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Here are 1-3 brief analogies to describe Credit Acceptance (CACC):

• A specialized Capital One, entirely focused on providing auto loans to people with lower credit scores.
• Rent-A-Center for car financing: they help people with bad credit get loans to buy cars.

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• Dealer Financing Program: This financial service provides automobile dealers with the ability to offer car loans to consumers across the credit spectrum, including those with subprime credit, through a non-recourse lending model.

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Credit Acceptance (CACC) primarily partners with automobile dealerships, providing them with a unique non-recourse financing program that enables the dealerships to sell vehicles to consumers regardless of their credit history. While these dealerships are direct business partners that utilize CACC's services, Credit Acceptance's extensive network of thousands of dealerships means there are no individual "major customer companies" in the traditional sense of a concentrated customer base. As such, the company's business model is ultimately driven by serving specific categories of individual borrowers who require specialized financing.

The categories of individual customers that Credit Acceptance serves are:

• Subprime Credit Consumers: These are individuals with low credit scores (typically below 620-660) who do not qualify for traditional auto loans due to a history of missed payments, high debt utilization, or other credit imperfections.
• Credit-Challenged Consumers: This category includes individuals who have experienced significant adverse credit events such as bankruptcy, repossessions, foreclosures, or multiple delinquencies, which severely limit their access to conventional financing options.
• Consumers with Limited or No Credit History: This group comprises individuals who have not yet established a sufficient credit profile, such as first-time borrowers, young adults, or new immigrants, making it challenging for them to obtain mainstream auto financing.

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• Equifax Inc. (Symbol: EFX)
• TransUnion (Symbol: TRU)
• Experian plc (Symbol: EXPN)

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Kenneth S. Booth, Chief Executive Officer and President

Mr. Booth became Chief Executive Officer and President of Credit Acceptance in May 2021. He joined the company in January 2004 as Director of Internal Audit, then served as Chief Accounting Officer from May 2004, and Chief Financial Officer from December 2004 until May 2021. Before joining Credit Acceptance, he worked in public accounting, most recently as a senior manager at PricewaterhouseCoopers LLP from August 1991.

Jay D. Martin, Chief Financial Officer

Mr. Martin was promoted to Chief Financial Officer in January 2024. He joined Credit Acceptance in September 2003 as Manager of SEC Reporting and advanced through various financial roles, including Director of Accounting, Vice President - Accounting & Financial Reporting, and Senior Vice President - Finance & Accounting. Previously, Mr. Martin worked as an audit manager at the public accounting firm Crowe LLP.

Jonathan L. Lum, Chief Operating Officer

Mr. Lum joined Credit Acceptance in 2002 and has held several positions within the company, initially in the finance department. He rose to Accounting Manager, then Director – Projects and Support in 2007, and Director – Policy Compliance in 2008.

Erin J. Kerber, Chief Legal Officer

Ms. Kerber became Chief Legal Officer in July 2021. She started at Credit Acceptance in 2010 as a Litigation Manager, was promoted to Director of Regulatory Compliance in 2012, Vice President - Regulatory Compliance in 2014, and Senior Vice President, Assistant General Counsel – Regulatory Compliance in 2018. Prior to her tenure at Credit Acceptance, Ms. Kerber was an attorney with the law firm Dickinson Wright PLLC.

Douglas W. Busk, Chief Treasury Officer

Mr. Busk joined Credit Acceptance in November 1996 as Vice President and Treasurer. He was appointed Chief Financial Officer in January 2000, a role he held until May 2004, and also served as President of the company's Capital Services unit for a period. He then became Senior Vice President and Treasurer in May 2004 before assuming his current position as Chief Treasury Officer in July 2020.

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1. Deteriorating Credit Quality and Economic Sensitivity

Credit Acceptance primarily provides financing to consumers with impaired or limited credit histories, making its business highly sensitive to economic fluctuations. The company is currently navigating a challenging collection environment, with a notable decline in forecasted collection rates that has reduced expected net cash flows from its loan portfolio. Default rates on subprime auto loans have reached levels not seen in decades, indicating a growing inability of borrowers to repay their loans. This deterioration in credit quality and the potential for insufficient provisions for loan losses directly threaten the company's profitability and financial health.

2. Regulatory Scrutiny and Legal Challenges

Credit Acceptance operates under persistent regulatory scrutiny and faces ongoing legal challenges. The company has acknowledged that legal and regulatory issues could impact its financial performance, and it is frequently subject to consumer claims and investigations, which can result in substantial damages, fines, and penalties. A significant example is the joint lawsuit filed in January 2023 by the Consumer Financial Protection Bureau (CFPB) and the New York Attorney General, accusing Credit Acceptance of engaging in deceptive practices, fraud, misrepresenting loan terms, and pushing dealers to sell cars with hidden interest costs and expensive add-on products. This lawsuit highlights the potential for significant legal liabilities and reputational damage.

3. Interest Rate Fluctuations and Funding/Liquidity Risks

As a finance company, Credit Acceptance is significantly exposed to changes in interest rates. A higher interest rate environment can slow down its business and increase the likelihood of higher-than-expected default rates on its loans. Fluctuations in interest rates can adversely affect the company's borrowing costs, overall profitability, and liquidity. Furthermore, Credit Acceptance faces risks related to its ability to access and renew funding sources and obtain the necessary capital to sustain and grow its operations. The company's substantial debt levels could also negatively impact its business and its capacity to meet its financial obligations.

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Credit Acceptance (CACC) is expected to drive future revenue growth over the next 2-3 years through several key strategies and market dynamics:

1. Growth in the Non-Prime Borrower Segment: The company's business model is focused on providing auto financing to subprime consumers. Ongoing demand from this segment, coupled with demographic trends and persistent income inequality in the U.S., is anticipated to support a stable or increasing demand for Credit Acceptance's auto loan products. This expansion of the addressable market is a foundational driver for long-term revenue growth.

2. Expansion of Dealer Network and Active Dealers: Credit Acceptance continues to grow its network of active dealers. In a recent quarter, the company enrolled over 1,300 new dealers, bringing the total number of active dealers to 10,180. A sustained increase in dealer enrollments and active dealers is expected to contribute to top-line growth by facilitating a higher volume of financed contracts.

3. Technology Modernization and Advanced Analytics: Significant investments in technology, including a revamped loan origination system and accelerated feature development, are expected to enhance operational efficiency, improve the dealer and customer experience, and strengthen risk management. The adoption of advanced data analytics and ongoing scorecard updates are projected to improve risk assessment and loan performance, potentially leading to reduced default rates and expanded net margins. The appointment of a new CEO with expertise in digital transformation further underscores a commitment to technology-driven growth.

4. Improved Loan Performance and Credit Quality: While some prior loan vintages have underperformed, the company's 2025 vintage exceeded expectations. Credit Acceptance has implemented stricter scorecard changes aimed at improving credit quality, even if it results in lower advance rates and reduced loan origination volumes in the short term. A focus on economic profit and portfolio quality over chasing higher loan volumes is expected to support operating margins and, ultimately, revenue quality.

5. Strategic Capital Allocation (Share Repurchases): Although not a direct revenue driver, Credit Acceptance's ongoing share repurchase program can enhance per-share earnings growth. The company repurchased a significant number of shares in the latest quarter, signaling efforts to improve shareholder value, which can indirectly support the company's financial health and capacity for future growth initiatives.

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