What changed in this filing

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Item 1. Financial Statements

2024-04-30 compared with 2023-10-30 · 172 added, 307 removed, 1213 unchanged (28% of the section changed)

3 unchanged sentences

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and cash equivalents $ 8.4 $ 13.2

21 unchanged sentences

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

Common stock, $ .01 par value, 80,000,000 shares authorized, 12,566,219 and 12,756,885 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Common stock, $ .01 par value, 80,000,000 shares authorized, 12,220,580 and 12,522,397 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Paid-in capital 303.5 279.0

7 unchanged sentences

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

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Finance charges $ 469.2 $ 421.1

26 unchanged sentences

(In millions) For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 64.3 $ 99.5

Other comprehensive loss, net of tax:

Unrealized loss on securities, net of tax ( 0.2 ) ( 1.2 ) — ( 3.6 )

Other comprehensive loss ( 0.2 ) ( 1.2 ) — ( 3.6 )

Other comprehensive gain (loss), net of tax:

Unrealized gain (loss) on securities, net of tax ( 0.2 ) 0.8

Other comprehensive gain (loss) ( 0.2 ) 0.8

Comprehensive income $ 64.1 $ 100.3

2 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

(Dollars in millions) For the Three Months Ended March 31, 2024

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

6 unchanged sentences

( 351,368 ) — ( 1.0 ) ( 190.1 ) — ( 191.1 )

Restricted stock units settled in common stock 7,125 — — — — —

Stock options exercised 42,426 — 14.6 — — 14.6

Balance, end of period 12,220,580 $ 0.1 $ 303.5 $ 1,349.8 $ ( 1.2 ) $ 1,652.2

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

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

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

2 unchanged sentences

Net income — — — 99.5 — 99.5

Other comprehensive loss — — — — ( 1.2 ) ( 1.2 )

Other comprehensive income — — — — 0.8 0.8

Stock-based compensation — — 9.9 — — 9.9

1 unchanged sentence

( 33,035 ) — ( 7.6 ) ( 7.3 ) — ( 14.9 )

Stock options exercised 3,025 — 1.3 — — 1.3

Balance, end of period 12,924,711 $ 0.1 $ 235.8 $ 1,356.7 $ ( 3.4 ) $ 1,589.2

(Dollars in millions) For the Nine Months Ended September 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 — — — 192.5 — 192.5

Stock-based compensation — — 29.0 — — 29.0

Repurchase of common stock ( 305,493 ) — ( 7.8 ) ( 141.2 ) — ( 149.0 )

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

Stock options exercised 13,070 — 4.4 — — 4.4

Balance, end of period 12,566,219 $ 0.1 $ 271.3 $ 1,432.4 $ ( 2.9 ) $ 1,700.9

(Dollars in millions) For the Nine Months Ended September 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 — — — 408.5 — 408.5

Other comprehensive loss — — — — ( 3.6 ) ( 3.6 )

Stock-based compensation — — 26.9 — — 26.9

Repurchase of common stock ( 1,261,457 ) — ( 0.7 ) ( 678.5 ) — ( 679.2 )

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

Restricted stock units settled in common stock 100,757 — — — — —

Stock options exercised 12,300 — 4.1 — — 4.1

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) For the Nine Months Ended September 30,

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

Cash Flows From Operating Activities:

8 unchanged sentences

Change in operating assets and liabilities:

Increase in accounts payable and accrued liabilities 14.6 44.4

Decrease (increase) in income taxes receivable ( 5.5 ) 80.2

Increase in income taxes payable 7.0 —

Increase (decrease) in accounts payable and accrued liabilities 16.6 ( 6.0 )

Increase in income taxes receivable ( 6.8 ) ( 2.3 )

Decrease in income taxes payable ( 11.5 ) ( 0.2 )

Decrease in other assets 11.1 27.3

20 unchanged sentences

Other 7.6 2.6

Net cash provided by (used in) financing activities 199.8 ( 651.6 )

Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents 20.5 ( 38.8 )

Net cash provided by financing activities 370.6 118.1

Net increase in cash and cash equivalents and restricted cash and cash equivalents 96.7 70.4

Cash and cash equivalents and restricted cash and cash equivalents beginning of period 470.9 417.7

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 September 30, 2023 for items that could potentially be recognized or disclosed in these financial statements.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of March 31, 2024 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.

2 unchanged sentences

DESCRIPTION OF BUSINESS

Since 1972, Credit Acceptance has offered financing programs that enable automobile dealers to sell vehicles to consumers, regardless of their credit history.

We make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history.

Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing;

3 unchanged sentences

Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that we provide consumers with an opportunity to improve their lives by improving their credit score and move on to more traditional sources of financing.

We refer to automobile dealers who participate in our programs and who share our commitment to changing consumers’ lives as “Dealers”.

Upon enrollment in our financing programs, the Dealer enters into a Dealer servicing agreement with us that defines the legal relationship between Credit Acceptance and the Dealer.

We refer to automobile dealers who participate in our programs and who share our desire to provide an opportunity to consumers to improve their lives as “Dealers.” Upon enrollment in our financing programs, the Dealer enters into a Dealer servicing agreement with us that defines the legal relationship between Credit Acceptance and the Dealer.

The Dealer servicing agreement assigns the responsibilities for administering, servicing, and collecting the amounts due on retail installment contracts (referred to as “Consumer Loans”) from the Dealers to us.

2 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 September 30, For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Consumer Loan Assignment Volume 2024 2023

7 unchanged sentences

Under the Purchase Program, we buy the Consumer Loans from the Dealers (referred to as a “Purchased Loan”) and keep all amounts collected from the consumer.

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 seven quarters:

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:

Unit Volume Dollar Volume (1)

5 unchanged sentences

March 31, 2024 78.2 % 21.8 % 76.6 % 23.4 %

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

September 30, 2023 74.8 % 25.2 % 71.7 % 28.3 %

(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.

42 unchanged sentences

Business Segment Information

We currently operate in one reportable segment which represents our core business of offering financing programs that enable Dealers to sell vehicles to consumers, regardless of their credit history.

We currently operate in one reportable segment which represents our core business of offering innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history.

The consolidated financial statements reflect the financial results of our one reportable operating segment.

1 unchanged sentence

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

As of September 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”).

As of March 31, 2024 and December 31, 2023, we had $ 8.1 million and $ 12.8 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 September 30, 2023 and December 31, 2022, we had $ 431.2 million and $ 406.5 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

As of March 31, 2024 and December 31, 2023, we had $ 554.7 million and $ 453.7 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

September 30, 2023 December 31, 2022 September 30, 2022 December 31, 2021

March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2022

Cash and cash equivalents $ 8.4 $ 13.2 $ 8.1 $ 7.7

20 unchanged sentences

the Portfolio Program and the Purchase Program.

We are considered to be a lender to our Dealers for Consumer Loans assigned under the Portfolio Program and a purchaser of Consumer Loans assigned under the Purchase Program.

We are considered to be a lender to Dealers for Consumer Loans assigned under the Portfolio Program and a purchaser of Consumer Loans assigned under the Purchase Program.

• The Portfolio Program and the Purchase Program have different levels of risk in relation to credit losses.

52 unchanged sentences

Expected future net cash flows for Purchased Loans are comprised of expected future collections on the assigned Consumer Loans.

Expected future collections are forecasted for each individual Consumer Loan based on the historical performance of Consumer Loans with similar characteristics, adjusted for recent trends in payment patterns and economic conditions.

Our forecast of expected future collections includes estimates for prepayments and post-contractual-term cash flows.

13 unchanged sentences

The credit quality indicators considered in our model include attributes contained in the consumer’s credit bureau report, data contained in the consumer’s credit application, the structure of the proposed transaction, vehicle information and other factors.

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

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

Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast.

6 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 and nine months ended September 30, 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 months ended March 31, 2024 and 2023, we did not make any methodology changes for Loans that had a material impact on our financial statements.

Finance Charges

14 unchanged sentences

We bear the risk of loss for claims on certain vehicle service contracts that are reinsured by us.

We market the vehicle service contracts directly to our Dealers.

We market the vehicle service contracts directly to Dealers.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

20 unchanged sentences

The reduction of finance charges allocated to the allowance for credit losses is equal to the effective interest rate applied to the allowance for credit losses balance.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

VSC Re Company (“VSC Re”), our wholly owned subsidiary, is engaged in the business of reinsuring coverage under vehicle service contracts sold to consumers by Dealers on vehicles financed by us.

Our wholly owned subsidiary VSC Re Company (“VSC Re”) is engaged in the business of reinsuring coverage under vehicle service contracts sold to consumers by Dealers on vehicles financed by us.

VSC Re currently reinsures vehicle service contracts that are offered through one of our TPPs.

17 unchanged sentences

In addition, VSC Re has the obligation to absorb losses of the trust that could potentially be significant.

New Accounting Updates Adopted During the Current Year

Troubled Debt Restructurings and Vintage Disclosures.

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, which intends to improve the usefulness of information provided to investors about certain loan refinancings, restructurings, and write-offs.

The adoption of ASU 2022-02 on January 1, 2023 expanded our write-off disclosures, but did not otherwise have a material impact on our consolidated financial statements.

Reference Rate Reform:

Deferral of the Sunset Date.

In December 2022, the FASB issued ASU 2022-06, which amends ASU 2020-04 to extend the period of time preparers can utilize the reference rate reform relief guidance during the phaseout of the London Interbank Offered Rate (“LIBOR”).

ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

The adoption of ASU 2022-06 on January 1, 2023 did not have a material impact on our consolidated financial statements or related disclosures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

New Accounting Updates Not Yet Adopted

Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.

In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”).

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

If, by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity.

We are currently evaluating the impact the adoption of ASU 2023-06 will have on our consolidated financial statements and related disclosures.

Improvements to Reportable Segment Disclosures.

In November 2023, the FASB issued ASU 2023-07, which enhances the required disclosures for operating segments in our annual and interim consolidated financial statements.

ASU 2023-07 is effective on a retrospective basis for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024.

Early adoption is permitted but we have not yet adopted ASU 2023-07.

We are currently evaluating the impact the adoption of ASU 2023-07 will have on our consolidated financial statements and related disclosures.

Improvements to Income Tax Disclosures.

In December 2023, the FASB issued ASU 2023-09, which intends to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments intended to improve the effectiveness of income tax disclosures.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted, but we have not yet adopted ASU 2023-09.

We are currently evaluating the impact the adoption of ASU 2023-09 will have on our consolidated financial statements and related disclosures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

4 unchanged sentences

The fair value of U.S.

Government and agency securities and corporate bonds is based on quoted market values in active markets.

Government and agency securities, corporate bonds, and municipal securities is based on quoted market values in active markets.

For asset-backed securities, mortgage-backed securities, and commercial paper, we use model-based valuation techniques for which all significant assumptions are observable in the market.

11 unchanged sentences

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

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

(In millions) As of March 31, 2024 As of December 31, 2023

Amount Estimated Fair

19 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 September 30, 2023

(In millions) As of March 31, 2024

Level 1 Level 2 Level 3 Total Fair Value

22 unchanged sentences

Restricted securities available for sale consist of the following:

(In millions) As of September 30, 2023

(In millions) As of March 31, 2024

Amortized Cost Gross Unrealized

14 unchanged sentences

Asset-backed securities 18.0 0.1 ( 0.2 ) 17.9

Municipal securities 0.7 — — 0.7

Mortgage-backed securities 0.2 — — 0.2

1 unchanged sentence

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 September 30, 2023

(In millions) Securities Available for Sale with Gross Unrealized Losses as of March 31, 2024

Less than 12 Months 12 Months or More

26 unchanged sentences

(In millions) As of

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Contractual Maturity Amortized Cost Estimated Fair

8 unchanged sentences

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

(In millions) As of September 30, 2023

(In millions) As of March 31, 2024

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 September 30, 2023

For the Three Months Ended March 31, 2024

(In millions)

28 unchanged sentences

$ 7,553.0 $ 2,930.5 $ 10,483.5 $ ( 2,471.2 ) $ ( 666.7 ) $ ( 3,137.9 ) $ 5,081.8 $ 2,263.8 $ 7,345.6

For the Three Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

(In millions)

28 unchanged sentences

$ 6,314.4 $ 3,069.9 $ 9,384.3 $ ( 2,073.2 ) $ ( 810.8 ) $ ( 2,884.0 ) $ 4,241.2 $ 2,259.1 $ 6,500.3

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Nine Months Ended September 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 1,156.8 698.1 1,854.9 ( 386.7 ) ( 164.4 ) ( 551.1 ) 770.1 533.7 1,303.8

Provision for credit losses — — — ( 327.3 ) ( 245.2 ) ( 572.5 ) ( 327.3 ) ( 245.2 ) ( 572.5 )

New Consumer Loan assignments (1) 2,202.9 970.6 3,173.5 — — — 2,202.9 970.6 3,173.5

Collections (2) ( 2,376.9 ) ( 1,266.9 ) ( 3,643.8 ) — — — ( 2,376.9 ) ( 1,266.9 ) ( 3,643.8 )

Accelerated Dealer Holdback payments 35.3 — 35.3 — — — 35.3 — 35.3

Dealer Holdback payments 177.3 — 177.3 — — — 177.3 — 177.3

Transfers (3) ( 78.9 ) 78.9 — 28.5 ( 28.5 ) — ( 50.4 ) 50.4 —

Write-offs ( 417.2 ) ( 546.7 ) ( 963.9 ) 417.2 546.7 963.9 — — —

Recoveries (4) 1.3 2.9 4.2 ( 1.3 ) ( 2.9 ) ( 4.2 ) — — —

Deferral of Loan origination costs 9.2 — 9.2 — — — 9.2 — 9.2

Balance, end of period $ 6,784.6 $ 3,027.6 $ 9,812.2 $ ( 2,269.6 ) $ ( 762.1 ) $ ( 3,031.7 ) $ 4,515.0 $ 2,265.5 $ 6,780.5

For the Nine Months Ended September 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 1,030.9 764.3 1,795.2 ( 324.3 ) ( 200.6 ) ( 524.9 ) 706.6 563.7 1,270.3

Provision for credit losses — — — ( 170.0 ) ( 181.1 ) ( 351.1 ) ( 170.0 ) ( 181.1 ) ( 351.1 )

New Consumer Loan assignments (1) 1,971.9 851.4 2,823.3 — — — 1,971.9 851.4 2,823.3

Collections (2) ( 2,488.0 ) ( 1,459.7 ) ( 3,947.7 ) — — — ( 2,488.0 ) ( 1,459.7 ) ( 3,947.7 )

Accelerated Dealer Holdback payments 35.2 — 35.2 — — — 35.2 — 35.2

Dealer Holdback payments 138.7 — 138.7 — — — 138.7 — 138.7

Transfers (3) ( 57.0 ) 57.0 — 14.2 ( 14.2 ) — ( 42.8 ) 42.8 —

Write-offs ( 315.8 ) ( 701.8 ) ( 1,017.6 ) 315.8 701.8 1,017.6 — — —

Recoveries (4) 0.6 2.3 2.9 ( 0.6 ) ( 2.3 ) ( 2.9 ) — — —

Deferral of Loan origination costs 6.6 — 6.6 — — — 6.6 — 6.6

Balance, end of period $ 5,978.2 $ 3,208.2 $ 9,186.4 $ ( 1,932.7 ) $ ( 942.1 ) $ ( 2,874.8 ) $ 4,045.5 $ 2,266.1 $ 6,311.6

(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 September 30, 2023

Provision for Credit Losses

Purchased Loans

New Consumer Loan assignments

$ 37.4 $ 40.9 $ 78.3

Forecast changes

70.6 35.7 106.3

$ 108.0 $ 76.6 $ 184.6

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

Provision for Credit Losses Dealer Loans Purchased Loans Total

New Consumer Loan assignments $ 37.6 $ 45.8 $ 83.4

Forecast changes 57.6 39.3 96.9

Total $ 95.2 $ 85.1 $ 180.3

(In millions)

For the Nine Months Ended September 30, 2023

For the Three Months Ended March 31, 2024

Provision for Credit Losses

5 unchanged sentences

$ 121.7 $ 64.3 $ 186.0

(In millions) For the Nine Months Ended September 30, 2022

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

Provision for Credit Losses Dealer Loans Purchased Loans Total

2 unchanged sentences

Total $ 74.7 $ 62.7 $ 137.4

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.

Under CECL, we are required to recognize a significant provision for credit losses expense at the time of assignment for contractual net cash flows we never expect to realize and to recognize in subsequent periods finance charge revenue that is significantly in excess of our expected yields.

The net Loan income (finance charge revenue less provision for credit losses expense) that we 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.

Under CECL, we are required to recognize:

• a significant provision for credit losses expense at the time of the Loan's assignment to us for contractual net cash flows we do not expect to realize;

• finance charge revenue in subsequent periods that is significantly in excess of our expected yield.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Additional information related to new Consumer Loan assignments is as follows:

(In millions)

For the Three Months Ended September 30, 2023

For the Three Months Ended March 31, 2024

New Consumer Loan Assignments

12 unchanged sentences

$ 428.4 $ 140.6 $ 569.0

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions)

For the Three Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

New Consumer Loan Assignments

12 unchanged sentences

$ 318.2 $ 139.4 $ 457.6

(In millions) For the Nine Months Ended September 30, 2023

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

Contractual net cash flows at the time of assignment (1) $ 3,435.1 $ 1,948.9 $ 5,384.0

Expected net cash flows at the time of assignment (2) 3,118.1 1,357.7 4,475.8

Loans receivable at the time of assignment (3) 2,202.9 970.6 3,173.5

Provision for credit losses expense at the time of assignment $ ( 108.9 ) $ ( 144.2 ) $ ( 253.1 )

Expected future finance charges at the time of assignment (4) 1,024.1 531.3 1,555.4

Expected net Loan income at the time of assignment (5) $ 915.2 $ 387.1 $ 1,302.3

(In millions) For the Nine Months Ended September 30, 2022

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

Contractual net cash flows at the time of assignment (1) $ 3,015.3 $ 1,698.3 $ 4,713.6

Expected net cash flows at the time of assignment (2) 2,736.4 1,158.9 3,895.3

Loans receivable at the time of assignment (3) 1,971.9 851.4 2,823.3

Provision for credit losses expense at the time of assignment $ ( 130.7 ) $ ( 152.8 ) $ ( 283.5 )

Expected future finance charges at the time of assignment (4) 895.2 460.3 1,355.5

Expected net Loan income at the time of assignment (5) $ 764.5 $ 307.5 $ 1,072.0

(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 September 30, 2023

For the Three Months Ended March 31, 2024

Expected Future Net Cash Flows

13 unchanged sentences

(In millions)

For the Three Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

Expected Future Net Cash Flows

12 unchanged sentences

$ 5,935.7 $ 3,484.6 $ 9,420.3

(In millions) For the Nine Months Ended September 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) 3,118.1 1,357.7 4,475.8

Realized net cash flows (2) ( 2,164.3 ) ( 1,266.9 ) ( 3,431.2 )

Forecast changes ( 89.3 ) ( 60.0 ) ( 149.3 )

Transfers (3) ( 73.4 ) 83.9 10.5

Balance, end of period $ 6,429.0 $ 3,510.2 $ 9,939.2

(In millions) For the Nine Months Ended September 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) 2,736.4 1,158.9 3,895.3

Realized net cash flows (2) ( 2,314.1 ) ( 1,459.7 ) ( 3,773.8 )

Forecast changes ( 17.4 ) ( 1.2 ) ( 18.6 )

Transfers (3) ( 63.5 ) 71.1 7.6

Balance, end of period $ 5,591.1 $ 3,467.7 $ 9,058.8

(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.

4 unchanged sentences

We transfer the Dealer’s outstanding Dealer Loan balance, related allowance for credit losses balance, and related expected future net cash flows to Purchased Loans in the period this forfeiture occurs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Credit Quality

1 unchanged sentence

For additional information regarding credit quality, see Note 3.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table compares our aggregated forecast of Consumer Loan collection rates as of March 31, 2024 with the aggregated forecasts as of December 31, 2023 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 September 30, 2023 June 30, 2023 December 31, 2022 Initial

Forecast June 30, 2023 December 31, 2022 Initial

Assignment Year March 31, 2024 December 31, 2023 Initial

Forecast December 31, 2023 Initial

2015 65.3 % 65.2 % 67.7 % 0.1 % - 2.4 %

10 unchanged sentences

Consumer Loan

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

Forecast June 30, 2023 December 31, 2022 Initial

Assignment Year March 31, 2024 December 31, 2023 Initial

Forecast December 31, 2023 Initial

2015 64.6 % 64.6 % 67.5 % 0.0 % - 2.9 %

8 unchanged sentences

2024 66.0 % — 66.0 % — 0.0 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Purchased Loans

1 unchanged sentence

Consumer Loan

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

Forecast June 30, 2023 December 31, 2022 Initial

Assignment Year March 31, 2024 December 31, 2023 Initial

Forecast December 31, 2023 Initial

2015 68.9 % 68.9 % 68.5 % 0.0 % 0.4 %

12 unchanged sentences

(2) The forecasted collection rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.

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 September 30, 2023 and December 31, 2022, segmented by year of assignment:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

We evaluate and adjust the expected collection rate for 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, 2024 and December 31, 2023, segmented by year of assignment:

(In millions)

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

Total Loans as of March 31, 2024 (1) (2)

Pre-term Consumer Loans (3)

9 unchanged sentences

(In millions)

Dealer Loans as of September 30, 2023 (1)

Dealer Loans as of March 31, 2024 (1)

Pre-term Consumer Loans (3)

8 unchanged sentences

$ 5,397.6 $ 1,069.0 $ 941.2 $ 145.2 $ 7,553.0

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions)

Purchased Loans as of September 30, 2023 (2)

Purchased Loans as of March 31, 2024 (2)

Pre-term Consumer Loans (3)

20 unchanged sentences

$ 6,507.1 $ 1,694.5 $ 1,568.8 $ 249.7 $ 10,020.1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions)

22 unchanged sentences

$ 1,764.8 $ 513.2 $ 570.8 $ 105.8 $ 2,954.6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(1) As Consumer Loans are aggregated by Dealer for purposes of recognizing revenue and measuring credit losses, the Dealer Loan amount was estimated by allocating the balance of each Dealer Loan to the underlying Consumer Loans based on the forecasted future collections of each Consumer Loan.

3 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 and nine months ended September 30, 2023, segmented by year of assignment:

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

The following table summarizes the write-offs for Consumer Loan assignments for the three months ended March 31, 2024 and 2023, segmented by year of assignment:

(In millions) For the Three Months Ended March 31, 2024

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

6 unchanged sentences

$ 142.8 $ 168.6 $ 311.4

(In millions) For the Nine Months Ended September 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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

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

6 unchanged sentences

$ 117.7 $ 182.9 $ 300.6

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.

The below-average levels of Consumer Loan prepayments continued through the third quarter of 2023.

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.

During the first quarter of 2020, we applied a subjective adjustment to our forecasting model to reflect our best estimate of the future impact of the COVID-19 pandemic on future net cash flows (“COVID forecast adjustment”), which reduced our estimate of future net cash flows by $ 162.2 million.

We continued to apply the COVID forecast adjustment through the end of 2021 as it continued to represent our best estimate.

During the first quarter of 2022, we determined that we had sufficient Consumer Loan performance experience since the lapse of federal stimulus payments and enhanced unemployment benefits to refine our estimate of future net cash flows.

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.

PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

(In millions) As of

March 31, 2024 December 31, 2023

Land and land improvements $ 2.9 $ 2.9

Building and improvements 58.8 58.8

Data processing equipment and software 49.2 50.0

Office furniture and equipment 2.6 2.6

Total property and equipment 113.5 114.3

Accumulated depreciation on property and equipment ( 68.9 ) ( 67.8 )

Total property and equipment, net $ 44.6 $ 46.5

As the vast majority of our team members now work remotely, we have significant excess space in the two office buildings that we own, which are located in Southfield, Michigan.

After exploring options to reduce our office space, we have made the preliminary decision to sell the larger building and consolidate into the smaller building that has served as our headquarters since 1993.

The building that we intend to sell is currently scheduled for auction in mid-May 2024.

As there is currently a significant amount of unoccupied office space in our region, we do not know whether the auction will result in a sale.

Additionally, we believe the market value of the building and its improvements, together with the related land and land improvements and office furniture and equipment, is significantly less than the carrying value of $ 27.5 million.

We have evaluated the facts and circumstances of the potential auction sale, and we do not believe that the building currently meets all of the criteria necessary for us to reclassify it as held for sale.

If we were to reclassify the building as held for sale, we would record an impairment charge to reduce its carrying value to its estimated market value less costs to sell.

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:

(In millions) Increase / (Decrease) in

Forecasting Methodology Changes Forecasted Net Cash Flows Provision for Credit Losses

Removal of COVID forecast adjustment $ 149.5 $ ( 118.5 )

Implementation of enhanced forecasting methodology ( 53.8 ) 47.9

Total $ 95.7 $ ( 70.6 )

A summary of reinsurance activity is as follows:

(In millions) For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Net assumed written premiums $ 31.2 $ 25.4

4 unchanged sentences

(In millions) As of

Balance Sheet Location September 30, 2023 December 31, 2022

Balance Sheet Location March 31, 2024 December 31, 2023

Trust assets Restricted cash and cash equivalents $ 3.0 $ 1.4

4 unchanged sentences

Other income consists of the following:

(In millions) For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

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

Ancillary product profit sharing $ 7.3 $ 7.5

7 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 charged to Dealers that are 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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 September 30, 2023

Ancillary Product Profit Sharing Interest Remarketing Fees Other Total Other Income

Source of Income

Third Party Providers $ 7.8 $ 5.3 $ — $ 0.1 $ 13.2

Dealers — — 2.5 0.4 2.9

Total $ 7.8 $ 5.3 $ 2.5 $ 0.5 $ 16.1

Timing of Revenue Recognition

Over time $ 7.8 $ 5.3 $ — $ 0.2 $ 13.3

At a point in time — — 2.5 0.3 2.8

Total $ 7.8 $ 5.3 $ 2.5 $ 0.5 $ 16.1

(In millions) For the Nine Months Ended September 30, 2023

(In millions) For the Three Months Ended March 31, 2024

Ancillary Product Profit Sharing Interest Remarketing Fees Other Total Other Income

7 unchanged sentences

Total $ 7.3 $ 5.8 $ 3.3 $ 0.5 $ 16.9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Debt consists of the following:

(In millions) As of September 30, 2023

(In millions) As of March 31, 2024

Principal Outstanding Unamortized Debt Issuance Costs Unamortized Discount Carrying

11 unchanged sentences

Total debt $ 5,106.6 $ ( 36.6 ) $ ( 2.5 ) $ 5,067.5

(1) Excludes deferred debt issuance cost s of $ 4.6 million and $ 3.9 million as of September 30, 2023 and December 31, 2022, respectively, which are included in other assets.

(1) Excludes deferred debt issuance costs of $ 3.8 million and $ 4.2 million as of March 31, 2024 and December 31, 2023, 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 September 30, 2023 is as follows:

General information for each of our financing transactions in place as of March 31, 2024 is as follows:

(Dollars in millions)

2 unchanged sentences

Amount Interest Rate Basis as of

September 30, 2023

March 31, 2024

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

6 unchanged sentences

Term ABS 2019-2 (2) Credit Acceptance Funding LLC 2019-2 08/15/2025 (6) 500.0 Fixed rate

Term ABS 2020-2 (2) Credit Acceptance Funding LLC 2020-2 07/15/2022 (3) 481.8 Fixed rate

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 02/17/2026 (6) 100.0 SOFR plus 220 basis points (4)

8 unchanged sentences

Term ABS 2023-3 (2) Credit Acceptance Funding LLC 2023-3 8/15/2025 (3) 400.0 Fixed rate

Term ABS 2023-A (2) Credit Acceptance Funding LLC 2023-A 12/15/2025 (6) 200.0 Fixed rate

Term ABS 2023-5 (2) Credit Acceptance Funding LLC 2023-5 12/15/2025 (3) 294.0 Fixed rate

Term ABS 2024-A (2) Credit Acceptance Funding LLC 2024-A 02/15/2027 (6) 200.0 Fixed rate

Term ABS 2024-1 (2) Credit Acceptance Funding LLC 2024-1 03/16/2026 (3) 500.0 Fixed rate

2026 Senior Notes n/a 03/15/2026 400.0 Fixed rate

1 unchanged sentence

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(1) Borrowings are subject to repayment on demand.

8 unchanged sentences

If we do not elect this option, the outstanding balance will amortize based on the cash flows of the pledged assets .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Additional information related to the amounts outstanding on each facility is as follows:

(In millions) For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Revolving Secured Lines of Credit

18 unchanged sentences

(Dollars in millions) As of

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Revolving Secured Lines of Credit

43 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions) As of

March 31, 2024 December 31, 2023

Term ABS 2021-1

44 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions) As of

March 31, 2024 December 31, 2023

Term ABS 2023-3

3 unchanged sentences

Interest rate 6.86 % 6.86 %

Term ABS 2023-1

Term ABS 2023-A

Principal balance outstanding $ 200.0 $ 200.0

7 unchanged sentences

Interest rate 6.54 % 6.54 %

Term ABS 2024-A

Principal balance outstanding $ 200.0 $ —

Loans pledged as collateral 285.4 —

Restricted cash and cash equivalents pledged as collateral 19.9 —

Interest rate 7.45 % — %

Term ABS 2024-1

16 unchanged sentences

(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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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.

1 unchanged sentence

Borrowings under our revolving secured line of credit facility are secured by a lien on most of our assets that do not secure obligations under our Warehouse facilities or Term ABS financings.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Warehouse Facilities

6 unchanged sentences

Such indebtedness is non-recourse to us (other than customary, limited recourse to us in the form of repurchase obligations or indemnification obligations for any violations by us of our representations or obligations as seller, servicer, or custodian), even though we are consolidated for financial reporting purposes with the subsidiaries.

Because the subsidiaries are organized as bankruptcy-remote legal entities separate from us, their assets (including the conveyed Loans) are intended to be unavailable to our creditors.

Because the subsidiaries are organized as bankruptcy-remote legal entities separate from us, their assets (including the conveyed Loans) are not available to any creditors other than the creditors of the applicable subsidiary.

The subsidiaries pay us a monthly servicing fee equal to either 4 % or 6 %, depending upon the facility, of the collections received with respect to the conveyed Loans.

5 unchanged sentences

In connection with each of these transactions, we conveyed Loans on an arms-length basis to a Funding LLC for cash and the sole membership interest in that Funding LLC.

In turn, each Funding LLC, other than the Funding LLCs for the Term ABS 2019-2, 2021-1, and 2022-2 financings, conveyed the Loans to the respective trusts that issued notes to qualified institutional investors.

The Funding LLCs for the Term ABS 2019-2, 2021-1, and 2022-2 financings pledged the Loans for the benefit of their respective lenders.

The Term ABS 2020-2, 2020-3, 2021-2, 2021-3, 2021-4, 2023-1, 2023-2, and 2023-3 financings each consist of three classes of notes, while the Term ABS 2022-1 and Term ABS 2022-3 financings consist of four classes of notes.

In turn, each Funding LLC, other than the Funding LLCs for the Term ABS 2019-2, 2021-1, 2022-2, and 2023-A financings, conveyed the Loans to the respective trusts that issued notes to qualified institutional investors.

The Funding LLCs for the Term ABS 2019-2, 2021-1, 2022-2, and 2023-A financings pledged the Loans for the benefit of their respective lenders.

The Term ABS 2021-2, 2021-3, 2021-4, 2023-1, 2023-2, 2023-3, 2023-A, 2023-5, 2024-A, and 2024-1 financings each consist of three classes of notes (or, in the case of the Term ABS 2023-A, three classes of loans), while the Term ABS 2022-1 and Term ABS 2022-3 financings consist of four classes of notes.

Each Term ABS financing at the time of issuance has a specified revolving period during which we are likely to convey additional Loans to the applicable Funding LLC.

Each Funding LLC (other than the Funding LLCs of the Term ABS 2019-2, 2021-1, and 2022-2 financings) will then convey the Loans to its respective trust.

Each Funding LLC (other than the Funding LLCs of the Term ABS 2019-2, 2021-1, 2022-2, and 2023-A financings) will then convey the Loans to its respective trust.

At the end of the applicable revolving period, the debt outstanding under each financing will begin to amortize.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Term ABS financings create indebtedness for which the applicable trust or Funding LLC is liable and which is secured by all the assets of the applicable trust or Funding LLC.

Because the trusts and the Funding LLCs are organized as bankruptcy-remote legal entities separate from us, their assets (including the conveyed Loans) are intended to be unavailable to our creditors.

Because the trusts and the Funding LLCs are organized as bankruptcy-remote legal entities separate from us, their assets (including the conveyed Loans) are not available to any creditors other than the creditors of the applicable subsidiary.

We receive a monthly servicing fee on each financing equal to either 4 % or 6 %, depending upon the financing, of the collections received with respect to the conveyed Loans.

3 unchanged sentences

In addition, in our capacity as servicer of the Loans, we have a limited right to exercise a “clean-up call” option to purchase Loans from the Funding LLCs and/or the trusts under certain specified circumstances.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

those Funding LLCs with a trust, when the trust’s indebtedness is paid in full, either through collections or through a prepayment of the indebtedness, the trust is to pay any remaining collections over to its Funding LLC as the sole beneficiary of the trust.

For those Funding LLCs with a trust, when the trust’s indebtedness is paid in full, either through collections or through a prepayment of the indebtedness, the trust is to pay any remaining collections over to its Funding LLC as the sole beneficiary of the trust.

For all Funding LLCs, after the indebtedness is paid in full, any remaining collections will ultimately be available to be distributed to us as the sole member of the respective Funding LLC.

4 unchanged sentences

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

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

Term ABS 2020-3 October 22, 2020 750.1 Through October 17, 2022

Term ABS 2021-1 January 29, 2021 125.1 Through December 16, 2024

Term ABS 2021-1 January 29, 2021 125.1 Through February 17, 2026

Term ABS 2021-2 February 18, 2021 625.1 Through February 15, 2023

7 unchanged sentences

Term ABS 2023-3 August 24, 2023 500.1 Through August 15, 2025

Term ABS 2023-A November 30, 2023 252.0 Through December 15, 2025

Term ABS 2023-5 December 21, 2023 375.1 Through December 15, 2025

Term ABS 2024-A February 27, 2024 250.1 Through February 15, 2027

Term ABS 2024-1 March 28, 2024 625.2 Through March 16, 2026

On December 19, 2023, we issued $ 600.0 million aggregate principal amount of 9.250 % senior notes due 2028 (the “2028 senior notes”).

The 2028 senior notes were issued pursuant to an indenture, dated as of December 19, 2023, among the Company, as issuer, the Company’s subsidiaries Buyers Vehicle Protection Plan, Inc.

and Vehicle Remarketing Services, Inc., as guarantors (collectively, the “Guarantors”), and U.S.

Bank National Association, as trustee.

and Vehicle Remarketing Services, Inc., as guarantors (collectively, the “Guarantors”), and the trustee under the indenture.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The 2028 senior notes mature on December 15, 2028 and bear interest at a rate of 9.250 % per annum, computed on the basis of a 360-day year composed of twelve 30-day months and payable semi-annually on June 15 and December 15 of each year, beginning on June 15, 2024.

We used a portion of the net proceeds from the 2024 senior notes to repurchase or redeem all of the $ 300.0 million outstanding principal amount of our 6.125 % senior notes due 2021 (the “2021 senior notes”), of which $ 148.2 million was repurchased on December 18, 2019 and the remaining $ 151.8 million was redeemed on January 17, 2020.

We used the remaining net proceeds from the 2024 senior notes, together with borrowings under our revolving credit facility and cash on hand to the extent available, to redeem in full the $ 250.0 million outstanding principal amount of our 7.375 % senior notes due 2023 (the “2023 senior notes”) on March 15, 2020.

During the fourth quarter of 2019, we recognized a pre-tax loss on extinguishment of debt of $ 1.8 million related to the repurchase of the 2021 senior notes in the fourth quarter of 2019 and the irrevocable notice given in December 2019 for the redemption of the remaining 2021 senior notes in the first quarter of 2020.

During the first quarter of 2020, we recognized a pre-tax loss on extinguishment of debt of $ 7.4 million related to the redemption of the 2023 senior notes.

We used a portion of the net proceeds from the 2028 senior notes to repurchase or redeem all of the $ 400.0 million outstanding principal amount of our 5.125 % senior notes due 2024 (the “2024 senior notes”), of which $ 322.3 million was repurchased on December 19, 2023 and the remaining $ 77.7 million was redeemed on December 31, 2023.

We used the remaining net proceeds from the 2028 senior notes for general corporate purposes.

During the fourth quarter of 2023, we recognized a pre-tax loss on extinguishment of debt of $ 1.8 million related to the repurchase and redemption of the 2024 senior notes.

On March 7, 2019 , we issued $ 400.0 million aggregate principal amount of 6.625 % senior notes due 2026 (the “2026 senior notes”).

The 2026 senior notes were issued pursuant to an indenture, dated as of March 7, 2019 , among the Company, as issuer, the Guarantors and U.S.

Bank National Association, as trustee.

The 2026 senior notes were issued pursuant to an indenture, dated as of March 7, 2019 , among the Company, as issuer, the Guarantors, and the trustee under the indenture.

The 2026 senior notes mature on March 15, 2026 and bear interest at a rate of 6.625 % per annum, computed on the basis of a 360-day year composed of twelve 30-day months and payable semi-annually on March 15 and September 15 of each year, beginning on September 15, 2019.

We used the net proceeds from the offering of the 2026 senior notes for general corporate purposes, including repayment of outstanding borrowings under our revolving secured line of credit facility.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The 2028 senior notes and 2026 senior notes (the “senior notes”) are guaranteed on a senior basis by the Guarantors, which are also guarantors of obligations under our revolving secured line of credit facility.

5 unchanged sentences

Debt Covenants

As of September 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.

As of March 31, 2024, 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.

3 unchanged sentences

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

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

As of March 31, 2024, 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.

3 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 September 30, 2023 and December 31, 2022:

The following tables provide the terms of our interest rate cap agreements that were in effect as of March 31, 2024 and December 31, 2023:

(Dollars in millions)

As of September 30, 2023

As of March 31, 2024

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

$ 400.0 Warehouse Facility II Cap Floating Rate 07/2022 12/2023 $ 205.0 6.50 %

$ 300.0 Warehouse Facility IV Cap Floating Rate 05/2023 11/2024 $ 300.0 7.50 %

6 unchanged sentences

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

$ 400.0 Warehouse Facility II Cap Floating Rate 07/2022 12/2023 $ 205.0 6.50 %

$ 300.0 Warehouse Facility IV Cap Floating Rate 05/2023 11/2024 $ 300.0 7.50 %

1 unchanged sentence

200.0 Warehouse Facility VIII Cap Floating Rate 09/2022 9/2025 200.0 5.42 %

Cap Floating Rate 09/2022 09/2025 83.3 5.50 %

100.0 Term ABS 2021-1 Cap Floating Rate 04/2023 06/2024 37.5 5.46 %

2 unchanged sentences

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

As of September 30, 2023 and December 31, 2022, the interest rate caps had a fair value of $ 0.9 million and $ 2.0 million, respectively.

As of March 31, 2024 and December 31, 2023, the interest rate caps had a fair value of $ 0.1 million, as the capped rates were above market rates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2 unchanged sentences

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

federal statutory income tax rate 21.0 % 21.0 %

State and local income taxes 3.7 % 3.2 %

Non-deductible executive compensation expense 1.3 % 1.4 %

Excess tax benefits from stock-based compensation - 0.6 % - 4.2 %

1 unchanged sentence

Effective income tax rate 25.6 % 21.5 %

State and local income taxes

For the three months ended September 30, 2023, the impact of state and local income taxes on our effective income tax rate decreased from the same period in 2022 primarily due to the greater impact of state and local tax law changes recorded in the prior period.

For the nine months ended September 30, 2023, the impact of state and local income taxes on our effective income tax rate decreased from the same period in 2022 primarily due to the settlement of an uncertain tax position for state income taxes during the second quarter of 2023.

Excess tax benefits from stock-based compensation

We recognize an excess tax benefit or tax deficiency when the deduction for the stock-based compensation expense of a stock award for tax purposes differs from the cumulative stock-based compensation expense recognized in the financial statements.

The excess tax benefit or tax deficiency is recognized in provision for income taxes in the period in which the amount of the deduction is determined, which is when restricted stock units are converted to common stock or stock options are exercised.

The excess tax benefit or tax deficiency is recognized in provision for income taxes in the period in which the amount of the deduction is determined, which is when restricted stock units are settled in common stock or stock options are exercised.

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 nine months ended September 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 and nine months ended September 30, 2023 increased in magnitude from the same periods in 2022 due to an increase in non-deductible executive compensation and a decrease in pre-tax income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The impact of excess tax benefits on our effective income tax rate for the three months ended March 31, 2024 decreased from the same period in 2023 primarily due to a decrease in the number of restricted stock units that were settled in common stock during the first quarter of 2023 due to the timing of long-term stock award grants.

NET INCOME PER SHARE

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For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Weighted average shares outstanding:

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For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Stock options 51,750 345,585

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Total 54,767 356,994

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STOCK REPURCHASES

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

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

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

Open Market (1) 256,232 $ 126.3 53,769 $ 26.5

(Dollars in millions) For the Nine Months Ended September 30,

The following table summarizes our stock repurchases for the three months ended March 31, 2024 and 2023:

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

Stock Repurchases Number of Shares Repurchased Cost (1) Number of Shares Repurchased Cost (1)

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Total 351,368 $ 191.1 33,035 $ 14.9

(1) Total cost of repurchases includes excise tax.

(2) 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 August 21, 2023, 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 September 30, 2023, we had authorization to repurchase 1,886,035 shares of our common stock.

As of March 31, 2024, we had authorization to repurchase 1,456,751 shares of our common stock.

(3) 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STOCK-BASED COMPENSATION PLANS

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

Outstanding as of December 31, 2022

341,228 $ 169.28

Granted 15,027 466.15

Converted ( 101,757 ) 233.39

Forfeited ( 791 ) 461.95

Outstanding as of September 30, 2023

253,707 $ 160.24

Stock-based compensation expense consists of the following:

(In millions) For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Stock options $ 8.2 $ 8.5

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Total $ 10.9 $ 9.9

We expect to recognize the future stock-based compensation expense as follows:

Pursuant to our Amended and Restated Incentive Compensation Plan, we can grant stock-based awards in the form of restricted stock, restricted stock units, and stock options to team members, officers, directors, and contractors.

Instead of a short-term compensation program providing for rolling, annual equity awards to our executive officers and senior leaders, we utilize a multi-year compensation program that grants a one-time equity award at the beginning of the compensation program period that is intended to incentivize recipients over the multi-year compensation period.

Our current compensation program for executive officers and senior leaders covers the 2021 through 2024 compensation period and included a one-time equity award in December 2020 with a vesting period of four years.

Based on the stock-based awards that are currently outstanding, we expect to recognize the future stock-based compensation expense as follows:

(in millions)

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We may also have disputes and litigation with Dealers.

The claims may allege, among other theories of liability, that we breached our Dealer servicing agreement.

The claims may allege, among other theories of liability, that we breached the Dealer servicing agreement.

We may also have disputes and litigation with vendors and other third parties.

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The damages, fines, and penalties that may be claimed by consumers, regulatory agencies, Dealers, vendors, or other third parties in these types of matters can be substantial.

The relief requested by plaintiffs varies but may include requests for compensatory, statutory, and punitive damages and injunctive relief, and plaintiffs may seek treatment as purported class actions or they may file individual arbitration demands for which arbitration providers may request separate filing fees.

The following matters include current actions to which we are a party and updates to matters that were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

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See the description below of the lawsuit commenced by the Bureau on January 4, 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

On January 4, 2023, the Office of the New York State Attorney General and the Bureau jointly filed a complaint in the United States District Court for the Southern District of New York alleging that the Company engaged in deceptive practices, fraud, illegality, and securities fraud in violation of New York Executive Law § 63(12) and New York General Business Law §§ 349 and 352, and that the Company engaged in deceptive and abusive acts and provided substantial assistance to a covered person or service provider in violation of the CFPA, 12 U.S.C.

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Community Financial Services Association of America, Ltd., No.

22-448 (the “CFSA case”).

The court ordered the parties to file a joint letter updating the court by the earlier of November 3, 2023, or one week after a major development in the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

We are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this litigation.

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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