1 unchanged sentence
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
−Removed: We offer financing programs that enable automobile dealers to sell vehicles to consumers, regardless of their credit history.
+Added: 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;
2 unchanged sentences
For the year ended December 31, 2024, consolidated net income was $247.9 million, or $19.88 per diluted share, compared to $286.1 million, or $21.99 per diluted share, for the same period in 2023.
−Removed: The decrease in consolidated net income was primarily due to increases in provision for credit losses and interest expense.
+Added: The decrease in consolidated net income was primarily due to increases in interest expense and provision for credit losses, partially offset by an increase in finance charges.
Our results for the year ended December 31, 2024 included:
−Removed: • A larger decrease in forecasted collection rates
−Removed: The decrease in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $206.3 million, or 2.3%, compared to a decrease in forecasted collection rates during 2022 that decreased forecasted net cash flows from our Loan portfolio by $59.7 million, or 0.7%.
+Added: • A larger decline in forecasted collection rates
+Added: The decline in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $314.0 million, or 3.1%, compared to a decrease in forecasted collection rates during 2023 that decreased forecasted net cash flows from our Loan portfolio by $206.3 million, or 2.3%.
+Added: The $314.0 million decrease in forecasted net cash flows during 2024 was composed of an ordinary decrease in forecasted net cash flows of $166.8 million, or 1.7%, and an adjustment applied to our forecasting methodology during the second quarter of 2024, which upon implementation, reduced forecasted net cash flows by $147.2 million, or 1.4%.
+Added: The $206.3 million decrease in forecasted net cash flows during 2023 was composed of an ordinary decrease in forecasted net cash flows of $161.8 million, or 1.8%, and an adjustment to our forecasting methodology, which upon implementation, reduced forecasted net cash flows by $44.5 million, or 0.5%.
• A decrease in forecasted profitability for Consumer Loans assigned in 2021 through 2024
−Removed: Forecasted profitability was lower than our estimates at December 31, 2022, due to a decline in forecasted collection rates during 2023 and slower forecasted net cash flow timing during 2023, primarily as a result of a decrease in Consumer Loan prepayments to below-average levels.
+Added: Forecasted profitability was lower than our estimates at December 31, 2023, due to both a decline in forecasted collection rates and slower forecasted net cash flow timing since 2023.
+Added: The slower forecasted net cash flow timing was primarily a result of a decrease in Consumer Loan prepayments, which remain below historical averages.
• Growth in Consumer Loan assignment volume and the average balance of our Loan portfolio
Unit and dollar volumes grew 16.1% and 11.3%, respectively, as compared to 2023.
−Removed: The average balance of our Loan portfolio increased 5.0% as compared to 2022.
+Added: The average balance of our Loan portfolio, which is our largest-ever, increased 13.6% as compared to 2023.
• An increase in the initial spread on Consumer Loan assignments
1 unchanged sentence
• An increase in our average cost of debt
−Removed: The increase in our average cost of debt was primarily a result of higher interest rates on recently-completed or extended secured financings and the repayment of older secured financings with lower interest rates.
+Added: Our average cost of debt increased from 5.5% to 7.2%, primarily as a result of higher interest rates on recently completed or extended secured financings and recently issued senior notes and the repayment of older secured financings and senior notes with lower interest rates.
• A decrease in common shares outstanding due to stock repurchases
−Removed: We repurchased 0.4 million shares, or 2.8% of the shares outstanding at the beginning of the year.
+Added: We repurchased approximately 590,000 shares, or 4.7% of the shares outstanding at the beginning of the year.
+Added: • Loss on sale of building
+Added: We recognized a $23.7 million loss during the second quarter of 2024 related to the sale of one of our two office buildings.
+Added: The building was sold to reduce excess office space and eliminate the associated annual operating costs of approximately $2.1 million.
For the year ended December 31, 2023, consolidated net income was $286.1 million, or $21.99 per diluted share, compared to $535.8 million, or $39.32 per diluted share, for the same period in 2022.
−Removed: The decrease in consolidated net income was primarily due to an increase in provision for credit losses, a decrease in finance charges, and an increase in operating expenses.
+Added: The decrease in consolidated net income was primarily due to increases in provision for credit losses and interest expense.
Our results for the year ended December 31, 2023 included:
−Removed: • A decrease in forecasted collection rates
−Removed: The decrease in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $59.7 million, or 0.7%, compared to an increase in forecasted collection rates during 2021 that increased forecasted net cash flows from our Loan portfolio by $326.1 million, or 3.4%.
−Removed: • A decrease in forecasted profitability for Consumer Loans assigned in 2021 and 2022
−Removed: Forecasted profitability for Consumer Loans assigned in 2022 was lower than our initial estimates and forecasted profitability for Consumer Loans assigned in 2021 was lower than our estimates at December 31, 2021, due to a decline in forecasted collection rates during 2022.
−Removed: • Growth in Consumer Loan assignment volume and a decline in the average balance of our Loan portfolio
+Added: • A larger decline in forecasted collection rates
+Added: The decline in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $206.3 million, or 2.3%, compared to a decrease in forecasted collection rates during 2022 that decreased forecasted net cash flows from our Loan portfolio by $59.7 million, or 0.7%.
+Added: • A decrease in forecasted profitability for Consumer Loans assigned in 2020 through 2022
+Added: Forecasted profitability was lower than our estimates at December 31, 2022, due to a decline in forecasted collection rates during 2023 and slower forecasted net cash flow timing during 2023, primarily as a result of a decrease in Consumer Loan prepayments to below-average levels.
+Added: • Growth in Consumer Loan assignment volume and the average balance of our Loan portfolio
Unit and dollar volumes grew 18.6% and 14.4%, respectively, as compared to 2022.
−Removed: The average balance of our Loan portfolio decreased 5.7% as compared to 2021.
−Removed: • A decrease in the initial spread on Consumer Loan assignments
−Removed: The initial spread decreased to 20.1% compared to 20.3% on Consumer Loans assigned in 2021.
−Removed: • An increase in operating expenses
−Removed: The increase in operating expenses was primarily due to investments in our business to enhance our product and transform our technology systems to be more Dealer- and customer-focused.
+Added: The average balance of our Loan portfolio increased 5.0% as compared to 2022.
+Added: • An increase in the initial spread on Consumer Loan assignments
+Added: The initial spread increased to 21.3% compared to 20.1% on Consumer Loans assigned in 2022.
+Added: • An increase in our average cost of debt
+Added: Our average cost of debt increased from 3.6% to 5.5%, primarily as a result of higher interest rates on recently completed or extended secured financings and the repayment of older secured financings with lower interest rates.
• A decrease in common shares outstanding due to stock repurchases
29 unchanged sentences
Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates.
−Removed: Consumer Loans assigned in 2018 through 2020 have yielded forecasted collection results significantly better than our initial estimates, while Consumer Loans assigned in 2015, 2016, 2021, and 2022 have yielded forecasted collection results significantly worse than our initial estimates.
+Added: Consumer Loans assigned in 2018 through 2020 have yielded forecasted collection results significantly better than our initial estimates, while Consumer Loans assigned in 2015, 2016, and 2021 through 2023 have yielded forecasted collection results significantly worse than our initial estimates.
For all other assignment years presented, actual results have been close to our initial estimates.
+Added: For the year ended December 31, 2024, forecasted collection rates improved for Consumer Loans assigned in 2019, declined for Consumer Loans assigned in 2021 through 2024, and were generally consistent with expectations at the start of the period for all other assignment years presented.
For the year ended December 31, 2023, forecasted collection rates improved for Consumer Loans assigned in 2018 and 2019, declined for Consumer Loans assigned in 2020 through 2022, and were generally consistent with expectations at the start of the period for all other assignment years presented.
−Removed: For the year ended December 31, 2022, forecasted collection rates improved for Consumer Loans assigned in 2014, 2016, and 2017, declined for Consumer Loans assigned in 2021 and 2022, and were generally consistent with expectations at the start of the period for all other assignment years presented.
The changes in forecasted collection rates impacted forecasted net cash flows (forecasted collections less forecasted Dealer Holdback payments) as follows:
(In millions) For the Years Ended December 31,
−Removed: Increase (Decrease) in Forecasted Net Cash Flows 2023 2022 2021
+Added: Decrease in Forecasted Net Cash Flows 2024 2023 2022
Dealer Loans $ (204.6) $ (125.3) $ (41.6)
2 unchanged sentences
% change from forecast at beginning of period -3.1 % -2.3 % -0.7 %
+Added: During the second quarter of 2024, we applied an adjustment to our methodology for forecasting the amount of future net cash flows from our Loan portfolio, which reduced the forecasted collection rates for Consumer Loans assigned in 2022 through 2024.
+Added: Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.
+Added: Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.
+Added: During the second quarter of 2024, we determined that we had sufficient Consumer Loan performance experience to estimate the magnitude by which we expected Consumer Loans assigned in 2022 through 2024 would likely underperform our historical collection rates on Consumer Loans with similar characteristics.
+Added: Accordingly, we applied an adjustment to Consumer Loans assigned in 2022 through 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends.
+Added: Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses.
+Added: The implementation of this forecast adjustment during the second quarter of 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased provision for credit losses by $127.5 million.
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.
−Removed: 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.
−Removed: The below-average levels of Consumer Loan prepayments continued through the fourth quarter of 2023.
+Added: We had 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.
−Removed: Changes in the amount and timing of forecasted net cash flows are recognized in the period of change through provision for credit losses.
+Added: Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a 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.
We have experienced increased levels of uncertainty associated with our estimate of the amount and timing of future net cash flows from our Loan portfolio since the beginning of 2020, with realized collections underperforming our expectations during the early stages of the COVID-19 pandemic, outperforming our expectations following the distribution of federal stimulus payments and enhanced unemployment benefits, and underperforming our expectations during the current economic environment.
−Removed: For the period from January 1, 2020 through December 31, 2023, the cumulative change to our forecast of future net cash flows from our Loan portfolio has been an increase of $13.8 million, or 0.2%.
−Removed: Forecasting collection rates accurately is challenging, so we have designed our business model to produce acceptable levels of profitability across our portfolio, even if Loan performance is less than forecasted in the aggregate.
+Added: The quarterly changes to our forecast of future net cash flows from our Loan portfolio for the period from January 1, 2020 through December 31, 2024 are shown in the following table:
+Added: (Dollars in millions) Increase (Decrease) in Forecasted Net Cash Flows
+Added: Three Months Ended Total Loans % Change from Forecast at Beginning of Period
+Added: March 31, 2020 $ (206.5) -2.3 %
+Added: June 30, 2020 24.4 0.3 %
+Added: September 30, 2020 138.5 1.5 %
+Added: December 31, 2020 (2.7) 0.0 %
+Added: March 31, 2021 107.4 1.1 %
+Added: June 30, 2021 104.5 1.1 %
+Added: September 30, 2021 82.3 0.9 %
+Added: December 31, 2021 31.9 0.3 %
+Added: March 31, 2022 110.2 1.2 %
+Added: June 30, 2022 (43.4) -0.5 %
+Added: September 30, 2022 (85.4) -0.9 %
+Added: December 31, 2022 (41.1) -0.5 %
+Added: March 31, 2023 9.4 0.1 %
+Added: June 30, 2023 (89.3) -0.9 %
+Added: September 30, 2023 (69.4) -0.7 %
+Added: December 31, 2023 (57.0) -0.6 %
+Added: March 31, 2024 (30.8) -0.3 %
+Added: June 30, 2024 (189.3) -1.7 %
+Added: September 30, 2024 (62.8) -0.6 %
+Added: December 31, 2024 (31.1) -0.3 %
The following table presents information on Consumer Loan assignments for each of the last 10 years:
14 unchanged sentences
(1) Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.
−Removed: (2) 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.
+Added: (2) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.
Payments of Dealer Holdback and accelerated Dealer Holdback are not included.
17 unchanged sentences
2024 66.5 % 67.2 % 45.1 % 21.4 % 22.1 % 15.1 %
−Removed: (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 as a percentage of the initial balance of the Consumer Loans.
+Added: (1) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program as a percentage of the initial balance of the Consumer Loans.
Payments of Dealer Holdback and accelerated Dealer Holdback are not included.
6 unchanged sentences
The spread with respect to 2022 Consumer Loans has been negatively impacted by Consumer Loan performance, which has been lower than our initial estimates by a greater margin than the other years presented.
−Removed: The higher spread for 2023 Consumer Loans relative to 2022 Consumer Loans as of December 31, 2023 is primarily due to the underperformance of the 2022 Consumer Loans.
−Removed: Additionally, 2023 Consumer Loans had a higher initial spread due to a decrease in the advance rate.
+Added: The higher spread for 2024 Consumer Loans relative to 2023 Consumer Loans as of December 31, 2024 was primarily a result of Consumer Loan performance, as the performance of 2023 Consumer Loans has been lower than our initial estimates by a greater margin than 2024 Consumer Loans.
+Added: Additionally, 2024 Consumer Loans had a higher initial spread, which was primarily due to a decrease in the advance rate.
The following table compares our forecast of aggregate Consumer Loan collection rates as of December 31, 2024 with the forecasts at the time of assignment, for Dealer Loans and Purchased Loans separately:
33 unchanged sentences
(1) The forecasted collection rates and advance rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.
−Removed: (2) 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 as a percentage of the initial balance of the Consumer Loans.
+Added: (2) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program as a percentage of the initial balance of the Consumer Loans.
Payments of Dealer Holdback and accelerated Dealer Holdback are not included.
1 unchanged sentence
The spread as of December 31, 2024 on 2024 Dealer Loans was 21.3%, as compared to a spread of 18.3% on 2023 Dealer Loans.
−Removed: The increase was primarily as a result of Consumer Loan performance, as the performance of 2022 Dealer Loans has been significantly lower than our initial estimates.
−Removed: Additionally, 2023 Dealer Loans had a higher initial spread, due to the advance rate decreasing by a greater margin than the initial forecast.
+Added: The increase was primarily due to Consumer Loan performance, as the performance of 2023 Dealer Loans has been lower than our initial estimates by a greater margin than 2024 Dealer Loans.
The spread as of December 31, 2024 on 2024 Purchased Loans was 21.8%, as compared to a spread of 17.9% on 2023 Purchased Loans.
−Removed: The increase was primarily as a result of Consumer Loan performance, as the performance of 2022 Purchased Loans has been significantly lower than our initial estimates, while the performance of 2023 Purchased Loans has exceeded our initial estimates.
−Removed: Additionally, 2023 Purchased Loans had a higher initial spread, due to a higher initial forecast and a lower advance rate.
+Added: The increase was primarily a result of a higher initial spread on 2024 Purchased Loans, due to a higher initial forecast and lower advance rate.
+Added: Additionally, the performance of 2023 Purchased Loans has been lower than our initial estimates.
Access to Capital
16 unchanged sentences
2024 16.1 % 11.3 %
−Removed: (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.
+Added: (1) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.
Payments of Dealer Holdback and accelerated Dealer Holdback are not included.
1 unchanged sentence
Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints.
+Added: During 2024, unit and dollar volumes increased 16.1% and 11.3%, respectively, as the number of active Dealers increased 9.1% while average volume per active Dealer increased 6.4%.
+Added: Dollar volume increased less than unit volume in 2024 due to a decrease in the average advance paid, due to decreases in the average advance rate and the average size of Consumer Loans assigned.
+Added: Unit volume for 2024 was the highest unit volume in our history.
During 2023, unit and dollar volumes increased 18.6% and 14.4%, respectively, as the number of active Dealers increased 19.1% while average volume per active Dealer decreased 0.4%.
Dollar volume increased less than unit volume in 2023 due to a decrease in the average advance paid, due to decreases in the average advance rate and the average size of Consumer Loans assigned.
−Removed: Unit volume for 2023 was 10.9% less than unit volume for 2018, which was the highest unit volume in our history.
−Removed: During 2022, unit and dollar volumes increased 4.4% and 14.5%, respectively, as the number of active Dealers increased 4.3% while average volume per active Dealer remained consistent with the prior year.
−Removed: Dollar volume increased more than unit volume in 2022 due to an increase in the average advance paid per unit.
−Removed: This increase was the result of an increase in the average size of the Consumer Loans assigned, primarily due to an increase in the average vehicle selling price.
−Removed: The comparable 2021 period reflected a significant decline in unit volume, which we believe was primarily due to low dealer inventories and elevated used vehicle prices, which we believe were primarily due to the downstream impact of supply chain disruptions in the automotive industry.
The following table summarizes the changes in Consumer Loan unit volume and active Dealers:
28 unchanged sentences
decrease in Consumer Loan unit volume from Dealers who have received funding for at least one Loan during the comparable period of the prior year but did not receive funding for any Loans during the current period divided by prior year comparable period Consumer Loan unit volume.
−Removed: Consumer Loans are assigned to us as either Dealer Loans through our Portfolio Program or Purchased Loans through our Purchase Program.
+Added: Consumer Loans are assigned to us as either Dealer Loans through the Portfolio Program or Purchased Loans through the Purchase Program.
The following table shows the percentage of Consumer Loans assigned to us under each of the programs for each of the last three years:
4 unchanged sentences
2024 78.7 % 21.3 % 77.5 % 22.5 %
−Removed: (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.
+Added: (1) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.
Payments of Dealer Holdback and accelerated Dealer Holdback are not included.
9 unchanged sentences
Due to the GAAP treatment of contractual net cash flows we do not expect to realize at the time of loan assignment (i.e.
−Removed: significant expense at the time of loan assignment, which is offset by higher revenue in subsequent periods), we do not believe the GAAP methodology we employ provides sufficient transparency into the economics of our business.
+Added: significant expense at the time of loan assignment, which is offset by higher revenue in subsequent periods), we do not believe the GAAP methodology we employ provides sufficient transparency into the economics of our business, including our results of operations, financial condition, and financial leverage.
For additional information, see Note 2 and Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
17 unchanged sentences
Loss on extinguishment of debt — 1.8 (1.8) -100.0 %
+Added: Loss on sale of building 23.7 — 23.7 — %
Total costs and expenses 1,832.9 1,534.3 298.6 19.5 %
22 unchanged sentences
The increase in the average net Loans receivable balance was primarily due to the dollar volume of new Consumer Loan assignments exceeding the principal collected on Loans receivable.
−Removed: The decrease in the average yield of our Loan portfolio was primarily due to lower contractual yields on more recent Consumer Loan assignments.
Premiums Earned.
The increase of $16.5 million, or 20.7%, was primarily due to growth in the size of our reinsurance portfolio, which resulted from growth in new Consumer Loan assignments and an increase in the average premium written per reinsured vehicle service contract in recent periods.
−Removed: Other Income .
−Removed: The decrease of $16.5 million, or 19.8%, was primarily due to:
−Removed: • A $26.5 million decrease in ancillary product profit sharing income, primarily due to:
−Removed: • Increases in average claim rates and volume of claims on GAP contracts.
−Removed: • $5.9 million of income recognized in 2022 related to an inception-to-date adjustment to premium recognition timing based on our historical claims experience on GAP contracts.
−Removed: • A $2.7 million decrease in remarketing fee income for fees charged to Dealers related to the repossession and remarketing of vehicles.
−Removed: Remarketing fee income for the year ended December 31, 2022 included $3.1 million of fees charged to Dealers for repossession activity that occurred from August 2020 through December 2021.
−Removed: • A $13.1 million increase in interest income due to increases in benchmark interest rates and the average restricted cash and cash equivalents balance.
Operating Expenses .
The increase of $42.4 million, or 9.2%, was primarily due to:
−Removed: • An increase in salaries and wages expense of $18.2 million, or 6.9%, primarily due to our engineering department as we are investing in our business to enhance our product and transform our technology systems to be more Dealer- and customer-focused and an increase in fringe benefits primarily due to higher medical claims.
−Removed: ▪ An increase in sales and marketing expense of $16.1 million, or 21.3%, primarily due to investments in our business to enhance our sales and marketing strategy, an increase in the size of our sales force, and an increase in sales commissions related to growth in Consumer Loan assignment volume.
+Added: • An increase in salaries and wages expense of $29.0 million, or 10.3%, primarily due to increases in (i) the number of team members as we are investing in our business with the goal of increasing the speed at which we enhance our product for Dealers and consumers, (ii) fringe benefits, primarily due to higher medical claims, and (iii) stock-based compensation expense, primarily due to equity awards granted to our executive officers and senior leaders.
+Added: ▪ An increase in general and administrative expense of $10.7 million, or 12.3%, primarily due to increases in legal and technology systems expenses.
Provision for Credit Losses .
−Removed: The increase of $254.8 million, or 52.9%, was primarily due to an increase in provision for credit losses on forecast changes, partially offset by a decrease in provision for credit losses on new Consumer Loan assignments.
+Added: The increase of $78.5 million, or 10.7%, was primarily due to an increase in provision for credit losses on forecast changes.
We recognize provision for credit losses on new Consumer Loan assignments for contractual net cash flows that are not expected to be realized at the time of assignment.
6 unchanged sentences
Total $ 814.7 $ 736.2 $ 78.5
−Removed: The increase in provision for credit losses related to forecast changes was primarily due to a greater decline in Consumer Loan performance during 2023 compared to 2022.
−Removed: During 2023, we decreased our estimate of future net cash flows by $206.3 million, or 2.3%, to reflect a decline in forecasted collection rates during the period and slowed our forecasted net cash flow timing to reflect a decrease in Consumer Loan prepayments to below-average levels.
+Added: The increase in provision for credit losses related to forecast changes was due to a greater decline in Consumer Loan performance during 2024 compared to 2023 and slower net cash flow timing during 2024 compared to 2023.
+Added: During 2024, we decreased our estimate of future net cash flows by $314.0 million, or 3.1%, to reflect a decline in forecasted collection rates during the period and slowed our forecasted net cash flow timing to reflect a decrease in Consumer Loan prepayments, which remain below historical averages.
Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer credit.
−Removed: The $206.3 million decrease in forecasted net cash flows during 2023 included the impact of an adjustment to our forecasting methodology during the second quarter of 2023, which, upon implementation, decreased our estimate of future net cash flows by $44.5 million, or 0.5%, and increased our provision for credit losses by $71.3 million.
+Added: The $314.0 million decrease in forecasted net cash flows for the year ended December 31, 2024 was composed of an ordinary decrease in forecasted net cash flows of $166.8 million, or 1.7%, and an adjustment applied to our forecasting methodology during the second quarter of 2024, which upon implementation, reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased our provision for credit losses by $127.5 million.
+Added: Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.
+Added: Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.
+Added: During the second quarter of 2024, we determined that we had sufficient Consumer Loan performance experience to estimate the magnitude by which we expected Consumer Loans assigned in 2022 through 2024 would likely underperform our historical collection rates on Consumer Loans with similar characteristics.
+Added: Accordingly, we applied an adjustment to Consumer Loans assigned in 2022 through 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends.
+Added: During 2023, we decreased our estimate of future net cash flows by $206.3 million, or 2.3%, to reflect a decline in Consumer Loan prepayments to below-average levels.
+Added: The $206.3 million decrease in forecasted net cash flows during 2023 was composed of an ordinary decrease in forecasted net cash flows of $161.8 million, or 1.8%, and an adjustment to our forecasting methodology during the second quarter of 2023, which, upon implementation, decreased our estimate of future net cash flows by $44.5 million, or 0.5%, and increased our provision for credit losses by $71.3 million.
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.
For additional information, see Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
−Removed: During 2022, we reduced our estimate of future net cash flows by $59.7 million, or 0.7%, to reflect a decline in Consumer Loan performance during the period.
−Removed: The $59.7 million decrease in forecasted net cash flows during 2022 included the impact of forecasting methodology changes implemented during the first quarter of 2022, which upon implementation increased our estimate of future net cash flows by $95.7 million and reduced our provision for credit losses by $70.6 million.
−Removed: The forecasting methodology changes included the removal of the COVID forecast adjustment (as defined below under “Critical Accounting Estimates—Finance Charge Revenue & Allowance for Credit Losses”) from our estimate of future net cash flows and an enhancement to 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.
−Removed: For additional information, see Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
−Removed: The decrease in provision for credit losses related to new Consumer Loan assignments was due to a 20.9% decrease in the average provision per new Consumer Loan assignment, partially offset by an 18.6% increase in Consumer Loan assignment unit volume.
−Removed: The decrease in average provision per new Consumer Loan assignment was primarily due to a decrease in the average advance rate for 2023 Consumer Loans.
−Removed: The increase in interest expense of $99.9 million, or 60.0%, was primarily due to an increase in our average cost of debt, which was primarily a result of higher interest rates on recently-completed or extended secured financings and the repayment of older secured financings with lower interest rates, as follows:
+Added: The decrease in provision for credit losses related to new Consumer Loan assignments was due to a 14.3% decrease in the average provision per new Consumer Loan assignment, partially offset by a 16.1% increase in Consumer Loan assignment unit volume.
+Added: The decrease in average provision per new Consumer Loan assignment was primarily due to a decrease in the average advance rate for 2024 Consumer Loans and a lower percentage of Purchased Loans in the mix of Consumer Loan assignments received during 2024.
+Added: The increase in interest expense of $153.0 million, or 57.4%, was due to:
+Added: • An increase in our average cost of debt, which increased interest expense by $93.7 million, primarily as a result of higher interest rates on recently completed or extended secured financings and recently issued senior notes and the repayment of older secured financings and senior notes with lower interest rates.
+Added: • An increase in our average outstanding debt balance, which increased interest expense by $59.3 million, primarily due to borrowings used to fund the growth of our Loan portfolio and stock repurchases.
+Added: The following table presents the change in interest expense, average outstanding debt balance, and average cost of debt for the year ended December 31, 2024 as compared to the year ended December 31, 2023:
(Dollars in millions) For the Years Ended December 31,
1 unchanged sentence
Interest expense $ 419.5 $ 266.5 $ 153.0
−Removed: Average outstanding debt principal balance (1) 4,808.4 4,687.6 120.8
+Added: Average outstanding debt balance 5,849.7 4,785.7 1,064.0
Average cost of debt 7.2 % 5.5 % 1.7 %
−Removed: (1) Includes the unamortized debt discount and excludes deferred debt issuance costs.
−Removed: Provision for Claims.
−Removed: The increase in provision for claims of $24.3 million, or 52.4%, was primarily due to increases in the size of our reinsurance portfolio and the average claim paid per reinsured vehicle service contract.
+Added: Loss on Sale of Building.
+Added: For the year ended December 31, 2024, we recognized a loss on the sale of a building of $23.7 million.
+Added: For additional information, see Note 6 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
Provision for Income Taxes.
−Removed: For the year ended December 31, 2023, the effective income tax rate decreased to 22.2% from 24.7% for the year ended December 31, 2022.
−Removed: The decrease was primarily due to the impact of tax benefits related to our stock-based compensation plan and the settlement of an uncertain tax position for state income taxes during the second quarter of 2023, partially offset by an increase in non-deductible executive compensation expense.
+Added: For the year ended December 31, 2024, the effective income tax rate increased to 24.8% from 22.2% for the year ended December 31, 2023.
+Added: The increase was primarily due to:
+Added: • A decrease in the impact of excess tax benefits on our effective income tax rate, primarily due to the timing of long-term stock award grants.
+Added: • An increase in non-deductible executive compensation expense.
+Added: • An increase in the impact of state and local income taxes on our effective income tax rate, primarily due to an adjustment to an uncertain tax position estimate during the second quarter of 2024 and changes in state tax laws that were enacted during the second quarter of 2024.
For additional information, see Note 10 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
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On January 1, 2020, we adopted Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments, which is known as the current expected credit loss model, or CECL.
−Removed: Prior to the adoption of CECL on January 1, 2020, we accounted for our Loans as loans acquired with significant credit deterioration.
For additional information regarding the adoption impact of CECL, see Note 2 and Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
2 unchanged sentences
For Consumer Loans assigned on or subsequent to January 1, 2020, the effective interest rate is based on contractual future net cash flows.
−Removed: For Consumer Loans assigned prior to January 1, 2020, the effective interest rate was determined based on expected future net cash flows.
+Added: Consumer Loans assigned prior to January 1, 2020 are no longer material to our consolidated financial statements.
The outstanding balance of the allowance for credit losses of each Loan represents the amount required to reduce the net carrying amount of Loans (Loans receivable less allowance for credit losses) to the present value of expected future net cash flows discounted at the effective interest rate.
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We periodically adjust our statistical pricing model for new trends that we identify through our evaluation of these forecasted collection rate variances.
+Added: During the second quarter of 2024, we applied an adjustment to our methodology for forecasting the amount of future net cash flows from our Loan portfolio, which reduced the forecasted collection rates for Consumer Loans assigned in 2022 through 2024.
+Added: Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.
+Added: Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.
+Added: During the second quarter of 2024, we determined that we had sufficient Consumer Loan performance experience to estimate the magnitude by which we expected Consumer Loans assigned in 2022 through 2024 would likely underperform our historical collection rates on Consumer Loans with similar characteristics.
+Added: Accordingly, we applied an adjustment to Consumer Loans assigned in 2022 through 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends.
+Added: Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses.
+Added: The implementation of this forecast adjustment during the second quarter of 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased provision for credit losses by $127.5 million.
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.
−Removed: 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.
+Added: We had 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 fourth quarter of 2023.
Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer credit.
−Removed: Changes in the amount and timing of forecasted net cash flows are recognized in the period of change through provision for credit losses.
+Added: Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a 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.
64 unchanged sentences
For information regarding these financings and the covenants included in the related documents, see Note 9 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
+Added: On February 16, 2024, we extended the $100.0 million Term ABS 2021-1 financing and extended the date on which the financing will cease to revolve from December 16, 2024 to February 17, 2026.
+Added: On February 27, 2024, we completed a $200.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
+Added: The financing has an expected average annualized cost of 7.8% (including upfront fees and other costs), and it will revolve for 36 months, after which it will amortize based upon the cash flows on the underlying Loans.
On March 28, 2024, we completed a $500.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
−Removed: The financing has an expected average annualized cost of 7.3% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
−Removed: 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.
−Removed: The interest rate on borrowings under the facility has been increased from LIBOR plus 175 basis points to SOFR plus 230 basis points.
−Removed: On May 25, 2023, we completed a $400.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
−Removed: The financing has an expected average annualized cost of 6.8% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
+Added: The financing has an expected average annualized cost of 6.4% (including upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
On June 17, 2024, we extended the maturity of our revolving secured line of credit facility from June 22, 2026 to June 22, 2027.
−Removed: Prior to this amendment, the amount of the facility was set to decrease by $25.0 million on June 22, 2023;
−Removed: however, this amendment increased the amount of the facility by $5.0 million, resulting in a net decrease of $20.0 million, from $410.0 million to $390.0 million.
−Removed: On August 4, 2023, we extended the date on which our $75.0 million Warehouse Facility VI will cease to revolve from September 30, 2024 to September 30, 2026.
−Removed: On August 24, 2023, we completed a $400.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
−Removed: The financing has an expected average annualized cost of 7.3% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
−Removed: On September 21, 2023, we extended the date on which our $200.0 million Warehouse Facility VIII will cease to revolve from September 1, 2024 to September 21, 2026.
−Removed: The interest rate on borrowings under the facility has been increased from SOFR plus 201.4 basis points to SOFR plus 225 basis points.
−Removed: On November 30, 2023, we completed a $200.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
−Removed: The financing has an expected average annualized cost of 8.6% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
−Removed: On December 19, 2023, we issued $600.0 million of 9.250% senior notes due 2028 (the “2028 senior notes”).
−Removed: 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.
−Removed: We used the remaining net proceeds from the 2028 senior notes for general corporate purposes.
−Removed: 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.
+Added: The interest rate on borrowings under the facility has changed from the Bloomberg Short-Term Bank Yield Index rate plus 187.5 basis points to the Secured Overnight Financing Rate (“SOFR”) plus 197.5 basis points.
+Added: On June 20, 2024, we completed a $550.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
+Added: The financing has an expected average annualized cost of 6.5% (including upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
+Added: On June 21, 2024, we increased the financing amount on the Term ABS 2022-2 financing from $200.0 million to $300.0 million and extended the date on which the financing will cease to revolve from December 15, 2025 to June 15, 2027.
+Added: On September 19, 2024, we increased the financing amount on Warehouse Facility II from $400.0 million to $500.0 million and extended the date on which the facility will cease to revolve from April 30, 2026 to September 20, 2027.
+Added: The interest rate on borrowings under the facility has been decreased from SOFR plus 230 basis points to SOFR plus 185 basis points.
+Added: On September 19, 2024, we extended the date on which the $500.0 million Term ABS 2019-2 financing will cease to revolve from August 15, 2025 to September 15, 2026 and increased the interest rate under the financing from 5.15% to 5.43%.
+Added: On September 26, 2024, we completed a $600.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
+Added: The financing has an expected average annualized cost of 5.2% (including upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
+Added: On December 5, 2024, we increased the financing amount on Warehouse Facility V from $200.0 million to $250.0 million and extended the date on which the facility will cease to revolve from December 29, 2025 to December 29, 2027.
+Added: The maturity of the facility was also extended from December 27, 2027 to December 27, 2029.
+Added: The interest rate on borrowings under the facility has been decreased from SOFR plus 245 basis points to SOFR plus 185 basis points.
On December 20, 2024, we completed a $300.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
−Removed: The financing has an expected average annualized cost of 7.0% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
−Removed: On December 29, 2023, we extended the date on which our $300.0 million Warehouse Facility IV will cease to revolve from May 20, 2025 to December 29, 2026.
+Added: The financing has an expected average annualized cost of 6.3% (including upfront fees and other costs), and it will revolve for 36 months, after which it will amortize based upon the cash flows on the underlying Loans.
Cash and cash equivalents increased to $343.7 million as of December 31, 2024 from $13.2 million as of December 31, 2023.
As of December 31, 2024 and December 31, 2023, we had $1,734.9 million and $1,505.8 million, respectively, in unused and available lines of credit.
−Removed: As of December 31, 2023 and December 31, 2022, we had $5,067.5 million and $4,590.7 million, respectively, of total balance sheet indebtedness.
+Added: Our total balance sheet indebtedness increased to $6,352.9 million as of December 31, 2024 from $5,067.5 million as of December 31, 2023, primarily due to the growth in new Consumer Loan assignments and stock repurchases.
A summary as of December 31, 2024 of our material financial obligations requiring future repayments is as follows:
22 unchanged sentences
Our policies and procedures prohibit the use of financial instruments for speculative purposes.
−Removed: A discussion of our accounting policies for derivative instruments is included in Note 2 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
Interest Rate Risk.
We rely on various sources of financing, some of which contain floating rates of interest and expose us to risks associated with increases in interest rates.
−Removed: We manage such risk primarily by entering into interest rate cap agreements.
+Added: Assuming that we maintain a level amount of floating rate debt, an increase in interest rates may result in higher interest expense for our floating rate debt facilities.
+Added: From time to time, we may manage that risk through the use of derivatives such as interest rate caps.
As of December 31, 2024, we had $0.1 million of floating rate debt outstanding under our revolving secured lines of credit, without interest rate protection.
−Removed: For every 100-basis-point increase in interest rates on our revolving secured lines of credit, annual after-tax earnings would decrease by approximately $0.6 million, assuming we maintain a level amount of floating rate debt.
−Removed: As of December 31, 2023, we had interest rate cap agreements outstanding to manage the interest rate risk on Warehouse Facility IV, Warehouse Facility V, and Warehouse Facility VIII.
+Added: For every 100-basis-point increase in interest rates on our revolving secured lines of credit, annual after-tax earnings would decrease by a negligible amount, assuming we maintain a level amount of floating rate debt.
+Added: As of December 31, 2024, we had interest rate cap agreements outstanding to manage the interest rate risk on Warehouse Facility V and Warehouse Facility VIII.
However, as of December 31, 2024, there was no floating rate debt outstanding under these facilities.
−Removed: As of December 31, 2023, we did not have a balance outstanding under Warehouse Facility II and Warehouse Facility VI, which do not have interest rate protection.
−Removed: As of December 31, 2023, we had $100.0 million in floating rate debt outstanding under Term ABS 2021-1, which was covered by an interest rate cap with a cap rate of 5.46% on the underlying benchmark rate.
−Removed: For every 100-basis-point increase in interest rates on Term ABS 2021-1 up to the cap rate of 5.46%, annual after-tax earnings would decrease by approximately $0.8 million, assuming we maintain a level amount of floating rate debt.
−Removed: As of December 31, 2023, we had $200.0 million in floating rate debt outstanding under Term ABS 2022-2, which was covered by an interest rate cap with a cap rate of 6.50% on the underlying benchmark rate.
−Removed: For every 100-basis-point increase in interest rates on Term ABS 2022-2 up to the cap rate of 6.50%, annual after-tax earnings would decrease by approximately $1.5 million, assuming we maintain a level amount of floating rate debt.
−Removed: New Accounting Update Not Yet Adopted
−Removed: See Note 2 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference, for information concerning the following new accounting update and the impact of the implementation of this update on our financial statements:
+Added: As of December 31, 2024, we did not have a balance outstanding under Warehouse Facility II, Warehouse IV, and Warehouse Facility VI, which do not have interest rate protection.
+Added: As of December 31, 2024, we had $100.0 million in floating rate debt outstanding under Term ABS 2021-1, without interest rate protection.
+Added: For every 100-basis-point increase in interest rates on Term ABS 2021-1, annual after-tax earnings would decrease by approximately $0.8 million, assuming we maintain a level amount of floating rate debt.
+Added: As of December 31, 2024, we had $300.0 million in floating rate debt outstanding under Term ABS 2022-2, without interest rate protection.
+Added: For every 100-basis-point increase in interest rates on Term ABS 2022-2, annual after-tax earnings would decrease by approximately $2.3 million, assuming we maintain a level amount of floating rate debt.
+Added: New Accounting Updates Not Yet Adopted
+Added: See Note 2 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference, for information concerning the following new accounting updates and the impact of the implementation of these updates on our financial statements:
• Disclosure Improvements:
Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative
−Removed: • Improvements to Reportable Segment Disclosures
• Improvements to Income Tax Disclosures
+Added: • Disaggregation of Income Statement Expenses
Forward-Looking Statements
10 unchanged sentences
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.