What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-12 compared with 2024-02-12 · 192 added, 269 removed, 1523 unchanged (23% of the section changed)

12 unchanged sentences

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Credit Acceptance Corporation (a Michigan corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Credit Acceptance Corporation (a Michigan corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 12, 2025 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses, Provision for Credit Losses and Finance Charge Revenue

The Company offers financing programs to a network of automobile dealers (“Dealers”) who enter into retail installment contracts directly with consumers (“Consumer Loans”).

The Company has two programs, the Portfolio Program and the Purchase Program.

Under the Portfolio Program, the Company advances money to Dealers (“Dealer Loans”) in exchange for the right to service the underlying Consumer Loans.

Under the Purchase Program, the Company buys the Consumer Loan from the Dealers (“Purchased Loans”) and keeps all amounts collected from the consumer.

Dealer Loans and Purchased Loans, collectively referred to as “Loans”, are presented as Loans receivable in the consolidated balance sheets.

The Company accounts for Loans in accordance with Financial Accounting Standards Board Accounting Standard Codification (“ASC”) 326, Financial Instruments, which is also known as the current expected credit loss model (“CECL”).

We identified the allowance for credit losses, provision for credit losses and finance charge revenue, which are recorded based on internally developed models, as a critical audit matter.

The principal consideration for our determination that the allowance for credit losses, provision for credit losses and finance charge revenue is a critical audit matter is the high degree of subjectivity that is involved in evaluating the reasonableness of management’s estimates of expected future cash flows on the Loans, which are derived from the models.

Our audit procedures related to the allowance for credit losses, provision for credit losses and finance charge revenue included the following, among others:

• We tested the design and operating effectiveness of relevant controls related to the models, including controls over the validation of the models, the completeness and accuracy of information used in the models, management review controls over the models, and segregation of duties for maintaining the models.

• We assessed the reasonableness of the methodology used in the models to compute the expected future cash flows.

Our assessment included the use of our internal specialist’s evaluation of the appropriateness of the Company’s internal model validation process.

• We reperformed the computation of the initial and current forecasts of expected future cash flows for a sample of Loans using management’s model methodology.

For that sample, we verified the accuracy of certain credit quality indicators used in the models, by comparing to the Consumer Loan documents.

For an additional sample, we assessed the correlation of collection history to forecasted future net cash flows for a sample of Loans.

• We assessed the reasonableness of the timing of the expected future cash flows based on historical monthly cash flows compared to forecasted monthly cash flows considering seasonality trends.

• We analyzed the historical forecasts against actual cash flows in evaluating management’s ability to predict future cash flows.

• We sampled new Loans during 2023 and confirmed the balance with the Dealer and/or agreed to the Consumer Loan documents for accuracy and existence.

• We sampled collections received during 2023 to verify the accuracy of the Loans.

• We recalculated the effective interest rate for a sample of Loans based on the contractual net cash flows.

• We recomputed the present value of expected future net cash flows discounted at the effective interest rate and the initial provision for credit losses for a sample of new Consumer Loan assignments.

• We selected a sample of Loans and recomputed the provision for credit losses and finance charge revenue for the year-ended December 31, 2023, and allowance for credit losses as of December 31, 2023.

For the sample tested, we also recomputed the estimated dealer holdback, if applicable.

Finance Charge Revenue and Allowance for Credit Losses

As described further in Notes 2 and 5 to the consolidated financial statements, the Company recorded $1,992.7 million in finance charge revenue for the period ended December 31, 2024 and an allowance for credit losses of $3,438.8 million on loans receivable of $11,289.1 million for a net carrying amount of loan receivables of $7,850.3 million as of December 31, 2024.

Finance charge revenue is determined by applying the effective interest rate to the net carrying amount of the loan receivable.

The effective interest rate is based on contractual future net cash flows.

The allowance for credit losses is then estimated by discounting the expected future net cash flows at the same effective interest used in determining finance charge revenue.

Expected future net cash flows are estimated using a statistical model that considers a number of credit quality indicators to derive the amount of those expected future net cash flows.

We identified finance charge revenue and allowance for credit losses as a critical audit matter.

The principal considerations for our determination that finance charge revenue and allowance for credit losses is a critical audit matter are the high degree of estimation uncertainty in management’s modeling of expected future net cash flows.

Management’s statistical model used to determine expected future net cash flows required complex auditor judgment to evaluate the reasonableness of the outcomes of the model and the involvement of those with specialized skill and knowledge.

Our audit procedures related to the finance charge revenue and allowance for credit losses included the following, among others:

• We tested the design and operating effectiveness of management’s review control over model performance variances between actual and expected future net cash flows.

• We tested the design and operating effectiveness of management’s review control over their statistical model used to determine expected future net cash flows which verifies the statistical model is operating as intended.

• For a sample of loans, we selected loan specific credit quality indicators used in the statistical model and agreed those credit quality indicators to source documents in order to recalculate the expected future net cash flows produced by the statistical model.

• We involved those with specialized skill and knowledge to assess the conceptual soundness of the statistical model’s design and management’s validation to accurately determine estimated future net cash flows.

/s/ GRANT THORNTON LLP

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Loss on extinguishment of debt — 1.8 —

Loss on sale of building 23.7 — —

Total costs and expenses 1,832.9 1,534.3 1,120.7

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Stock-based compensation — — 36.5 — — 36.5

Forfeiture of restricted stock awards ( 109,085 ) — — — — —

Repurchase of common stock ( 1,491,481 ) — ( 3.1 ) ( 781.4 ) — ( 784.5 )

Restricted stock units converted to common stock

11,416 — — — — —

Restricted stock units settled in common stock 57,928 — — — — —

Stock options exercised 44,550 — 15.1 — — 15.1

1 unchanged sentence

Net income — — — 286.1 — 286.1

Other comprehensive loss — — — — ( 3.1 ) ( 3.1 )

Other comprehensive gain — — — — 1.9 1.9

Stock-based compensation — — 39.1 — — 39.1

Repurchase of common stock ( 409,317 ) — ( 11.0 ) ( 191.6 ) — ( 202.6 )

Restricted stock units converted to common stock

57,928 — — — — —

Restricted stock units settled in common stock 159,205 — — — — —

Stock options exercised 15,624 — 5.2 — — 5.2

4 unchanged sentences

Repurchase of common stock ( 588,025 ) — ( 4.5 ) ( 308.8 ) — ( 313.3 )

Restricted stock units converted to common stock

159,205 — — — — —

Restricted stock units settled in common stock 68,003 — — — — —

Stock options exercised 45,776 — 15.6 — — 15.6

10 unchanged sentences

Amortization 21.1 17.7 16.6

Provision (credit) for deferred income taxes ( 38.0 ) ( 7.7 ) 44.7

Credit for deferred income taxes ( 70.4 ) ( 38.0 ) ( 7.7 )

Stock-based compensation 45.0 39.1 36.5

Loss on extinguishment of debt — 1.8 —

Loss on sale of building 23.7 — —

Other 0.8 0.6 0.3

Change in operating assets and liabilities:

Increase (decrease) in accounts payable and accrued liabilities 49.7 67.9 ( 10.7 )

Increase in accounts payable and accrued liabilities 6.8 49.7 67.9

Decrease in income taxes receivable 0.1 4.4 100.5

12 unchanged sentences

Purchases of property and equipment ( 1.8 ) ( 4.0 ) ( 3.1 )

Net cash provided by (used in) investing activities ( 1,416.8 ) ( 460.6 ) 437.3

Proceeds from sale of building 3.2 — —

Net cash used in investing activities ( 1,721.1 ) ( 1,416.8 ) ( 460.6 )

Cash Flows From Financing Activities:

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Principal Business.

Since 1972, Credit Acceptance Corporation (referred to as the “Company”, “Credit Acceptance”, “we”, “our” or “us”) has offered financing programs that enable automobile dealers to sell vehicles to consumers, regardless of their credit history.

Credit Acceptance Corporation (referred to as the “Company”, “Credit Acceptance”, “we”, “our” or “us”) makes 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;

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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.

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80.6 % 80.9 % 84.8 %

In recent years, we expanded our financing programs to consumers with higher credit ratings, which has contributed to the reduction in the percentage of total unit volume with either FICO ® scores below 650 or no FICO ® scores over the three year period presented above.

We have two programs:

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2024 78.7 % 21.3 % 77.5 % 22.5 %

(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.

(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 (as defined below) and accelerated Dealer Holdback are not included.

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Purchase Program

The Purchase Program differs from our Portfolio Program in that the Dealer receives a one-time payment from us at the time of assignment to purchase the Consumer Loan instead of a cash advance at the time of assignment and future Dealer Holdback payments.

The Purchase Program differs from the Portfolio Program in that the Dealer receives a one-time payment from us at the time of assignment to purchase the Consumer Loan instead of a cash advance at the time of assignment and future Dealer Holdback payments.

For accounting purposes, the transactions described under the Purchase Program are considered to be originated by the Dealer and then purchased by us.

Program Enrollment

Dealers are granted access to our Portfolio Program upon enrollment.

Dealers are granted access to the Portfolio Program upon enrollment.

Access to the Purchase Program is typically only granted to Dealers that meet one of the following:

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(“BVPP”), Vehicle Remarketing Services, Inc.

(“VRS”), VSC Re Company (“VSC Re”), CAC Warehouse Funding LLC II, CAC Warehouse Funding LLC IV, CAC Warehouse Funding LLC V, CAC Warehouse Funding LLC VI, CAC Warehouse Funding LLC VIII, Credit Acceptance Funding LLC 2019-2, Credit Acceptance Funding LLC 2020-3, Credit Acceptance Funding LLC 2021-1, Credit Acceptance Funding LLC 2021-2, Credit Acceptance Funding LLC 2021-3, Credit Acceptance Funding LLC 2021-4, Credit Acceptance Funding LLC 2022-1, Credit Acceptance Funding LLC 2022-2, Credit Acceptance Funding LLC 2022-3, Credit Acceptance Funding LLC 2023-1, Credit Acceptance Funding LLC 2023-2, Credit Acceptance Funding LLC 2023-3, Credit Acceptance Funding LLC 2023-A, and Credit Acceptance Funding LLC 2023-5.

(“VRS”), VSC Re Company (“VSC Re”), CAC Warehouse Funding LLC II, CAC Warehouse Funding LLC IV, CAC Warehouse Funding LLC V, CAC Warehouse Funding LLC VI, CAC Warehouse Funding LLC VIII, Credit Acceptance Funding LLC 2019-2, Credit Acceptance Funding LLC 2021-1, Credit Acceptance Funding LLC 2021-4, Credit Acceptance Funding LLC 2022-1, Credit Acceptance Funding LLC 2022-2, Credit Acceptance Funding LLC 2022-3, Credit Acceptance Funding LLC 2023-1, Credit Acceptance Funding LLC 2023-2, Credit Acceptance Funding LLC 2023-3, Credit Acceptance Funding LLC 2023-A, Credit Acceptance Funding LLC 2023-5, Credit Acceptance Funding LLC 2024-A, Credit Acceptance Funding LLC 2024-1, Credit Acceptance Funding LLC 2024-2, Credit Acceptance Funding LLC 2024-3, and Credit Acceptance Funding LLC 2024-B.

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.

For information regarding our one reportable segment and related entity wide disclosures, see Note 14 to the consolidated financial statements.

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$ 845.0 $ 470.9 $ 417.7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Restricted Securities Available for Sale

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Debt securities for which we do not have the intent or ability to hold to maturity are classified as available for sale, and stated at fair value with unrealized gains and losses, net of income taxes included in the determination of comprehensive income and reported as a component of shareholders’ equity.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Loans Receivable and Allowance for Credit Losses

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• We only accept Consumer Loan assignments from Dealers located within the United States.

Recognition and Measurement Policies.

Recognition and Measurement Policy.

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.

Loans outstanding prior to the adoption date qualified for transition relief and are accounted for as purchased financial assets with credit deterioration (“PCD Method”).

Under the PCD Method, for each reporting period subsequent to the adoption of CECL, we:

• recognize finance charge revenue using the effective interest rate that was calculated on the adoption date based on expected future net cash flows;

• adjust the allowance for credit losses so that the net carrying amount of each Loan equals the present value of expected future net cash flows discounted at the effective interest rate.

The adjustment to the allowance for credit losses is recognized as either provision for credit losses expense or a reversal of provision for credit losses expense.

Loans outstanding prior to the adoption date are no longer material to our consolidated financial statements.

Consumer Loans assigned to us on or subsequent to January 1, 2020 are accounted for as originated financial assets (“Originated Method”).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Consumer Loans assigned to us on or subsequent to January 1, 2020 do not qualify for the PCD Method and are accounted for as originated financial assets (“Originated Method”).

While the cash flows we expect to collect at the time of assignment are significantly lower than the contractual cash flows owed to us due to credit quality, our Loans do not qualify for the PCD Method because the assignment of the Consumer Loan to us occurs a moment after the Consumer Loan is originated by the Dealer, so “a more-than-insignificant deterioration in credit quality since origination” has not occurred at the time of assignment.

In addition, Dealer Loans also do not qualify for the PCD Method because Consumer Loans assigned to us under the Portfolio Program are considered to be advances under Dealer Loans originated by us rather than Consumer Loans purchased by us.

Under the Originated Method, at the time of assignment, we:

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Amounts advanced to Dealers for Consumer Loans assigned under the Portfolio Program are recorded as Dealer Loans and are aggregated by Dealer for purposes of recognizing revenue and measuring credit losses.

Amounts paid to Dealers for Consumer Loans assigned under the Purchase Program are recorded as Purchased Loans and, for purposes of recognizing revenue and measuring credit losses, are:

• not aggregated, if assigned on or subsequent to January 1, 2020;

• aggregated into pools based on the month of purchase, if assigned prior to January 1, 2020.

Amounts paid to Dealers for Consumer Loans assigned under the Purchase Program are recorded as Purchased Loans and, for purposes of recognizing revenue and measuring credit losses, are not aggregated.

The outstanding balance of each Loan included in Loans receivable is comprised of the following:

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transfers out.

Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.

Under the Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.

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

We aggregate these Purchased Loans by Dealer for purposes of recognizing revenue and measuring credit losses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Allowance for Credit Losses.

2 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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.

22 unchanged sentences

Methodology Changes.

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.

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 .

2 unchanged sentences

For the three year period ended December 31, 2024, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Property and Equipment

7 unchanged sentences

We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Costs incurred during the application development stage of software developed for internal use are capitalized and generally depreciated on a straight-line basis over five years .

5 unchanged sentences

For additional information regarding deferred debt issuance costs, see Note 9 to the consolidated financial statements.

Derivative Instruments

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.

We manage such risk primarily by entering into interest rate cap agreements (“derivative instruments”).

These derivative instruments are not designated as hedges, and changes in their fair value increase or decrease interest expense.

We recognize derivative instruments as either other assets or accounts payable and accrued liabilities on our consolidated balance sheets.

For additional information regarding our derivative instruments, see Note 10 to the consolidated financial statements.

Finance Charges

22 unchanged sentences

TPPs process claims on GAP contracts that are underwritten by third-party insurers.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Program fees represent monthly fees charged to Dealers for access to our Credit Approval Processing System (“CAPS”);

2 unchanged sentences

and all tangible and intangible property owned by Credit Acceptance.

We charge a monthly fee of $ 599 to Dealers participating in our Portfolio Program and we collect it from future Dealer Holdback payments.

We charge a monthly fee of $ 599 to Dealers participating in the Portfolio Program and we collect it from future Dealer Holdback payments.

Recognition Policy.

1 unchanged sentence

We calculate finance charges on a monthly basis by applying the effective interest rate of the Loan to the net carrying amount of the Loan (Loan receivable less the related allowance for credit losses).

For Consumer Loans assigned on or subsequent to January 1, 2020, the effective interest rate is based on contractual future net cash flows.

For Consumer Loans assigned prior to January 1, 2020, the effective interest rate was determined based on expected future net cash flows.

The effective interest rate is based on contractual future net cash flows.

We report the change in the present value of credit losses attributable to the passage of time as a reduction to finance charges.

2 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.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Our wholly owned subsidiary 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.

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We apply a fair-value-based measurement method in accounting for stock-based compensation plans and recognize stock-based compensation expense over the requisite service period of the grant as salaries and wages expense.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Employee Benefit Plan

We sponsor a 401(k) plan that covers substantially all of our team members.

We offer matching contributions to the 401(k) plan based on each enrolled team members’ eligible annual gross pay (subject to statutory limitations).

We offer matching contributions to the 401(k) plan based on each enrolled team member’s eligible annual gross pay (subject to statutory limitations).

Our matching contribution rate is equal to 100 % of the first 4 % participants contribute and an additional 50 % of the next 2 % participants contribute, for a maximum matching contribution of 5 % of each participant’s eligible annual gross pay.

3 unchanged sentences

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

We follow a two-step approach for recognizing uncertain tax positions.

8 unchanged sentences

Advertising expenses were $ 1.4 million for the year ended December 31, 2024, $ 0.5 million for the year ended December 31, 2023, and $ 1.0 million for the year ended December 31, 2022.

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.

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 Update Not Yet Adopted

New Accounting Update Adopted During the Current Year

Improvements to Reportable Segment Disclosures.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, which enhances the required disclosures for operating segments in annual and interim consolidated financial statements.

The adoption of ASU 2023-07 for the year ended December 31, 2024 expanded our business segment disclosures, but did not otherwise have a material impact on our consolidated financial statements.

New Accounting Updates Not Yet Adopted

Disclosure Improvements:

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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.

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

Reclassification

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

Disaggregation of Income Statement Expenses.

In November 2024, the FASB issued ASU 2024-03, which requires disaggregated disclosure of income statement expenses.

ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement;

rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements.

ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027.

We are currently evaluating the impact the adoption of ASU 2024-03 will have on our consolidated financial statements and related disclosures.

Subsequent Events

1 unchanged sentence

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

13 unchanged sentences

For our warehouse facilities and certain other Term ABS financings, the fair values are determined by calculating the present value of each debt instrument based on current rates for debt with similar risk profiles and maturities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Senior Notes.

1 unchanged sentence

Mortgage Note.

The fair value is determined by calculating the present value of the debt instrument based on current rates

for debt with a similar risk profile and maturity.

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

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

11 unchanged sentences

Mortgage note — — 8.4 8.4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

6 unchanged sentences

These unobservable assumptions reflect estimates or assumptions that market participants would use in pricing the asset or liability.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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:

9 unchanged sentences

Senior notes (1) 1,035.3 — — 1,035.3

Mortgage note (1) — 8.4 — 8.4

(In millions) As of December 31, 2023

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Asset-backed securities 20.1 0.1 — 20.2

Municipal securities 0.7 — — 0.7

Mortgage-backed securities 1.7 — — 1.7

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Asset-backed securities 18.0 0.1 ( 0.2 ) 17.9

Municipal securities 0.7 — — 0.7

Mortgage-backed securities 0.2 — — 0.2

151 unchanged sentences

$ 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

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

The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

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

The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.

(2) Represents repayments that we collected on Consumer Loans assigned under our programs.

(3) Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.

(3) Under the Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.

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

85 unchanged sentences

$ 986.1 $ 401.7 $ 1,387.8

(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.

The Purchased Loans amount represents repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Purchase Program.

(2) 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.

The Purchased Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Purchase Program.

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

The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

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

The Purchased Loans amount represents repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under the Purchase Program.

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

The Purchased Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under the Purchase Program.

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

The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.

(4) Represents revenue that is expected to be recognized on a level-yield basis over the lives of the Loans.

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

(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.

The Purchased Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Purchase Program.

(2) The Dealer Loans amount represents repayments that we collected on Consumer Loans assigned under our Portfolio Program, less the Dealer Holdback and Accelerated Dealer Holdback payments that we made.

Purchased Loans amount represents repayments that we collected on Consumer Loans assigned under our Purchase Program.

(3) Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.

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

The Purchased Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under the Purchase Program.

(2) The Dealer Loans amount represents repayments that we collected on Consumer Loans assigned under the Portfolio Program, less the Dealer Holdback and Accelerated Dealer Holdback payments that we made.

Purchased Loans amount represents repayments that we collected on Consumer Loans assigned under the Purchase Program.

(3) Under the Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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

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

(In millions) For the Year Ended December 31, 2024

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$ 658.3 $ 634.7 $ 1,293.0

(In millions) For the Year Ended December 31, 2023

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

2018 and prior $ 120.6 $ 104.8 $ 225.4

2019 101.3 176.6 277.9

2020 107.0 101.9 208.9

2021 107.2 119.7 226.9

2022 113.3 158.0 271.3

2023 17.2 62.8 80.0

$ 566.6 $ 723.8 $ 1,290.4

Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.

Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.

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.

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.

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 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 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 fourth quarter of 2023.

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.

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

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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.

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Total $ 95.7 $ ( 70.6 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY AND EQUIPMENT

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Total property and equipment, net $ 14.7 $ 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.

We are actively exploring options to reduce our office space, which could result in the sale or lease of one or both of our buildings.

As there is currently a significant amount of unoccupied office space, we believe the market value of our buildings and improvements, land and land improvements, and office furniture and equipment is significantly less than their combined carrying value of $ 34.4 million.

If we were to reclassify one or both of these buildings as held for sale, we would be required to record an impairment charge to reduce their carrying value to their estimated market value less costs to sell.

As the vast majority of our team members now work remotely, we had significant excess space in the two office buildings that we owned in Southfield, Michigan.

During the second quarter of 2024, we sold the larger building for net sales proceeds of $ 3.2 million and recognized a loss on sale of the building of $ 23.7 million.

The loss on sale of the building represented the amount by which the $ 26.9 million carrying value of the building and its improvements, the related land and land improvements, and office furniture and equipment exceeded the net sales proceeds of $ 3.2 million.

Depreciation expense on property and equipment was $ 6.7 million, $ 8.9 million, and $ 9.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.

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Revolving Secured

Line of Credit Facility n/a 06/22/26 $ 390.0 At our option, either the Bloomberg Short-Term Bank Yield Index rate (BSBY) plus 187.5 basis points or the prime rate plus 87.5 basis points

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

Warehouse Facility II (2) CAC Warehouse Funding LLC II 04/30/26 (3) $ 400.0 The Secured Overnight Financing Rate (SOFR) plus 230 basis points

Line of Credit Facility n/a 06/22/27 $ 390.0 At our option, either the Secured Overnight Financing Rate (SOFR) plus 197.5 basis points or the prime rate plus 87.5 basis points

RTP Facility n/a — (1) $ 20.0 SOFR plus 197.5 basis points

Warehouse Facility II (2) CAC Warehouse Funding LLC II 09/20/27 (3) $ 500.0 SOFR plus 185.0 basis points

Warehouse Facility IV (2) CAC Warehouse Funding LLC IV 12/29/26 (3) $ 300.0 SOFR plus 221.4 basis points

Warehouse Facility V (2) CAC Warehouse Funding LLC V 12/29/27 (4) $ 250.0 SOFR plus 185.0 basis points

Warehouse Facility VI (2) CAC Warehouse Funding LLC VI 09/30/26 (3) $ 75.0 BSBY plus 200 basis points

Warehouse Facility VI (2) CAC Warehouse Funding LLC VI 09/30/26 (3) $ 75.0 SOFR plus 210.0 basis points

Warehouse Facility VIII (2) CAC Warehouse Funding LLC VIII 09/21/26 (3) $ 200.0 SOFR plus 225.0 basis points

Term ABS 2019-2 (2) Credit Acceptance Funding LLC 2019-2 09/15/26 (5) $ 500.0 Fixed rate

Term ABS 2020-3 (2) Credit Acceptance Funding LLC 2020-3 10/17/22 (3) $ 600.0 Fixed rate

Term ABS 2021-1 (2) Credit Acceptance Funding LLC 2021-1 02/17/26 (5) $ 100.0 SOFR plus 220.0 basis points

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Term ABS 2022-1 (2) Credit Acceptance Funding LLC 2022-1 06/17/24 (3) $ 350.0 Fixed rate

Term ABS 2021-4 (2) Credit Acceptance Funding LLC 2021-4 10/16/23 (3) $ 250.1 Fixed rate

Term ABS 2022-1 (2) Credit Acceptance Funding LLC 2022-1 06/17/24 (3) $ 350.0 Fixed rate

Term ABS 2022-2 (2) Credit Acceptance Funding LLC 2022-2 06/15/27 (5) $ 300.0 SOFR plus 246.4 basis points

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Term ABS 2023-5 (2) Credit Acceptance Funding LLC 2023-5 12/15/25 (3) $ 294.0 Fixed rate

Term ABS 2024-A (2) Credit Acceptance Funding LLC 2024-A 02/15/27 (5) $ 200.0 Fixed rate

Term ABS 2024-1 (2) Credit Acceptance Funding LLC 2024-1 03/16/26 (3) $ 500.0 Fixed rate

Term ABS 2024-2 (2) Credit Acceptance Funding LLC 2024-2 06/15/26 (3) $ 550.0 Fixed rate

Term ABS 2024-3 (2) Credit Acceptance Funding LLC 2024-3 09/15/26 (3) $ 600.0 Fixed rate

Term ABS 2024-B (2) Credit Acceptance Funding LLC 2024-B 12/15/27 (5) $ 300.0 Fixed rate

2026 Senior Notes n/a 03/15/26 $ 400.0 Fixed rate

2028 Senior Notes n/a 12/15/28 $ 600.0 Fixed rate

Mortgage Note (2) Chapter 4 Properties, LLC 08/06/28 $ 9.0 BSBY plus 150 basis points

(1) Borrowings are subject to repayment on demand.

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The outstanding balance will amortize after the revolving maturity date based on the cash flows of the pledged assets.

(4) Interest rate cap agreements are in place to limit the exposure to increasing interest rates.

(4) Represents the revolving maturity date.

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(Dollars in millions) As of December 31,

Term ABS 2023-1

Term ABS 2023-A

Principal balance outstanding $ 200.0 $ 200.0

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Interest rate 6.54 % 6.54 %

Term ABS 2024-A

Principal balance outstanding $ 200.0 $ —

Loans pledged as collateral 248.4 —

Restricted cash and cash equivalents pledged as collateral 18.1 —

Interest rate 7.45 % — %

Term ABS 2024-1

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Interest rate 6.01 % — %

Term ABS 2023-A

Term ABS 2024-2

Principal balance outstanding $ 550.0 $ —

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Interest rate 4.91 % — %

2024 Senior Notes

Term ABS 2024-B

Principal balance outstanding $ 300.0 $ —

Loans pledged as collateral 425.8 —

Restricted cash and cash equivalents pledged as collateral 37.9 —

Interest rate 6.13 % — %

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Revolving Secured Lines of Credit

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

This limitation equals 80 % of the value of Loans, as defined in the agreement governing

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

our revolving secured line of credit facility, less a hedging reserve (not exceeding $ 1.0 million), and the amount of other debt secured by the collateral that secures our revolving secured line of credit facility.

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

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

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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, 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 2020-3, 2021-2, 2021-3, 2021-4, 2023-1, 2023-2, 2023-3, 2023-A, and 2023-5 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, 2023-A, and 2024-B 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, 2023-A, and 2024-B financings pledged the Loans for the benefit of their respective lenders.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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, 2022-2, and 2023-A 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, 2023-A, and 2024-B 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.

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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.

We receive a monthly servicing fee on each financing equal to 4 % of the collections received with respect to the conveyed Loans.

The fee is paid out of the collections.

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

If a Term ABS financing is in its revolving period, the applicable trust or Funding LLC is entitled to the portion of such collections available after application of any amounts necessary to acquire additional Loans from us and to pay accrued interest on the debt and any other transaction expenses, provided that any necessary principal payments are made to compensate for certain reductions in the balance of eligible loans or, in the case of Term ABS financings occurring after the Term ABS 2021-3 financing, certain reductions in forecasted collections.

If a Term ABS financing is in its revolving period, the applicable trust or Funding LLC is entitled to the portion of such collections available after application of any amounts necessary to acquire additional Loans from us and to pay accrued interest on the debt and any other transaction expenses, provided that any necessary principal payments are made to compensate for certain reductions in the balance of eligible loans or, in the case of the Term ABS 2019-2 financing and Term ABS financings occurring after the Term ABS 2021-3 financing, certain reductions in forecasted collections.

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.

1 unchanged sentence

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.

The table below sets forth certain additional details regarding the outstanding Term ABS financings:

(Dollars in millions)

Term ABS Financings Closing Date Net Book Value of Loans

Conveyed at Closing Revolving Period

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

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

Term ABS 2021-3 May 20, 2021 562.6 Through May 15, 2023

Term ABS 2021-4 October 28, 2021 312.6 Through October 16, 2023

Term ABS 2022-1 June 16, 2022 437.6 Through June 17, 2024

Term ABS 2022-2 December 15, 2022 250.1 Through December 15, 2025

Term ABS 2022-3 November 3, 2022 500.1 Through October 15, 2024

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

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

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

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

5 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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

5 unchanged sentences

The indentures for the senior notes provide for a guarantor of the senior notes to be released from its obligations under its guarantee of the senior notes under specified circumstances.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Mortgage Note

We have a $ 9.0 million mortgage note with a commercial bank that is secured by a first mortgage lien on a building acquired by us and an assignment of all leases, rents, revenues, and profits under all present and future leases of the building.

The note matures on August 6, 2028, and bears interest at BSBY plus 150 basis points.

We had a mortgage note with a commercial bank that was secured by a first mortgage lien on a building acquired by us and an assignment of all leases, rents, revenues, and profits under all present and future leases of the building.

The note was paid off in full during the second quarter of 2024 in connection with the sale of the related building.

Principal Debt Maturities

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Year Revolving Secured Lines of Credit Facility Warehouse Facilities Term ABS

Financings (1) Senior Notes Mortgage Note Total

Financings (1) Senior Notes Total

2025 $ — $ — $ 1,249.6 $ — $ 1,249.6

7 unchanged sentences

Debt Covenants

As of December 31, 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 December 31, 2024, we were in compliance with our covenants under our revolving secured line of credit facility, our Warehouse facilities, our Term ABS financings, the senior notes indentures, and the RTP Facility.

Our revolving secured line of credit facility and our Warehouse facilities include covenants 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.

1 unchanged sentence

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

Our Warehouse facilities also contain covenants that measure the performance of the conveyed assets.

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

DERIVATIVE AND HEDGING INSTRUMENTS

Interest Rate Caps.

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 December 31, 2023 and 2022:

(Dollars in millions)

As of December 31, 2023

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

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

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

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

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

200.0 Term ABS 2022-2 Cap Floating Rate 12/2022 06/2024 200.0 6.50 %

(Dollars in millions)

As of December 31, 2022

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 07/2019 07/2023 175.0 6.50 %

200.0 Warehouse Facility V Cap Floating Rate 12/2020 01/2026 94.0 5.50 %

200.0 Warehouse Facility VIII Cap Floating Rate 08/2019 08/2023 116.7 5.50 %

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

100.0 Term ABS 2021-1 Cap Floating Rate 02/2021 06/2024 100.0 5.50 %

200.0 Term ABS 2022-2 Cap Floating Rate 12/2022 06/2024 200.0 6.50 %

(1) Rate excludes the spread over the corresponding benchmark rate.

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

As of December 31, 2023 and 2022, the interest rate caps had a fair value of $ 0.1 million and $ 2.0 million, respectively.

Information related to the effect of derivative instruments not designated as hedging instruments on our consolidated statements of income for the years ended December 31, 2023, 2022, and 2021 is as follows:

(In millions) Amount of (Income) Loss

Recognized in Income on Derivatives

Derivatives Not Designated as

Hedging Instruments For the Years Ended December 31,

Location 2023 2022 2021

Interest rate caps Interest expense $ 2.0 $ ( 1.0 ) $ ( 0.1 )

Our Warehouse facilities and Term ABS financings contain covenants that measure the performance of the conveyed assets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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Provision for income taxes $ 81.6 $ 81.5 $ 175.9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Deferred Taxes

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We do not anticipate expiration of the net operating loss carryforwards prior to their utilization.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Effective Income Tax Rate

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State and local income taxes

For the year ended December 31, 2024, the impact of state and local income taxes on our effective income tax rate increased from 2023, primarily due to an adjustment to an uncertain tax position estimate for state income taxes during the second quarter of 2024 and changes in state tax laws that were enacted during the second quarter of 2024.

For the year ended December 31, 2023, the impact of state and local income taxes on our effective income tax rate decreased from 2022 primarily due to the settlement of an uncertain tax position for state income taxes during the second quarter of 2023.

The increase in our state and local income tax rate from 2021 to 2022 was primarily due to changes in state and local tax laws that were enacted during the third quarter of 2022.

The enactment of these tax law changes increased our effective income tax rate by approximately 60 basis points for the year ended December 31, 2022, of which 50 basis points related to the impact of tax law changes that are effective for future periods and 10 basis points related to the impact of tax law changes that were effective retroactively to the beginning of 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Non-deductible executive compensation expense

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

We recognize non-deductible executive compensation expense as an increase of provision for income taxes or a reduction of benefit for income taxes.

For the year ended December 31, 2024, the impact of non-deductible executive compensation expense on our effective income tax rate increased from 2023, primarily due to an increase in non-deductible executive compensation expense.

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 vests, 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 vests, 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 year ended December 31, 2023 increased from the same period in 2022 primarily due to an increase in the number of restricted stock units that were converted to common stock during 2023 due to the timing of long-term stock award grants.

The decrease in the impact of excess tax benefits on our effective income tax rate for the year ended December 31, 2024 as compared to 2023 was primarily due to a decrease in the number of restricted stock units that were settled in common stock during 2024 due to the timing of long-term stock award grants.

Unrecognized Tax Benefits

9 unchanged sentences

Unrecognized tax benefits at December 31, $ 73.0 $ 61.0 $ 57.1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The total amount of gross unrecognized tax benefits that, if recognized, would favorably affect our effective income tax rate in future periods was $ 73.0 million as of December 31, 2024.

13 unchanged sentences

Basic number of weighted average shares outstanding 12,323,261 12,953,424 13,563,885

Dilutive effect of restricted stock, restricted stock units, and stock options 57,311 61,196 14,729

Dilutive effect of restricted stock units and stock options 146,022 57,311 61,196

Dilutive number of weighted average shares outstanding 12,469,283 13,010,735 13,625,081

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following outstanding stock awards were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive:

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Total 588,025 $ 313.3 409,317 $ 202.6 1,491,481 $ 784.5

(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.

1 unchanged sentence

As of December 31, 2024, we had authorization to repurchase 1,245,091 shares of our common stock.

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

(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 settlement of restricted stock units in common stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STOCK-BASED COMPENSATION PLANS

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The shares available for future grants under the Incentive Plan totaled 310,552 as of December 31, 2024.

Restricted Stock Units

We grant performance-based and time-based restricted stock units to team members and directors in accordance with the Incentive Plan.

The grant-date fair value per share is estimated to equal the market price of our common stock on the date of grant.

Each restricted stock unit represents and has a value equal to one share of common stock.

Based on the terms of individual restricted stock unit grant agreements, restricted stock units vest under one of the following methods:

• For executive officers and senior leaders, over a period of ten years , based on continuous employment.

• For certain team members, over a period of three or four years , based on continuous employment.

• For independent directors, over a period of three years , based on continuous service as a director.

A summary of the restricted stock unit (“RSU”) activity under the Incentive Plan for the year ended December 31, 2024, is presented below:

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

(in millions) Weighted Average Remaining Contractual Term (in years)

Outstanding as of December 31, 2023 203,444 $ 179.13

Granted 401,670 484.58

Converted ( 68,503 ) 181.30

Forfeited ( 3,164 ) 466.28

Outstanding as of December 31, 2024 (1) 533,447 $ 407.15 $ 250.4 4.1 (3)

Vested as of December 31, 2024 110,140 $ 113.85 $ 51.7 1.0

(1) No RSUs outstanding at December 31, 2024 were convertible to shares of common stock.

(2) The intrinsic value of RSUs is measured by applying the closing stock price as of December 31, 2024 to the applicable number of units.

(3) The calculation of weighted average remaining contractual term of RSUs outstanding excludes 98,497 RSUs that are to be settled in common stock on future dates that are currently not known, as they are contingent on the timing of the team members' retirement from the Company.

The grant-date weighted average fair value of RSUs granted in 2024, 2023, and 2022 was $ 484.58 , $ 454.04 , and $ 488.27 , respectively.

The total intrinsic value of RSUs settled in common stock during 2024, 2023, and 2022 was $ 32.2 million, $ 84.8 million, and $ 27.5 million, respectively.

Stock option grants

We grant time-based stock options to team members and directors in accordance with the Incentive Plan.

We have granted time-based stock options to team members and directors in accordance with the Incentive Plan.

Based on the terms of individual stock option grant agreements, the stock options:

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Net cash proceeds from the exercise of stock options in 2024 was $ 15.6 million.

Restricted Stock Units

We grant performance-based and time-based restricted stock units to team members and directors in accordance with the Incentive Plan.

The grant-date fair value per share is estimated to equal the market price of our common stock on the date of grant.

Each restricted stock unit represents and has a value equal to one share of common stock.

Based on the terms of individual restricted stock unit grant agreements, restricted stock units vest under one of the following methods:

• For our former Chief Executive Officer, over a period of ten years , based on continuous employment and the cumulative improvement in our annual adjusted economic profit.

• For certain team members, over a period of three or four years , based on continuous employment.

• For independent directors, over a period of three years , based on continuous service as a director.

• For certain independent directors, over a period of five years , based upon the compounded annual growth rate in our adjusted net income per diluted share, a non-GAAP financial measure.

A summary of the restricted stock unit (“RSU”) activity under the Incentive Plan for the year ended December 31, 2023, is presented below:

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

(in millions) Weighted Average Remaining Contractual Term (in years)

Outstanding as of December 31, 2022 341,228 $ 169.28

Granted 22,261 454.04

Converted ( 159,205 ) 194.97

Forfeited ( 840 ) 462.46

Outstanding as of December 31, 2023 (1) 203,444 $ 179.13 $ 108.4 1.5

Vested as of December 31, 2023 163,948 $ 110.92 $ 87.3 1.5

(1) No RSUs outstanding at December 31, 2023 were convertible to shares of common stock.

(2) The intrinsic value of RSUs is measured by applying the closing stock price as of December 31, 2023 to the applicable number of units.

The grant-date weighted average fair value of RSUs granted in 2023, 2022, and 2021 was $ 454.04 , $ 488.27 , and $ 366.07 , respectively.

The total intrinsic value of RSUs converted to common stock during 2023, 2022, and 2021 was $ 84.8 million, $ 27.5 million, and $ 7.9 million, respectively.

During 2021, we recognized a $ 3.0 million reversal of stock-based compensation expense due to the forfeiture of 31,000 unvested RSUs upon the retirement of our former Chief Executive Officer in May 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Restricted Stock

Prior to 2020, we granted performance-based and time-based shares of restricted stock to team members in accordance with the Incentive Plan.

As of December 31, 2023 and December 31, 2022, there were no unvested shares of restricted stock.

During 2021, we recognized an $ 8.5 million reversal of stock-based compensation expense due to the forfeiture of 109,000 shares of unvested restricted stock upon the retirement of our former Chief Executive Officer in May 2021.

Stock-based compensation expense

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Restricted stock units 12.1 5.6 2.7

Restricted stock — — ( 7.8 )

Total $ 45.0 $ 39.1 $ 36.5

Assuming performance targets are achieved in the periods currently estimated, we expect to recognize the remaining expense for stock-based awards outstanding as of December 31, 2023 over a weighted average period of 0.9 years, 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 2025 through 2034 compensation period and included a one-time equity award in December 2024 with a vesting period of ten years.

We expect to recognize the remaining expense for stock-based awards outstanding as of December 31, 2024 over a weighted-average period of 4.3 years as follows:

(In millions)

For the Years Ended December 31, Stock Options Restricted

Stock Units Total Projected Expense

For the Years Ended December 31, Restricted

Stock Units Stock Options Total Projected Expense

2025 $ 33.2 $ 5.0 $ 38.2

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2028 19.7 — 19.7

2029 17.2 — 17.2

Thereafter 71.7 — 71.7

Total $ 194.9 $ 6.2 $ 201.1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

BUSINESS SEGMENT AND OTHER INFORMATION

Business Segment Overview

We identify operating segments as components of our business for which separate financial information is regularly evaluated by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance.

We identify operating segments as components of our business for which separate financial information is regularly evaluated by our Chief Executive Officer, who acts as the chief operating decision-maker (“CODM”), in assessing performance and making decisions regarding resource allocation.

We periodically review and redefine our segment reporting as internal management reporting practices evolve and the components of our business change.

Currently, the CODM reviews consolidated financial statements and metrics to allocate resources and assess performance.

Thus, we have determined that we operate in one reportable operating segment.

Currently, the CODM reviews consolidated financial statements and metrics to assess performance and allocate resources.

Thus, we have determined that we operate in one reportable operating segment that represents our core business of offering Dealers innovative financing solutions and related products and services that enable them to sell vehicles to consumers, regardless of their credit history.

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

The accounting policies of this segment are the same as those described in the summary of significant accounting policies in Note 2.

The CODM assesses performance for our one reportable operating segment and decides how to allocate resources based on net income, as reported on our consolidated statements of income, and total assets, as reported on our consolidated balance sheets.

Geographic Information

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Products and Services Information

Our primary product consists of financing programs that enable Dealers to sell vehicles to consumers, regardless of their credit history.

Our primary product consists of innovative financing solutions that enable Dealers to sell vehicles to consumers, regardless of their credit history.

We also provide Dealers the ability to offer ancillary products on vehicles financed by us.

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Additionally, no single Dealer’s Loans receivable balance accounted for more than 10% of total Loans receivable as of December 31, 2024 or 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

COMMITMENTS AND CONTINGENCIES

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On December 1, 2021, we received a subpoena from the Office of the Attorney General for the State of California seeking documents and information regarding GAP products, GAP product administration, and refunds.

We are cooperating with this inquiry and cannot predict the eventual scope, duration, or outcome at this time.

We have cooperated with this inquiry and cannot predict the eventual scope, duration, or outcome at this time.

As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On May 7, 2019, we received a subpoena from the Consumer Frauds and Protection Bureau of the Office of the New York State Attorney General, relating to the Company’s origination and collection policies and procedures in the state of New York.

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

22-448 (“CFSA”).

On July 1, 2024, the court lifted the stay in view of the decision in CFSA and requested revised briefing on the Company’s motion to dismiss that would address the intervening legal developments and sharpen the issues for resolution.

As of October 29, 2024, the Company's motion to dismiss has been fully briefed.

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

The Company intends to vigorously defend itself in this matter.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the Company’s repossession and sale policies and procedures in the state of Maryland.

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As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from these investigations.

On December 9, 2014, we received a civil investigative subpoena from the U.S.

Department of Justice pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 directing us to produce certain information relating to subprime automotive finance and related securitization activities.

We have cooperated with the inquiry, but cannot predict the eventual scope, duration, or outcome at this time.

As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

Litigation Resolved during 2022

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On December 16, 2022, the court entered a final order and judgment consistent with the settlement agreement, including dismissal with prejudice of all claims asserted against the Company and its officers.

Regulatory Matters Resolved during 2021

On August 30, 2020, we were served with a complaint, filed by the Attorney General in Massachusetts Superior Court in Suffolk County, alleging that the Company engaged in unfair and deceptive trade practices in subprime auto lending, debt collection and asset-backed securitizations in the Commonwealth of Massachusetts, in violation of the Massachusetts Consumer Protection Law, M.G.L.

The complaint sought injunctive relief, restitution, disgorgement, civil penalties and payment of the Commonwealth’s attorney’s fees and costs.

On September 1, 2021, we entered into a settlement agreement with the Office of the Attorney General, reflecting the parties’ agreement to settle and fully resolve the claims asserted against us.

We made a payment in the total amount of $ 27.2 million, which was recognized as a contingent loss during the first quarter of 2021, to an independent trust for purposes of making payments to provide relief for eligible Massachusetts consumers, paying costs of implementation of the agreement and paying the Attorney General’s costs of investigation, and to pay up to $ 95,000 to cover costs and expenses incurred by an independent trustee for management of the independent trust.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

On April 23, 2019, the Attorney General of the State of Mississippi, on behalf of the State of Mississippi, filed a complaint in the Chancery Court of the First Judicial District of Hinds County, Mississippi, alleging that the Company engaged in unfair and deceptive trade practices in subprime auto lending, loan servicing, vehicle repossession and debt collection in the State of Mississippi in violation of the Mississippi Consumer Protection Act.

On December 15, 2021, the Company announced its settlement of litigation with the Mississippi Attorney General.

As part of the settlement, the Company made a charitable donation of $125,000, paid $325,000 to the State of Mississippi, inclusive of attorney’s fees and expenses, and provided certain assurances relating to, among other things, continued compliance with laws applicable to indirect auto finance operations in Mississippi and disclosures to consumers purchasing an optional vehicle service contract.

The Attorney General agreed to dismiss the litigation, and Credit Acceptance made no admission of liability or wrongdoing as part of the settlement.

Lease Commitments

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What changed 10-K

Item 8. Financial Statements and Supplementary Data