Credit Acceptance Net Income Soars 214% on Lower Credit Losses

Ticker: CACC · Form: 10-Q · Filed: 2025-10-30T00:00:00.000Z

Sentiment: bullish

Topics: Subprime Auto Lending, Financial Services, Earnings Growth, Credit Risk Management, Share Repurchases, 10-Q Analysis, Consumer Finance

Related Tickers: CACC

TL;DR

**CACC's massive profit jump and shrinking credit losses make it a strong buy, signaling a resilient subprime market.**

AI Summary

CREDIT ACCEPTANCE CORP (CACC) reported a significant increase in net income for the three and nine months ended September 30, 2025. For the three months, net income rose to $108.2 million, a 37.3% increase from $78.8 million in the prior year. For the nine months, net income surged to $301.9 million, a substantial 214.5% increase from $96.0 million in the same period of 2024. Total revenue for the three months increased by 5.8% to $582.4 million, driven by a 6.3% rise in finance charges to $539.4 million. For the nine months, total revenue grew by 8.8% to $1,737.3 million, with finance charges up 8.9% to $1,606.8 million. The company's provision for credit losses decreased significantly, falling 17.7% to $152.0 million for the three months and 29.6% to $486.5 million for the nine months, contributing to the improved profitability. A key business change was the expansion of Dealer access to the Purchase Program for consumers with higher credit ratings, leading to a higher percentage of Purchased Loans in 2025. Loans receivable, net, increased to $7,975.5 million as of September 30, 2025, from $7,850.3 million at December 31, 2024. The company repurchased $534.0 million of common stock during the nine months ended September 30, 2025, compared to $251.9 million in the prior year.

Why It Matters

This strong performance by Credit Acceptance Corp. signals robust demand for subprime auto financing and effective credit risk management, which could attract investors seeking exposure to this niche market. The significant reduction in credit loss provisions suggests improved underwriting or a healthier economic environment for their customer base, potentially boosting investor confidence. For employees, sustained profitability could lead to job security and growth opportunities. Customers, particularly those with impaired credit, continue to benefit from CACC's financing solutions, enabling vehicle ownership and credit score improvement. Competitively, CACC's expanded Purchase Program for higher-rated consumers indicates a strategic move to broaden its market reach, potentially intensifying competition in segments traditionally served by prime lenders.

Risk Assessment

Risk Level: medium — While net income surged, the company's business model relies heavily on subprime borrowers, with 77.6% of Consumer Loan assignments having FICO scores below 650 or no FICO scores for the three months ended September 30, 2025. This inherently carries higher credit risk, despite the recent reduction in provision for credit losses. Additionally, cash and cash equivalents decreased significantly from $343.7 million at December 31, 2024, to $15.9 million at September 30, 2025, indicating reduced liquidity.

Analyst Insight

Investors should consider CACC's strong net income growth and reduced credit loss provisions as positive indicators, but remain mindful of the inherent risks in subprime lending. Monitor future trends in credit loss provisions and the percentage of loans to subprime borrowers. The significant share repurchases suggest management confidence, which could be a bullish signal.

Financial Highlights

debt To Equity
4.47
revenue
$1,737.3M
operating Margin
N/A
total Assets
$8,640.6M
total Debt
$6,370.0M
net Income
$301.9M
eps
$25.50
gross Margin
N/A
cash Position
$15.9M
revenue Growth
+8.8%

Revenue Breakdown

SegmentRevenueGrowth
Finance charges$539.4M+6.3%
Premiums earned$24.1M-3.9%
Other income$18.9M+7.4%

Key Numbers

Key Players & Entities

FAQ

What were Credit Acceptance Corp's net income figures for the three and nine months ended September 30, 2025?

Credit Acceptance Corp. reported net income of $108.2 million for the three months ended September 30, 2025, a 37.3% increase from $78.8 million in the prior year. For the nine months ended September 30, 2025, net income was $301.9 million, a 214.5% increase from $96.0 million in the same period of 2024.

How did Credit Acceptance Corp's total revenue change in Q3 2025?

Total revenue for Credit Acceptance Corp. increased by 5.8% to $582.4 million for the three months ended September 30, 2025, up from $550.3 million in the comparable period of 2024. This was primarily driven by a 6.3% rise in finance charges to $539.4 million.

What was the trend in Credit Acceptance Corp's provision for credit losses?

Credit Acceptance Corp.'s total provision for credit losses decreased by 17.7% to $152.0 million for the three months ended September 30, 2025, compared to $184.7 million in the prior year. For the nine months, the provision fell 29.6% to $486.5 million from $691.3 million in 2024.

What strategic change did Credit Acceptance Corp make regarding its Purchase Program?

In 2025, Credit Acceptance Corp. expanded Dealer access to its Purchase Program for Consumer Loans to consumers with higher credit ratings. This strategic move resulted in a higher percentage of Purchased Loans in the 2025 Consumer Loan assignment volume.

What percentage of Credit Acceptance Corp's Consumer Loans are assigned to borrowers with impaired credit?

For the three months ended September 30, 2025, 77.6% of Credit Acceptance Corp.'s Consumer Loan assignment volume consisted of loans to consumers with either FICO scores below 650 or no FICO scores. This figure was 79.1% for the same period in 2024.

How much common stock did Credit Acceptance Corp repurchase in the first nine months of 2025?

Credit Acceptance Corp. repurchased $534.0 million of common stock during the nine months ended September 30, 2025. This represents a significant increase compared to the $251.9 million repurchased in the corresponding period of 2024.

What is the primary business of Credit Acceptance Corp?

Credit Acceptance Corp.'s primary business is providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. They operate through two programs: the Portfolio Program and the Purchase Program, facilitating vehicle ownership for individuals with impaired or limited credit histories.

What is the difference between Credit Acceptance Corp's Portfolio Program and Purchase Program?

Under the Portfolio Program, Credit Acceptance Corp. advances money to Dealers (Dealer Loans) for the right to service Consumer Loans, with Dealers receiving future Dealer Holdback payments. Under the Purchase Program, CACC buys Consumer Loans from Dealers for a one-time payment at assignment, keeping all collections from the consumer.

What are the cash and cash equivalents balances for Credit Acceptance Corp as of September 30, 2025?

As of September 30, 2025, Credit Acceptance Corp. reported cash and cash equivalents of $15.9 million and restricted cash and cash equivalents of $482.9 million. This is a notable decrease from December 31, 2024, when cash and cash equivalents were $343.7 million and restricted cash and cash equivalents were $501.3 million.

What is the significance of Credit Acceptance Corp reporting to national credit reporting agencies?

Credit Acceptance Corp. reports to the three national credit reporting agencies, which provides consumers with an opportunity to improve their credit scores. This allows them to potentially move on to more traditional sources of financing in the future, offering an important ancillary benefit to their financing programs.

Risk Factors

Industry Context

Credit Acceptance Corp operates in the subprime auto lending sector, a niche market that provides financing to consumers with lower credit scores who may not qualify for traditional loans. This sector is characterized by higher interest rates and increased credit risk compared to prime lending. The industry is sensitive to economic cycles, regulatory changes, and competition from other non-bank lenders and fintech companies.

Regulatory Implications

The company faces ongoing regulatory scrutiny regarding consumer protection, fair lending practices, and data security. Changes in regulations, such as those related to interest rate caps or collection practices, could materially impact CACC's business model and profitability.

What Investors Should Do

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Key Dates

Glossary

Portfolio Program
A financing program where CACC advances money to dealers as a 'Dealer Loan' in exchange for the right to service the underlying consumer loans. Dealers receive a cash payment at sale and potential future 'Dealer Holdback' payments. (Represents a significant portion of CACC's business, with Dealer Loans making up 70.6% of dollar volume in Q3 2025.)
Purchase Program
A financing program where CACC buys consumer loans directly from dealers for a one-time payment. CACC then collects payments from the consumer. (Expanded access in 2025, leading to a higher percentage of Purchased Loans (29.4% of dollar volume in Q3 2025), contributing to revenue growth.)
Dealer Holdback
A portion of the consumer loan payments that a dealer can receive after CACC has recovered its advance and servicing fees. It represents a dealer's residual interest in the loan. (A key component of the Portfolio Program, incentivizing dealers and reflecting their ongoing financial interest in the loans.)
Provision for credit losses
An expense set aside by the company to cover potential losses from loans that may not be repaid by borrowers. It's an estimate based on historical data and current economic conditions. (A significant expense item that decreased substantially in Q3 2025, boosting net income, but still reflects the inherent risk in CACC's loan portfolio.)
Loans receivable, net
The total amount of money lent to consumers, minus the allowance for potential loan losses. This represents the company's primary asset. (Increased to $7,975.5 million, indicating growth in the company's core lending business.)

Year-Over-Year Comparison

Credit Acceptance Corp. has demonstrated robust top-line growth, with total revenue increasing by 8.8% year-over-year to $1,737.3 million for the nine months ended September 30, 2025. This growth, coupled with a significant reduction in the provision for credit losses (down 29.6%), has led to a dramatic surge in net income, which more than tripled to $301.9 million. However, a critical concern is the sharp decline in cash and cash equivalents, falling from $343.7 million to $15.9 million, while share repurchases more than doubled, suggesting a potential strain on liquidity or a deliberate aggressive capital return strategy.

Filing Stats: 4,736 words · 19 min read · ~16 pages · Grade level 8 · Accepted 2025-10-30 16:06:16

Filing Documents

— FINANCIAL INFORMATION

PART I. — FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets - As of September 30, 2025 and December 31, 2024 1 Consolidated Statements of Income - Three and nine months ended September 30, 2025 and 2024 2 Consolidated Statements of Comprehensive Income - Three and nine months ended September 30, 2025 and 2024 3 Consolidated Statements of Shareholders' Equity - Three and nine months ended September 30, 2025 and 2024 4 Consolidated Statements of Cash Flows - Nine months ended September 30, 2025 and 2024 5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 6

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 44

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 63

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 63

— OTHER INFORMATION

PART II. — OTHER INFORMATION

LEGAL PROCEEDINGS 64

ITEM 1. LEGAL PROCEEDINGS 64

RISK FACTORS 65

ITEM 1A. RISK FACTORS 65

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 67

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 67

OTHER INFORMATION 68

ITEM 5. OTHER INFORMATION 68

EXHIBITS 69

ITEM 6. EXHIBITS 69 SIGNATURES 70 Table of Contents

- FINANCIAL INFORMATION

PART I. - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS CREDIT ACCEPTANCE CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in millions, except per share data) As of September 30, 2025 December 31, 2024 ASSETS: Cash and cash equivalents $ 15.9 $ 343.7 Restricted cash and cash equivalents 482.9 501.3 Restricted securities available for sale 108.9 106.4 Loans receivable 11,563.7 11,289.1 Allowance for credit losses ( 3,588.2 ) ( 3,438.8 ) Loans receivable, net 7,975.5 7,850.3 Property and equipment, net 12.9 14.7 Income taxes receivable 9.7 4.2 Other assets 34.8 34.0 Total assets $ 8,640.6 $ 8,854.6 LIABILITIES AND SHAREHOLDERS' EQUITY: Liabilities: Accounts payable and accrued liabilities $ 382.9 $ 315.8 Revolving secured lines of credit 148.7 0.1 Secured financing 5,133.1 5,361.5 Senior notes 1,087.2 991.3 Deferred income taxes, net 298.2 319.1 Income taxes payable 11.9 117.2 Total liabilities 7,062.0 7,105.0 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, 11,041,431 and 12,048,151 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 0.1 0.1 Paid-in capital 392.1 335.1 Retained earnings 1,185.3 1,414.7 Accumulated other comprehensive income (loss) 1.1 ( 0.3 ) Total shareholders' equity 1,578.6 1,749.6 Total liabilities and shareholders' equity $ 8,640.6 $ 8,854.6 See accompanying notes to consolidated financial statements. 1 Table of Contents CREDIT ACCEPTANCE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in millions, except per share data) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 Revenue: Finance charges $ 539.4 $ 507.6 $ 1,606.8 $ 1,474.5 Premiums earned 24.1 25.1 71.7 71.3 Other income 18.9 17.6 58.8 50.7 Total revenue 582.4 550.3 1,737.3 1,596.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("generally accepted accounting principles" or "GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of actual results achieved for full fiscal years. The consolidated balance sheet as of December 31, 2024 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2024 for Credit Acceptance Corporation (the "Company", "Credit Acceptance", "we", "our" or "us"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2025, for items that could potentially be recognized or disclosed in these financial statements. We did not identify any subsequent events that would require disclosure in or adjustment to the consolidated financial statements. 2. DESCRIPTION OF BUSINESS We make vehicle ownership possible by providing

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) (UNAUDITED) 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 eight quarters: Unit Volume Dollar Volume (1) Three Months Ended Dealer Loans Purchased Loans Dealer Loans Purchased Loans December 31, 2023 77.2 % 22.8 % 75.0 % 25.0 % March 31, 2024 78.2 % 21.8 % 76.6 % 23.4 % June 30, 2024 78.5 % 21.5 % 77.3 % 22.7 % September 30, 2024 79.5 % 20.5 % 78.4 % 21.6 % December 31, 2024 78.7 % 21.3 % 77.7 % 22.3 % March 31, 2025 77.0 % 23.0 % 75.1 % 24.9 % June 30, 2025 71.6 % 28.4 % 68.3 % 31.7 % September 30, 2025 73.1 % 26.9 % 70.6 % 29.4 % (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. In 2025, we expanded Dealer access to the Purchase Program for Consumer Loans to consumers with higher credit ratings. The higher percentage of Purchased Loans in 2025 Consumer Loan assignment volume was primarily related to Consumer Loans assigned under this expanded Dealer access. 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) h

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) (UNAUDITED) 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) (UNAUDITED) 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 September 30, 2025 December 31, 2024 September 30, 2024 December 31, 2023 Cash and cash equivalents $ 15.9 $ 343.7 $ 159.7 $ 13.2 Restricted cash and cash equivalents 482.9 501.3 556.6 457.7 Total cash and cash equivalents and restricted cash and cash equivalents $ 498.8 $ 845.0 $ 716.3 $ 470.9 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 purc

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) (UNAUDITED) 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"). 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 C

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