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1. Company Snapshot

1.a. Company Description

Credit Acceptance Corporation provides financing programs, and related products and services to independent and franchised automobile dealers in the United States.The company advances money to dealers in exchange for the right to service the underlying consumer loans; and buys the consumer loans from the dealers and keeps various amounts 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 was founded in 1972 and is headquartered in Southfield, Michigan.

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1.b. Last Insights on CACC

Breaking News: Credit Acceptance Corporation reported Q4 2025 earnings, beating expectations despite a year-over-year rise in expenses and provisions. Revenue gains offset higher costs, driving the beat. New CEO Vinayak Hegde outlined leadership priorities, focusing on technology investment, servicing, and improving loan volume comparisons. Credit performance in recent vintages was modestly weaker. Executives highlighted operating trends and the company's approach under new leadership. Analysts at RBC Capital raised their price target to $640 from $590 and maintain an Outperform rating, while Wedbush analysts reiterated a Neutral rating.

1.c. Company Highlights

2. Credit Acceptance Corporation's Q3 2025 Earnings: Steady Execution Amidst Industry Challenges

The Credit Acceptance Corporation reported its third-quarter 2025 earnings, with the company delivering an earnings per share (EPS) of $10.28, surpassing analyst estimates of $9.61. The company's adjusted portfolio reached a record high of $9.1 billion, up 2% from the same quarter last year. Forecasted net cash flows declined by 0.5% or $59 million. The company financed almost 80,000 contracts for dealers and consumers and collected $1.4 billion overall. General and administrative (G&A) expenses were $36 million, with $15 million in contingent losses.

Publication Date: Nov -03

📋 Highlights
  • Record Adjusted Portfolio:: Portfolio reached $9.1 billion, a 2% increase from Q3 2024.
  • Originations Decline:: Forecasted net cash flows fell by 0.5% ($59 million) amid lower originations volume.
  • Dealer Growth:: Enrolled 1,300 new dealers, ending Q3 with 10,180 active dealers nationwide.
  • Market Share Drop:: Core used vehicle subprime segment share fell to 5.1% (vs. 6.5% in prior year period).
  • Leverage Position:: Debt-to-equity ratio remains at the high end of 2-3x, with $1.6 billion in unused ABS facility capacity.

Operational Highlights

The company enrolled over 1,300 new dealers and had 10,180 active dealers during the quarter. The market share in the core segment of used vehicles financed by subprime consumers was 5.1% for the first 8 months of the year, down from 6.5% from the same period in 2024. CEO Kenneth Booth noted that the environment is very competitive, but the company is in a great position for the future, focusing on maximizing intrinsic value.

Balance Sheet and Capital Management

The company's current leverage is at the high end of the 2-3x debt-to-equity range. Douglas Busk stated that they consider leverage when repurchasing shares, but it hasn't changed their view on their balance sheet. The company has just over 2 million shares under the Board authorization for repurchase. The unused availability on their revolving credit facilities stands at $1.6 billion.

Valuation and Outlook

The stock trades at a P/E Ratio of 11.09 and a P/B Ratio of 3.19, indicating a relatively reasonable valuation. With analysts estimating next year's revenue growth at 2.5%, the company's prospects appear stable. The return on equity (ROE) stands at 27.53%, reflecting the company's ability to generate profits from shareholders' equity. The Free Cash Flow Yield is 22.07%, suggesting a significant return for investors.

Management Commentary and Future Plans

CEO Kenneth Booth announced his retirement, effective after this quarter, and the appointment of a new Board member, Vinayak. The company's focus on maximizing intrinsic value and positively changing the lives of their key constituents remains unchanged. The management's outlook on the ABS market has been favorable, with tight spreads despite some widening after the Tricolor bankruptcy.

3. NewsRoom

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Credit Acceptance Q4 Earnings Call Highlights

Jan -31

Source: defenseworld.net

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CACC Up on Q4 Earnings Beat Despite Y/Y Rise in Expenses, Provisions

Jan -30

Source: zacks.com

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Credit Acceptance Corporation (CACC) Q4 2025 Earnings Call Transcript

Jan -30

Source: seekingalpha.com

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Credit Acceptance (CACC) Q4 Earnings Beat Estimates

Jan -29

Source: zacks.com

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Credit Acceptance Announces Fourth Quarter 2025 Results

Jan -29

Source: globenewswire.com

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Credit Acceptance Announces Timing of Fourth Quarter 2025 Earnings Release and Webcast

Jan -22

Source: globenewswire.com

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Credit Acceptance Announces Extension of $100.0 Million Asset-Backed Financing

Jan -15

Source: globenewswire.com

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Credit Acceptance Honored for the 11th Time as a Best Place to Work in IT by Computerworld

Dec -10

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.92%)

6. Segments

Dealers Financing Programs

Expected Growth: 7.92%

The 7.92% growth in Dealers Financing Programs from Credit Acceptance Corporation is driven by increasing demand for subprime auto loans, expansion into new markets, strategic partnerships with dealerships, and effective risk management practices. Additionally, the company's proprietary technology and scoring models enable efficient underwriting, contributing to the segment's growth.

7. Detailed Products

Indirect Financing

Credit Acceptance Corporation provides indirect financing to consumers through a network of automobile dealerships, enabling them to purchase vehicles.

Portfolio Purchasing

The company purchases existing portfolios of consumer loans from dealerships, banks, and other financial institutions, providing liquidity to the sellers.

Direct Financing

Credit Acceptance Corporation offers direct financing to consumers, allowing them to purchase vehicles directly from the company.

Portfolio Servicing

The company provides servicing for portfolios of consumer loans, including billing, collections, and customer service.

8. Credit Acceptance Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Credit Acceptance Corporation operates in a niche market, providing financing for subprime auto loans. While there are some substitutes available, such as other financing options or public transportation, they are not highly attractive to the target market, reducing the threat of substitutes.

Bargaining Power Of Customers

Credit Acceptance Corporation's customers are typically subprime borrowers with limited bargaining power. They have limited options for financing, and the company's financing options are often more attractive than those offered by competitors.

Bargaining Power Of Suppliers

Credit Acceptance Corporation's suppliers are primarily dealerships and other partners that provide vehicles for financing. The company has a strong network of suppliers and is not heavily dependent on any one supplier, reducing the bargaining power of suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the regulatory hurdles and capital requirements necessary to enter the subprime auto lending market. Additionally, Credit Acceptance Corporation's established relationships with dealerships and its proprietary scoring model create barriers to entry.

Intensity Of Rivalry

The subprime auto lending market is competitive, with several established players. However, Credit Acceptance Corporation's niche focus and proprietary scoring model help to differentiate it from competitors, reducing the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 74.57%
Debt Cost 6.71%
Equity Weight 25.43%
Equity Cost 11.18%
WACC 7.84%
Leverage 293.19%

11. Quality Control: Credit Acceptance Corporation passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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OneMain Holdings

A-Score: 6.6/10

Value: 5.5

Growth: 5.4

Quality: 5.2

Yield: 10.0

Momentum: 7.0

Volatility: 6.7

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FirstCash

A-Score: 6.3/10

Value: 4.1

Growth: 7.6

Quality: 6.4

Yield: 2.0

Momentum: 9.5

Volatility: 8.0

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SLM

A-Score: 6.1/10

Value: 7.1

Growth: 5.6

Quality: 6.8

Yield: 4.0

Momentum: 7.0

Volatility: 6.0

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Nelnet

A-Score: 5.8/10

Value: 4.9

Growth: 5.2

Quality: 5.3

Yield: 2.0

Momentum: 8.0

Volatility: 9.3

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Ally Financial

A-Score: 5.6/10

Value: 6.6

Growth: 5.1

Quality: 3.1

Yield: 6.0

Momentum: 6.0

Volatility: 6.7

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Credit Acceptance

A-Score: 5.0/10

Value: 6.3

Growth: 6.3

Quality: 7.2

Yield: 0.0

Momentum: 4.5

Volatility: 5.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

495.97$

Current Price

495.97$

Potential

-0.00%

Expected Cash-Flows