to us in exchange for compensation.
The transaction between the dealer and the consumer is not a loan, but instead something called a “retail installment contract.” However,
for simplicity and to conform to the language commonly used in the industry and used in our disclosures, I will refer in this letter to retail
installment contracts as “loans” and to indirect auto finance companies as “lenders.”
1
2
3
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2024 Annual Report | Shareholder Letter
Vivien’s car ownership journey was not without challenges. After financing her vehicle, she
experienced an injury that required multiple surgeries and physical therapy, disrupting her ability to
work steadily. Throughout this challenging period, she worked with Credit Acceptance to establish
manageable payment plans, helping her regain financial stability. When it comes time to finance
another vehicle, Vivien plans to use Credit Acceptance again, knowing she would be supported by a
team that listens and puts her at ease, even in the face of unexpected difficulties.
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2024 Annual Report | Shareholder Letter
While Vivien’s story is inspiring, she’s far from alone. Our potential market is huge — adults with
no credit history (credit invisible), with limited credit information available through the credit
bureaus (a thin file), and subprime credit are often ignored by mainstream lenders and have
limited credit choices.
An industry white paper published in 2022, citing Experian® data, placed adults in the United
States into the following credit categories:
Credit Acceptance makes it possible for all
of these individuals to finance a vehicle —
a life-changing opportunity for many.
57 million have a
credit profile that is
considered subprime.
35 million have
credit profiles
considered
near prime.
28 million have no
credit score and
are considered
credit invisible.
114 million have
prime credit.
21 million have thin credit files
or a limited credit history and
are unscorable.
22%
11%
8%
14%
44%
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2024 Annual Report | Shareholder Letter
We also provide our dealers with a unique opportunity to grow their businesses and improve their
financial futures. A business relationship with Credit Acceptance creates incremental profit for the
dealer, and the potential for incremental repeat and referral business. We have helped thousands of
dealers build their businesses and continue to strengthen our dealer relationships.
Our dealers are business owners like Nate W. of Integrity Auto in Ocean Springs, Mississippi. In 2015,
after being laid off, Nate partnered with a friend to launch Integrity Auto. They began with a small
gravel lot and just 10 vehicles, offering financing through a single source for customers with good
credit. Many potential buyers with poor credit visited their lot but, without financing options for them,
Nate had to turn them away. To solve this problem, Nate enrolled with Credit Acceptance and gained
the ability to offer financing to all customers regardless of their credit history. Integrity Auto started by
financing 6-8 vehicles per month through us and grew that number to over 30 per month, closing 16
pools.4 With increased sales and stable cash flow from Credit Acceptance, Integrity Auto opened a
second, larger location and continued to grow through repeat customers and referrals.
Pools are groups of either 50 or 100 loans assigned under the Portfolio Program.
4
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2024 Annual Report | Shareholder Letter
History
Our business model has been quite successful over time. The three pillars of our success are: (1) our
purpose; (2) our long-term strategy and goals; and (3) our values and beliefs.
Our Purpose
First, our purpose is to make vehicle ownership possible by providing innovative financing solutions
that enable automobile dealers to sell vehicles to consumers regardless of their credit history. Arising
from this purpose is our North Star: to create intrinsic value by positively changing the lives of dealers,
consumers, team members, investors, and our communities. To do so, we must offer a great product
and build a successful, profitable business. And when we serve our constituents well — when we
change their lives in positive ways — our business thrives.
Don Foss founded Credit Acceptance in 1972 on these beliefs. Don had learned early in his career
as an auto dealer that many individuals could not acquire vehicles they need due to their lack of
credit. Don witnessed traditional lending sources unfairly misjudge credit-impaired and credit-
invisible applicants, assuming the applicants’ less-than-prime credit made them undeserving of a
second chance. Don started Credit Acceptance to help those individuals move their lives in a positive
direction by providing them the opportunity to finance a vehicle and establish or reestablish positive
credit history. Don served as our CEO until 2002 and continued to serve on our Board as Chairman
until his retirement in 2017. Our purpose and North Star have guided our decisions, actions, and
policies, in all phases of our evolution.
Our Long-Term Strategy and Goals
Second, we focus on the long-term success of the business and set big, hairy, audacious goals
accordingly. Our second pillar was greatly influenced by one of our long-standing Board members.
Before our initial public offering, we had limited competition and wrote highly profitable business.
After we became publicly traded in 1992, competition intensified, and we struggled for several
years in the mid- to late-1990s. One of the first changes the Board member made was to establish
a minimum required return on capital. The message was clear: If we could not earn more than our
cost of capital, we needed to give that capital back to shareholders. This message got leadership’s
attention, since at the time we were not meeting this minimum requirement. With the Board’s help, we
worked through those challenges and began focusing on a metric called “Economic Profit.” This led to
an increased focus on our core business under Brett Roberts, our CEO from 2002 to 2021, and our exit
from several business lines and geographic locations. This focus, institutionalized by Brett, has since
guided our success.
With our attention on Economic Profit, we wisely invested our capital and consistently earned a return
on capital well above its cost, even in years when our loans performed worse than we expected. We
invested in our core business and used excess capital to repurchase stock, buying approximately 40.9
million shares from 1999 through 2024.
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2024 Annual Report | Shareholder Letter
Our Values and Beliefs
Third, we have clear and unwavering values and beliefs. We began concentrating on building a great
culture for our team members in 2001. Brett was confident that creating a strong culture and great
work environment would help us create a financially successful business. In 2012, our team members
were asked to describe our values and from their responses we created our PRIDE values: Positive,
Respectful, Insightful, Direct, and Earnest. The PRIDE values are now organic to our culture and fully
integrated into our hiring processes, workplace, communications, and performance management.
Those values are now organic to our culture and fully integrated into our hiring processes, workplace,
communications, and performance management.
To retain our great people and environment, we have devoted a significant portion of our time
to executing something we call Organizational Health — setting clear expectations, managing
performance, providing training, maintaining effective incentive compensation plans, establishing the
right environment, and providing the technology and processes required for operational excellence.
We have positioned our team members to produce their best work by making decisions through the
lens of Organizational Health.
We are honored by the many workplace awards we have earned as a result of PRIDE and our focus
on Organizational Health. The awards and recognition received by Credit Acceptance, from local
awards to national ranking among the Fortune 100 Best Companies to Work For®, provide outside
confirmation of our great culture.
Our purpose, long-term focus on the business, and values have helped us navigate many challenges
throughout our history, including those recently arising as the United States continues to recover from
decades-high inflation.
We have clear and unwavering values and beliefs.
Positive, Respectful, Insightful, Direct, and Earnest.
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2024 Annual Report | Shareholder Letter
Create a sense of belonging and focus on
our purpose, goals, and values through
engagement and collaboration remotely
and in person. This requires great intention
when team members are no longer all
located within the same building. Through
top-down communications, we ensure
that team members understand our
shared purpose, goals, values, and beliefs.
We offer team members opportunities
throughout the year to strengthen their
connections and foster cross-functional
collaboration both virtually and in person.
Today
Our purpose, strategy, and values remain relatively unchanged. We continue to offer a product that
provides enormous benefits to our dealers and their customers; focus on the long-term success of the
business; and provide a culture that attracts talented people around the country and enables them to
excel. We apply lessons learned over the years to continue to improve.
To preserve and enhance these three pillars in our remote-first environment, we are continuing to:
Our executive leadership team, including eleven individuals averaging 19 years of
experience at Credit Acceptance. I have been with the Company over 21 years. I
became the Chief Executive Officer in May 2021 and, prior to that, primarily served as
the Company’s Chief Financial Officer.
Our senior leadership team, made up of vice presidents and senior vice presidents,
including 25 individuals with an average of 15 years of experience at Credit
Acceptance, and four new seasoned leaders experienced in their respective fields,
including Engineering and Treasury.
Our mid-level leadership team, made up of managers and directors, including 296
individuals with an average of eight years of experience at Credit Acceptance.
Provide exceptional leadership. The experience, consistency, and business knowledge of our
leaders are key advantages. Our exceptional leaders include:
Focus on retaining and attracting the
best talent. We continue to build our
bench strength — developing our internal
talent and, when needed, recruiting the
best external talent worldwide with our
remote-first environment. This includes
the addition of over 100 new Engineering
team members in 2024. The wide-ranging
experience and backgrounds of our team
members allow us to approach problems
from different perspectives and develop
innovative solutions.
9
From Fortune. ©2024 Fortune Media IP Limited. All rights reserved. Used under license.
2024 Annual Report | Shareholder Letter
Today, consistent with how we addressed past macroeconomic challenges, we are leveraging
our strengths to grow as described in the section of this letter entitled “Impact of Business Cycles
on our Performance.” Consistent with our historical operating principles, we use Economic Profit
as a framework to evaluate business decisions and strategies, with an objective to maximize
Economic Profit over the long term. We reinvest capital in the business, and we return that capital
to shareholders through share repurchases to the extent we generate capital in excess of what
is needed to fund and invest in the business, as described in the section of this letter entitled
“Operating Principles.”
Connect and empower our team members to produce their best work. Our great team
members and culture allow us to thrive. We maintain a great culture, and continue to
enhance it, through our PRIDE values, the dimensions of Organizational Health, and always
listening. We received 13 workplace awards in 2024. For the tenth time in 11 years, Credit
Acceptance was named to the FORTUNE 100 Best Companies to Work For® list. We ranked
#39 on the 2024 list. In 2024, for the third year in a row, PEOPLE Magazine and Great Place
to Work also named Credit Acceptance as one of PEOPLE® Companies that Care for
demonstrating outstanding respect, care, and concern for our team members and their
communities. Other workplace-related accolades included being named in: Fortune’s lists
for Best Workplaces in Financial Services & Insurance, Best Workplaces for Millennials, and
Best Workplaces for Women; Newsweek’s list of America’s Top 200 Most Loved Workplaces;
Top Workplaces USA; Computerworld Best Places to Work in IT; 2024 Top Workplaces for
Remote Work; and Detroit Free Press’ Top Workplaces in Michigan.
Rank #39
10-time
Winner
Rank #9
4-time
Winner
Rank #29
6-time
Winner
Rank #8
10-time
Winner
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2024 Annual Report | Shareholder Letter
Impact of Business Cycles on Our Performance
It is important for shareholders to understand the impact of the external environment on our
performance. Access to capital, competitive cycles, and economic cycles have affected our past
results and are likely to affect our results in the future.
Summary
In 2024, the United States’ ongoing recovery from widespread inflation and vehicle shortages
continued to influence our industry’s capital availability, impact competitive dynamics, and pose
economic difficulties for consumers. We observed a combination of favorable and unfavorable
trends, both externally and internally, related to that recovery last year.
As to capital availability, capital markets were favorable to issuers and borrowing costs declined as
inflation cooled throughout 2024. These trends made raising capital more attractive in our industry
and contributed to increased competition for the Company by the end of 2024.
As to competitive dynamics, direct and indirect consumer lenders remained cautious for much of
2024 as uncertainty about loan performance remained. This contributed to the continuing demand
for our product throughout the majority of 2024 and allowed us to increase our margin of safety in the
aggregate and grow our active dealer base, our loan assignment volume, and the average balance
of our loan portfolio. Our unit and dollar volumes grew 16.1% and 11.3%, respectively, during a period
with ten consecutive quarters of growth from March 2022 through September 2024. In 2024, we had
our highest loan assignment volume in a single year (386,126 contracts) and our largest loan portfolio
in its history ($8.9 billion on an adjusted basis, up 15% from 2023). By the end of 2024, the industry saw
increased competition from lenders who tightened their credit standards for loans originated in 2023
and 2024 and then saw improved performance.
Our highest loan assignment
volume in a single year
Consecutive quarters of growth
from Q2 2022 to Q3 2024
Our largest loan portfolio in our
history in 2024
10
386,126
$8.9 billion
on an adjusted basis
contracts assigned in 2024
Unit
Volume
Increase YOY
Dollar
Volume
Increase YOY
16.1% 11.3%
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2024 Annual Report | Shareholder Letter
The current economic cycle kept subprime originations low in 2024 compared to pre-pandemic
levels, but relatively steady year-over-year. We observed three trends which may have contributed
to stabilized subprime origination volumes: (1) used vehicle supply, though depressed, showed
recovery from Q1 2023 lows; (2) vehicle values and prices, though still elevated compared to pre-
pandemic levels, decreased from their 2022 peaks and were stable year-over-year; and (3) although
subcompact sedan production was scarce, inventory and incentives grew for other new small, more
affordable vehicles.
The industry remained concerned about auto loan delinquency rates in 2024. Industrywide,
collections on consumer auto loans originated in 2021, 2022, and 2023 were lower than anticipated,
particularly for subprime originations. We believe this trend may be due to rising consumer costs
due to inflation and increased consumer debt levels. Although the performance of loans assigned to
Credit Acceptance in 2021, 2022, and 2023 yielded forecasted collection results significantly worse
than our initial estimates, we anticipate these loans will continue to generate positive Economic Profit
as our initial margin of safety is designed to produce acceptable returns in the aggregate even if loan
performance is less than forecasted.
Access to Capital
The auto finance market historically has been sensitive to changes in the availability of capital and the
cost of capital. When access to capital decreases or the cost of capital increases or both, competition
in our market has historically decreased.
From 2019 through mid-2022, aside for a period in 2020 at the onset of the pandemic, capital markets
were generally favorable to issuers, which increased competition in the industry. In late 2020
through early 2021, treasury rates were at historic lows due to aggressive easing of monetary policy
from the Federal Reserve to stimulate the economy. Low rates, tight credit spreads, and stimulus-
driven liquidity made access to capital exceptionally easy and inexpensive. These circumstances
contributed to a particularly intense competitive environment for the Company in 2021 and the first
half of 2022.
From the second half of 2022 through the first half of 2023, changes in the capital markets contributed
to decreased competition for the Company. In mid-2022, borrowing costs began to increase
significantly due to macroeconomic concerns and overall interest rate volatility. In March 2022, the
Fed began raising interest rates to combat rapidly growing inflation, which had hit multi-decade
highs. The Fed increased interest rates 11 times from March 2022 to July 2023 to combat inflation
(which peaked at 9.1% in June 2022 and dropped to 2.9% in December 2024 according to the
Consumer Price Index as reported by the Bureau of Labor Statistics). As the Fed raised rates, Treasury
yields climbed, borrowing costs increased (peaking in late 2023), and spreads widened as risk
aversion grew. These circumstances (rate and market volatility), along with credit quality concerns
related to loans originated in 2021 and 2022 (as explained below), decreased access to capital and
resulted in a more favorable origination environment for the Company.
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2024 Annual Report | Shareholder Letter
Because capital markets are cyclical, we apply lessons learned from the past to position the Company
for continued success if access to capital becomes constrained. As of the date of this letter, we
have done so by: (1) completing offerings of senior notes, of which two series ($600 million of senior
notes due 2028 and $500 million of senior notes due 2030) are currently outstanding and together
provide us with $1.1 billion of long-term debt capital; (2) lengthening the terms of certain asset-
backed financings to over three years; and (3) increasing our revolving credit facilities to $1.7 billion.
We aim to maintain a considerable amount of available borrowing capacity under our revolving credit
facilities at all times and to renew these facilities well before they mature. As of March 31, 2025, we
had $1.7 billion of unused capacity under our revolving credit facilities and more than $500 million
of unrestricted cash. While lengthening the term of our debt facilities, issuing higher-cost long-
term debt, and keeping a significant portion of our revolving credit facilities available comes with
incremental cost, we view this as a prudent investment for when capital becomes more scarce, which
has historically resulted in a positive origination environment for us.
In 2024, our annual average cost of debt increased year-over-year from 5.5% to 7.2% of outstanding
principal, primarily as a result of higher interest rates on recently completed or extended secured
financings and recently issued senior notes and the repayment of older secured financings and senior
notes with lower interest rates. An increase in the cost of debt is not unique to Credit Acceptance;
however, we have been less sensitive to increased borrowing costs as we produce a high unlevered
return on capital and therefore have been able operate with a modest amount of financial leverage,
unlike a lot of our competitors.
Competitive Cycles
Competitive cycles tend to be related to access to capital. When capital is easier to obtain,
underwriting standards in the industry tend to drop, making financing for credit-challenged
consumers more accessible and increasing competition in our market. To stay competitive in such
a market, lenders may reduce the margin of safety in the amount advanced to dealers, reducing
loan profitability. Conversely, when capital is more difficult to obtain, underwriting standards in
the industry tend to rise, making financing for credit-challenged consumers less accessible and
decreasing our competition. In such an environment, lenders are able to increase the margin of safety
in the amount advanced to dealers, generally increasing loan profitability.
Because we take a long view on the industry, price to maximize Economic Profit over the long term (as
described below in the section of this letter entitled “Economic Profit”), and seek to best position the
Company if access to capital becomes limited, we are less reactive to changes in access to capital
(as described above). As a result, we will have difficulty growing, or will even shrink, our business at
times; and we will be able to grow strongly at other times. Through several competitive cycles, we
have applied past lessons learned and leveraged our strengths (e.g., our ability to predict aggregate
performance, deploy risk-adjusted pricing, monitor loan performance, and execute key functions
consistently) to successfully maintain our business despite the competitive environment.
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2024 Annual Report | Shareholder Letter
When capital markets were generally favorable to issuers in 2019 through mid-2022 and capital
remained accessible, competition intensified from the fourth quarter of 2019 to the second quarter
of 2022, and the number of loans assigned to us by dealers decreased year-over-year, eventually
shrinking our portfolio. The Company’s loan unit volume decreased from 341,967 in 2020 to 268,730 in
2021 and increased modestly to 280,467 in 2022. Consistent with our historical practices, during the
period of intense competition, we focused on our long-term strategy and maintained an aggregate
margin of safety in the amount we advanced to dealers. Initial spreads (the initial forecasted
collection rate less the advance rate) were relatively stable during this period: 20.0% in 2019, 19.5% in
2020, 20.3% in 2021, and 20.1% in 2022.
When the cost of capital increased and loan performance moderated (as described below) in the
second half of 2022, competition eased as many lenders significantly tightened subprime lending
parameters, while other lenders exited the subprime market altogether. As liquidity became an issue,
credit unions also began pulling back on auto lending after growing their share of subprime in 2022.
When these trends persisted into 2023, certain lenders continued to tighten their credit policies to
keep up with the rapid pace of inflation. The Company’s loan unit volume increased from 280,467 in
2022 to 332,499 in 2023 and 386,126 in 2024 (our highest single-year loan assignment volume). The
eased competition, among other factors, also allowed us to increase the aggregate margin of safety
in the amount advanced to dealers slightly, with initial spreads increasing from 21.3% in 2023 to 22.1%
in 2024.
Loans originated in 2023 and 2024 by lenders who tightened their credit standards saw improved
performance, which drove a renewed desire for growth in the market and, thus, increased
competition toward the end of 2024. During the fourth quarter of 2024, while our growth slowed, it
was still the Company’s second highest fourth quarter unit and dollar volume ever.
We were also able to enroll more new dealers and increase our active dealer base from mid-2022 to
2024 to address volume per dealer trends. After a modest increase in 2022, we experienced significant
growth in our active dealers in 2023, reaching the highest level in our history in 2024 — increasing both
dealer enrollments (3,627 in 2022; 5,605 in 2023; and 6,088 in 2024 — a 68% increase from 2022 to 2024)
and the number of active dealers (11,901 in 2022; 14,174 in 2023; and 15,463 in 2024 — a 30% increase
from 2022 to 2024).
Increase in active dealers
from 2022 to 2024
Increase in dealer enrollments
from 2022 to 2024
30%
68%
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2024 Annual Report | Shareholder Letter
Economic Cycles
Economic cycles also affect our business. The pandemic triggered the most recent economic cycle
to impact our business. Challenges arising from pandemic-related policies continue to suppress
subprime auto loan originations and impact loan performance.
Subprime auto loan originations remained low industrywide in 2024 compared to pre-pandemic
levels. According to Experian, consumers with subprime (501-600) and deep subprime (300-500)
VantageScores® comprised 21.7% of used auto loan originations in 2024, remaining relatively steady
year-over-year but low compared to pre-pandemic levels of 28.0% in 2019. The low subprime auto
loan origination rates stemmed from pandemic-related policies, which caused credit scores to
increase; vehicle supplies to decrease and used vehicle prices to increase; availability of low-cost
new vehicles to decrease; and inflation to rise and, as a result, consumer costs to increase, including
those associated with vehicle ownership.
The average consumer credit score improved as a result of pandemic-related programs and changes
to credit reporting, resulting in fewer consumers with subprime scores. Government policies provided
consumers federal stimulus payments, enhanced unemployment benefits due to the pandemic,
and paused reporting of certain loan delinquencies under the CARES Act. Additionally, between
the second quarter of 2020 and third quarter of 2024, missed federal student loan payments were
not reported to credit bureaus. In 2023, credit reporting bureaus removed medical debt collections
under $500. These actions collectively resulted in an upward shift in credit scores, from an average
FICO® score of 703 in 2019, to an average of 715 as of Q3 2024, holding the record high of 2023 steady,
according to Experian data.
Used vehicle demand was strong and supply remained tight in 2024. While used vehicle prices as
of year-end 2024 were up 45% since 2020, they were down 16% from their June 2022 peak. Used
vehicle values also remained high compared to pre-pandemic levels, particularly for those financed
by subprime and deep subprime consumers, but steady year-over-year. Pandemic-related limits on
economic activity disrupted the supply chain, which led to a lack of parts such as semi-conductor
chips needed for new vehicles. That, in turn, created new and used vehicle shortages, reduced new
vehicle leasing, and drove up used vehicle prices to their peak in June 2022. Used vehicle supply
reached its lowest point in the first quarter of 2023 and remained depressed in 2024 compared to
pre-pandemic levels due, in part, to the lack of leased vehicles, which historically supply dealers’
used vehicle inventory when turned in at lease end. Given their tight supply, inflation remained more
pronounced on used vehicles than new.
The impact of the pandemic’s disruption to the manufacturing of lower-priced new vehicles
and vehicle parts lessened in 2024. As a result of the disruption in vehicle manufacturing, some
manufacturers reduced or discontinued production of subcompact sedans to focus on higher-profit
margin vehicles (SUVs, crossovers, light trucks, and luxury models). Consequently, subcompact sedans
remained scarce in 2024, with discontinued models not replaced, keeping their prices elevated
relative to availability. The average price for subcompact sedans increased from $16,000 in 2018 to
about $23,000 in 2024. Small cars and small crossovers, however, saw inventory growth and incentives
leading to gains in sales in 2024. The April 2024 NADA Market Beat noted over 15% year-over-year
sales increases in these segments.
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2024 Annual Report | Shareholder Letter
In 2024, we observed trends fairly consistent with those of the industry as a whole. Dealers doing
business with us were able to increase the average number of vehicles in their inventory in 2024 to
levels nearing those of 2019. The average vehicle selling price set by dealers in contracts assigned to
the Company declined year-over-year but remained elevated compared to pre-pandemic times. The
average vehicle value received by the Company for vehicles sold at auction stabilized but remained
elevated compared to pre-pandemic levels.
During the post-pandemic period, consumers have experienced rising costs, including those
associated with vehicle ownership, such as the cost of insurance and vehicle repairs, and growing
debt levels making them less likely to seek to purchase a vehicle without a need to do so. As noted
in the section entitled Access to Capital, the effects of the pandemic contributed to inflation hitting
multi-decade highs. Despite inflation cooling after June 2022, consumer purchasing power was
reduced from 2020 to 2024 as inflation outpaced real wage growth and food, housing, gasoline, and
transportation costs increased. An analysis of Bureau of Labor Statistics data found that consumers
faced a 20 – 30% cumulative price increase for essentials in 2024 compared to 2020. The New York
Fed reported total household debt reached $18.04 trillion in Q4 2024, up $3.9 trillion, a 27.6% increase
since the end of 2019, which contributed to increased monthly payments and reduced disposable
income for consumers.
In addition, dealers generally make higher profits on higher credit quality and cash customers. Given
limited inventory and supply of low-cost vehicles, dealers have been likely more willing to sell their
limited vehicle supplies to higher credit quality and cash customers instead of those with less-than-
prime credit.
We mitigated the impact of these trends, in part, by expanding our program to near-prime consumers.
In 2020, 5.1% of loans assigned to us were made with consumers with FICO® scores 650 and above. In
2023 and 2024 that percentage increased to 19.1% and 19.4%, respectively.
Inflation, a ripple effect of the pandemic, also impacted loan performance, including the industrywide
rise in auto loan delinquency rates in 2024. From the second half of 2020 to the first quarter of 2022,
loan performance in the industry improved markedly following the distribution of federal stimulus
payments and enhanced unemployment benefits due to the pandemic. Thereafter, the industry
experienced lower-than-anticipated collections on loans originated in the second half of 2021 and
2022, a period when intense competition coincided with the lapse of federal stimulus payments and
enhanced unemployment benefits, the peak of vehicle values and prices, and rising inflation.
In 2023 and 2024, the percentage of auto loans 30-days and 60-days delinquent continued to surpass
pre-pandemic levels. Sixty-day delinquencies increased year-over-year, hitting an all-time high of
6.56% in December 2024, but grew at a slower rate than 2021 and 2022. Average monthly losses for
lenders rose to their highest level since 2009. Ultimately, many lenders, particularly subprime lenders,
experienced higher than expected losses on their 2021, 2022, and 2023 originations. While these
trends decreased competition in our space for the majority of 2024, they also negatively impacted the
amount and timing of future net cash flows from our loan portfolio.
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2024 Annual Report | Shareholder Letter
The pandemic-policy induced changes in loan performance created an increased level of
uncertainty associated with our estimate of the amount and timing of future net cash flows from our
loan portfolio. The initial uncertainty arising from the pandemic, followed by changing performance
patterns, caused us to make four adjustments to our forecasting. Ultimately, for the year ended
December 31, 2024, forecasted collection rates declined for loans assigned in 2021 through
2024. Loans assigned to the Company during the highly competitive period of 2021-2023 yielded
forecasted collection results significantly worse than our initial estimates; yet, we estimate these loans
will generate Economic Profit in the aggregate. This is because we understand forecasting collection
rates is challenging and, thus, designed our business model to produce acceptable returns in the
aggregate even if loan performance is less than forecasted.
In the first of the four adjustments to our forecasting after the onset of the pandemic, during the first
quarter of 2020, we applied a subjective adjustment to our forecasting model to reflect our best
estimate of the future impact of the pandemic on future net cash flows (“COVID forecast adjustment”),
which reduced our estimate of future net cash flows by $162.2 million, or 1.8%. We continued to
apply the COVID forecast adjustment through the end of 2021, as it continued to represent our
best estimate. Next, during the first quarter of 2022, we determined that we had sufficient loan
performance experience since the lapse of federal stimulus payments and enhanced unemployment
benefits to refine our estimate of future net cash flows. Accordingly, during the first quarter of 2022,
we removed the COVID forecast adjustment and enhanced our methodology for forecasting the
amount and timing of future net cash flows from our loan portfolio using more recent data and new
forecast variables, which increased our estimate of future net cash flows by $95.7 million, or 1.1%.
Then, during the second quarter of 2023, we adjusted our methodology for forecasting the amount
and timing of future net cash flows from our loan portfolio using more recent loan performance and
consumer loan prepayment data. Similar to others in the industry who tightened their credit policies,
we experienced a decrease in prepayments to below-average levels and, as a result, slowed our
forecasted net cash flow timing. Consistent with historical patterns, loan prepayments were lower
with less availability of consumer credit. The implementation of the adjustment to our forecasting
methodology during the second quarter of 2023 reduced forecasted net cash flows by $44.5 million,
or 0.5%, and increased provision for credit losses by $71.3 million.
Finally, during the second quarter of 2024, we applied another adjustment to our methodology
for forecasting the amount of future net cash flows from our loan portfolio, which reduced the
forecasted collection rates for loans assigned in 2022 through 2024. Again, consistent with the
experience of others in the industry, loans originated in 2022 and 2023 and assigned to the Company
continued to be impacted, presumably due to the rising inflation and consumer expenses described
above. More specifically, loans assigned in 2022 continued to underperform our expectations for
several quarters, and the spread was lower than our initial estimates by a greater margin than the
other years presented in our Key Operating Results. Loans assigned in 2023 had also begun exhibiting
similar trends of underperformance, although not as severe as loans assigned in 2022.
17
2024 Annual Report | Shareholder Letter
We determined in the second quarter of 2024 that we had sufficient loan performance experience
to estimate the magnitude by which we expected loans assigned in 2022 through 2024 would likely
underperform our historical collection rates on loans with similar characteristics. Accordingly, we
applied an adjustment to loans assigned in 2022 through 2024 to reduce forecasted collection
rates to what we believed the ultimate collection rates would be based on these trends. The
implementation of this forecast adjustment during the second quarter of 2024 reduced forecasted
net cash flows by $147.2 million, or 1.4%, and increased provision for credit losses by $127.5 million.
Although performance on loans originated in 2022 and 2023 reduced the current spread from the
initial spread, we anticipate those loans will generate positive Economic Profit.
18
2024 Annual Report | Shareholder Letter
Operating Principles
Economic Profit
We use a financial measure called Economic Profit to evaluate our financial results and determine
profit-sharing for team members. We also use Economic Profit as a framework to evaluate business
decisions and strategies, with an objective to maximize Economic Profit over the long term. Economic
Profit measures how efficiently we utilize our total capital, both debt and equity, and is a function of
the return on capital in excess of the cost of capital and the amount of capital invested in the business.
Economic Profit differs from net income in that it includes a cost for equity capital. To the extent
we generate capital in excess of what we believe is needed to maximize Economic Profit through
investing in our business, we focus on maximizing Economic Profit per share (diluted) through our
share repurchases approach outlined below. In the “Supplemental Financial Results” section following
the signature page of this letter, we detail our past Economic Profit and Economic Profit per share
(diluted) performance.
Investments in the Business
Our core product has remained essentially unchanged for 53 years. We provide innovative financing
solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit
history. Consumers that benefit from our program consist primarily of individuals who have typically
been turned away by other lenders. Traditional lenders have many reasons for declining a loan. We
have always believed that a significant number of individuals, if given an opportunity to establish
or reestablish a positive credit history, will take advantage of it. As a result of this belief, we have
provided a life-changing opportunity to more than five million consumers.
Our financial success is a result of having a unique and valuable product and of putting in many years
of hard work to develop the business. Consistent with recent years, in 2024, we made investments
focused on enhancing the value of our product for our key constituents and preparing for future
growth. I would like to highlight a couple of changes that we believe make a positive impact.
We continued to form persistent cross-functional teams built around outcomes, focused on
understanding our dealers’ and consumers’ needs and quickly delivering value. These teams stay
committed to an outcome versus finishing a project or release and moving on to a new, different
assignment. This allows team members to develop expertise to truly deliver value for the dealer and
consumer.
We invested in our Engineering team and technology to further increase velocity, deliver great
customer experiences, modernize our key architecture, and accelerate business value. The impact of
technology on our business is significant. By becoming a “remote first” organization, we have been
able to hire 100 new Engineering team members in 2024 and compete for the best talent.
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2024 Annual Report | Shareholder Letter
We have learned how to develop relationships with dealers that are profitable throughout our history.
Forging a profitable relationship requires us to select the right dealer, align incentives, communicate
constantly, and create processes to enforce standards. In our segment of the market, the dealer has
significant influence over loan performance. Learning how to create relationships with dealers who
share our passion for changing lives has been one of our most important accomplishments. In 2024,
we worked to modernize our originations platform. Once complete, these changes will allow us to
enhance our product faster to meet the needs of the dealer. We continued to create opportunities to
listen to the voice of the dealer through dealer visits, meetings, and celebrations. We made additional
enhancements to make it more convenient for dealers to do business with us by continuing to expand
our financing options for dealers to provide more competitive deal structures and advances.
We invested in consumer experiences. Throughout the life of the loan, consumers can access
account information and payment channels through our mobile app, which we continued to enhance
throughout the year.
We invested in our team members. We recruited new talent; recognized top talent; enhanced our
benefits; and created professional development experiences through a mix of in-person and virtual
events, such as open forum meetings with top leadership, virtual town halls, monthly management
meetings, regional roundtables, retreats for our Sales and Operations leaders, and Team Member
Resource Group meetings. We also offered team members opportunities to give back, including
packaging over 100,000 meals for charity groups in their communities. These events furthered our
shared sense of purpose and cross-functional collaboration to maintain productivity in a remote
setting.
Share Repurchases
To the extent we generate capital in excess of what is needed to fund and re-invest in the business,
we will return that capital to shareholders through share repurchases as we have done in the past.
We have used excess capital to repurchase shares when prices are at or below our estimate of
intrinsic value (which is the discounted value of estimated future cash flows). As long as the share
price is at or below our estimate of intrinsic value, we prefer share repurchases to dividends for
several reasons. First, repurchasing shares below intrinsic value increases the value of the remaining
shares. Second, distributing capital to shareholders through a share repurchase gives shareholders
the option to defer taxes by electing not to sell any of their holdings. A dividend does not allow
shareholders to defer taxes in this manner. Finally, share repurchases enable shareholders to increase
their ownership, receive cash, or do both based on their individual circumstances and view of the
20
2024 Annual Report | Shareholder Letter
value of a Credit Acceptance share — they do both if the proportion of shares they sell is smaller than
the ownership stake they gain through the repurchase. A dividend does not provide similar flexibility.
Before starting the share repurchase program, the Company had approximately 46 million shares
outstanding. After beginning our share repurchase program in mid-1999, we have repurchased
approximately 40.9 million shares at a total cost of $5.2 billion through year-end 2024. We actively
repurchased shares in 2021 and 2022 as the pandemic resulted in conditions where: (1) we had
significant excess capital; and (2) our share price was trading at or below our estimate of intrinsic
value. During 2021 and 2022, we repurchased approximately 4.3 million shares, which represented
25.4% of the shares outstanding at the beginning of 2021, at a total cost of $2.2 billion. In 2023 and
2024, due to the improvement in the competitive environment and the increase in our growth rate, we
repurchased only approximately 913,000 shares, which represented 7.2% of the shares outstanding at
the beginning of 2023, at a total cost of $476 million.
At times, it may appear that we have excess capital, but we will not be active in repurchasing our
shares. This can occur for several reasons. First, the assessment of our capital position involves a high
degree of judgment. We need to consider future expected capital needs and the likelihood that
this capital will be available. Simply put, when our debt-to-equity ratio falls below the normal trend
line, it does not necessarily mean we have concluded that we have excess capital. Our first priority is
always to make sure we have enough capital to fund our business, and such assessments are always
made using what we believe are conservative assumptions. Second, we may have excess capital
but conclude our shares are overvalued relative to intrinsic value or are trading at a level where we
believe it’s likely they could be purchased at a lower price at some point in the future. The assessment
of intrinsic value is also highly judgmental. The final reason we may be inactive in repurchasing shares,
when we have excess capital at a time when the share price is attractive, is that we are in possession
of what we believe to be material information that has not yet been made public. During such periods,
we suspend our share repurchases until the information has been publicly disclosed.
Unless we disclose a different intention, shareholders should assume we are following the approach
outlined above in this “Share Repurchases” section. Our priority is to fund the business. If we conclude
we have excess capital, we will return that capital to shareholders through share repurchases. If we
are inactive for a period, shareholders should not assume that we believe our shares are overvalued.
21
2024 Annual Report | Shareholder Letter
Litigation and Regulatory Matters
Shareholders should consider how the litigation and regulatory landscape may impact their
investment in the Company. Since the Company is engaged in active litigation, it is a topic that I am
unable to discuss in this letter in much detail. With that qualification, and it is a significant one, I share
largely the same thoughts as last year.
First, there are state and federal laws and regulations governing virtually every facet of the auto
finance industry. We have a comprehensive compliance management system to oversee compliance
with those laws. We first documented this system in 2002 and have enhanced it over time. We believe
our compliance management system is among the best in the industry. Ultimately, we strive to do what
is right and are dedicated to working with dealers to help change lives of consumers through our
product.
Second, we have observed that the regulatory landscape has changed dramatically in recent years.
Certain regulators are increasingly likely to move toward enforcement actions or litigation rather than
work through perceived differences. Regulatory expectations are not always communicated clearly,
and companies do not always get credit for strong internal controls. It is too soon to tell if this trend
will change at the federal level with new leadership at the Consumer Financial Protection Bureau
(CFPB). Given our experience, we can say with certainty that a regulatory environment is challenging
if laws are not consistently and fairly applied to regulated entities or interpreted in a different manner
by administration or entity.
To manage this risk, we closely follow how agencies, such as the CFPB, state attorneys general, and
financial services regulators, are interpreting the existing laws through their blog posts, circulars,
changes to exam manuals, consent orders, and enforcement actions, and adjust our policies and
procedures as we believe is necessary.
We support the mission of agencies such as the CFPB, which was created “to implement and, where
applicable, enforce Federal consumer financial law consistently for the purpose of ensuring all
consumers have access to markets for consumer financial products and services and that markets for
consumer financial products and services are fair, transparent, and competitive.” However, we speak
up — and defend ourselves — when we believe that an agency has overstepped its bounds or has
unfairly accused us of violating the law. Because we have a matter in active litigation, we must let our
court filings speak for themselves on this point.
Our public disclosures include three pending regulatory matters, with one of those being in litigation.
We have closed seven previously disclosed matters since 2014 without any material changes to
the Company. The first of these matters started in mid-2014, which means we have been subject to
continuous scrutiny for the last 10 years. We have responded to informational requests on almost
every aspect of our business and produced millions of pages of documents to support those
responses.
22
2024 Annual Report | Shareholder Letter
As I stated above, there is not much I can say about the ongoing matters other than that our intention
is to seek common ground where we can and defend ourselves vigorously when a compromise is
unavailable. We continue to take these matters seriously, and they have our full attention.
A Final Note
For 53 years, Credit Acceptance has been dedicated to helping people finance a vehicle. We have
provided an opportunity for vehicle ownership to over five million people. To accomplish this, we have
had an incredibly talented team of dedicated individuals that have spent a large portion of their lives
helping us achieve our goals.
During the pandemic, almost our entire team went remote in a matter of days. Prior to this, other than
the Sales team, we were entirely in the office with limited remote capabilities. At the time, we worried
that we would slip and be much less effective. While our Sales team had been very effective working
remotely, we questioned whether this would work as well for other teams. We monitored it closely.
Fortunately, and somewhat surprisingly, we didn’t miss a beat. We measure the performance of most
of our team members and our metrics remained strong. In fact, after a while, it seemed to be a more
efficient and effective way of working. We have always tried to put our team members in the best
position to succeed, this seemed like another opportunity to do so. So, in December of 2020, we
announced that we would permanently stay remote. By doing so, it also enabled us to access a much
larger talent pool for hiring going forward. Previously, to work on most of our various teams, you had
to be able to commute to Southfield, Michigan every day. Now we hire the best talent we can find,
regardless of their location.
I chose to highlight this as there continues to be pushes by other companies to return to office,
either hybrid or full time. I have paid close attention to this as it is the opposite of what we are doing.
Fortunately, problems that other organizations reference have not been an issue for us. Perhaps, it
works well for us because we made it part of our already strong culture and committed to its
long-term success . We communicated our direction clearly, developed new ways of working, and
created opportunities for connection. We set expectations for virtual collaboration and introduced
structured touchpoints.
Working remotely works well for us because we
made it part of our already strong culture and
committed to its long-term success.
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2024 Annual Report | Shareholder Letter
Strengthening our culture continues to be one of our key initiatives. Over the long term, having a
great environment that enables people to excel while working together will allow us to continue
to attract and retain the best talent. We are leaning into taking advantage of technology for
collaboration and learning, two areas commonly cited as concerns by organizations returning to the
office. We also prioritize time to connect in person each year. Four years in, it seems to be working
very well — our team members seem as committed and effective as ever to positively changing lives.
I’m incredibly grateful for the amazing dedication of our team members who have made Credit
Acceptance what it is today.
We look forward to another year of innovation, collaboration, and positively changing lives in 2025
and beyond.
Kenneth S. Booth
Chief Executive Officer
April 2, 2025
Certain statements herein are forward-looking statements that are subject to certain risks. Please see “Forward-Looking Statements” on
page 45 of our Annual Report on Form 10-K for the year ended December 31, 2024.
24
2024 Annual Report | Shareholder Letter
25
Key operating results
26
2024 Annual Report | Shareholder Letter
Key operating results
At the simplest level, our business success is largely determined by how many loans we originate and
how those loans perform.
Unit Volume
The following table summarizes the growth in number of loans, or unit volume, over the last 20 years:
8.6% compound annual growth rate 2005-2024
% Year-to-year change
2011
2005
81,184
2006
12.5%
91,344
178,074
2007
106,693
16.8%
2008
121,282
13.7%
2009
111,029
-8.5%
2010
136,813
23.2%
30.2%
2012
190,023
6.7%
2013
202,250
6.4%
2014
223,998
10.8%
2015
298,288
33.2%
2016
330,710
10.9%
2017
328,507
-0.7%
2018
373,329
13.6%
2019
369,805
-0.9%
2020
341,967
-7.5%
2021
268,730
-21.4%
2022
280,467
4.4%
2023
332,499
18.6%
2024
386,126
16.1%
27
Active dealers
Year-to-year
change
Unit volume per
dealer
Year-to-year
change
2005
1,759
46.2
2006
2,214
25.9%
41.3
-10.6%
2007
2,827
27.7%
37.7
-8.7%
2008
3,264
15.5%
37.2
-1.3%
2009
3,168
-2.9%
35.0
-5.9%
2010
3,206
1.2%
42.7
22.0%
2011
3,998
24.7%
44.5
4.2%
2012
5,319
33.0%
35.7
-19.8%
2013
6,394
20.2%
31.6
-11.5%
2014
7,247
13.3%
30.9
-2.2%
2015
9,064
25.1%
32.9
6.5%
2016
10,536
16.2%
31.4
-4.6%
2017
11,551
9.6%
28.4
-9.6%
2018
12,528
8.5%
29.8
4.9%
2019
13,399
7.0%
27.6
-7.4%
2020
12,690
-5.3%
26.9
-2.5%
2021
11,410
-10.1%
23.6
-12.3%
2022
11,901
4.3%
23.6
0.0%
2023
14,174
19.1%
23.5
-0.4%
2024
15,463
9.1%
25.0
6.4%
Compound annual growth rate
2005-2024
12.1%
-3.2%
2024 Annual Report | Shareholder Letter
Unit volume is a function of the number of active dealers and the average volume per dealer. The
following table summarizes the trend in each of these variables over the last 20 years:
As the table shows, the growth in unit volume since 2005 has resulted, in most years, from an
increase in the number of active dealers partially offset by a reduction in volume per dealer. Prior to
the COVID-19 pandemic and resulting vehicle shortages, we faced two challenges in growing unit
volume. First, increased competition made it more difficult to enroll new dealers and more difficult
to retain those who had already enrolled, since they had more alternatives to choose from. In
addition, increased competition was putting downward pressure on volume per dealer.
28
2024 Annual Report | Shareholder Letter
Second, as the number of active dealers increased, it became harder to grow at the same rate. The
impact of these challenges is apparent starting in 2017. Following robust expansion each year from
2011 to 2016, the growth of active dealers decelerated annually from 2017 to 2019. The number
of active dealers decreased in 2020 and 2021 due to the pandemic. The growth in active dealers
from 2022 to 2024 is attributable primarily to a more favorable competitive environment and also
improvements to our sales and marketing strategy. In 2024, the number of active dealers reached its
highest level in our history.
Loan Performance
The most critical time to correctly assess future loan performance is at loan inception, since that is
when we determine the amount we pay to the dealer.
At loan inception, we use a statistical model to estimate the expected collection rate for that loan.
The statistical model is called a credit scorecard. Most consumer finance companies use such a
tool to forecast the performance of the loans they originate. Our credit scorecard combines credit
bureau data, customer data supplied in the credit application, vehicle data, dealer data, and data
captured from the loan transaction such as the initial loan term or the amount of the down payment
received from the customer. We developed our first credit scorecard in 1998, which we have revised
periodically as we identified new trends through our evaluation of variances in expected collection
rates. A credit scorecard that is accurate across a population of loans allows us to properly price new
loan originations, which improves the probability that we will realize our expected returns on capital.
Subsequent to loan inception, we continue to evaluate the expected collection rate for each loan.
Our evaluation becomes more accurate as the loans age, since we use actual loan performance data
in our aggregated forecast. By comparing our current expected collection rate for each loan with the
rate we projected at the time of origination, we can assess the accuracy of that initial forecast.
29
Loan performance can be explained by a combination of internal and external factors. Internal
factors, among other things, include the quality of our origination and collection processes, the
quality of our credit scorecard, and changes in our policies governing new loan originations. External
factors include, among other things, inflation, the unemployment rate, the retail price of gasoline,
vehicle wholesale values, and the cost of other required expenditures (such as for food and energy)
that impact consumers. In addition, the level of competition is thought to impact loan performance
through something called adverse selection.
Adverse selection, as it relates to our market, refers to an inverse correlation between the number of
lenders that are competing for the loan and the accuracy of an empirical scorecard. Said another
December 31,
2024 forecast
Initial forecast
Variance
2005
73.6%
74.0%
-0.4%
2006
70.0%
71.4%
-1.4%
2007
68.1%
70.7%
-2.6%
2008
70.4%
69.7%
0.7%
2009
79.5%
71.9%
7.6%
2010
77.7%
73.6%
4.1%
2011
74.7%
72.5%
2.2%
2012
73.7%
71.4%
2.3%
2013
73.4%
72.0%
1.4%
2014
71.7%
71.8%
-0.1%
2015
65.3%
67.7%
-2.4%
2016
63.9%
65.4%
-1.5%
2017
64.7%
64.0%
0.7%
2018
65.5%
63.6%
1.9%
2019
67.2%
64.0%
3.2%
2020
67.7%
63.4%
4.3%
2021
63.8%
66.3%
-2.5%
2022
60.2%
67.5%
-7.3%
2023
64.3%
67.5%
-3.2%
2024
66.5%
67.2%
-0.7%
Average
69.1%
68.8%
0.3%
2024 Annual Report | Shareholder Letter
The following table compares our December 31, 2024 aggregated forecast of loan performance with
our initial forecast, segmented by year of origination:
30
way, without any competition, it is easier to build a scorecard that accurately assesses expected
collections across a population of loans based on attributes collected at the time of loan
origination. As competition increases, creating an accurate scorecard becomes more challenging.
To illustrate adverse selection, we will give a simple example. Assume that the scorecard we use to
accept assignment of loans originated by participating dealers is based on a single variable, the
amount of the customer’s down payment, and that the higher the down payment, the higher the
expected collection rate. Assume that, for many years, we have no competitors, and we accumulate
performance data indicating that loans with down payments above $1,000 consistently produce
the same average collection rate. Then assume that we begin to compete with another lender
whose scorecard ignores down payment and instead emphasizes the amount of the customer’s
weekly income.
As the competing lender begins to acquire loans originated by dealers based on its scorecard,
our mix of loans would be impacted as follows: We would start to receive loans for borrowers with
lower average weekly incomes as the new lender acquires loans for borrowers with higher weekly
incomes — i.e., borrowers whose loans we would previously have acquired. Furthermore, since, in
this example, our scorecard focuses only on down payment, the shift in our borrower mix would
not be detected by our scorecard, and our collection rate expectation would remain unchanged.
It is easy to see that this shift in borrower characteristics would have a negative impact on loan
performance, and that this impact will be missed by our scorecard.
Although the real world is more complex than this simple example — with hundreds of lenders
competing for loans and with each lender using many variables in its scorecard — adverse selection
is something that probably does impact loan performance.
Over the 20-year period shown in the table on page 29, our loans have performed on average 30
basis points better than our initial forecasts. Loans originated in 10 of the 20 years have yielded
actual collection results worse than our initial estimates. What is noteworthy, however, is that
the underperformance was modest for all years other than 2022. Similar to others in our industry,
2022 loans significantly underperformed our initial estimates as they were originated in a period
when intense competition coincided with the lapse of federal stimulus payments and enhanced
unemployment benefits, the peak of vehicle values and prices, and rising inflation. Despite the
underperformance, we continue to estimate that loans originated in each of these 10 years will
generate Economic Profit in the aggregate.
We have understood for many years that expecting to predict the performance of our loans with
exacting precision is not realistic. For this reason, we have made it a priority to maintain a margin
of safety so that, even if our forecasts prove to be optimistic, our loans, on average, will still be
profitable. Because of this approach, we believe we can withstand a significant deterioration in
loan performance and still have an opportunity to move forward and create significant value for our
shareholders.
2024 Annual Report | Shareholder Letter
In 2024, the number of active dealers
reached its highest level in our history.
31
Supplemental
financial results
32
1 Return on equity is defined as GAAP net income for the applicable period divided by average shareholders’ equity for such period.
GAAP net income
per diluted share
Year-to-year
change in GAAP net
income per share
Return on equity1
2005
$1.85
21.8%
2006
$1.66
-10.3%
20.2%
2007
$1.76
6.0%
23.1%
2008
$2.16
22.7%
22.2%
2009
$4.62
113.9%
35.6%
2010
$5.67
22.7%
34.8%
2011
$7.07
24.7%
40.0%
2012
$8.58
21.4%
37.8%
2013
$10.54
22.8%
38.0%
2014
$11.92
13.1%
37.0%
2015
$14.28
19.8%
35.4%
2016
$16.31
14.2%
31.1%
2017
$24.04
47.4%
36.9%
2018
$29.39
22.3%
31.7%
2019
$34.57
17.6%
29.8%
2020
$23.47
-32.1%
19.2%
2021
$59.52
153.6%
43.3%
2022
$39.32
-33.9%
32.7%
2023
$21.99
-44.1%
16.6%
2024
$19.88
-9.6%
15.0%
Compound annual growth rate 2005-2024
13.3%
Average annual return on equity 2005-2024
30.1%
Supplemental financial results
2024 Annual Report | Shareholder Letter
GAAP Results
The table below summarizes our results over the last 20 years under accounting principles generally
accepted in the United States of America (GAAP):
33
2024 Annual Report | Shareholder Letter
Over the last 20 years, GAAP net income per diluted share has grown at a compounded annual rate of
13.3%, with an average annual return on equity of 30.1%.
The decline in GAAP net income per diluted share from 2021 to 2024 was primarily driven by shifts
in loan performance during this period. Prior to moderating in 2022, loan performance significantly
exceeded expectations in 2021 following the distribution of federal stimulus payments and enhanced
unemployment benefits. In 2023 and 2024, we experienced a decline in loan performance and slower
forecasted net cash flow timing as a result of below-average levels of consumer loan prepayments.
Historically, consumer loan prepayments have been lower in periods with less availability of consumer
credit. Last year, GAAP net income per diluted share decreased 9.6% to $19.88, with a return on equity
of 15.0%. The decrease was primarily due to a higher cost of debt and the decline in loan performance
and slower forecasted net cash flow timing, partially offset by an increase in the average balance of
our loan portfolio. The “Adjusted Results” section below explains our financial results after considering
the impact of the current expected credit loss (CECL) accounting standard and other accounting-
related items.
Adjusted Results
Our business model is different from that of a typical lender and doesn’t fit neatly into GAAP. The
adoption of CECL at the beginning of 2020 means we have now been required to use three different
GAAP accounting methods. Unfortunately, none of the three GAAP methods results in financial
statements that are consistent with how we think about our business. To solve this problem, we began
reporting adjusted results using an accounting method that we believe is simple to understand, is
consistently presented, and matches the economics of our business. To explain this method, some
additional background is needed.
Most of the automobile dealers we enroll receive two types of payments from us. The first payment
is made at the time of origination. The remaining payments are remitted over time based on the
performance of the loan. The amount we pay at the time of origination is called an advance; the
portion paid over time is called dealer holdback.
Over the last 20 years GAAP net income per
diluted share has grown at a compounded
annual rate of 13.3%, with an average annual
return on equity of 30.1%.
34
2024 Annual Report | Shareholder Letter
The finance charge revenue we recognize over the life of a loan equals the cash we collect from
the loan (e.g., repayments by the consumer), less the amounts we pay to the dealer (advance +
dealer holdback). In other words, the finance charge revenue we recognize over the life of the loan
equals the cash inflows from the loan less the cash outflows to acquire the loan. This amount, plus
a modest amount of revenue from other sources, less our operating expenses, interest, and taxes, is
the sum that will ultimately be paid to shareholders or reinvested in new assets.
For our adjusted financial results, we recognize finance charge revenue on a level-yield basis. That
is, the amount of finance charge revenue recognized in a given period, divided by the loan asset,
is a constant percentage. Since the future cash flows from a loan are not known with certainty, we
use statistical models to forecast the amount of cash flows from each loan. Our finance charge
revenue is recorded based on these estimates. As the estimates change, we adjust the yield.
This method produces financial results that we believe are a close approximation of the actual
economics of our business.
35
2024 Annual Report | Shareholder Letter
While our adjusted methodology is simple and closely represents the actual economics of our
business, we do not believe that our GAAP financial results provide sufficient transparency into
the economics of our business. As noted earlier, the current required GAAP methodology is called
CECL. Like the adjusted methodology described above, CECL requires a level-yield approach
for recognizing finance charge revenue. However, the yield under CECL is not the yield that we
expect to earn on our portfolio of loans. Instead, the yield is what we would earn if every payment
were received according to the contractual terms of the loans, a figure much higher than what we
actually expect to earn across the population of loans. Based on this alone, you might expect CECL to
overstate our profitability. But CECL, like any accounting standard, doesn’t change the total amount
of income recorded, it only changes the timing. Eventually, the true cash profits and the accounting
profits need to match.
To arrive at a result that eventually matches the cash profit, CECL requires us to offset the additional
revenue that it causes to be recorded over the life of the loans with an additional expense in an
equivalent amount. The expense is recorded as a provision for credit losses at the time the loans
are originated. Since no revenue has yet been recorded, this means that, under CECL, our financial
statements reflect an initial loss on each loan we originate, a result that does not match the economics
of the transaction.
CECL also differs from our adjusted methodology in the way it treats changes in expected cash flows.
As mentioned above, for the adjusted results, we treat those changes as yield adjustments. In contrast,
CECL treats changes in expected cash flows as a current-period expense (for unfavorable changes)
or reversal of expense (for favorable changes). The combination of the three CECL-required steps —
(1) recording a large expense at loan inception, (2) recording finance charge revenue at a yield higher
than the yield we expect to earn, and (3) recording forecast changes through the income statement
in the current period — can make it difficult to understand the performance of our business using our
GAAP-based financial statements. The floating yield adjustment in the tables below addresses all
three of these issues by eliminating the provision for credit losses recorded in our GAAP statements
and modifying GAAP-based finance charges so the yield is equal to the one we expect to earn on
the loan.
36
2024 Annual Report | Shareholder Letter
The tables below show net income and net income per diluted share for the last 20 years on both a
GAAP and an adjusted basis. Besides the floating yield adjustment, the tables include several other
categories of adjustments that are generally less material. The notable exception is the income tax
adjustment in 2017, which reverses the one-time benefit arising from the 2017 Tax Cuts and Jobs
Act. While the benefit recorded in 2017 represented a real cash savings due to the reduction in
income tax rates, we reversed it for adjusted net income as we prefer to measure the performance
of the business using consistent tax rates. To that end, we calculated adjusted net income using a
37% tax rate for 2005-2017 and a 23% tax rate for 2018-2024. The other, less-material adjustments are
explained in our quarterly earnings press releases.
($ in millions)
GAAP net
income
Floating yield
adjustment
Income tax
adjustment
Other
adjustments
Adjusted
net income
Year-to-year
change
2005
$72.6
$(2.2)
$0.1
$(7.3)
$63.2
2006
$58.6
$0.4
$(1.7)
$4.4
$61.7
-2.4%
2007
$54.9
$3.6
$(1.2)
$4.4
$61.7
0.0%
2008
$67.2
$13.1
$0.4
$2.1
$82.8
34.2%
2009
$146.3
$(19.6)
$(1.8)
$0.1
$125.0
51.0%
2010
$170.1
$0.5
$(10.4)
$0.3
$160.5
28.4%
2011
$188.0
$7.1
$(1.3)
$0.3
$194.1
20.9%
2012
$219.7
$ —
$(3.5)
$ —
$216.2
11.4%
2013
$253.1
$(2.5)
$(2.3)
$ —
$248.3
14.8%
2014
$266.2
$(6.0)
$(1.0)
$12.5
$271.7
9.4%
2015
$299.7
$12.9
$(0.8)
$(2.0)
$309.8
14.0%
2016
$332.8
$28.1
$1.8
$(2.1)
$360.6
16.4%
2017
$470.2
$34.1
$(102.4)
$(2.1)
$399.8
10.9%
2018
$574.0
$(24.4)
$7.4
$(2.5)
$554.5
38.7%
2019
$656.1
$0.2
$2.9
$(0.8)
$658.4
18.7%
2020
$421.0
$259.2
$2.1
$4.0
$686.3
4.2%
2021
$958.3
$(142.0)
$12.6
$(2.1)
$826.8
20.5%
2022
$535.8
$174.2
$12.2
$(2.1)
$720.1
-12.9%
2023
$286.1
$256.8
$(3.1)
$(4.2)
$535.6
-25.6%
2024
$247.9
$206.9
$5.8
$18.3
$478.9
-10.6%
Compound annual growth rate 2005-2024
11.2%
37
2024 Annual Report | Shareholder Letter
As the second table shows, adjusted net income per diluted share decreased 6.7% in 2024. Since
2005, adjusted net income per diluted share has increased at a compounded annual rate of 18.2%.
Just like our GAAP results, the change in adjusted net income per diluted share from 2021 to 2024
was primarily driven by shifts in loan performance. Prior to moderating in 2022, loan performance
significantly exceeded expectations in 2021 following the distribution of federal stimulus payments
and enhanced unemployment benefits. In 2023 and 2024, we experienced a decline in loan
performance and slower forecasted net cash flow timing as a result of below-average levels of
consumer loan prepayments. The decrease in adjusted net income per diluted share last year was
attributable to a decrease in adjusted net income, partially offset by a decrease in our weighted
average diluted shares outstanding. Our adjusted net income decreased 10.6% in 2024 primarily due
to a higher cost of debt and the decline in loan performance and slower forecasted net cash flow
timing, partially offset by an increase in the average balance of our loan portfolio. Our weighted
average diluted shares outstanding decreased 4.2% during 2024, primarily due to share repurchases.
GAAP net
income per
diluted share
Floating yield
adjustment
per diluted
share
Income tax
adjustment
per diluted
share
Other
adjustments
per diluted
share
Adjusted net
income per
diluted share
Year-to-year
change
2005
$1.85
$(0.06)
$ —
$(0.18)
$1.61
2006
$1.66
$0.01
$(0.05)
$0.13
$1.75
8.7%
2007
$1.76
$0.11
$(0.04)
$0.15
$1.98
13.1%
2008
$2.16
$0.42
$0.01
$0.07
$2.66
34.3%
2009
$4.62
$(0.62)
$(0.06)
$0.01
$3.95
48.5%
2010
$5.67
$0.02
$(0.35)
$0.01
$5.35
35.4%
2011
$7.07
$0.26
$(0.04)
$0.01
$7.30
36.4%
2012
$8.58
$ —
$(0.13)
$ —
$8.45
15.8%
2013
$10.54
$(0.11)
$(0.09)
$ —
$10.34
22.4%
2014
$11.92
$(0.27)
$(0.04)
$0.56
$12.17
17.7%
2015
$14.28
$0.62
$(0.03)
$(0.10)
$14.77
21.4%
2016
$16.31
$1.37
$0.09
$(0.10)
$17.67
19.6%
2017
$24.04
$1.74
$(5.23)
$(0.11)
$20.44
15.7%
2018
$29.39
$(1.25)
$0.38
$(0.13)
$28.39
38.9%
2019
$34.57
$0.01
$0.16
$(0.04)
$34.70
22.2%
2020
$23.47
$14.45
$0.12
$0.22
$38.26
10.3%
2021
$59.52
$(8.82)
$0.78
$(0.13)
$51.35
34.2%
2022
$39.32
$12.79
$0.90
$(0.16)
$52.85
2.9%
2023
$21.99
$19.73
$(0.23)
$(0.32)
$41.17
-22.1%
2024
$19.88
$16.60
$0.46
$1.47
$38.41
-6.7%
Compound annual growth rate 2005-2024
18.2%
38
See Exhibit A (pages 44 to 48) for a reconciliation of the adjusted financial measures to the most directly comparable GAAP financial
measures.
We determine the imputed cost of equity by using a formula that considers the risk of the business and the risk associated with our use of
debt. The formula is as follows: average equity x {(the average 30-year Treasury rate + 5%) + [(1 – tax rate) x (the average 30-year Treasury
rate + 5% – pre-tax average cost-of-debt rate) x average debt / (average equity + average debt x tax rate)]}.
1
2
2024 Annual Report | Shareholder Letter
Economic Profit
We use a non-GAAP financial measure called Economic Profit to evaluate our financial results and
determine profit-sharing for team members. We also use Economic Profit as a framework to evaluate
business decisions and strategies, with an objective to maximize Economic Profit over the long term.
Economic Profit measures how efficiently we utilize our total capital, both debt and equity, and is a
function of the return on capital in excess of the cost of capital and the amount of capital invested in
the business. Economic Profit differs from net income in that it includes a cost for equity capital.
The following table summarizes Economic Profit for 2005-2024:1
($ in millions)
Adjusted net
income
Imputed cost
of equity2
Economic Profit
Year-to-year
change
2005
$63.2
$(34.5)
$28.7
2006
$61.7
$(29.6)
$32.1
11.8%
2007
$61.7
$(27.2)
$34.5
7.5%
2008
$82.8
$(35.8)
$47.0
36.2%
2009
$125.0
$(45.9)
$79.1
68.3%
2010
$160.5
$(47.8)
$112.7
42.5%
2011
$194.1
$(51.0)
$143.1
27.0%
2012
$216.2
$(56.6)
$159.6
11.5%
2013
$248.3
$(75.1)
$173.2
8.5%
2014
$271.7
$(87.5)
$184.2
6.4%
2015
$309.8
$(93.2)
$216.6
17.6%
2016
$360.6
$(113.8)
$246.8
13.9%
2017
$399.8
$(142.8)
$257.0
4.1%
2018
$554.5
$(214.1)
$340.4
32.5%
2019
$658.4
$(225.7)
$432.7
27.1%
2020
$686.3
$(215.0)
$471.3
8.9%
2021
$826.8
$(252.7)
$574.1
21.8%
2022
$720.1
$(243.5)
$476.6
-17.0%
2023
$535.6
$(275.1)
$260.5
-45.3%
2024
$478.9
$(278.6)
$200.3
-23.1%
Compound annual growth rate 2005-2024
10.8%
39
1 See Exhibit A (pages 44 to 48) for a reconciliation of the adjusted financial measures to the most directly comparable GAAP financial
2024 Annual Report | Shareholder Letter
Economic Profit is a function of three variables: the adjusted average amount of capital invested, the
adjusted return on capital, and the adjusted weighted average cost of capital. The following table
summarizes our financial performance in these areas over the last 20 years:1
($ in millions)
Adjusted average
capital invested
Adjusted return on
capital
Adjusted weighted
average cost of
capital
Spread
2005
$523.4
13.7%
8.3%
5.4%
2006
$548.5
13.9%
8.1%
5.8%
2007
$710.1
11.9%
7.0%
4.9%
2008
$975.0
11.3%
6.4%
4.9%
2009
$998.7
14.6%
6.7%
7.9%
2010
$1,074.2
17.7%
7.2%
10.5%
2011
$1,371.1
16.8%
6.4%
10.4%
2012
$1,742.8
14.7%
5.5%
9.2%
2013
$2,049.2
14.1%
5.7%
8.4%
2014
$2,338.1
13.2%
5.3%
7.9%
2015
$2,831.9
12.7%
5.0%
7.7%
2016
$3,572.0
11.9%
5.0%
6.9%
2017
$4,276.4
11.2%
5.2%
6.0%
2018
$5,420.9
12.5%
6.2%
6.3%
2019
$6,372.2
12.7%
6.0%
6.7%
2020
$7,076.0
11.8%
5.2%
6.6%
2021
$7,078.4
13.5%
5.4%
8.1%
2022
$6,466.1
13.2%
5.8%
7.4%
2023
$6,909.8
10.8%
7.0%
3.8%
2024
$8,140.5
9.9%
7.4%
2.5%
Compound annual growth rate 2005-2024
15.5%
40
2024 Annual Report | Shareholder Letter
From 2005 to 2011, Economic Profit improved as a result of growth in average capital, higher returns
on capital and lower costs of capital. In 2005, our return on capital was 13.7%. In 2011, as a result of
a favorable competitive environment, it was 16.8%. Since 2011, almost all of the growth in Economic
Profit has occurred from increasing average capital. In each year from 2011 through 2017, the return
on capital declined as competition returned to our market. The trend reversed in 2018 as our return
on capital improved, by 130 basis points, due to a change in the federal tax rate. In 2020, our return
on capital declined by 90 basis points due to the impact of COVID-19 on loan performance. With
hindsight, our downward forecast adjustment recorded in the first quarter of 2020 was too large.
In 2021, much of the 170-basis point improvement in our return on capital was due to increased
collections and improvement in our forecast. In 2022, Economic Profit decreased as a result of a
decline in average capital, a higher cost of capital, and a lower return on capital.
In both 2024 and 2023, Economic Profit decreased as a result of a lower return on capital and a higher
cost of capital, partially offset by an increase in average capital as a result of an increase in the
average balance of our loan portfolio. During 2024 and 2023, our adjusted return on capital declined
by 90 basis points and 240 basis points, respectively, due to a decline in loan performance and slower
forecasted net cash flow timing primarily as a result of a decrease in consumer loan prepayments to
below-average levels.
We grew active dealers each year from 2022
to 2024, reaching the highest number of active
dealers in our history.
41
2024 Annual Report | Shareholder Letter
There are several additional points worth mentioning.
We grew adjusted average capital each year from 2005 to 2021. The growth was a direct result
of our success in growing the number of active dealers. While variables like volume per dealer
and contract size impact adjusted average capital growth as well, the trend in the number
of active dealers tells us much of what we need to know to understand the trajectory of our
business. Growing the number of active dealers makes future Economic Profit growth likely. If
we are unable to grow the number of active dealers, Economic Profit growth will likely stall. This
is important since in 2020 and 2021 the number of active dealers declined. While the COVID-19
pandemic and related vehicle shortages contributed to this decline, the downturn follows a
trend of decelerating growth that began in 2017 after strong growth each year from 2011 to
2016. We grew active dealers each year from 2022 to 2024, reaching the highest number of active
dealers in our history.
While the return on capital has been volatile, expenses as a percentage of adjusted average
capital have declined for 14 of the last 18 years, to 6.2% in 2024 from 15.1% in 2006. This
underscores the importance of growing average capital. As long as the return on incremental
capital invested exceeds the cost of that capital, growing average capital increases Economic
Profit directly. In addition, growing average capital improves the return on capital by reducing
the impact of expenses, since a portion of our expenses is fixed. The volatility in the return on
capital is primarily due to the revenue component, which moves up and down based on the
competitive environment. When the competitive environment is favorable, we reduce advance
rates (the amount we pay the dealer at loan origination), and that increases our return. When the
competitive environment worsens, the opposite occurs. But growing expenses more slowly than
capital allows us to achieve greater returns in both favorable and unfavorable environments.
As described previously in the section entitled “Operating Principles”, to the extent we generate
capital in excess of what’s needed to fund and re-invest in the business, we will return that capital
to shareholders through share repurchases. During 2021 and 2022, we used excess capital to
actively repurchase shares rather than growing loan volume through pricing changes at lower
profitability. Over those two years, we repurchased approximately 4.3 million shares, which
represented 25.4% of the shares outstanding at the beginning of 2021, at a total cost of $2.2
billion. Since then, the competitive environment has improved and our growth rate has increased.
In 2023 and 2024, we repurchased approximately 913,000 shares in total, which represented 7.2%
of the shares outstanding at the beginning of 2023, at a total cost of $476 million. Over the long
term, our share repurchase program has enabled us to grow Economic Profit per diluted share
at higher rate than Economic Profit. Likewise, over the long term, we have grown adjusted net
income per diluted share at higher rate than adjusted net income. Shares repurchased during
2021 through 2024 enabled us to minimize the per share impact of the declines in Economic Profit
and adjusted net income in 2023 and 2024.
1
2
3
42
1 See Exhibit A (pages 44 to 48) for a reconciliation of the adjusted financial measures to the most directly comparable GAAP financial meas
Over the last 20 years, Economic Profit per diluted share has grown at a compounded annual rate of
17.7% while Economic Profit has grown at a compounded annual rate of 10.8%. Last year, Economic
Profit per diluted share declined 19.8% while Economic Profit declined 23.1%.
2024 Annual Report | Shareholder Letter
The following table summarizes Economic Profit per diluted share for 2005-2024:1
17.7% compound annual growth rate 2005-2024
Year-to-year change in
Economic Profit per share %
($ in millions)
2011
2005
$0.73
2006
24.7%
$0.91
$5.38
2007
$1.11 22.0%
2008
$1.51 36.0%
2009
$2.50 65.6%
2010
$3.76 50.4%
43.1%
2012
$6.23
15.8%
2013
$7.21
15.7%
2014
$8.25
14.4%
2015
$10.32
25.1%
2016
$12.09
17.2%
2017
$13.14
8.7%
2018
$17.43
32.6%
2019
$22.80
30.8%
2020
$26.28
15.3%
2021
$35.66
35.7%
2022
$34.98
-1.9%
2023
$20.02
-42.8%
2024
$16.06
-19.8%
43
Exhibit A
44
2024 Annual Report | Shareholder Letter
Reconciliation of GAAP Financial Results to Non-GAAP Measures
($ in millions)
GAAP net
income
Floating
yield
adjustment
Income tax
adjustment
Other
adjustments
Adjusted
net income
Imputed
cost of
equity
Economic
Profit
2005
$72.6
$(2.2)
$0.1
$(7.3)
$63.2
$(34.5)
$28.7
2006
$58.6
$0.4
$(1.7)
$4.4
$61.7
$(29.6)
$32.1
2007
$54.9
$3.6
$(1.2)
$4.4
$61.7
$(27.2)
$34.5
2008
$67.2
$13.1
$0.4
$2.1
$82.8
$(35.8)
$47.0
2009
$146.3
$(19.6)
$(1.8)
$0.1
$125.0
$(45.9)
$79.1
2010
$170.1
$0.5
$(10.4)
$0.3
$160.5
$(47.8)
$112.7
2011
$188.0
$7.1
$(1.3)
$0.3
$194.1
$(51.0)
$143.1
2012
$219.7
$ —
$(3.5)
$ —
$216.2
$(56.6)
$159.6
2013
$253.1
$(2.5)
$(2.3)
$ —
$248.3
$(75.1)
$173.2
2014
$266.2
$(6.0)
$(1.0)
$12.5
$271.7
$(87.5)
$184.2
2015
$299.7
$12.9
$(0.8)
$(2.0)
$309.8
$(93.2)
$216.6
2016
$332.8
$28.1
$1.8
$(2.1)
$360.6
$(113.8)
$246.8
2017
$470.2
$34.1
$(102.4)
$(2.1)
$399.8
$(142.8)
$257.0
2018
$574.0
$(24.4)
$7.4
$(2.5)
$554.5
$(214.1)
$340.4
2019
$656.1
$0.2
$2.9
$(0.8)
$658.4
$(225.7)
$432.7
2020
$421.0
$259.2
$2.1
$4.0
$686.3
$(215.0)
$471.3
2021
$958.3
$(142.0)
$12.6
$(2.1)
$826.8
$(252.7)
$574.1
2022
$535.8
$174.2
$12.2
$(2.1)
$720.1
$(243.5)
$476.6
2023
$286.1
$256.8
$(3.1)
$(4.2)
$535.6
$(275.1)
$260.5
2024
$247.9
$206.9
$5.8
$18.3
$478.9
$(278.6)
$200.3
Exhibit A
45
Average capital invested is defined as average debt plus average shareholders’ equity.
Beginning in 2024, we no longer apply the deferred debt issuance adjustment, which has been explained in prior year letters, because
we determined that the adjustment is not material.
1
2
2024 Annual Report | Shareholder Letter
($ in millions)
GAAP
average
capital invested1
Floating yield
adjustment
Income tax
adjustment
Other
adjustments2
Adjusted
average
capital invested
2005
$519.4
$7.5
$ —
$(3.5)
$523.4
2006
$548.0
$5.5
$ —
$(5.0)
$548.5
2007
$706.1
$8.2
$ —
$(4.2)
$710.1
2008
$960.7
$13.8
$ —
$0.5
$975.0
2009
$983.6
$13.2
$ —
$1.9
$998.7
2010
$1,057.3
$5.2
$ —
$11.7
$1,074.2
2011
$1,346.0
$9.4
$ —
$15.7
$1,371.1
2012
$1,715.3
$11.1
$ —
$16.4
$1,742.8
2013
$2,024.5
$9.9
$ —
$14.8
$2,049.2
2014
$2,324.8
$6.7
$ —
$6.6
$2,338.1
2015
$2,792.8
$7.0
$ —
$32.1
$2,831.9
2016
$3,513.1
$29.6
$ —
$29.3
$3,572.0
2017
$4,200.2
$51.6
$(4.1)
$28.7
$4,276.4
2018
$5,425.8
$80.8
$(117.8)
$32.1
$5,420.9
2019
$6,399.2
$66.2
$(118.5)
$25.3
$6,372.2
2020
$6,874.7
$287.6
$(118.5)
$32.2
$7,076.0
2021
$6,914.1
$243.0
$(118.5)
$39.8
$7,078.4
2022
$6,302.3
$250.8
$(118.5)
$31.5
$6,466.1
2023
$6,508.6
$490.7
$(118.5)
$29.0
$6,909.8
2024
$7,501.8
$757.2
$(118.5)
$ —
$8,140.5
46
Return on capital is defined as net income plus after-tax interest expense divided by average capital.
For 2024, other adjustments includes the reversal of the after-tax loss on the sale of a building. For a description of other adjustments prior
to 2024, refer to prior year letters.
1
2
2024 Annual Report | Shareholder Letter
GAAP return on
capital1
Floating yield
adjustment
Income tax
adjustment
Other
adjustments2
Adjusted return
on capital
2005
15.6%
-0.6%
0.0%
-1.3%
13.7%
2006
13.3%
-0.1%
-0.3%
1.0%
13.9%
2007
11.0%
0.4%
-0.2%
0.7%
11.9%
2008
9.8%
1.2%
0.0%
0.3%
11.3%
2009
17.0%
-2.2%
-0.2%
0.0%
14.6%
2010
18.9%
0.0%
-1.0%
-0.2%
17.7%
2011
16.7%
0.4%
-0.1%
-0.2%
16.8%
2012
15.1%
-0.1%
-0.2%
-0.1%
14.7%
2013
14.5%
-0.2%
-0.1%
-0.1%
14.1%
2014
13.1%
-0.3%
0.0%
0.4%
13.2%
2015
12.5%
0.4%
0.0%
-0.2%
12.7%
2016
11.3%
0.7%
0.0%
-0.1%
11.9%
2017
13.0%
0.7%
-2.3%
-0.2%
11.2%
2018
12.8%
-0.6%
0.4%
-0.1%
12.5%
2019
12.6%
-0.1%
0.2%
0.0%
12.7%
2020
8.3%
3.3%
0.2%
0.0%
11.8%
2021
15.7%
-2.5%
0.4%
-0.1%
13.5%
2022
10.6%
2.2%
0.4%
0.0%
13.2%
2023
7.6%
3.0%
0.2%
0.0%
10.8%
2024
7.6%
1.8%
0.2%
0.3%
9.9%
47
The weighted average cost of capital includes both a cost of equity and a cost of debt. The cost of equity capital is determined
based on a formula that considers the risk of the business and the risk associated with our use of debt. The formula utilized for
determining the cost of equity capital is as follows: (the average 30-year Treasury rate + 5%) + [(1 – tax rate) x (the average 30-year
Treasury rate + 5% – pre-tax average cost-of-debt rate) x average debt / (average equity + average debt x tax rate)].
The adjusted weighted average cost of capital includes both a cost of adjusted equity and a cost of debt. The cost of adjusted
equity capital is calculated using the same formula as above except that adjusted average equity is used in the calculation instead
of average equity.
1
2
2024 Annual Report | Shareholder Letter
GAAP weighted
average cost of
capital1
Floating yield
adjustment
Income tax
adjustment
Other
adjustments
Adjusted
weighted
average cost of
capital2
2005
8.3%
0.0%
0.0%
0.0%
8.3%
2006
8.1%
0.0%
0.0%
0.0%
8.1%
2007
7.0%
0.0%
0.0%
0.0%
7.0%
2008
6.4%
0.0%
0.0%
0.0%
6.4%
2009
6.7%
0.0%
0.0%
0.0%
6.7%
2010
7.3%
0.0%
0.0%
-0.1%
7.2%
2011
6.5%
0.0%
0.0%
-0.1%
6.4%
2012
5.6%
0.0%
0.0%
-0.1%
5.5%
2013
5.7%
0.0%
0.0%
0.0%
5.7%
2014
5.2%
0.1%
0.0%
0.0%
5.3%
2015
5.0%
0.0%
0.0%
0.0%
5.0%
2016
4.9%
0.1%
0.0%
0.0%
5.0%
2017
5.1%
0.1%
0.0%
0.0%
5.2%
2018
6.3%
0.1%
-0.1%
-0.1%
6.2%
2019
6.0%
0.1%
-0.1%
0.0%
6.0%
2020
5.1%
0.2%
-0.1%
0.0%
5.2%
2021
5.3%
0.2%
-0.1%
0.0%
5.4%
2022
5.6%
0.4%
-0.2%
0.0%
5.8%
2023
6.7%
0.4%
-0.1%
0.0%
7.0%
2024
7.0%
0.5%
-0.1%
0.0%
7.4%
48
Non-GAAP adjustments per share include a summation of adjustments made to calculate adjusted net income per share. For additional
detail on these adjustments, see the section of this letter entitled “Adjusted Results.”
1
GAAP net
income per
diluted share
Non-GAAP
adjustments per
diluted share1
Adjusted net
income per
diluted share
Imputed cost
of equity per
diluted share
Economic
Profit per
diluted share
2005
$1.85
$(0.24)
$1.61
$(0.88)
$0.73
2006
$1.66
$0.09
$1.75
$(0.84)
$0.91
2007
$1.76
$0.22
$1.98
$(0.87)
$1.11
2008
$2.16
$0.50
$2.66
$(1.15)
$1.51
2009
$4.62
$(0.67)
$3.95
$(1.45)
$2.50
2010
$5.67
$(0.32)
$5.35
$(1.59)
$3.76
2011
$7.07
$0.23
$7.30
$(1.92)
$5.38
2012
$8.58
$(0.13)
$8.45
$(2.22)
$6.23
2013
$10.54
$(0.20)
$10.34
$(3.13)
$7.21
2014
$11.92
$0.25
$12.17
$(3.92)
$8.25
2015
$14.28
$0.49
$14.77
$(4.45)
$10.32
2016
$16.31
$1.36
$17.67
$(5.58)
$12.09
2017
$24.04
$(3.60)
$20.44
$(7.30)
$13.14
2018
$29.39
$(1.00)
$28.39
$(10.96)
$17.43
2019
$34.57
$0.13
$34.70
$(11.90)
$22.80
2020
$23.47
$14.79
$38.26
$(11.98)
$26.28
2021
$59.52
$(8.17)
$51.35
$(15.69)
$35.66
2022
$39.32
$13.53
$52.85
$(17.87)
$34.98
2023
$21.99
$19.18
$41.17
$(21.15)
$20.02
2024
$19.88
$18.53
$38.41
$(22.35)
$16.06
2024 Annual Report | Shareholder Letter
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ________
Commission file number 000-20202
CREDIT ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
Michigan
38-1999511
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
25505 W. Twelve Mile Road
Southfield, Michigan
48034-8339
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (248) 353-2700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value
CACC
The Nasdaq Stock Market LLC
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The aggregate market value of 6,201,669 shares of the registrant’s common stock held by non-affiliates on June 30, 2024 was approximately $3,191.9 million. For purposes of
this computation, all officers, directors and 10% beneficial owners of the registrant are assumed to be affiliates. Such determination should not be deemed an admission that
such officers, directors and beneficial owners are, in fact, affiliates of the registrant.
At February 4, 2025, there were 12,031,647 shares of the registrant’s common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement pertaining to the registrant’s 2025 annual meeting of shareholders (the “Proxy Statement”) to be filed pursuant to
Regulation 14A are incorporated herein by reference into Part III of this Annual Report on Form 10-K (this “Form 10-K”).
CREDIT ACCEPTANCE CORPORATION
YEAR ENDED DECEMBER 31, 2024
INDEX TO FORM 10-K
Item
Description
Page
PART I
1.
Business
3
1A.
Risk Factors
14
1B.
Unresolved Staff Comments
23
1C.
Cybersecurity
23
2.
Properties
24
3.
Legal Proceedings
25
4.
Mine Safety Disclosures
25
PART II
5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
26
6.
[Reserved]
27
7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
28
7A.
Quantitative and Qualitative Disclosures About Market Risk
45
8.
Financial Statements and Supplementary Data
46
9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
95
9A.
Controls and Procedures
95
9B.
Other Information
97
9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
97
PART III
10.
Directors, Executive Officers and Corporate Governance
97
11.
Executive Compensation
97
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
97
13.
Certain Relationships and Related Transactions, and Director Independence
98
14.
Principal Accounting Fees and Services
98
PART IV
15.
Exhibits and Financial Statement Schedules
98
16.
Form 10-K Summary
109
Signatures
110
2
PART I
ITEM 1.
BUSINESS
General
Credit Acceptance Corporation (referred to as the “Company”, “Credit Acceptance”, “we”, “our” or “us”) makes vehicle
ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers,
regardless of their credit history. Our financing programs are offered through a nationwide network of automobile dealers who
benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated
by these same customers; and from sales to customers responding to advertisements for our financing programs, but who
actually end up qualifying for traditional financing.
Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable
ones. Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that
we provide consumers with an opportunity to improve their lives by improving their credit score and move on to more
traditional sources of financing.
Credit Acceptance was founded in 1972 to collect retail installment contracts (referred to as “Consumer Loans”) originated
by automobile dealerships owned by Donald Foss, our founder. During the 1980s, we began to market this service to non-
affiliated dealers and, at the same time, began to offer dealers a non-recourse cash payment (referred to as an “advance”)
against anticipated future collections on Consumer Loans serviced for that dealer.
We refer to automobile dealers who participate in our programs and who share our desire to provide an opportunity to
consumers to improve their lives as “Dealers.” Upon enrollment in our financing programs, the Dealer enters into a Dealer
servicing agreement with us that defines the legal relationship between Credit Acceptance and the Dealer. The Dealer servicing
agreement assigns the responsibilities for administering, servicing, and collecting the amounts due on Consumer Loans from the
Dealers to us. We are an indirect lender from a legal perspective, meaning the Consumer Loan is originated by the Dealer and
assigned to us.
The majority of the Consumer Loans assigned to us are made to consumers with impaired or limited credit histories. The
following table shows the percentage of Consumer Loans assigned to us with either FICO® scores below 650 or no FICO®
scores:
For the Years Ended December 31,
Consumer Loan Assignment Volume
2024
2023
2022
Percentage of total unit volume with either FICO® scores
below 650 or no FICO® scores
80.6 %
80.9 %
84.8 %
Business Segment Information
We currently operate in one reportable segment which represents our core business of offering innovative financing
solutions and related products and services that enable Dealers to sell vehicles to consumers regardless of their credit
history. For information regarding our one reportable segment and related disclosures, see Note 14 to the consolidated financial
statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
3
Principal Business
We offer Dealers financing programs that enable them to sell vehicles to consumers, regardless of their credit history. We
have two programs: the Portfolio Program and the Purchase Program. Under the Portfolio Program, we advance money to
Dealers (referred to as a “Dealer Loan”) in exchange for the right to service the underlying Consumer Loans. Under the
Purchase Program, we buy the Consumer Loans from the Dealers (referred to as a “Purchased Loan”) and keep all amounts
collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as “Loans.” The following table
shows the percentage of Consumer Loans assigned to us under each of the programs for each of the last three years:
Unit Volume
Dollar Volume (1)
For the Years Ended December 31,
Portfolio Program
Purchase Program
Portfolio Program
Purchase Program
2022
73.5 %
26.5 %
69.8 %
30.2 %
2023
74.0 %
26.0 %
70.7 %
29.3 %
2024
78.7 %
21.3 %
77.5 %
22.5 %
(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 (as defined below) and accelerated Dealer Holdback are not
included.
Portfolio Program
As payment for the vehicle, the Dealer generally receives the following:
•
a down payment from the consumer;
•
a cash advance from us; and
•
after the advance balance (cash advance and related Dealer Loan fees and costs) has been recovered by us, the cash
from payments made on the Consumer Loan, net of certain collection costs and our servicing fee (“Dealer
Holdback”).
We record the amount advanced to the Dealer as a Dealer Loan, which is classified within Loans receivable in our
consolidated balance sheets. Cash advanced to the Dealer is automatically assigned to the Dealer’s open pool of advances.
Dealers make an election as to how many Consumer Loans (either 50 or 100) will be assigned to an open pool before it is
closed, and subsequent advances are assigned to a new pool. Unless we receive a request from the Dealer to keep a pool open,
we automatically close each pool based on the Dealer’s election. All advances within a Dealer’s pool are secured by the future
collections on the related Consumer Loans assigned to the pool. For Dealers with more than one pool, the pools are cross-
collateralized so the performance of other pools is considered in determining eligibility for Dealer Holdback. We perfect our
security interest with respect to the Dealer Loans by obtaining control or taking possession of the Consumer Loans, which list
us as lien holder on the vehicle title.
The Dealer servicing agreement provides that collections received by us during a calendar month on Consumer Loans
assigned by a Dealer are applied on a pool-by-pool basis as follows:
•
first, to reimburse us for certain collection costs;
•
second, to pay us our servicing fee, which generally equals 20% of collections;
•
third, to reduce the aggregate advance balance and to pay any other amounts due from the Dealer to us; and
•
fourth, to the Dealer as payment of Dealer Holdback.
If the collections on Consumer Loans from a Dealer’s pool are not sufficient to repay the advance balance and any other
amounts due to us, the Dealer will not receive Dealer Holdback. Certain events may also result in Dealers forfeiting their rights
to Dealer Holdback, including becoming inactive before assigning 100 Consumer Loans.
Dealers have an opportunity to receive an accelerated Dealer Holdback payment each time a pool of Consumer Loans is
closed. The amount paid to the Dealer is calculated using a formula that considers the number of Consumer Loans assigned to
the pool and the related forecasted collections and advance balance.
Since typically the combination of the advance and the consumer’s down payment provides the Dealer with a cash profit at
the time of sale, the Dealer’s risk in the Consumer Loan is limited. We cannot demand repayment of the advance from the
Dealer except in the event the Dealer is in default of the Dealer servicing agreement. Advances are made only after the
consumer and Dealer have signed a Consumer Loan contract, we have received the executed Consumer Loan contract and
supporting documentation in either physical or electronic form, and we have approved all of the related stipulations for
funding.
4
For accounting purposes, the transactions described under the Portfolio Program are not considered to be loans to
consumers. Instead, our accounting reflects that of a lender to the Dealer. The classification as a Dealer Loan for accounting
purposes is primarily a result of (1) the Dealer’s financial interest in the Consumer Loan and (2) certain elements of our legal
relationship with the Dealer.
Purchase Program
The Purchase Program differs from the Portfolio Program in that the Dealer receives a one-time payment from us at the
time of assignment to purchase the Consumer Loan instead of a cash advance at the time of assignment and future Dealer
Holdback payments. For accounting purposes, the transactions described under the Purchase Program are considered to be
originated by the Dealer and then purchased by us.
Program Enrollment
Dealers are granted access to the Portfolio Program upon enrollment. Access to the Purchase Program is typically only
granted to Dealers that meet one of the following:
•
assigned at least 50 Consumer Loans under the Portfolio Program;
•
franchise dealership; or
•
independent dealership that meets certain criteria upon enrollment.
Revenue Sources
Credit Acceptance derives its revenues from the following principal sources:
•
finance charges, which are comprised of: (1) interest income earned on Loans; (2) administrative fees earned from
ancillary products; (3) program fees charged to Dealers under the Portfolio Program; (4) Consumer Loan assignment
fees charged to Dealers; and (5) direct origination costs incurred on Dealer Loans;
•
premiums earned on the reinsurance of vehicle service contracts; and
•
other income, which primarily consists of ancillary product profit sharing, remarketing fees, and interest. For
additional information, see Note 8 to the consolidated financial statements contained in Item 8 to this Form 10-K,
which is incorporated herein by reference.
The following table sets forth the percent relationship to total revenue of each of these sources:
For the Years Ended December 31,
Percent of Total Revenue
2024
2023
2022
Finance charges
92.2 %
92.3 %
92.0 %
Premiums earned
4.4 %
4.2 %
3.4 %
Other income
3.4 %
3.5 %
4.6 %
Total revenue
100.0 %
100.0 %
100.0 %
5
Operations
Sales and Marketing. Our target market is approximately 60,000 independent and franchised automobile dealers in the
United States. We have market area managers located throughout the United States that market our programs to prospective
Dealers, enroll new Dealers, and support active Dealers. The number of Dealer enrollments and active Dealers for each of the
last three years are presented in the table below:
For the Years Ended December 31,
Dealer Enrollments
Active Dealers (1)
2022
3,627
11,901
2023
5,605
14,174
2024
6,088
15,463
(1)
Active Dealers are Dealers who have received funding for at least one Loan during the period.
Once Dealers have enrolled in our programs, the market area managers work closely with the newly enrolled Dealers to
help them successfully launch our programs within their dealerships. Market area managers also provide active Dealers with
ongoing support and consulting focused on improving the Dealers’ success on our programs, including assistance with
increasing the volume and performance of Consumer Loan assignments.
Dealer Servicing Agreement. As a part of the enrollment process, a new Dealer is required to enter into a Dealer servicing
agreement with Credit Acceptance that defines the legal relationship between Credit Acceptance and the Dealer. The Dealer
servicing agreement assigns the responsibilities for administering, servicing, and collecting the amounts due on Consumer
Loans from the Dealers to us. Under the typical Dealer servicing agreement, a Dealer represents that it will only assign
Consumer Loans to us that satisfy criteria established by us, meet certain conditions with respect to their binding nature and the
status of the security interest in the purchased vehicle, and comply with applicable state and federal laws and regulations.
The typical Dealer servicing agreement may be terminated by us or by the Dealer upon written notice. We may terminate
the Dealer servicing agreement immediately in the case of an event of default by the Dealer. Events of default include, among
other things:
•
the Dealer’s refusal to allow us to audit its records relating to the Consumer Loans assigned to us;
•
the Dealer, without our consent, is dissolved; merges or consolidates with an entity not affiliated with the Dealer; or
sells a material part of its assets outside the course of its business to an entity not affiliated with the Dealer; or
•
the appointment of a receiver for, or the bankruptcy or insolvency of, the Dealer.
While a Dealer can cease assigning Consumer Loans to us at any time without terminating the Dealer servicing agreement,
if the Dealer elects to terminate the Dealer servicing agreement or in the event of a default, we have the right to require that the
Dealer immediately pay us:
•
any unreimbursed collection costs on Dealer Loans;
•
any unpaid advances and all amounts owed by the Dealer to us; and
•
a termination fee equal to 15% of the then outstanding amount of the Consumer Loans assigned to us.
Upon receipt of such amounts in full, we reassign the Consumer Loans and our security interest in the financed vehicles to
the Dealer.
In the event of a termination of the Dealer servicing agreement by us, we may continue to service Consumer Loans
assigned by the Dealer to us prior to termination in the normal course of business without charging a termination fee.
Consumer Loan Assignment. Once a Dealer has enrolled in our programs, the Dealer may begin assigning Consumer
Loans to us. For legal purposes, a Consumer Loan is considered to have been assigned to us after the following has occurred:
•
the consumer and Dealer have signed a Consumer Loan contract; and
•
we have received the executed Consumer Loan contract and supporting documentation in either physical or
electronic form.
6
For accounting and financial reporting purposes, a Consumer Loan is considered to have been assigned to us after the
following has occurred:
•
the Consumer Loan has been legally assigned to us; and
•
we have made a funding decision and generally have provided funding to the Dealer in the form of either an advance
under the Portfolio Program or one-time purchase payment under the Purchase Program.
A Consumer Loan is originated by the Dealer when a consumer enters into a contract with the Dealer that sets forth the
terms of the agreement between the consumer and the Dealer for the payment of the purchase price of the vehicle. The amount
of the Consumer Loan consists of the total principal and interest that the consumer is required to pay over the term of the
Consumer Loan. Consumer Loans are written on a contract form provided or approved by us. Although the Dealer is named in
the Consumer Loan contract, the Dealer generally does not have legal ownership of the Consumer Loan for more than a
moment, and we, not the Dealer, are listed as lien holder on the vehicle title. Consumers are obligated to make payments on the
Consumer Loan directly to us, and any failure to make such payments will result in our pursuing payment through collection
efforts.
All Consumer Loans submitted to us for assignment are processed through our Credit Approval Processing System
(“CAPS”). CAPS allows Dealers to input a consumer’s credit application and view the response from us via the internet. CAPS
allows Dealers to: (1) receive a quick approval from us; (2) interact with our proprietary credit scoring system to optimize the
structure of each transaction prior to delivery; and (3) create, electronically execute, and print legally compliant Consumer Loan
documents. All responses include the amount of funding (advance for a Dealer Loan or purchase price for a Purchased Loan),
as well as any stipulations required for funding. The amount of funding is determined using a formula which considers a
number of factors, including the timing and amount of cash flows expected on the related Consumer Loan and our target
profitability at the time the Consumer Loan is submitted to us for assignment. The estimated future cash flows are determined
based upon our proprietary credit scoring system, which considers numerous variables, including attributes contained in the
consumer’s credit bureau report, data contained in the consumer’s credit application, the structure of the proposed transaction,
vehicle information, and other factors, to calculate a composite credit score that corresponds to an expected collection rate. Our
proprietary credit scoring system forecasts the collection rate based upon the historical performance of Consumer Loans in our
portfolio that share similar characteristics. The performance of our proprietary credit scoring system is evaluated monthly by
comparing projected to actual Consumer Loan performance. Adjustments are made to our proprietary credit scoring system as
necessary. For additional information on adjustments to forecasted collection rates, please see the Critical Accounting
Estimates section in Item 7 of this Form 10-K, which is incorporated herein by reference.
While a Dealer can submit any legally compliant Consumer Loan to us for assignment, the decision whether to provide
funding to the Dealer and the amount of any funding is made solely by us. Through our Dealer Service Center, we perform all
significant functions relating to the processing of the Consumer Loan applications and bear certain costs of Consumer Loan
assignment, including the cost of assessing the adequacy of Consumer Loan documentation, the cost of compliance with our
underwriting guidelines, and the cost of verifying employment, residence, and other information provided by the Dealer.
We audit Consumer Loan files for compliance with our underwriting guidelines on a daily basis in order to assess whether
Dealers are operating in accordance with the terms and conditions of the Dealer servicing agreement. We occasionally identify
breaches of the Dealer servicing agreement, and, depending upon the circumstances, and at our discretion, we may:
•
change pricing or charge the Dealer fees for future Consumer Loan assignments;
•
reassign the Consumer Loans back to the Dealer and require repayment of the related advances and/or purchase
payments; or
•
terminate our relationship with the Dealer.
Consumer Loans that have been assigned to us can be reassigned back to the Dealer at the Dealer’s discretion as follows:
•
an individual Consumer Loan may be reassigned within 180 days of assignment, in which case we require
repayment of the related advance or purchase payment and, if requested more than 90 days after assignment,
payment of a fee; and
•
all Consumer Loans assigned under the Portfolio Program may be reassigned through termination of the Dealer
servicing agreement, as described under “Dealer Servicing Agreement,” above.
7
Our business model allows us to share the risk and reward of collecting on the Consumer Loans with the Dealers, more so
with the Portfolio Program than the Purchase Program. Such sharing is intended to motivate the Dealer to assign better quality
Consumer Loans, follow our underwriting guidelines, comply with various legal regulations, meet our credit compliance
requirements, and provide appropriate service and support to the consumer after the sale. In addition, our Dealer Service Center
works closely with Dealers to assist them in resolving any documentation deficiencies or funding stipulations. We believe this
arrangement causes the interests of the Dealer, the consumer, and us to all be aligned.
We measure various criteria for each Dealer against other Dealers in their geographic area as well as the top performing
Dealers. Dealers are assigned a Dealer rating based upon the performance of their Consumer Loans in both the Portfolio
Program and Purchase Program as well as other criteria. The Dealer rating is one of the factors used to determine the amount
paid to Dealers as an advance or to acquire a Purchased Loan. We provide each Dealer under the Portfolio Program with a
monthly statement summarizing all activity that occurred on its Consumer Loan assignments.
Servicing. Our largest group of representatives services Consumer Loans that are in the early stages of delinquency. Our
representatives work with consumers to attempt to develop a solution that will help them avoid becoming further past due and
get them current where possible. We utilize a variety of methods to attempt to contact the consumer or to remind them of
upcoming scheduled payments, including phone calls, email, text messaging, mail, and mobile notifications.
The decision to repossess a vehicle is based on policy-based criteria. When a Consumer Loan is approved for repossession,
we continue to service the Consumer Loan while it is being assigned to a third-party repossession service provider, who works
on a contingency fee basis. Once a vehicle has been repossessed, the consumer can redeem the vehicle, whereupon the vehicle
is returned to the consumer in exchange for paying off the Consumer Loan balance; or, where appropriate or if required by law,
the vehicle is returned to the consumer and the consumer is permitted to continue with the Consumer Loan in exchange for a
payment or series of payments which eliminates the past due balance. If the consumer elects not to regain possession of the
vehicle after repossession, the vehicle is sold at a wholesale automobile auction. Prior to sale, the vehicle is typically inspected
by a representative at the auction who provides repair and reconditioning recommendations. Alternatively, our remarketing
representatives may inspect the vehicle directly. Our remarketing representatives then authorize any repair and reconditioning
work in order to maximize the net sale proceeds at auction.
If the vehicle sale proceeds are not sufficient to satisfy the balance owing on the Consumer Loan, we may offer the
consumer the opportunity to settle any outstanding balance for less than the amount owed. At this point, the Consumer Loan is
serviced by either: (1) our internal collection team, in the event the consumer is willing to make payments on the full or partial
deficiency balance; or (2) where permitted by law, our external collection team, if it is believed that legal action will be
successful in reducing or eliminating the deficiency balance owing on the Consumer Loan. Our external collection team may
assign Consumer Loans to third-party collection attorneys who work on a contingency fee basis.
Representatives service Consumer Loans through our servicing platform, which consists of the following two systems:
•
The collection system, which assigns Consumer Loans to representatives through a predictive dialer and records all
collection activity, including:
•
details of past phone conversations with the consumer;
•
collection letters sent;
•
promises to pay;
•
broken promises;
•
payment history;
•
repossession orders; and
•
collection attorney activity.
•
The servicing system, which maintains a record of all transactions relating to Consumer Loan assignments and is a
primary source of data utilized to:
•
determine the outstanding balance of the Consumer Loans;
•
forecast future collections;
•
analyze the profitability of our program; and
•
evaluate our proprietary credit scoring system.
8
Ancillary Products
We provide Dealers the ability to offer vehicle service contracts to consumers through our relationships with Third-Party
Providers (“TPPs”). A vehicle service contract provides the consumer protection by paying for the repair or replacement of
certain components of the vehicle in the event of a mechanical failure. The retail price of the vehicle service contract is included
in the principal balance of the Consumer Loan. The wholesale cost of the vehicle service contract is paid to the TPP, net of an
administrative fee retained by us. We recognize our fee as finance charges on a level-yield basis over the life of the related
Loan. The difference between the wholesale cost and the retail price to the consumer is paid to the Dealer as a commission.
Under the Portfolio Program, the wholesale cost of the vehicle service contract and the commission paid to the Dealer are
charged to the Dealer’s advance balance. TPPs process claims on vehicle service contracts that are underwritten by third-party
insurers. We bear the risk of loss for claims on certain vehicle service contracts that are reinsured by us. We market the vehicle
service contracts directly to Dealers. Our agreement with one of our TPPs allows us to receive profit sharing payments
depending on the performance of the vehicle service contracts.
Our wholly owned subsidiary VSC Re Company (“VSC Re”) is engaged in the business of reinsuring coverage under
vehicle service contracts sold to consumers by Dealers on vehicles financed by us. VSC Re currently reinsures vehicle service
contracts that are offered through one of our TPPs. Vehicle service contract premiums, which represent the selling price of the
vehicle service contract to the consumer, less fees and certain administrative costs, are contributed to trust accounts controlled
by VSC Re. These premiums are used to fund claims covered under the vehicle service contracts. VSC Re is a bankruptcy
remote entity. As such, our exposure to fund claims is limited to the trust assets controlled by VSC Re and our net investment
in VSC Re.
We provide Dealers the ability to offer Guaranteed Asset Protection (“GAP”) to consumers through our relationships with
TPPs. GAP provides the consumer protection by paying the difference between the loan balance and the amount covered by the
consumer’s insurance policy in the event of a total loss of the vehicle due to severe damage or theft. The retail price of GAP is
included in the principal balance of the Consumer Loan. The wholesale cost of GAP is paid to the TPP, net of an administrative
fee retained by us. We recognize our fee as finance charges on a level-yield basis over the life of the related Loan. The
difference between the wholesale cost and the retail price to the consumer is paid to the Dealer as a commission. Under the
Portfolio Program, the wholesale cost of GAP and the commission paid to the Dealer are charged to the Dealer’s advance
balance. TPPs process claims on GAP contracts that are underwritten by third-party insurers. Our agreement with one of our
TPPs allow us to receive profit sharing payments depending on the performance of the GAP contracts.
Under the Purchase Program, we provide Dealers that meet certain criteria the ability to offer vehicle service contracts and
GAP to consumers through the Dealers’ relationships with TPPs. The retail price of the vehicle service contract and/or GAP is
included in the principal balance of the Consumer Loan and is paid to the Dealer. Under this arrangement, we do not receive an
administrative fee, and the Dealers’ TPPs process claims.
Competition
The market for consumers who do not qualify for conventional automobile financing is large and highly competitive. The
market is currently served by “buy here, pay here” dealerships, banks, captive finance affiliates of automobile manufacturers,
credit unions, and independent finance companies both publicly and privately owned. Many of these companies are much
larger and have greater resources than us. We compete on the basis of the level of service provided by our Dealer Service
Center and sales personnel. In addition, we compete by offering a profitable and efficient method for Dealers to finance
consumers who would be more difficult or less profitable to finance through other methods.
9
Customer and Geographic Concentrations
The following tables provide information regarding the five states that were responsible for the largest dollar volume of
Consumer Loan assignments and the related number of active Dealers during 2024, 2023, and 2022:
For the Year Ended December 31, 2024
(Dollars in millions)
Consumer Loan Assignments
Active Dealers (2)
Dollar Volume (1)
% of Total
Number
% of Total
Michigan
$
372.4
8.1 %
861
5.6 %
Texas
327.9
7.1 %
1,295
8.4 %
New Jersey
303.5
6.6 %
386
2.5 %
Ohio
269.5
5.8 %
1,024
6.6 %
Florida
233.7
5.1 %
873
5.6 %
All other states
3,111.4
67.3 %
11,024
71.3 %
Total
$
4,618.4
100.0 %
15,463
100.0 %
For the Year Ended December 31, 2023
(Dollars in millions)
Consumer Loan Assignments
Active Dealers (2)
Dollar Volume (1)
% of Total
Number
% of Total
Michigan
$
326.3
7.9 %
833
5.9 %
Texas
272.5
6.6 %
1,170
8.3 %
Ohio
245.2
5.9 %
986
7.0 %
New Jersey
238.2
5.7 %
357
2.5 %
Tennessee
216.0
5.2 %
569
4.0 %
All other states
2,849.6
68.7 %
10,259
72.3 %
Total
$
4,147.8
100.0 %
14,174
100.0 %
For the Year Ended December 31, 2022
(Dollars in millions)
Consumer Loan Assignments
Active Dealers (2)
Dollar Volume (1)
% of Total
Number
% of Total
Michigan
$
353.0
9.7 %
731
6.1 %
New York
229.8
6.3 %
687
5.8 %
Ohio
205.7
5.7 %
832
7.0 %
Texas
205.5
5.7 %
903
7.6 %
New Jersey
204.0
5.6 %
300
2.5 %
All other states
2,427.3
67.0 %
8,448
71.0 %
Total
$
3,625.3
100.0 %
11,901
100.0 %
(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.
(2)
Active Dealers are Dealers who have received funding for at least one Loan during the year.
No single Dealer’s Loans receivable balance accounted for more than 10% of total Loans receivable balance as of
December 31, 2024 or 2023.
10
Seasonality
Our business is seasonal with peak Consumer Loan assignments and collections occurring during the first quarter of the
year. This seasonality has a material impact on our interim results, as we are required to recognize a significant provision for
credit losses expense at the time of assignment. For additional information, see Note 2 to the consolidated financial statements
contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
Regulation
Our business is subject to laws and regulations, including the Truth in Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, prohibitions against unfair, deceptive, and abusive acts and practices, and various other state and
federal laws and regulations. These laws and regulations, among other things, require licensing and qualification; limit interest
rates, fees, and other charges associated with the Consumer Loans assigned to us; require specified disclosures by Dealers to
consumers; govern the sale and terms of ancillary products; and define the rights to repossess and sell collateral. Failure to
comply with these laws or regulations could have a material adverse effect on us by, among other things, limiting the
jurisdictions in which we may operate, restricting our ability to realize the value of the collateral securing the Consumer Loans,
making it more costly or burdensome to do business, or resulting in potential liability. The volume of new or modified laws
and regulations, and new interpretations of existing laws and regulations, has increased in recent years. From time to time,
enactment and interpretations of legislation and regulations increase the cost of doing business, limit or expand permissible
activities, or affect the competitive balance among financial services providers. Proposals to change the laws and regulations
governing the operations and taxation of financial institutions and financial services providers are frequently made in the U.S.
Congress, in state legislatures, and by various regulatory agencies. Such changes in laws and regulations, or the interpretation
of such laws and regulations, may change our operating environment in substantial and unpredictable ways and may have a
material adverse effect on our business.
We are subject to supervision by the Consumer Financial Protection Bureau (the “Bureau”). The Bureau has rulemaking
and enforcement authority over certain non-depository institutions, including us. The Bureau is specifically authorized, among
other things, to take actions to prevent companies providing consumer financial products or services and their service providers
from engaging in unfair, deceptive, or abusive acts or practices in connection with consumer financial products and services,
and to issue rules requiring enhanced disclosures or consumer access to information for consumer financial products or
services. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Bureau also
may restrict the use of pre-dispute mandatory arbitration clauses in contracts between covered persons and consumers for a
consumer financial product or service. The Bureau also has authority to interpret, enforce, and issue regulations implementing
enumerated consumer laws, including certain laws that apply to our business. The Dodd-Frank Act and regulations promulgated
thereunder may affect our cost of doing business, may limit or expand our permissible activities, may affect the competitive
balance within our industry and market areas, and could have a material adverse effect on us.
In addition to the Bureau, other state and federal agencies have the ability to regulate aspects of our business. For example,
the Dodd-Frank Act provides a mechanism for state attorneys general to investigate us. Separately, state attorneys general and
certain state regulators have authority under their respective rules and laws, to investigate and/or regulate aspects of our
business. In addition, the Federal Trade Commission has jurisdiction to investigate aspects of our business. We expect that
regulatory investigations of our business by both state and federal agencies will continue and that the results of these
investigations could have a material adverse impact on us.
Ongoing Regulatory Matters
Regulatory matters to which we are a party include the following matters, in each case the eventual scope, duration, and
outcome of which we cannot predict at this time.
•
On December 1, 2021, we received a subpoena from the Office of the Attorney General for the State of California
seeking documents and information regarding GAP products, GAP product administration, and refunds.
11
•
On May 7, 2019, we received a subpoena from the Consumer Frauds and Protection Bureau of the Office of the New
York State Attorney General, relating to the Company’s origination and collection policies and procedures in the state
of New York. After May 7, 2019 through April 30, 2021, we received additional subpoenas from the Office of the
New York State Attorney General relating to the Company’s origination, collection, and securitization practices. On
November 19, 2020 and August 23, 2022, we received letters from the Office of the New York State Attorney General
indicating that it may commence litigation against the Company asserting violations of New York Executive Law §
63(12) and New York General Business Law §§ 349 and 352 et seq. and applicable federal laws, including but not
limited to claims that the Company engaged in unfair and deceptive trade practices in auto lending, debt collection,
and asset-backed securitizations in the State of New York in violation of the Dodd-Frank Act, New York Executive
Law § 63(12), the New York Martin Act, and New York General Business Law § 349. See the description below of
the lawsuit commenced by the Office of the New York State Attorney General on January 4, 2023.
On April 22, 2019, we received a civil investigative demand from the Bureau seeking, among other things, certain
information relating to the Company’s origination and collection of Consumer Loans, TPPs, and credit reporting. After
April 22, 2019 through March 7, 2022, we received additional subpoenas from the Bureau. On December 6, 2021, we
received a Notice and Opportunity to Respond and Advise letter from the Staff of the Office of Enforcement (“Staff”)
of the Bureau, stating that the Staff was considering whether to recommend that the Bureau take legal action against
the Company for alleged violations of the Consumer Financial Protection Act of 2010 (the “CFPA”) in connection
with the Company’s consumer loan origination practices. See the description below of the lawsuit commenced by the
Bureau on January 4, 2023.
On January 4, 2023, the Office of the New York State Attorney General and the Bureau jointly filed a complaint in the
United States District Court for the Southern District of New York alleging that the Company engaged in deceptive
practices, fraud, illegality, and securities fraud in violation of New York Executive Law § 63(12) and New York
General Business Law §§ 349 and 352, and that the Company engaged in deceptive and abusive acts and provided
substantial assistance to a covered person or service provider in violation of the CFPA, 12 U.S.C. § 5531 and 12
U.S.C. § 5536(a)(1)(B). The complaint seeks injunctive relief, an accounting of all consumers for whom the Company
provided financing, restitution, damages, disgorgement, civil penalties, and payment of costs. On March 14, 2023, the
Company filed a motion to dismiss the complaint. On August 7, 2023, the court stayed the action pending the U.S.
Supreme Court’s decision in Consumer Financial Protection Bureau v. Community Financial Services Association of
America Ltd., No. 22-448 (“CFSA”). On July 1, 2024, the court lifted the stay in view of the decision in CFSA and
requested revised briefing on the Company’s motion to dismiss that would address the intervening legal developments
and sharpen the issues for resolution. As of October 29, 2024, the Company's motion to dismiss has been fully briefed.
The Company intends to vigorously defend itself in this matter.
•
On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the
Company’s repossession and sale policies and procedures in the state of Maryland. On April 3, 2020, we received a
subpoena from the Attorney General of the State of Maryland relating to the Company’s origination and collection
policies and procedures in the state of Maryland. On August 11, 2020, we received a subpoena from the Attorney
General of the State of Maryland restating most of the requests contained in the March 18, 2016 and April 3, 2020
subpoenas, making additional requests, and expanding the inquiry to include 41 other states (Alabama, Alaska,
Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New
Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South
Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, and Wisconsin) and the District of Columbia. Also
on August 11, 2020, we received from the Attorney General of the State of New Jersey a subpoena that is essentially
identical to the August 11, 2020 Maryland subpoena, both as to substance and as to the jurisdictions identified. The
Company has been informed that the State of Kansas, the State of Texas, and the State of Iowa have withdrawn from
the multistate investigation.
In addition, governmental regulations that would deplete the supply of used vehicles, such as environmental protection
regulations governing emissions or fuel consumption, could have a material adverse effect on us.
Dealers must also comply with credit and trade practice statutes and regulations. Failure of Dealers to comply with these
statutes and regulations could result in consumers having rights of rescission and other remedies that could have a material
adverse effect on us.
12
The sale of vehicle service contracts and GAP by Dealers in connection with Consumer Loans assigned to us from Dealers
is also subject to state laws and regulations. As we are the holder of the Consumer Loans that may, in part, finance these
products, some of these state laws and regulations may apply to our servicing and collection of the Consumer Loans. Although
these laws and regulations do not significantly affect our business, there can be no assurance that insurance or other regulatory
authorities in the jurisdictions in which these products are offered by Dealers will not seek to regulate or restrict the operation of
our business in these jurisdictions. Any regulation or restriction of our business in these jurisdictions could materially adversely
affect the income received from these products.
We believe that we maintain all material licenses and permits required for our current operations and are in substantial
compliance with all applicable laws and regulations. Our agreements with Dealers provide that the Dealer shall indemnify us
with respect to any loss or expense we incur as a result of the Dealer’s failure to comply with applicable laws and regulations.
Team Members
Our team members are organized into four operating functions as follows:
Servicing. The servicing function includes team members that are responsible for servicing Consumer Loans. The majority
of these team members are responsible for collection activities on delinquent Consumer Loans.
Originations. The originations function includes team members that are responsible for enrolling new Dealers and
supporting active Dealers. Originations also includes team members responsible for processing new Consumer Loan
assignments.
Engineering, Analytics, Marketing, and Product Management. This function consists of team members that are responsible
for innovating, transforming, enhancing, modernizing, and optimizing our product for Dealers and consumers.
Support. The support function includes team members that are responsible for corporate legal and compliance, human
resources, and finance.
The following table presents team members by operating function:
Number of Team Members
as of December 31,
Operating Function
2024
2023
2022
Servicing
906
845
907
Originations
578
533
505
Engineering, Analytics, Marketing, and Product Management
512
420
425
Support
435
434
409
Total
2,431
2,232
2,246
As of December 31, 2024, we had 2,431 full- and part-time team members. Our team members have no union affiliations,
and we believe our relationship with our team members is in good standing. We strive to create a work environment that is
pleasant, professional, and free from intimidation, hostility, or other offenses that may interfere with work performance. All
team members complete non-discrimination and anti-harassment training, promoting a safe and inclusive work environment.
The vast majority of our team members work remotely from locations within the United States, with more than half of our
team members located outside of Michigan. Our remote-first work environment allows us to take advantage of the national
talent pool and hire the most qualified team members. We believe our workplace supports an inclusive culture due to our
practices of maintaining open and transparent communication and fostering a climate in which all team members are welcome
to speak up and contribute. We engage in initiatives that encourage our team members to generate concrete actions that we can
take together to enhance the environment of inclusion, a sense of belonging, and acceptance of others to make our culture and
our Company stronger. We believe these factors naturally contribute to the diversity of our workforce.
We place great importance on listening to our team members, as we believe that “the people doing the work know the most
about it.” We encourage participation in periodic anonymous surveys to gain honest feedback about our workplace from our
team members, and we use this feedback to generate ideas for improvement. Our Company’s culture attracts talented people
and enables them to perform to their potential. We have been honored to receive many workplace awards in recent years.
13
Available Information
Our internet address is creditacceptance.com. We make available free of charge on our internet web site our annual report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the
“SEC”).
ITEM 1A.
RISK FACTORS
Industry, Operational, and Macroeconomic Risks
Our inability to accurately forecast and estimate the amount and timing of future collections could have a material
adverse effect on results of operations.
The majority of the Consumer Loans assigned to us are made to individuals with impaired or limited credit histories.
Consumer Loans made to these individuals generally entail a higher risk of delinquency, default, and repossession, and higher
losses than loans made to consumers with better credit. Since most of our revenue and cash flows from operations are generated
from these Consumer Loans, our ability to accurately forecast Consumer Loan performance is critical to our business and
financial results. At the time of assignment, we forecast future expected cash flows from the Consumer Loan. Based on these
forecasts, which include estimates for wholesale vehicle prices in the event of vehicle repossession and sale, we make an
advance or one-time purchase payment to the related Dealer at a level designed to maximize economic profit, a non-GAAP
financial measure. We continue to forecast the expected collection rate for each Consumer Loan subsequent to assignment.
These forecasts also serve as a critical assumption in our accounting for recognizing finance charge income and determining our
allowance for credit losses. Please see the Critical Accounting Estimates – Finance Charge Revenue & Allowance for Credit
Losses section in Item 7 of this Form 10-K, which is incorporated herein by reference. Actual cash flows from any individual
Consumer Loan are often different from cash flows estimated at the time of assignment. There can be no assurance that our
forecasts will be accurate or that Consumer Loan performance will be as expected. In periods with changing economic
conditions, accurately forecasting the performance of Consumer Loans is more difficult. In the event that our forecasts are not
accurate in the aggregate, our financial position, liquidity, and results of operations could be materially adversely affected.
Due to competition from traditional financing sources and non-traditional lenders, we may not be able to compete
successfully.
The automobile finance market for consumers who do not qualify for conventional automobile financing is large and
highly competitive. The market is served by a variety of companies, including “buy here, pay here” dealerships. The market is
also currently served by banks, captive finance affiliates of automobile manufacturers, credit unions, and independent finance
companies both publicly and privately owned. Many of these companies are much larger and have greater financial resources
than are available to us, and many have long-standing relationships with automobile dealerships. Providers of automobile
financing have traditionally competed based on the interest rate charged, the quality of credit accepted, the flexibility of loan
terms offered, and the quality of service provided to dealers and consumers. We may be unable to compete successfully in the
automobile finance market or, due to the intense competition in this market, our results of operations, cash flows, and financial
condition may be adversely affected as we adjust our business in response to competitive pressures. Increasing advance rates on
Loans has the impact of reducing the return on capital we expect to earn on Loans. Additionally, if we are unsuccessful in
maintaining and expanding our relationships with Dealers, we may be unable to accept Consumer Loans in the volume and on
the terms that we anticipate.
14
Adverse changes in economic conditions, the automobile or finance industries, or the non-prime consumer market could
adversely affect our financial position, liquidity, and results of operations, the ability of key vendors that we depend on
to supply us with services, and our ability to enter into future financing transactions.
We are subject to general economic conditions which are beyond our control. During periods of economic slowdown or
recession, delinquencies, defaults, repossessions, and losses may increase on our Consumer Loans, and Consumer Loan
prepayments may decline. These periods are also typically accompanied by decreased consumer demand for automobiles and
declining values of automobiles securing outstanding Consumer Loans, which weakens collateral coverage and increases the
amount of loss in the event of default. Significant increases in the inventory of used automobiles during periods of economic
recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales.
Additionally, inflation, higher gasoline prices, the deferral or resumption of student loan payments, increased focus on climate-
related initiatives and regulation, declining stock market values, unstable real estate values, resets of adjustable rate mortgages
to higher interest rates, increasing unemployment levels, general availability of consumer credit, or other factors that impact
consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles as
well as weaken collateral values of automobiles. Because our business is focused on consumers who do not qualify for
conventional automobile financing, the actual rates of delinquencies, defaults, repossessions, and losses on our Consumer
Loans could be higher than those experienced in the general automobile finance industry, and could be more dramatically
affected by a general economic downturn.
We rely on Dealers to originate Consumer Loans for assignment under our programs. High levels of Dealer attrition, due to
a general economic downturn or otherwise, could materially adversely affect our operations. In addition, we rely on vendors to
provide us with services we need to operate our business. Any disruption in our operations due to the untimely or discontinued
supply of these services could substantially adversely affect our operations. Finally, during an economic slowdown or
recession, our servicing costs may increase without a corresponding increase in finance charge revenue. Any sustained period
of increased delinquencies, defaults, repossessions, or losses or increased servicing costs could also materially adversely affect
our financial position, liquidity, and results of operations and our ability to enter into future financing transactions.
Technological advancements or changes to trends in the automobile industry such as new autonomous driving technologies
or car- and ride-sharing programs could decrease consumer demand for automobiles. Decreased consumer demand for
automobiles could negatively impact demand for our financing programs as well as weaken collateral values of automobiles,
which could materially adversely affect our financial position, liquidity, and results of operations.
Reliance on third parties to administer our ancillary product offerings could adversely affect our business and financial
results.
We have relationships with TPPs to administer vehicle service contracts and GAP underwritten by third-party insurers and
financed by us. We depend on these TPPs to evaluate and pay claims in an accurate and timely manner. If our relationships with
these TPPs were modified, disrupted, or terminated, we would need to obtain these services from an alternative administrator or
provide them using our internal resources. We may be unable to replace these TPPs with a suitable alternative in a timely and
efficient manner on terms we consider acceptable, or at all. In the event we were unable to effectively administer our ancillary
products offerings, we may need to eliminate or suspend our ancillary product offerings from our future business, we may
experience a decline in the performance of our Consumer Loans, our reputation in the marketplace could be undermined, and
our financial position, liquidity, and results of operations could be adversely affected.
We are dependent on our senior management, and the loss of any of these individuals or an inability to hire additional
team members could adversely affect our ability to operate profitably.
Our senior management average 16 years of experience with us. Our success is dependent upon the management and the
leadership skills of this team. In addition, competition from other companies to hire our team members possessing the necessary
skills and experience required could contribute to an increase in team member turnover. The loss of any of these individuals or
an inability to attract and retain additional qualified team members could adversely affect us. There can be no assurance that we
will be able to retain our existing senior management or attract additional qualified team members.
15
Our reputation is a key asset to our business, and our business may be affected by how we are perceived in the
marketplace.
Our reputation is a key asset to our business. Our ability to attract consumers through Dealers is highly dependent upon
external perceptions of our level of service, trustworthiness, business practices, and financial condition. Negative publicity
regarding these matters could damage our reputation among existing and potential consumers and Dealers, which could make it
difficult for us to attract new consumers and Dealers and maintain existing Dealers. Adverse developments with respect to our
industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or
litigation against us.
An outbreak of contagious disease or other public health emergency could materially and adversely affect our business,
financial condition, liquidity, and results of operations.
Contagious-disease outbreaks or other public health emergencies could cause a deterioration in the U.S. economy and our
industry, disruptions in our workforce, decreases in collections from our consumers, declines in Consumer Loan assignments,
or extended periods of economic or supply chain disruptions. Financial market disruptions that occur as a result of contagious-
disease outbreaks or other public health emergencies could reduce our ability to access capital or our consumers’ ability to
repay past or future Consumer Loans and could negatively affect our liquidity and results of operations. A future contagious-
disease outbreak or other public health emergency could materially adversely affect our business, financial condition, liquidity,
and results of operations and also intensify the risks described in the other risk factors disclosed in this Form 10-K.
The concentration of Dealers in several states could adversely affect us.
Dealers are located throughout the United States. During the year ended December 31, 2024, our five largest states
(measured by 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) contained 28.7% of Dealers. While we believe
we have a diverse geographic presence, for the near term, we expect that significant amounts of Consumer Loan assignments
will continue to be generated by Dealers in these five states due to the number of Dealers in these states and currently prevailing
economic, demographic, regulatory, competitive, and other conditions in these states. Changes to conditions in these states
could lead to an increase in Dealer attrition or a reduction in demand for our service that could materially adversely affect our
financial position, liquidity, and results of operations.
Reliance on our outsourced business functions could adversely affect our business.
We outsource certain business functions to third-party service providers, which increases our operational complexity and
decreases our control. We rely on these service providers to provide a high level of service and support, which subjects us to
risks associated with inadequate or untimely service. In addition, if these outsourcing arrangements were not renewed or were
terminated or the services provided to us were otherwise disrupted, we would have to obtain these services from an alternative
provider or provide them using our internal resources. We may be unable to replace, or be delayed in replacing these sources
and there is a risk that we would be unable to enter into a similar agreement with an alternate provider on terms that we
consider favorable or in a timely manner. In the future, we may outsource additional business functions. If any of these or other
risks related to outsourcing were realized, our financial position, liquidity, and results of operations could be adversely affected.
Our ability to hire and retain foreign engineering personnel could be hindered by immigration restrictions.
A portion of our engineering team is composed of foreign nationals whose ability to work for us depends on maintaining
the necessary H-1B visas. The H-1B visa category allows U.S. employers to hire qualified foreign nationals to perform services
in specialty occupations that require the attainment of at least a bachelor’s degree or its equivalent. Our ability to hire and retain
these foreign nationals and their ability to remain and work in the United States are affected by various laws and regulations,
including limitations on the number of available H-1B visas, which the U.S. government allocates by lottery. Changes in the
laws or regulations affecting the availability, allocation, and/or cost of H-1B visas, eligibility for the H-1B visa category, or
otherwise affecting the admission or retention of skilled foreign nationals by U.S. employers, or any increase in demand for
H-1B visas relative to the limited supply of those visas, may adversely affect our ability to hire or retain foreign engineering
personnel and may, as a result, increase our operating costs and impair our business operations.
16
We may be unable to execute our business strategy due to current economic conditions.
Our financial position, liquidity, and results of operations depend on management’s ability to execute our business strategy.
Key factors involved in the execution of our business strategy include achieving our desired Consumer Loan assignment
volume, continued and successful use of CAPS and pricing strategy, the use of effective credit risk management techniques and
servicing strategies, continued investment in technology to support operating efficiency, and continued access to funding and
liquidity sources. Although our pricing strategy is intended to maximize the amount of economic profit we generate, within the
confines of capital and infrastructure constraints, there can be no assurance that this strategy will have its intended effect. Please
see the Consumer Loan Volume section in Item 7 of this Form 10-K, which is incorporated herein by reference. Our failure or
inability to execute any element of our business strategy could materially adversely affect our financial position, liquidity, and
results of operations.
Natural disasters, climate change, military conflicts, acts of war, terrorist attacks and threats, or the escalation of
military activity in response to terrorist attacks or otherwise may negatively affect our business, financial condition, and
results of operations.
Natural disasters, climate change, military conflicts, acts of war, terrorist attacks, and the escalation of military activity in
response to terrorist attacks or otherwise may have negative and significant effects, such as imposition of increased security
measures, changes in applicable laws, economic and financial market disruptions, loss of lives, damage to infrastructure, and
job losses. These types of events or developments and their consequences may have an adverse effect on the economy in
general, including diminished liquidity and credit availability, reduced consumer confidence, disruptions to energy and food
supplies, decreased economic growth, higher unemployment rates, increased inflation, and political and social upheaval. The
consequences of these types of events or developments could reduce used-car sales and demand for our product, impair the
performance of our Loan portfolio, limit our access to capital, and intensify other risk factors disclosed in this Form 10-K,
including cybersecurity-related risks. Moreover, the potential for future military conflicts and terrorist attacks, natural disasters,
and escalating effects of climate change, and the national and international responses to these threats, could affect our business
in ways that cannot be predicted. The effect of any of these events, developments, or threats could have a material adverse
effect on our business, financial condition, and results of operations.
Governmental or market responses to climate change and related environmental issues could have a material adverse
effect on our business.
Governments have become increasingly focused on the effects of climate change and related environmental issues. How
governments act to mitigate climate and related environmental risks, as well as associated changes in the behavior and
preferences of businesses and consumers, could have an adverse effect on our business and results of operations. A decline in
demand for gasoline-powered automobiles, such as could occur due to regulatory restrictions or a shift in consumer preference
toward electric vehicles, could decrease the value of gasoline-powered vehicles securing outstanding Consumer Loans, which
would weaken collateral coverage and increase the amount of loss in the event of default. Further, we may be compelled to
change our business practices or our operational processes, and we could have less access to capital or face a higher cost of
capital, because of climate- or environmental-driven changes in applicable law or due to related political, social, or market
pressure. It is possible as well that changes in climate and related environmental risks, perceptions of them, and governmental
responses to them may occur more rapidly than our ability to adapt without disrupting our business, which could have a
material adverse effect on our financial position and results of operations.
A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval
and such shareholders have interests which may conflict with the interests of our other security holders.
As of December 31, 2024, based on filings made with the SEC and other information made available to us, Allan V. Apple
beneficially owned 20.0% of our common stock, Prescott General Partners LLC and its affiliates beneficially owned 19.3% of
our common stock, Jill Foss Watson beneficially owned 14.2% of our common stock, and John P. Neary beneficially owned
8.6% of our common stock (representing, collectively, beneficial ownership of 42.8% of our common stock, after taking into
account those shares reported as beneficially owned by more than one of these shareholders). As a result, these shareholders are
able to significantly influence matters presented to shareholders, including the election and removal of directors, the approval of
significant corporate transactions, such as any reclassification, reorganization, merger, consolidation, or sale of all or
substantially all of our assets, and the control of our management and affairs, including executive compensation arrangements.
Their interests may conflict with the interests of our other security holders.
17
The beneficial ownership reported by Mr. Apple and Mr. Neary includes, in each case, beneficial ownership in their
capacity as trustees of shares held in a marital trust established by our late founder, Donald Foss, and representing 8.6% of our
common stock as of December 31, 2024. The shares in the trust are subject to the terms of a shareholder agreement, entered
into by Mr. Foss on January 3, 2017. Under the terms of that agreement that became applicable to the trustees of the trust upon
Mr. Foss’s death on August 14, 2022, until the final adjournment of the tenth annual meeting of shareholders held by the
Company after the date of the shareholder agreement, the shares in the trust are to be voted in accordance with the
recommendation of the Company’s Board of Directors with respect to election and removal of directors, certain routine matters,
and any other proposal to be submitted to the Company’s shareholders with respect to any extraordinary transaction providing
for the acquisition of all of the Company’s outstanding common stock.
Capital and Liquidity Risks
We may be unable to continue to access or renew funding sources and obtain capital needed to maintain and grow our
business.
We use debt financing to maintain and grow our business. We currently utilize the following primary forms of debt
financing: (1) a revolving secured line of credit facility; (2) revolving secured warehouse (“Warehouse”) facilities; (3) asset-
backed secured financings (“Term ABS financings”); and (4) senior notes. We cannot guarantee that the revolving secured line
of credit facility or the Warehouse facilities will continue to be available beyond their current maturity dates, on acceptable
terms, or at all, or that we will be able to obtain additional financing on acceptable terms or at all. The availability of additional
financing will depend on a variety of factors such as market conditions, the general availability of credit, our financial position,
our results of operations, and the capacity for additional borrowing under our existing financing arrangements. If our various
financing alternatives were to become limited or unavailable, we may be unable to maintain or grow Consumer Loan volume at
the level that we anticipate and our operations could be materially adversely affected.
The terms of our debt limit how we conduct our business.
The agreements that govern our debt contain covenants that restrict our ability to, among other things:
•
incur and guarantee debt;
•
pay dividends or make other distributions on or redeem or repurchase our stock;
•
make investments or acquisitions;
•
create liens on our assets;
•
sell assets;
•
merge with or into other companies; and
•
enter into transactions with stockholders and other affiliates.
Some of our debt agreements also impose requirements that we maintain specified financial measures not in excess of, or
not below, specified levels. In particular, our revolving credit facility requires, among other things, that we maintain (i) as of the
end of each fiscal quarter, a ratio of consolidated funded debt less unrestricted cash and cash equivalents to consolidated
tangible net worth at or below a specified maximum and (ii) as of the end of each fiscal quarter, a ratio of consolidated income
available for fixed charges for the period of four consecutive fiscal quarters most recently ended to consolidated fixed charges,
as defined in the agreements, for that period of not less than a specified minimum. These covenants limit the manner in which
we can conduct our business and could prevent us from engaging in favorable business activities or financing future operations
and capital needs and impair our ability to successfully execute our strategy and operate our business.
A breach of any of the covenants in our debt instruments would result in an event of default thereunder if not promptly
cured or waived. Any continuing default would permit the creditors to accelerate the related debt, which could also result in the
acceleration of other debt containing a cross acceleration or cross default provision. In addition, an event of default under our
revolving credit facility would permit the lenders thereunder to terminate all commitments to extend further credit under our
revolving credit facility. Furthermore, if we were unable to repay the amounts due and payable under our revolving credit
facility or other secured debt, the lenders thereunder could cause the collateral agent to proceed against the collateral securing
that debt. In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have
sufficient assets to repay that debt, and our financial condition, liquidity, and results of operations would suffer.
18
A violation of the terms of our Term ABS financings or Warehouse facilities could have a material adverse impact on
our operations.
Under our Term ABS financings and our Warehouse facilities, (1) we have various obligations and covenants as seller,
servicer, and custodian of the Loans conveyed thereunder and in our individual capacity and (2) the special purpose subsidiaries
to which we convey Loans have various obligations and covenants. A violation of any of these obligations or covenants in any
of our Term ABS financings or our Warehouse facilities by us or the special purpose subsidiaries, respectively, may result in an
early termination of the revolving period, repurchase or indemnification obligations on our part, and the termination of our
servicing rights (and, accordingly, the loss of servicing fees), and may further result in amounts outstanding under such Term
ABS financings and Warehouse facilities becoming immediately due and payable. In addition, the violation of any financial
covenant under our revolving secured line of credit facility is an event of default or termination event under certain of our Term
ABS financings and our Warehouse facilities.
The occurrence of any of the events described in the immediately-preceding paragraph could have a material adverse effect
on our financial position, liquidity, and results of operations.
Our substantial debt could negatively impact our business, prevent us from satisfying our debt obligations, and
adversely affect our financial condition.
We have a substantial amount of debt, which could have negative consequences, including the following:
•
our ability to obtain additional financing for Consumer Loan assignments, working capital, debt refinancing, or other
purposes could be impaired;
•
a substantial portion of our cash flows from operations will be dedicated to paying principal and interest on our debt,
reducing funds available for other purposes;
•
we may be vulnerable to interest rate increases, as some of our borrowings, including those under our revolving
credit facility and Warehouse facilities, bear interest at variable rates;
•
we could be more vulnerable to adverse developments in our industry or in general economic conditions;
•
we may be restricted from taking advantage of business opportunities or making strategic acquisitions; and
•
we may be limited in our flexibility in planning for, or reacting to, changes in our business and the industries in
which we operate.
We may not be able to generate sufficient cash flows to service our outstanding debt and fund operations and may be
forced to take other actions to satisfy our obligations under such debt.
Our ability to make payments of principal and interest on indebtedness will depend in part on our cash flows from
operations, which are subject to economic, financial, competitive, and other factors beyond our control. We cannot assure you
that we will maintain a level of cash flows from operations sufficient to permit us to meet our debt service obligations. If we are
unable to generate sufficient cash flows from operations to service our debt, we may be required to sell assets, refinance all or a
portion of our existing debt, or obtain additional financing. There can be no assurance that any refinancing will be possible or
that any asset sales or additional financing can be completed on acceptable terms or at all.
Interest rate fluctuations may adversely affect our borrowing costs, profitability, and liquidity.
Our profitability may be directly affected by the level of and fluctuations in interest rates, whether caused by changes in
economic conditions or other factors, which affect our borrowing costs. Our profitability and liquidity could be materially
adversely affected during any period of higher interest rates. We monitor the interest rate environment and employ strategies
designed to partially mitigate the impact of increases in interest rates. We can provide no assurance, however, that our strategies
will mitigate the impact of increases in interest rates.
Reduction in our credit rating could increase the cost of our funding from, and restrict our access to, the capital markets
and adversely affect our liquidity, financial condition, and results of operations.
Credit rating agencies evaluate us, and their ratings of our debt and creditworthiness are based on a number of factors.
These factors include our financial strength and other factors not entirely within our control, including conditions affecting the
financial services industry generally. As the financial services industry and the financial markets periodically face difficulties,
there can be no assurance that we will maintain our current ratings. Failure to maintain those ratings could, among other things,
adversely limit our access to the capital markets and affect the cost and other terms upon which we are able to obtain financing.
19
We may incur substantially more debt and other liabilities. This could exacerbate further the risks associated with our
current debt levels.
We may be able to incur substantial additional debt in the future. Although the terms of our debt instruments contain
restrictions on our ability to incur additional debt, these restrictions are subject to exemptions that could permit us to incur a
substantial amount of additional debt. In addition, our debt instruments do not prevent us from incurring liabilities that do not
constitute indebtedness as defined for purposes of those debt instruments. If new debt or other liabilities are added to our
current debt levels, the risks associated with our having substantial debt could intensify.
The conditions of the U.S. and international capital markets may adversely affect lenders with which we have
relationships, causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our
financial position, liquidity, and results of operations.
Periodically, there has been uncertainty in the global capital markets and the overall economy. Such uncertainty can result
in disruptions in the financial sector and affect lenders with which we have relationships. Disruptions in the financial sector
may increase our exposure to credit risk and adversely affect the ability of lenders to perform under the terms of their lending
arrangements with us. Failure by our lenders to perform under the terms of our lending arrangements could cause us to incur
additional costs that may adversely affect our liquidity, financial condition, and results of operations. There can be no assurance
that future disruptions in the financial sector will not occur that could have similar adverse effects on our business.
Technology and Cybersecurity Risks
Our dependence on technology could have a material adverse effect on our business.
All Consumer Loans submitted to us for assignment are processed through our internet-based CAPS application. Our
Consumer Loan servicing platform is also technology based. We rely on these systems to record and process significant
amounts of data quickly and accurately. Our systems, and those of our third-party service providers, are dependent upon
computer and telecommunications equipment, software systems, and internet access. The temporary or permanent loss of any
components of these systems through hardware failures, software errors, operating malfunctions, the vulnerability of the
internet, or otherwise could interrupt our business operations and harm our business.
Although Company systems and systems of third party service providers are subject to risks from cybersecurity threats and
incidents, these have not materially affected the Company, including its business strategy, results of operations, or financial
condition, though there can be no assurance that cybersecurity threats and incidents will not have a material adverse effect on us
in the future.
We rely on a variety of measures to protect our technology and proprietary information, including copyrights and a
comprehensive information security program. However, these measures may not prevent misappropriation or infringement of
our intellectual property or proprietary information, which would adversely affect us. In addition, our competitors or other third
parties may allege that our proprietary systems, processes, or technologies infringe their intellectual property rights.
Our ability to integrate computer and telecommunications technologies into our business is essential to our success.
Computer and telecommunications technologies are evolving rapidly and, as a result, may be characterized by short product life
cycles. We may not be successful in anticipating, managing, or adopting technological changes on a timely basis. While we
believe that our existing information systems are sufficient to meet our current demands and continued expansion, our future
growth may require additional investment in these systems. We cannot assure that adequate capital resources will be available
to us at the appropriate time.
20
We depend on secure information technology, and a breach of our systems or those of our third-party service providers
could result in our experiencing significant financial, legal, and reputational exposure and could materially adversely
affect our business, financial condition, and results of operations.
We and our third-party service providers face ongoing threats to our systems and data and from time to time experience
cyberattacks and other security incidents. Numerous national finance companies have disclosed security breaches involving
sophisticated cyber-attacks, including ransomware, that were not recognized or detected until after such companies had been
affected, notwithstanding the preventive measures such companies had in place. Further, the rapid evolution and increased
adoption of artificial intelligence technologies, increased sophistication and activities of organized crime, hackers, terrorists,
activists and other external parties may increase our level of cybersecurity risk. Additionally, our increased use of mobile and
cloud technologies could heighten these and other operational risks by increasing our attack surface, and any failure by mobile
or cloud technology service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our
operations and result in misappropriation, corruption or loss of confidential or propriety information. The security measures we
have implemented to protect against cybersecurity incidents, or those of our third-party service providers, may not always
prevent or mitigate the impact of a cybersecurity incident, and there can be no assurance that future efforts to prevent or
mitigate a cybersecurity incident will be effective either. As a result, our computer systems, software, and networks, as well as
those of our third-party service providers, are vulnerable to unauthorized access, computer viruses, malware attacks, and other
events that could have a security impact beyond our control, and information we transmit and receive may be vulnerable to
interception, misuse, or mishandling. Cybersecurity incidents, including such occurrences that compromise information
processed by, stored in, or transmitted through our computer systems and networks, or those of our third-party service
providers, or that cause interruptions or malfunctions in our or our service providers’ operations could result in losses, loss of
business by us and loss of confidence in us, consumer and Dealer dissatisfaction, significant litigation, regulatory exposures,
and harm to our reputation, any of which could have a material adverse impact on our business, financial condition, and results
of operations.
While we have not been materially affected by cybersecurity incidents to date, we may be required to expend significant
additional resources in the future to enhance our security controls, modify our protective measures, investigate the
circumstances surrounding cybersecurity incidents, and implement mitigation and remediation measures in response to
cybersecurity incidents and new or more sophisticated threats, as well as in response to new regulations related to cybersecurity.
Cybersecurity incidents may result in our being subject to fines, penalties, litigation (including securities fraud class action
lawsuits) and regulatory investigation costs and settlements and other financial losses, which could have a material adverse
effect on our business, financial condition, and results of operations.
Our use of electronic contracts could impact our ability to perfect our ownership or security interest in Consumer
Loans.
Our systems permit origination and assignment of Consumer Loans in electronic form. We have engaged a TPP to facilitate
the process of creating, establishing control of, and storing electronic contracts in a manner that enables us to perfect our
ownership or security interest in the electronic contracts by satisfying the requirements for “control” of electronic chattel paper
under the Uniform Commercial Code.
Although the law governing the perfection of ownership and security interests in electronic contracts was enacted in 2001,
the statutory requirements for the relevant control arrangements have not been meaningfully tested in court. In addition, market
practices regarding control of electronic contracts are still developing. As a result, there is a risk that the systems employed by
us or any TPP to maintain control of the electronic contracts may not be sufficient as a matter of law to give us a perfected
ownership or security interest in the Consumer Loans evidenced by electronic contracts. In addition, technological failure,
including failure in the security or access restrictions with respect to the systems, and operational failure, such as the failure to
implement and maintain adequate internal controls and procedures, could also affect our ability to obtain or maintain a
perfected ownership or security interest in the Consumer Loans evidenced by electronic contracts (or the priority of such
interests). Our failure or inability to perfect our ownership or security interest in the Consumer Loans could materially
adversely affect our financial position, liquidity, and results of operations.
21
Failure to properly safeguard our proprietary business information or confidential consumer and team member
personal information could subject us to liability, decrease our profitability, and damage our reputation.
In the ordinary course of our business, we collect and store sensitive data on our computer networks. This sensitive data
includes our proprietary business information and personally identifiable information of our consumers and team members. The
secure processing, maintenance, and transmission of this information is critical to our operations and business strategy.
If third parties or our team members breach or are able to breach our network security or the network security of a third
party that we share information with or otherwise are able to misappropriate our consumers’ and team members’ personal
information, or if we give third parties or our team members improper access to our consumers’ and team members’ personal
information, we could be subject to liability. This liability could include identity theft or other similar fraud-related claims. This
liability could also include claims for other misuses or losses of personal information, including for unauthorized marketing
purposes. Other liabilities could include claims alleging misrepresentation of our privacy and data security practices. Moreover,
the loss of confidential customer personal information could harm our reputation, result in the loss of business, and subject us to
liability under laws that protect personal information, resulting in increased costs, loss of revenues and substantial penalties. For
instance, the California Consumer Privacy Act of 2018, as amended (“CCPA”), provides for enhanced consumer protections for
California residents and statutory fines for data security breaches or other CCPA violations.
We rely on encryption and authentication technology licensed from third parties to provide the security and authentication
necessary to secure online transmission of confidential consumer and team member information, which can include personal
information. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments
may result in a compromise or breach of the algorithms that we use to protect sensitive consumer transaction data. A party who
is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our
operations. We may be required to expend capital and other resources to protect against, or alleviate problems caused by,
security breaches or other cybersecurity incidents. Although we have experienced cybersecurity incidents from time to time that
have not had a material effect on our business, financial condition, or results of operations, there can be no assurance that a
cyber-attack, security breach, or other cybersecurity incident will not have a material adverse effect on us in the future. Our
security measures are designed to protect against security breaches, but our failure to prevent security breaches could subject us
to liability, decrease our profitability, and damage our reputation.
Legal and Regulatory Risks
Litigation we are involved in from time to time may adversely affect our financial condition, results of operations, and
cash flows.
As a result of the consumer-oriented nature of the industry in which we operate and uncertainties with respect to the
application of various laws and regulations in some circumstances, we are subject to various consumer claims, litigation, and
regulatory investigations seeking damages, fines, and statutory penalties, based upon, among other things, usury, disclosure
inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, and breach of
contract. As the assignee of Consumer Loans originated by Dealers, we may also be named as a co-defendant in lawsuits filed
by consumers principally against Dealers. We may also have disputes and litigation with Dealers. The claims may allege,
among other theories of liability, that we breached the Dealer servicing agreement. We may also have disputes and litigation
with vendors and other third parties. The claims may allege, among other theories of liability, that we breached a license
agreement or contract. The damages, fines, and penalties that may be claimed by consumers, regulatory agencies, Dealers,
vendors, or other third parties in these types of matters can be substantial. The relief requested by plaintiffs varies but may
include requests for compensatory, statutory, and punitive damages and injunctive relief, and plaintiffs may seek treatment as
purported class actions or they may file individual arbitration demands for which arbitration providers may request separate
filing fees. A significant judgment against us in connection with any litigation or arbitration or the requirement to pay filing
fees for a large number of individual arbitration demands could have a material adverse effect on our financial position,
liquidity, and results of operations.
For a description of significant litigation to which we are a party, see Note 15 to the consolidated financial statements
contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
22
Changes in tax laws and the resolution of uncertain income tax matters could have a material adverse effect on our
results of operations and cash flows from operations.
We are subject to income tax in many of the various jurisdictions in which we operate. Increases in statutory income tax
rates and other adverse changes in applicable law in these jurisdictions could have an adverse effect on our results of operations.
In the ordinary course of business, there are transactions and calculations where the ultimate tax determination is uncertain. At
any one time, multiple tax years are subject to audit by various taxing jurisdictions. We provide reserves for potential payments
of tax to various tax authorities related to uncertain tax positions. Please see the Critical Accounting Estimates – Uncertain Tax
Positions section in Item 7 of this Form 10-K, which is incorporated herein by reference. We adjust these liabilities as a result
of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may
result in a payment that is materially different from our current estimate of the tax liabilities. Such payments could have a
material adverse effect on our results of operations and cash flows from operations.
The regulations to which we are or may become subject could result in a material adverse effect on our business.
Reference should be made to Item 1. Business “Regulation” for a discussion of regulatory risk factors.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
The Company regularly assesses risks from cybersecurity threats, monitors its information systems for potential
vulnerabilities, and tests those systems pursuant to the Company’s cybersecurity policies, standards, processes, and practices,
which are integrated into the Company’s overall risk management program. We have adopted aspects of the ISO 27002, NIST
SP 800-37 Rev. 2, and NIST Cybersecurity frameworks, to which risk management in relation to our information systems is
aligned. We categorize our information systems as either critical or secondary, depending on business value and/or risk of
financial or compliance impact of cybersecurity incidents. Our information security team uses a multifaceted approach to
assess, identify, and manage material risks to the Company from cybersecurity threats, including testing of the effectiveness of
our cybersecurity incident prevention and response systems; conducting routine vulnerability scanning of information systems
assets; network/endpoint detection and response coupled with anomaly identification enhanced logging capabilities powered by
artificial intelligence software; discovery through collaboration with the Company’s internal audit team; monitoring of threat
intelligence feeds provided by industry associations/groups, service providers, and federal/state authorities; and professional
service engagements, such as retaining the services of an external 24/7 security operations center and partnering with third
parties in testing our information systems for vulnerabilities from external, internal, and social engineering perspectives and
assessing the effectiveness of our cybersecurity controls.
The Company partners with third-party service providers and employs processes to assess, identify, and manage material
risks from cybersecurity threats arising from the use of such third-party service providers. Our latest assessment attempted to
identify vulnerabilities in our network and systems from external, internal, and social engineering perspectives. Our
cybersecurity practices (including with respect to third-party service providers) have been assessed to represent a level of
maturity consistent with industry best practices.
Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected
the Company, including its business strategy, results of operations, and financial condition. For more information about these
risks, see the disclosure under the heading “Technology and Cybersecurity Risks” in Part I, Item 1A. Risk Factors.
23
Our board of directors oversees the Company’s risk management process, including cybersecurity risks, directly and
through its committees. The audit committee of the Company’s board of directors provides structured oversight of the
Company’s risk management program, which focuses on the most significant short-, intermediate-, and long-term risks the
Company faces. The Company has an information security compliance committee (the “Committee”) that consists of the
members of the Company's compliance committee, which reports to the board of directors, and at least three members of
Company management. The Committee is responsible for overseeing the development and upkeep of written policies and
procedures aimed at safeguarding the Company’s information systems and the nonpublic information stored within them. In
addition, the Committee plays a crucial role in the governance of the cybersecurity risk management process. This involves
collaborating with third-party industry experts and the Company’s internal audit team to conduct risk assessments of the
Company’s information security program (the “Program”). The assessments encompass an evaluation of the Company’s
adherence to the Program, including the elements of the Program that are dictated by relevant laws, regulations, and the
Company’s information security manual. Furthermore, the Company conducts periodic cybersecurity assessments and
preparedness analyses, supervised by our Vice President, Engineering – Security, Compliance, and Trust, who maintains a
CRISC certification, has more than twenty years of experience in information security, risk management, and regulatory
compliance in the financial services industry, and serves as our designated Chief Information Security Officer (“CISO”).
At least annually, our internal audit team conducts a formal risk assessment and develops an audit plan that identifies,
assesses, and prioritizes risks that include cybersecurity. The results of the risk assessment and the proposed audit plan are
communicated to various leaders within the Company as well as the audit committee of the board of directors for input. The
audit plan is reassessed throughout the year, and the plan is subject to modification by our internal audit team, e.g., based on
such considerations as changes to resources, business operations, or internal or external risk factors. The CISO also issues an
annual written report to the board of directors on the Program and material cybersecurity risks.
The Company takes a risk-based approach to cybersecurity and has implemented cybersecurity policies throughout its
operations that are designed to address cybersecurity threats and incidents. In particular, the Company has adopted and
maintains written policies and procedures for the protection of Company’s information systems and nonpublic information
stored on those systems, which are based on the Company’s risk assessment and that address all other specific topics as may be
required by applicable laws and regulations. The Company requires all team members with access to any of its information
systems, including contractors, to complete social engineering, cybersecurity, and compliance training programs annually.
The Program includes processes to coordinate and facilitate the implementation of information security best practices and
services throughout the Company and to comply with applicable cybersecurity requirements under federal and state laws and
regulations, including, but not limited to, the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act
of 1996, and the New York State Department of Financial Services Cybersecurity Requirements for Financial Services
Companies, 23 NYCRR 500. The Program is based on the Company’s risk assessment and designed to perform in accordance
with applicable laws and regulations.
The Company has established and maintains a comprehensive information security incident management plan (the “Plan”)
that allows the Company to respond quickly and effectively to cybersecurity threats and cybersecurity incidents, including
cybersecurity breaches, in accordance with applicable laws and regulations.
The Company routinely engages third-party industry experts to work in conjunction with our internal audit team in
performing risk assessments of the Program and the Plan and of the Company’s execution of the Program and the Plan.
The CISO, in coordination with the information security managers, is responsible for leading the assessment and
management of cybersecurity risks. The Company’s information security team has extensive experience in information security
and previous information security work experience in several industries, including defense, manufacturing, and financial
services. The CISO reports to the board of directors, the audit committee, and senior management on cybersecurity threats.
ITEM 2.
PROPERTIES
Our headquarters is located in Southfield, Michigan, in an office building we purchased in 1993, which includes
approximately 136,000 square feet of space. To take advantage of the national talent pool and to maximize team member
satisfaction, we utilize a “remote first” strategy. While remote work has become the primary experience for most of our team
members, some team members, due to the nature of their responsibilities, continue to work primarily on site at our
headquarters. Additionally, we have various on-site meetings, events, and team building activities for which in-person
attendance is encouraged. Therefore, we continue to have a need for office space.
24
ITEM 3.
LEGAL PROCEEDINGS
In the normal course of business and as a result of the consumer-oriented nature of the industry in which we operate, we
and other industry participants are frequently subject to various consumer claims, litigation, and regulatory investigations
seeking damages, fines, and statutory penalties. The claims allege, among other theories of liability, violations of state, federal,
and foreign truth-in-lending, credit availability, credit reporting, consumer protection, warranty, debt collection, insurance, and
other consumer-oriented laws and regulations, including claims seeking damages for alleged physical and mental harm relating
to the repossession and sale of consumers’ vehicles and other debt collection activities. As the assignee of Consumer Loans
originated by Dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against Dealers. We
may also have disputes and litigation with Dealers. The claims may allege, among other theories of liability, that we breached
the Dealer servicing agreement. We may also have disputes and litigation with vendors and other third parties. The claims may
allege, among other theories of liability, that we breached a license agreement or contract. The damages, fines, and penalties
that may be claimed by consumers, regulatory agencies, Dealers, vendors, or other third parties in these types of matters can be
substantial. The relief requested by plaintiffs varies but may include requests for compensatory, statutory, and punitive damages
and injunctive relief, and plaintiffs may seek treatment as purported class actions or they may file individual arbitration
demands for which arbitration providers may request separate filing fees. An adverse ultimate disposition in any action to
which we are a party or otherwise subject, or the requirement to pay filing fees for a large number of individual arbitration
demands, could have a material adverse impact on our financial position, liquidity, and results of operations.
For a description of significant litigation to which we are a party, see Note 15 to the consolidated financial statements
contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
25
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on The Nasdaq Global Select Market® under the symbol “CACC.”
Holders
As of February 4, 2025, we had approximately 50 shareholders of record of our common stock.
Stock Performance Graph
The following graph compares the percentage change in the cumulative total shareholder return on our common stock
during the five-year period ended December 31, 2024 with the cumulative total return on the NASDAQ Composite Index and a
peer group index based upon approximately 100 companies included in the Dow Jones U.S. Financial Services Index. The
comparison assumes that $100 was invested on December 31, 2019 in our common stock and in the foregoing indices and
assumes the reinvestment of dividends.
Source: Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2025.
Index Data: Copyright Nasdaq, Inc. Used with permission. All rights reserved.
Index Data: Copyright S&P Dow Jones Indices LLC. Used with permission. All rights reserved.
26
Stock Repurchases
The following table summarizes our stock repurchases for the three months ended December 31, 2024:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number of
Shares Purchased
Average Price Paid
per Share (1)
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs (2)
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (2)
October 1 through October 31, 2024
1,945 (3) $
465.22
—
1,346,570
November 1 through November 30, 2024
178 (3)
463.76
—
1,346,570
December 1 through December 31, 2024
123,771 (4)
485.88
101,479
1,245,091
125,894
$
485.53
101,479
(1)
Average price paid per share excludes excise tax. As of January 1, 2023, our share repurchases in excess of issuances are subject to a 1% excise tax
enacted by the Inflation Reduction Act of 2022. Any excise tax incurred is recognized as part of the cost basis of the shares acquired in the
consolidated statements of shareholders’ equity.
(2)
On August 21, 2023, our board of directors authorized the repurchase by us from time to time of up to two million shares of our common stock (the
"August 2023 Authorization"). The August 2023 Authorization, which was announced on August 24, 2023, does not have a specified expiration date.
Repurchases under the August 2023 Authorization may be made in the open market, through privately negotiated transactions, through block trades,
pursuant to trading plans adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934 or otherwise.
(3)
Consists of shares of common stock released to us by team members as payment of tax withholdings upon the settlement of restricted stock units in
common stock and the vesting of restricted stock units.
(4)
Amount includes 22,292 shares of common stock released to us by team members as payment of tax withholdings upon the settlement of restricted
stock units in common stock.
ITEM 6.
[RESERVED]
27
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related
notes contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
Overview
We make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell
vehicles to consumers, regardless of their credit history. Our financing programs are offered through a nationwide network of
automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and
referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing
programs, but who actually end up qualifying for traditional financing.
For the year ended December 31, 2024, consolidated net income was $247.9 million, or $19.88 per diluted share, compared
to $286.1 million, or $21.99 per diluted share, for the same period in 2023. The decrease in consolidated net income was
primarily due to increases in interest expense and provision for credit losses, partially offset by an increase in finance charges.
Our results for the year ended December 31, 2024 included:
•
A larger decline in forecasted collection rates
The decline in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $314.0
million, or 3.1%, compared to a decrease in forecasted collection rates during 2023 that decreased forecasted net cash
flows from our Loan portfolio by $206.3 million, or 2.3%. The $314.0 million decrease in forecasted net cash flows
during 2024 was composed of an ordinary decrease in forecasted net cash flows of $166.8 million, or 1.7%, and an
adjustment applied to our forecasting methodology during the second quarter of 2024, which upon implementation,
reduced forecasted net cash flows by $147.2 million, or 1.4%. The $206.3 million decrease in forecasted net cash
flows during 2023 was composed of an ordinary decrease in forecasted net cash flows of $161.8 million, or 1.8%, and
an adjustment to our forecasting methodology, which upon implementation, reduced forecasted net cash flows by
$44.5 million, or 0.5%.
•
A decrease in forecasted profitability for Consumer Loans assigned in 2021 through 2024
Forecasted profitability was lower than our estimates at December 31, 2023, due to both a decline in forecasted
collection rates and slower forecasted net cash flow timing since 2023. The slower forecasted net cash flow timing was
primarily a result of a decrease in Consumer Loan prepayments, which remain below historical averages.
•
Growth in Consumer Loan assignment volume and the average balance of our Loan portfolio
Unit and dollar volumes grew 16.1% and 11.3%, respectively, as compared to 2023. The average balance of our Loan
portfolio, which is our largest-ever, increased 13.6% as compared to 2023.
•
An increase in the initial spread on Consumer Loan assignments
The initial spread increased to 22.1% compared to 21.3% on Consumer Loans assigned in 2023.
•
An increase in our average cost of debt
Our average cost of debt increased from 5.5% to 7.2%, primarily as a result of higher interest rates on recently
completed or extended secured financings and recently issued senior notes and the repayment of older secured
financings and senior notes with lower interest rates.
•
A decrease in common shares outstanding due to stock repurchases
We repurchased approximately 590,000 shares, or 4.7% of the shares outstanding at the beginning of the year.
•
Loss on sale of building
We recognized a $23.7 million loss during the second quarter of 2024 related to the sale of one of our two office
buildings. The building was sold to reduce excess office space and eliminate the associated annual operating costs of
approximately $2.1 million.
28
For the year ended December 31, 2023, consolidated net income was $286.1 million, or $21.99 per diluted share, compared
to $535.8 million, or $39.32 per diluted share, for the same period in 2022. The decrease in consolidated net income was
primarily due to increases in provision for credit losses and interest expense. Our results for the year ended December 31, 2023
included:
•
A larger decline in forecasted collection rates
The decline in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $206.3
million, or 2.3%, compared to a decrease in forecasted collection rates during 2022 that decreased forecasted net cash
flows from our Loan portfolio by $59.7 million, or 0.7%.
•
A decrease in forecasted profitability for Consumer Loans assigned in 2020 through 2022
Forecasted profitability was lower than our estimates at December 31, 2022, due to a decline in forecasted collection
rates during 2023 and slower forecasted net cash flow timing during 2023, primarily as a result of a decrease in
Consumer Loan prepayments to below-average levels.
•
Growth in Consumer Loan assignment volume and the average balance of our Loan portfolio
Unit and dollar volumes grew 18.6% and 14.4%, respectively, as compared to 2022. The average balance of our Loan
portfolio increased 5.0% as compared to 2022.
•
An increase in the initial spread on Consumer Loan assignments
The initial spread increased to 21.3% compared to 20.1% on Consumer Loans assigned in 2022.
•
An increase in our average cost of debt
Our average cost of debt increased from 3.6% to 5.5%, primarily as a result of higher interest rates on recently
completed or extended secured financings and the repayment of older secured financings with lower interest rates.
•
A decrease in common shares outstanding due to stock repurchases
We repurchased 0.4 million shares, or 2.8% of the shares outstanding at the beginning of the year.
Critical Success Factors
Critical success factors include our ability to accurately forecast Consumer Loan performance, access capital on acceptable
terms, and maintain or grow Consumer Loan volume at the level and on the terms that we anticipate, with the objective to
maximize economic profit over the long term. Economic profit is a non-GAAP financial measure we use to evaluate our
financial results and determine profit-sharing for team members. We also use economic profit as a framework to evaluate
business decisions and strategies. Economic profit measures how efficiently we utilize our total capital, both debt and equity,
and is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business.
29
Consumer Loan Metrics
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.
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
December 31, 2024, with the aggregated forecasts as of December 31, 2023, as of December 31, 2022, and at the time of
assignment, segmented by year of assignment:
Forecasted Collection Percentage as of (1)
Current Forecast Variance from
Consumer Loan
Assignment Year
December 31,
2024
December 31,
2023
December 31,
2022
Initial
Forecast
December 31,
2023
December 31,
2022
Initial
Forecast
2015
65.3 %
65.2 %
65.2 %
67.7 %
0.1 %
0.1 %
-2.4 %
2016
63.9 %
63.8 %
63.8 %
65.4 %
0.1 %
0.1 %
-1.5 %
2017
64.7 %
64.7 %
64.7 %
64.0 %
0.0 %
0.0 %
0.7 %
2018
65.5 %
65.5 %
65.2 %
63.6 %
0.0 %
0.3 %
1.9 %
2019
67.2 %
66.9 %
66.6 %
64.0 %
0.3 %
0.6 %
3.2 %
2020
67.7 %
67.6 %
67.8 %
63.4 %
0.1 %
-0.1 %
4.3 %
2021
63.8 %
64.5 %
66.2 %
66.3 %
-0.7 %
-2.4 %
-2.5 %
2022
60.2 %
62.7 %
66.3 %
67.5 %
-2.5 %
-6.1 %
-7.3 %
2023
64.3 %
67.4 %
—
67.5 %
-3.1 %
—
-3.2 %
2024
66.5 %
—
—
67.2 %
—
—
-0.7 %
(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.
Consumer Loans assigned in 2018 through 2020 have yielded forecasted collection results significantly better than our
initial estimates, while Consumer Loans assigned in 2015, 2016, and 2021 through 2023 have yielded forecasted collection
results significantly worse than our initial estimates. For all other assignment years presented, actual results have been close to
our initial estimates.
For the year ended December 31, 2024, forecasted collection rates improved for Consumer Loans assigned in 2019,
declined for Consumer Loans assigned in 2021 through 2024, and were generally consistent with expectations at the start of the
period for all other assignment years presented.
For the year ended December 31, 2023, forecasted collection rates improved for Consumer Loans assigned in 2018 and
2019, declined for Consumer Loans assigned in 2020 through 2022, and were generally consistent with expectations at the start
of the period for all other assignment years presented.
The changes in forecasted collection rates impacted forecasted net cash flows (forecasted collections less forecasted Dealer
Holdback payments) as follows:
(In millions)
For the Years Ended December 31,
Decrease in Forecasted Net Cash Flows
2024
2023
2022
Dealer Loans
$
(204.6)
$
(125.3)
$
(41.6)
Purchased Loans
(109.4)
(81.0)
(18.1)
Total
$
(314.0)
$
(206.3)
$
(59.7)
% change from forecast at beginning of period
-3.1 %
-2.3 %
-0.7 %
30
During the second quarter of 2024, 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 2022
through 2024. Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.
Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as
Consumer Loans assigned in 2022. During the second quarter of 2024, we determined that we had sufficient Consumer Loan
performance experience to estimate the magnitude by which we expected Consumer Loans assigned in 2022 through 2024
would likely underperform our historical collection rates on Consumer Loans with similar characteristics. Accordingly, we
applied an adjustment to Consumer Loans assigned in 2022 through 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 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased provision for
credit losses by $127.5 million.
During the second quarter of 2023, we adjusted our methodology for forecasting the amount and timing of future net cash
flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan
prepayment data. We had experienced a decrease in Consumer Loan prepayments to below-average levels and, as a result,
slowed our forecasted net cash flow timing. Historically, Consumer Loan prepayments have been lower in periods with less
availability of consumer credit. 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 the adjustment to our forecasting methodology during the second
quarter of 2023 reduced forecasted net cash flows by $44.5 million, or 0.5%, and increased provision for credit losses by $71.3
million.
We have experienced increased levels of uncertainty associated with our estimate of the amount and timing of future net
cash flows from our Loan portfolio since the beginning of 2020, with realized collections underperforming our expectations
during the early stages of the COVID-19 pandemic, outperforming our expectations following the distribution of federal
stimulus payments and enhanced unemployment benefits, and underperforming our expectations during the current economic
environment. The quarterly changes to our forecast of future net cash flows from our Loan portfolio for the period from January
1, 2020 through December 31, 2024 are shown in the following table:
(Dollars in millions)
Increase (Decrease) in Forecasted Net Cash Flows
Three Months Ended
Total Loans
% Change from Forecast at
Beginning of Period
March 31, 2020
$
(206.5)
-2.3 %
June 30, 2020
24.4
0.3 %
September 30, 2020
138.5
1.5 %
December 31, 2020
(2.7)
0.0 %
March 31, 2021
107.4
1.1 %
June 30, 2021
104.5
1.1 %
September 30, 2021
82.3
0.9 %
December 31, 2021
31.9
0.3 %
March 31, 2022
110.2
1.2 %
June 30, 2022
(43.4)
-0.5 %
September 30, 2022
(85.4)
-0.9 %
December 31, 2022
(41.1)
-0.5 %
March 31, 2023
9.4
0.1 %
June 30, 2023
(89.3)
-0.9 %
September 30, 2023
(69.4)
-0.7 %
December 31, 2023
(57.0)
-0.6 %
March 31, 2024
(30.8)
-0.3 %
June 30, 2024
(189.3)
-1.7 %
September 30, 2024
(62.8)
-0.6 %
December 31, 2024
(31.1)
-0.3 %
31
The following table presents information on Consumer Loan assignments for each of the last 10 years:
Average
Total Assignment Volume
Consumer Loan
Assignment Year
Consumer Loan (1)
Advance (2)
Initial Loan Term
(in months)
Unit Volume
Dollar Volume (2)
(in millions)
2015
$
16,354 $
7,272
50
298,288
$
2,167.0
2016
18,218
7,976
53
330,710
2,635.5
2017
20,230
8,746
55
328,507
2,873.1
2018
22,158
9,635
57
373,329
3,595.8
2019
23,139
10,174
57
369,805
3,772.2
2020
24,262
10,656
59
341,967
3,641.2
2021
25,632
11,790
59
268,730
3,167.8
2022
27,242
12,924
60
280,467
3,625.3
2023
27,025
12,475
61
332,499
4,147.8
2024
26,497
11,961
61
386,126
4,618.4
(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.
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
December 31, 2024, 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.
Forecasted Collection % as of
Spread % as of
Consumer Loan Assignment Year
December 31,
2024
Initial Forecast
Advance % (1)
December 31,
2024
Initial Forecast
% of Forecast
Realized (2)
2015
65.3 %
67.7 %
44.5 %
20.8 %
23.2 %
99.7 %
2016
63.9 %
65.4 %
43.8 %
20.1 %
21.6 %
99.5 %
2017
64.7 %
64.0 %
43.2 %
21.5 %
20.8 %
99.2 %
2018
65.5 %
63.6 %
43.5 %
22.0 %
20.1 %
98.6 %
2019
67.2 %
64.0 %
44.0 %
23.2 %
20.0 %
96.9 %
2020
67.7 %
63.4 %
43.9 %
23.8 %
19.5 %
92.4 %
2021
63.8 %
66.3 %
46.0 %
17.8 %
20.3 %
83.6 %
2022
60.2 %
67.5 %
47.4 %
12.8 %
20.1 %
66.0 %
2023
64.3 %
67.5 %
46.2 %
18.1 %
21.3 %
43.1 %
2024
66.5 %
67.2 %
45.1 %
21.4 %
22.1 %
15.1 %
(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.
32
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 December 31, 2024 and the advance rate ranges from 12.8% to
23.8% 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 spread with respect to 2022 Consumer Loans has 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 2024 Consumer Loans relative to 2023 Consumer Loans as of December 31, 2024 was primarily a result of
Consumer Loan performance, as the performance of 2023 Consumer Loans has been lower than our initial estimates by a
greater margin than 2024 Consumer Loans. Additionally, 2024 Consumer Loans had a higher initial spread, which was
primarily due to a decrease in the advance rate.
The following table compares our forecast of aggregate Consumer Loan collection rates as of December 31, 2024 with the
forecasts at the time of assignment, for Dealer Loans and Purchased Loans separately:
Dealer Loans
Purchased Loans
Forecasted Collection Percentage
as of (1)
Forecasted Collection Percentage
as of (1)
Consumer Loan Assignment Year
December 31,
2024
Initial
Forecast
Variance
December 31,
2024
Initial
Forecast
Variance
2015
64.6 %
67.5 %
-2.9 %
69.0 %
68.5 %
0.5 %
2016
63.1 %
65.1 %
-2.0 %
66.1 %
66.5 %
-0.4 %
2017
64.1 %
63.8 %
0.3 %
66.3 %
64.6 %
1.7 %
2018
64.9 %
63.6 %
1.3 %
66.8 %
63.5 %
3.3 %
2019
66.8 %
63.9 %
2.9 %
67.9 %
64.2 %
3.7 %
2020
67.5 %
63.3 %
4.2 %
67.9 %
63.6 %
4.3 %
2021
63.5 %
66.3 %
-2.8 %
64.3 %
66.3 %
-2.0 %
2022
59.5 %
67.3 %
-7.8 %
62.1 %
68.0 %
-5.9 %
2023
63.1 %
66.8 %
-3.7 %
67.7 %
69.4 %
-1.7 %
2024
65.4 %
66.3 %
-0.9 %
70.7 %
70.7 %
0.0 %
(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.
33
The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the
forecasted collection rate less the advance rate) as of December 31, 2024 for Dealer Loans and Purchased Loans separately. All
amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).
Dealer Loans
Purchased Loans
Consumer Loan Assignment Year
Forecasted
Collection %
(1)
Advance %
(1)(2)
Spread %
Forecasted
Collection %
(1)
Advance %
(1)(2)
Spread %
2015
64.6 %
43.4 %
21.2 %
69.0 %
50.2 %
18.8 %
2016
63.1 %
42.1 %
21.0 %
66.1 %
48.6 %
17.5 %
2017
64.1 %
42.1 %
22.0 %
66.3 %
45.8 %
20.5 %
2018
64.9 %
42.7 %
22.2 %
66.8 %
45.2 %
21.6 %
2019
66.8 %
43.1 %
23.7 %
67.9 %
45.6 %
22.3 %
2020
67.5 %
43.0 %
24.5 %
67.9 %
45.5 %
22.4 %
2021
63.5 %
45.1 %
18.4 %
64.3 %
47.7 %
16.6 %
2022
59.5 %
46.4 %
13.1 %
62.1 %
50.1 %
12.0 %
2023
63.1 %
44.8 %
18.3 %
67.7 %
49.8 %
17.9 %
2024
65.4 %
44.1 %
21.3 %
70.7 %
48.9 %
21.8 %
(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 December 31, 2024 on 2024 Dealer Loans was 21.3%, as compared to a spread of 18.3% on 2023 Dealer
Loans. The increase was primarily due to Consumer Loan performance, as the performance of 2023 Dealer Loans has been
lower than our initial estimates by a greater margin than 2024 Dealer Loans.
The spread as of December 31, 2024 on 2024 Purchased Loans was 21.8%, as compared to a spread of 17.9% on 2023
Purchased Loans. The increase was primarily a result of a higher initial spread on 2024 Purchased Loans, due to a higher initial
forecast and lower advance rate. Additionally, the performance of 2023 Purchased Loans has been lower than our initial
estimates.
Access to Capital
Our strategy for accessing capital on acceptable terms needed to maintain and grow the business is to: (1) maintain
consistent financial performance; (2) maintain modest financial leverage; and (3) maintain multiple funding sources. Our
funded debt to equity ratio was 3.6 to 1 as of December 31, 2024. We currently utilize the following primary forms of debt
financing: (1) our revolving secured line of credit facility; (2) Warehouse facilities; (3) Term ABS financings; and (4) senior
notes.
34
Consumer Loan Volume
The following table summarizes changes in Consumer Loan assignment volume in each of the last three years as compared
to the same period in the previous year:
Year over Year Percent Change
For the Year Ended December 31,
Unit Volume
Dollar Volume (1)
2022
4.4 %
14.5 %
2023
18.6 %
14.4 %
2024
16.1 %
11.3 %
(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, (2) the amount of capital available to fund new Loans, and (3) our assessment of the volume that our infrastructure
can support. Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of
capital and infrastructure constraints.
During 2024, unit and dollar volumes increased 16.1% and 11.3%, respectively, as the number of active Dealers increased
9.1% while average volume per active Dealer increased 6.4%. Dollar volume increased less than unit volume in 2024 due to a
decrease in the average advance paid, due to decreases in the average advance rate and the average size of Consumer Loans
assigned. Unit volume for 2024 was the highest unit volume in our history.
During 2023, unit and dollar volumes increased 18.6% and 14.4%, respectively, as the number of active Dealers increased
19.1% while average volume per active Dealer decreased 0.4%. Dollar volume increased less than unit volume in 2023 due to a
decrease in the average advance paid, due to decreases in the average advance rate and the average size of Consumer Loans
assigned.
The following table summarizes the changes in Consumer Loan unit volume and active Dealers:
For the Years Ended December 31,
For the Years Ended December 31,
2024
2023
% Change
2023
2022
% Change
Consumer Loan unit volume
386,126
332,499
16.1 %
332,499
280,467
18.6 %
Active Dealers (1)
15,463
14,174
9.1 %
14,174
11,901
19.1 %
Average volume per active Dealer
25.0
23.5
6.4 %
23.5
23.6
-0.4 %
Consumer Loan unit volume from
Dealers active both periods
339,361
304,779
11.3 %
282,008
259,999
8.5 %
Dealers active both periods
10,637
10,637
—
9,506
9,506
—
Average volume per Dealer active
both periods
31.9
28.7
11.3 %
29.7
27.4
8.5 %
Consumer Loan unit volume from
Dealers not active both periods
46,765
27,720
68.7 %
50,491
20,468
146.7 %
Dealers not active both periods
4,826
3,537
36.4 %
4,668
2,395
94.9 %
Average volume per Dealer not
active both periods
9.7
7.8
24.4 %
10.8
8.5
27.1 %
(1)
Active Dealers are Dealers who have received funding for at least one Consumer Loan during the period.
35
The following table provides additional information on the changes in Consumer Loan unit volume and active Dealers:
For the Years Ended December 31,
For the Years Ended December 31,
2024
2023
% Change
2023
2022
% Change
Consumer Loan unit volume from
new active Dealers
43,985
46,741
-5.9 %
46,741
28,223
65.6 %
New active Dealers (1)
4,330
4,070
6.4 %
4,070
2,819
44.4 %
Average volume per new active
Dealer
10.2
11.5
-11.3 %
11.5
10.0
15.0 %
Attrition (2)
-8.3 %
-7.3 %
-7.3 %
-6.9 %
(1)
New active Dealers are Dealers who enrolled in our program and have received funding for their first 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 Loan during the comparable period of the prior year but did not receive funding for any Loans during the current period divided by prior year
comparable period Consumer Loan unit volume.
Consumer Loans are assigned to us as either Dealer Loans through the Portfolio Program or Purchased Loans through the
Purchase Program. The following table shows the percentage of Consumer Loans assigned to us under each of the programs for
each of the last three years:
Unit Volume
Dollar Volume (1)
For the Years Ended December 31,
Portfolio Program
Purchase Program
Portfolio Program
Purchase Program
2022
73.5 %
26.5 %
69.8 %
30.2 %
2023
74.0 %
26.0 %
70.7 %
29.3 %
2024
78.7 %
21.3 %
77.5 %
22.5 %
(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 December 31, 2024 and 2023, the net Dealer Loans receivable balance was 72.3% and 67.7%, respectively, of the
total net Loans receivable balance.
Results of Operations
The following is a discussion of our 2024 and 2023 results of operations and income statement data on a consolidated
basis, including year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons
between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2023.
The net Loan income (finance charge revenue less provision for credit losses expense) that we recognize over the life of a
Loan equals the cash we collect from the underlying Consumer Loan less the cash we pay to the Dealer. We believe the
economics of our business are best exhibited by recognizing net Loan income on a level-yield basis over the life of the Loan
based on expected future net cash flows. Under the GAAP methodology we employ, which is known as the current expected
credit loss model, or CECL, we are required to recognize:
•
a significant provision for credit losses expense at the time of the Loan’s assignment to us for contractual net cash
flows we do not expect to realize; and
•
finance charge revenue in subsequent periods that is significantly in excess of our expected yields.
Due to the GAAP treatment of contractual net cash flows we do not expect to realize at the time of loan assignment (i.e.
significant expense at the time of loan assignment, which is offset by higher revenue in subsequent periods), we do not believe
the GAAP methodology we employ provides sufficient transparency into the economics of our business, including our results
of operations, financial condition, and financial leverage. For additional information, see Note 2 and Note 5 to the consolidated
financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
36
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
(Dollars in millions, except per share data)
For the Years Ended December 31,
2024
2023
$ Change
% Change
Revenue:
Finance charges
$
1,992.7 $
1,755.4 $
237.3
13.5 %
Premiums earned
96.1
79.6
16.5
20.7 %
Other income
73.6
66.9
6.7
10.0 %
Total revenue
2,162.4
1,901.9
260.5
13.7 %
Costs and expenses:
Salaries and wages
309.2
280.2
29.0
10.3 %
General and administrative
97.9
87.2
10.7
12.3 %
Sales and marketing
94.4
91.7
2.7
2.9 %
Total operating expenses
501.5
459.1
42.4
9.2 %
Provision for credit losses on forecast changes
493.8
413.7
80.1
19.4 %
Provision for credit losses on new Consumer Loan
assignments
320.9
322.5
(1.6)
-0.5 %
Total provision for credit losses
814.7
736.2
78.5
10.7 %
Interest
419.5
266.5
153.0
57.4 %
Provision for claims
73.5
70.7
2.8
4.0 %
Loss on extinguishment of debt
—
1.8
(1.8)
-100.0 %
Loss on sale of building
23.7
—
23.7
— %
Total costs and expenses
1,832.9
1,534.3
298.6
19.5 %
Income before provision for income taxes
329.5
367.6
(38.1)
-10.4 %
Provision for income taxes
81.6
81.5
0.1
0.1 %
Net income
$
247.9 $
286.1 $
(38.2)
-13.4 %
Net income per share:
Basic
$
20.12 $
22.09 $
(1.97)
-8.9 %
Diluted
$
19.88 $
21.99 $
(2.11)
-9.6 %
Weighted average shares outstanding:
Basic
12,323,261 12,953,424
(630,163)
-4.9 %
Diluted
12,469,283 13,010,735
(541,452)
-4.2 %
Finance Charges. The increase of $237.3 million, or 13.5%, was primarily due to an increase in the average net Loans
receivable balance, as follows:
(Dollars in millions)
For the Years Ended December 31,
2024
2023
Change
Average net Loans receivable balance
$
7,530.7
$
6,627.8
$
902.9
Average yield on our Loan portfolio
26.5 %
26.5 %
— %
37
The following table summarizes the impact each component had on the overall increase in finance charges for the year
ended December 31, 2024:
(In millions)
Impact on finance charges:
For the Year Ended
December 31, 2024
Due to an increase in the average net Loans receivable balance
$
239.1
Due to a decrease in the average yield
(1.8)
Total increase in finance charges
$
237.3
The increase in the average net Loans receivable balance was primarily due to the dollar volume of new Consumer Loan
assignments exceeding the principal collected on Loans receivable.
Premiums Earned. The increase of $16.5 million, or 20.7%, was primarily due to growth in the size of our reinsurance
portfolio, which resulted from growth in new Consumer Loan assignments and an increase in the average premium written per
reinsured vehicle service contract in recent periods.
Operating Expenses. The increase of $42.4 million, or 9.2%, was primarily due to:
•
An increase in salaries and wages expense of $29.0 million, or 10.3%, 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, (ii) fringe benefits, primarily due to higher medical claims, and (iii) stock-based
compensation expense, primarily due to equity awards granted to our executive officers and senior leaders.
▪
An increase in general and administrative expense of $10.7 million, or 12.3%, primarily due to increases in legal and
technology systems expenses.
Provision for Credit Losses. The increase of $78.5 million, or 10.7%, was primarily due to an increase in provision for
credit losses on forecast changes.
We recognize provision for credit losses on new Consumer Loan assignments for contractual net cash flows that are not
expected to be realized at the time of assignment. We also recognize provision for credit losses on forecast changes in the
amount and timing of expected future net cash flows subsequent to assignment. The following table summarizes the provision
for credit losses for each of these components:
(In millions)
For the Years Ended December 31,
Provision for Credit Losses
2024
2023
Change
Forecast changes
$
493.8 $
413.7 $
80.1
New Consumer Loan assignments
320.9
322.5
(1.6)
Total
$
814.7 $
736.2 $
78.5
The increase in provision for credit losses related to forecast changes was due to a greater decline in Consumer Loan
performance during 2024 compared to 2023 and slower net cash flow timing during 2024 compared to 2023.
During 2024, we decreased our estimate of future net cash flows by $314.0 million, or 3.1%, to reflect a decline in
forecasted collection rates during the period and slowed our forecasted net cash flow timing to reflect a decrease in Consumer
Loan prepayments, which remain below historical averages. Historically, Consumer Loan prepayments have been lower in
periods with less availability of consumer credit. The $314.0 million decrease in forecasted net cash flows for the year ended
December 31, 2024 was composed of an ordinary decrease in forecasted net cash flows of $166.8 million, or 1.7%, and an
adjustment applied to our forecasting methodology during the second quarter of 2024, which upon implementation, reduced
forecasted net cash flows by $147.2 million, or 1.4%, and increased our provision for credit losses by $127.5 million. Consumer
Loans assigned in 2022 had continued to underperform our expectations for several quarters. Consumer Loans assigned in 2023
had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.
During the second quarter of 2024, we determined that we had sufficient Consumer Loan performance experience to estimate
the magnitude by which we expected Consumer Loans assigned in 2022 through 2024 would likely underperform our historical
collection rates on Consumer Loans with similar characteristics. Accordingly, we applied an adjustment to Consumer Loans
assigned in 2022 through 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be
based on these trends.
38
During 2023, we decreased our estimate of future net cash flows by $206.3 million, or 2.3%, to reflect a decline in
Consumer Loan prepayments to below-average levels. The $206.3 million decrease in forecasted net cash flows during 2023
was composed of an ordinary decrease in forecasted net cash flows of $161.8 million, or 1.8%, and an adjustment to our
forecasting methodology during the second quarter of 2023, which, upon implementation, decreased our estimate of future net
cash flows by $44.5 million, or 0.5%, and increased our provision for credit losses by $71.3 million. We adjusted our
methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of
more recent Consumer Loan performance and Consumer Loan prepayment data.
For additional information, see Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K,
which is incorporated herein by reference.
The decrease in provision for credit losses related to new Consumer Loan assignments was due to a 14.3% decrease in the
average provision per new Consumer Loan assignment, partially offset by a 16.1% increase in Consumer Loan assignment unit
volume. The decrease in average provision per new Consumer Loan assignment was primarily due to a decrease in the average
advance rate for 2024 Consumer Loans and a lower percentage of Purchased Loans in the mix of Consumer Loan assignments
received during 2024.
Interest. The increase in interest expense of $153.0 million, or 57.4%, was due to:
•
An increase in our average cost of debt, which increased interest expense by $93.7 million, primarily as a result of
higher interest rates on recently completed or extended secured financings and recently issued senior notes and the
repayment of older secured financings and senior notes with lower interest rates.
•
An increase in our average outstanding debt balance, which increased interest expense by $59.3 million, primarily due
to borrowings used to fund the growth of our Loan portfolio and stock repurchases.
The following table presents the change in interest expense, average outstanding debt balance, and average cost of debt for
the year ended December 31, 2024 as compared to the year ended December 31, 2023:
(Dollars in millions)
For the Years Ended December 31,
2024
2023
Change
Interest expense
$
419.5
$
266.5
$
153.0
Average outstanding debt balance
5,849.7
4,785.7
1,064.0
Average cost of debt
7.2 %
5.5 %
1.7 %
Loss on Sale of Building. For the year ended December 31, 2024, we recognized a loss on the sale of a building of $23.7
million. For additional information, see Note 6 to the consolidated financial statements contained in Item 8 of this Form 10-K,
which is incorporated herein by reference.
Provision for Income Taxes. For the year ended December 31, 2024, the effective income tax rate increased to 24.8% from
22.2% for the year ended December 31, 2023. The increase was primarily due to:
•
A decrease in the impact of excess tax benefits on our effective income tax rate, primarily due to the timing of long-
term stock award grants.
•
An increase in non-deductible executive compensation expense.
•
An increase in the impact of state and local income taxes on our effective income tax rate, primarily due to an
adjustment to an uncertain tax position estimate during the second quarter of 2024 and changes in state tax laws that
were enacted during the second quarter of 2024.
For additional information, see Note 10 to the consolidated financial statements contained in Item 8 of this Form 10-K,
which is incorporated herein by reference.
39
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an ongoing basis, we review our accounting policies, assumptions, estimates, and judgments to
ensure that our financial statements are presented fairly and in accordance with GAAP.
Our significant accounting policies are discussed in Note 2 to the consolidated financial statements contained in Item 8 of
this Form 10-K, which is incorporated herein by reference. We believe that the following accounting estimates are the most
critical to aid in fully understanding and evaluating our reported financial results, and involve a high degree of subjective or
complex judgment, and the use of different estimates or assumptions could produce materially different financial results.
Finance Charge Revenue & Allowance for Credit Losses
Nature of Estimates Required. We estimate the amount and timing of future collections and Dealer Holdback payments.
These estimates impact Loans receivable and allowance for credit losses on our balance sheet and finance charges and provision
for credit losses on our income statement.
Assumptions and Approaches Used. On January 1, 2020, we adopted Accounting Standards Update 2016-13, Measurement
of Credit Losses on Financial Instruments, which is known as the current expected credit loss model, or CECL. For additional
information regarding the adoption impact of CECL, see Note 2 and Note 5 to the consolidated financial statements contained
in Item 8 of this Form 10-K, which is incorporated herein by reference.
We recognize finance charges under the interest method such that revenue is recognized on a level-yield basis over the life
of the Loan. We calculate finance charges on a monthly basis by applying the effective interest rate of the Loan to the net
carrying amount of the Loan (Loan receivable less the related allowance for credit losses). For Consumer Loans assigned on or
subsequent to January 1, 2020, the effective interest rate is based on contractual future net cash flows. Consumer Loans
assigned prior to January 1, 2020 are no longer material to our consolidated financial statements.
The outstanding balance of the allowance for credit losses of each Loan represents the amount required to reduce the net
carrying amount of Loans (Loans receivable less allowance for credit losses) to the present value of expected future net cash
flows discounted at the effective interest rate. Expected future net cash flows for Dealer Loans are comprised of expected future
collections on the assigned Consumer Loans, less any expected future Dealer Holdback payments. Expected future net cash
flows for Purchased Loans are comprised of expected future collections on the assigned Consumer Loans.
Expected future collections are forecasted for each individual Consumer Loan based on the historical performance of
Consumer Loans with similar characteristics, adjusted for recent trends in payment patterns. Our forecast of expected future
collections includes estimates for prepayments and post-contractual-term cash flows. Unless the consumer is no longer
contractually obligated to pay us, we forecast future collections on each Consumer Loan for a 120 month period after the
origination date. Expected future Dealer Holdback payments are forecasted for each individual Dealer based on the expected
future collections and current advance balance of each Dealer Loan.
We monitor and evaluate Consumer Loan performance on a monthly basis by comparing our current forecasted collection
rates to our initial expectations. We use a statistical model that considers a number of credit quality indicators to estimate the
expected collection rate for each Consumer Loan at the time of assignment. The credit quality indicators considered in our
model include attributes contained in the consumer’s credit bureau report, data contained in the consumer’s credit application,
the structure of the proposed transaction, vehicle information, and other factors. We continue to evaluate the expected collection
rate for each Consumer Loan subsequent to assignment primarily through the monitoring of consumer payment behavior. Our
evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast. Since all
known, significant credit quality indicators have already been factored into our forecasts and pricing, we are not able to use any
specific credit quality indicators to predict or explain variances in actual performance from our initial expectations. Any
variances in performance from our initial expectations are the result of Consumer Loans performing differently from historical
Consumer Loans with similar characteristics. We periodically adjust our statistical pricing model for new trends that we
identify through our evaluation of these forecasted collection rate variances.
40
During the second quarter of 2024, 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 2022
through 2024. Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.
Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as
Consumer Loans assigned in 2022. During the second quarter of 2024, we determined that we had sufficient Consumer Loan
performance experience to estimate the magnitude by which we expected Consumer Loans assigned in 2022 through 2024
would likely underperform our historical collection rates on Consumer Loans with similar characteristics. Accordingly, we
applied an adjustment to Consumer Loans assigned in 2022 through 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 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased provision for
credit losses by $127.5 million.
During the second quarter of 2023, we adjusted our methodology for forecasting the amount and timing of future net cash
flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan
prepayment data. We had experienced a decrease in Consumer Loan prepayments to below-average levels and, as a result,
slowed our forecasted net cash flow timing. The below-average levels of Consumer Loan prepayments continued through the
fourth quarter of 2023. Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer
credit. 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 the adjustment to our forecasting methodology during the second quarter of 2023 reduced
forecasted net cash flows by $44.5 million, or 0.5%, and increased provision for credit losses by $71.3 million.
The COVID-19 pandemic created conditions that increased the level of uncertainty associated with our estimate of the
amount and timing of future net cash flows from our Loan portfolio. During the first quarter of 2020, we applied a subjective
adjustment to our forecasting model to reflect our best estimate of the future impact of the COVID-19 pandemic on future net
cash flows (“COVID forecast adjustment”), which reduced our estimate of future net cash flows by $162.2 million. We
continued to apply the COVID forecast adjustment through the end of 2021, as it continued to represent our best estimate.
During the first quarter of 2022, we determined that we had sufficient Consumer Loan performance experience since the lapse
of federal stimulus payments and enhanced unemployment benefits to refine our estimate of future net cash flows. Accordingly,
during the first quarter of 2022, we removed the COVID forecast adjustment and enhanced our methodology for forecasting the
amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent data and new forecast
variables. Under CECL, changes in the amount and timing of forecasted net cash flows are recorded as a provision for credit
losses in the period of change.
The removal of the COVID forecast adjustment and the implementation of the enhanced forecasting methodology during
the first quarter of 2022 impacted forecasted net cash flows and provision for credit losses as follows:
(In millions)
Increase / (Decrease) in
Forecasting Methodology Changes
Forecasted Net Cash
Flows
Provision for Credit
Losses
Removal of COVID forecast adjustment
$
149.5 $
(118.5)
Implementation of enhanced forecasting methodology
(53.8)
47.9
Total
$
95.7 $
(70.6)
Our provision for credit losses for the year ended December 31, 2024, included:
•
$320.9 million provision for credit losses on new Consumer Loan assignments, which reduced consolidated net
income by $247.1 million, or $19.82 per diluted share; and
•
$493.8 million provision for credit losses on forecast changes related to changes in the amount and timing of expected
future net cash flows, which reduced consolidated net income by $380.2 million, or $30.49 per diluted share.
Our provision for credit losses for the year ended December 31, 2023, included:
•
$322.5 million provision for credit losses on new Consumer Loan assignments, which reduced consolidated net
income by $248.3 million, or $19.08 per diluted share; and
•
$413.7 million provision for credit losses on forecast changes related to changes in the amount and timing of expected
future net cash flows, which reduced consolidated net income by $318.5 million, or $24.48 per diluted share.
41
Key Factors. Variances in the amount and timing of future net cash flows from current estimates could materially impact
earnings in future periods. A 1% decline in the forecasted future net cash flows on Loans as of December 31, 2024 would have
reduced 2024 consolidated net income by approximately $59.7 million.
During periods of economic slowdown or recession, delinquencies, defaults, repossessions, and losses may increase on our
Consumer Loans, and Consumer Loan prepayments may decline. These periods are also typically accompanied by decreased
consumer demand for automobiles and declining values of automobiles securing outstanding Consumer Loans, which weakens
collateral coverage and increases the amount of a loss in the event of default. Significant increases in the inventory of used
automobiles during periods of economic recession may also depress the prices at which repossessed automobiles may be sold or
delay the timing of these sales. Additionally, inflation, higher gasoline prices, the deferral or resumption of student loan
payments, increased focus on climate-related initiatives and regulation, declining stock market values, unstable real estate
values, resets of adjustable rate mortgages to higher interest rates, increasing unemployment levels, general availability of
consumer credit, or other factors that impact consumer confidence or disposable income could increase loss frequency and
decrease consumer demand for automobiles as well as weaken collateral values of automobiles. Because our business is focused
on consumers who do not qualify for conventional automobile financing, the actual rates of delinquencies, defaults,
repossessions, and losses on our Consumer Loans could be higher than those experienced in the general automobile finance
industry and could be more dramatically affected by a general economic downturn.
Premiums Earned
Nature of Estimates Required. We estimate the pattern of future claims on vehicle service contracts. These estimates
impact accounts payable and accrued liabilities on our balance sheet and premiums earned on our income statement.
Assumptions and Approaches Used. Premiums from the reinsurance of vehicle service contracts are recognized over the
life of the policy in proportion to the expected costs of servicing those contracts. Expected costs are determined based on our
historical claims experience. In developing our cost expectations, we stratify our historical claims experience into groupings
based on contractual term, as this characteristic has led to different patterns of cost incurrence in the past. We will continue to
update our analysis of historical costs under the vehicle service contract program as appropriate, including the consideration of
other characteristics that may have led to different patterns of cost incurrence, and revise our revenue recognition timing for any
changes in the pattern of our expected costs as they are identified.
Key Factors. Variances in the pattern of future claims from our current estimates would impact the timing of premiums
recognized in future periods. A 10% change in premiums earned for the year ended December 31, 2024 would have affected
2024 consolidated net income by approximately $7.4 million.
Contingencies
Nature of Estimates Required. We estimate the likelihood of adverse judgments against us and any resulting damages,
fines, or statutory penalties owed. These estimates impact accounts payable and accrued liabilities on our balance sheet and are
general and administrative expenses on our income statement.
Assumptions and Approaches Used. With assistance from our legal counsel, we determine if the likelihood of an adverse
judgment for various claims, litigation, and regulatory investigations is remote, reasonably possible, or probable. To the extent
we believe an adverse judgment is probable and the amount of the judgment is estimable, we recognize a liability. For
information regarding current actions to which we are a party, see Note 15 to the consolidated financial statements contained in
Item 8 of this Form 10-K, which is incorporated herein by reference.
Key Factors. Negative variances in the ultimate disposition of claims and litigation outstanding from current estimates
could result in additional expense in future periods.
42
Uncertain Tax Positions
Nature of Estimates Required. We estimate the impact of an uncertain income tax position on the income tax return. These
estimates impact income taxes receivable and accounts payable and accrued liabilities on our balance sheet and provision for
income taxes on our income statement.
Assumptions and Approaches Used. We follow a two-step approach for recognizing uncertain tax positions. First, we
evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more-likely-than-not
that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any.
Second, for positions that we determine are more-likely-than-not to be sustained, we recognize the tax benefit as the largest
benefit that has a greater than 50% likelihood of being sustained. We establish a reserve for uncertain tax positions liability that
is comprised of unrecognized tax benefits and related interest. We adjust this liability in the period in which an uncertain tax
position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position, or
more information becomes available.
Key Factors. To the extent we prevail in matters for which a liability has been established or are required to pay amounts in
excess of our established liability, our effective income tax rate in future periods could be materially affected.
Liquidity and Capital Resources
We need capital to maintain and grow our business. Our primary sources of capital are cash flows from operating activities,
collections of Consumer Loans, and borrowings under: (1) our revolving secured line of credit facility; (2) Warehouse facilities;
(3) Term ABS financings; and (4) senior notes. There are various restrictive covenants to which we are subject under each
financing arrangement, and we were in compliance with those covenants as of December 31, 2024. For information regarding
these financings and the covenants included in the related documents, see Note 9 to the consolidated financial statements
contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
On February 16, 2024, we extended the $100.0 million Term ABS 2021-1 financing and extended the date on which the
financing will cease to revolve from December 16, 2024 to February 17, 2026.
On February 27, 2024, we completed a $200.0 million Term ABS financing, which was used to repay outstanding
indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 7.8% (including
upfront fees and other costs), and it will revolve for 36 months, after which it will amortize based upon the cash flows on the
underlying Loans.
On March 28, 2024, we completed a $500.0 million Term ABS financing, which was used to repay outstanding
indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 6.4% (including
upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the
underlying Loans.
On June 17, 2024, we extended the maturity of our revolving secured line of credit facility from June 22, 2026 to June 22,
2027. The interest rate on borrowings under the facility has changed from the Bloomberg Short-Term Bank Yield Index rate
plus 187.5 basis points to the Secured Overnight Financing Rate (“SOFR”) plus 197.5 basis points.
On June 20, 2024, we completed a $550.0 million Term ABS financing, which was used to repay outstanding indebtedness
and for general corporate purposes. The financing has an expected average annualized cost of 6.5% (including upfront fees and
other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
On June 21, 2024, we increased the financing amount on the Term ABS 2022-2 financing from $200.0 million to $300.0
million and extended the date on which the financing will cease to revolve from December 15, 2025 to June 15, 2027.
On September 19, 2024, we increased the financing amount on Warehouse Facility II from $400.0 million to $500.0
million and extended the date on which the facility will cease to revolve from April 30, 2026 to September 20, 2027. The
interest rate on borrowings under the facility has been decreased from SOFR plus 230 basis points to SOFR plus 185 basis
points.
43
On September 19, 2024, we extended the date on which the $500.0 million Term ABS 2019-2 financing will cease to
revolve from August 15, 2025 to September 15, 2026 and increased the interest rate under the financing from 5.15% to 5.43%.
On September 26, 2024, we completed a $600.0 million Term ABS financing, which was used to repay outstanding
indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 5.2% (including
upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the
underlying Loans.
On December 5, 2024, we increased the financing amount on Warehouse Facility V from $200.0 million to $250.0 million
and extended the date on which the facility will cease to revolve from December 29, 2025 to December 29, 2027. The maturity
of the facility was also extended from December 27, 2027 to December 27, 2029. The interest rate on borrowings under the
facility has been decreased from SOFR plus 245 basis points to SOFR plus 185 basis points.
On December 20, 2024, we completed a $300.0 million Term ABS financing, which was used to repay outstanding
indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 6.3% (including
upfront fees and other costs), and it will revolve for 36 months, after which it will amortize based upon the cash flows on the
underlying Loans.
Cash and cash equivalents increased to $343.7 million as of December 31, 2024 from $13.2 million as of December 31,
2023. As of December 31, 2024 and December 31, 2023, we had $1,734.9 million and $1,505.8 million, respectively, in unused
and available lines of credit. Our total balance sheet indebtedness increased to $6,352.9 million as of December 31, 2024 from
$5,067.5 million as of December 31, 2023, primarily due to the growth in new Consumer Loan assignments and stock
repurchases.
A summary as of December 31, 2024 of our material financial obligations requiring future repayments is as follows:
(In millions)
Payments Due as of December 31, 2024
In less than
12 months
In 12 months
or more
Total
Long-term debt, including current maturities (1)
$
1,249.6 $
5,142.3 $
6,391.9
Dealer Holdback (2)
139.5
450.5
590.0
Operating lease obligations (3)
1.0
0.7
1.7
Purchase obligations (4)
2.4
14.8
17.2
Total financial obligations
$
1,392.5 $
5,608.3 $
7,000.8
(1)
The amounts presented consist solely of principal and do not reflect deferred debt issuance costs of $37.7 million and unamortized debt discount of
$1.3 million. We are also obligated to make interest payments at the applicable interest rates, as discussed in Note 9 to the consolidated financial
statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. Based on the actual principal amounts outstanding under
our revolving secured line of credit facility, our Warehouse facilities, our Term ABS financings, and our senior notes as of December 31, 2024, the
forecasted principal amounts outstanding on all other debt, and the actual interest rates in effect as of December 31, 2024, interest is expected to be
approximately $397.8 million during 2025; $271.8 million during 2026; and $180.9 million during 2027 and thereafter.
(2)
We have contractual obligations to pay Dealer Holdback to Dealers. Payments of Dealer Holdback are contingent upon the receipt of consumer
payments and the repayment of advances. The amounts presented represent our forecast as of December 31, 2024.
(3)
A lease liability of $1.6 million is recognized within accounts payable and accrued liabilities in our consolidated balance sheet as of December 31,
2024.
(4)
Purchase obligations consist primarily of contractual obligations related to our information system needs.
Based upon anticipated cash flows, management believes that cash flows from operations and our various financing
alternatives will provide sufficient financing for debt maturities and for future operations. Our ability to borrow funds may be
impacted by economic and financial market conditions. If the various financing alternatives were to become limited or
unavailable to us, our operations and liquidity could be materially and adversely affected.
Market Risk
We are exposed primarily to market risks associated with movements in interest rates. Our policies and procedures prohibit
the use of financial instruments for speculative purposes.
44
Interest Rate Risk. We rely on various sources of financing, some of which contain floating rates of interest and expose us
to risks associated with increases in interest rates. Assuming that we maintain a level amount of floating rate debt, an increase in
interest rates may result in higher interest expense for our floating rate debt facilities. From time to time, we may manage that
risk through the use of derivatives such as interest rate caps.
As of December 31, 2024, we had $0.1 million of floating rate debt outstanding under our revolving secured lines of credit,
without interest rate protection. For every 100-basis-point increase in interest rates on our revolving secured lines of credit,
annual after-tax earnings would decrease by a negligible amount, assuming we maintain a level amount of floating rate debt.
As of December 31, 2024, we had interest rate cap agreements outstanding to manage the interest rate risk on Warehouse
Facility V and Warehouse Facility VIII. However, as of December 31, 2024, there was no floating rate debt outstanding under
these facilities.
As of December 31, 2024, we did not have a balance outstanding under Warehouse Facility II, Warehouse IV, and
Warehouse Facility VI, which do not have interest rate protection.
As of December 31, 2024, we had $100.0 million in floating rate debt outstanding under Term ABS 2021-1, without
interest rate protection. For every 100-basis-point increase in interest rates on Term ABS 2021-1, annual after-tax earnings
would decrease by approximately $0.8 million, assuming we maintain a level amount of floating rate debt.
As of December 31, 2024, we had $300.0 million in floating rate debt outstanding under Term ABS 2022-2, without
interest rate protection. For every 100-basis-point increase in interest rates on Term ABS 2022-2, annual after-tax earnings
would decrease by approximately $2.3 million, assuming we maintain a level amount of floating rate debt.
New Accounting Updates Not Yet Adopted
See Note 2 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by
reference, for information concerning the following new accounting updates and the impact of the implementation of these
updates on our financial statements:
•
Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification
Initiative
•
Improvements to Income Tax Disclosures
•
Disaggregation of Income Statement Expenses
Forward-Looking Statements
We make forward-looking statements in this report and may make such statements in future filings with the SEC. We may
also make forward-looking statements in our press releases or other public or shareholder communications. Our forward-
looking statements are subject to risks and uncertainties and include information about our expectations and possible or
assumed future results of operations. When we use any of the words “may,” “will,” “should,” “believe,” “expect,” “anticipate,”
“assume,” “forecast,” “estimate,” “intend,” “plan,” “target,” or similar expressions, we are making forward-looking statements.
We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995 for all of our forward-looking statements. These forward-looking statements represent our outlook only as
of the date of this report. While we believe that our forward-looking statements are reasonable, actual results could differ
materially since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that
might cause such a difference include, but are not limited to, the factors set forth in Item 1A of this Form 10-K, which is
incorporated herein by reference, and the risks and uncertainties discussed elsewhere in this Form 10-K and in our other reports
filed or furnished from time to time with the SEC.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by Item 7A is incorporated herein by reference from the information in Item 7 under the caption
“Market Risk” in this Form 10-K.
45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
47
Consolidated Balance Sheets as of December 31, 2024 and 2023
49
Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022
50
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022
51
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024, 2023, and 2022
52
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022
53
Notes to Consolidated Financial Statements
54
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Credit Acceptance Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Credit Acceptance Corporation (a Michigan corporation)
and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income,
comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024,
and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and
2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in
conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in
the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated February 12, 2025 expressed an unqualified opinion.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Finance Charge Revenue and Allowance for Credit Losses
As described further in Notes 2 and 5 to the consolidated financial statements, the Company recorded $1,992.7 million in
finance charge revenue for the period ended December 31, 2024 and an allowance for credit losses of $3,438.8 million on loans
receivable of $11,289.1 million for a net carrying amount of loan receivables of $7,850.3 million as of December 31, 2024.
Finance charge revenue is determined by applying the effective interest rate to the net carrying amount of the loan receivable.
The effective interest rate is based on contractual future net cash flows. The allowance for credit losses is then estimated by
discounting the expected future net cash flows at the same effective interest used in determining finance charge revenue.
Expected future net cash flows are estimated using a statistical model that considers a number of credit quality indicators to
derive the amount of those expected future net cash flows. We identified finance charge revenue and allowance for credit losses
as a critical audit matter.
47
The principal considerations for our determination that finance charge revenue and allowance for credit losses is a critical audit
matter are the high degree of estimation uncertainty in management’s modeling of expected future net cash flows.
Management’s statistical model used to determine expected future net cash flows required complex auditor judgment to
evaluate the reasonableness of the outcomes of the model and the involvement of those with specialized skill and knowledge.
Our audit procedures related to the finance charge revenue and allowance for credit losses included the following, among
others:
•
We tested the design and operating effectiveness of management’s review control over model performance variances
between actual and expected future net cash flows.
•
We tested the design and operating effectiveness of management’s review control over their statistical model used to
determine expected future net cash flows which verifies the statistical model is operating as intended.
•
For a sample of loans, we selected loan specific credit quality indicators used in the statistical model and agreed those
credit quality indicators to source documents in order to recalculate the expected future net cash flows produced by the
statistical model.
•
We involved those with specialized skill and knowledge to assess the conceptual soundness of the statistical model’s
design and management’s validation to accurately determine estimated future net cash flows.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2005.
Southfield, Michigan
February 12, 2025
48
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share data)
As of December 31,
2024
2023
ASSETS:
Cash and cash equivalents
$
343.7 $
13.2
Restricted cash and cash equivalents
501.3
457.7
Restricted securities available for sale
106.4
93.2
Loans receivable
11,289.1
10,020.1
Allowance for credit losses
(3,438.8)
(3,064.8)
Loans receivable, net
7,850.3
6,955.3
Property and equipment, net
14.7
46.5
Income taxes receivable
4.2
4.3
Other assets
34.0
40.0
Total Assets
$
8,854.6 $
7,610.2
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Liabilities:
Accounts payable and accrued liabilities
$
315.8 $
318.8
Revolving secured lines of credit
0.1
79.2
Secured financing
5,361.5
3,990.9
Senior notes
991.3
989.0
Mortgage note
—
8.4
Deferred income taxes, net
319.1
389.2
Income taxes payable
117.2
81.0
Total Liabilities
7,105.0
5,856.5
Commitments and Contingencies - See Note 15
Shareholders’ Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued
—
—
Common stock, $.01 par value, 80,000,000 shares authorized, 12,048,151 and
12,522,397 shares issued and outstanding as of December 31, 2024 and
December 31, 2023, respectively
0.1
0.1
Paid-in capital
335.1
279.0
Retained earnings
1,414.7
1,475.6
Accumulated other comprehensive loss
(0.3)
(1.0)
Total Shareholders’ Equity
1,749.6
1,753.7
Total Liabilities and Shareholders’ Equity
$
8,854.6 $
7,610.2
See accompanying notes to consolidated financial statements.
49
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share data)
For the Years Ended December 31,
2024
2023
2022
Revenue:
Finance charges
$
1,992.7 $
1,755.4 $
1,686.3
Premiums earned
96.1
79.6
62.7
Other income
73.6
66.9
83.4
Total revenue
2,162.4
1,901.9
1,832.4
Costs and expenses:
Salaries and wages
309.2
280.2
262.0
General and administrative
97.9
87.2
88.7
Sales and marketing
94.4
91.7
75.6
Total operating expenses
501.5
459.1
426.3
Provision for credit losses on forecast changes
493.8
413.7
137.7
Provision for credit losses on new Consumer Loan assignments
320.9
322.5
343.7
Total provision for credit losses
814.7
736.2
481.4
Interest
419.5
266.5
166.6
Provision for claims
73.5
70.7
46.4
Loss on extinguishment of debt
—
1.8
—
Loss on sale of building
23.7
—
—
Total costs and expenses
1,832.9
1,534.3
1,120.7
Income before provision for income taxes
329.5
367.6
711.7
Provision for income taxes
81.6
81.5
175.9
Net income
$
247.9 $
286.1 $
535.8
Net income per share:
Basic
$
20.12 $
22.09 $
39.50
Diluted
$
19.88 $
21.99 $
39.32
Weighted average shares outstanding:
Basic
12,323,261 12,953,424 13,563,885
Diluted
12,469,283 13,010,735 13,625,081
See accompanying notes to consolidated financial statements.
50
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
For the Years Ended December 31,
2024
2023
2022
Net income
$
247.9 $
286.1 $
535.8
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities, net of tax
0.7
1.9
(3.1)
Other comprehensive income (loss)
0.7
1.9
(3.1)
Comprehensive income
$
248.6 $
288.0 $
532.7
See accompanying notes to consolidated financial statements.
51
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in millions)
Common Stock
Number of
Shares
Amount
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Balance, January 1, 2022
14,145,888 $
0.1 $
197.2 $
1,626.7 $
0.2 $
1,824.2
Net income
—
—
—
535.8
—
535.8
Other comprehensive loss
—
—
—
—
(3.1)
(3.1)
Stock-based compensation
—
—
36.5
—
—
36.5
Repurchase of common stock (1,491,481)
—
(3.1)
(781.4)
—
(784.5)
Restricted stock units settled
in common stock
57,928
—
—
—
—
—
Stock options exercised
44,550
—
15.1
—
—
15.1
Balance, December 31, 2022
12,756,885
0.1
245.7
1,381.1
(2.9)
1,624.0
Net income
—
—
—
286.1
—
286.1
Other comprehensive gain
—
—
—
—
1.9
1.9
Stock-based compensation
—
—
39.1
—
—
39.1
Repurchase of common stock
(409,317)
—
(11.0)
(191.6)
—
(202.6)
Restricted stock units settled
in common stock
159,205
—
—
—
—
—
Stock options exercised
15,624
—
5.2
—
—
5.2
Balance, December 31, 2023
12,522,397
0.1
279.0
1,475.6
(1.0)
1,753.7
Net income
—
—
—
247.9
—
247.9
Other comprehensive gain
—
—
—
—
0.7
0.7
Stock-based compensation
—
—
45.0
—
—
45.0
Repurchase of common stock
(588,025)
—
(4.5)
(308.8)
—
(313.3)
Restricted stock units settled
in common stock
68,003
—
—
—
—
—
Stock options exercised
45,776
—
15.6
—
—
15.6
Balance, December 31, 2024
12,048,151 $
0.1 $
335.1 $
1,414.7 $
(0.3) $
1,749.6
See accompanying notes to consolidated financial statements.
52
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
For the Years Ended December 31,
2024
2023
2022
Cash Flows From Operating Activities:
Net income
$
247.9 $
286.1 $
535.8
Adjustments to reconcile cash provided by operating activities:
Provision for credit losses
814.7
736.2
481.4
Depreciation
6.7
8.9
9.0
Amortization
21.1
17.7
16.6
Credit for deferred income taxes
(70.4)
(38.0)
(7.7)
Stock-based compensation
45.0
39.1
36.5
Loss on extinguishment of debt
—
1.8
—
Loss on sale of building
23.7
—
—
Other
0.8
0.6
0.3
Change in operating assets and liabilities:
Increase in accounts payable and accrued liabilities
6.8
49.7
67.9
Decrease in income taxes receivable
0.1
4.4
100.5
Increase in income taxes payable
36.2
78.5
2.3
Decrease (increase) in other assets
5.3
18.8
(3.9)
Net cash provided by operating activities
1,137.9
1,203.8
1,238.7
Cash Flows From Investing Activities:
Purchases of restricted securities available for sale
(59.0)
(43.3)
(50.1)
Proceeds from sale of restricted securities available for sale
36.9
15.8
11.1
Maturities of restricted securities available for sale
9.3
8.5
24.3
Principal collected on Loans receivable
3,208.9
3,036.8
3,413.3
Advances to Dealers
(3,578.3)
(2,933.7)
(2,530.0)
Purchases of Consumer Loans
(1,040.1)
(1,214.1)
(1,095.3)
Accelerated payments of Dealer Holdback
(59.0)
(46.9)
(44.2)
Payments of Dealer Holdback
(241.2)
(235.9)
(186.6)
Purchases of property and equipment
(1.8)
(4.0)
(3.1)
Proceeds from sale of building
3.2
—
—
Net cash used in investing activities
(1,721.1)
(1,416.8)
(460.6)
Cash Flows From Financing Activities:
Borrowings under revolving secured lines of credit
6,125.9
7,431.9
6,622.6
Repayments under revolving secured lines of credit
(6,205.0)
(7,383.6)
(6,594.3)
Proceeds from secured financing
3,619.4
2,762.0
1,541.9
Repayments of secured financing
(2,246.6)
(2,519.8)
(1,599.2)
Proceeds from issuance of senior notes
—
600.0
—
Repayment of senior notes
—
(400.0)
—
Payments of debt issuance costs and debt extinguishment costs
(21.7)
(33.3)
(12.5)
Repurchase of common stock
(313.3)
(202.6)
(784.5)
Proceeds from stock options exercised
15.6
5.2
15.1
Other
(17.0)
6.4
16.3
Net cash provided by (used in) financing activities
957.3
266.2
(794.6)
Net increase (decrease) in cash and cash equivalents and restricted cash
and cash equivalents
374.1
53.2
(16.5)
Cash and cash equivalents and restricted cash and cash equivalents,
beginning of period
470.9
417.7
434.2
Cash and cash equivalents and restricted cash and cash equivalents, end
of period
$
845.0 $
470.9 $
417.7
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest
$
393.4 $
242.1 $
147.3
Cash paid during the period for income taxes, net of refunds
$
103.7 $
31.9 $
72.7
See accompanying notes to consolidated financial statements.
53
1.
DESCRIPTION OF BUSINESS
Principal Business. Credit Acceptance Corporation (referred to as the “Company”, “Credit Acceptance”, “we”, “our” or
“us”) makes vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell
vehicles to consumers, regardless of their credit history. Our financing programs are offered through a nationwide network of
automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and
referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing
programs, but who actually end up qualifying for traditional financing.
Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable ones.
Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that we
provide consumers with an opportunity to improve their lives by improving their credit score and move on to more traditional
sources of financing.
We refer to automobile dealers who participate in our programs and who share our desire to provide an opportunity to
consumers to improve their lives as “Dealers.” Upon enrollment in our financing programs, the Dealer enters into a Dealer
servicing agreement with us that defines the legal relationship between Credit Acceptance and the Dealer. The Dealer servicing
agreement assigns the responsibilities for administering, servicing, and collecting the amounts due on retail installment
contracts (referred to as “Consumer Loans”) from the Dealers to us. We are an indirect lender from a legal perspective, meaning
the Consumer Loan is originated by the Dealer and assigned to us.
The majority of the Consumer Loans assigned to us are made to consumers with impaired or limited credit histories. The
following table shows the percentage of Consumer Loans assigned to us with either FICO® scores below 650 or no FICO®
scores:
For the Years Ended December 31,
Consumer Loan Assignment Volume
2024
2023
2022
Percentage of total unit volume with either FICO® scores
below 650 or no FICO® scores
80.6 %
80.9 %
84.8 %
We have two programs: the Portfolio Program and the Purchase Program. Under the Portfolio Program, we advance money
to Dealers (referred to as a “Dealer Loan”) in exchange for the right to service the underlying Consumer Loans. Under the
Purchase Program, we buy the Consumer Loans from the Dealers (referred to as a “Purchased Loan”) and keep all amounts
collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as “Loans.” The following table
shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last three years:
Unit Volume
Dollar Volume (1)
For the Years Ended December 31,
Dealer Loans
Purchased Loans
Dealer Loans
Purchased Loans
2022
73.5 %
26.5 %
69.8 %
30.2 %
2023
74.0 %
26.0 %
70.7 %
29.3 %
2024
78.7 %
21.3 %
77.5 %
22.5 %
(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 (as defined below) and accelerated Dealer Holdback are not
included.
Portfolio Program
As payment for the vehicle, the Dealer generally receives the following:
•
a down payment from the consumer;
•
a non-recourse cash payment (“advance”) from us; and
•
after the advance balance (cash advance and related Dealer Loan fees and costs) has been recovered by us, the cash
from payments made on the Consumer Loan, net of certain collection costs and our servicing fee (“Dealer
Holdback”).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
54
We record the amount advanced to the Dealer as a Dealer Loan, which is classified within Loans receivable in our
consolidated balance sheets. Cash advanced to the Dealer is automatically assigned to the Dealer’s open pool of advances.
Dealers make an election as to how many Consumer Loans (either 50 or 100) will be assigned to an open pool before it is
closed, and subsequent advances are assigned to a new pool. Unless we receive a request from the Dealer to keep a pool open,
we automatically close each pool based on the Dealer’s election. All advances within a Dealer’s pool are secured by the future
collections on the related Consumer Loans assigned to the pool. For Dealers with more than one pool, the pools are cross-
collateralized so the performance of other pools is considered in determining eligibility for Dealer Holdback. We perfect our
security interest with respect to the Dealer Loans by obtaining control or taking possession of the Consumer Loans, which list
us as lien holder on the vehicle title.
The Dealer servicing agreement provides that collections received by us during a calendar month on Consumer Loans
assigned by a Dealer are applied on a pool-by-pool basis as follows:
•
first, to reimburse us for certain collection costs;
•
second, to pay us our servicing fee, which generally equals 20% of collections;
•
third, to reduce the aggregate advance balance and to pay any other amounts due from the Dealer to us; and
•
fourth, to the Dealer as payment of Dealer Holdback.
If the collections on Consumer Loans from a Dealer’s pool are not sufficient to repay the advance balance and any other
amounts due to us, the Dealer will not receive Dealer Holdback. Certain events may also result in Dealers forfeiting their rights
to Dealer Holdback, including becoming inactive before assigning 100 Consumer Loans.
Dealers have an opportunity to receive an accelerated Dealer Holdback payment each time a pool of Consumer Loans is
closed. The amount paid to the Dealer is calculated using a formula that considers the number of Consumer Loans assigned to
the pool and the related forecasted collections and advance balance.
Since typically the combination of the advance and the consumer’s down payment provides the Dealer with a cash profit at
the time of sale, the Dealer’s risk in the Consumer Loan is limited. We cannot demand repayment of the advance from the
Dealer except in the event the Dealer is in default of the Dealer servicing agreement. Advances are made only after the
consumer and Dealer have signed a Consumer Loan contract, we have received the executed Consumer Loan contract and
supporting documentation in either physical or electronic form, and we have approved all of the related stipulations for
funding.
For accounting purposes, the transactions described under the Portfolio Program are not considered to be loans to
consumers. Instead, our accounting reflects that of a lender to the Dealer. The classification as a Dealer Loan for accounting
purposes is primarily a result of (1) the Dealer’s financial interest in the Consumer Loan and (2) certain elements of our legal
relationship with the Dealer.
Purchase Program
The Purchase Program differs from the Portfolio Program in that the Dealer receives a one-time payment from us at the
time of assignment to purchase the Consumer Loan instead of a cash advance at the time of assignment and future Dealer
Holdback payments. For accounting purposes, the transactions described under the Purchase Program are considered to be
originated by the Dealer and then purchased by us.
Program Enrollment
Dealers are granted access to the Portfolio Program upon enrollment. Access to the Purchase Program is typically only
granted to Dealers that meet one of the following:
•
assigned at least 50 Consumer Loans under the Portfolio Program;
•
franchise dealership; or
•
independent dealership that meets certain criteria upon enrollment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
55
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include our accounts and our wholly owned subsidiaries. All significant
intercompany transactions have been eliminated. Our primary subsidiaries as of December 31, 2024 are: Buyer’s Vehicle
Protection Plan, Inc. (“BVPP”), Vehicle Remarketing Services, Inc. (“VRS”), VSC Re Company (“VSC Re”), CAC Warehouse
Funding LLC II, CAC Warehouse Funding LLC IV, CAC Warehouse Funding LLC V, CAC Warehouse Funding LLC VI,
CAC Warehouse Funding LLC VIII, Credit Acceptance Funding LLC 2019-2, Credit Acceptance Funding LLC 2021-1, Credit
Acceptance Funding LLC 2021-4, Credit Acceptance Funding LLC 2022-1, Credit Acceptance Funding LLC 2022-2, Credit
Acceptance Funding LLC 2022-3, Credit Acceptance Funding LLC 2023-1, Credit Acceptance Funding LLC 2023-2, Credit
Acceptance Funding LLC 2023-3, Credit Acceptance Funding LLC 2023-A, Credit Acceptance Funding LLC 2023-5, Credit
Acceptance Funding LLC 2024-A, Credit Acceptance Funding LLC 2024-1, Credit Acceptance Funding LLC 2024-2, Credit
Acceptance Funding LLC 2024-3, and Credit Acceptance Funding LLC 2024-B.
Business Segment Information
We currently operate in one reportable segment which represents our core business of offering innovative financing
solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. For information
regarding our one reportable segment and related entity wide disclosures, see Note 14 to the consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The accounts which are subject to significant estimation include the allowance for credit
losses, finance charge revenue, premiums earned, contingencies, and uncertain tax positions. Actual results could materially
differ from those estimates.
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents
Cash equivalents consist of readily marketable securities with original maturities at the date of acquisition of three months
or less. As of December 31, 2024 and 2023, we had $342.7 million and $12.8 million, respectively, in cash and cash equivalents
that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).
Restricted cash and cash equivalents consist of cash pledged as collateral for secured financings and cash held in a trust for
future vehicle service contract claims. As of December 31, 2024 and 2023, we had $497.0 million and $453.7 million,
respectively, in restricted cash and cash equivalents that were not insured by the FDIC.
The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents reported
in our consolidated balance sheets to the total shown in our consolidated statements of cash flows:
(In millions)
As of December 31,
2024
2023
2022
Cash and cash equivalents
$
343.7 $
13.2 $
7.7
Restricted cash and cash equivalents
501.3
457.7
410.0
Total cash and cash equivalents and restricted cash and cash
equivalents
$
845.0 $
470.9 $
417.7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
56
Restricted Securities Available for Sale
Restricted securities available for sale consist of amounts held in a trust for future vehicle service contract claims. We
determine the appropriate classification of our investments in debt securities at the time of purchase and reevaluate such
determinations at each balance sheet date. Debt securities for which we do not have the intent or ability to hold to maturity are
classified as available for sale, and stated at fair value with unrealized gains and losses, net of income taxes included in the
determination of comprehensive income and reported as a component of shareholders’ equity.
Loans Receivable and Allowance for Credit Losses
Consumer Loan Assignment. For legal purposes, a Consumer Loan is considered to have been assigned to us after the
following has occurred:
•
the consumer and Dealer have signed a Consumer Loan contract; and
•
we have received the executed Consumer Loan contract and supporting documentation in either physical or
electronic form.
For accounting and financial reporting purposes, a Consumer Loan is considered to have been assigned to us after the
following has occurred:
•
the Consumer Loan has been legally assigned to us; and
•
we have made a funding decision and generally have provided funding to the Dealer in the form of either an advance
under the Portfolio Program or one-time purchase payment under the Purchase Program.
Portfolio Segments and Classes. Our Loan portfolio consists of two portfolio segments: Dealer Loans and Purchased
Loans. Our determination is based on the following:
•
We have two financing programs: the Portfolio Program and the Purchase Program. We are considered to be a
lender to Dealers for Consumer Loans assigned under the Portfolio Program and a purchaser of Consumer Loans
assigned under the Purchase Program.
•
The Portfolio Program and the Purchase Program have different levels of risk in relation to credit losses. Under the
Portfolio Program, the impact of negative variances in Consumer Loan performance is mitigated by Dealer
Holdback and the cross-collateralization of Consumer Loan assignments. Under the Purchase Program, we are
impacted by the full amount of negative variances in Consumer Loan performance.
•
Our business model is narrowly focused on Consumer Loan assignments from one industry with expected cash
flows that are significantly lower than the contractual cash flows owed to us due to credit quality. We do not believe
that it is meaningful to disaggregate our Loan portfolio beyond the Dealer Loans and Purchased Loans portfolio
segments.
Each portfolio segment consists of one class of Consumer Loan assignments, which is Consumer Loans originated by
Dealers to finance purchases of vehicles and related ancillary products by consumers with impaired or limited credit histories.
Our determination is based on the following:
•
All of the Consumer Loans assigned to us have similar risk characteristics in relation to the categorization of
borrowers, type of financing receivable, industry sector, and type of collateral.
•
We only accept Consumer Loan assignments from Dealers located within the United States.
Recognition and Measurement Policy. On January 1, 2020, we adopted Accounting Standards Update 2016-13,
Measurement of Credit Losses on Financial Instruments, which is known as the current expected credit loss model, or CECL.
Loans outstanding prior to the adoption date are no longer material to our consolidated financial statements. Consumer Loans
assigned to us on or subsequent to January 1, 2020 are accounted for as originated financial assets (“Originated Method”).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
57
Under the Originated Method, at the time of assignment, we:
•
calculate the effective interest rate based on contractual future net cash flows;
•
record a Loan receivable equal to the advance paid to the Dealer under the Portfolio Program or purchase price paid
to the Dealer under the Purchase Program; and
•
record an allowance for credit losses equal to the difference between the initial Loan receivable balance and the
present value of expected future net cash flows discounted at the effective interest rate. The initial allowance for
credit losses is recognized as provision for credit losses expense.
The effective interest rate and initial allowance for credit losses are significantly higher for Consumer Loans assigned
under the Purchase Program than for Consumer Loans assigned under the Portfolio Program, as contractual net cash flows
exceed expected net cash flows by a significantly greater margin under the Purchase Program. Under the Purchase Program, we
retain all contractual collections that exceed our initial expectations. Under the Portfolio Program, contractual collections that
exceed our initial expectations are substantially offset by additional Dealer Holdback payments.
Under the Originated Method, for each reporting period subsequent to assignment, we:
•
recognize finance charge revenue using the effective interest rate that was calculated at the time of assignment based
on contractual future net cash flows; and
•
adjust the allowance for credit losses so that the net carrying amount of each Loan equals the present value of
expected future net cash flows discounted at the effective interest rate. The adjustment to the allowance for credit
losses is recognized as either provision for credit losses expense or a reversal of provision for credit losses expense.
Loans Receivable. Amounts advanced to Dealers for Consumer Loans assigned under the Portfolio Program are recorded
as Dealer Loans and are aggregated by Dealer for purposes of recognizing revenue and measuring credit losses. Amounts paid
to Dealers for Consumer Loans assigned under the Purchase Program are recorded as Purchased Loans and, for purposes of
recognizing revenue and measuring credit losses, are not aggregated.
The outstanding balance of each Loan included in Loans receivable is comprised of the following:
•
cash paid to the Dealer (or to third-party ancillary product providers on the Dealer’s behalf) for the Consumer Loan
assignment (advance under the Portfolio Program or one-time purchase payment under the Purchase Program);
•
finance charges;
•
Dealer Holdback payments;
•
accelerated Dealer Holdback payments;
•
recoveries;
•
transfers in;
•
less: collections (net of certain collection costs);
•
less: write-offs; and
•
less: transfers out.
Under the Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. We transfer
the Dealer’s outstanding Dealer Loan balance and the related allowance for credit losses balance to Purchased Loans in the
period this forfeiture occurs. We aggregate these Purchased Loans by Dealer for purposes of recognizing revenue and
measuring credit losses.
Allowance for Credit Losses. The outstanding balance of the allowance for credit losses of each Loan represents the
amount required to reduce net carrying amount of Loans (Loans receivable less allowance for credit losses) to the present value
of expected future net cash flows discounted at the effective interest rate. Expected future net cash flows for Dealer Loans are
comprised of expected future collections on the assigned Consumer Loans, less any expected future Dealer Holdback payments.
Expected future net cash flows for Purchased Loans are comprised of expected future collections on the assigned Consumer
Loans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
58
Expected future collections are forecasted for each individual Consumer Loan based on the historical performance of
Consumer Loans with similar characteristics, adjusted for recent trends in payment patterns. Our forecast of expected future
collections includes estimates for prepayments and post-contractual-term cash flows. Unless the consumer is no longer
contractually obligated to pay us, we forecast future collections on each Consumer Loan for a 120 month period after the
origination date. Expected future Dealer Holdback payments are forecasted for each individual Dealer based on the expected
future collections and current advance balance of each Dealer Loan.
We fully write off the outstanding balances of a Loan and the related allowance for credit losses once we are no longer
forecasting any expected future net cash flows on the Loan. Under our partial write-off policy, we write off the amount of the
outstanding balances of a Loan and the related allowance for credit losses, if any, that exceeds 200% of the present value of
expected future net cash flows on the Loan, as we deem this amount to be uncollectable.
Credit Quality. The vast majority of the Consumer Loans assigned to us are made to individuals with impaired or limited
credit histories. Consumer Loans made to these individuals generally entail a higher risk of delinquency, default, and
repossession and higher losses than loans made to consumers with better credit. Since most of our revenue and cash flows are
generated from these Consumer Loans, our ability to accurately forecast Consumer Loan performance is critical to our business
and financial results. At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows
from the Consumer Loan. Based on these forecasts, an advance or one-time purchase payment is made to the related Dealer at a
price designed to maximize our economic profit, a non-GAAP financial measure that considers our return on capital, our cost of
capital, and the amount of capital invested.
We monitor and evaluate the credit quality of Consumer Loans on a monthly basis by comparing our current forecasted
collection rates to our initial expectations. We use a statistical model that considers a number of credit quality indicators to
estimate the expected collection rate for each Consumer Loan at the time of assignment. The credit quality indicators
considered in our model include attributes contained in the consumer’s credit bureau report, data contained in the consumer’s
credit application, the structure of the proposed transaction, vehicle information, and other factors. We continue to evaluate the
expected collection rate for each Consumer Loan subsequent to assignment primarily through the monitoring of consumer
payment behavior. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our
forecast. Since all known, significant credit quality indicators have already been factored into our forecasts and pricing, we are
not able to use any specific credit quality indicators to predict or explain variances in actual performance from our initial
expectations. Any variances in performance from our initial expectations are a result of Consumer Loans performing differently
from historical Consumer Loans with similar characteristics. We periodically adjust our statistical pricing model for new trends
that we identify through our evaluation of these forecasted collection rate variances.
When overall forecasted collection rates underperform our initial expectations, the decline in forecasted collections has a
more adverse impact on the profitability of the Purchased Loans than on the profitability of the Dealer Loans. For Purchased
Loans, the decline in forecasted collections is absorbed entirely by us. For Dealer Loans, the decline in the forecasted
collections is substantially offset by a decline in forecasted payments of Dealer Holdback.
Methodology Changes. During the second quarter of 2024, 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 2022 through 2024. During the second quarter of 2023, we adjusted our methodology for forecasting the amount
and timing of future net cash flows from our Loan portfolio through the utilization of more recent Consumer Loan performance
and Consumer Loan prepayment data. During the first quarter of 2022, we removed the COVID-19 forecast adjustment (as
defined in Note 5) from our estimate of future net cash flows and enhanced our methodology for forecasting the amount and
timing of future net cash flows from our Loan portfolio through the utilization of more recent data and new forecast variables.
For additional information, see Note 5. For the three year period ended December 31, 2024, we did not make any other
methodology changes for Loans that had a material impact on our financial statements.
Property and Equipment
Purchases of property and equipment are recorded at cost. Depreciation is provided on a straight-line basis over the
estimated useful life of the asset. Estimated useful lives are generally as follows: buildings – 40 years, building improvements –
10 years, data processing equipment – 3 years, software – 5 years, and office furniture and equipment – 7 years. The cost of
assets sold or retired and the related accumulated depreciation are removed from the balance sheet at the time of disposition and
any resulting gain or loss is included in operations. Maintenance, repairs, and minor replacements are charged to operations as
incurred; major replacements and improvements are capitalized. We evaluate long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
59
Costs incurred during the application development stage of software developed for internal use are capitalized and
generally depreciated on a straight-line basis over five years. Costs incurred to maintain existing software are expensed as
incurred. For additional information regarding our property and equipment, see Note 6 to the consolidated financial statements.
Deferred Debt Issuance Costs
Deferred debt issuance costs associated with secured financings and senior notes are included as a deduction from the
carrying amount of the related debt liability, and deferred debt issuance costs associated with our revolving secured line of
credit facility are included in other assets. Expenses associated with the issuance of debt instruments are capitalized and
amortized as interest expense over the term of the debt instrument using the effective interest method for asset-backed secured
financings (“Term ABS financings”) and senior notes and the straight-line method for lines of credit and revolving secured
warehouse (“Warehouse”) facilities. For additional information regarding deferred debt issuance costs, see Note 9 to the
consolidated financial statements.
Finance Charges
Sources of Revenue. Finance charges is comprised of: (1) interest income earned on Loans; (2) administrative fees earned
from ancillary products; (3) program fees charged to Dealers under the Portfolio Program; (4) Consumer Loan assignment fees
charged to Dealers; and (5) direct origination costs incurred on Dealer Loans.
We provide Dealers the ability to offer vehicle service contracts to consumers through our relationships with Third-Party
Providers (“TPPs”). A vehicle service contract provides the consumer protection by paying for the repair or replacement of
certain components of the vehicle in the event of a mechanical failure. The retail price of the vehicle service contract is included
in the principal balance of the Consumer Loan. The wholesale cost of the vehicle service contract is paid to the TPP, net of an
administrative fee retained by us. The difference between the wholesale cost and the retail price to the consumer is paid to the
Dealer as a commission. Under the Portfolio Program, the wholesale cost of the vehicle service contract and the commission
paid to the Dealer are charged to the Dealer’s advance balance. TPPs process claims on vehicle service contracts that are
underwritten by third-party insurers. We bear the risk of loss for claims on certain vehicle service contracts that are reinsured by
us. We market the vehicle service contracts directly to Dealers.
We provide Dealers the ability to offer Guaranteed Asset Protection (“GAP”) to consumers through our relationships with
TPPs. GAP provides the consumer protection by paying the difference between the loan balance and the amount covered by the
consumer’s insurance policy in the event of a total loss of the vehicle due to severe damage or theft. The retail price of GAP is
included in the principal balance of the Consumer Loan. The wholesale cost of GAP is paid to the TPP, net of an administrative
fee retained by us. The difference between the wholesale cost and the retail price to the consumer is paid to the Dealer as a
commission. Under the Portfolio Program, the wholesale cost of GAP and the commission paid to the Dealer are charged to the
Dealer’s advance balance. TPPs process claims on GAP contracts that are underwritten by third-party insurers.
Program fees represent monthly fees charged to Dealers for access to our Credit Approval Processing System (“CAPS”);
administration, servicing, and collection services offered by us; documentation related to or affecting our program; and all
tangible and intangible property owned by Credit Acceptance. We charge a monthly fee of $599 to Dealers participating in the
Portfolio Program and we collect it from future Dealer Holdback payments.
Recognition Policy. We recognize finance charges under the interest method such that revenue is recognized on a level-
yield basis over the life of the Loan. We calculate finance charges on a monthly basis by applying the effective interest rate of
the Loan to the net carrying amount of the Loan (Loan receivable less the related allowance for credit losses). The effective
interest rate is based on contractual future net cash flows.
We report the change in the present value of credit losses attributable to the passage of time as a reduction to finance
charges. Accordingly, we allocate finance charges recognized on each Loan between the Loan receivable and the related
allowance for credit losses. The amount of finance charges allocated to the Loan receivable is equal to the effective interest rate
applied to the Loans receivable balance. The reduction of finance charges allocated to the allowance for credit losses is equal to
the effective interest rate applied to the allowance for credit losses balance.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
60
Reinsurance
Our wholly owned subsidiary VSC Re is engaged in the business of reinsuring coverage under vehicle service contracts
sold to consumers by Dealers on vehicles financed by us. VSC Re currently reinsures vehicle service contracts that are offered
through one of our TPPs. Vehicle service contract premiums, which represent the selling price of the vehicle service contract to
the consumer, less fees and certain administrative costs, are contributed to a trust account controlled by VSC Re. These
premiums are used to fund claims covered under the vehicle service contracts. VSC Re is a bankruptcy remote entity. As such,
our exposure to fund claims is limited to the trust assets controlled by VSC Re and our net investment in VSC Re.
Premiums from the reinsurance of vehicle service contracts are recognized over the life of the policy in proportion to
expected costs of servicing those contracts. Expected costs are determined based on our historical claims experience. Claims are
expensed through a provision for claims in the period the claim was incurred. Capitalized acquisition costs are comprised of
premium taxes and are amortized as general and administrative expense over the life of the contracts in proportion to premiums
earned.
We have consolidated the trust within our financial statements based on our determination of the following:
•
We have a variable interest in the trust. We have a residual interest in the assets of the trust, which is variable in
nature, given that it increases or decreases based upon the actual loss experience of the related service contracts. In
addition, VSC Re is required to absorb any losses in excess of the trust’s assets.
•
The trust is a variable interest entity. The trust has insufficient equity at risk as no parties to the trust were required
to contribute assets that provide them with any ownership interest.
•
We are the primary beneficiary of the trust. We control the amount of premiums written and placed in the trust
through Consumer Loan assignments under our Programs, which is the activity that most significantly impacts the
economic performance of the trust. We have the right to receive benefits from the trust that could potentially be
significant. In addition, VSC Re has the obligation to absorb losses of the trust that could potentially be significant.
Stock-Based Compensation Plans
We have stock-based compensation plans for team members and non-employee directors, which are described more fully
in Note 13 to the consolidated financial statements. We apply a fair-value-based measurement method in accounting for stock-
based compensation plans and recognize stock-based compensation expense over the requisite service period of the grant as
salaries and wages expense.
Employee Benefit Plan
We sponsor a 401(k) plan that covers substantially all of our team members. We offer matching contributions to the 401(k)
plan based on each enrolled team member’s eligible annual gross pay (subject to statutory limitations). Our matching
contribution rate is equal to 100% of the first 4% participants contribute and an additional 50% of the next 2% participants
contribute, for a maximum matching contribution of 5% of each participant’s eligible annual gross pay. For the years ended
December 31, 2024, 2023 and 2022, we recognized compensation expense of $10.3 million, $9.4 million, and $8.5 million,
respectively, for our matching contributions to the plan.
Income Taxes
Provisions for federal, state, and foreign income taxes are calculated on reported pre-tax earnings based on current tax law
and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in
determining deferred tax assets and liabilities. Such provisions differ from the amounts currently receivable or payable because
certain items of income and expense are recognized in different time periods for financial reporting purposes than for income
tax purposes.
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and
liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or
recovered.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
61
We follow a two-step approach for recognizing uncertain tax positions. First, we evaluate the tax position for recognition
by determining if the weight of available evidence indicates it is more-likely-than-not that the position will be sustained upon
examination, including resolution of related appeals or litigation processes, if any. Second, for positions that we determine are
more-likely-than-not to be sustained, we recognize the tax benefit as the largest benefit that has a greater than 50% likelihood of
being sustained. We establish a reserve for uncertain tax positions liability that is comprised of unrecognized tax benefits and
related interest. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require
periodic adjustments and which may not accurately anticipate actual outcomes. We recognize interest and penalties related to
uncertain tax positions in provision for income taxes. For additional information regarding our income taxes, see Note 10 to the
consolidated financial statements.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses were $1.4 million for the year ended December 31, 2024,
$0.5 million for the year ended December 31, 2023, and $1.0 million for the year ended December 31, 2022.
New Accounting Update Adopted During the Current Year
Improvements to Reportable Segment Disclosures. In November 2023, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, which enhances the required disclosures for operating
segments in annual and interim consolidated financial statements. The adoption of ASU 2023-07 for the year ended December
31, 2024 expanded our business segment disclosures, but did not otherwise have a material impact on our consolidated financial
statements.
New Accounting Updates Not Yet Adopted
Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification
Initiative. In October 2023, the FASB issued ASU 2023-06, which amends the disclosure or presentation requirements related
to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The effective date for each
amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K
becomes effective, with early adoption prohibited. If by June 30, 2027, the SEC has not removed the applicable requirement
from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification
and will not become effective for any entity. We are currently evaluating the impact the adoption of ASU 2023-06 will have on
our consolidated financial statements and related disclosures.
Improvements to Income Tax Disclosures. In December 2023, the FASB issued ASU 2023-09, which intends to improve
the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in
the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments
intended to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after
December 15, 2024. Early adoption is permitted, but we have not yet adopted ASU 2023-09. We are currently evaluating the
impact the adoption of ASU 2023-09 will have on our consolidated financial statements and related disclosures.
Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU 2024-03, which requires
disaggregated disclosure of income statement expenses. ASU 2024-03 does not change the expense captions an entity presents
on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in
disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for annual periods beginning after
December 15, 2026 and interim periods beginning after December 15, 2027. We are currently evaluating the impact the
adoption of ASU 2024-03 will have on our consolidated financial statements and related disclosures.
Subsequent Events
We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of December 31,
2024 for items that could potentially be recognized or disclosed in these financial statements. We did not identify any items
which would require disclosure in or adjustment to the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
62
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for
which it is practicable to estimate their value.
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents. The carrying amounts approximate their fair value
due to the short maturity of these instruments.
Restricted Securities Available for Sale. The fair value of U.S. Government and agency securities, corporate bonds, and
municipal bonds is based on quoted market values in active markets. For asset-backed securities, mortgage-backed securities,
and commercial paper we use model-based valuation techniques for which all significant assumptions are observable in the
market.
Loans Receivable, net. The fair value is determined by calculating the present value of expected future net cash flows
estimated by us by utilizing the discount rate used to calculate the value of our Loans under our non-GAAP floating yield
methodology.
Revolving Secured Lines of Credit. The fair value is determined by calculating the present value of the debt instrument
based on current rates for debt with a similar risk profile and maturity.
Secured Financing. The fair value of certain Term ABS financings is determined using quoted market prices in an active
market. For our warehouse facilities and certain other Term ABS financings, the fair values are determined by calculating the
present value of each debt instrument based on current rates for debt with similar risk profiles and maturities.
Senior Notes. The fair value is determined using quoted market prices in an active market.
Mortgage Note. The fair value was determined by calculating the present value of the debt instrument based on current
rates for debt with a similar risk profile and maturity.
A comparison of the carrying amount and estimated fair value of these financial instruments is as follows:
(In millions)
As of December 31,
2024
2023
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Assets
Cash and cash equivalents
$
343.7 $
343.7 $
13.2 $
13.2
Restricted cash and cash equivalents
501.3
501.3
457.7
457.7
Restricted securities available for sale
106.4
106.4
93.2
93.2
Loans receivable, net
7,850.3
8,922.7
6,955.3
7,759.1
Liabilities
Revolving secured lines of credit
$
0.1 $
0.1 $
79.2 $
79.2
Secured financing
5,361.5
5,431.9
3,990.9
4,025.9
Senior notes
991.3
1,035.3
989.0
1,039.8
Mortgage note
—
—
8.4
8.4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
63
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined
based on assumptions that market participants would use in pricing an asset or liability. We group assets and liabilities at fair
value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions
used to determine fair value. These levels are:
Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions
are observable in the market.
Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the
market. These unobservable assumptions reflect estimates or assumptions that market participants would use in pricing
the asset or liability.
The following table provides the level of measurement used to determine the fair value for each of our financial
instruments measured or disclosed at fair value:
(In millions)
As of December 31, 2024
Level 1
Level 2
Level 3
Total Fair Value
Assets
Cash and cash equivalents (1)
$
343.7 $
— $
— $
343.7
Restricted cash and cash equivalents (1)
501.3
—
—
501.3
Restricted securities available for sale (2)
84.5
21.9
—
106.4
Loans receivable, net (1)
—
—
8,922.7
8,922.7
Liabilities
Revolving secured lines of credit (1)
$
— $
0.1 $
— $
0.1
Secured financing (1)
3,831.7
1,600.2
—
5,431.9
Senior notes (1)
1,035.3
—
—
1,035.3
(In millions)
As of December 31, 2023
Level 1
Level 2
Level 3
Total Fair Value
Assets
Cash and cash equivalents (1)
$
13.2 $
— $
— $
13.2
Restricted cash and cash equivalents (1)
457.7
—
—
457.7
Restricted securities available for sale (2)
75.1
18.1
—
93.2
Loans receivable, net (1)
—
—
7,759.1
7,759.1
Liabilities
Revolving secured lines of credit (1)
$
— $
79.2 $
— $
79.2
Secured financing (1)
3,225.8
800.1
—
4,025.9
Senior notes (1)
1,039.8
—
—
1,039.8
Mortgage note (1)
—
8.4
—
8.4
(1)
Measured at amortized cost with fair value disclosed.
(2)
Measured at fair value on a recurring basis.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
64
4. RESTRICTED SECURITIES AVAILABLE FOR SALE
Restricted securities available for sale consist of the following:
(In millions)
As of December 31, 2024
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated
Fair Value
Corporate bonds
$
49.4 $
0.2 $
(0.4) $
49.2
U.S. Government and agency securities
35.6
0.1
(0.4)
35.3
Asset-backed securities
20.1
0.1
—
20.2
Mortgage-backed securities
1.7
—
—
1.7
Total restricted securities available
for sale
$
106.8 $
0.4 $
(0.8) $
106.4
(In millions)
As of December 31, 2023
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated
Fair Value
Corporate bonds
$
40.5 $
0.3 $
(0.9) $
39.9
U.S. Government and agency securities
35.2
0.2
(0.9)
34.5
Asset-backed securities
18.0
0.1
(0.2)
17.9
Municipal securities
0.7
—
—
0.7
Mortgage-backed securities
0.2
—
—
0.2
Total restricted securities available
for sale
$
94.6 $
0.6 $
(2.0) $
93.2
The fair value and gross unrealized losses for restricted securities available for sale, aggregated by investment category and
length of time that individual securities have been in a continuous unrealized loss position, are as follows:
(In millions)
Securities Available for Sale with Gross Unrealized Losses as of December 31, 2024
Less than 12 Months
12 Months or More
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Total
Estimated
Fair Value
Total Gross
Unrealized
Losses
Corporate bonds
$
13.1 $
(0.2) $
8.4 $
(0.2) $
21.5 $
(0.4)
U.S. Government and agency securities
19.8
(0.2)
4.9
(0.2)
24.7
(0.4)
Asset-backed securities
2.4
—
3.6
—
6.0
—
Mortgage-backed securities
1.7
—
—
—
1.7
—
Total restricted securities available
for sale
$
37.0 $
(0.4) $
16.9 $
(0.4) $
53.9 $
(0.8)
(In millions)
Securities Available for Sale with Gross Unrealized Losses as of December 31, 2023
Less than 12 Months
12 Months or More
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Total
Estimated
Fair Value
Total Gross
Unrealized
Losses
Corporate bonds
$
2.7 $
— $
18.4 $
(0.9) $
21.1 $
(0.9)
U.S. Government and agency securities
6.8
(0.1)
16.4
(0.8)
23.2
(0.9)
Asset-backed securities
1.6
—
7.3
(0.2)
8.9
(0.2)
Mortgage-backed securities
—
—
0.2
—
0.2
—
Total restricted securities available
for sale
$
11.1 $
(0.1) $
42.3 $
(1.9) $
53.4 $
(2.0)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
65
The cost and estimated fair values of debt securities by contractual maturity were as follows (securities with multiple
maturity dates are classified in the period of final maturity). Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
(In millions)
As of December 31,
2024
2023
Contractual Maturity
Amortized Cost
Estimated Fair Value
Amortized Cost
Estimated Fair Value
Within one year
$
9.5 $
9.4 $
6.9 $
6.8
Over one year to five years
84.7
84.3
80.5
79.1
Over five years to ten years
12.6
12.7
7.1
7.2
Over ten years
—
—
0.1
0.1
Total restricted securities available
for sale
$
106.8 $
106.4 $
94.6 $
93.2
5.
LOANS RECEIVABLE
Loans receivable and allowance for credit losses consist of the following:
(In millions)
As of December 31, 2024
Dealer Loans
Purchased Loans
Total
Loans receivable
$
8,521.0 $
2,768.1 $
11,289.1
Allowance for credit losses
(2,844.5)
(594.3)
(3,438.8)
Loans receivable, net
$
5,676.5 $
2,173.8 $
7,850.3
(In millions)
As of December 31, 2023
Dealer Loans
Purchased Loans
Total
Loans receivable
$
7,065.5 $
2,954.6 $
10,020.1
Allowance for credit losses
(2,355.7)
(709.1)
(3,064.8)
Loans receivable, net
$
4,709.8 $
2,245.5 $
6,955.3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
66
A summary of changes in Loans receivable and allowance for credit losses is as follows:
(In millions)
For the Year Ended December 31, 2024
Loans Receivable
Allowance for Credit Losses
Loans Receivable, Net
Dealer
Loans
Purchased
Loans
Total
Dealer
Loans
Purchased
Loans
Total
Dealer
Loans
Purchased
Loans
Total
Balance, beginning of
period
$ 7,065.5
$ 2,954.6
$ 10,020.1
$ (2,355.7) $
(709.1) $ (3,064.8) $ 4,709.8
$ 2,245.5
$ 6,955.3
Finance charges
1,931.4
905.9
2,837.3
(651.7)
(192.9)
(844.6) 1,279.7
713.0
1,992.7
Provision for credit
losses
—
—
—
(537.3)
(277.4)
(814.7)
(537.3)
(277.4)
(814.7)
New Consumer Loan
assignments (1)
3,578.3
1,040.1
4,618.4
—
—
—
3,578.3
1,040.1
4,618.4
Collections (2)
(3,575.5) (1,641.0) (5,216.5)
—
—
—
(3,575.5) (1,641.0) (5,216.5)
Accelerated Dealer
Holdback payments
59.0
—
59.0
—
—
—
59.0
—
59.0
Dealer Holdback
payments
241.2
—
241.2
—
—
—
241.2
—
241.2
Transfers (3)
(138.9)
138.9
—
45.3
(45.3)
—
(93.6)
93.6
—
Write-offs
(658.3)
(634.7) (1,293.0)
658.3
634.7
1,293.0
—
—
—
Recoveries (4)
3.4
4.3
7.7
(3.4)
(4.3)
(7.7)
—
—
—
Deferral of Loan
origination costs
14.9
—
14.9
—
—
—
14.9
—
14.9
Balance, end of period
$ 8,521.0
$ 2,768.1
$ 11,289.1
$ (2,844.5) $
(594.3) $ (3,438.8) $ 5,676.5
$ 2,173.8
$ 7,850.3
(In millions)
For the Year Ended December 31, 2023
Loans Receivable
Allowance for Credit Losses
Loans Receivable, Net
Dealer
Loans
Purchased
Loans
Total
Dealer
Loans
Purchased
Loans
Total
Dealer
Loans
Purchased
Loans
Total
Balance, beginning of
period
$ 6,074.8
$ 3,090.7
$ 9,165.5
$ (2,000.0) $
(867.8) $ (2,867.8) $ 4,074.8
$ 2,222.9
$ 6,297.7
Finance charges
1,575.5
925.5
2,501.0
(528.8)
(216.8)
(745.6) 1,046.7
708.7
1,755.4
Provision for credit
losses
—
—
—
(427.7)
(308.5)
(736.2)
(427.7)
(308.5)
(736.2)
New Consumer Loan
assignments (1)
2,933.7
1,214.1
4,147.8
—
—
—
2,933.7
1,214.1
4,147.8
Collections (2)
(3,147.7) (1,656.8) (4,804.5)
—
—
—
(3,147.7) (1,656.8) (4,804.5)
Accelerated Dealer
Holdback payments
46.9
—
46.9
—
—
—
46.9
—
46.9
Dealer Holdback
payments
235.9
—
235.9
—
—
—
235.9
—
235.9
Transfers (3)
(100.9)
100.9
—
35.8
(35.8)
—
(65.1)
65.1
—
Write-offs
(566.6)
(723.8) (1,290.4)
566.6
723.8
1,290.4
—
—
—
Recoveries (4)
1.6
4.0
5.6
(1.6)
(4.0)
(5.6)
—
—
—
Deferral of Loan
origination costs
12.3
—
12.3
—
—
—
12.3
—
12.3
Balance, end of period
$ 7,065.5
$ 2,954.6
$ 10,020.1
$ (2,355.7) $
(709.1) $ (3,064.8) $ 4,709.8
$ 2,245.5
$ 6,955.3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
67
(In millions)
For the Year Ended December 31, 2022
Loans Receivable
Allowance for Credit Losses
Loans Receivable, Net
Dealer
Loans
Purchased
Loans
Total
Dealer
Loans
Purchased
Loans
Total
Dealer
Loans
Purchased
Loans
Total
Balance, beginning of
period
$ 5,655.1
$ 3,694.7
$ 9,349.8
$ (1,767.8) $ (1,245.7) $ (3,013.5) $ 3,887.3
$ 2,449.0
$ 6,336.3
Finance charges
1,391.0
997.8
2,388.8
(442.4)
(260.1)
(702.5)
948.6
737.7
1,686.3
Provision for credit
losses
—
—
—
(240.4)
(241.0)
(481.4)
(240.4)
(241.0)
(481.4)
New Consumer Loan
assignments (1)
2,530.0
1,095.3
3,625.3
—
—
—
2,530.0
1,095.3
3,625.3
Collections (2)
(3,237.5) (1,871.9) (5,109.4)
—
—
—
(3,237.5) (1,871.9) (5,109.4)
Accelerated Dealer
Holdback payments
44.2
—
44.2
—
—
—
44.2
—
44.2
Dealer Holdback
payments
186.6
—
186.6
—
—
—
186.6
—
186.6
Transfers (3)
(72.1)
72.1
—
18.3
(18.3)
—
(53.8)
53.8
—
Write-offs
(433.4)
(900.4) (1,333.8)
433.4
900.4
1,333.8
—
—
—
Recoveries (4)
1.1
3.1
4.2
(1.1)
(3.1)
(4.2)
—
—
—
Deferral of Loan
origination costs
9.8
—
9.8
—
—
—
9.8
—
9.8
Balance, end of period
$ 6,074.8
$ 3,090.7
$ 9,165.5
$ (2,000.0) $
(867.8) $ (2,867.8) $ 4,074.8
$ 2,222.9
$ 6,297.7
(1)
The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program. The Purchased Loans
amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.
(2)
Represents repayments that we collected on Consumer Loans assigned under our programs.
(3)
Under the Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. We transfer the Dealer’s outstanding
Dealer Loan balance and related allowance for credit losses balance to Purchased Loans in the period this forfeiture occurs.
(4)
The Dealer Loans amount represents net cash flows received (collections less any related Dealer Holdback payments) on Dealer Loans that were
previously written off in full. The Purchased Loans amount represents collections received on Purchased Loans that were previously written off in full.
We recognize provision for credit losses on new Consumer Loan assignments for contractual net cash flows that were not
expected to be realized at the time of assignment. We also recognize provision for credit losses on forecast changes in the
amount and timing of expected future net cash flows subsequent to assignment. The following table summarizes the provision
for credit losses for each of these components:
(In millions)
For the Year Ended December 31, 2024
Provision for Credit Losses
Dealer Loans
Purchased Loans
Total
New Consumer Loan assignments
$
191.4 $
129.5 $
320.9
Forecast changes
345.9
147.9
493.8
Total
$
537.3 $
277.4 $
814.7
(In millions)
For the Year Ended December 31, 2023
Provision for Credit Losses
Dealer Loans
Purchased Loans
Total
New Consumer Loan assignments
$
146.2 $
176.3 $
322.5
Forecast changes
281.5
132.2
413.7
Total
$
427.7 $
308.5 $
736.2
(In millions)
For the Year Ended December 31, 2022
Provision for Credit Losses
Dealer Loans
Purchased Loans
Total
New Consumer Loan assignments
$
154.8 $
188.9 $
343.7
Forecast changes
85.6
52.1
137.7
Total
$
240.4 $
241.0 $
481.4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
68
The net Loan income (finance charge revenue less provision for credit losses expense) that we recognize over the life of a
Loan equals the cash we collect from the underlying Consumer Loan less the cash we pay to the Dealer. Under CECL, we are
required to recognize:
•
a significant provision for credit losses expense at the time of assignment for contractual net cash flows we do not
expect to realize; and
•
finance charge revenue in subsequent periods that is significantly in excess of our expected yields.
Additional information related to new Consumer Loan assignments is as follows:
(In millions)
For the Year Ended December 31, 2024
New Consumer Loan Assignments
Dealer Loans
Purchased Loans
Total
Contractual net cash flows at the time of assignment (1)
$
5,613.6 $
2,126.0 $
7,739.6
Expected net cash flows at the time of assignment (2)
5,090.0
1,514.5
6,604.5
Loans receivable at the time of assignment (3)
3,578.3
1,040.1
4,618.4
Provision for credit losses expense at the time of assignment
$
(191.4) $
(129.5) $
(320.9)
Expected future finance charges at the time of assignment (4)
1,703.1
603.9
2,307.0
Expected net Loan income at the time of assignment (5)
$
1,511.7 $
474.4 $
1,986.1
(In millions)
For the Year Ended December 31, 2023
New Consumer Loan Assignments
Dealer Loans
Purchased Loans
Total
Contractual net cash flows at the time of assignment (1)
$
4,579.3 $
2,438.1 $
7,017.4
Expected net cash flows at the time of assignment (2)
4,154.8
1,704.4
5,859.2
Loans receivable at the time of assignment (3)
2,933.7
1,214.1
4,147.8
Provision for credit losses expense at the time of assignment
$
(146.2) $
(176.3) $
(322.5)
Expected future finance charges at the time of assignment (4)
1,367.3
666.6
2,033.9
Expected net Loan income at the time of assignment (5)
$
1,221.1 $
490.3 $
1,711.4
(In millions)
For the Year Ended December 31, 2022
New Consumer Loan Assignments
Dealer Loans
Purchased Loans
Total
Contractual net cash flows at the time of assignment (1)
$
3,874.4 $
2,185.9 $
6,060.3
Expected net cash flows at the time of assignment (2)
3,516.1
1,497.0
5,013.1
Loans receivable at the time of assignment (3)
2,530.0
1,095.3
3,625.3
Provision for credit losses expense at the time of assignment
$
(154.8) $
(188.9) $
(343.7)
Expected future finance charges at the time of assignment (4)
1,140.9
590.6
1,731.5
Expected net Loan income at the time of assignment (5)
$
986.1 $
401.7 $
1,387.8
(1)
The Dealer Loans amount represents repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under the
Portfolio Program, less the related Dealer Holdback payments that we would be required to make if we collected all of the contractual repayments. The
Purchased Loans amount represents repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under the
Purchase Program.
(2)
The Dealer Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under the Portfolio
Program, less the related Dealer Holdback payments that we expected to make. The Purchased Loans amount represents repayments that we expected
to collect at the time of assignment on Consumer Loans assigned under the Purchase Program.
(3)
The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program. The Purchased Loans
amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.
(4)
Represents revenue that is expected to be recognized on a level-yield basis over the lives of the Loans.
(5)
Represents the amount that expected net cash flows at the time of assignment exceed Loans receivable at the time of assignment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
69
A summary of changes in expected future net cash flows is as follows:
(In millions)
For the Year Ended December 31, 2024
Expected Future Net Cash Flows
Dealer Loans
Purchased Loans
Total
Balance, beginning of period
$
6,707.2 $
3,472.0 $
10,179.2
New Consumer Loan assignments (1)
5,090.0
1,514.5
6,604.5
Realized net cash flows (2)
(3,275.3)
(1,641.0)
(4,916.3)
Forecast changes
(204.6)
(109.4)
(314.0)
Transfers (3)
(141.0)
147.8
6.8
Balance, end of period
$
8,176.3 $
3,383.9 $
11,560.2
(In millions)
For the Year Ended December 31, 2023
Expected Future Net Cash Flows
Dealer Loans
Purchased Loans
Total
Balance, beginning of period
$
5,637.9 $
3,395.5 $
9,033.4
New Consumer Loan assignments (1)
4,154.8
1,704.4
5,859.2
Realized net cash flows (2)
(2,864.9)
(1,656.8)
(4,521.7)
Forecast changes
(125.3)
(81.0)
(206.3)
Transfers (3)
(95.3)
109.9
14.6
Balance, end of period
$
6,707.2 $
3,472.0 $
10,179.2
(In millions)
For the Year Ended December 31, 2022
Expected Future Net Cash Flows
Dealer Loans
Purchased Loans
Total
Balance, beginning of period
$
5,249.7 $
3,698.6 $
8,948.3
New Consumer Loan assignments (1)
3,516.1
1,497.0
5,013.1
Realized net cash flows (2)
(3,006.7)
(1,871.9)
(4,878.6)
Forecast changes
(41.6)
(18.1)
(59.7)
Transfers (3)
(79.6)
89.9
10.3
Balance, end of period
$
5,637.9 $
3,395.5 $
9,033.4
(1)
The Dealer Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under the Portfolio
Program, less the related Dealer Holdback payments that we expected to make. The Purchased Loans amount represents repayments that we expected
to collect at the time of assignment on Consumer Loans assigned under the Purchase Program.
(2)
The Dealer Loans amount represents repayments that we collected on Consumer Loans assigned under the Portfolio Program, less the Dealer Holdback
and Accelerated Dealer Holdback payments that we made. Purchased Loans amount represents repayments that we collected on Consumer Loans
assigned under the Purchase Program.
(3)
Under the Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. We transfer the Dealer’s outstanding
Dealer Loan balance, related allowance for credit losses balance, and related expected future net cash flows to Purchased Loans in the period this
forfeiture occurs.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
70
Credit Quality
We monitor and evaluate the credit quality of Consumer Loans assigned under our Portfolio and Purchase Programs on a
monthly basis by comparing our current forecasted collection rates to our prior forecasted collection rates and our initial
expectations. For additional information regarding credit quality, see Note 2 to the consolidated financial statements. The
following table compares our aggregated forecast of Consumer Loan collection rates as of December 31, 2024, with the
aggregated forecasts as of December 31, 2023, as of December 31, 2022, and at the time of assignment, segmented by year of
assignment:
Total Loans as of December 31, 2024
Forecasted Collection Percentage as of (1)
Current Forecast Variance from
Consumer Loan
Assignment Year
December 31,
2024
December 31,
2023
December 31,
2022
Initial
Forecast
December 31,
2023
December 31,
2022
Initial
Forecast
2015
65.3 %
65.2 %
65.2 %
67.7 %
0.1 %
0.1 %
-2.4 %
2016
63.9 %
63.8 %
63.8 %
65.4 %
0.1 %
0.1 %
-1.5 %
2017
64.7 %
64.7 %
64.7 %
64.0 %
0.0 %
0.0 %
0.7 %
2018
65.5 %
65.5 %
65.2 %
63.6 %
0.0 %
0.3 %
1.9 %
2019
67.2 %
66.9 %
66.6 %
64.0 %
0.3 %
0.6 %
3.2 %
2020
67.7 %
67.6 %
67.8 %
63.4 %
0.1 %
-0.1 %
4.3 %
2021
63.8 %
64.5 %
66.2 %
66.3 %
-0.7 %
-2.4 %
-2.5 %
2022
60.2 %
62.7 %
66.3 %
67.5 %
-2.5 %
-6.1 %
-7.3 %
2023
64.3 %
67.4 %
—
67.5 %
-3.1 %
—
-3.2 %
2024
66.5 %
—
—
67.2 %
—
—
-0.7 %
Dealer Loans as of December 31, 2024
Forecasted Collection Percentage as of (1) (2)
Current Forecast Variance from
Consumer Loan
Assignment Year
December 31,
2024
December 31,
2023
December 31,
2022
Initial
Forecast
December 31,
2023
December 31,
2022
Initial
Forecast
2015
64.6 %
64.6 %
64.5 %
67.5 %
0.0 %
0.1 %
-2.9 %
2016
63.1 %
63.0 %
63.0 %
65.1 %
0.1 %
0.1 %
-2.0 %
2017
64.1 %
64.0 %
64.0 %
63.8 %
0.1 %
0.1 %
0.3 %
2018
64.9 %
64.9 %
64.6 %
63.6 %
0.0 %
0.3 %
1.3 %
2019
66.8 %
66.5 %
66.3 %
63.9 %
0.3 %
0.5 %
2.9 %
2020
67.5 %
67.4 %
67.7 %
63.3 %
0.1 %
-0.2 %
4.2 %
2021
63.5 %
64.2 %
66.0 %
66.3 %
-0.7 %
-2.5 %
-2.8 %
2022
59.5 %
62.0 %
65.8 %
67.3 %
-2.5 %
-6.3 %
-7.8 %
2023
63.1 %
66.4 %
—
66.8 %
-3.3 %
—
-3.7 %
2024
65.4 %
—
—
66.3 %
—
—
-0.9 %
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
71
Purchased Loans as of December 31, 2024
Forecasted Collection Percentage as of (1) (2)
Current Forecast Variance from
Consumer Loan
Assignment Year
December 31,
2024
December 31,
2023
December 31,
2022
Initial
Forecast
December 31,
2023
December 31,
2022
Initial
Forecast
2015
69.0 %
68.9 %
68.9 %
68.5 %
0.1 %
0.1 %
0.5 %
2016
66.1 %
66.1 %
66.0 %
66.5 %
0.0 %
0.1 %
-0.4 %
2017
66.3 %
66.3 %
66.3 %
64.6 %
0.0 %
0.0 %
1.7 %
2018
66.8 %
66.8 %
66.4 %
63.5 %
0.0 %
0.4 %
3.3 %
2019
67.9 %
67.5 %
67.2 %
64.2 %
0.4 %
0.7 %
3.7 %
2020
67.9 %
67.8 %
68.0 %
63.6 %
0.1 %
-0.1 %
4.3 %
2021
64.3 %
65.0 %
66.7 %
66.3 %
-0.7 %
-2.4 %
-2.0 %
2022
62.1 %
64.3 %
67.4 %
68.0 %
-2.2 %
-5.3 %
-5.9 %
2023
67.7 %
70.1 %
—
69.4 %
-2.4 %
—
-1.7 %
2024
70.7 %
—
—
70.7 %
—
—
0.0 %
(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 in the table.
(2)
The forecasted collection rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.
We evaluate and adjust the expected collection rate for each Consumer Loan subsequent to assignment primarily through
the monitoring of consumer payment behavior. The following table summarizes the past-due status of Consumer Loan
assignments as of December 31, 2024 and December 31, 2023, segmented by year of assignment:
(In millions)
Total Loans as of December 31, 2024 (1) (2)
Pre-term Consumer Loans (3)
Post-term
Consumer Loans
(4)
Total
Consumer Loan Assignment Year
Current (5)
Past Due
11-90 Days
Past Due
Over 90 Days
2019 and prior
$
25.5 $
18.8 $
87.3 $
239.7 $
371.3
2020
113.3
64.2
179.1
25.7
382.3
2021
267.8
125.2
259.0
3.8
655.8
2022
795.2
269.8
371.7
1.0
1,437.7
2023
2,033.7
576.5
420.6
—
3,030.8
2024
4,412.3
819.1
179.8
—
5,411.2
$
7,647.8 $
1,873.6 $
1,497.5 $
270.2 $
11,289.1
(In millions)
Dealer Loans as of December 31, 2024 (1)
Pre-term Consumer Loans (3)
Post-term
Consumer Loans
(4)
Total
Consumer Loan Assignment Year
Current (5)
Past Due
11-90 Days
Past Due
Over 90 Days
2019 and prior
$
11.3 $
8.2 $
39.7 $
132.4 $
191.6
2020
67.9
37.7
106.4
18.5
230.5
2021
180.2
82.6
171.0
3.0
436.8
2022
569.7
191.5
262.1
0.8
1,024.1
2023
1,487.0
429.4
312.8
—
2,229.2
2024
3,571.3
686.8
150.7
—
4,408.8
$
5,887.4 $
1,436.2 $
1,042.7 $
154.7 $
8,521.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
72
(In millions)
Purchased Loans as of December 31, 2024 (2)
Pre-term Consumer Loans (3)
Post-term
Consumer Loans
(4)
Total
Consumer Loan Assignment Year
Current (5)
Past Due
11-90 Days
Past Due
Over 90 Days
2019 and prior
$
14.2 $
10.6 $
47.6 $
107.3 $
179.7
2020
45.4
26.5
72.7
7.2
151.8
2021
87.6
42.6
88.0
0.8
219.0
2022
225.5
78.3
109.6
0.2
413.6
2023
546.7
147.1
107.8
—
801.6
2024
841.0
132.3
29.1
—
1,002.4
$
1,760.4 $
437.4 $
454.8 $
115.5 $
2,768.1
(In millions)
Total Loans as of December 31, 2023 (1) (2)
Pre-term Consumer Loans (3)
Post-term
Consumer Loans
(4)
Total
Consumer Loan Assignment Year
Current (5)
Past Due
11-90 Days
Past Due
Over 90 Days
2018 and prior
$
24.2 $
16.8 $
73.5 $
204.9 $
319.4
2019
150.7
83.8
237.6
39.5
511.6
2020
328.9
165.5
314.5
4.6
813.5
2021
596.6
262.1
368.7
0.7
1,228.1
2022
1,518.0
499.8
422.5
—
2,440.3
2023
3,888.7
666.5
152.0
—
4,707.2
$
6,507.1 $
1,694.5 $
1,568.8 $
249.7 $
10,020.1
(In millions)
Dealer Loans as of December 31, 2023 (1)
Pre-term Consumer Loans (3)
Post-term
Consumer Loans
(4)
Total
Consumer Loan Assignment Year
Current (5)
Past Due
11-90 Days
Past Due
Over 90 Days
2018 and prior
$
11.7 $
7.9 $
35.0 $
117.8 $
172.4
2019
69.9
38.0
111.2
22.0
241.1
2020
201.7
98.0
190.4
3.5
493.6
2021
407.3
173.4
245.0
0.6
826.3
2022
1,109.4
360.4
303.5
—
1,773.3
2023
2,942.3
503.6
112.9
—
3,558.8
$
4,742.3 $
1,181.3 $
998.0 $
143.9 $
7,065.5
(In millions)
Purchased Loans as of December 31, 2023 (2)
Pre-term Consumer Loans (3)
Post-term
Consumer Loans
(4)
Total
Consumer Loan Assignment Year
Current (5)
Past Due
11-90 Days
Past Due
Over 90 Days
2018 and prior
$
12.5 $
8.9 $
38.5 $
87.1 $
147.0
2019
80.8
45.8
126.4
17.5
270.5
2020
127.2
67.5
124.1
1.1
319.9
2021
189.3
88.7
123.7
0.1
401.8
2022
408.6
139.4
119.0
—
667.0
2023
946.4
162.9
39.1
—
1,148.4
$
1,764.8 $
513.2 $
570.8 $
105.8 $
2,954.6
(1)
As Consumer Loans are aggregated by Dealer for purposes of recognizing revenue and measuring credit losses, the Dealer Loan amount was estimated
by allocating the balance of each Dealer Loan to the underlying Consumer Loans based on the forecasted future collections of each Consumer Loan.
(2)
As certain Consumer Loans are aggregated by Dealer or month of purchase for purposes of recognizing revenue and measuring credit losses, the
Purchased Loan amount was estimated by allocating the balance of certain Purchased Loans to the underlying Consumer Loans based on the forecasted
future collections of each Consumer Loan.
(3)
Represents the Loan balance attributable to Consumer Loans outstanding within their initial loan terms.
(4)
Represents the Loan balance attributable to Consumer Loans outstanding beyond their initial loan terms.
(5)
We consider a Consumer Loan to be current for purposes of forecasting expected collection rates if contractual repayments are less than 11 days past
due.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
73
The following table summarizes the write-offs for Consumer Loan assignments for the years ended December 31, 2024 and
2023, segmented by year of assignment:
(In millions)
For the Year Ended December 31, 2024
Write-offs by Consumer Loan Assignment Year
Dealer Loans
Purchased Loans
Total
2019 and prior
$
177.6 $
134.5 $
312.1
2020
110.5
73.5
184.0
2021
131.3
92.3
223.6
2022
175.0
139.8
314.8
2023
47.6
143.9
191.5
2024
16.3
50.7
67.0
$
658.3 $
634.7 $
1,293.0
(In millions)
For the Year Ended December 31, 2023
Write-offs by Consumer Loan Assignment Year
Dealer Loans
Purchased Loans
Total
2018 and prior
$
120.6 $
104.8 $
225.4
2019
101.3
176.6
277.9
2020
107.0
101.9
208.9
2021
107.2
119.7
226.9
2022
113.3
158.0
271.3
2023
17.2
62.8
80.0
$
566.6 $
723.8 $
1,290.4
During the second quarter of 2024, 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 2022
through 2024. Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.
Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as
Consumer Loans assigned in 2022. During the second quarter of 2024, we determined that we had sufficient Consumer Loan
performance experience to estimate the magnitude by which we expected Consumer Loans assigned in 2022 through 2024
would likely underperform our historical collection rates on Consumer Loans with similar characteristics. Accordingly, we
applied an adjustment to Consumer Loans assigned in 2022 through 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 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased provision for
credit losses by $127.5 million.
During the second quarter of 2023, we adjusted our methodology for forecasting the amount and timing of future net cash
flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan
prepayment data. We had experienced a decrease in Consumer Loan prepayments to below-average levels and, as a result,
slowed our forecasted net cash flow timing. Historically, Consumer Loan prepayments have been lower in periods with less
availability of consumer credit. 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 the adjustment to our forecasting methodology during the second
quarter of 2023 reduced forecasted net cash flows by $44.5 million, or 0.5%, and increased provision for credit losses by
$71.3 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
74
The COVID-19 pandemic created conditions that increased the level of uncertainty associated with our estimate of the
amount and timing of future net cash flows from our Loan portfolio. During the first quarter of 2020, we applied a subjective
adjustment to our forecasting model to reflect our best estimate of the future impact of the COVID-19 pandemic on future net
cash flows (“COVID forecast adjustment”), which reduced our estimate of future net cash flows by $162.2 million. We
continued to apply the COVID forecast adjustment through the end of 2021, as it continued to represent our best estimate.
During the first quarter of 2022, we determined that we had sufficient Consumer Loan performance experience since the lapse
of federal stimulus payments and enhanced unemployment benefits to refine our estimate of future net cash flows. Accordingly,
during the first quarter of 2022, we removed the COVID forecast adjustment and enhanced our methodology for forecasting the
amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent data and new forecast
variables.
The removal of the COVID forecast adjustment and the implementation of the enhanced forecasting methodology during
the first quarter of 2022 impacted forecasted net cash flows and provision for credit losses as follows:
(In millions)
Increase / (Decrease) in
Forecasting Methodology Changes
Forecasted Net Cash
Flows
Provision for Credit
Losses
Removal of COVID forecast adjustment
$
149.5 $
(118.5)
Implementation of enhanced forecasting methodology
(53.8)
47.9
Total
$
95.7 $
(70.6)
6.
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
(In millions)
As of December 31,
2024
2023
Land and land improvements
$
2.7 $
2.9
Building and improvements
17.6
58.8
Data processing equipment and software
44.1
50.0
Office furniture and equipment
2.2
2.6
Total property and equipment
66.6
114.3
Less: Accumulated depreciation on property and equipment
(51.9)
(67.8)
Total property and equipment, net
$
14.7 $
46.5
As the vast majority of our team members now work remotely, we had significant excess space in the two office buildings
that we owned in Southfield, Michigan. During the second quarter of 2024, we sold the larger building for net sales proceeds of
$3.2 million and recognized a loss on sale of the building of $23.7 million. The loss on sale of the building represented the
amount by which the $26.9 million carrying value of the building and its improvements, the related land and land
improvements, and office furniture and equipment exceeded the net sales proceeds of $3.2 million.
Depreciation expense on property and equipment was $6.7 million, $8.9 million, and $9.0 million for the years ended
December 31, 2024, 2023, and 2022, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
75
7.
REINSURANCE
A summary of reinsurance activity is as follows:
(In millions)
For the Years Ended December 31,
2024
2023
2022
Net assumed written premiums
$
104.4 $
92.8 $
72.5
Net premiums earned
96.1
79.6
62.7
Provision for claims
73.5
70.7
46.4
Amortization of capitalized acquisition costs
2.4
1.9
1.5
The trust assets and related reinsurance liabilities are as follows:
(In millions)
As of December 31,
Balance Sheet location
2024
2023
Trust assets
Restricted cash and cash equivalents
$
0.3 $
1.4
Trust assets
Restricted securities available for sale
106.4
93.2
Unearned premium
Accounts payable and accrued liabilities
75.9
67.6
Claims reserve (1)
Accounts payable and accrued liabilities
6.0
5.6
(1)
The claims reserve represents our liability for incurred-but-not-reported claims and is estimated based on historical claims experience.
The following tables present information about incurred and paid claims development for the five-year period ended
December 31, 2024:
(Dollars in millions)
Cumulative Incurred Claims
As of December 31, 2024
Incident Year
As of December 31,
Claims Reserve
Cumulative
Number of
Reported
Claims
2020
2021
2022
2023
2024
2020
$
37.7 $
37.6 $
37.7 $
37.7 $
37.7 $
—
28,214
2021
38.9
39.2
39.3
39.3
—
28,855
2022
46.0
47.7
47.8
—
30,492
2023
68.9
69.2
—
38,725
2024
73.1
6.0
38,798
Total
$
267.1 $
6.0
165,084
(In millions)
Cumulative Paid Claims
As of December 31,
Incident Year
2020
2021
2022
2023
2024
2020
$
35.4 $
37.6 $
37.7 $
37.7 $
37.7
2021
36.5
39.2
39.3
39.3
2022
42.9
47.7
47.8
2023
63.3
69.2
2024
67.1
Total
$
261.1
Average Annual Percentage Payout of Incurred Claims by Age
Claim Age (Years)
1
2
3
4
5
Payout Percentage
91.7 %
8.1 %
0.2 %
— %
— %
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
76
8.
OTHER INCOME
Other income consists of the following:
(In millions)
For the Years Ended December 31,
2024
2023
2022
Ancillary product profit sharing
$
33.4 $
34.1 $
60.6
Interest
26.2
19.7
6.6
Remarketing fees
12.1
10.7
13.4
Other
1.9
2.4
2.8
Total
$
73.6 $
66.9 $
83.4
Ancillary product profit sharing consists of payments received from TPPs based upon the performance of vehicle service
contracts and GAP contracts, and is recognized as income over the life of the vehicle service contracts and GAP contracts.
Interest consists of income earned on cash and cash equivalents, restricted cash and cash equivalents, and restricted
securities available for sale. Interest income is generally recognized over time as it is earned. Interest income on restricted
securities available for sale is recognized over the life of the underlying financial instruments using the interest method.
Remarketing fees consist of fees charged to Dealers that are retained from the sale of repossessed vehicles by Vehicle
Remarketing Services, Inc. (“VRS”), our wholly owned subsidiary that is responsible for remarketing vehicles for Credit
Acceptance. VRS coordinates vehicle repossessions with a nationwide network of repossession contractors, the redemption of
the vehicles by the consumers, and the sale of the vehicles through a nationwide network of vehicle auctions. VRS recognizes
income from the retained fees at the time of the sale and does not retain a fee if a repossessed vehicle is redeemed by the
consumer prior to the sale.
The following table disaggregates our other income by major source of income and timing of the revenue recognition:
(In millions)
For the Year Ended December 31, 2024
Ancillary
product
profit sharing
Interest
Remarketing
fees
Other
Total Other
Income
Source of income
Third-Party Providers
$
33.4 $
26.2 $
— $
0.5 $
60.1
Dealers
—
—
12.1
1.4
13.5
Total
$
33.4 $
26.2 $
12.1 $
1.9 $
73.6
Timing of revenue recognition
Over time
$
33.4 $
26.2 $
— $
0.6 $
60.2
At a point in time
—
—
12.1
1.3
13.4
Total
$
33.4 $
26.2 $
12.1 $
1.9 $
73.6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
77
9.
DEBT
Debt consists of the following:
(In millions)
As of December 31, 2024
Principal
Outstanding
Unamortized Debt
Issuance Costs
Unamortized
Discount
Carrying
Amount
Revolving secured lines of credit (1)
$
0.1 $
— $
— $
0.1
Secured financing (2)
5,391.8
(29.0)
(1.3)
5,361.5
Senior notes
1,000.0
(8.7)
—
991.3
Mortgage note
—
—
—
—
Total debt
$
6,391.9 $
(37.7) $
(1.3) $
6,352.9
(In millions)
As of December 31, 2023
Principal
Outstanding
Unamortized Debt
Issuance Costs
Unamortized
Discount
Carrying
Amount
Revolving secured lines of credit (1)
$
79.2 $
— $
— $
79.2
Secured financing (2)
4,019.0
(25.6)
(2.5)
3,990.9
Senior notes
1,000.0
(11.0)
—
989.0
Mortgage note
8.4
—
—
8.4
Total debt
$
5,106.6 $
(36.6) $
(2.5) $
5,067.5
(1)
Excludes deferred debt issuance costs of $4.4 million and $4.2 million as of December 31, 2024 and December 31, 2023, respectively, which are
included in other assets.
(2)
Warehouse facilities and Term ABS financings.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
78
General information for each of our financing transactions in place as of December 31, 2024 is as follows:
(Dollars in millions)
Financings
Wholly Owned Subsidiary
Maturity Date
Financing
Amount
Interest Rate Basis
as of December 31, 2024
Revolving Secured
Line of Credit Facility
n/a
06/22/27
$ 390.0
At our option, either the Secured
Overnight Financing Rate (SOFR)
plus 197.5 basis points or the prime
rate plus 87.5 basis points
RTP Facility
n/a
— (1)
$
20.0 SOFR plus 197.5 basis points
Warehouse Facility II (2)
CAC Warehouse Funding
LLC II
09/20/27
(3)
$ 500.0 SOFR plus 185.0 basis points
Warehouse Facility IV (2)
CAC Warehouse Funding
LLC IV
12/29/26
(3)
$ 300.0 SOFR plus 221.4 basis points
Warehouse Facility V (2)
CAC Warehouse Funding
LLC V
12/29/27
(4)
$ 250.0 SOFR plus 185.0 basis points
Warehouse Facility VI (2)
CAC Warehouse Funding
LLC VI
09/30/26
(3)
$
75.0 SOFR plus 210.0 basis points
Warehouse Facility VIII (2)
CAC Warehouse Funding
LLC VIII
09/21/26
(3)
$ 200.0 SOFR plus 225.0 basis points
Term ABS 2019-2 (2)
Credit Acceptance
Funding LLC 2019-2
09/15/26
(5)
$ 500.0 Fixed rate
Term ABS 2021-1 (2)
Credit Acceptance
Funding LLC 2021-1
02/17/26
(5)
$ 100.0 SOFR plus 220.0 basis points
Term ABS 2021-4 (2)
Credit Acceptance
Funding LLC 2021-4
10/16/23
(3)
$ 250.1 Fixed rate
Term ABS 2022-1 (2)
Credit Acceptance
Funding LLC 2022-1
06/17/24
(3)
$ 350.0 Fixed rate
Term ABS 2022-2 (2)
Credit Acceptance
Funding LLC 2022-2
06/15/27
(5)
$ 300.0 SOFR plus 246.4 basis points
Term ABS 2022-3 (2)
Credit Acceptance
Funding LLC 2022-3
10/15/24
(3)
$ 389.9 Fixed rate
Term ABS 2023-1 (2)
Credit Acceptance
Funding LLC 2023-1
03/17/25
(3)
$ 400.0 Fixed rate
Term ABS 2023-2 (2)
Credit Acceptance
Funding LLC 2023-2
05/15/25
(3)
$ 400.0 Fixed rate
Term ABS 2023-3 (2)
Credit Acceptance
Funding LLC 2023-3
08/15/25
(3)
$ 400.0 Fixed rate
Term ABS 2023-A (2)
Credit Acceptance
Funding LLC 2023-A
12/15/25
(5)
$ 200.0 Fixed rate
Term ABS 2023-5 (2)
Credit Acceptance
Funding LLC 2023-5
12/15/25
(3)
$ 294.0 Fixed rate
Term ABS 2024-A (2)
Credit Acceptance
Funding LLC 2024-A
02/15/27
(5)
$ 200.0 Fixed rate
Term ABS 2024-1 (2)
Credit Acceptance
Funding LLC 2024-1
03/16/26
(3)
$ 500.0 Fixed rate
Term ABS 2024-2 (2)
Credit Acceptance
Funding LLC 2024-2
06/15/26
(3)
$ 550.0 Fixed rate
Term ABS 2024-3 (2)
Credit Acceptance
Funding LLC 2024-3
09/15/26
(3)
$ 600.0 Fixed rate
Term ABS 2024-B (2)
Credit Acceptance
Funding LLC 2024-B
12/15/27
(5)
$ 300.0 Fixed rate
2026 Senior Notes
n/a
03/15/26
$ 400.0 Fixed rate
2028 Senior Notes
n/a
12/15/28
$ 600.0 Fixed rate
(1)
Borrowings are subject to repayment on demand.
(2)
Financing made available only to a specified subsidiary of the Company.
(3)
Represents the revolving maturity date. The outstanding balance will amortize after the revolving maturity date based on the cash flows of the pledged
assets.
(4)
Represents the revolving maturity date. The outstanding balance will amortize after the revolving maturity date and any amounts remaining on
December 27, 2029 will be due on that date.
(5)
Represents the revolving maturity date. The Company has the option to redeem and retire the indebtedness after the revolving maturity date. If we do
not elect this option, the outstanding balance will amortize based on the cash flows of the pledged assets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
79
Additional information related to the amounts outstanding on each facility is as follows:
(In millions)
For the Years Ended December 31,
2024
2023
Revolving Secured Lines of Credit
Maximum outstanding principal balance
$
342.0 $
355.5
Average outstanding principal balance
127.0
156.8
Warehouse Facility II
Maximum outstanding principal balance
$
251.0 $
201.0
Average outstanding principal balance
94.4
74.3
Warehouse Facility IV
Maximum outstanding principal balance
$
— $
100.0
Average outstanding principal balance
—
14.0
Warehouse Facility V
Maximum outstanding principal balance
$
100.0 $
82.0
Average outstanding principal balance
5.7
5.2
Warehouse Facility VI
Maximum outstanding principal balance
$
75.0 $
—
Average outstanding principal balance
36.5
—
Warehouse Facility VIII
Maximum outstanding principal balance
$
100.0 $
82.0
Average outstanding principal balance
19.4
5.2
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
80
Revolving Secured Lines of Credit
Principal balance outstanding
$
0.1
$
79.2
Amount available for borrowing (1)
409.9
330.8
Interest rate
6.37 %
7.33 %
Warehouse Facility II
Principal balance outstanding
$
—
$
—
Amount available for borrowing (1)
500.0
400.0
Loans pledged as collateral
—
—
Restricted cash and cash equivalents pledged as collateral
2.5
1.0
Interest rate
— %
— %
Warehouse Facility IV
Principal balance outstanding
$
—
$
—
Amount available for borrowing (1)
300.0
300.0
Loans pledged as collateral
—
—
Restricted cash and cash equivalents pledged as collateral
—
1.5
Interest rate
— %
— %
Warehouse Facility V
Principal balance outstanding
$
—
$
—
Amount available for borrowing (1)
250.0
200.0
Loans pledged as collateral
—
—
Restricted cash and cash equivalents pledged as collateral
1.0
1.0
Interest rate
— %
— %
Warehouse Facility VI
Principal balance outstanding
$
—
$
—
Amount available for borrowing (1)
75.0
75.0
Loans pledged as collateral
—
—
Restricted cash and cash equivalents pledged as collateral
—
—
Interest rate
— %
— %
Warehouse Facility VIII
Principal balance outstanding
$
—
$
—
Amount available for borrowing (1)
200.0
200.0
Loans pledged as collateral
—
—
Restricted cash and cash equivalents pledged as collateral
—
0.8
Interest rate
— %
— %
Term ABS 2019-2
Principal balance outstanding
$
500.0
$
500.0
Loans pledged as collateral
529.0
597.3
Restricted cash and cash equivalents pledged as collateral
41.7
47.6
Interest rate
5.43 %
5.15 %
Term ABS 2020-3
Principal balance outstanding
$
—
$
110.3
Loans pledged as collateral
—
418.4
Restricted cash and cash equivalents pledged as collateral
—
42.3
Interest rate
— %
2.06 %
Term ABS 2021-1
Principal balance outstanding
$
100.0
$
100.0
Loans pledged as collateral
112.0
112.8
Restricted cash and cash equivalents pledged as collateral
8.7
8.8
Interest rate
6.60 %
7.56 %
(Dollars in millions)
As of December 31,
2024
2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
81
Term ABS 2021-2
Principal balance outstanding
$
—
$
188.2
Loans pledged as collateral
—
415.5
Restricted cash and cash equivalents pledged as collateral
—
37.3
Interest rate
— %
1.38 %
Term ABS 2021-3
Principal balance outstanding
$
—
$
265.0
Loans pledged as collateral
—
396.3
Restricted cash and cash equivalents pledged as collateral
—
33.8
Interest rate
— %
1.24 %
Term ABS 2021-4
Principal balance outstanding
$
63.6
$
221.6
Loans pledged as collateral
167.0
255.2
Restricted cash and cash equivalents pledged as collateral
16.4
21.0
Interest rate
1.89 %
1.46 %
Term ABS 2022-1
Principal balance outstanding
$
236.6
$
350.0
Loans pledged as collateral
310.0
378.2
Restricted cash and cash equivalents pledged as collateral
24.9
27.4
Interest rate
5.24 %
5.03 %
Term ABS 2022-2
Principal balance outstanding
$
300.0
$
200.0
Loans pledged as collateral
406.0
212.1
Restricted cash and cash equivalents pledged as collateral
25.2
14.7
Interest rate
7.29 %
7.66 %
Term ABS 2022-3
Principal balance outstanding
$
347.6
$
389.9
Loans pledged as collateral
395.2
418.9
Restricted cash and cash equivalents pledged as collateral
29.1
28.9
Interest rate
7.82 %
7.68 %
Term ABS 2023-1
Principal balance outstanding
$
400.0
$
400.0
Loans pledged as collateral
453.0
611.6
Restricted cash and cash equivalents pledged as collateral
33.1
38.5
Interest rate
6.92 %
6.92 %
Term ABS 2023-2
Principal balance outstanding
$
400.0
$
400.0
Loans pledged as collateral
533.3
701.7
Restricted cash and cash equivalents pledged as collateral
36.8
42.0
Interest rate
6.39 %
6.39 %
Term ABS 2023-3
Principal balance outstanding
$
400.0
$
400.0
Loans pledged as collateral
524.9
643.8
Restricted cash and cash equivalents pledged as collateral
36.5
40.3
Interest rate
6.86 %
6.86 %
(Dollars in millions)
As of December 31,
2024
2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
82
Term ABS 2023-A
Principal balance outstanding
$
200.0
$
200.0
Loans pledged as collateral
252.0
273.4
Restricted cash and cash equivalents pledged as collateral
17.7
17.2
Interest rate
7.51 %
7.51 %
Term ABS 2023-5
Principal balance outstanding
$
294.0
$
294.0
Loans pledged as collateral
398.7
433.9
Restricted cash and cash equivalents pledged as collateral
32.9
52.2
Interest rate
6.54 %
6.54 %
Term ABS 2024-A
Principal balance outstanding
$
200.0
$
—
Loans pledged as collateral
248.4
—
Restricted cash and cash equivalents pledged as collateral
18.1
—
Interest rate
7.45 %
— %
Term ABS 2024-1
Principal balance outstanding
$
500.0
$
—
Loans pledged as collateral
553.3
—
Restricted cash and cash equivalents pledged as collateral
45.0
—
Interest rate
6.01 %
— %
Term ABS 2024-2
Principal balance outstanding
$
550.0
$
—
Loans pledged as collateral
646.8
—
Restricted cash and cash equivalents pledged as collateral
42.0
—
Interest rate
6.21 %
— %
Term ABS 2024-3
Principal balance outstanding
$
600.0
$
—
Loans pledged as collateral
700.9
—
Restricted cash and cash equivalents pledged as collateral
51.5
—
Interest rate
4.91 %
— %
Term ABS 2024-B
Principal balance outstanding
$
300.0
$
—
Loans pledged as collateral
425.8
—
Restricted cash and cash equivalents pledged as collateral
37.9
—
Interest rate
6.13 %
— %
2026 Senior Notes
Principal balance outstanding
$
400.0
$
400.0
Interest rate
6.625 %
6.625 %
2028 Senior Notes
Principal balance outstanding
$
600.0
$
600.0
Interest rate
9.250 %
9.250 %
Mortgage Note
Principal balance outstanding
$
—
$
8.4
Interest rate
— %
6.88 %
(1) Availability may be limited by the amount of assets pledged as collateral.
(Dollars in millions)
As of December 31,
2024
2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
83
Revolving Secured Lines of Credit
We have two revolving secured lines of credit: (1) a $390.0 million revolving secured line of credit facility, to which we
refer as our revolving secured line of credit facility, with a commercial bank syndicate and (2) an uncommitted $20.0 million
revolving secured line of credit facility, to which we refer as the RTP facility, with a lender for use solely in facilitating
payments by the Company through the lender’s real-time payments service.
Borrowings under our revolving secured line of credit facility, including any letters of credit issued under the facility, are
subject to a borrowing-base limitation. This limitation equals 80% of the Dealer Loans Receivable constituting revolving credit
facility collateral and 80% of Purchased Contract Balances constituting revolving credit facility collateral (each as defined in
the agreement governing our revolving secured line of credit facility), less a hedging reserve (not exceeding $1.0 million), and
less the amount of other outstanding debt secured by the collateral that secures our revolving secured line of credit
facility. Borrowings under our revolving secured line of credit facility are secured by a lien on most of our assets that do not
secure obligations under our Warehouse facilities or Term ABS financings.
Borrowings under the RTP facility are secured by a lien on the same collateral that secures obligations under our revolving
secured line of credit facility. The RTP facility terminates automatically if the lender ceases to be part of the commercial bank
syndicate under our revolving secured line of credit facility or if its lending commitments under our revolving secured line of
credit facility are terminated.
Warehouse Facilities
We have five Warehouse facilities with total borrowing capacity of $1,325.0 million. Each of the facilities is with a
different lender or group of lenders. Under each Warehouse facility, we can convey Loans to the applicable wholly owned
subsidiary in return for cash and/or an increase in the value of our equity in such subsidiary. In turn, each such subsidiary
pledges the Loans as collateral to secure financing that will fund the cash portion of the purchase price of the Loans. The
financing provided to each such subsidiary under the applicable facility is generally limited to the lesser of 80% of the
outstanding balance of the conveyed Loans, as determined in accordance with the applicable agreement, plus certain restricted
cash and cash equivalents pledged as collateral, or the facility limit.
The financings create indebtedness for which the subsidiaries are liable and which is secured by all the assets of each
subsidiary. Such indebtedness is non-recourse to us (other than customary, limited recourse to us in the form of repurchase
obligations or indemnification obligations for any violations by us of our representations or obligations as seller, servicer, or
custodian), even though we are consolidated for financial reporting purposes with the subsidiaries. Because the subsidiaries are
organized as bankruptcy-remote legal entities separate from us, their assets (including the conveyed Loans) are not available to
any creditors other than the creditors of the applicable subsidiary.
The subsidiaries pay us a monthly servicing fee equal to either 4% or 6%, depending upon the facility, of the collections
received with respect to the conveyed Loans. The servicing fee is paid out of the collections. Except for the servicing fee and
holdback payments due to Dealers, if a facility is amortizing, we do not have any rights in any portion of such collections until
all outstanding principal, accrued and unpaid interest, fees, and other related costs have been paid in full. If a facility is in its
revolving period, the applicable subsidiary is entitled to the portion of such collections available after the payment of interest
and transaction expenses under the facility, provided that the borrowing base requirements of the facility are satisfied.
Term ABS Financings
We have wholly owned subsidiaries (the “Funding LLCs”) that have completed secured financing transactions with
qualified institutional investors or lenders. In connection with each of these transactions, we conveyed Loans on an arms-length
basis to a Funding LLC for cash and the sole membership interest in that Funding LLC. In turn, each Funding LLC, other than
the Funding LLCs for the Term ABS 2019-2, 2021-1, 2022-2, 2023-A, and 2024-B financings, conveyed the Loans to the
respective trusts that issued notes to qualified institutional investors. The Funding LLCs for the Term ABS 2019-2, 2021-1,
2022-2, 2023-A, and 2024-B financings pledged the Loans for the benefit of their respective lenders. The Term ABS 2021-4,
2023-1, 2023-2, 2023-3, 2023-A, 2023-5, 2024-A, 2024-1, 2024-2, and 2024-3 financings each consist of three classes of notes
(or, in the case of the Term ABS 2023-A and Term ABS 2024-B, three classes of loans), while the Term ABS 2022-1 and Term
ABS 2022-3 financings consist of four classes of notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
84
Each Term ABS financing at the time of issuance has a specified revolving period during which we are likely to convey
additional Loans to the applicable Funding LLC. Each Funding LLC (other than the Funding LLCs of the Term ABS 2019-2,
2021-1, 2022-2, 2023-A, and 2024-B financings) will then convey the Loans to its respective trust. At the end of the applicable
revolving period, the debt outstanding under each financing will begin to amortize.
The Term ABS financings create indebtedness for which the applicable trust or Funding LLC is liable and which is secured
by all the assets of the applicable trust or Funding LLC. Such indebtedness is non-recourse to us (other than customary, limited
recourse to us in the form of repurchase obligations or indemnification obligations for any violations by us of our
representations or obligations as seller, servicer, or custodian), even though we are consolidated for financial reporting purposes
with the trusts and the Funding LLCs. Because the trusts and the Funding LLCs are organized as bankruptcy-remote legal
entities separate from us, their assets (including the conveyed Loans) are not available to any creditors other than the creditors
of the applicable subsidiary. We receive a monthly servicing fee on each financing equal to 4% of the collections received with
respect to the conveyed Loans. The fee is paid out of the collections. Except for the servicing fee and Dealer Holdback
payments due to Dealers, if a Term ABS financing is amortizing, we do not have any rights in any portion of such collections
until all outstanding principal, accrued and unpaid interest, fees, and other related costs have been paid in full. If a Term ABS
financing is in its revolving period, the applicable trust or Funding LLC is entitled to the portion of such collections available
after application of any amounts necessary to acquire additional Loans from us and to pay accrued interest on the debt and any
other transaction expenses, provided that any necessary principal payments are made to compensate for certain reductions in the
balance of eligible loans or, in the case of the Term ABS 2019-2 financing and Term ABS financings occurring after the Term
ABS 2021-3 financing, certain reductions in forecasted collections. In addition, in our capacity as servicer of the Loans, we
have a limited right to exercise a “clean-up call” option to purchase Loans from the Funding LLCs and/or the trusts under
certain specified circumstances. For those Funding LLCs with a trust, when the trust’s indebtedness is paid in full, either
through collections or through a prepayment of the indebtedness, the trust is to pay any remaining collections over to its
Funding LLC as the sole beneficiary of the trust. For all Funding LLCs, after the indebtedness is paid in full, any remaining
collections will ultimately be available to be distributed to us as the sole member of the respective Funding LLC.
Senior Notes
On December 19, 2023, we issued $600.0 million aggregate principal amount of 9.250% senior notes due 2028 (the “2028
senior notes”). The 2028 senior notes were issued pursuant to an indenture, dated as of December 19, 2023, among the
Company, as issuer, the Company’s subsidiaries Buyers Vehicle Protection Plan, Inc. and Vehicle Remarketing Services, Inc.,
as guarantors (collectively, the “Guarantors”), and the trustee under the indenture.
The 2028 senior notes mature on December 15, 2028 and bear interest at a rate of 9.250% per annum, computed on the
basis of a 360-day year composed of twelve 30-day months and payable semi-annually on June 15 and December 15 of each
year, beginning on June 15, 2024. We used a portion of the net proceeds from the 2028 senior notes to repurchase or redeem all
of the $400.0 million outstanding principal amount of our 5.125% senior notes due 2024 (the “2024 senior notes”), of which
$322.3 million was repurchased on December 19, 2023 and the remaining $77.7 million was redeemed on December 31, 2023.
We used the remaining net proceeds from the 2028 senior notes for general corporate purposes. During the fourth quarter of
2023, we recognized a pre-tax loss on extinguishment of debt of $1.8 million related to the repurchase and redemption of the
2024 senior notes.
On March 7, 2019, we issued $400.0 million aggregate principal amount of 6.625% senior notes due 2026 (the “2026
senior notes”). The 2026 senior notes were issued pursuant to an indenture, dated as of March 7, 2019, among the Company, as
issuer, the Guarantors and the trustee under the indenture.
The 2026 senior notes mature on March 15, 2026 and bear interest at a rate of 6.625% per annum, computed on the basis of
a 360-day year composed of twelve 30-day months and payable semi-annually on March 15 and September 15 of each year,
beginning on September 15, 2019. We used the net proceeds from the offering of the 2026 senior notes for general corporate
purposes, including repayment of outstanding borrowings under our revolving secured line of credit facility.
The 2028 senior notes and 2026 senior notes (the “senior notes”) are guaranteed on a senior basis by the Guarantors, which
are also guarantors of obligations under our revolving secured line of credit facility. Other existing and future subsidiaries of
ours may become guarantors of the senior notes in the future. The indentures for the senior notes provide for a guarantor of the
senior notes to be released from its obligations under its guarantee of the senior notes under specified circumstances.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
85
Mortgage Note
We had a mortgage note with a commercial bank that was secured by a first mortgage lien on a building acquired by us and
an assignment of all leases, rents, revenues, and profits under all present and future leases of the building. The note was paid off
in full during the second quarter of 2024 in connection with the sale of the related building.
Principal Debt Maturities
The scheduled principal maturities of our debt as of December 31, 2024 are as follows:
(In millions)
Year
Revolving
Secured Lines of
Credit Facility
Warehouse
Facilities
Term ABS
Financings (1)
Senior Notes
Total
2025
$
— $
— $
1,249.6 $
— $
1,249.6
2026
—
—
2,146.9
400.0
2,546.9
2027
0.1
—
1,924.7
—
1,924.8
2028
—
—
70.6
600.0
670.6
2029
—
—
—
—
—
Thereafter
—
—
—
—
—
Total
$
0.1 $
— $
5,391.8 $
1,000.0 $
6,391.9
(1)
The principal maturities of the Term ABS financings are estimated based on forecasted collections.
Debt Covenants
As of December 31, 2024, we were in compliance with our covenants under our revolving secured line of credit facility,
our Warehouse facilities, our Term ABS financings, the senior notes indentures, and the RTP Facility.
Our revolving secured line of credit facility and our Warehouse facilities include covenants that require the maintenance of
certain financial ratios and other financial conditions. These covenants require a minimum ratio of (1) our net earnings, adjusted
for specified items, before income taxes, depreciation, amortization, and fixed charges to (2) our fixed charges, as defined in the
agreements. These covenants also limit the maximum ratio of our funded debt less unrestricted cash and cash equivalents to
tangible net worth. Some of these covenants may indirectly limit the repurchase of common stock or payment of dividends on
common stock. Our Warehouse facilities and Term ABS financings contain covenants that measure the performance of the
conveyed assets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
86
10.
INCOME TAXES
Income Tax Provision
The income tax provision consists of the following:
(In millions)
For the Years Ended December 31,
2024
2023
2022
Income before provision for income taxes:
$
329.5 $
367.6 $
711.7
Current provision for income taxes:
Federal
116.1
97.1
152.7
State
32.9
20.2
28.5
149.0
117.3
181.2
Deferred provision for income taxes:
Federal
(47.9)
(26.4)
(10.8)
State
(22.5)
(11.6)
3.1
(70.4)
(38.0)
(7.7)
Interest and penalties expense:
Interest
3.0
2.2
2.4
Penalties
—
—
—
3.0
2.2
2.4
Provision for income taxes
$
81.6 $
81.5 $
175.9
Deferred Taxes
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities consist of the following:
(In millions)
As of December 31,
2024
2023
Deferred tax assets:
Allowance for credit losses
$
831.7 $
741.2
Stock-based compensation
14.3
14.6
Deferred state net operating loss
25.3
13.7
Other, net
15.2
14.1
Total deferred tax assets
886.5
783.6
Deferred tax liabilities:
Valuation of Loans receivable
1,195.8
1,158.9
Deferred Loan origination costs
1.8
1.6
Other, net
8.0
12.3
Total deferred tax liabilities
1,205.6
1,172.8
Net deferred tax liability
$
319.1 $
389.2
The deferred state net operating loss tax asset arising from the operating loss carryforward for state income tax purposes is
expected to expire at various times beginning in 2034, if not utilized. We do not anticipate expiration of the net operating loss
carryforwards prior to their utilization.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
87
Effective Income Tax Rate
A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is as follows:
For the Years Ended December 31,
2024
2023
2022
U.S. federal statutory income tax rate
21.0 %
21.0 %
21.0 %
State and local income taxes
3.1 %
2.7 %
3.8 %
Non-deductible executive compensation expense
2.1 %
1.3 %
0.5 %
Excess tax benefits from stock-based compensation plans
-1.6 %
-3.0 %
-0.8 %
Other
0.2 %
0.2 %
0.2 %
Effective income tax rate
24.8 %
22.2 %
24.7 %
State and local income taxes
For the year ended December 31, 2024, the impact of state and local income taxes on our effective income tax rate
increased from 2023, primarily due to an adjustment to an uncertain tax position estimate for state income taxes during the
second quarter of 2024 and changes in state tax laws that were enacted during the second quarter of 2024.
For the year ended December 31, 2023, the impact of state and local income taxes on our effective income tax rate
decreased from 2022 primarily due to the settlement of an uncertain tax position for state income taxes during the second
quarter of 2023.
Non-deductible executive compensation expense
We recognize non-deductible executive compensation expense as an increase of provision for income taxes or a reduction
of benefit for income taxes. For the year ended December 31, 2024, the impact of non-deductible executive compensation
expense on our effective income tax rate increased from 2023, primarily due to an increase in non-deductible executive
compensation expense.
Excess tax benefits from stock-based compensation
We recognize an excess tax benefit or tax deficiency when the deduction for the stock-based compensation expense of a
stock award for tax purposes differs from the cumulative stock-based compensation expense recognized in the financial
statements. The excess tax benefit or tax deficiency is recognized in provision for income taxes in the period in which the
amount of the deduction is determined, which is when restricted stock vests, restricted stock units are settled in common stock,
or stock options are exercised. Excess tax benefits reduce our effective income tax rate, while tax deficiencies increase our
effective income tax rate. The decrease in the impact of excess tax benefits on our effective income tax rate for the year ended
December 31, 2024 as compared to 2023 was primarily due to a decrease in the number of restricted stock units that were
settled in common stock during 2024 due to the timing of long-term stock award grants.
Unrecognized Tax Benefits
The following table is a summary of changes in gross unrecognized tax benefits:
(In millions)
For the Years Ended December 31,
2024
2023
2022
Unrecognized tax benefits at January 1,
$
61.0 $
57.1 $
49.4
Additions for tax positions of the current year
20.3
16.2
14.5
Additions for tax positions of prior years
2.8
—
—
Reductions for tax positions of prior years
(0.2)
(0.1)
—
Settlements
(3.2)
(3.7)
—
Reductions as a result of a lapse of the statute of limitations
(7.7)
(8.5)
(6.8)
Unrecognized tax benefits at December 31,
$
73.0 $
61.0 $
57.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
88
The total amount of gross unrecognized tax benefits that, if recognized, would favorably affect our effective income tax
rate in future periods was $73.0 million as of December 31, 2024. As of December 31, 2024, it is not possible to reasonably
estimate the expected change to the total amount of unrecognized tax benefits in the next twelve months. Accrued interest
related to uncertain tax positions was $17.9 million and $15.1 million as of December 31, 2024 and 2023, respectively.
We are subject to income tax in federal, state, and local jurisdictions. We are generally no longer subject to tax
examinations on federal returns filed for years prior to 2021 and state and local returns filed for years prior to 2018.
11.
NET INCOME PER SHARE
Basic net income per share has been computed by dividing net income by the basic number of weighted average shares
outstanding. Diluted net income per share has been computed by dividing net income by the diluted number of weighted
average shares outstanding using the treasury stock method. The share effect is as follows:
For the Years Ended December 31,
2024
2023
2022
Weighted average shares outstanding:
Common shares
12,159,941
12,728,888
13,197,912
Vested restricted stock units
163,320
224,536
365,973
Basic number of weighted average shares outstanding
12,323,261
12,953,424
13,563,885
Dilutive effect of restricted stock units and stock options
146,022
57,311
61,196
Dilutive number of weighted average shares outstanding
12,469,283
13,010,735
13,625,081
The following outstanding stock awards were excluded from the computation of diluted net income per share because their
inclusion would have been anti-dilutive:
For the Years Ended December 31,
2024
2023
2022
Stock options
69,083
228,998
189,465
Restricted stock units
240
3,185
2,827
Total
69,323
232,183
192,292
12.
STOCK REPURCHASES
The following table summarizes our stock repurchases for the years ended December 31, 2024, 2023, and 2022:
(Dollars in millions)
For the Years Ended December 31,
2024
2023
2022
Stock Repurchases
Number of
Shares
Repurchased
Cost (1)
Number of
Shares
Repurchased
Cost (1)
Number of
Shares
Repurchased
Cost
Open Market (2)
560,916 $
300.4
352,062 $
175.1
1,467,481 $
773.0
Other (3)
27,109
12.9
57,255
27.5
24,000
11.5
Total
588,025 $
313.3
409,317 $
202.6
1,491,481 $
784.5
(1)
Total cost of repurchases includes excise tax.
(2)
Represents repurchases under authorizations by the board of directors for the repurchase of shares by us from time to time in the open market through
privately negotiated transactions, through block trades, pursuant to trading plans adopted in accordance with Rule 10b5-1 under the Securities
Exchange Act of 1934, or otherwise. On August 21, 2023, the board of directors authorized the repurchase of up to two million shares of our common
stock in addition to the board’s prior authorizations. As of December 31, 2024, we had authorization to repurchase 1,245,091 shares of our common
stock.
(3)
Represents shares of common stock released to us by team members as payment of tax withholdings upon the vesting of restricted stock units and the
settlement of restricted stock units in common stock.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
89
13. STOCK-BASED COMPENSATION PLANS
Pursuant to our Amended and Restated Incentive Compensation Plan (the “Incentive Plan”), at any time prior to April 12,
2031, we can grant stock-based awards in the form of restricted stock, restricted stock units, and stock options to team
members, officers, directors, and contractors. On April 10, 2024, our board of directors approved an amendment to the
Incentive Plan, subject to shareholder approval, increasing the number of shares authorized for issuance by 250,000 shares, to
3,250,000 shares. Shareholder approval was received at our annual meeting of shareholders on June 5, 2024. The shares
available for future grants under the Incentive Plan totaled 310,552 as of December 31, 2024.
Restricted Stock Units
We grant performance-based and time-based restricted stock units to team members and directors in accordance with the
Incentive Plan. The grant-date fair value per share is estimated to equal the market price of our common stock on the date of
grant. Each restricted stock unit represents and has a value equal to one share of common stock. Based on the terms of
individual restricted stock unit grant agreements, restricted stock units vest under one of the following methods:
•
For executive officers and senior leaders, over a period of ten years, based on continuous employment.
•
For certain team members, over a period of three or four years, based on continuous employment.
•
For independent directors, over a period of three years, based on continuous service as a director.
A summary of the restricted stock unit (“RSU”) activity under the Incentive Plan for the year ended December 31, 2024, is
presented below:
Restricted Stock Units
Number of Restricted
Stock Units
Weighted Average
Grant-Date Fair
Value Per Share
Aggregate Intrinsic
Value (2)
(in millions)
Weighted Average
Remaining
Contractual Term
(in years)
Outstanding as of December 31, 2023
203,444 $
179.13
Granted
401,670
484.58
Converted
(68,503)
181.30
Forfeited
(3,164)
466.28
Outstanding as of December 31, 2024 (1)
533,447 $
407.15 $
250.4
4.1 (3)
Vested as of December 31, 2024
110,140 $
113.85 $
51.7
1.0
(1)
No RSUs outstanding at December 31, 2024 were convertible to shares of common stock.
(2)
The intrinsic value of RSUs is measured by applying the closing stock price as of December 31, 2024 to the applicable number of units.
(3)
The calculation of weighted average remaining contractual term of RSUs outstanding excludes 98,497 RSUs that are to be settled in common stock on
future dates that are currently not known, as they are contingent on the timing of the team members' retirement from the Company.
The grant-date weighted average fair value of RSUs granted in 2024, 2023, and 2022 was $484.58, $454.04, and $488.27,
respectively. The total intrinsic value of RSUs settled in common stock during 2024, 2023, and 2022 was $32.2 million, $84.8
million, and $27.5 million, respectively.
Stock option grants
We have granted time-based stock options to team members and directors in accordance with the Incentive Plan. Based on
the terms of individual stock option grant agreements, the stock options:
•
vest and become exercisable in three or four equal annual installments beginning on the first anniversary of the date
on which the options were granted, based on continuous employment or service, and
•
expire either six or ten years from the date of the grant.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
90
A summary of the stock option activity under the Incentive Plan for the year ended December 31, 2024, is presented below:
Stock Options
Number of Stock
Options
Weighted Average
Exercise Price Per
Share
Aggregate Intrinsic
Value (1)
(in millions)
Weighted Average
Remaining
Contractual Term
(in years)
Outstanding as of December 31, 2023
655,200 $
365.93
Exercised
(45,776)
340.17
Forfeited
(3,958)
366.45
Outstanding as of December 31, 2024
605,466 $
367.88 $
64.5
3.0
Exercisable as of December 31, 2024
537,342 $
357.60 $
61.6
2.8
Unvested as of December 31, 2024
68,124 $
448.94 $
2.9
4.6
(1)
The intrinsic value of stock options is the amount by which the market price of the stock as of December 31, 2024 exceeded the exercise price of the
options.
The total intrinsic value of stock options exercised during 2024 was $10.0 million. Net cash proceeds from the exercise of
stock options in 2024 was $15.6 million.
Stock-based compensation expense
Stock-based compensation expense consists of the following:
(In millions)
For the Years Ended December 31,
2024
2023
2022
Stock options
$
32.9 $
33.5 $
33.8
Restricted stock units
12.1
5.6
2.7
Total
$
45.0 $
39.1 $
36.5
Pursuant to our Amended and Restated Incentive Compensation Plan, we can grant stock-based awards in the form of
restricted stock, restricted stock units, and stock options to team members, officers, directors, and contractors. Instead of a
short-term compensation program providing for rolling, annual equity awards to our executive officers and senior leaders, we
utilize a multi-year compensation program that grants a one-time equity award at the beginning of the compensation program
period that is intended to incentivize recipients over the multi-year compensation period. Our current compensation program for
executive officers and senior leaders covers the 2025 through 2034 compensation period and included a one-time equity award
in December 2024 with a vesting period of ten years. We expect to recognize the remaining expense for stock-based awards
outstanding as of December 31, 2024 over a weighted-average period of 4.3 years as follows:
(In millions)
For the Years Ended December 31,
Restricted
Stock Units
Stock Options
Total Projected
Expense
2025
$
33.2 $
5.0 $
38.2
2026
29.5
1.2
30.7
2027
23.6
—
23.6
2028
19.7
—
19.7
2029
17.2
—
17.2
Thereafter
71.7
—
71.7
Total
$
194.9 $
6.2 $
201.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
91
14.
BUSINESS SEGMENT AND OTHER INFORMATION
Business Segment Overview
We identify operating segments as components of our business for which separate financial information is regularly
evaluated by our Chief Executive Officer, who acts as the chief operating decision-maker (“CODM”), in assessing performance
and making decisions regarding resource allocation. We periodically review and redefine our segment reporting as internal
management reporting practices evolve and the components of our business change. Currently, the CODM reviews
consolidated financial statements and metrics to assess performance and allocate resources. Thus, we have determined that we
operate in one reportable operating segment that represents our core business of offering Dealers innovative financing solutions
and related products and services that enable them to sell vehicles to consumers, regardless of their credit history.
The consolidated financial statements reflect the financial results of our one reportable operating segment. The accounting
policies of this segment are the same as those described in the summary of significant accounting policies in Note 2. The
CODM assesses performance for our one reportable operating segment and decides how to allocate resources based on net
income, as reported on our consolidated statements of income, and total assets, as reported on our consolidated balance sheets.
Geographic Information
For the three years ended December 31, 2024, 2023, and 2022, all of our revenues were derived from the United States. As
of December 31, 2024 and 2023, all of our long-lived assets were located in the United States.
Products and Services Information
Our primary product consists of innovative financing solutions that enable Dealers to sell vehicles to consumers, regardless
of their credit history. We also provide Dealers the ability to offer ancillary products on vehicles financed by us.
Major Customer Information
We did not have any Dealers that provided 10% or more of our revenue during 2024, 2023, or 2022. Additionally, no
single Dealer’s Loans receivable balance accounted for more than 10% of total Loans receivable as of December 31, 2024 or
2023.
15.
COMMITMENTS AND CONTINGENCIES
Litigation and Other Legal Matters
In the normal course of business and as a result of the consumer-oriented nature of the industry in which we operate, we
and other industry participants are frequently subject to various consumer claims, litigation, and regulatory investigations
seeking damages, fines, and statutory penalties. The claims allege, among other theories of liability, violations of state, federal,
and foreign truth-in-lending, credit availability, credit reporting, consumer protection, warranty, debt collection, insurance, and
other consumer-oriented laws and regulations, including claims seeking damages for alleged physical and mental harm relating
to the repossession and sale of consumers’ vehicles and other debt collection activities. As the assignee of Consumer Loans
originated by Dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against Dealers. We
may also have disputes and litigation with Dealers. The claims may allege, among other theories of liability, that we breached
the Dealer servicing agreement. We may also have disputes and litigation with vendors and other third parties. The claims may
allege, among other theories of liability, that we breached a license agreement or contract. The damages, fines, and penalties
that may be claimed by consumers, regulatory agencies, Dealers, vendors, or other third parties in these types of matters can be
substantial. The relief requested by plaintiffs varies but may include requests for compensatory, statutory, and punitive damages
and injunctive relief, and plaintiffs may seek treatment as purported class actions or they may file individual arbitration
demands for which arbitration providers may request separate filing fees. Current actions to which we are a party include the
following matters:
On December 1, 2021, we received a subpoena from the Office of the Attorney General for the State of California seeking
documents and information regarding GAP products, GAP product administration, and refunds. We have cooperated with this
inquiry and cannot predict the eventual scope, duration, or outcome at this time. As a result, we are unable to estimate the
reasonably possible loss or range of reasonably possible loss arising from this investigation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
92
On May 7, 2019, we received a subpoena from the Consumer Frauds and Protection Bureau of the Office of the New York
State Attorney General, relating to the Company’s origination and collection policies and procedures in the state of New York.
After May 7, 2019 through April 30, 2021, we received additional subpoenas from the Office of the New York State Attorney
General relating to the Company's origination, collection, and securitization practices. On November 19, 2020 and August 23,
2022, we received letters from the Office of the New York State Attorney General indicating that it may commence litigation
against the Company asserting violations of New York Executive Law § 63(12) and New York General Business Law §§ 349
and 352 et seq. and applicable federal laws, including but not limited to claims that the Company engaged in unfair and
deceptive trade practices in auto lending, debt collection, and asset-backed securitizations in the State of New York in violation
of the Dodd-Frank Wall Street Reform and Consumer Protection Act, New York Executive Law § 63(12), the New York
Martin Act, and New York General Business Law § 349. See the description below of the lawsuit commenced by the Office of
the New York State Attorney General on January 4, 2023.
On April 22, 2019, we received a civil investigative demand from the Consumer Financial Protection Bureau (“Bureau”)
seeking, among other things, certain information relating to the Company’s origination and collection of Consumer Loans,
TPPs, and credit reporting. After April 22, 2019 through March 7, 2022, we received additional subpoenas from the Bureau. On
December 6, 2021, we received a Notice and Opportunity to Respond and Advise letter from the Staff of the Office of
Enforcement (“Staff”) of the Bureau, stating that the Staff was considering whether to recommend that the Bureau take legal
action against the Company for alleged violations of the Consumer Financial Protection Act of 2010 (the “CFPA”) in
connection with the Company’s consumer loan origination practices. See the description below of the lawsuit commenced by
the Bureau on January 4, 2023.
On January 4, 2023, the Office of the New York State Attorney General and the Bureau jointly filed a complaint in the
United States District Court for the Southern District of New York alleging that the Company engaged in deceptive practices,
fraud, illegality, and securities fraud in violation of New York Executive Law § 63(12) and New York General Business Law
§§ 349 and 352, and that the Company engaged in deceptive and abusive acts and provided substantial assistance to a covered
person or service provider in violation of the CFPA, 12 U.S.C. § 5531 and 12 U.S.C. § 5536(a)(1)(B). The complaint seeks
injunctive relief, an accounting of all consumers for whom the Company provided financing, restitution, damages,
disgorgement, civil penalties, and payment of costs. On March 14, 2023, the Company filed a motion to dismiss the complaint.
On August 7, 2023, the court stayed the action pending the U.S. Supreme Court's decision in Consumer Financial Protection
Bureau v. Community Financial Services Association of America, Ltd., No. 22-448 (“CFSA”). On July 1, 2024, the court lifted
the stay in view of the decision in CFSA and requested revised briefing on the Company’s motion to dismiss that would address
the intervening legal developments and sharpen the issues for resolution. As of October 29, 2024, the Company's motion to
dismiss has been fully briefed. We are unable to estimate the reasonably possible loss or range of reasonably possible loss
arising from this litigation. The Company intends to vigorously defend itself in this matter.
On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the
Company’s repossession and sale policies and procedures in the state of Maryland. On April 3, 2020, we received a subpoena
from the Attorney General of the State of Maryland relating to the Company’s origination and collection policies and
procedures in the state of Maryland. On August 11, 2020, we received a subpoena from the Attorney General of the State of
Maryland restating most of the requests contained in the March 18, 2016 and April 3, 2020 subpoenas, making additional
requests, and expanding the inquiry to include 41 other states (Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan,
Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington,
and Wisconsin) and the District of Columbia. Also on August 11, 2020, we received from the Attorney General of the State of
New Jersey a subpoena that is essentially identical to the August 11, 2020 Maryland subpoena, both as to substance and as to
the jurisdictions identified. The Company has been informed that the State of Kansas, the State of Texas, and the State of Iowa
have withdrawn from the multistate investigation. We are cooperating with these investigations and cannot predict their
eventual scope, duration, or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of
reasonably possible loss arising from these investigations.
An adverse ultimate disposition in any action to which we are a party or otherwise subject could have a material adverse
impact on our financial position, liquidity, and results of operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
93
Litigation Resolved during 2022
On October 2, 2020, a shareholder filed a putative class action complaint against the Company, its Chief Executive Officer
(now former Chief Executive Officer), and its Chief Financial Officer (now Chief Executive Officer) in the United States
District Court for the Eastern District of Michigan, Southern Division, alleging violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder, based on alleged false and/or misleading statements
or omissions regarding the Company and its business, and seeking class certification, unspecified damages plus interest and
attorney and expert witness fees, and other costs on behalf of a purported class consisting of all persons and entities (subject to
specified exceptions) that purchased or otherwise acquired Credit Acceptance common stock from November 1, 2019 through
August 28, 2020. In 2022, the Company reached an agreement to make an aggregate cash payment of $12.0 million, all of
which was recognized during the second quarter of 2022, to settle claims brought on behalf of all persons and entities that
purchased or otherwise acquired Credit Acceptance common stock from May 4, 2018 through August 28, 2020, and provided
for a full release of all claims against all defendants, including the Company and its officers. On December 16, 2022, the court
entered a final order and judgment consistent with the settlement agreement, including dismissal with prejudice of all claims
asserted against the Company and its officers.
Lease Commitments
We lease office equipment and, until December 31, 2022, we also leased office space. We expect that, in the normal course
of business, leases will be renewed or replaced by other leases. Total rental expense on all operating leases was $2.0 million for
2024, $1.2 million for 2023, and $1.3 million for 2022. Contingent rentals under the operating leases were insignificant. Our
total minimum future lease commitments under operating leases as of December 31, 2024 are as follows:
(In millions)
Year
Minimum Future
Lease Commitments
2025
$
1.0
2026
0.6
2027
0.1
2028
—
2029
—
Total
$
1.7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)
94
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
(a) Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and
principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of
the period covered by this report. Based on such evaluation, our principal executive officer and principal financial officer have
concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing,
summarizing, and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit
under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive
officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended
December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Management’s Report on Internal Control over Financial Reporting.
We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and
procedures that:
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of our management and directors; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In
addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
We assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this
assessment, we used the criteria set forth in the 2013 Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, we believe that as of December 31,
2024, our internal control over financial reporting is effective based on those criteria.
Our independent registered public accounting firm, Grant Thornton LLP, audited our internal control over financial
reporting as of December 31, 2024, and their attestation report dated February 12, 2025 expressed an unqualified opinion on our
internal control over financial reporting and is included in this Item 9A.
95
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Credit Acceptance Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Credit Acceptance Corporation (a Michigan corporation) and
subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based
on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2024, and our
report dated February 12, 2025 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Southfield, Michigan
February 12, 2025
96
ITEM 9B.
OTHER INFORMATION
During the quarter ended December 31, 2024, there were no Rule 10b5-1 trading arrangements (as defined in Item 408(a)
of Regulation S-K) or non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K) adopted or
terminated by any director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of Credit Acceptance Corporation.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information is contained under the captions “Proposal #1 – Election of Directors” (excluding the “Report of the Audit
Committee”) and, if required, “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement and is
incorporated herein by reference.
ITEM 11.
EXECUTIVE COMPENSATION
Information is contained under the caption “Compensation of Executive Officers and Directors” in the Proxy Statement and
is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information is contained under the caption “Common Stock Ownership of Certain Beneficial Owners and Management” in
the Proxy Statement and is incorporated herein by reference.
Our Amended and Restated Incentive Compensation Plan (the “Incentive Plan”), which was approved by shareholders on
July 21, 2021, and amendments to which were approved by shareholders on June 2, 2023 and June 5, 2024, provides for the
granting of restricted stock, restricted stock units, and stock options to team members, officers, and directors.
The following table sets forth (1) the number of shares of common stock to be issued upon the exercise of outstanding
stock options or restricted stock units, (2) the weighted average exercise price of outstanding options, if applicable, and (3) the
number of shares remaining available for future issuance, as of December 31, 2024:
Equity Compensation Plan Information
Plan category
Number of shares to be
issued upon exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options (a)
Number of shares
remaining available for future
issuance under equity compensation
plans (b)
Equity compensation plan approved by
shareholders:
Incentive Plan
1,138,913 $
367.88
310,552
(a)
The weighted average exercise price in this column does not take into account restricted stock units that are outstanding under the Incentive Plan,
which have no exercise price.
(b)
For additional information regarding our equity compensation plans, including grants of restricted stock units, see Note 13 to the consolidated financial
statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
97
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information is contained under the caption “Certain Relationships and Transactions” and “Proposal #1 – Election of
Directors – Meetings and Committees of the Board of Directors” in the Proxy Statement and is incorporated herein by
reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Information is contained under the caption “Independent Accountants” in the Proxy Statement and is incorporated herein
by reference.
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)
The following consolidated financial statements of the Company and notes thereto and the Report of
Independent Registered Public Accounting Firm are contained in Item 8 — Financial Statements and
Supplementary Data of this Form 10-K, which is incorporated herein by reference.
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
— Consolidated Balance Sheets as of December 31, 2024 and 2023
— Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022
— Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022
— Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024, 2023, and 2022
— Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022
Notes to Consolidated Financial Statements
(2)
Financial statement schedules have been omitted because they are not applicable or are not required or the
information required to be set forth therein is included in the consolidated financial statements or notes thereto.
(3)
The exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index below.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
98
EXHIBIT INDEX
Exhibit No.
Description
3.1
Articles of Incorporation, as amended July 1, 1997 (incorporated by reference to Exhibit 3(a)(1) to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997).
3.2
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on
Form 8-K filed March 7, 2022).
4.1
Description of Common Stock of Credit Acceptance Corporation (incorporated by reference to Exhibit 4.1 to
the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022).
4.2
Amended and Restated Intercreditor Agreement, dated as of February 1, 2010, among Credit Acceptance
Corporation, the other Grantors party thereto, representatives of the Secured Parties thereunder, and Comerica
Bank, as administrative agent under the Original Credit Agreement (as defined therein) and as collateral agent
(incorporated by reference to Exhibit 4(g)(6) to the Company’s Current Report on Form 8-K filed February 5,
2010).
4.3
Amended and Restated Sale and Contribution Agreement, dated as of April 5, 2013, between the Company
and CAC Warehouse Funding LLC IV (incorporated by reference to Exhibit 4.85 to the Company’s Current
Report on Form 8-K filed April 5, 2013).
4.4
First Amendment to Amended and Restated Sale and Contribution Agreement, dated as of December 4, 2013,
between the Company and CAC Warehouse Funding LLC IV (incorporated by reference to Exhibit 4.107 to
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013).
4.5
Sixth Amended and Restated Credit Agreement, dated as of June 23, 2014, among the Company, the Banks
signatory thereto, and Comerica Bank, as agent for the Banks (incorporated by reference to Exhibit 4.124 to
the Company’s Current Report on Form 8-K filed June 25, 2014).
4.6
Loan and Security Agreement, dated as of September 15, 2014, among the Company, CAC Warehouse
Funding LLC V, Fifth Third Bank, and Systems & Services Technologies, Inc. (incorporated by reference to
Exhibit 4.127 to the Company’s Current Report on Form 8-K filed September 18, 2014).
4.7
Backup Servicing Agreement, dated as of September 15, 2014, among the Company, CAC Warehouse
Funding LLC V, Fifth Third Bank, and Systems & Services Technologies, Inc. (incorporated by reference to
Exhibit 4.128 to the Company’s Current Report on Form 8-K filed September 18, 2014).
4.8
Contribution Agreement, dated as of September 15, 2014, between the Company and CAC Warehouse
Funding LLC V (incorporated by reference to Exhibit 4.129 to the Company’s Current Report on Form 8-K
filed September 18, 2014).
4.9
First Amendment to the Sixth Amended and Restated Credit Agreement, dated as of June 11, 2015, among
the Company, the Banks which are parties thereto from time to time, and Comerica Bank (incorporated by
reference to Exhibit 4.74 to the Company’s Current Report on Form 8-K filed June 16, 2015).
4.10
First Amendment to Loan and Security Agreement, dated as of June 11, 2015, among the Company, CAC
Warehouse Funding LLC V, Fifth Third Bank, and Systems & Services Technologies, Inc. (incorporated by
reference to Exhibit 4.75 to the Company’s Current Report on Form 8-K filed June 16, 2015).
4.11
Loan and Security Agreement, dated as of September 30, 2015, among the Company, CAC Warehouse
Funding LLC VI, and Flagstar Bank, FSB (incorporated by reference to Exhibit 4.82 to the Company’s
Current Report on Form 8-K filed October 5, 2015).
4.12
Contribution Agreement, dated as of September 30, 2015, between the Company and CAC Warehouse
Funding LLC VI (incorporated by reference to Exhibit 4.83 to the Company’s Current Report on Form 8-K
filed October 5, 2015).
4.13
Second Amendment to the Sixth Amended and Restated Credit Agreement, dated as of June 15, 2016, among
the Company, the Banks signatory thereto, and Comerica Bank, as agent for the Banks (incorporated by
reference to Exhibit 4.76 to the Company’s Current Report on Form 8-K filed June 20, 2016).
4.14
Second Amendment to Loan and Security Agreement, dated as of August 18, 2016, among the Company,
CAC Warehouse Funding LLC V, Fifth Third Bank, and Systems & Services Technologies, Inc.
(incorporated by reference to Exhibit 4.79 to the Company’s Current Report on Form 8-K filed August 23,
2016).
4.15
First Amendment to Contribution Agreement, dated as of August 18, 2016, between the Company and CAC
Warehouse Funding LLC V (incorporated by reference to Exhibit 4.80 to the Company’s Current Report on
Form 8-K filed August 23, 2016).
4.16
Third Amendment to Sixth Amended and Restated Credit Agreement and Extension Agreement, dated as of
June 28, 2017, among the Company, the Banks signatory thereto, and Comerica Bank, as agent for the Banks
(incorporated by reference to Exhibit 4.80 to the Company’s Current Report on Form 8-K filed June 30,
2017).
4.17
First Amendment to Loan and Security Agreement, dated as of July 18, 2017, among the Company, CAC
Warehouse Funding LLC VI, and Flagstar Bank, fsb (incorporated by reference to Exhibit 4.87 to the
Company’s Current Report on Form 8-K filed July 21, 2017).
99
4.18
New Bank Addendum, dated October 19, 2017, to the Sixth Amended and Restated Credit Acceptance
Corporation Credit Agreement dated as of October 19, 2017, among the Company, each of the financial
institutions parties thereto, and Comerica Bank, as agent (incorporated by reference to Exhibit 4.94 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017).
4.19
Assignment Agreement, dated October 19, 2017, among the Company, the Banks signatory thereto, and
Comerica Bank, as agent, under the Sixth Amended and Restated Credit Acceptance Corporation Credit
Agreement dated as of June 23, 2014 (incorporated by reference to Exhibit 4.95 to the Company’s Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2017).
4.20
Amended and Restated Loan and Security Agreement, dated as of May 10, 2018, among the Company, CAC
Warehouse Funding LLC IV, the lenders from time to time party thereto, Bank of Montreal, BMO Capital
Markets Corp., and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.86 to the
Company’s Current Report on Form 8-K filed May 15, 2018).
4.21
Fourth Amendment to Sixth Amended and Restated Credit Agreement, dated as of June 27, 2018, among the
Company, the Banks which are parties thereto from time to time, and Comerica Bank as Administrative Agent
and Collateral Agent for the Banks (incorporated by reference to Exhibit 4.94 to the Company’s Current
Report on Form 8-K filed June 28, 2018).
4.22
Third Amendment to Loan and Security Agreement, dated as of August 15, 2018, among the Company, CAC
Warehouse Funding LLC V, Fifth Third Bank, and Systems & Services Technologies, Inc. (incorporated by
reference to Exhibit 4.95 to the Company’s Current Report on Form 8-K filed August 17, 2018).
4.23
Indenture, dated as of March 7, 2019, among Credit Acceptance Corporation, the Guarantors named therein,
and U.S. Bank Trust Company, National Association, as successor to U.S. Bank National Association, as
trustee (incorporated by reference to Exhibit 4.99 to the Company’s Current Report on Form 8-K filed March
8, 2019).
4.24
Registration Rights Agreement, dated March 7, 2019, among Credit Acceptance Corporation, Buyers Vehicle
Protection Plan, Inc., Vehicle Remarketing Services, Inc., and the representative of the initial purchasers of
Credit Acceptance Corporation’s 6.625% Senior Notes due 2026 (incorporated by reference to Exhibit 4.100
to the Company’s Current Report on Form 8-K filed March 8, 2019).
4.25
Fifth Amendment to Sixth Amended and Restated Credit Agreement, dated as of June 24, 2019, among the
Company, Comerica Bank, and the other banks signatory thereto and Comerica Bank, as administrative agent
for the banks (incorporated by reference to Exhibit 4.101 to the Company’s Current Report on Form 8-K filed
June 26, 2019).
4.26
Fourth Amendment to Loan Security Agreement, dated as of July 16, 2019, among the Company, CAC
Warehouse Funding LLC V, and Fifth Third Bank (incorporated by reference to Exhibit 4.103 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019).
4.27
Second Amendment to Loan and Security Agreement, dated as of July 25, 2019, among the Company, CAC
Warehouse Funding LLC VI, and Flagstar Bank, FSB (incorporated by reference to Exhibit 4.105 to the
Company’s Current Report on Form 8-K filed July 26, 2019).
4.28
Loan and Security Agreement, dated as of July 26, 2019, among the Company, CAC Warehouse Funding
LLC VIII, the lenders from time to time party thereto, Citizens Bank N.A., and Wells Fargo Bank, National
Association (incorporated by reference to Exhibit 4.106 to the Company’s Current Report on Form 8-K filed
July 29, 2019).
4.29
Sale and Contribution Agreement, dated as of July 26, 2019, between the Company and CAC Warehouse
Funding LLC VIII (incorporated by reference to Exhibit 4.107 to the Company’s Current Report on Form 8-K
filed July 29, 2019).
4.30
Backup Servicing Agreement, dated as of July 26, 2019, among the Company, CAC Warehouse Funding LLC
VIII, Citizens Bank, N.A., and Wells Fargo Bank, National Association (incorporated by reference to Exhibit
4.108 to the Company’s Current Report on Form 8-K filed July 29, 2019).
4.31
First Amendment to Amended and Restated Loan and Security Agreement, dated as of July 26, 2019, among
the Company, CAC Warehouse Funding LLC IV, Bank of Montreal, Citizens Bank, N.A., BMO Capital
Markets Corp., and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.110 to
the Company’s Current Report on Form 8-K filed July 29, 2019).
4.32
Amended and Restated Backup Servicing Agreement, dated as of July 26, 2019, among the Company, CAC
Warehouse Funding LLC IV, Bank of Montreal, BMO Capital Markets Corp., and Wells Fargo Bank,
National Association (incorporated by reference to Exhibit 4.111 to the Company’s Current Report on Form
8-K filed July 29, 2019).
4.33
Loan and Security Agreement, dated as of August 28, 2019, among the Company, Credit Acceptance Funding
LLC 2019-2, and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.112 to the
Company’s Current Report on Form 8-K filed September 4, 2019).
100
4.34
Backup Servicing Agreement, dated as of August 28, 2019, among the Company, Credit Acceptance Funding
LLC 2019-2, and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.113 to the
Company’s Current Report on Form 8-K filed September 4, 2019).
4.35
Sale and Contribution Agreement, dated as of August 28, 2019, between the Company and Credit Acceptance
Funding LLC 2019-2 (incorporated by reference to Exhibit 4.114 to the Company’s Current Report on Form
8-K filed September 4, 2019).
4.36
Second Amended and Restated Backup Servicing Agreement, dated as of August 16, 2019, among the
Company, CAC Warehouse Funding LLC II, and Wells Fargo Bank, National Association (incorporated by
reference to Exhibit 4.117 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2019).
4.37
Sixth Amendment to Sixth Amended and Restated Credit Agreement, dated as of June 30, 2020, among the
Company, Comerica Bank, and the other banks signatory thereto and Comerica Bank, as administrative agent
for the banks (incorporated by reference to Exhibit 4.115 to the Company’s Current Report on Form 8-K filed
July 1, 2020).
4.38
Fifth Amendment to Loan and Security Agreement, dated as of December 16, 2020, among the Company,
CAC Warehouse Funding LLC V, and Fifth Third Bank, National Association (incorporated by reference to
Exhibit 4.129 to the Company’s Current Report on Form 8-K filed December 18, 2020).
4.39
Seventh Amendment to Sixth Amended and Restated Credit Agreement and Extension Agreement, dated as
of December 15, 2020, among the Company, Comerica Bank, and the other banks signatory thereto and
Comerica Bank, as administrative agent for the banks (incorporated by reference to Exhibit 4.128 to the
Company’s Current Report on Form 8-K filed December 18, 2020).
4.40
Loan and Security Agreement, dated as of January 29, 2021, among the Company, Credit Acceptance
Funding LLC 2021-1, Fifth Third Bank, National Association, and Systems and Services Technologies, Inc.
(incorporated by reference to Exhibit 4.130 to the Company’s Current Report on Form 8-K filed February 4,
2021).
4.41
Backup Servicing Agreement, dated as of January 29, 2021, among the Company, Credit Acceptance Funding
LLC 2021-1, Fifth Third Bank, National Association, and Systems and Services Technologies, Inc.
(incorporated by reference to Exhibit 4.131 to the Company’s Current Report on Form 8-K filed February 4,
2021).
4.42
Sale and Contribution Agreement, dated as of January 29, 2021, between the Company and Credit Acceptance
Funding LLC 2021-1 (incorporated by reference to Exhibit 4.132 to the Company’s Current Report on Form
8-K filed February 4, 2021).
4.43
Second Amendment to Amended and Restated Loan and Security Agreement, dated as of January 29, 2021,
among the Company, CAC Warehouse Funding LLC IV, and Bank of Montreal (incorporated by reference to
Exhibit 4.134 to the Company’s Current Report on Form 8-K filed February 4, 2021).
4.44
Sixth Amendment to Loan and Security Agreement, dated as of March 22, 2021, among the Company, CAC
Warehouse Funding LLC V, and Fifth Third Bank, National Association (incorporated by reference to Exhibit
4.109 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021).
4.45
First Amendment to Loan and Security Agreement, dated as of March 22, 2021, among the Company, Credit
Acceptance Funding LLC 2021-1, and Fifth Third Bank, National Association (incorporated by reference to
Exhibit 4.110 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2021).
4.46
Seventh Amended and Restated Loan and Security Agreement, dated as of April 30, 2021, among the
Company, CAC Warehouse Funding LLC II, the lenders from time to time party thereto, and Wells Fargo
Bank, National Association (incorporated by reference to Exhibit 4.117 to the Company’s Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2021).
4.47
Fifth Amended and Restated Sale and Contribution Agreement, dated as of April 30, 2021, between the
Company and CAC Warehouse Funding LLC II (incorporated by reference to Exhibit 4.118 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021).
4.48
First Amendment to the Loan and Security Agreement, dated as of September 1, 2021, among the Company,
CAC Warehouse Funding LLC VIII, Citizens Bank N.A.. and Wells Fargo Bank, National Association
(incorporated by reference to Exhibit 4.119 to the Company’s Current Report on Form 8-K filed September 8,
2021).
4.49
Eighth Amendment to Sixth Amended and Restated Credit Agreement and Extension Agreement, dated as of
October 6, 2021, among the Company, Comerica Bank, and the other banks signatory thereto and Comerica
Bank, as administrative agent for the banks (incorporated by reference to Exhibit 4.120 to the Company’s
Current Report on Form 8-K filed October 12, 2021).
101
4.50
Third Amendment to Loan and Security Agreement dated as of October 15, 2021 among the Company, CAC
Warehouse Funding Corporation VI, and Flagstar Bank, FSB (incorporated by reference to Exhibit 4.121 to
the Company’s Current Report on Form 8-K filed October 21, 2021).
4.51
Indenture dated as of October 28, 2021, between Credit Acceptance Auto Loan Trust 2021-4 and Wells Fargo
Bank, National Association (incorporated by reference to Exhibit 4.122 to the Company’s Current Report on
Form 8-K filed November 2, 2021).
4.52
Sale and Servicing Agreement dated as of October 28, 2021 among the Company, Credit Acceptance Auto
Loan Trust 2021-4, Credit Acceptance Funding LLC 2021-4, and Wells Fargo Bank, National Association
(incorporated by reference to Exhibit 4.123 to the Company’s Current Report on Form 8-K filed November 2,
2021).
4.53
Backup Servicing Agreement dated as of October 28, 2021, among the Company, Credit Acceptance Funding
LLC 2021-4, Credit Acceptance Auto Loan Trust 2021-4, and Wells Fargo Bank, National Association
(incorporated by reference to Exhibit 4.124 to the Company’s Current Report on Form 8-K filed November 2,
2021).
4.54
Amended and Restated Trust Agreement dated as of October 28, 2021, between Credit Acceptance Funding
LLC 2021-4 and U.S. Bank Trust National Association (incorporated by reference to Exhibit 4.125 to the
Company’s Current Report on Form 8-K filed November 2, 2021).
4.55
Sale and Contribution Agreement dated as of October 28, 2021, between the Company and Credit Acceptance
Funding LLC 2021-4 (incorporated by reference to Exhibit 4.126 to the Company’s Current Report on Form
8-K filed November 2, 2021).
4.56
Indenture dated as of June 16, 2022, between Credit Acceptance Auto Loan Trust 2022-1 and Computershare
Trust Company, N.A. (incorporated by reference to Exhibit 4.94 to the Company’s Current Report on Form 8-
K filed June 23, 2022).
4.57
Sale and Servicing Agreement, dated as of June 16, 2022, among the Company, Credit Acceptance Auto Loan
Trust 2022-1, Credit Acceptance Funding LLC 2022-1, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.95 to the Company’s Current Report on Form 8-K filed June 23,
2022).
4.58
Backup Servicing Agreement, dated as of June 16, 2022, among the Company, Credit Acceptance Funding
LLC 2022-1, Credit Acceptance Auto Loan Trust 2022-1, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.96 to the Company’s Current Report on Form 8-K filed June 23,
2022).
4.59
Amended and Restated Trust Agreement, dated as of June 16, 2022, among Credit Acceptance Funding LLC
2022-1, each of the initial members of the Board of Trustees of the Trust and U.S. Bank Trust National
Association (incorporated by reference to Exhibit 4.97 to the Company’s Current Report on Form 8-K filed
June 23, 2022).
4.60
Sale and Contribution Agreement, dated as of June 16, 2022, between the Company and Credit Acceptance
Funding LLC 2022-1 (incorporated by reference to Exhibit 4.98 to the Company’s Current Report on Form 8-
K filed June 23, 2022).
4.61
Third Amendment to the Amended and Restated Loan and Security Agreement, dated as of June 16, 2022,
among the Company, CAC Warehouse Funding LLC IV, Bank of Montreal, BMO Capital Markets Corp., and
Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.100 to the Company’s
Current Report on Form 8-K filed June 23, 2022).
4.62
Ninth Amendment to the Sixth Amended and Restated Credit Agreement and Extension Agreement, dated as
of June 22, 2022, among the Company, Comerica Bank and the other banks signatory thereto and Comerica
Bank, as administrative agent for the banks (incorporated by reference to Exhibit 4.101 to the Company’s
Current Report on Form 8-K filed June 23, 2022).
4.63
Amendment No. 1 to Loan and Security Agreement and Backup Servicing Agreement, dated as of August 12,
2022, among the Company, Credit Acceptance Funding LLC 2019-2, and Wells Fargo Bank, National
Association (incorporated by reference to Exhibit 4.102 to the Company’s Current Report on Form 8-K filed
August 17, 2022).
4.64
Second Amendment to Loan and Security Agreement, dated as of July 22, 2022, among Credit Acceptance
Corporation, CAC Warehouse Funding LLC VIII, Citizens Bank, N.A., and Wells Fargo Bank, National
Association (incorporated by reference to Exhibit 4.103 to the Company’s Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2022).
4.65
Seventh Amendment to Loan and Security Agreement, dated as of July 28, 2022, among Credit Acceptance
Corporation, CAC Warehouse Funding LLC V and Fifth Third Bank, National Association (incorporated by
reference to Exhibit 4.104 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2022).
102
4.66
Second Amendment to Loan and Security Agreement, dated as of July 28, 2022, among Credit Acceptance
Corporation, Credit Acceptance Funding LLC 2021-1 and Fifth Third Bank, National Association
(incorporated by reference to Exhibit 4.105 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2022).
4.67
Indenture dated as of November 3, 2022, between Credit Acceptance Auto Loan Trust 2022-3 and
Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.106 to the Company’s Current
Report on Form 8-K filed November 9, 2022).
4.68
Sale and Servicing Agreement, dated as of November 3, 2022, among the Company, Credit Acceptance Auto
Loan Trust 2022-3, Credit Acceptance Funding LLC 2022-3, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.107 to the Company’s Current Report on Form 8-K filed November 9,
2022).
4.69
Backup Servicing Agreement, dated as of November 3, 2022, among the Company, Credit Acceptance Auto
Loan Trust 2022-3, Credit Acceptance Funding LLC 2022-3, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.108 to the Company’s Current Report on Form 8-K filed November 9,
2022).
4.70
Amended and Restated Trust Agreement, dated as of November 3, 2022, between Credit Acceptance Funding
LLC 2022-3, each of the initial members of the Board of Trustees of the Trust, and U.S. Bank Trust National
Association (incorporated by reference to Exhibit 4.109 to the Company’s Current Report on Form 8-K filed
November 9, 2022).
4.71
Sale and Contribution Agreement, dated as of November 3, 2022, between the Company and Credit
Acceptance Funding LLC 2022-3 (incorporated by reference to Exhibit 4.110 to the Company’s Current
Report on Form 8-K filed November 9, 2022).
4.72
Loan and Security Agreement, dated as of December 15, 2022, among the Company, Credit Acceptance
Funding LLC 2022-2, Bank of Montreal, BMO Capital Markets Corp., and Computershare Trust Company,
N.A. (incorporated by reference to Exhibit 4.112 to the Company’s Current Report on Form 8-K filed
December 21, 2022).
4.73
Backup Servicing Agreement, dated as of December 15, 2022, among the Company, Credit Acceptance
Funding LLC 2022-2, Bank of Montreal, BMO Capital Markets Corp., and Computershare Trust Company,
N.A. (incorporated by reference to Exhibit 4.113 to the Company’s Current Report on Form 8-K filed
December 21, 2022).
4.74
Sale and Contribution Agreement, dated as of December 15, 2022, between the Company and Credit
Acceptance Funding LLC 2022-2 (incorporated by reference to Exhibit 4.115 to the Company’s Current
Report on Form 8-K filed December 21, 2022).
4.75
Eighth Amendment to Loan and Security Agreement, dated as of December 27, 2022, among the Company,
CAC Warehouse Funding LLC V, and Fifth Third Bank, National Association (incorporated by reference to
Exhibit 4.116 to the Company’s Current Report on Form 8-K filed January 3, 2023).
4.76
Third Amendment to Loan and Security Agreement, dated as of December 27, 2022, among the Company,
Credit Acceptance Funding LLC 2021-1, and Fifth Third Bank, National Association (incorporated by
reference to Exhibit 4.117 to the Company’s Current Report on Form 8-K filed January 3, 2023).
4.77
Amendment No. 1 to Letter Agreement dated November 15, 2022, between Chapter 4 Properties LLC and
Comerica Bank (incorporated by reference to Exhibit 4.110 to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2022).
4.78
Indenture, dated as of March 16, 2023, between Credit Acceptance Auto Loan Trust 2023-1 and
Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.111 to the Company’s Current
Report on Form 8-K filed March 22, 2023).
4.79
Backup Servicing Agreement, dated as of March 16, 2023, among the Company, Credit Acceptance Funding
LLC 2023-1, Credit Acceptance Auto Loan Trust 2023-1, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.112 to the Company’s Current Report on Form 8-K filed March 22,
2023).
4.80
Sale and Contribution Agreement, dated as of March 16, 2023, between the Company and Credit Acceptance
Funding LLC 2023-1 (incorporated by reference to Exhibit 4.114 to the Company’s Current Report on Form
8-K filed March 22, 2023).
4.81
Amended and Restated Trust Agreement, dated as of March 16, 2023, among Credit Acceptance Funding
LLC 2023-1, the initial members of the Board of Trustees of the Trust, and U.S. Bank Trust National
Association (incorporated by reference to Exhibit 4.115 to the Company’s Current Report on Form 8-K filed
March 16, 2023).
103
4.82
Sale and Servicing Agreement, dated as of March 16, 2023, among the Company, Credit Acceptance Auto
Loan Trust 2023-1, Credit Acceptance Funding LLC 2023-1, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.116 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2023).
4.83
Amendment No. 1 to the Seventh Amended and Restated Loan and Security Agreement, dated as of April 28,
2023, among the Company, CAC Warehouse Funding LLC II, and Wells Fargo Bank, National Association
(incorporated by reference to Exhibit 4.117 to the Company’s Current Report on Form 8-K filed May 4,
2023).
4.84
Indenture, dated as of May 25, 2023, between Credit Acceptance Auto Loan Trust 2023-2 and Computershare
Trust Company, N.A. (incorporated by reference to Exhibit 4.118 to the Company’s Current Report on Form
8-K filed June 1, 2023).
4.85
Backup Servicing Agreement, dated as of May 25, 2023, among the Company, Credit Acceptance Funding
LLC 2023-2, Credit Acceptance Auto Loan Trust 2023-2, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.119 to the Company’s Current Report on Form 8-K filed June 1,
2023).
4.86
Sale and Contribution Agreement, dated as of May 25, 2023, between the Company and Credit Acceptance
Funding LLC 2023-2 (incorporated by reference to Exhibit 4.121 to the Company’s Current Report on Form
8-K filed June 1, 2023).
4.87
Amended and Restated Trust Agreement, dated as of May 25, 2023, among Credit Acceptance Funding LLC
2023-2, each of the initial members of the Board of Trustees of the Trust, and Computershare Delaware Trust
Company (incorporated by reference to Exhibit 4.122 to the Company’s Current Report on Form 8-K filed
June 1, 2023).
4.88
Sale and Servicing Agreement, dated as of May 25, 2023, among the Company, Credit Acceptance Auto Loan
Trust 2023-2, Credit Acceptance Funding LLC 2023-2, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.123 to the Company’s Current Report on Form 8-K filed June 1,
2023).
4.89
Eleventh Amendment to Sixth Amended and Restated Credit Agreement, dated as of June 22, 2023, among
the Company, Comerica Bank and the other banks signatory thereto, and Comerica Bank, as administrative
agent for the banks (incorporated by reference to Exhibit 4.124 to the Company’s Current Report on Form 8-
K filed June 28, 2023).
4.90
Amendment No. 2 to Loan and Security Agreement, dated as of May 15, 2023, among the Company, Credit
Acceptance Funding LLC 2019-2, and Wells Fargo Bank, National Association (incorporated by reference to
Exhibit 4.125 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2023).
4.91
Ninth Amendment to Loan and Security Agreement, dated as of July 10, 2023, among the Company, CAC
Warehouse Funding LLC V, and Fifth Third Bank, National Association (incorporated by reference to Exhibit
4.126 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023).
4.92
Fourth Amendment to Loan and Security Agreement, dated as of July 10, 2023, among the Company, Credit
Acceptance Funding LLC 2021-1, and Fifth Third Bank, National Association (incorporated by reference to
Exhibit 4.127 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2023).
4.93
Fifth Amendment to Loan and Security Agreement, dated as of August 4, 2023, among the Company, CAC
Warehouse Funding LLC VI, and Flagstar Bank, N.A. (incorporated by reference to Exhibit 4.128 to the
Company's Current Report on Form 8-K filed August 9, 2023).
4.94
Indenture, dated as of August 24, 2023, between Credit Acceptance Auto Loan Trust 2023-3 and
Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.129 to the Company's Current
Report on Form 8-K filed August 30, 2023).
4.95
Backup Servicing Agreement, dated as of August 24, 2023, among the Company, Credit Acceptance Funding
LLC 2023-3, Credit Acceptance Auto Loan Trust 2023-3, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.130 to the Company's Current Report on Form 8-K filed August 30,
2023).
4.96
Sale and Contribution Agreement, dated as of August 24, 2023, between the Company and Credit Acceptance
Funding LLC 2023-3 (incorporated by reference to Exhibit 4.132 to the Company's Current Report on Form
8-K filed August 30, 2023).
4.97
Amended and Restated Trust Agreement, dated as of August 24, 2023, among Credit Acceptance Funding
LLC 2023-3, each of the initial members of the Board of Trustees of the Trust, and Computershare Delaware
Trust Company (incorporated by reference to Exhibit 4.133 to the Company's Current Report on Form 8-K
filed August 30, 2023).
4.98
Sale and Servicing Agreement, dated as of August 24, 2023, among the Company, Credit Acceptance Auto
Loan Trust 2023-3, Credit Acceptance Funding LLC 2023-3, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.134 to the Company's Current Report on Form 8-K filed August 30,
2023).
104
4.99
Third Amendment to Loan and Security Agreement, dated as of September 21, 2023, among the Company,
CAC Warehouse Funding LLC VIII, Citizens Bank, N.A., and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.135 to the Company's Current Report on Form 8-K filed September
26, 2023).
4.100
Fourth Amendment to Amended and Restated Loan and Security Agreement, dated as of August 30, 2023,
among the Company, CAC Warehouse Funding LLC IV, Bank of Montreal, BMO Capital Markets Corp., and
Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.136 to the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023).
4.101
First Amendment to Loan and Security Agreement, dated as of August 30, 2023, among the Company, Credit
Acceptance Funding LLC 2022-2, Bank of Montreal, and BMO Capital Markets Corp. (incorporated by
reference to Exhibit 4.137 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2023).
4.102
Loan and Security Agreement, dated as of November 30, 2023, among the Company, Credit Acceptance
Funding LLC 2023-A, the lenders from time to time party thereto, Wells Fargo Bank, National Association,
and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.138 to the Company’s
Current Report on Form 8-K filed December 4, 2023).
4.103
Backup Servicing Agreement, dated as of November 30, 2023, among the Company, Credit Acceptance
Funding LLC 2023-A, Wells Fargo Bank, National Association, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.139 to the Company’s Current Report on Form 8-K filed December 4,
2023).
4.104
Sale and Contribution Agreement, dated as of November 30, 2023, between the Company and Credit
Acceptance Funding LLC 2023-A (incorporated by reference to Exhibit 4.141 to the Company’s Current
Report on Form 8-K filed December 4, 2023).
4.105
Indenture, dated as of December 21, 2023, between Credit Acceptance Auto Loan Trust 2023-5 and
Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.143 to the Company’s Current
Report on Form 8-K filed December 27, 2023).
4.106
Backup Servicing Agreement, dated as of December 21, 2023, among the Company, Credit Acceptance
Funding LLC 2023-5, Credit Acceptance Auto Loan Trust 2023-5, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.144 to the Company’s Current Report on Form 8-K filed December
27, 2023).
4.107
Sale and Contribution Agreement, dated as of December 21, 2023, between the Company and Credit
Acceptance Funding LLC 2023-5 (incorporated by reference to Exhibit 4.146 to the Company’s Current
Report on Form 8-K filed December 27, 2023).
4.108
Amended and Restated Trust Agreement, dated as of December 21, 2023, among Credit Acceptance Funding
LLC 2023-5, each of the initial members of the Board of Trustees of the Trust, and Computershare Delaware
Trust Company (incorporated by reference to Exhibit 4.147 to the Company’s Current Report on Form 8-K
filed December 27, 2023).
4.109
Sale and Servicing Agreement, dated as of December 21, 2023, among the Company, Credit Acceptance Auto
Loan Trust 2023-5, Credit Acceptance Funding LLC 2023-5, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.148 to the Company’s Current Report on Form 8-K filed December
27, 2023).
4.110
Fifth Amendment to Amended and Restated Loan and Security Agreement, dated as of December 29, 2023,
among the Company, CAC Warehouse Funding LLC IV, Bank of Montreal, BMO Capital Markets Corp.,
Computershare Trust Company, N.A., and (with respect to Section 9 thereof) Wells Fargo Bank, National
Association (incorporated by reference to Exhibit 4.149 to the Company’s Current Report on Form 8-K filed
January 4, 2024).
4.111
Fifth Amendment to Loan and Security Agreement, dated as of February 16, 2024, among the Company,
Credit Acceptance Funding LLC 2021-1, Fifth Third Bank, National Association, and Systems and Services
Technologies, Inc. (incorporated by reference to Exhibit 4.132 to the Company’s Current Report on Form 8-K
filed February 22, 2024).
4.112
Sale and Servicing Agreement, dated as of February 27, 2024, among the Company, Credit Acceptance Auto
Loan Trust 2024-A, Credit Acceptance Funding LLC 2024-A, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.133 to the Company’s Current Report on Form 8-K filed February 29,
2024).
4.113
Backup Servicing Agreement, dated as of February 27, 2024, among the Company, Credit Acceptance Auto
Loan Trust 2024-A, Credit Acceptance Funding LLC 2024-A, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.134 to the Company’s Current Report on Form 8-K filed February 29,
2024).
4.114
Sale and Contribution Agreement, dated as of February 27, 2024, between the Company and Credit
Acceptance Funding LLC 2024-A (incorporated by reference to Exhibit 4.136 to the Company’s Current
Report on Form 8-K filed February 29, 2024).
105
4.115
Amended and Restated Trust Agreement, dated as of February 27, 2024, among Credit Acceptance Funding
LLC 2024-A, each of the initial members of the Board of Trustees of the Trust, and Computershare Delaware
Trust Company (incorporated by reference to Exhibit 4.137 to the Company’s Current Report on Form 8-K
filed February 29, 2024).
4.116
Indenture, dated as of February 27, 2024, between Credit Acceptance Auto Loan Trust 2024-A and
Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.138 to the Company’s Current
Report on Form 8-K filed February 29, 2024).
4.117
Indenture, dated as of March 28, 2024, between Credit Acceptance Auto Loan Trust 2024-1 and
Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.139 to the Company’s Current
Report on Form 8-K filed April 3, 2024).
4.118
Backup Servicing Agreement, dated as of March 28, 2024, among the Company, Credit Acceptance Funding
LLC 2024-1, Credit Acceptance Auto Loan Trust 2024-1, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.140 to the Company’s Current Report on Form 8-K filed April 3,
2024).
4.119
Sale and Contribution Agreement, dated as of March 28, 2024, between the Company and Credit Acceptance
Funding LLC 2024-1 (incorporated by reference to Exhibit 4.142 to the Company’s Current Report on Form
8-K filed April 3, 2024).
4.120
Amended and Restated Trust Agreement, dated as of March 28, 2024, among Credit Acceptance Funding
LLC 2024-1, each of the initial members of the Board of Trustees of the Trust, and Computershare Delaware
Trust Company (incorporated by reference to Exhibit 4.143 to the Company’s Current Report on Form 8-K
filed April 3, 2024).
4.121
Sale and Servicing Agreement, dated as of March 28, 2024, among the Company, Credit Acceptance Auto
Loan Trust 2024-1, Credit Acceptance Funding LLC 2024-1, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.144 to the Company’s Current Report on Form 8-K filed April 3,
2024).
4.122
Twelfth Amendment to Sixth Amended and Restated Credit Agreement, dated as of June 17, 2024, among the
Company, Comerica Bank and the other banks signatory thereto, and Comerica Bank, as administrative agent
for the banks (incorporated by reference to Exhibit 4.145 to the Company’s Current Report on Form 8-K filed
June 20, 2024).
4.123
Indenture, dated as of June 20, 2024, between Credit Acceptance Auto Loan Trust 2024-2 and Computershare
Trust Company, N.A. (incorporated by reference to Exhibit 4.146 to the Company’s Current Report on Form
8-K filed June 26, 2024).
4.124
Backup Servicing Agreement, dated as of June 20, 2024, among the Company, Credit Acceptance Funding
LLC 2024-2, Credit Acceptance Auto Loan Trust 2024-2, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.147 to the Company’s Current Report on Form 8-K filed June 26,
2024).
4.125
Sale and Contribution Agreement, dated as of June 20, 2024, between the Company and Credit Acceptance
Funding LLC 2024-2 (incorporated by reference to Exhibit 4.149 to the Company’s Current Report on Form
8-K filed June 26, 2024).
4.126
Amended and Restated Trust Agreement, dated as of June 20, 2024, among Credit Acceptance Funding LLC
2024-2, each of the initial members of the Board of Trustees of the Trust, and Computershare Delaware Trust
Company (incorporated by reference to Exhibit 4.150 to the Company’s Current Report on Form 8-K filed
June 26, 2024).
4.127
Sale and Servicing Agreement, dated as of June 20, 2024, among the Company, Credit Acceptance Auto Loan
Trust 2024-2, Credit Acceptance Funding LLC 2024-2, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.151 to the Company’s Current Report on Form 8-K filed June 26,
2024).
4.128
Second Amendment to Loan and Security Agreement, dated as of June 21, 2024, among the Company, Credit
Acceptance Funding LLC 2022-2, Bank of Montreal, Fairway Finance Company, LLC, and BMO Capital
Markets Corp. (incorporated by reference to Exhibit 4.152 to the Company’s Current Report on Form 8-K
filed June 26, 2024).
4.129
Thirteenth Amendment to Sixth Amended and Restated Credit Agreement, dated as of July 26, 2024, among
the Company, Comerica Bank and the other banks signatory thereto, and Comerica Bank, as administrative
agent for the banks (incorporated by reference to Exhibit 4.153 to the Company’s Current Report on Form 8-
K filed July 31, 2024).
4.130
Consent, dated June 26, 2024, under the Loan and Security Agreement, dated as of November 30, 2023,
among the Company, Credit Acceptance Funding LLC 2023-A, the lenders from time to time party thereto,
Wells Fargo Bank, National Association, and Computershare Trust Company, N.A. (incorporated by
reference to Exhibit 4.154 to the Company’s Current Report on Form 8-K filed July 31, 2024).
106
4.131
Amendment No. 2 to the Seventh Amended and Restated Loan and Security Agreement, dated as of July 26,
2024, among CAC Warehouse Funding LLC II, the Company, Wells Fargo Bank, National Association, and
Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.155 to the Company’s Current
Report on Form 8-K filed July 31, 2024).
4.132
Amendment No. 3 to Loan and Security Agreement, dated as of September 19, 2024, among the Company,
Credit Acceptance Funding LLC 2019-2, and Wells Fargo Bank, National Association (incorporated by
reference to Exhibit 4.156 to the Company’s Current Report on Form 8-K filed September 24, 2024).
4.133
Amendment No. 3 to the Seventh Amended and Restated Loan and Security Agreement, dated as of
September 19, 2024, among CAC Warehouse Funding LLC II, the Company, Wells Fargo Bank, National
Association, and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.157 to the
Company’s Current Report on Form 8-K filed September 24, 2024).
4.134
Indenture, dated as of September 26, 2024, between Credit Acceptance Auto Loan Trust 2024-3 and
Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.158 to the Company’s Current
Report on Form 8-K filed October 2, 2024).
4.135
Backup Servicing Agreement, dated as of September 26, 2024, among the Company, Credit Acceptance
Funding LLC 2024-3, Credit Acceptance Auto Loan Trust 2024-3, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.159 to the Company’s Current Report on Form 8-K filed October 2,
2024).
4.136
Sale and Contribution Agreement, dated as of September 26, 2024, between the Company and Credit
Acceptance Funding LLC 2024-3 (incorporated by reference to Exhibit 4.161 to the Company’s Current
Report on Form 8-K filed October 2, 2024).
4.137
Amended and Restated Trust Agreement, dated as of September 26, 2024, among Credit Acceptance Funding
LLC 2024-3, each of the initial members of the Board of Trustees of the Trust, and Computershare Delaware
Trust Company (incorporated by reference to Exhibit 4.162 to the Company’s Current Report on Form 8-K
filed October 2, 2024).
4.138
Sale and Servicing Agreement, dated as of September 26, 2024, among the Company, Credit Acceptance
Auto Loan Trust 2024-3, Credit Acceptance Funding LLC 2024-3, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.163 to the Company’s Current Report on Form 8-K filed October 2,
2024).
4.139
Sixth Amendment to Loan and Security Agreement, dated as of August 1, 2024, among the Company, CAC
Warehouse Funding LLC VI, and Flagstar Bank, N.A. (incorporated by reference to Exhibit 4.164 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024).
4.140
Tenth Amendment to Loan and Security Agreement, dated as of December 5, 2024, among the Company,
CAC Warehouse Funding LLC V, and Fifth Third Bank, National Association (incorporated by reference to
Exhibit 4.165 to the Company’s Current Report on Form 8-K filed December 10, 2024).
4.141
Loan and Security Agreement, dated as of December 20, 2024, among the Company, Credit Acceptance
Funding LLC 2024-B, Wells Fargo Bank, National Association, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.166 to the Company’s Current Report on Form 8-K filed December
23, 2024).
4.142
Backup Servicing Agreement, dated as of December 20, 2024 among the Company, Credit Acceptance
Funding LLC 2024-B, Wells Fargo Bank, National Association, and Computershare Trust Company, N.A.
(incorporated by reference to Exhibit 4.167 to the Company’s Current Report on Form 8-K filed December
23, 2024).
4.143
Amended and Restated Intercreditor Agreement, dated December 20, 2024, among the Company, CAC
Warehouse Funding LLC II, CAC Warehouse Funding LLC IV, CAC Warehouse Funding LLC V, CAC
Warehouse Funding LLC VI, CAC Warehouse Funding LLC VIII, Credit Acceptance Funding LLC 2024-B,
Credit Acceptance Funding LLC 2024-3, Credit Acceptance Funding LLC 2024-2, Credit Acceptance
Funding LLC 2024-1, Credit Acceptance Funding LLC 2024-A, Credit Acceptance Funding LLC 2023-5,
Credit Acceptance Funding LLC 2023-A, Credit Acceptance Funding LLC 2023-3, Credit Acceptance
Funding LLC 2023-2, Credit Acceptance Funding LLC 2023-1, Credit Acceptance Funding LLC 2022-3,
Credit Acceptance Funding LLC 2022-2, Credit Acceptance Funding LLC 2022-1, Credit Acceptance
Funding LLC 2021-4, Credit Acceptance Funding LLC 2021-1, Credit Acceptance Funding LLC 2019-2,
Credit Acceptance Auto Loan Trust 2024-3, Credit Acceptance Auto Loan Trust 2024-2, Credit Acceptance
Auto Loan Trust 2024-1, Credit Acceptance Auto Loan Trust 2024-A, Credit Acceptance Auto Loan Trust
2023-5, Credit Acceptance Auto Loan Trust 2023-3, Credit Acceptance Auto Loan Trust 2023-2, Credit
Acceptance Auto Loan Trust 2023-1, Credit Acceptance Auto Loan Trust 2022-3, Credit Acceptance Auto
Loan Trust 2022-1, Credit Acceptance Auto Loan Trust 2021-4, Computershare Trust Company, N.A., Bank
of Montreal, Fifth Third Bank, National Association, Flagstar Bank, National Association, Citizens Bank,
N.A., and Comerica Bank (incorporated by reference to Exhibit 4.168 to the Company’s Current Report on
Form 8-K filed December 23, 2024).
4.144
Sale and Contribution Agreement, dated as of December 20, 2024, between the Company and Credit
Acceptance Funding LLC 2024-B (incorporated by reference to Exhibit 4.169 to the Company’s Current
Report on Form 8-K filed December 23, 2024).
107
10.1
Form of Restricted Stock Grant Agreement (incorporated by reference to Exhibit 10(q)(4) to the Company’s
Current Report on Form 8-K filed February 28, 2007).*
10.2
Credit Acceptance Corporation Amended and Restated Incentive Compensation Plan, as amended, April 6,
2009 (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement on Schedule 14A
filed April 10, 2009).*
10.3
Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10(q)(11) to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009).*
10.4
Form of Board of Directors Restricted Stock Unit Award Agreement (incorporated by reference to
Exhibit 10(q)(12) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2009).*
10.5
Restricted Stock Unit Award Agreement, dated March 26, 2012, between the Company and Brett A. Roberts
(incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2012).*
10.6
Restricted Stock Award Agreement, dated March 26, 2012, between the Company and Brett A. Roberts
(incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2012).*
10.7
Credit Acceptance Corporation Amended and Restated Incentive Compensation Plan, as amended March 26,
2012 (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement on Schedule 14A
filed April 5, 2012).*
10.8
Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013).*
10.9
Shareholder Agreement, dated as of January 3, 2017, between the Company and Donald A. Foss
(incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K filed January 4,
2017).*
10.10
Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.19 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017).*
10.11
Amendment to Shareholder Agreement dated September 15, 2017, between the Company and Donald A. Foss
(incorporated by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2017).*
10.12
Amendment to Shareholder Agreement dated November 29, 2017, between the Company and Donald A.
Foss.*
10.13
Form of Director Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.13 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019).*
10.14
Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.14 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2020).*
10.15
Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.15 to the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021).*
10.16
Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.17 to the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021).*
10.17
Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.18 to the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021).*
10.18
Settlement Agreement and Assurance of Discontinuance with the Commonwealth of Massachusetts
(incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed September 1,
2021).
10.19
Credit Acceptance Corporation Amended and Restated Incentive Compensation Plan as amended and restated
April 12, 2021 (incorporated by reference to Annex A to the Company’s definitive proxy statement on
Schedule 14A filed June 10, 2021).*
10.20
Non-Employee Director Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.20
to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023).*
10.21
Credit Acceptance Corporation Amended and Restated Incentive Compensation Plan, as amended effective
June 2, 2023 (incorporated by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2023).*
10.22
Credit Acceptance Corporation Amended and Restated Incentive Compensation Plan, as amended effective
June 5, 2024 (incorporated by reference to Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2024).*
10.23
Amendment, effective September 19, 2024, to the Credit Acceptance Corporation Amended and Restated
Incentive Compensation Plan (incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2024).*
108
10.24
Form of Restricted Stock Unit Award Agreement*
19
Securities trading policy.
21
List of Credit Acceptance Corporation subsidiaries.
23
Consent of Grant Thornton LLP.
31.1
Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
31.2
Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
32.1
Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
97
Policy relating to recovery of erroneously awarded compensation (incorporated by reference to Exhibit 97 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023).
101(SCH)
Inline XBRL Taxonomy Extension Schema Document.
101(CAL)
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101(DEF)
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101(LAB)
Inline XBRL Taxonomy Label Linkbase Document.
101(PRE)
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (included in the Exhibit 101 Inline XBRL Document Set).
*
Management contract or compensatory plan or arrangement.
Other instruments, notes, or extracts from agreements defining the rights of holders of long-term debt of the Company or its
subsidiaries have not been filed because (i) in each case the total amount of long-term debt permitted thereunder does not
exceed 10% of the Company’s consolidated assets and (ii) the Company hereby agrees that it will furnish such instruments,
notes, and extracts to the Securities and Exchange Commission upon its request.
Amendments and modifications to other exhibits previously filed have been omitted when in the opinion of the registrant such
exhibits as amended or modified are no longer material or, in certain instances, are no longer required to be filed as exhibits.
ITEM 16.
FORM 10-K SUMMARY
None.
109
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CREDIT ACCEPTANCE CORPORATION
By:
/s/ KENNETH S. BOOTH
Kenneth S. Booth
Chief Executive Officer
Date:
February 12, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on February 12, 2025 on behalf of the registrant and in the capacities indicated.
Signature
Title
/s/ KENNETH S. BOOTH
Chief Executive Officer and Director
Kenneth S. Booth
(Principal Executive Officer)
/s/ JAY D. MARTIN
Chief Financial Officer
Jay D. Martin
(Principal Financial Officer and Principal Accounting Officer)
/s/ THOMAS N. TRYFOROS
Chair of the Board and Lead Director
Thomas N. Tryforos
/s/ GLENDA J. FLANAGAN
Director
Glenda J. Flanagan
/s/ VINAYAK R. HEGDE
Director
Vinayak R. Hegde
/s/ SEAN E. QUINN
Director
Sean E. Quinn
/s/ SCOTT J. VASSALLUZZO
Director
Scott J. Vassalluzzo
110
49
Board of Directors
Kenneth S. Booth
Chief Executive Officer and President
Credit Acceptance Corporation
Thomas N. Tryforos
Chair of the Board of Directors
Private Investor
Glenda J. Flanagan
Executive Vice President and
Chief Financial Officer
Healthy America, LLC
Vinayak R. Hegde
Consumer Chief Marketing Officer
T-Mobile US, Inc.
Sean E. Quinn
Executive Vice President and
Chief Financial Officer
Cimpress plc
Scott J. Vassalluzzo
Managing Member
Prescott General Partners LLC
Executive Officers
Kenneth S. Booth
Chief Executive Officer and President
Douglas W. Busk
Chief Treasury Officer
Nicholas J. Elliott
Chief Alignment Officer
Erin J. Kerber
Chief Legal Officer
Jonathan L. Lum
Chief Operating Officer
Jay D. Martin
Chief Financial Officer
Ravi Mohan
Chief Technology Officer
Andrew K. Rostami
Chief Marketing and Product Officer
Wendy A. Rummler
Chief People Officer
Arthur L. Smith
Chief Analytics Officer
Daniel A. Ulatowski
Chief Sales Officer
Other Information
Corporate Headquarters
25505 West Twelve Mile Road
Southfield, MI 48034
(248) 353-2700
Transfer Agent and Registrar
Computershare Trust Company, N.A.
150 Royall Street, Suite 101
Canton, MA 02021
(781) 575-3120
Corporate Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Chicago, IL
Certified Public Accountants
Grant Thornton LLP
Southfield, MI
Stock Listing
Nasdaq symbol: CACC
Investor Relations
Information requests should be directed to:
Douglas W. Busk
(248) 353-2700 Ext. 4432
Annual Meeting of Shareholders
June 4, 2025 8:00 a.m.
Corporate Headquarters
25505 West Twelve Mile Road
Southfield, MI 48034
Shareholders may obtain, without charge,
a copy of the Company’s Annual Report
on Form 10-K, as filed with the Securities
and Exchange Commission, by writing
the Investor Relations Department at the
corporate headquarters address or by
accessing our investor information on the
Company’s website at:
CreditAcceptance.com.
50