What changed in this filing

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Item 1. Financial Statements

2023-08-01 compared with 2023-05-01 · 259 added, 116 removed, 1244 unchanged (23% of the section changed)

3 unchanged sentences

(Dollars in millions, except per share data) As of

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 3.2 $ 7.7

11 unchanged sentences

Accounts payable and accrued liabilities $ 263.1 $ 260.8

Revolving secured line of credit 145.1 30.9

Revolving secured lines of credit 168.9 30.9

Secured financing 3,774.2 3,756.4

7 unchanged sentences

Preferred stock, $ .01 par value, 1,000,000 shares authorized, none issued

Common stock, $ .01 par value, 80,000,000 shares authorized, 12,836,907 and 12,756,885 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Common stock, $ .01 par value, 80,000,000 shares authorized, 12,821,681 and 12,756,885 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Paid-in capital 261.7 245.7

7 unchanged sentences

(Dollars in millions, except per share data) For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Finance charges $ 441.0 $ 425.6 $ 862.1 $ 849.7

26 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Net income $ 22.2 $ 107.4 $ 121.7 $ 321.7

6 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in millions) For the Three Months Ended March 31, 2023

(Dollars in millions) For the Three Months Ended June 30, 2023

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

Number Amount

Number of Shares Amount

Balance, beginning of period 12,836,907 $ 0.1 $ 252.1 $ 1,473.3 $ ( 2.1 ) $ 1,723.4

Net income — — — 22.2 — 22.2

Other comprehensive income — — — — 0.8 0.8

Other comprehensive loss — — — — ( 0.6 ) ( 0.6 )

Stock-based compensation — — 9.8 — — 9.8

3 unchanged sentences

1,000 — — — — —

Stock options exercised 12,300 — 4.1 — — 4.1

Balance, end of period 12,821,681 $ 0.1 $ 261.7 $ 1,487.9 $ ( 2.7 ) $ 1,747.0

(Dollars in millions) For the Three Months Ended March 31, 2022

(Dollars in millions) For the Three Months Ended June 30, 2022

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

Number Amount

Number of Shares Amount

Balance, beginning of period 13,363,783 $ 0.1 $ 211.5 $ 1,418.7 $ ( 1.5 ) $ 1,628.8

4 unchanged sentences

( 403,953 ) — — ( 229.7 ) — ( 229.7 )

Stock options exercised 15,625 — 5.2 — — 5.2

Balance, end of period 12,975,455 $ 0.1 $ 225.8 $ 1,296.4 $ ( 2.2 ) $ 1,520.1

(Dollars in millions) For the Six Months Ended June 30, 2023

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

Number of Shares Amount

Balance, beginning of period 12,756,885 $ 0.1 $ 245.7 $ 1,381.1 $ ( 2.9 ) $ 1,624.0

Net income — — — 121.7 — 121.7

Other comprehensive gain — — — — 0.2 0.2

Stock-based compensation — — 19.7 — — 19.7

Repurchase of common stock ( 49,261 ) — ( 7.8 ) ( 14.9 ) — ( 22.7 )

Restricted stock units converted to common stock 101,757 — — — — —

3,980 — — — — —

Stock options exercised 12,300 — 4.1 — — 4.1

Balance, end of period 12,821,681 $ 0.1 $ 261.7 $ 1,487.9 $ ( 2.7 ) $ 1,747.0

(Dollars in millions) For the Six Months Ended June 30, 2022

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

Number of Shares Amount

Balance, beginning of period 14,145,888 $ 0.1 $ 197.2 $ 1,626.7 $ 0.2 $ 1,824.2

Net income — — — 321.7 — 321.7

Other comprehensive loss — — — — ( 2.4 ) ( 2.4 )

Stock-based compensation — — 18.2 — — 18.2

Repurchase of common stock ( 1,207,688 ) — ( 0.7 ) ( 652.0 ) — ( 652.7 )

Restricted stock units converted to common stock 3,980 — — — — —

Stock options exercised 33,275 — 11.1 — — 11.1

Balance, end of period 12,975,455 $ 0.1 $ 225.8 $ 1,296.4 $ ( 2.2 ) $ 1,520.1

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) For the Three Months Ended March 31,

(In millions) For the Six Months Ended June 30,

Cash Flows From Operating Activities:

8 unchanged sentences

Change in operating assets and liabilities:

Increase (decrease) in accounts payable and accrued liabilities ( 6.0 ) 43.1

Increase in accounts payable and accrued liabilities 3.3 37.2

Decrease (increase) in income taxes receivable ( 5.0 ) 57.0

14 unchanged sentences

Cash Flows From Financing Activities:

Borrowings under revolving secured line of credit 1,522.3 697.8

Repayments under revolving secured line of credit ( 1,408.1 ) ( 595.7 )

Borrowings under revolving secured lines of credit 3,509.5 3,876.1

Repayments under revolving secured lines of credit ( 3,371.5 ) ( 3,658.0 )

Proceeds from secured financing 1,201.0 729.8

5 unchanged sentences

Net cash provided by (used in) financing activities 127.1 ( 462.6 )

Net increase in cash and cash equivalents and restricted cash and cash equivalents 70.4 64.5

Net decrease in cash and cash equivalents and restricted cash and cash equivalents ( 5.7 ) ( 3.4 )

Cash and cash equivalents and restricted cash and cash equivalents beginning of period 417.7 434.2

15 unchanged sentences

Actual results could differ from those estimates.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of March 31, 2023 for items that could potentially be recognized or disclosed in these financial statements.

For additional information regarding subsequent events, see Note 16.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2023 for items that could potentially be recognized or disclosed in these financial statements.

We did not identify any items that would require disclosure in or adjustment to the consolidated financial statements.

Reclassification

Certain amounts for prior periods have been reclassified to conform to the current presentation.

DESCRIPTION OF BUSINESS

11 unchanged sentences

The following table shows the percentage of Consumer Loans assigned to us with either FICO ® scores below 650 or no FICO ® scores:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

Consumer Loan Assignment Volume 2023 2022 2023 2022

7 unchanged sentences

Dealer Loans and Purchased Loans are collectively referred to as “Loans”.

The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last five quarters:

The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last six quarters:

Unit Volume Dollar Volume (1)

5 unchanged sentences

March 31, 2023 72.1 % 27.9 % 68.1 % 31.9 %

June 30, 2023 72.4 % 27.6 % 68.6 % 31.4 %

(1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

46 unchanged sentences

Cash equivalents consist of readily marketable securities with original maturities at the date of acquisition of three months or less.

As of March 31, 2023 and December 31, 2022, we had $ 7.8 million and $ 7.1 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

As of June 30, 2023 and December 31, 2022, we had $ 2.8 million and $ 7.1 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

Restricted cash and cash equivalents consist of cash pledged as collateral for secured financings and cash held in a trust for future vehicle service contract claims.

As of March 31, 2023 and December 31, 2022, we had $ 476.5 million and $ 406.5 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

As of June 30, 2023 and December 31, 2022, we had $ 405.0 million and $ 406.5 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

1 unchanged sentence

(In millions) As of

March 31, 2023 December 31, 2022 March 31, 2022 December 31, 2021

June 30, 2023 December 31, 2022 June 30, 2022 December 31, 2021

Cash and cash equivalents $ 3.2 $ 7.7 $ 4.1 $ 23.3

100 unchanged sentences

Methodology Changes .

During the second quarter of 2023, we adjusted our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan prepayment data.

During the first quarter of 2022, we removed the COVID forecast adjustment from our estimate of future net cash flows and enhanced our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent data and new forecast variables.

For additional information, see Note 6.

For the three months ended March 31, 2023 and 2022, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

For the three and six months ended June 30, 2023 and 2022, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

Finance Charges

78 unchanged sentences

The fair value is determined by calculating the present value of expected future net cash flows estimated by us by utilizing the discount rate used to calculate the value of our Loans under our non-GAAP floating yield methodology.

Revolving Secured Line of Credit.

Revolving Secured Lines of Credit.

The fair value is determined by calculating the present value of the debt instrument based on current rates for debt with a similar risk profile and maturity.

7 unchanged sentences

A comparison of the carrying amount and estimated fair value of these financial instruments is as follows:

(In millions) As of March 31, 2023 As of December 31, 2022

(In millions) As of June 30, 2023 As of December 31, 2022

Amount Estimated Fair

5 unchanged sentences

Loans receivable, net 6,610.3 7,274.0 6,297.7 6,767.9

Revolving secured line of credit $ 145.1 $ 145.1 $ 30.9 $ 30.9

Revolving secured lines of credit $ 168.9 $ 168.9 $ 30.9 $ 30.9

Secured financing 3,774.2 3,742.9 3,756.4 3,581.9

11 unchanged sentences

The following table provides the level of measurement used to determine the fair value for each of our financial instruments measured or disclosed at fair value:

(In millions) As of March 31, 2023

(In millions) As of June 30, 2023

Level 1 Level 2 Level 3 Total Fair Value

3 unchanged sentences

Loans receivable, net (1) — — 7,274.0 7,274.0

Revolving secured line of credit (1) $ — $ 145.1 $ — $ 145.1

Revolving secured lines of credit (1) $ — $ 168.9 $ — $ 168.9

Secured financing (1) 2,942.8 800.1 — 3,742.9

7 unchanged sentences

Loans receivable, net (1) — — 6,767.9 6,767.9

Revolving secured line of credit (1) $ — $ 30.9 $ — $ 30.9

Revolving secured lines of credit (1) $ — $ 30.9 $ — $ 30.9

Secured financing (1) 2,781.8 800.1 — 3,581.9

6 unchanged sentences

Restricted securities available for sale consist of the following:

(In millions) As of March 31, 2023

(In millions) As of June 30, 2023

Amortized Cost Gross Unrealized

16 unchanged sentences

The fair value and gross unrealized losses for restricted securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

(In millions) Securities Available for Sale with Gross Unrealized Losses as of March 31, 2023

(In millions) Securities Available for Sale with Gross Unrealized Losses as of June 30, 2023

Less than 12 Months 12 Months or More

26 unchanged sentences

(In millions) As of

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Contractual Maturity Amortized Cost Estimated Fair

8 unchanged sentences

Loans receivable and allowance for credit losses consist of the following:

(In millions) As of March 31, 2023

(In millions) As of June 30, 2023

Dealer Loans Purchased Loans Total

9 unchanged sentences

A summary of changes in Loans receivable and allowance for credit losses is as follows:

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

(In millions)

28 unchanged sentences

$ 6,534.1 $ 3,065.5 $ 9,599.6 $ ( 2,188.4 ) $ ( 800.9 ) $ ( 2,989.3 ) $ 4,345.7 $ 2,264.6 $ 6,610.3

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

(In millions)

28 unchanged sentences

$ 5,832.9 $ 3,357.7 $ 9,190.6 $ ( 1,844.8 ) $ ( 1,022.1 ) $ ( 2,866.9 ) $ 3,988.1 $ 2,335.6 $ 6,323.7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Six Months Ended June 30, 2023

(In millions) Loans Receivable Allowance for Credit Losses Loans Receivable, Net

Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total

Balance, beginning of period $ 6,074.8 $ 3,090.7 $ 9,165.5 $ ( 2,000.0 ) $ ( 867.8 ) $ ( 2,867.8 ) $ 4,074.8 $ 2,222.9 $ 6,297.7

Finance charges 755.8 467.0 1,222.8 ( 250.7 ) ( 110.0 ) ( 360.7 ) 505.1 357.0 862.1

Provision for credit losses — — — ( 219.3 ) ( 168.6 ) ( 387.9 ) ( 219.3 ) ( 168.6 ) ( 387.9 )

New Consumer Loan assignments (1) 1,470.4 680.9 2,151.3 — — — 1,470.4 680.9 2,151.3

Collections (2) ( 1,601.5 ) ( 860.2 ) ( 2,461.7 ) — — — ( 1,601.5 ) ( 860.2 ) ( 2,461.7 )

Accelerated Dealer Holdback payments 24.6 — 24.6 — — — 24.6 — 24.6

Dealer Holdback payments 118.3 — 118.3 — — — 118.3 — 118.3

Transfers (3) ( 51.6 ) 51.6 — 19.0 ( 19.0 ) — ( 32.6 ) 32.6 —

Write-offs ( 263.5 ) ( 366.5 ) ( 630.0 ) 263.5 366.5 630.0 — — —

Recoveries (4) 0.9 2.0 2.9 ( 0.9 ) ( 2.0 ) ( 2.9 ) — — —

Deferral of Loan origination costs 5.9 — 5.9 — — — 5.9 — 5.9

Balance, end of period $ 6,534.1 $ 3,065.5 $ 9,599.6 $ ( 2,188.4 ) $ ( 800.9 ) $ ( 2,989.3 ) $ 4,345.7 $ 2,264.6 $ 6,610.3

For the Six Months Ended June 30, 2022

(In millions) Loans Receivable Allowance for Credit Losses Loans Receivable, Net

Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total

Balance, beginning of period $ 5,655.1 $ 3,694.7 $ 9,349.8 $ ( 1,767.8 ) $ ( 1,245.7 ) $ ( 3,013.5 ) $ 3,887.3 $ 2,449.0 $ 6,336.3

Finance charges 679.3 519.8 1,199.1 ( 212.0 ) ( 137.4 ) ( 349.4 ) 467.3 382.4 849.7

Provision for credit losses — — — ( 74.8 ) ( 96.0 ) ( 170.8 ) ( 74.8 ) ( 96.0 ) ( 170.8 )

New Consumer Loan assignments (1) 1,320.0 578.4 1,898.4 — — — 1,320.0 578.4 1,898.4

Collections (2) ( 1,698.8 ) ( 1,010.8 ) ( 2,709.6 ) — — — ( 1,698.8 ) ( 1,010.8 ) ( 2,709.6 )

Accelerated Dealer Holdback payments 24.9 — 24.9 — — — 24.9 — 24.9

Dealer Holdback payments 90.4 — 90.4 — — — 90.4 — 90.4

Transfers (3) ( 43.2 ) 43.2 — 10.6 ( 10.6 ) — ( 32.6 ) 32.6 —

Write-offs ( 199.7 ) ( 469.1 ) ( 668.8 ) 199.7 469.1 668.8 — — —

Recoveries (4) 0.5 1.5 2.0 ( 0.5 ) ( 1.5 ) ( 2.0 ) — — —

Deferral of Loan origination costs 4.4 — 4.4 — — — 4.4 — 4.4

Balance, end of period $ 5,832.9 $ 3,357.7 $ 9,190.6 $ ( 1,844.8 ) $ ( 1,022.1 ) $ ( 2,866.9 ) $ 3,988.1 $ 2,335.6 $ 6,323.7

(1) The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program.

10 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

Provision for Credit Losses

5 unchanged sentences

$ 144.6 $ 105.9 $ 250.5

(In millions) For the Three Months Ended March 31, 2022

(In millions) For the Three Months Ended June 30, 2022

Provision for Credit Losses Dealer Loans Purchased Loans Total

2 unchanged sentences

Total $ 73.3 $ 74.2 $ 147.5

(In millions)

For the Six Months Ended June 30, 2023

Provision for Credit Losses

Purchased Loans

New Consumer Loan assignments

$ 71.5 $ 103.3 $ 174.8

Forecast changes

147.8 65.3 213.1

$ 219.3 $ 168.6 $ 387.9

(In millions) For the Six Months Ended June 30, 2022

Provision for Credit Losses Dealer Loans Purchased Loans Total

New Consumer Loan assignments $ 93.1 $ 107.0 $ 200.1

Forecast changes ( 18.3 ) ( 11.0 ) ( 29.3 )

Total $ 74.8 $ 96.0 $ 170.8

The net Loan income (finance charge revenue less provision for credit losses expense) that we will recognize over the life of a Loan equals the cash we collect from the underlying Consumer Loan less the cash we pay to the Dealer.

2 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

New Consumer Loan Assignments

12 unchanged sentences

$ 294.4 $ 129.8 $ 424.2

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions)

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

New Consumer Loan Assignments

12 unchanged sentences

$ 265.2 $ 104.7 $ 369.9

(In millions) For the Six Months Ended June 30, 2023

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

Contractual net cash flows at the time of assignment (1) $ 2,294.3 $ 1,371.2 $ 3,665.5

Expected net cash flows at the time of assignment (2) 2,083.0 950.1 3,033.1

Loans receivable at the time of assignment (3) 1,470.4 680.9 2,151.3

Provision for credit losses expense at the time of assignment $ ( 71.5 ) $ ( 103.3 ) $ ( 174.8 )

Expected future finance charges at the time of assignment (4) 684.1 372.5 1,056.6

Expected net Loan income at the time of assignment (5) $ 612.6 $ 269.2 $ 881.8

(In millions) For the Six Months Ended June 30, 2022

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

Contractual net cash flows at the time of assignment (1) $ 2,017.2 $ 1,150.1 $ 3,167.3

Expected net cash flows at the time of assignment (2) 1,830.8 784.7 2,615.5

Loans receivable at the time of assignment (3) 1,320.0 578.4 1,898.4

Provision for credit losses expense at the time of assignment $ ( 93.1 ) $ ( 107.0 ) $ ( 200.1 )

Expected future finance charges at the time of assignment (4) 603.9 313.3 917.2

Expected net Loan income at the time of assignment (5) $ 510.8 $ 206.3 $ 717.1

(1) The Dealer Loans amount represents repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we would be required to make if we collected all of the contractual repayments.

10 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

Expected Future Net Cash Flows

13 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Expected Future Net Cash Flows

12 unchanged sentences

$ 5,468.6 $ 3,573.6 $ 9,042.2

(In millions) For the Six Months Ended June 30, 2023

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

Balance, beginning of period $ 5,637.9 $ 3,395.5 $ 9,033.4

New Consumer Loan assignments (1) 2,083.0 950.1 3,033.1

Realized net cash flows (2) ( 1,458.6 ) ( 860.2 ) ( 2,318.8 )

Forecast changes ( 49.0 ) ( 30.9 ) ( 79.9 )

Transfers (3) ( 46.9 ) 55.4 8.5

Balance, end of period $ 6,166.4 $ 3,509.9 $ 9,676.3

(In millions) For the Six Months Ended June 30, 2022

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

Balance, beginning of period $ 5,249.7 $ 3,698.6 $ 8,948.3

New Consumer Loan assignments (1) 1,830.8 784.7 2,615.5

Realized net cash flows (2) ( 1,583.5 ) ( 1,010.8 ) ( 2,594.3 )

Forecast changes 19.9 46.9 66.8

Transfers (3) ( 48.3 ) 54.2 5.9

Balance, end of period $ 5,468.6 $ 3,573.6 $ 9,042.2

(1) The Dealer Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we expected to make.

8 unchanged sentences

For additional information regarding credit quality, see Note 3.

The following table compares our forecast of Consumer Loan collection rates as of March 31, 2023 with the forecasts as of December 31, 2022 and at the time of assignment, segmented by year of assignment:

The following table compares our forecast of Consumer Loan collection rates as of June 30, 2023 with the forecasts as of March 31, 2023, December 31, 2022, and at the time of assignment, segmented by year of assignment:

Forecasted Collection Percentage as of (1) Current Forecast Variance from

Consumer Loan

Assignment Year March 31, 2023 December 31, 2022 Initial

Forecast December 31, 2022 Initial

Assignment Year June 30, 2023 March 31, 2023 December 31, 2022 Initial

Forecast March 31, 2023 December 31, 2022 Initial

2014 71.7 % 71.7 % 71.7 % 71.8 % 0.0 % 0.0 % - 0.1 %

10 unchanged sentences

Consumer Loan

Assignment Year March 31, 2023 December 31, 2022 Initial

Forecast December 31, 2022 Initial

Assignment Year June 30, 2023 March 31, 2023 December 31, 2022 Initial

Forecast March 31, 2023 December 31, 2022 Initial

2014 71.6 % 71.6 % 71.6 % 71.9 % 0.0 % 0.0 % - 0.3 %

12 unchanged sentences

Consumer Loan

Assignment Year March 31, 2023 December 31, 2022 Initial

Forecast December 31, 2022 Initial

Assignment Year June 30, 2023 March 31, 2023 December 31, 2022 Initial

Forecast March 31, 2023 December 31, 2022 Initial

2014 72.5 % 72.5 % 72.5 % 70.9 % 0.0 % 0.0 % 1.6 %

13 unchanged sentences

We evaluate and adjust the expected collection rate of each Consumer Loan subsequent to assignment primarily through the monitoring of consumer payment behavior.

The following table summarizes the past-due status of Consumer Loan assignments as of March 31, 2023 and December 31, 2022, segmented by year of assignment:

The following table summarizes the past-due status of Consumer Loan assignments as of June 30, 2023 and December 31, 2022, segmented by year of assignment:

(In millions)

Total Loans as of March 31, 2023 (1) (2)

Total Loans as of June 30, 2023 (1) (2)

Pre-term Consumer Loans (3)

9 unchanged sentences

(In millions)

Dealer Loans as of March 31, 2023 (1)

Dealer Loans as of June 30, 2023 (1)

Pre-term Consumer Loans (3)

10 unchanged sentences

(In millions)

Purchased Loans as of March 31, 2023 (2)

Purchased Loans as of June 30, 2023 (2)

Pre-term Consumer Loans (3)

50 unchanged sentences

(5) We consider a Consumer Loan to be current for purposes of forecasting expected collection rates if contractual repayments are less than 11 days past due.

The following table summarizes the write-offs for Consumer Loan assignments for the three months ended March 31, 2023, segmented by year of assignment:

(In millions) For the Three Months Ended March 31, 2023

The following table summarizes the write-offs for Consumer Loan assignments for the three and six months ended June 30, 2023, segmented by year of assignment:

(In millions) For the Three Months Ended June 30, 2023

Write-offs by Consumer Loan Assignment Year Dealer Loans Purchased Loans Total

6 unchanged sentences

$ 145.8 $ 183.6 $ 329.4

(In millions) For the Six Months Ended June 30, 2023

Write-offs by Consumer Loan Assignment Year Dealer Loans Purchased Loans Total

2018 and prior $ 65.5 $ 59.5 $ 125.0

2019 50.8 99.1 149.9

2020 51.3 54.9 106.2

2021 45.4 62.2 107.6

2022 46.3 80.4 126.7

2023 4.2 10.4 14.6

$ 263.5 $ 366.5 $ 630.0

During the first half of 2023, we experienced a decrease in Consumer Loan prepayments to below-average levels and as a result, slowed our forecasted net cash flow timing.

Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer credit.

Changes in the amount and timing of forecasted net cash flows are recognized in the period of change through provision for credit losses.

The implementation of the adjustment to our forecasting methodology during the second quarter of 2023 reduced forecasted net cash flows by $44.5 million, or 0.5%, and increased provision for credit losses by $71.3 million.

The COVID-19 pandemic created conditions that increased the level of uncertainty associated with our estimate of the amount and timing of future net cash flows from our Loan portfolio.

3 unchanged sentences

Accordingly, during the first quarter of 2022, we removed the COVID forecast adjustment and enhanced our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent data and new forecast variables.

Under CECL, changes in the amount and timing of forecasted net cash flows are recorded as a provision for credit losses in the period of change.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The removal of the COVID forecast adjustment and the implementation of the enhanced forecasting methodology during the first quarter of 2022 impacted forecasted net cash flows and provision for credit losses as follows:

4 unchanged sentences

Total $ 95.7 $ ( 70.6 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

A summary of reinsurance activity is as follows:

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Net assumed written premiums $ 23.5 $ 19.1 $ 48.9 $ 36.8

4 unchanged sentences

(In millions) As of

Balance Sheet location March 31, 2023 December 31, 2022

Balance Sheet Location June 30, 2023 December 31, 2022

Trust assets Restricted cash and cash equivalents $ 1.0 $ 0.4

4 unchanged sentences

Other income consists of the following:

(In millions) For the Three Months Ended March 31,

(In millions) For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

Ancillary product profit sharing $ 9.1 $ 12.9 $ 16.6 $ 27.6

1 unchanged sentence

Remarketing fees 2.7 1.9 5.7 3.9

Dealer support products and services 0.4 0.4

Dealer enrollment fees 0.3 0.4

Other 0.4 0.9 1.1 1.7

Total $ 17.1 $ 16.4 $ 32.4 $ 34.2

3 unchanged sentences

Interest income on restricted securities available for sale is recognized over the life of the underlying financial instruments using the interest method.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Remarketing fees consist of fees retained from the sale of repossessed vehicles by Vehicle Remarketing Services, Inc.

2 unchanged sentences

VRS recognizes income from the retained fees at the time of the sale and does not retain a fee if a repossessed vehicle is redeemed by the consumer prior to the sale.

Dealer support products and services consist of income earned from products and services provided to Dealers to assist with their operations, including sales and marketing, purchasing supplies and materials, and acquiring vehicle inventory.

Income is recognized in the period the product or service is provided.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Dealer enrollment fees consist of fees from Dealers that enrolled in our Portfolio Program prior to August 5, 2019.

Depending on the enrollment option selected by the Dealer, Dealers may have enrolled by paying us an upfront, one-time fee of $9,850, or by agreeing to allow us to retain 50 % of their accelerated Dealer Holdback payment(s) on the first 100 Consumer Loan assignments.

A portion of the $ 9,850 upfront, one-time fee was considered to be Dealer support products and services revenue.

The remaining portion of the $ 9,850 fee was considered to be a Dealer enrollment fee, which was amortized on a straight-line basis over the estimated life of the Dealer relationship.

In the case of Dealers that enrolled by agreeing to allow us to retain 50% of their accelerated Dealer Holdback payment(s) on the first 100 Consumer Loan assignments, the 50 % portion we retain is considered to be a Dealer enrollment fee.

We do not recognize any of this Dealer enrollment fee until the Dealer has met the eligibility requirements to receive the accelerated Dealer Holdback payment(s) and the amount(s) of the payment(s), if any, have been calculated.

Once the accelerated Dealer Holdback payment(s) have been calculated, we defer the 50 % portion that we keep and recognize it on a straight-line basis over the remaining estimated life of the Dealer relationship.

Beginning August 5, 2019, Dealers enroll in our Portfolio Program without incurring an enrollment fee.

The following table disaggregates our other income by major source of income and timing of the revenue recognition:

(In millions) For the Three Months Ended March 31, 2023

Ancillary product profit sharing Interest Remarketing fees Dealer support products and services Dealer enrollment fees Total Other Income

(In millions) For the Three Months Ended June 30, 2023

Ancillary Product Profit Sharing Interest Remarketing Fees Other Total Other Income

Source of Income

6 unchanged sentences

Total $ 9.1 $ 4.9 $ 2.7 $ 0.4 $ 17.1

(In millions) For the Six Months Ended June 30, 2023

Ancillary Product Profit Sharing Interest Remarketing Fees Other Total Other Income

Source of Income

Third Party Providers $ 16.6 $ 9.0 $ — $ — $ 25.6

Dealers — — 5.7 1.1 6.8

Total $ 16.6 $ 9.0 $ 5.7 $ 1.1 $ 32.4

Timing of Revenue Recognition

Over time $ 16.6 $ 9.0 $ — $ 0.6 $ 26.2

At a point in time — — 5.7 0.5 6.2

Total $ 16.6 $ 9.0 $ 5.7 $ 1.1 $ 32.4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Debt consists of the following:

(In millions) As of March 31, 2023

(In millions) As of June 30, 2023

Principal Outstanding Unamortized Debt Issuance Costs Unamortized Discount Carrying

Revolving secured line of credit (1) $ 145.1 $ — $ — $ 145.1

Revolving secured lines of credit (1) $ 168.9 $ — $ — $ 168.9

Secured financing (2) 3,796.6 ( 19.5 ) ( 2.9 ) 3,774.2

4 unchanged sentences

Principal Outstanding Unamortized Debt Issuance Costs Unamortized Discount Carrying

Revolving secured line of credit (1) $ 30.9 $ — $ — $ 30.9

Revolving secured lines of credit (1) $ 30.9 $ — $ — $ 30.9

Secured financing (2) 3,776.7 ( 16.9 ) ( 3.4 ) 3,756.4

2 unchanged sentences

Total debt $ 4,616.5 $ ( 22.4 ) $ ( 3.4 ) $ 4,590.7

(1) Excludes deferred debt issuance cost s of $ 3.5 million and $ 3.9 million as of March 31, 2023 and December 31, 2022, respectively, which are included in other assets.

(1) Excludes deferred debt issuance cost s of $ 4.9 million and $ 3.9 million as of June 30, 2023 and December 31, 2022, respectively, which are included in other assets.

(2) Warehouse facilities and Term ABS financings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

General information for each of our financing transactions in place as of March 31, 2023 is as follows:

General information for each of our financing transactions in place as of June 30, 2023 is as follows:

(Dollars in millions)

2 unchanged sentences

Amount Interest Rate Basis as of

March 31, 2023

Revolving Secured Line of Credit n/a 06/22/2025 $ 410.0 (1) At our option, either the Bloomberg Short-Term Bank Yield Index rate (BSBY) plus 187.5 basis points or the prime rate plus 87.5 basis points

Warehouse Facility II (2) CAC Warehouse Funding LLC II 04/30/2024 (3) 400.0 LIBOR plus 175 basis points (4)

Warehouse Facility IV (2) CAC Warehouse Funding LLC IV 05/20/2025 (3) 300.0 The Secured Overnight Financing Rate (SOFR) plus 221.4 basis points (4)

June 30, 2023

Revolving Secured Line of Credit Facility n/a 06/22/2026 $ 390.0 At our option, either the Bloomberg Short-Term Bank Yield Index rate (BSBY) plus 187.5 basis points or the prime rate plus 87.5 basis points

RTP Facility n/a — (1) $ 20.0 BSBY plus 187.5 basis points

Warehouse Facility II (2) CAC Warehouse Funding LLC II 04/30/2026 (3) 400.0 The Secured Overnight Financing Rate (SOFR) plus 230 basis points (4)

Warehouse Facility IV (2) CAC Warehouse Funding LLC IV 05/20/2025 (3) 300.0 SOFR plus 221.4 basis points (4)

Warehouse Facility V (2) CAC Warehouse Funding LLC V 12/29/2025 (5) 200.0 SOFR plus 245 basis points (4)

4 unchanged sentences

Term ABS 2020-3 (2) Credit Acceptance Funding LLC 2020-3 10/17/2022 (3) 600.0 Fixed rate

Term ABS 2021-1 (2) Credit Acceptance Funding LLC 2021-1 12/16/2024 (6) 100.0 SOFR plus 220 basis points (4)

6 unchanged sentences

Term ABS 2023-1 (2) Credit Acceptance Funding LLC 2023-1 03/17/2025 (3) 400.0 Fixed rate

Term ABS 2023-2 (2) Credit Acceptance Funding LLC 2023-2 5/15/2025 (3) $ 400.0 Fixed rate

2024 Senior Notes n/a 12/31/2024 400.0 Fixed rate

1 unchanged sentence

Mortgage Note (2) Chapter 4 Properties, LLC 08/06/2028 9.0 BSBY plus 150 basis points

(1) The amount of the facility will decrease by $25.0 million on June 22, 2023.

(1) Borrowings are subject to repayment on demand.

(2) Financing made available only to a specified subsidiary of the Company.

10 unchanged sentences

(In millions) For the Three Months Ended

Revolving Secured Line of Credit

June 30, For the Six Months Ended

2023 2022 2023 2022

Revolving Secured Lines of Credit

Maximum outstanding principal balance $ 355.5 $ 379.7 $ 355.5 $ 379.7

17 unchanged sentences

(Dollars in millions) As of

March 31, 2023 December 31, 2022

Revolving Secured Line of Credit

June 30, 2023 December 31, 2022

Revolving Secured Lines of Credit

Principal balance outstanding $ 168.9 $ 30.9

98 unchanged sentences

Interest rate 6.92 % — %

Term ABS 2023-2

Principal balance outstanding $ 400.0 $ —

Loans pledged as collateral 638.8 —

Restricted cash and cash equivalents pledged as collateral 38.7 —

Interest rate 6.39 % — %

2024 Senior Notes

8 unchanged sentences

(1) Availability may be limited by the amount of assets pledged as collateral.

Revolving Secured Line of Credit Facility

We have a $ 410.0 million revolving secured line of credit facility with a commercial bank syndicate.

The amount of the facility will decrease by $25.0 million on June 22, 2023.

Borrowings under the revolving secured line of credit facility, including any letters of credit issued under the facility, are subject to a borrowing-base limitation.

This limitation equals 80 % of the value of Loans, as defined in the agreement, less a hedging reserve (not exceeding $ 1.0 million), and the amount of other debt secured by the collateral which secures the revolving secured line of credit facility.

Borrowings under the revolving secured line of credit facility agreement are secured by a lien on most of our assets.

Revolving Secured Lines of Credit

We have two revolving secured lines of credit:

(1) a $ 390.0 million revolving secured line of credit facility, to which we refer as our revolving secured line of credit facility, with a commercial bank syndicate and (2) an uncommitted $20.0 million revolving secured line of credit facility, to which we refer as the RTP facility, with a lender for use solely in facilitating payments by the Company through the lender’s real-time payments service.

Borrowings under our revolving secured line of credit facility, including any letters of credit issued under the facility, are subject to a borrowing-base limitation.

This limitation equals 80 % of the value of Loans, as defined in the agreement governing our revolving secured line of credit facility, less a hedging reserve (not exceeding $ 1.0 million), and the amount of other debt secured by the collateral that secures our revolving secured line of credit facility.

Borrowings under our revolving secured line of credit facility are secured by a lien on most of our assets.

We entered into the RTP facility on May 3, 2023.

Borrowings under the RTP facility are secured by a lien on the same collateral that secures obligations under our revolving secured line of credit facility.

The RTP facility terminates automatically if the lender ceases to be part of the commercial bank syndicate under our revolving secured line of credit facility or if its lending commitments under our revolving secured line of credit facility are terminated.

Warehouse Facilities

3 unchanged sentences

In turn, each such subsidiary pledges the Loans as collateral to secure financing that will fund the cash portion of the purchase price of the Loans.

The financing provided to each such subsidiary under the applicable facility is generally limited to the lesser of 80 % of the outstanding balance of the conveyed Loans, as determined in accordance with the applicable agreement, plus certain restricted cash and cash equivalents pledged as collateral, or the facility limit.

The financing provided to each such subsidiary under the applicable facility is generally limited to the lesser of 80 % of the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

outstanding balance of the conveyed Loans, as determined in accordance with the applicable agreement, plus certain restricted cash and cash equivalents pledged as collateral, or the facility limit.

The financings create indebtedness for which the subsidiaries are liable and which is secured by all the assets of each subsidiary.

4 unchanged sentences

Except for the servicing fee and holdback payments due to Dealers, if a facility is amortizing, we do not have any rights in any portion of such collections until all outstanding principal, accrued and unpaid interest, fees, and other related costs have been paid in full.

If a facility is in its

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

revolving period, the applicable subsidiary is entitled to the portion of such collections available after the payment of interest and transaction expenses under the facility, provided that the borrowing base requirements of the facility are satisfied.

If a facility is in its revolving period, the applicable subsidiary is entitled to the portion of such collections available after the payment of interest and transaction expenses under the facility, provided that the borrowing base requirements of the facility are satisfied.

Term ABS Financings

23 unchanged sentences

Term ABS 2019-2 August 28, 2019 $ 625.1 Through August 15, 2025

Term ABS 2020-1 February 20, 2020 625.1 Through February 15, 2022

Term ABS 2020-2 July 23, 2020 602.3 Through July 15, 2022

8 unchanged sentences

Term ABS 2023-1 March 16, 2023 500.2 Through March 17, 2025

Term ABS 2023-2 May 25, 2023 500.1 Through May 15, 2025

On December 18, 2019, we issued $ 400.0 million aggregate principal amount of 5.125 % senior notes due 2024 (the “2024 senior notes”).

20 unchanged sentences

Debt Covenants

As of March 31, 2023, we were in compliance with our covenants under the revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions.

As of June 30, 2023, we were in compliance with our covenants under our revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions.

These covenants require a minimum ratio of (1) our net earnings, adjusted for specified items, before income taxes, depreciation, amortization, and fixed charges to (2) our fixed charges, as defined in the agreements.

These covenants also limit the maximum ratio of our funded debt less unrestricted cash and cash equivalents to tangible net worth.

Additionally, for one of our Warehouse facilities, we must maintain consolidated net income, as defined in the agreement, of not less than $1 for the two most recently ended fiscal quarters.

Some of these covenants may indirectly limit the repurchase of common stock or payment of dividends on common stock.

1 unchanged sentence

Our Term ABS financings also contain covenants that measure the performance of the conveyed assets.

As of March 31, 2023, we were in compliance with all such covenants.

As of the end of the quarter, we were also in compliance with our covenants under the senior notes indentures.

As of June 30, 2023, we were in compliance with all such covenants.

As of the end of the quarter, we were also in compliance with our covenants under the senior notes indentures and the RTP facility.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2 unchanged sentences

We utilize interest rate cap agreements to manage the interest rate risk on certain secured financings.

The following tables provide the terms of our interest rate cap agreements that were in effect as of March 31, 2023 and December 31, 2022:

The following tables provide the terms of our interest rate cap agreements that were in effect as of June 30, 2023 and December 31, 2022:

(Dollars in millions)

As of March 31, 2023

As of June 30, 2023

Facility Amount Facility Name Purpose Start End Notional Cap Interest Rate (1)

1 unchanged sentence

300.0 Warehouse Facility IV Cap Floating Rate 07/2019 07/2023 25.0 6.50 %

Cap Floating Rate 05/2023 11/2024 275.0 7.50 %

200.0 Warehouse Facility V Cap Floating Rate 04/2023 01/2026 94.0 5.44 %

15 unchanged sentences

The interest rate caps have not been designated as hedging instruments.

As of March 31, 2023 and December 31, 2022, the interest rate caps had a fair value of $ 1.4 million and $ 2.0 million, respectively.

As of June 30, 2023 and December 31, 2022, the interest rate caps had a fair value of $ 1.4 million and $ 2.0 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

federal statutory income tax rate 21.0 % 21.0 % 21.0 % 21.0 %

3 unchanged sentences

Effective income tax rate 20.4 % 24.4 % 21.3 % 24.6 %

State and local income taxes

The decrease in our state income tax rate from 2022 to 2023 was primarily the result of the settlement of an uncertain tax position for state income taxes during the second quarter of 2023.

Excess tax benefits from stock-based compensation

2 unchanged sentences

Excess tax benefits reduce our effective income tax rate, while tax deficiencies increase our effective income tax rate.

The impact of excess tax benefits on our effective income tax rate for the three months ended March 31, 2023 increased from the same period in 2022 primarily due to an increase in the number of restricted stock units that were converted to common stock during 2023 due to the timing of long-term stock award grants.

The impact of excess tax benefits on our effective income tax rate for the six months ended June 30, 2023 increased from the same period in 2022 primarily due to an increase in the number of restricted stock units that were converted to common stock during the first quarter of 2023 due to the timing of long-term stock award grants.

Other items impacting our effective income tax rate primarily consist of non-deductible executive compensation expense.

The impact of non-deductible expense on our effective income tax rate for the three months ended March 31, 2023 increased in magnitude from the same period in 2022 due to an increase in non-deductible executive compensation and a decrease in pre-tax income.

The impact of non-deductible expense on our effective income tax rate for the three and six months ended June 30, 2023 increased in magnitude from the same period in 2022 due to an increase in non-deductible executive compensation and a decrease in pre-tax income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

4 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Weighted average shares outstanding:

6 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Stock options 228,625 67,264 241,201 56,492

2 unchanged sentences

STOCK REPURCHASES

The following table summarizes our stock repurchases for the three months ended March 31, 2023 and 2022:

(Dollars in millions) For the Three Months Ended March 31,

The following table summarizes our stock repurchases for the three and six months ended June 30, 2023 and 2022:

(Dollars in millions) For the Three Months Ended June 30,

Stock Repurchases Number of Shares Repurchased Cost Number of Shares Repurchased Cost

2 unchanged sentences

Total 16,226 $ 7.8 403,953 $ 229.7

(Dollars in millions) For the Six Months Ended June 30,

Stock Repurchases Number of Shares Repurchased Cost Number of Shares Repurchased Cost

Open Market (1) 15,802 $ 7.6 1,205,943 $ 651.7

Other (2) 33,459 15.1 1,745 1.0

Total 49,261 $ 22.7 1,207,688 $ 652.7

(1) Represents repurchases under authorizations by the board of directors for the repurchase of shares by us from time to time in the open market through privately negotiated transactions, through block trades, pursuant to trading plans adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934 or otherwise.

On September 28, 2021, the board of directors authorized the repurchase of up to two million shares of our common stock in addition to the board’s prior authorizations.

As of March 31, 2023, we had authorization to repurchase 158,069 shares of our common stock.

As of June 30, 2023, we had authorization to repurchase 142,267 shares of our common stock.

(2) Represents shares of common stock released to us by team members as payment of tax withholdings upon the vesting of restricted stock units and the conversion of restricted stock units to common stock.

1 unchanged sentence

STOCK-BASED COMPENSATION PLANS

A summary of the restricted stock unit activity is presented below:

A summary of restricted stock unit activity is presented in the following table:

Restricted Stock Units Number of Restricted Stock Units Weighted Average Grant-Date Fair Value Per Share

4 unchanged sentences

Forfeited ( 516 ) 469.72

Outstanding as of March 31, 2023

Outstanding as of June 30, 2023

252,311 $ 158.36

1 unchanged sentence

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Stock options $ 8.6 $ 8.5 $ 17.1 $ 17.0

44 unchanged sentences

Also on August 11, 2020, we received from the Attorney General of the State of New Jersey a subpoena that is essentially identical to the August 11, 2020 Maryland subpoena, both as to substance and as to the jurisdictions identified.

The Company has been informed that the State of Kansas and the State of Texas have withdrawn from the multistate investigation.

The Company has been informed that the State of Kansas, the State of Texas, and the State of Iowa have withdrawn from the multistate investigation.

We are cooperating with these investigations and cannot predict their eventual scope, duration, or outcome at this time.

5 unchanged sentences

An adverse ultimate disposition in any action to which we are a party or otherwise subject could have a material adverse impact on our financial position, liquidity, and results of operations.

SUBSEQUENT EVENTS

On April 28, 2023, we extended the date on which our $ 400.0 million Warehouse Facility II will cease to revolve from April 30, 2024 to April 30, 2026.

The interest rate on borrowings under the facility has been increased from LIBOR plus 175 basis points to SOFR plus 230 basis points.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements