Credit Acceptance Announces Third Quarter 2026 Results

Southfield, Michigan, Oct. 29, 2026 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq: CACC) (referred to as the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) today announced a consolidated net loss of $56.6 million, or $5.43 per diluted share, for the three months ended September 30, 2026, compared to consolidated net income of $108.2 million, or $9.43 per diluted share, for the same period in 2025. Adjusted net income, a non-GAAP financial measure, for the three months ended September 30, 2026 was $135.5 million, or $13.01 per diluted share, compared to $117.9 million, or $10.28 per diluted share, for the same period in 2025.

Third Quarter 2026 Additional Financial Highlights

• Economic profit, a non-GAAP financial measure, was $50.7 million, or $4.87 per diluted share, compared to $43.0 million, or $3.75 per diluted share, in the third quarter of 2025.
• Consumer Loan assignment volume reached 110,010 units and $1.4 billion, up 37.7% and 51.0%, respectively, compared to the third quarter of 2025, while unit volume per active dealer increased by 15.2% compared to the third quarter of 2025.
• Forecasted net cash flows from our loan portfolio declined 2.5% ($291.2 million), compared to a decline of 0.5% ($58.6 million) in the third quarter of 2025, primarily reflecting the impact of an adjustment to our methodology for forecasting the amount of future net cash flows.
• Average balance of our loan portfolio increased to $8.1 billion, up 1.1% compared with the third quarter of 2025.
• Share repurchases totaled 269,150 shares (2.6% of the shares outstanding at the beginning of the quarter) for an aggregate cost of $161.6 million.
• Total liquidity stood at $1.2 billion as of September 30, 2026. Additionally, we completed a $600.0 million asset-backed financing, matching the largest asset-backed financing in our history and achieved our lowest credit spreads since late 2021.

“During the third quarter, Consumer Loan unit and dollar volume grew 38% and 51%, respectively, both economic profit and adjusted net income experienced double-digit growth, and the number of active dealers reached an all-time high,” said Vinayak Hegde, Chief Executive Officer. “One of the most encouraging aspects of this growth is that rather than relying on a single lever, our momentum is driven by our four-pronged strategy of customer obsession, segmentation, leveraging data and AI, and disciplined operating rhythms and practices. We believe execution of this strategy strengthens our forecasting, pricing, and operating processes and positions the Company to make more informed capital-allocation decisions.”

Third Quarter 2026 Company Highlights

• Enrolled 1,350 new dealers in our programs and had a record 12,093 active dealers during the quarter, reflecting continued engagement across our dealer network.
• $37.3 million in dealer holdback paid to dealers.
• Made continued progress executing our product roadmap, including the following initiatives, which contributed to increased volume growth:
  • Scorecard update: Launched a new scorecard that uses refreshed and additional data attributes to enhance our risk-assessment capabilities by credit profile, dealer, vehicle, and deal structure.
  • Segmentation: Reorganized our sales force to improve alignment by dealer type, origination channel, and geography, with targeted teams for independent dealers, franchise dealers, and national dealer groups.
  • Reduced friction for dealers: Continued integration improvement with the aggregator platforms and enhanced the deal optimization tool, which reduced friction for dealers who use Dealertrack, RouteOne, and DealerCenter, and resulted in higher volume with franchise and large independent dealers.
• Settled claims related to a longstanding multi-state investigation and the New York state attorney general lawsuit without any admission of fault or wrongdoing by the Company and on terms not requiring the Company to record additional charges beyond amounts previously accrued and disclosed.
• Named one of PEOPLE magazine’s 100 Companies That Care^® by Great Place to Work^® and PEOPLE magazine, for the fifth consecutive year, with a #11 ranking.
  
  

Consumer Loan Metrics

Dealers assign retail installment contracts (referred to as “Consumer Loans”) to Credit Acceptance. At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on the amount and timing of these forecasts and expected expense levels, an advance or one-time purchase payment is made to the related dealer at a price designed to maximize economic profit, a non-GAAP financial measure that considers our return on capital, our cost of capital, and the amount of capital invested. 

We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate for each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast. By comparing our current expected collection rate for each Consumer Loan with the rate we projected at the time of assignment, we are able to assess the accuracy of our initial forecast. The following table compares our aggregated forecast of Consumer Loan collection rates as of September 30, 2026, with the aggregated forecasts as of June 30, 2026 and at the time of assignment, segmented by year of assignment:

^{(1)   Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment, including both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans because the contractual amount owed is not removed from the denominator used to calculate these rates.
(2)   The forecasted collection rate for 2026 Consumer Loans as of September 30, 2026 includes both Consumer Loans that were in our portfolio as of June 30, 2026 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates for each of these segments:}

For the three months ended September 30, 2026, forecasted collection rates declined for Consumer Loans assigned in 2023 through 2026 and were generally consistent with expectations at the start of the period for all other assignment years presented.

The changes to our forecast of future net cash flows from our loan portfolio (forecasted collections less forecasted dealer holdback payments) for each of the last eight quarters are shown in the following table:

During the third quarter of 2026, based on our analysis of historical Consumer Loan performance data and market trends, we adjusted our methodology for forecasting future net cash flows from our loan portfolio. The adjustment reduced forecasted collection rates for Consumer Loans assigned to us in 2022 through 2026 to the levels we now expect for the life of these Consumer Loans. Prior to our making the adjustment in the third quarter of 2026, we had observed small but consistent quarterly underperformance of these Consumer Loans relative to forecasted cash flows and had made corresponding adjustments to our forecast each quarter. The underperformance of the Consumer Loans assigned to us in 2022 through 2026 had been most pronounced in the case of Consumer Loans in lower scorecard bands. Most of the impact of the forecast adjustment we made in the third quarter of 2026 is related to Consumer Loans assigned to us before the scorecard change we introduced in the second quarter of 2026.

The following table presents information on Consumer Loan assignments for each of the last 10 years:

^{(1)   Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.
(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 are not included.
(3)   Represents activity for the nine months ended September 30, 2026. Information in this table for each of the years prior to 2026 represents activity for all 12 months of that year.
(4)   The averages for 2026 Consumer Loans include both Consumer Loans that were in our portfolio as of June 30, 2026 and Consumer Loans assigned during the most recent quarter. The following table provides averages for each of these segments:}

The profitability of our loans is primarily driven by the amount and timing of the net cash flows we receive from the spread between the forecasted collection rate and the advance rate, less operating expenses and the cost of capital. Forecasting collection rates accurately at loan inception is difficult. With this in mind, we establish advance rates that are intended to allow us to achieve acceptable levels of profitability across our portfolio, even if collection rates are less than we initially forecast.

The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, spreads (the forecasted collection rate less the advance rate), and forecasted future net cash flows as of September 30, 2026, as well as forecasted collection rates and spreads at the time of assignment. All amounts, unless otherwise noted, are presented as a percentage of the initial balance of the Consumer Loan (principal + interest). The table includes both dealer loans and purchased loans.

^{(1)   Represents the forecasted future collections we expect to collect on Consumer Loans less the forecasted future dealer holdback payments we expect to make to dealers.
(2)   Represents activity for the nine months ended September 30, 2026. Information in this table for each of the years prior to 2026 represents activity for all 12 months of that year.
(3)   The forecasted collection rate, advance rate and spread for 2026 Consumer Loans as of September 30, 2026 include both Consumer Loans that were in our portfolio as of June 30, 2026 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates, advance rates, and spreads for each of these segments:}

The risk of a material change in our forecasted collection rate declines as the Consumer Loans age. Because Consumer Loans assigned in 2022 and prior years represent less than 10% of total forecasted future net cash flows from Consumer Loans, changes in the forecasted collection rate for those loans would generally be expected to have a relatively modest impact on total forecasted future net cash flows. In contrast, Consumer Loans assigned since 2022 represent a larger portion of expected future net cash flows, and a significant portion of their total forecasted collections has not yet been realized. Accordingly, changes in the forecasted collection rate for those more recent loans would generally be expected to have a more significant impact on total forecasted future net cash flows.

The spread as of September 30, 2026 ranges from 11.8% to 24.2%, on an annual basis, for Consumer Loans assigned over the last 10 years. The spreads with respect to 2019 and 2020 Consumer Loans have been positively impacted by Consumer Loan performance, which has exceeded our initial estimates by a greater margin than the other years presented. The spreads with respect to Consumer Loans assigned to us in 2021 through 2026 have been negatively impacted by Consumer Loan performance, which has been lower than our initial estimates by a greater margin than the other years presented. The lower spread for 2026 Consumer Loans relative to 2025 Consumer Loans as of September 30, 2026 reflects the net impact of two offsetting factors. A lower initial spread on 2026 Consumer Loans, primarily due to a higher advance rate, decreased the spread from 2025 to 2026. The impact of the lower initial spread was partially offset by Consumer Loan performance, as the performance of 2025 Consumer Loans has been lower than our initial estimates by a greater margin than 2026 Consumer Loans.

The following table compares our forecast of aggregate Consumer Loan collection rates as of September 30, 2026 with the forecasts at the time of assignment, for dealer loans and purchased loans separately:

^{(1)   The forecasted collection rates presented for dealer loans and purchased loans reflect the Consumer Loan classification at the time of assignment. Forecasted collection rates are negatively impacted by canceled Consumer Loans because the contractual amount owed is not removed from the denominator used to calculate these rates.}

The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate) as of September 30, 2026 for dealer loans and purchased loans separately.  All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).

^{(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.}

Although the advance rate on purchased loans is higher as compared to the advance rate on dealer loans, purchased loans do not require us to pay dealer holdback.

The spread as of September 30, 2026 on 2026 dealer loans was 20.0%, as compared to a spread of 19.9% on 2025 dealer loans, reflecting the net impact of two offsetting factors. Consumer Loan performance increased the spread from 2025 to 2026, as the performance of 2025 dealer loans has been lower than our initial estimates by a greater margin than 2026 dealer loans. The impact of Consumer Loan performance was partially offset by a lower initial spread on 2026 dealer loans, due to the advance rate increasing by a greater margin than the initial forecast in our dealer loan portfolio.

The spread as of September 30, 2026 on 2026 purchased loans was 18.3%, as compared to a spread of 19.6% on 2025 purchased loans. The decrease was primarily a result of a lower initial spread on 2026 purchased loans, primarily due to a lower initial forecast in our purchased loan portfolio.

Consumer Loan Volume

The following table summarizes changes in Consumer Loan assignment volume in each of the last eight quarters as compared to the same period in the previous year:

Consumer Loan assignment volumes depend on a number of factors including (1) the overall demand for our financing programs and (2) the amount of capital available to fund new loans. Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital constraints.

Unit volume increased 37.7% while dollar volume increased 51.0% during the third quarter of 2026 as the number of active dealers increased 18.8% and the average unit volume per active dealer increased 15.2%. Dollar volume increased by more than unit volume during the third quarter of 2026 due to an increase in the average advance paid. The increase in the average advance paid was primarily the result of an increase in the average size of the Consumer Loans assigned.

The following table summarizes the changes in Consumer Loan unit volume and active dealers:

^{(1)   Active dealers are dealers who have received funding for at least one Consumer Loan during the period.}

The following table provides additional information on the changes in Consumer Loan unit volume and active dealers:

^{(1)   New active dealers are dealers who enrolled in our program and have received funding for their first dealer loan or purchased loan from us during the period.
(2)   Attrition is measured according to the following formula: decrease in Consumer Loan unit volume from dealers who have received funding for at least one dealer loan or purchased loan during the comparable period of the prior year but did not receive funding for any dealer loans or purchased loans during the current period divided by prior year comparable period Consumer Loan unit volume.}

The following table shows the percentage of Consumer Loans assigned to us as dealer loans and purchased loans for each of the last eight quarters:

As of September 30, 2026 and December 31, 2025, the net dealer loans receivable balance was 70.0% and 72.1%, respectively, of the total net loans receivable balance.

Financial Results

*Not meaningful.

The decrease in GAAP net income for the three months ended September 30, 2026, as compared to the same period in 2025, was primarily a result of the following:

• An increase in provision for credit losses of 170.3% ($258.9 million), due to:
  • An increase in provision for credit losses on forecast changes of $193.8 million, reflecting a decline in Consumer Loan performance and changes in forecasted net cash flow timing, primarily due to a downward forecasting adjustment applied to our forecasting methodology during the third quarter of 2026.
  • An increase in provision for credit losses on new Consumer Loan assignments of $65.1 million, due to a 46.7% increase in the average provision per Consumer Loan assignment and a 37.7% increase in Consumer Loan assignment unit volume. The increase in the average provision per Consumer Loan assignment was primarily due to a higher average provision for purchased loans, driven by a lower initial forecast and spread, and a greater proportion of purchased loans in the mix of Consumer Loan assignments received during the third quarter of 2026.
• A decrease in interest expense of 7.8% ($9.1 million), from $116.3 million to $107.2 million, primarily due to a decrease in our average cost of debt.
• An increase in finance charges of 2.1% ($11.5 million), due to increases in the average yield on our loan portfolio, primarily due to higher contractual yields on more recent Consumer Loan assignments, and in the average balance of our loan portfolio.
• A decrease in operating expenses of 9.7% ($14.2 million), primarily due to:
  • A decrease in salaries and wages expense of 11.5% ($9.8 million), primarily due to (i) a reduction in headcount, (ii) a decrease in fringe benefits, primarily due to lower medical claims and a lower number of team members participating in the plan, and (iii) a decrease in stock-based compensation expense, primarily due to the retirements of senior leaders in 2026. These decreases were partially offset by an increase in severance expense in the third quarter of 2026.
  • A decrease in general and administrative expense of 24.8% ($9.0 million), primarily due to the recognition of a $15.0 million contingent loss during the three months ended September 30, 2025 related to previously disclosed legal matters. The decrease was partially offset by higher professional services costs related to strategic market analysis initiatives.
  • An increase in sales and marketing expense of 18.5% ($4.6 million), primarily due to an increase in sales commissions related to growth in Consumer Loan assignment volume.
• A decrease in provision for income taxes of 141.5% ($57.6 million), primarily due to a decrease in pre-tax income.

Adjusted financial results are provided to help shareholders understand our financial performance. The financial data below is non-GAAP, unless labeled otherwise. We use adjusted financial information internally to measure financial performance and to determine certain incentive compensation. We also use economic profit as a framework to evaluate business decisions and strategies, with the objective to maximize economic profit over the long term. In addition, certain debt facilities utilize adjusted financial information for the determination of loan collateral values and to measure financial covenants. The table below shows our results following adjustments to reflect non-GAAP accounting methods. Material adjustments are explained in the subsequent “Supplemental Information” and “Floating Yield Adjustment” sections. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.

Adjusted financial results for the three months ended September 30, 2026, compared to the same period in 2025, include the following:

Economic profit increased 17.9% for the three months ended September 30, 2026, as compared to the same period in 2025. Economic profit is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business. The following table summarizes the impact each of these components had on the changes in economic profit for the three months ended September 30, 2026, as compared to the same period in 2025.

Economic profit increased for the three months ended September 30, 2026, as compared to the same period in 2025, primarily as a result of an increase in our adjusted return on capital of 50 basis points. This increase was primarily due to an increase in the yield used to recognize adjusted finance charges on our loan portfolio, which increased our adjusted return on capital by 40 basis points, primarily due to higher expected yields on more recent Consumer Loan assignments, partially offset by a decline in Consumer Loan performance and slower forecasted net cash flow timing since the third quarter of 2025.

The following table shows adjusted finance charges as a percentage of adjusted average loans receivable, adjusted revenue and adjusted operating expenses as a percentage of adjusted average capital, the adjusted return on capital, and the percentage change in adjusted average capital for each of the last eight quarters, compared to the same period in the prior year:

^{(1)   Annualized.}

Cautionary Statement Regarding Forward-Looking Information

We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements. Statements in this release that are not historical facts, such as those using terms like “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “assume,” “forecast,” “estimate,” “intend,” “plan,” “target,” or similar expressions, and those regarding our future results, plans, and objectives, are “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this release. Actual results could differ materially from these forward-looking statements since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on February 13, 2026, and other risk factors discussed herein or listed from time to time in our reports filed with the SEC and the following:

Industry, Operational, and Macroeconomic Risks

• Our inability to accurately forecast and estimate the amount and timing of future collections could have a material adverse effect on results of operations.
• Due to competition from traditional financing sources and non-traditional lenders, we may not be able to compete successfully.
• Adverse changes in economic conditions, the automobile or finance industries, or the non-prime consumer market could adversely affect our financial position, liquidity, and results of operations, the ability of key vendors that we depend on to supply us with services, and our ability to enter into future financing transactions.
• Reliance on third parties to administer our ancillary product offerings could adversely affect our business and financial results.
• We are dependent on our senior management, and the loss of any of these individuals or an inability to hire additional team members could adversely affect our ability to operate profitably.
• Our reputation is a key asset to our business, and our business may be affected by how we are perceived in the marketplace.
• An outbreak of contagious disease or other public health emergency could materially and adversely affect our business, financial condition, liquidity, and results of operations.
• The concentration in several states of automobile dealers who participate in our programs could adversely affect us.
• Reliance on our outsourced business functions could adversely affect our business.
• Our ability to hire and retain foreign engineering personnel could be hindered by immigration restrictions.
• We may be unable to execute our business strategy due to current economic conditions.
• Natural disasters, climate change, military conflicts, acts of war, terrorist attacks and threats, or the escalation of military activity in response to terrorist attacks or otherwise may negatively affect our business, financial condition, and results of operations.
• Governmental or market responses to climate change and related environmental issues could have a material adverse effect on our business.
• A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval and such shareholders have interests which may conflict with the interests of our other security holders.

Capital and Liquidity Risks

• We may be unable to continue to access or renew funding sources and obtain capital needed to maintain and grow our business.
• The terms of our debt limit how we conduct our business.
• A violation of the terms of our asset-backed secured financings or revolving secured warehouse facilities could have a material adverse impact on our operations.
• Our substantial debt could negatively impact our business, prevent us from satisfying our debt obligations, and adversely affect our financial condition.
• We may not be able to generate sufficient cash flows to service our outstanding debt and fund operations and may be forced to take other actions to satisfy our obligations under such debt.
• Interest rate fluctuations may adversely affect our borrowing costs, profitability, and liquidity.
• Reduction in our credit rating could increase the cost of our funding from, and restrict our access to, the capital markets and adversely affect our liquidity, financial condition, and results of operations.
• We may incur substantially more debt and other liabilities. This could exacerbate further the risks associated with our current debt levels.
• The conditions of the U.S. and international capital markets may adversely affect lenders with which we have relationships, causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our financial position, liquidity, and results of operations.
  
  

Technology and Cybersecurity Risks

• Our dependence on technology could have a material adverse effect on our business.
• We depend on secure information technology, and a breach of our systems or those of our third-party service providers could result in our experiencing significant financial, legal, and reputational exposure and could materially adversely affect our business, financial condition, and results of operations.
• Our use of electronic contracts could impact our ability to perfect our ownership or security interest in Consumer Loans.
• Failure to properly safeguard our proprietary business information or confidential consumer and team member personal information could subject us to liability, decrease our profitability, and damage our reputation.
• The development and use of artificial intelligence presents risks and challenges that may adversely impact our business.
  
  

Legal and Regulatory Risks

• Litigation we are involved in from time to time may adversely affect our financial condition, results of operations, and cash flows.
• Changes in tax laws and the resolution of uncertain income tax matters could have a material adverse effect on our results of operations and cash flows from operations.
• The regulations to which we are or may become subject could result in a material adverse effect on our business.
  
  

Other factors not currently anticipated by management may also materially and adversely affect our business, financial condition, and results of operations. We do not undertake, and expressly disclaim any obligation, to update or alter our statements, whether as a result of new information or future events or otherwise, except as required by applicable law.

Webcast Details

We will host a webcast on October 29, 2026 at 5:00 p.m. Eastern Time to discuss our third quarter results. The webcast can be accessed live by visiting the “Investor Relations” section of our website at ir.creditacceptance.com or by telephone as described below. Only persons accessing the webcast by telephone will be able to pose questions to the presenters during the webcast. A replay and transcript of the webcast will be archived in the “Investor Relations” section of our website. 

To participate in the webcast by telephone, you must pre-register at https://register-conf.media-server.com/register/BIb09f4d3694a2478ba3f752ee48d8fc50, or through the link posted on the “Investor Relations” section of our website at ir.creditacceptance.com. Upon registration you will be provided with the dial-in number and a unique PIN to access the webcast by telephone.

Description of Credit Acceptance Corporation

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; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.

Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable ones. 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. Credit Acceptance is publicly traded on the Nasdaq Stock Market under the symbol CACC. For more information, visit creditacceptance.com.

CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
        

CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

Supplemental Information

Measures such as adjusted average capital, adjusted net income, adjusted net income per diluted share, interest expense (after-tax), adjusted net income plus interest expense (after-tax), adjusted return on capital, adjusted revenue, adjusted operating expenses, adjusted loans receivable, adjusted finance charges, adjusted average loans receivable, economic profit, and economic profit per diluted share are non-GAAP financial measures. The following tables provide a reconciliation of non-GAAP measures to GAAP measures.  Certain amounts do not recalculate due to rounding.

^{(1)   From time to time, we recognize a contingent loss related to legal matters. As contingent losses related to such matters are both unusual and infrequent in nature, and relate to business operations in prior periods, we have applied this adjustment to remove the impact of the contingent loss from our adjusted net income.
(2)   Adjustment to record taxes at our estimated long-term effective income tax rate. The adjustment for the three months ended September 30, 2026, June 30, 2026, March 31, 2026, December 31, 2025, September 30, 2025, and June 30, 2025 is calculated using a 25% income tax rate, which is expected to be used for future periods. This rate represents an increase from 23%, which had been used to calculate after-tax adjustments since 2018, following the enactment in December 2017 of Public Law 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The increase in our long-term estimate was due to higher state and local income taxes in certain jurisdictions and lower excess tax benefits from stock-based compensation.
(3)   The enactment of the 2017 Tax Act resulted in the reversal of provision for income taxes to reflect a new, lower federal statutory income tax rate. We began applying the income tax adjustment at that time to remove the impact of this reversal from adjusted average capital. As the enactment of Public Law 119-21 on July 4, 2025 made the lower federal statutory tax rate permanent, removing uncertainty on the future federal statutory income tax rate, we increased our estimated long-term effective income tax rate from 23% to 25% to reflect higher expected state and local income taxes in certain jurisdictions and lower excess tax benefits from stock-based compensation in future periods. We believe the income tax adjustment provides a more accurate reflection of the performance of our business as we are recognizing provision for income taxes at the applicable long-term effective tax rate for the period.
(4)   Annualized.}

^{(1)   Adjustment to record taxes at our estimated long-term effective income tax rate. The adjustment for the three months ended September 30, 2026, June 30, 2026, March 31, 2026, December 31, 2025, September 30, 2025, and June 30, 2025 is calculated using a 25% income tax rate, which is expected to be used for future periods. This rate represents an increase from 23%, which had been used to calculate after-tax adjustments since 2018, following the enactment of the 2017 Tax Act. The increase in our long-term estimate was due to higher state and local income taxes in certain jurisdictions and lower excess tax benefits from stock-based compensation.
(2)   Adjusted return on capital is defined as adjusted net income plus interest expense (after-tax) divided by adjusted average capital.
(3)   Calculated by dividing GAAP net income (loss) by GAAP average shareholders' equity.
(4)   The cost of capital includes both a cost of equity and a cost of debt.  The cost of equity capital is determined based on a formula that considers the risk of the business and the risk associated with our use of debt.  The formula utilized for determining the cost of equity capital is as follows: (the average 30-year Treasury rate + 5%) + [(1 – tax rate) x (the average 30-year Treasury rate + 5% – pre-tax average cost of debt rate) x average debt/(average equity + average debt x tax rate)].  For the periods presented, the average 30-year Treasury rate and the adjusted pre-tax average cost of debt were as follows:}

^{(5)   Annualized.
(6)   From time to time, we recognize a contingent loss related to legal matters. As contingent losses related to such matters are both unusual and infrequent in nature, and relate to business operations in prior periods, we have applied this adjustment to remove the impact of the contingent loss from our adjusted operating expenses.}

Floating Yield Adjustment

The net loan income (finance charge revenue less provision for credit losses expense) that we recognize over the life of a loan equals the cash we collect from the underlying Consumer Loan less the cash we pay to the dealer. We believe the economics of our business are best exhibited by recognizing loan revenue on a level-yield basis over the life of the loan based on expected future net cash flows. The purpose of this non-GAAP adjustment is to provide insight into our business by showing this level yield measure of income. Under GAAP, contractual amounts due in excess of the loan receivable balance at the time of assignment will be reflected as interest income, while contractual amounts due that are not expected to be collected are reflected in the provision for credit losses. Our non-GAAP floating yield adjustment recognizes the net effects of contractual interest income and expected credit losses in a single measure of finance charge revenue, consistent with how we manage our business. The floating yield adjustment recognizes revenue on a level-yield basis based upon expected future net cash flows, with any changes in expected future net cash flows, which are recognized immediately under GAAP as provision for credit losses, recognized over the remaining forecast period (up to 120 months after the origination date of the underlying Consumer Loans) for each individual dealer loan and purchased loan. The floating yield adjustment does not accelerate revenue recognition. Rather, it reduces revenue by taking amounts that are reported under GAAP as provision for credit losses and instead treating them as reductions of revenue over time.

Under the GAAP methodology we employ, which is known as the current expected credit loss model, or CECL, we are required to recognize:

• a significant provision for credit losses expense at the time of the loan’s assignment to us for contractual net cash flows we do not expect to realize; and
• finance charge revenue in subsequent periods that is significantly in excess of our expected yield.

Due to the GAAP treatment of contractual net cash flows we do not expect to realize at the time of loan assignment (i.e. 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. Our floating yield adjustment enables us to provide measures of income that are not impacted by GAAP’s treatment of contractual net cash flows we do not expect to realize at the time of loan assignment. We believe the floating yield adjustment is presented in a manner which reflects both the economic reality of our business and how the business is managed and provides valuable supplemental information to help investors better understand our business, executive compensation, liquidity, and capital resources.

Investor Relations: Jay Brinkley
Senior Vice President & Treasurer
(248) 353-2700 Ext. 6739
IR@creditacceptance.com