**Credit Acceptance Corporation 2025 Shareholder Letter Summary**

Credit Acceptance emphasizes its long-standing mission to help credit-challenged consumers finance vehicles, enabling over five million people to access reliable transportation. The company partners with dealers through a unique model where dealers share in long-term loan collections, aligning incentives and promoting better outcomes for all parties.

In 2024, CAC saw record loan volume (386,126 contracts) and its largest dealer base (15,463), benefiting from improved competitive conditions after many lenders pulled back from subprime. Despite inflation, rising debt, and higher delinquencies, CAC expects its recent loan originations to remain profitable due to conservative forecasting and a strong margin of safety.

The company continues investing in technology, remote work culture, and dealer relationships, while maintaining a long-term focus on Economic Profit. Share repurchases remain its preferred capital return method, with $5.2 billion spent since 1999. Though loan performance issues and rising debt costs led to a drop in 2024 earnings, CAC remains confident in its business model and purpose going forward.

Credit Acceptance completes $400 million asset-backed financing backed by $500.2 million in consumer loans

Credit Acceptance Corporation (Nasdaq: CACC) announced it has entered into a $400 million asset-backed, non-recourse secured financing on March 27, 2025. The transaction involved transferring approximately $500.2 million in consumer loans to a newly formed special purpose entity, Credit Acceptance Funding LLC 2025-1, which subsequently transferred the loans to a trust that issued three classes of notes.

The issued notes include:
- Class A: $223.1 million, 2.48-year average life, 5.02% interest
- Class B: $65.8 million, 3.14-year average life, 5.30% interest
- Class C: $111.1 million, 3.52-year average life, 5.71% interest

The financing is expected to have an average annualized cost of approximately 5.6%, including fees, and will revolve for 24 months before entering amortization based on cash flow from the conveyed loans.

Credit Acceptance will receive 4% of the cash flows as a servicing fee, with the remaining 96% (less dealer holdback) allocated to noteholders and associated financing costs. Proceeds from the financing will be used to repay debt and for general corporate purposes.

The transaction is structured to preserve existing dealer relationships and their rights to future holdback payments. The notes are not registered under the Securities Act and were privately placed. The trust’s debt is non-recourse to Credit Acceptance, aside from customary limited recourse provisions.

Credit Acceptance Corporation filed a Form 8-K on February 28, 2025, announcing the issuance of $500 million in 6.625% Senior Notes due 2030. The notes were issued under an indenture agreement with U.S. Bank Trust Company as the trustee and are guaranteed by the company’s subsidiaries Buyers Vehicle Protection Plan, Inc. and Vehicle Remarketing Services, Inc.

The notes mature on March 15, 2030, with interest payable semi-annually on March 15 and September 15. The company may redeem some or all of the notes starting March 15, 2027, at a premium that decreases annually until March 15, 2029, when they become redeemable at par. If a change of control event occurs and the notes are downgraded, holders can require the company to repurchase them at 101% of principal. Additionally, certain asset dispositions may trigger an obligation to repurchase the notes at par.

The indenture contains restrictions on incurring additional debt, paying dividends, making investments, selling assets, and other corporate activities. Some of these restrictions may be lifted if the notes receive an investment-grade credit rating. The indenture also outlines standard events of default, including bankruptcy or failure to meet obligations, which could trigger immediate repayment of the notes.

The notes were privately placed under Rule 144A and are not registered under the Securities Act. The company also announced the redemption of all its outstanding 6.625% senior notes due 2026 in a press release, which is attached as an exhibit to the filing.

Credit Acceptance Corporation has entered into a $300 million asset-backed non-recourse secured financing, using a wholly owned special purpose entity, Credit Acceptance Funding LLC 2024-B, to pledge consumer loans valued at approximately $375.1 million. The financing includes three classes of notes with interest rates ranging from 5.79% to 6.67% and an expected average annualized cost of 6.3%. The financing will revolve for 36 months before amortizing based on cash flows from the pledged loans.

The company will use the financing proceeds to repay outstanding debt and for general corporate purposes. It will retain 4.0% of the cash flows from the pledged loans for servicing expenses, while the remaining 96.0%—less dealer holdback payments—will go toward paying principal, interest, and other costs.

The agreement includes termination provisions, allowing creditors to accelerate repayment and exercise remedies if Credit Acceptance fails to meet financial performance requirements or breaches key covenants. The transaction structure ensures that dealer relationships remain unaffected.

A press release regarding this financing was issued on December 20, 2024.