Breaking Down Credit Acceptance Corporation (CACC) Financial Health: Key Insights for Investors

You're looking at Credit Acceptance Corporation (CACC) and seeing a mixed signal, right? The headline numbers from the Q3 2025 earnings report look strong-adjusted earnings per share (EPS) hit $10.28, easily beating expectations, and total GAAP revenues grew 5.8% year-over-year to $582.4 million. But, as a seasoned analyst, you know that's only half the story. The real tension is in the subprime auto loan market's health; specifically, the company saw a significant drop in consumer loan assignment volume, down 16.5% in units, and a concerning decline in forecasted collection rates, reducing expected net cash flows by $58.6 million for the quarter. Still, the average loan portfolio is massive at $8.0 billion, showing the scale of their operation. This isn't a simple buy or sell call; it's a deep dive into how CACC's unique business model handles a tough collection enviornment while still growing the top line. Let's defintely dig into the risks hidden behind that EPS beat, and map out the next steps for your portfolio strategy.

Revenue Analysis

You need to know where Credit Acceptance Corporation (CACC) makes its money, and the answer is clear: it's a finance charge story, almost entirely. For the trailing twelve months ending September 30, 2025, CACC's total revenue stood at approximately $2.30 billion. This top-line figure is overwhelmingly driven by the interest income from their subprime auto loan portfolio, which is the core of their business model.

The company's primary revenue sources are finance charges, which is just the financial analyst's way of saying interest income from the loans they hold. They also earn some revenue from premiums on reinsurance of vehicle service contracts and various other fees. Honestly, the other streams are minor. Your focus should be on the finance charges, as they are the lifeblood of the operation. Here's the quick math on the main segment:

• Q3 2025 Total Revenue: $582.4 million
• Q3 2025 Finance Charges: $539.4 million
• Contribution: Approximately 92.6% of Q3 revenue.

This heavy reliance on finance charges means CACC's revenue health is directly tied to the size and performance of its loan portfolio. The average balance of their loan portfolio grew by 3.9% from Q3 2024 to reach $8.0 billion in Q3 2025, which is a key driver for the higher finance charges.

Year-over-Year Growth and Segment Shifts

The good news is that CACC's revenue is still growing, but the pace is slowing, reflecting a more challenging market. Total revenue for the third quarter of 2025 was $582.4 million, representing a solid 5.8% increase year-over-year compared to the third quarter of 2024. This growth is defintely a win in a competitive landscape, but it masks some internal shifts you need to understand.

While revenue is up, the volume of new business is actually down. The Consumer Loan assignment unit volume declined by 16.5% and the dollar volume fell by 19.4% in Q3 2025 compared to the same period in 2024. This means they financed fewer, and lower-value, contracts. The revenue growth, therefore, comes from the larger existing loan book and higher interest rates, not from a surge in new originations. What this estimate hides is the impact of a scorecard change in late 2024 that resulted in lower advance rates, coupled with increased competition.

To get a clearer picture of how the core business contributes, look at the quarterly breakdown:

The key takeaway is that CACC is managing to increase revenue despite underwriting fewer loans, which points to a focus on maintaining profitability over volume. You can dig deeper into their long-term strategy and values here: Mission Statement, Vision, & Core Values of Credit Acceptance Corporation (CACC).

Profitability Metrics

You need to know if Credit Acceptance Corporation (CACC) is still a cash-generating machine, and the short answer is yes, but the engine is showing signs of strain. The company's unique business model, which focuses on non-prime auto lending, delivers exceptionally high gross margins, but rising credit risk is eating into the bottom line. For the Trailing Twelve Months (TTM) ended September 30, 2025, CACC generated a Net Profit Margin of roughly 20.0%, which is strong but reflects recent pressures.

Gross, Operating, and Net Margins

CACC's profitability structure is unusual because it operates as a finance company. Its Gross Profit Margin (GPM) for the LTM period is an enormous 92.7%. [cite: 8 of first search] This isn't a typo; for a finance company, the primary revenue is interest and fees, and the cost of goods sold is minimal, making Gross Profit essentially total revenue before operating expenses and provisions for credit losses. [cite: 8 of first search]

When you move to Operating Profit Margin (a proxy using TTM EBITDA), the number drops to approximately 26.4%. This is where the true cost of their business model-general and administrative expenses, and the critical provision for credit losses-comes into sharp focus. Finally, the TTM Net Profit Margin of roughly 20.0% on a revenue base of $2.27 billion shows the company remains highly profitable after all expenses and taxes. [cite: 10 of first search]

• Gross Profit Margin (LTM): 92.7%
• Operating Profit Margin (TTM, est. from EBITDA): 26.4%
• Net Profit Margin (TTM): 20.0%

Profitability Trends and Industry Comparison

CACC's TTM Net Profit Margin of 20.0% is highly competitive, even when compared to the broader Financials sector in the S&P 500, which reported a net profit margin of 20.2% in Q3 2025. However, the trend is the real story. The profitability of the core loan portfolio is under pressure due to a challenging collection environment and a decline in forecasted collection rates. In Q3 2025 alone, the decline in forecasted collection rates reduced future net cash flows from the loan portfolio by $58.6 million, or 0.5%.

This decline in loan performance is a direct hit to future profitability, and it's happening while the industry is seeing stress. The 60-day delinquency rate for subprime auto loans across the US industry climbed to 6.31% in June 2025, up from 5.62% a year prior. The company is a trend-aware realist, so they've been adjusting, but it's a headwind.

Operational Efficiency and Cost Management

The high Gross Profit Margin of CACC is a function of its product pricing, not just lean operations. The real measure of operational efficiency here is cost management relative to the provisions for credit losses (which is the major variable cost). Management is responding to the environment by tightening their underwriting, which is a clear action. This led to a substantial decline in new loan volumes in Q3 2025, with Consumer Loan assignment dollar volumes falling by 19.4% year-over-year.

Here's the quick math: you sacrifice volume now to protect margins later from higher credit losses. Still, the average balance of the loan portfolio grew by 3.9% to $8.0 billion in Q3 2025, due to the long-term nature of the loans. This portfolio growth is what keeps the revenue stream defintely flowing, but the decline in new volume is a risk to future growth. You can get a more comprehensive view of the company's financial standing and strategic moves by reading Breaking Down Credit Acceptance Corporation (CACC) Financial Health: Key Insights for Investors.

Finance: Monitor the Q4 2025 provision for credit losses closely for any acceleration beyond the Q3 $58.6 million reduction in forecasted cash flows.

Debt vs. Equity Structure

You need to know how Credit Acceptance Corporation (CACC) funds its core business-subprime auto loans-because the debt structure is the engine of any finance company. The direct takeaway is that Credit Acceptance Corporation is highly leveraged, with a debt-to-equity ratio significantly higher than its industry peers, yet it continues to access capital markets for long-term, asset-backed financing.

As of the trailing twelve months leading into the fourth quarter of 2025, Credit Acceptance Corporation's total debt stood at approximately $6.37 billion. This substantial debt load is primarily long-term, structured through a mix of senior notes and asset-backed securitizations (ABS), which are common for finance companies. The company's long-term strategy is to match the long-term nature of its loan portfolio-which hit a record high of $9.1 billion on an adjusted basis in Q3 2025-with long-term funding.

Here's the quick math on leverage: The company's trailing twelve-month Debt-to-Equity (D/E) ratio is approximately 4.03. To be fair, finance companies inherently carry more debt than, say, a tech company, but this still warrants attention. Their own adjusted historical operating range for this metric is typically 2x to 3x, and management has noted that current leverage is at the high end of that range. For context, the average D/E ratio for the Auto & Truck Dealerships industry, a close proxy for this sector, is a much lower 1.61 as of November 2025. This spread shows Credit Acceptance Corporation's aggressive reliance on debt capital.

The company has been very active in the debt markets in 2025, a crucial factor in maintaining liquidity and funding growth. Their primary method of financing is through securitization, which is essentially packaging their auto loans into bonds and selling them to investors. Recent activities include:

• Issuing $500 million in new bonds in February 2025, due 2030.
• Announcing a $400 million senior notes offering in February 2025, intended to redeem outstanding 6.625% senior notes due 2026.
• Completing a $500.0 million asset-backed non-recourse secured financing in November 2025.

The corporate credit rating from S&P Global Ratings is BB/Stable/-- as of October 2025, which is a non-investment grade (or 'junk') rating, reflecting the risk inherent in the subprime lending business model, but the stability outlook is a positive sign. The company balances this debt financing with equity funding primarily through share repurchases, which boosts earnings per share but reduces the equity base, thereby increasing the D/E ratio. They repurchased approximately 230,000 shares for $107.4 million in Q3 2025 alone. It's a tightrope walk between maximizing returns for shareholders and managing leverage risk. You can dig deeper into who is holding this debt and equity in Exploring Credit Acceptance Corporation (CACC) Investor Profile: Who's Buying and Why?

The table below summarizes the key leverage metrics for your quick reference:

The next step is to monitor the performance of those 2022-2024 loan vintages, which management noted are underperforming expectations, as a drop in loan performance could stress the capacity to service this high debt load. Finance: track quarterly net charge-off rates against the 2025 ABS deal covenants.

Liquidity and Solvency

You need to know if Credit Acceptance Corporation (CACC) can cover its short-term obligations, and the answer is complex due to its business model, but its core cash generation remains strong. The company's liquidity position is structurally tight, as is typical for a non-bank finance company, but it is effectively managed by a consistent, positive cash flow from operations and a proven ability to access the asset-backed securitization (ABS) market.

When we look at the standard liquidity gauges-the current and quick ratios-we see numbers that, at first glance, would alarm an analyst for a typical manufacturing firm. For instance, the Current Ratio (current assets divided by current liabilities) was reported as low as 0.03 for the third quarter of 2025. This extremely low figure means current liabilities vastly exceed current assets, which is a common characteristic for finance firms like Credit Acceptance Corporation, where the primary asset (the loan portfolio) is long-term and not classified as current. To be fair, some data aggregators report a much higher ratio, like 22.03 for the same period, but this likely misclassifies their long-term loan receivables as current, which is misleading.

The low ratio points directly to the working capital trend: it is structurally low or negative. Working capital (current assets minus current liabilities) is not the primary measure of health here. Instead, you should focus on the quality of their cash flow and their access to funding. Their ability to generate cash from their core business is the real liquidity strength.

Here's the quick math on cash flow for the near-term picture:

• Operating Cash Flow (OCF): This is the lifeblood. The trailing twelve months (TTM) OCF ending June 30, 2025, was a strong $2.802 billion. That's a massive, consistent cash generator from their core lending and collection activities.
• Investing Cash Flow (ICF): This is consistently a large outflow, as expected. They are a growth company and their primary investment is buying new loans. The annual ICF for 2024 was a net outflow of $-1.72 billion.
• Financing Cash Flow (FCF): This is where they fund the growth. The TTM FCF ending June 30, 2025, was a net inflow of $1.845 billion, largely driven by new debt issuances (asset-backed secured financings) to fund the loan portfolio growth.

This cash flow profile-strong OCF, large ICF outflow, and large FCF inflow-shows a company that is funding its loan growth primarily through debt, which is the industry standard. Still, the reliance on securitization markets for this funding is a key risk.

The biggest near-term risk is the loan performance itself. Forecasted net cash flows declined by $58.6 million in the third quarter of 2025 due to underperformance in older loan vintages (2022-2024), which directly impacts the quality of their core asset and future operating cash flow. However, the company defintely has a clear liquidity strength: its proven access to the capital markets. They completed a $500.0 million asset-backed non-recourse secured financing in November 2025, demonstrating that investor appetite for their securitized loan products remains healthy. This is a critical factor that mitigates the risk of a low current ratio. For a deeper dive into the profitability and valuation, check out Breaking Down Credit Acceptance Corporation (CACC) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Credit Acceptance Corporation (CACC) and wondering if the market has it priced right, especially after a volatile year. My take is that CACC is currently trading at a slight discount to its historical valuation on a price-to-earnings basis, but its enterprise value multiple suggests the market is pricing in significant debt and a less-than-stellar near-term outlook for cash flow generation.

The core question-is Credit Acceptance Corporation overvalued or undervalued?-requires looking past the stock price to the underlying metrics. As of November 2025, the stock is trading around $441.30, which is much closer to its 52-week low of $401.90 than its 52-week high of $560.00. This price action tells you the market has been punishing the stock, likely due to concerns around credit quality and a challenging economic environment for subprime auto lending.

Here's the quick math on the key valuation multiples based on the latest 2025 fiscal year data:

• Price-to-Earnings (P/E): The trailing twelve-month (TTM) P/E ratio stands at 11.70. This is relatively low for a company that has historically commanded a premium, suggesting either undervaluation or a clear expectation of lower future earnings.
• Price-to-Book (P/B): The P/B ratio is 3.09. For a financial company, a P/B over 1.0 is common, but 3.09 indicates the market values the company's equity significantly higher than its accounting book value, which is a common trait for businesses with high returns on equity (ROE).
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio is high at approximately 18.73. Here's the thinking: the Enterprise Value (EV) is about $11.22 billion, and the TTM Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is $598.90 million. An EV/EBITDA this high for a finance company suggests the debt load-which is factored into EV-is substantial, or that recent TTM EBITDA is depressed.

The high EV/EBITDA is the real red flag. It shows that while the P/E looks cheap, the company's total value, including its substantial debt of over $6.37 billion, is quite expensive relative to its operating cash flow proxy (EBITDA). This is defintely a risk you need to weigh heavily.

On the income side, Credit Acceptance Corporation is a non-dividend-paying stock, meaning its dividend yield and payout ratio are 0.00%. [cite: 1, 2 from 1st search] Your return here is purely from capital appreciation, so you need to be confident in the stock's ability to climb back toward that 52-week high of $560.00.

Wall Street analysts are currently cautious, with a consensus rating of 'Reduce' or 'Sell.' [cite: 4, 6 from 1st search] The average 12-month price target is $465.00, [cite: 4, 6 from 1st search] which implies a modest upside from the current price, but the low target of $430.00 [cite: 6 from 1st search] shows a clear downside risk is still on the table. You can dive deeper into the company's core strategy by reviewing their Mission Statement, Vision, & Core Values of Credit Acceptance Corporation (CACC).

Next Step: Finance: Model CACC's debt maturity schedule against projected TTM EBITDA to stress-test the high EV/EBITDA ratio by end of week.

Risk Factors

You're looking at Credit Acceptance Corporation (CACC) and seeing a successful niche player, but the subprime auto lending space is defintely a high-wire act. The key takeaway for 2025 is this: while their business model is designed to withstand poor loan performance, CACC is currently navigating a perfect storm of intense competition, macroeconomic pressure on their borrowers, and persistent regulatory scrutiny.

Here's the quick math on the near-term financial risk: in the third quarter of 2025, a decline in forecasted collection rates reduced expected net cash flows from their loan portfolio by a notable $58.6 million, or 0.5%. That's real money, and it shows the core operational risk-the difficulty in accurately predicting how much of the loan portfolio they will actually collect. The profitability of their loans hinges on the spread between the forecasted collection rate and the advance rate, and forecasting that is tough.

Operational and Financial Headwinds

The biggest internal risk is the performance of their existing book of business, especially the older loans. While the 2025 loan vintage is actually exceeding expectations, the vintages from 2022, 2023, and 2024 are underperforming. This underperformance is directly tied to the economic volatility we've seen, where inflation and other pressures hit the non-prime consumer hardest. Plus, there's a capital risk; substantial debt and a potential reduction in their credit rating could increase the cost of their funding, restricting access to capital markets.

• Collections Forecasting: Inability to accurately forecast collections remains a material risk.
• Vintage Underperformance: 2022-2024 loan vintages are not meeting original expectations.
• Liquidity Risk: Substantial debt and reliance on continued access to funding sources.

External Pressures: Competition and Market Conditions

The external environment is a major challenge. Competition in the used vehicle subprime segment is intense. In the second quarter of 2025, Credit Acceptance Corporation's market share in this segment fell to 5.4%, down from 6.6% in 2024. That's a significant drop, and it forces a choice between accepting lower returns or losing volume. Also, the macroeconomic picture is a constant threat. Volatility in economic conditions, including inflation, continues to impact loan performance and consumer purchasing power.

To be fair, they are growing their overall portfolio, which hit a record $9.1 billion in Q2 2025, a 6% year-over-year increase, but assignment volumes (new loans) fell by 16.5% in units and 19.4% in dollars year-over-year in Q3 2025. That tells you the competition is biting hard on new business.

Regulatory and Litigation Landscape

The regulatory environment, especially for subprime lenders, is a persistent risk. While the Consumer Financial Protection Bureau (CFPB) filed a motion to withdraw from its lawsuit against Credit Acceptance Corporation in April 2025, the company is still facing ongoing litigation with the Office of the New York State Attorney General. Legal challenges like this can create a difficult legal environment that could hinder business practices and result in significant costs. Plus, the broader US regulatory landscape in 2025 is in a state of 'Regulatory Shift,' which brings uncertainty, even with potential deregulation efforts.

The good news is Credit Acceptance Corporation is taking clear action. They've modernized their CAPS origination system, which has increased the speed of delivering enhancements to dealers by almost 70% compared to one year ago. They also continue to buy back shares, repurchasing $107.4 million worth in Q3 2025, which shows management's confidence in the long-term value. You can get a sense of their long-term vision here: Mission Statement, Vision, & Core Values of Credit Acceptance Corporation (CACC).

Next Step: Portfolio Managers should model a 1.0% further decline in forecasted collection rates for the 2023 and 2024 loan vintages to stress-test 2026 earnings projections against continued economic headwinds.

Growth Opportunities

You're looking for where Credit Acceptance Corporation (CACC) can push growth, and the answer lies in its unique subprime auto lending model, plus a critical tech upgrade. The company isn't chasing market share at any cost, but rather focusing on its core competitive advantage: a disciplined, high-margin approach to a risky segment.

The firm's strategic focus in 2025 has been on enhancing its dealer network and modernizing its technology. In Q2 2025, Credit Acceptance financed over 85,000 contracts and added 1,560 new dealers, bringing the total active dealer count to 10,655. This expansion, coupled with giving dealers more access to its Purchase Program, is a direct, tangible growth driver. They're also modernizing their loan origination system, which should defintely improve the dealer experience and streamline operations.

• Modernize loan origination system for efficiency.
• Expand dealer access to the high-margin Purchase Program.
• Maintain a record loan portfolio, currently at $9.1 billion.

Future Revenue and Earnings Outlook

Near-term projections show steady, albeit cautious, growth. Analysts estimate Credit Acceptance Corporation's full-year 2025 revenue will land around $2.389 billion. Looking ahead, the consensus for next year's earnings per share (EPS) is a solid increase, with EPS expected to grow 13.07% from $53.24 to an estimated $60.20 per share. This growth is anchored by the company's ability to maintain a massive loan portfolio, which hit a record $9.1 billion in Q2 2025, up 6% year-over-year.

Here's the quick math on the expected EPS jump:

What this estimate hides is the risk from older loan vintages (2022-2024) underperforming expectations, which led to a $56 million, or 0.5%, decline in forecasted net cash flows in Q2 2025. Still, the newer 2025 loan vintage is exceeding expectations, which signals management's recent underwriting changes are working.

Competitive Edge and Key Drivers

Credit Acceptance Corporation's biggest competitive advantage is its business model itself, which is built on providing financing solutions to consumers with impaired or limited credit histories-a market most traditional lenders won't touch. This focus allows it to maintain an impressive gross margin of 93.85% as of Q2 2025. That's a huge buffer against the inherent credit risk in subprime lending (financing for borrowers with low credit scores).

The company's strategic initiatives are all about reinforcing this core strength. They are expanding the dealer network, which directly feeds their loan volume, and investing heavily in technology to manage risk better. The recent CEO transition, with Vinayak Hegde stepping in, is also a key event that could drive future strategic direction. While market share in the used vehicle subprime segment has fallen to 5.4%, the focus is on maintaining profitability and margin, not just chasing volume. That's a realist's approach to a tough market. For a deeper look at the balance sheet, check out Breaking Down Credit Acceptance Corporation (CACC) Financial Health: Key Insights for Investors.

Finance: Monitor the performance of the 2025 loan vintage closely to confirm the trend reversal by year-end.