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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

Credit Acceptance Corporation's recent performance was positively driven by its Q4 2025 earnings beat, with quarterly earnings of $11.35 per share, surpassing the Zacks Consensus Estimate of $10.3 per share. The company's consolidated net income was $122.0 million, or $10.99 per diluted share, with adjusted net income of $126.0 million, or $11.35 per diluted share. Revenue gains offset higher expenses and provisions, driving the positive performance. Additionally, the company's new CEO, Vinayak Hegde, outlined leadership priorities, including improving loan volume comparisons and continued investment in technology and servicing.

1.c. Company Highlights

2. Credit Acceptance Corporation Posts Strong Q4 Earnings Despite Loan Performance Declines

Credit Acceptance Corporation reported adjusted earnings per share of $11.35, beating analyst estimates of $10.3. The company's financial performance was resilient, with collected cash reaching $1.3 billion in the fourth quarter. The company financed almost 72,000 contracts and enrolled over 1,200 new dealers during the quarter. Revenue growth is expected to be around 2.5% next year, according to analyst estimates.

Publication Date: Feb -08

📋 Highlights
  • Adjusted EPS Growth:: Despite loan performance and volume declines, the company achieved adjusted earnings per share growth in Q4.
  • Loan Volume & Collections:: Financed 72,000 contracts, collected $1.3 billion, and enrolled 1,200+ new dealers in Q4.
  • Loan Performance Decline:: 2023 and 2024 vintages showed 0.4% and 0.2% declines in forecasted collection rates, respectively.
  • Balance Sheet Leverage:: Leverage at 2.8x, remaining within acceptable range while prioritizing capital for originations and share repurchases.
  • Market Share Stability:: Maintained 4.5% share in the used vehicle subprime market, with focus on improving solutions for dealers.

Loan Performance and Credit Quality

The company's loan performance measured by variances in forecasted collection rates moderately declined, with the 2023 and 2024 vintages declining 0.4% and 0.2%, respectively. CEO Vinayak Hegde attributed this to the company's conservative and long-term approach to credit lending and underwriting, stating that they are focused on improving credit scoring models. This approach is reflected in the company's provision for new advances, which increased due to the mix between purchase and portfolio programs, as explained by CFO Jay Martin.

Leverage and Capital Allocation

The company's balance sheet leverage was around 2.8, which is at the higher end but within an acceptable range, according to Jay Martin. The company's strategy for capital allocation remains unchanged, with a focus on ensuring sufficient capital for new originations and repurchasing shares based on intrinsic value. Vinayak Hegde stated that the company will stay the course under his leadership, with no change in strategy.

Valuation and Growth Prospects

With a P/E Ratio of 13.1 and an ROE of 26.63%, the company's valuation appears reasonable. The stock's Free Cash Flow Yield is around 19.41%, indicating a potentially attractive return for investors. The company's market share in the used vehicle subprime market remained flat at 4.5%, and the decline was mostly among large independent dealers and franchise dealers. The initial spread has started to expand after a period of decline, attributed to pricing, as discussed by Jay Martin.

Outlook and Conclusion

Despite the decline in loan performance and volumes, the company's strong foundation and conservative approach to credit lending position it for growth. The company's focus on empowering dealers to serve credit-challenged and credit-invisible consumers, providing reliable transportation, and rebuilding credit remains unchanged. With a reasonable valuation and a potentially attractive return, the stock appears to be a viable investment opportunity.

3. NewsRoom

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Y Intercept Hong Kong Ltd Sells 7,667 Shares of Credit Acceptance Corporation $CACC

Feb -04

Source: defenseworld.net

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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

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

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Yield: 2.0

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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

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Volatility: 6.0

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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

511.7$

Current Price

511.7$

Potential

-0.00%

Expected Cash-Flows