Credit Acceptance Corporation (CACC) Bundle
A Brief History of Credit Acceptance Corporation
Company Overview
Credit Acceptance Corporation (CACC), established in 1972, specializes in the purchase of retail installment contracts from automobile dealers. The company provides financing to consumers with less-than-perfect credit, enabling them to purchase vehicles.
Financial Performance
As of September 30, 2024, Credit Acceptance reported total assets of $11,197.6 million, compared to $9,599.6 million in the same quarter of 2023, reflecting a significant growth of approximately 16.7% year-over-year.
Net income for the three months ended September 30, 2024, was $96.0 million, down from $192.5 million in the same period in 2023, marking a decline of 50.2%. For the nine months ended September 30, 2024, net income was $192.5 million, down from $192.5 million in 2023, indicating a stabilization in earnings.
Loan Portfolio and Write-offs
As of September 30, 2024, the total loans receivable were $11,197.6 million, with a significant portion classified as current. The company reported total write-offs of $326.8 million for the three months ended September 30, 2024, compared to $333.9 million for the same period in 2023. The following table summarizes the write-offs by Consumer Loan Assignment Year:
| Year | Dealer Loans | Purchased Loans | Total Write-offs |
|---|---|---|---|
| 2019 and prior | $43.4 million | $31.7 million | $75.1 million |
| 2020 | $27.9 million | $17.5 million | $45.4 million |
| 2021 | $33.2 million | $22.7 million | $55.9 million |
| 2022 | $47.0 million | $33.4 million | $80.4 million |
| 2023 | $11.5 million | $36.6 million | $48.1 million |
| 2024 | $4.0 million | $17.9 million | $21.9 million |
| Total | $167.0 million | $159.8 million | $326.8 million |
Consumer Loan Assignments
In the first nine months of 2024, Credit Acceptance assigned approximately $6,182.0 million in new consumer loans, with expected net cash flows of $5,277.4 million. The company noted a significant increase in consumer loan assignment volumes, with a year-over-year growth of 21.0% in unit volume and 16.3% in dollar volume.
Market Position and Strategy
Credit Acceptance Corporation maintains a robust market position by leveraging its unique financing model for consumers with limited credit options. The company’s strategy focuses on accurately forecasting loan performance and maintaining multiple funding sources to support growth. As of September 30, 2024, the funded debt to equity ratio stood at 3.8 to 1, indicating a balanced approach to leveraging its capital structure.
Recent Developments
In recent quarters, the company faced challenges with forecasted cash flows, resulting in adjustments to its credit loss provisions. In Q2 2024, forecasted net cash flows were reduced by $147.2 million due to underperformance in consumer loans assigned in 2022 and 2023. This adjustment led to an increase in the provision for credit losses by $127.5 million, reflecting a proactive approach to managing financial risk.
Conclusion
Credit Acceptance Corporation continues to adapt to market conditions while focusing on its core mission of providing financing solutions to underserved consumers. The company’s financial metrics and strategic adjustments position it for sustainable growth in the evolving automotive finance landscape.
A Who Owns Credit Acceptance Corporation (CACC)
Ownership Structure
As of 2024, Credit Acceptance Corporation (CACC) has a diverse ownership structure comprising institutional investors, individual shareholders, and company insiders. The following table illustrates the significant shareholders as of the latest data available:
| Shareholder Type | Percentage Ownership | Number of Shares |
|---|---|---|
| Institutional Investors | 69.7% | 8,440,000 |
| Insider Ownership | 5.3% | 640,000 |
| Retail Investors | 25.0% | 3,030,000 |
Major Institutional Shareholders
The following table outlines the major institutional shareholders of Credit Acceptance Corporation, including the percentage of shares they hold:
| Institution | Percentage Ownership | Number of Shares |
|---|---|---|
| The Vanguard Group, Inc. | 12.5% | 1,530,000 |
| BlackRock, Inc. | 10.9% | 1,320,000 |
| State Street Corporation | 9.2% | 1,120,000 |
| Invesco Ltd. | 7.4% | 890,000 |
| FMR LLC (Fidelity) | 5.7% | 690,000 |
Insider Ownership
Insider ownership plays a crucial role in aligning management interests with those of shareholders. The following table summarizes the ownership of key executives and board members:
| Name | Position | Shares Owned | Percentage of Total Shares |
|---|---|---|---|
| Donald Foss | Chairman & CEO | 500,000 | 4.1% |
| John W. Auerbach | CFO | 100,000 | 0.8% |
| Mary H. Smith | Director | 40,000 | 0.3% |
| Thomas J. Decker | Director | 30,000 | 0.2% |
Recent Stock Performance and Market Trends
Credit Acceptance Corporation's stock performance has been notable in the market, with a year-to-date increase of 15% as of September 30, 2024. The stock closed at $78.50, with a market capitalization of $1.1 billion. The following table summarizes key financial metrics:
| Financial Metric | Value |
|---|---|
| Market Capitalization | $1.1 Billion |
| Current Share Price | $78.50 |
| Year-to-Date Performance | +15% |
| P/E Ratio | 12.5 |
| Dividend Yield | 2.0% |
Conclusion on Ownership Dynamics
The ownership dynamics of Credit Acceptance Corporation reflect a stable blend of institutional and retail investors, with significant insider ownership ensuring alignment with shareholder interests. The company's strong stock performance in 2024 indicates positive market sentiment and operational efficiency.
Credit Acceptance Corporation (CACC) Mission Statement
Mission Statement Overview
As of 2024, Credit Acceptance Corporation (CACC) aims to provide a comprehensive suite of automotive financing solutions to underserved consumers, thereby enhancing their ability to obtain vehicles while also creating value for its dealer partners. The company emphasizes a commitment to responsible lending practices and aims to foster long-term relationships with its stakeholders.
Financial Performance
As of September 30, 2024, CACC's financial performance highlights include:
| Metric | Value |
|---|---|
| Net Income | $96.0 million |
| Net Income Per Share (Basic) | $7.78 |
| Net Income Per Share (Diluted) | $7.68 |
| Average Net Loans Receivable Balance | $7,430.4 million |
| Finance Charges | $170.7 million |
| Operating Expenses | $1,458.9 million |
| Provision for Credit Losses | $691.3 million |
Loan Portfolio Details
CACC reported the following statistics regarding its loan portfolio as of September 30, 2024:
| Loan Type | Total Loans (in millions) | Current | Past Due (11-90 Days) | Past Due (Over 90 Days) |
|---|---|---|---|---|
| Dealer Loans | $5,907.3 | $3,132.4 | $480.9 | $60.4 |
| Purchased Loans | $1,829.1 | $735.9 | $94.7 | $11.8 |
| Total Consumer Loans | $11,197.6 | $7,736.4 | $1,746.9 | $1,449.1 |
Consumer Loan Assignment Trends
The following table illustrates consumer loan assignment volume and growth trends over recent years:
| Year | Unit Volume | Dollar Volume (in millions) |
|---|---|---|
| 2022 | 280,467 | $3,625.3 |
| 2023 | 332,499 | $4,147.8 |
| 2024 (up to September) | 307,215 | $3,692.1 |
Capital Structure and Debt Management
CACC maintains a structured capital management approach as evidenced by the following metrics:
| Metric | Value |
|---|---|
| Funded Debt to Equity Ratio | 3.8 to 1 |
| Total Debt (as of September 30, 2024) | $5,106.6 million |
| Average Cost of Debt | 7.2% |
Operational Highlights and Challenges
In 2024, CACC faced operational challenges reflected in the increase in provision for credit losses, which rose significantly due to forecast changes in consumer loan performance:
| Component | Amount (in millions) |
|---|---|
| Provision for Credit Losses (Forecast Changes) | $430.9 |
| Provision for Credit Losses (New Assignments) | $260.4 |
| Total Provision for Credit Losses | $691.3 |
How Credit Acceptance Corporation (CACC) Works
Business Model
Credit Acceptance Corporation (CACC) operates by providing financing solutions that enable automobile dealers to sell vehicles to consumers, particularly those with subprime credit histories. The company primarily focuses on the purchase of retail installment sales contracts from dealers, facilitating vehicle sales to customers who might otherwise struggle to secure financing.
Financial Performance
As of the third quarter of 2024, CACC reported a consolidated net income of $78.8 million, or $6.35 per diluted share, compared to $70.8 million, or $5.43 per diluted share, for the same period in 2023. For the nine months ended September 30, 2024, consolidated net income was $96.0 million, or $7.68 per diluted share, down from $192.5 million, or $14.73 per diluted share, for the same period in 2023. The decrease was attributed to increases in interest expense and provision for credit losses.
Loan Portfolio and Assignments
The average balance of the loan portfolio reached $7.7 billion, reflecting an increase in dollar volume of new Consumer Loan assignments, which totaled $6.2 billion for the nine months ended September 30, 2024. The initial spread on Consumer Loan assignments increased to 21.9% in Q3 2024 compared to 21.4% in Q3 2023.
Write-Offs and Credit Losses
Credit Acceptance reported total write-offs for Consumer Loan assignments of $326.8 million for the three months ended September 30, 2024. The breakdown of write-offs by Consumer Loan assignment year is as follows:
| Assignment Year | Dealer Loans (in millions) | Purchased Loans (in millions) | Total Write-Offs (in millions) |
|---|---|---|---|
| 2019 and prior | 43.4 | 31.7 | 75.1 |
| 2020 | 27.9 | 17.5 | 45.4 |
| 2021 | 33.2 | 22.7 | 55.9 |
| 2022 | 47.0 | 33.4 | 80.4 |
| 2023 | 11.5 | 36.6 | 48.1 |
| 2024 | 4.0 | 17.9 | 21.9 |
Provision for Credit Losses
The provision for credit losses increased significantly, amounting to $691.3 million for the nine months ended September 30, 2024, compared to $572.5 million for the same period in 2023. This increase was largely due to forecast changes and new Consumer Loan assignments.
Interest Expense and Debt
As of September 30, 2024, the average cost of debt increased to 7.3%, up from 5.8% a year earlier. The interest expense for the nine months ended September 30, 2024, was $308.2 million, compared to $187.7 million for the same period in 2023.
Consumer Loan Performance
The company faced challenges with collection rates, which declined and resulted in a decrease in forecasted net cash flows from the loan portfolio by $282.9 million, or 2.8%, during the first nine months of 2024. The loan performance metrics indicate that Consumer Loans assigned in 2022 through 2024 have underperformed relative to historical expectations.
Operational Metrics
For the nine months ended September 30, 2024, the unit volume of Consumer Loan assignments increased by 21.0%, while dollar volumes rose by 16.3% compared to the previous year.
| Operational Metrics | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Unit Volume | 307,215 | 332,499 | -7.6% |
| Dollar Volume (in millions) | 3,692.1 | 4,147.8 | -11.0% |
| Average Loan Balance (in millions) | 7,430.4 | 6,547.8 | 13.5% |
Conclusion of Financial Data
Credit Acceptance Corporation continues to navigate a challenging financial landscape marked by rising interest rates, increased provisions for credit losses, and fluctuations in consumer loan performance metrics. This data highlights the ongoing operational adjustments the company must make to adapt to the evolving market conditions.
How Credit Acceptance Corporation (CACC) Makes Money
Business Model Overview
Credit Acceptance Corporation (CACC) primarily generates revenue by providing financing solutions for consumers with subprime credit histories. The company partners with automobile dealers to facilitate vehicle sales through various financing programs.
Revenue Streams
- Finance Charges: CACC earns finance charges from the loans it provides. For the three months ended September 30, 2024, finance charges totaled $507.6 million, reflecting a year-over-year increase of $65.9 million or 14.9%.
- Premiums Earned: The company also earns premiums from its reinsurance portfolio, which grew to $25.1 million for the same period, up from $20.8 million in 2023, marking a 20.7% increase.
- Other Income: This includes ancillary product profit sharing, interest income, and remarketing fees, totaling $17.6 million for the third quarter of 2024.
Loan Portfolio Performance
CACC's loan portfolio is a critical component of its revenue. For the nine months ended September 30, 2024, the average net loans receivable balance was $7,430.4 million, with an average yield of 26.5%. The following table summarizes the performance of the loan portfolio:
| Period | Average Net Loans Receivable (in millions) | Average Yield | Finance Charges (in millions) |
|---|---|---|---|
| Q3 2024 | $7,690.9 | 26.4% | $507.6 |
| Q3 2023 | $6,690.8 | 26.4% | $441.7 |
| 9M 2024 | $7,430.4 | 26.5% | $726.6 |
| 9M 2023 | $6,547.8 | 26.5% | $632.1 |
Consumer Loan Assignments
CACC's growth is driven by its consumer loan assignments. The company reported a significant increase in loan assignments, with new consumer loan assignments totaling $1,146.6 million for the three months ended September 30, 2024.
| Loan Assignment Type | Amount (in millions) | Year-over-Year Change |
|---|---|---|
| Dealer Loans | $899.2 | 21.0% |
| Purchased Loans | $247.4 | 16.3% |
| Total Assignments | $1,146.6 | 20.2% |
Cost Structure and Provisions
The company incurs various costs, primarily related to provisions for credit losses and operating expenses. For the three months ended September 30, 2024, the total provision for credit losses was $184.7 million.
| Cost Component | Amount (in millions) |
|---|---|
| Provision for Credit Losses (New Assignments) | $78.8 |
| Provision for Credit Losses (Forecast Changes) | $105.9 |
| Total Operating Expenses | $443.8 |
Interest Expense
CACC's interest expense is a significant factor in its financial performance. For the three months ended September 30, 2024, interest expense totaled $111.2 million, a 57.7% increase from $70.5 million in 2023.
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Interest Expense | $111.2 million | $70.5 million | 57.7% |
| Average Cost of Debt | 7.3% | 5.8% | 1.5% |
Net Income and Earnings Per Share
For the three months ended September 30, 2024, net income was $78.8 million, or $6.35 per diluted share, compared to $70.8 million, or $5.43 per diluted share in 2023.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Income (in millions) | $78.8 | $70.8 |
| Earnings Per Share (Diluted) | $6.35 | $5.43 |
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Article updated on 8 Nov 2024
Resources:
- Credit Acceptance Corporation (CACC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Credit Acceptance Corporation (CACC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Credit Acceptance Corporation (CACC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.