Credit Acceptance Q2 2025 Earnings Report

Credit Acceptance EPS Results

• Actual EPS: $8.56
• Consensus EPS: $9.84
• Beat/Miss: Missed by -$1.28
• One Year Ago EPS: $10.29

Credit Acceptance Revenue Results

• Actual Revenue: $583.80 million
• Expected Revenue: $583.30 million
• Beat/Miss: Beat by +$501.00 thousand
• YoY Revenue Growth: +8.50%

Credit Acceptance Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 5:00PM ET

Credit Acceptance (NASDAQ:CACC) engages in the provision of financing programs, and related products and services in the United States. The company advances money to automobile dealers in exchange for the right to service the underlying consumer loans; and buys the consumer loans from the dealers and keeps the amount collected from the consumers. It is also involved in the business of reinsuring coverage under vehicle service contracts sold to consumers by dealers on vehicles financed by the company. The company serves independent and franchised automobile dealers. Credit Acceptance Corporation was incorporated in 1972 and is headquartered in Southfield, Michigan.

Credit Acceptance Q2 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Loan performance declined with the 2022–2024 vintages underperforming expectations, while overall forecasted net cash flows fell by 0.5% ($56 million).
• Positive Sentiment: Adjusted portfolio reached a record high of $9.1 billion, up 6% year-over-year, showing continued portfolio growth despite volume headwinds.
• Negative Sentiment: Market share in subprime used-vehicle financing dropped to 5.4% (from 6.6%), and origination volumes declined due to Q3 2024 scorecard changes and increased competition.
• Positive Sentiment: Adjusted return on capital stood at 8.5% versus a 7.4% cost of capital, indicating ongoing economic profitability even amid collection adjustments.
• Positive Sentiment: Investments in engineering modernization accelerated feature releases from months to days, and the company was named one of the 100 Best Companies to Work For by Fortune.

Presentation

[Operator]

Day, everyone, and welcome to the Credit Acceptance Corporation Second Quarter twenty twenty five Earnings Call. Today's call is being recorded. A webcast and transcript of today's earnings call will be made available on Credit Acceptance's website. At this time, I would like to turn the call over to Credit Acceptance's Chief Financial Officer, Jay Martin. Please go ahead.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation second quarter twenty twenty five earnings call. As you read our news release posted on the Investor Relations section of our website at ir.creditacceptance.com And as you listen to this conference call, please recognize that both contain forward looking statements within the meaning of federal securities law. These forward looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the cautionary statement regarding forward looking information included in the news release.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Consider all forward looking statements in light of those and other risks and uncertainties. Additionally, I should mention that to comply with the SEC's Regulation G, please refer to the financial results section of our news release, which provides tables showing how non GAAP measures reconcile to GAAP measures. At this time, I will turn the call to chief executive officer, Ken Booth, to discuss our second quarter results.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

Thanks, Jay. Our results for this quarter reflect the steady execution with declines in loan performance and year over year origination volumes balanced by continued portfolio growth. Loan performance declined this quarter with our 2022, 2023, and 2024 underperforming our expectations and our 2025 vintage exceeding our expectations, while our other vintages were stable during the quarter. Overall, forecasted net cash flows declined by 0.5% or $56,000,000 During the quarter, we experienced a decline in unit and dollar volumes, though our loan portfolio still reached a new record high of 9,100,000,000 on an adjusted basis, up 6% from last Q2. Our market share in our core segment of used vehicles financed by subprime consumers was 5.4% for the first five months of the year, down from 6.6% for the same period in 2024.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

Our unit volume was impacted by our Q3 twenty twenty four scorecard change that resulted in lower advance rates and likely impacted by increased competition. Beyond these two key drivers, we continued making progress during the quarter towards our mission of maximizing intrinsic value and possibly changing the lives for our five key constituents, dealers, consumers, team members, investors, and the community communities we operate in. We do this by providing a valuable product that enables dealers to sell vehicle to consumers regardless of their credit history. This allows dealers to make incremental sales. For the fifty five percent of adults with other than prime credit, for these adults, it enables them to obtain a vehicle to get to their jobs, take their kids to school, etcetera.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

It also gives them the opportunity to improve or build their credit. Our customers are people like Sugar from Oklahoma. Sugar's life took a dramatic turn when the former credit counselor was arrested for driving under the influence in 2014. Overwhelmed with shame and having lost her license, she realized she needed to make a profound change. She sought help from Women's First Step, a treatment facility.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

And after graduating from the program eight months later, she began rebuilding her life. She regained her license, started a stable career, and achieved a powerful symbol of victory when she was approved by us for a car loan. This journey of recovery came full circle when Sugar was hired to work for the treatment facility that had helped her dedicate herself to her new mission of helping others find their own second chance. During the quarter, we financed over 85,000 contracts for our dealers and consumers. We collected 1,400,000,000.0 overall and paid 63,000,000 at dealer holdback and accelerated deal holdback to our dealers.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

We enrolled 1,560 new dealers and had 10,655 active dealers during the quarter. We continued to invest in our engineering team, which is focused on modernizing both our key technology architecture and how our teams perform work. The engineering team has made significant strides in modernizing our loan origination system. This modernization this modernization has laid a strong foundation for us to deploy innovative, frictionless dealer experiences, has increased the velocity of which we release features from a matter of months to a matter of days, us to accelerate value to our business and customers. During the quarter, we received two awards for our amazing workplace, including being named one of the 100 best companies to work for by Great Place to Work and Fortune magazine.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

With 93 of team members agreeing that Credit Acceptance is a great place to work, this year marked our eleventh time in the last twelve years receiving this prestigious award, moving up five spots to the number 34 ranking. We support our team members in making a difference to what makes a difference to them, raising over 270,000 for St. Jude's Research Hospital and Make A Wish Foundation. Through these donations, we're able to fund wishes for 15 children, bringing our total to 95 wishes granted. Now Jay Martin and I will take your questions along with Doug Busk, our chief treasury officer, and Jay Brinkley, our senior vice president and treasurer.

[Operator]

Thank you. If you have a question, please press 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press 11 again. We also ask that you wait for your name and company to be announced before proceeding with your question.

[Operator]

One moment for the first question. The first question will come from the line of Marsh Orenbuch of TD Cowen. Your line is open.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Great. Thanks. The I I noticed that, you know, obviously, the collections were down again this quarter, but the adjusted yield higher. That's happened, I think, at least once before. But maybe if you could just talk about what drives that usually that the, you know, the adjusted yield will kinda follow that, the, you know, the lower collections.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Sure. So the decline in forecasted collections, the the change in the amount and timing there, all things being equal, would drive the adjusted yield down. But the ultimate yield that we recognize is also dependent on the volume and pricing of new loan originations. So that's what you've seen the last few quarters. The yields of the new loans that we've originated is more than offset the decline in the yield due to loan performance.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Right. Although the interestingly, I mean, the collection shortfall is kinda greater than the last two quarters. So even though you said that the '25 vintage is outperforming, I mean, you know, the the underperformance in the in the back book has been greater than it's been in the past. And, you know, I mean, even if you kinda x out the change that you made, it's still bigger than each of the either of the last two quarters. So I I mean, you know, in the the discussions we've had before, I guess, there had been, you know, an idea that you were burning through those vintages and they should be, I guess, you know, hurting you less, but that's not what happened.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Any is there any way to kinda, you know, talk about why that is?

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Yeah. I I would say that our forecasting models generally perform well during a relatively stable economic period, but are less accurate during periods of volatility like we've experienced in recent years. We do think the continued impact of inflation is contributing to the the loan underperformance we've seen there. You may recall second quarter last year, we put in an adjustment to address that underperformance. It's worked fairly well for most vintages, but for our 2024 loans, we have seen some more underperformance there than what that adjustment would have, anticipated, and it's specifically related to the loans that we originated '24 before our scorecard changed during the third quarter.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

So that's the bulk of the decrease you saw for the quarter was on that segment of loans. The good news for the loans that we've originated, since we put that scorecard change in during the third quarter last year, those loans are performing as expected. We haven't seen any any signs of underperformance on those loans.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Right. And then just a couple of other two other trends that caught my attention. I guess the first is that the the loan size continues to decline over the last couple of quarters. Is is there a different type of car that you're financing, or is there something else kinda that's going on there? And then a follow-up to that.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Yeah. I think we've just we've had we just had a a different mix of consumer that's come in in recent years, and that's contributing to the size of the the consumer loan. So just a a different mix of business.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Different meaning higher quality, lower quality? Because, you know, back in '23, I guess, you were talking about a higher quality kind of borrower. Is this a lower quality borrower that you're seeing?

[Douglas Busk, Chief Treasury Officer at Credit Acceptance]

I I don't think it's a lower quality borrower. I think there's a slightly different mix of vehicles that are being financed. You know, again, there's been, you know, a fair amount of variability in the mix of vehicles, you know, since the start of the pandemic. So I I think it's just normal volatility there.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Right. And I guess the the last thing for me is that, you know, you're assuming you've got a forecasted collection percentage that's, you know, over 65% for 2025, and it's actually higher than that for the second quarter. So it's been rising even as you've kinda had these nine quarters in a row of, you know, kinda having to pull your estimates back down. I mean, does that I guess, it's hard it's hard for me on the outside. Obviously, we don't see the, you know, the detail in that, but, you know, it's hard hard to hard to understand that, I guess, from the outside.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Yeah. When you when you look at the initial forecast of collection rate there, to your point, they're very similar, but, again, to the point of having a different mix of business is driving that. So over over the last few years, we've lowered our initial expectations. So all things being equal, the loans were originated in '24 and '25. Had we originated those back in '22, we would have had a higher expected collection rate on those.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

So different mix of business, but we have as we always have, we we can continue to adjust our expectations on the new loans to address that underperformance, and that's reflected in those initial estimates.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Got it. Okay. Thanks.

[Operator]

Thank you. One moment for the next question. And the next question will be coming from the line of John Rowan of Janney Montgomery. Your line is open.

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

Good afternoon, guys. I guess, I just wanna understand, you know, your the return profile. Right? So, you know, your release says you've got an 8.5% return on capital, adjusted return on capital, but the cost of capital is 7.4%, which leaves, like, a 110 basis point spread. You know, as you look back at some of these vintages that you've written down, are some actually generating a negative economic return?

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

And where is that, you know, watermark? And I'm just trying to understand, you know, whether or not, you know, there is a point in time when, you know, you I don't know. I wanna say it would get more realistic, but start putting loans on the books at a number that's more achievable and whether or not you're really generating economic profit on the loans that you're putting on today, you know, assuming that, you know, there's gonna be a reduction in forecasted collection. I know it's a loaded question, but you spent a lot of money on share repurchases in the quarter. And I'm trying to, you know, assess whether or not you're diverting capital to repurchasing shares because, you know, in reality, when you look back at these older vintages, if '24 and '25 trend that way, they're gonna be generating negative economic profit.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Yeah. So so our business model is designed to produce an acceptable return even if our loans underperform. And to your point, if you if you look at the '22 vintage, that vintage has underperformed the most of any any year that we presented in that collection rate table. And I'll I'll say those loans in aggregate are still producing a return on capital in excess of our cost of capital, assuming that those collection expectations, are accurate. So there would be at some point if they continue to decline where, that return would fall below our weighted average cost of capital.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

But based on our current estimates, those are still producing economic profit. They're still profitable loans.

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

Okay. And can you tell me how much money you spent on repurchases in the quarter and what the plans are for repurchases going forward? Because it seems like you spent quite a bit of money in the second quarter.

[Jay Brinkley, SVP & Treasurer at Credit Acceptance]

Yeah. This is Jay Brinkley. We were we were very active in the quarter. We bought back 530,000 shares at roughly an average price of $490. You know, as always, we look at ensuring that we've got adequate capital to fund new originations, and then, look at the the share price as well.

[Jay Brinkley, SVP & Treasurer at Credit Acceptance]

We haven't changed our our view there. You know, volume is down, as as Ken mentioned, due to our pricing change and our, you know, to some degree, the competitive environment. So year over year growth, being slower, if you look back over a long period when originations are down, we tend to be pretty active. That was certainly the case this quarter.

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

And what's remaining on any current authorization and, you know, what are the plans going forward? That's it for me. Thank you.

[Jay Brinkley, SVP & Treasurer at Credit Acceptance]

Sure. Yeah. We've got under the the latest authorization, we've got, 391,000 shares left. I imagine based on that, we'll be, reviewing that and going back to the board for additional capacity should the buying opportunity arise.

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

Alright. Thank you.

[Operator]

Thank you. As a reminder, if you would like to ask a question, please press 11 on your telephone. One moment for the next question. And the next question will be coming from the line of Kyle Joseph of Stephens. Your line is open.

[Kyle Joseph, Managing Director at Stephens Inc]

Hey. Good afternoon. Thanks for taking my questions. Just wanted to talk about the competitive environment. I think in your prepared remarks, you mentioned that competition either heated up or remains intense.

[Kyle Joseph, Managing Director at Stephens Inc]

Just given the macro outlook and expectations with tariffs for used car prices to continue to increase and, you know, the the industry kinda reeling from a the 2022 vintage. I mean, is your expectation that you'd see some a a little bit of a pullback from traditional providers of credit, or, you know, did you actually see them kinda get more aggressive kinda post Liberation Day? Just kinda wanna get your sense for the pulse of the competitive environment.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

You know, the competitive environment's always hard to to kinda forecast how it's gonna be going forward. Obviously, like, our volume per dealer went down, so it does seem like the environment's more competitive on the first half of this year. You know, tariffs and things that drive up drive up costs for our consumers tend to be a negative for us, both, you know, whether it's related to vehicles or just other things that they spend money on. But it's really too early to tell what the impact will be on our business. I do think from a volume standpoint, you know, we had a pretty tough comparable.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

You know, last year was our highest volume year ever. So when we compare it year over year, it's a tough comparable. We made our scorecard change last year in the middle of the third quarter. Once we kinda get past that, we'll have an easier comparable. You know?

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

So I think that, those would be some things that might get positive going forward.

[Kyle Joseph, Managing Director at Stephens Inc]

Oh, no. That's that's a good color. Good reminder on the tough comps. Thanks for taking my questions.

[Operator]

Thank you. With no further questions in the queue, I would like to turn the conference back over over to Mr. Martin for any additional or closing remarks. Go ahead, please.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

We'd like to thank everyone for their support and for joining us on the conference call today. If you have any additional follow-up questions, please direct them to our Investor Relations mailbox at ircredit acceptance dot com. We look forward to talking to you again next quarter. Thank you.

[Operator]

Once again, this does conclude today's conference. We thank you for your participation. You may disconnect. Good day, everyone, and welcome to the Credit Acceptance Corporation Second Quarter twenty twenty five Earnings Call. Today's call is being recorded.

[Operator]

A webcast and transcript of today's earnings call will be made available on Credit Acceptance's website. At this time, I would like to turn the call over to Credit Acceptance's chief financial officer, Jay Martin. Please go ahead.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation second quarter twenty twenty five earnings call. As you read our news release posted on the Investor Relations section of our website @ir.creditacceptance.com and as you listen to this conference call, please recognize that both contain forward looking statements within the meaning of federal securities law. These forward looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the cautionary statement regarding forward looking information included in the news release.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Consider all forward looking statements in light of those and other risks and uncertainties. Additionally, I should mention that to comply with the SEC's Regulation G, please refer to the financial results section of our news release, which provides tables showing how non GAAP measures reconcile the GAAP measures. At this time, I will turn the call to chief executive officer, Ken Booth, to discuss our second quarter results.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

Thanks, Jay. Our results for this quarter reflect the steady execution with declines in loan performance and year over year origination volumes balanced by continued portfolio growth. Loan performance declined this quarter with our 2022, 2023, and 2024 vintages underperforming our expectations and our 2025 vintage exceeding our expectations, while our other vintages were stable during the quarter. Overall, forecasted net cash flows declined by 0.5% or $56,000,000 During the quarter, we experienced a decline in unit and dollar volumes, though our loan portfolio still reached a new record high of $9,100,000,000 on an adjusted basis, up 6% from last Q2. Our market share in our core segment of used vehicles financed by subprime consumers was 5.4% for the first five months of the year, down from 6.6 for the same period in 2024.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

Our unit volume was impacted by our Q3 twenty twenty four scorecard change that resulted in lower advance rates and likely impacted by increased competition. Beyond these two key drivers, we continued making progress during the quarter towards our mission of maximizing intrinsic value and positively changing the lives of our five key constituents, dealers, consumers, team members, investors, and the community communities we operate in. We do this by providing a valuable product that enables dealers to sell vehicles to consumers regardless of their credit history. This allows dealers to make incremental sales for the 55% of adults with other than prime credit. For these adults, it enables them to obtain a vehicle to get to their jobs, take their kids to school, etcetera.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

It also gives them the opportunity to improve or build their credit. Our customers are people like Sugar from Oklahoma. Sugar's life took a dramatic turn when the former credit counselor was arrested for driving under the influence in 2014. Overwhelmed with shame and having lost her license, she realized she needed to make a profound change. She sought help from Women's First Step, a treatment facility.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

And after graduating from the program eight months later, she began rebuilding her life. She regained her license, started a stable career, and achieved a powerful symbol of victory when she was approved by us for a car loan. This journey of recovery came full circle when Sugar was hired to work for the treatment facility that had helped her dedicate herself to her new mission of helping others find their own second chance. During the quarter, we financed over 85,000 contracts for dealers and consumers. We collected 1,400,000,000 overall and paid 63,000,000 in dealer holdback and accelerated dealer holdback to our dealers.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

We enrolled 1,560 new dealers and had 10,655 active dealers during the quarter. We continued to invest in our engineering team, which is focused on modernizing both our key technology architecture and how our teams perform work. The engineering team has made significant strides in modernizing our loan origination system. This modernization this modernization has laid a strong foundation for us to deploy innovative frictionless dealer experiences, has increased the velocity of which we release features from a matter of months to a matter of days, allowing us to accelerate value to our business and customers. During the quarter, we received two awards for our amazing workplace, including being named one of the 100 best companies to work for by Great Place to Work and Fortune magazine.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

With 93% of team members agreeing that Credit Acceptance is a great place to work, this year marked our eleventh time in the last twelve years receiving this prestigious award, moving up five spots in the number 34 ranking. We support our team members in making a difference to what makes a difference to them, raising over 270,000 for St. Jude's Research Hospital and Make A Wish Foundation. Through these donations, we're able to fund wishes for 15 children, bringing our total to 95 wishes granted. Now Jay Martin and I will take your questions along with Doug Busk, our chief treasury officer, and Jay Brinkley, our senior vice president and treasurer.

[Operator]

Thank you. If you have a question, please press 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press 11 again. We also ask that you wait for your name and company to be announced before proceeding with your question.

[Operator]

One moment for the first question. The first question will come from the line of Marsh Orenbuch of TD Cowen. Your line is open.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Great. Thanks. The I I noticed that, you know, obviously, the collections were down again this quarter, but the adjusted yield higher. That's happened, I think, at least once before. But maybe if you could just talk about what drives that.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Usually, the the, you know, the adjusted yield will kinda follow that that, you know, the lower collections?

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Sure. So the decline in forecasted collections, the the change in the amount and time in there, all things being equal, would drive the adjusted yield down. But the ultimate yield that we recognize is also dependent on the volume and pricing of new loan originations. So that's what you've seen the last few quarters. The yields of the new loans that we've originated is more than offset the decline in the yield due to loan performance.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Right. Although the interestingly, I mean, the collection shortfall is kinda greater than the last two quarters. So even though you said that the '25 vintage is outperforming, I mean, you know, the the underperformance in the in the back book has been greater than it's been in the past. And, you know, I mean, even if you kinda x out the change that you made, it's still bigger than each of the either of the last two quarters. So, I I mean, you know, in the the discussions we've had before, I guess there had been, you know, an idea that you were burning through those vintages and they should be, I guess, you know, hurting you less, but that's not what happened.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Any is there any way to kinda, you know, talk about why that is?

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Yeah. I I would say that our forecasting models generally perform well during a relatively stable economic period, but are less accurate during periods of volatility like we've experienced in recent years. We do think the continued impact of inflation is contributing to the the loan underperformance we've seen there. You may recall second quarter last year, we put in an adjustment to address that underperformance. It's worked fairly well for most vintages, but for our 2024 loans, we have seen some more underperformance there than what that adjustment would have anticipated, and it's specifically related to the loans that we originated '24 before our scorecard changed during the third quarter.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

So that's the bulk of the decrease you saw for the quarter was on that segment of loans. The good news for the loans that we've originated, since we put that scorecard change in during the third quarter last year, those loans are performing as expected. We haven't seen any any signs of underperformance on those loans.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Right. And then just a couple of other two other trends that caught my attention. I guess the first is that the the loan size continues to decline over the last couple of quarters. Is is it a different type of car that you're financing, or is there something else kind of that's going on there? And then a follow-up to that.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Yeah. I think we've just we've had we just had a a different mix of consumer that's come in in recent years, and that's contributing to the size of the the consumer loan. So just a a different mix of business.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Different meaning higher quality, lower quality? Because, you know, back in '23, I guess, you were talking about a higher quality kind of borrower. Is this a lower quality borrower that you're seeing?

[Douglas Busk, Chief Treasury Officer at Credit Acceptance]

I I don't think it's a lower quality borrower. I think there's a slightly different mix of vehicles that are being financed. You know, again, there's been, you know, a fair amount of variability in the mix of vehicles, you know, since the start of the pandemic. So I I think it's just normal volatility there.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Right. And I guess the the last thing for me is that, you know, you're assuming you've got a forecasted collection percentage that's, you know, over 65% for 2025, and it's actually higher than that for the second quarter. So it's been rising even as you've kinda had these nine quarters in a row of, you know, kinda having to pull your estimates back down. I mean, does that I guess, it's hard it's hard for me on the outside. Obviously, we don't see the, you know, the detail in that, but, you know, it's hard hard to hard to understand that, I guess, from the outside.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Yeah. When you when you look at the initial forecast of collection rate there, to your point, they're very similar, but, again, to the point of having a different mix of business is driving that. So over over the last few years, we've lowered our initial expectations. So all things being equal, the loans were originated in '24 and '25. Had we originated those back at '22, we would have had a higher expected collection rate on those.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

So different mix of business, but we have as we always have, we we can continue to adjust our expectations on the new loans to address that underperformance, and that's reflected in those initial estimates.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Got it. Okay. Thanks. Thank

[Operator]

you. One moment for the next question. And the next question will be coming from the line of John Rowan of Janney Montgomery. Your line is open.

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

Good afternoon, guys.

[Operator]

I guess, I

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

just wanna understand, you know, your the return profile. Right? So, you know, your release says you've got an 8.5% return on capital, adjusted return on capital, but the cost of capital is 7.4%, which leaves, like, a 110 basis point spread. You know, as you look back at some of these vintages that you've written down, are some actually generating a negative economic return? And where is that, you know, watermark?

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

And I'm just trying to understand, you know, whether or not, you know, there is a point in time when, you know, you I don't know. I wanna say we get more realistic, but start putting loans on the books at a number that's more achievable and whether or not you're really generating economic profit on the loans that you're putting on today, you know, assuming that, you know, there's gonna be a reduction in forecasted collection. I know it's a loaded question, but you spent a lot of money on share repurchases in the quarter. And I'm trying to, you know, assess whether or not you're diverting capital to repurchasing shares because, you know, in reality, when you look back at these older vintages, if '24 and '25 trend that way, they're gonna be generating negative economic profit.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

Yeah. So so our business model is designed to produce an acceptable return even if our loans underperform. And to your point, if you if you look at the '22 vintage, that vintage has underperformed the most of any any year that we presented in that collection rate table. And I'll I'll say those loans in aggregate are still producing a return on capital in excess of our cost of capital, assuming that those collection expectations, are accurate. So there would be at some point if they continue to decline where, that return would fall below our weighted average cost of capital.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

But based on our current estimates, those are still producing economic profit. They're still profitable loans.

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

Okay. And can you tell me how much money you spent on repurchases in the quarter and what the plans are for repurchases going forward? Because it seems like you spent quite a bit of money the second quarter.

[Jay Brinkley, SVP & Treasurer at Credit Acceptance]

Yeah. This is Jay Brinkley. We were we were very active in the quarter. We bought back 530,000 shares at roughly an average price of $490. You know, as always, we look at ensuring that we've got adequate capital to fund new originations, and then, look at the the share price as well.

[Jay Brinkley, SVP & Treasurer at Credit Acceptance]

We haven't changed our our view there. You know, volume is down, as as Ken mentioned, due to our pricing change and our, you know, to some degree, the competitive environment. So year over year growth, being slower, if you look back over a long period when originations are down, we tend to be pretty active. That was certainly the case this quarter.

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

And what's remaining on any current authorization and, you know, where are the plans going forward? That's it for me. Thank you.

[Jay Brinkley, SVP & Treasurer at Credit Acceptance]

Sure. Yeah. We've got under the the latest authorization, we've got 391,000 shares left. I imagine based on that, we'll be reviewing that and going back to the board for additional capacity should the buying opportunity arise.

[John Rowan, Director - Specialty Finance at Janney Montgomery Scott]

Alright. Thank you.

[Operator]

Thank you. And the next question will be coming from the line of Kyle Joseph of Stephens. Your line is open.

[Kyle Joseph, Managing Director at Stephens Inc]

Just wanted to talk about the competitive environment. I think in your prepared remarks, you mentioned that competition either heated up or remains intense. You know, just given the macro outlook and and, you know, expectations with tariffs for used car prices to continue to increase and, you know, the the industry kinda reeling from a the 2022 vintage. I mean, is your expectation that you'd see some a little bit of a pullback from traditional providers of credit, or, you know, did you actually see them kinda get more aggressive kinda post Liberation Day? Just kinda wanna get your sense for the pulse of the competitive environment.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

You know, the competitive environment's always hard to to kinda forecast how it's gonna be going forward. Obviously, like, our volume per dealer went down, so it does seem like the environment's more competitive on the first half of this year. You know, tariffs and things that drive up drive up costs for our consumers tend to be a negative for us, both, you know, whether it's related to vehicles or just other things that they spend money on. But it's really too early to tell what the impact will be on our business. I do think from a volume standpoint, you know, we had a pretty tough comparable.

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

You know, last year was our highest volume year ever. So when we compare it year over year, it's a tough comparable. We made our scorecard change last year in the middle of the third quarter. Once we kinda get past that, we'll have an easier comparable. You know?

[Kenneth Booth, CEO, President & Director at Credit Acceptance]

So I think that, those would be some things that might be a positive going forward.

[Kyle Joseph, Managing Director at Stephens Inc]

Oh, no. That's, that's good color. Good reminder on the, tough comps. Thanks for taking my questions.

[Operator]

Thank you. With no further questions in the queue, I would like to turn the conference back over to Mr. Martin for any additional or closing remarks. Go ahead, please.

[Jay Martin, Chief Financial Officer at Credit Acceptance]

We'd like to thank everyone for their support and for joining us on the conference call today. If you have any additional follow-up questions, please direct them to our Investor Relations mailbox at ir@creditacceptance.com. We look forward to talking to you again next quarter. Thank you.

Participants

Executives

• Jay Martin, Chief Financial Officer
• Kenneth Booth, CEO, President & Director
• Douglas Busk, Chief Treasury Officer
• Jay Brinkley, SVP & Treasurer

Analysts

• Moshe Orenbuch, MD & Senior Analyst at TD Cowen
• John Rowan, Director - Specialty Finance at Janney Montgomery Scott
• Kyle Joseph, Managing Director at Stephens Inc