There's an increase in purchased loans, with flat spreads on portfolio loans but down spreads on purchased loans. What's driving this dynamic?

Vinayak Hegde clarified that dealer access to the purchase program was expanded to include consumers with higher credit ratings, allowing dealers to use both portfolio and purchase options, with pricing focused on maximizing economic profit. The current purchased loan mix of 28% is within the historical range of 20% to 40%. Jay Martin added that the spread difference is due to 2025 purchased loans outperforming initial forecasts by 20 basis points, while 2026 purchased loans have underperformed. “For perspective, the loan mix is purchased is 28% and it is well within the historical range of 20% to 40% over the last 6 years.”

Despite a smaller decline in forecasted net cash flows ($9M this quarter vs. $34M last quarter), the provision for forecast changes was similar ($54M vs. $57M). Why isn't the lower forecast change translating to a proportionally lower provision expense?

Jay Martin explained that the provision for credit losses on forecast changes is driven by the change in the net present value of future cash flows, considering both undiscounted cash flow decreases and overall cash flow timing. A significant contributor in both periods was the slowing of forecasted cash flows, primarily due to lower-than-expected prepayments. The company's forecasts assume prepayments will normalize, but they haven't yet, possibly due to consumers holding cars longer, high new car prices, or negative equity. “So in both of those periods, a large contributor of the provision for credit losses was the overall slowing of forecasted cash flows. And that's primarily related to prepayments. We're seeing a lower level of prepayments than what our forecast would expect.”

What is the main driver behind the improved $9 million forecast change this quarter? Is it related to consumer tax refunds or a vintage remix?

Vinayak Hegde stated that the improvement is due to both the shrinking '22/'23 cohort and the stronger performance of newer vintages. The '24 vintage is performing at or above expectations, and the '25 vintage is tracking ahead. As each quarter passes, the relative mix of the '22/'23 vintages decreases compared to the '24/'25 vintages, contributing to improved portfolio confidence. “Yes, it's both the fact vintage remix of the '22, '23 cohort shrinking and the real performance of the newer vintages in the '24 and '25 vintages, right?”

CACC

Credit Acceptance (CACC) Q1 FY26 earnings call: the analyst Q&A

Earnings call· Mar 2026 (Q1 FY26)· Financials· May 5, 2026

Source: earnings call transcript

Executive summary

Credit Acceptance Corporation Q1 FY26 — Moderating Loan Declines and Strategic Operational Shifts

Credit Acceptance reported Q1 FY26 results showing moderating declines in loan volume and improved loan portfolio performance, driven by pricing adjustments and segmentation work. The company is implementing a new operating system, streamlining its cost structure with a 6% workforce reduction, and making strategic leadership additions to enhance data-driven decision-making and dealer engagement. Investments in AI are focused on practical applications to improve efficiency and customer experience, while maintaining a disciplined approach to risk and long-term value creation.

Highlights

GAAP net income of $12.40 per diluted share.
Adjusted net income of $10.71 per diluted share.
Forecasted net cash flows from the loan portfolio declined modestly by $9.1 million or 0.1%, the smallest quarterly change in the past 3 years.
Moderation in the decline of consumer loan assignment volume from 9.1% to 4.3% year-over-year.
Financed nearly 96,000 contracts, collected nearly $1.5 billion, and enrolled over 1,500 new dealers, reaching a record 10,977 active dealers.

Concerns

Market share in the core segment of used vehicles financed by subprime consumers was 4.5%, down from 5.2% for the same period in 2025.
Average unit volume per active dealer declined 6.5% year-over-year.
Forecasted cash flows are slowing due to lower prepayments than expected, contributing to the provision for credit losses.

CACC operating KPIs by quarter

CACC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Active dealers	10.977K Additionally, we enrolled over 1,500 new dealers and had a record 10,977 active dealers during the quarter, reflecting continued engagement across our dealer network. Source: earnings call transcript	11K+ We had over 11,000 active dealers during the quarter, making this our second consecutive record-setting quarter for active dealers. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Risks & headwinds

Challenging Macro Environment for Nonprime Consumers

Operating in an environment that remains challenging for nonprime consumers.

Mitigation:Vigilance, disciplined capital deployment, pricing adjustments, and segmentation work to bring greater predictability to the portfolio.

Lower Prepayments than Forecasted

Prepayments are at a lower level than the company's forecast expects, contributing to the slowing of forecasted cash flows and provision for credit losses.

Mitigation:Continuously evaluating forecasts and making revisions; potential drivers include consumers holding cars longer, high new car prices, or negative equity.

Market Share Decline and Reduced Unit Volume per Dealer

Market share in the core subprime used vehicle segment was 4.5% (down from 5.2% in 2025); average unit volume per active dealer declined 6.5% year-over-year.

Mitigation:Not trying to gain share at any cost; being deliberate about trade-offs; analyzing market by segment, price point, credit band, and geography to selectively target opportunities without compromising return on investment.

What to watch in Q2 FY26

Loan portfolio forecasted net cash flows

Next quarter

Current Declined $9.1 million or 0.1%

Target Continued moderation or stabilization

Why it matters

Indicates improving loan performance and reduced volatility, crucial for profitability.

From a loan performance perspective, forecasted net cash flows from our loan portfolio declined modestly by $9.1 million or 0.1%, which was the smallest quarterly change we have seen in the past 3 years.

Find out whether CACC delivers this. Inve re-checks your case every morning.

Q&A highlights

The data shows improved collection performance for prior vintages but deterioration for 2026, attributed to canceled loans. Could you explain this and if it's a one-time or continuing issue?

Jay Martin explained that cancellations impact collection rates in early quarters for newly originated loans because there isn't enough loan performance experience to offset the impact. When a loan cancels, its collection rate drops to zero, but the original contract amount remains in the denominator. This is a recurring effect seen in Q1 for new originations, not a one-time event.

“So in the quarter, something is originated. Generally, the change you see there is driven by these cancellations. So if you go back to first quarter last year, you'd see the 25 loans were down 20 basis points in Q1, and that's driven by these cancellations.”

asked by Moshe Orenbuch · answered by Jay Martin

2 min read 5 chapters

Detailed narrative

Operational Efficiency & Cost Structure

The company implemented a new company-wide operating system to improve planning, execution, and review, fostering a "founder's mentality" with clearer priorities and faster decision-making. This led to a 6% workforce reduction in April following a thorough review of resource allocation, aiming for a more focused and efficient operating model.

The broader goal is to simplify work, narrow focus to high-impact initiatives, and direct investment towards areas delivering strong long-term returns, while protecting investments in risk management, scalability, and customer experience.

Strategic Leadership & Dealer Engagement

Two strategic senior leadership additions were made: Steffen Schumann as Chief Business Officer to integrate pricing, performance, and analytics, and Robert Bourrier as Chief Sales Officer to lead the sales organization with a sharper focus on dealer segmentation and reducing friction.

The company is making deliberate changes to support franchise and large independent dealers, including simplifying workflows, integrating into existing systems, and reducing friction in origination and funding. Pricing and advanced strategies are being deployed more targetedly, with granular segmentation to partner with dealers where long-term economics are strongest.

Technology and AI Adoption

Technology and artificial intelligence are critical levers for improving operations. The focus is on practical AI applications to make operations seamless and efficient, embedding AI into daily workflows to improve speed, consistency, and decision quality. For example, an AI-enabled call center agent handled approximately 5x more inbound calls than the prior quarter, scaling servicing capacity without proportional cost increases.

AI is also used to automate and analyze dealer interaction data, combining performance data with dialogue to build a more intelligent CRM system, providing real-time insights to sales and support teams.

Pricing and Decision-Making Models

The company is intensely focused on improving pricing and decision-making models through deeper data use and granular analysis. A critical look was taken at market share loss drivers, including performance vector segmentation by dealer segment, credit band, geography, and vehicle characteristics.

Advanced models are being actively fine-tuned, and targeted opportunities are being tested to improve conversion while maintaining appropriate margins of safety. Scorecard enhancements are also being evaluated to ensure underwriting and pricing models remain aligned with current market conditions, supporting sustainable risk-adjusted growth.

Capital Allocation and Funding

Credit Acceptance closed its first ABS transaction of the year, raising $450 million in capital. The all-in cost was 5.2%, a modest increase compared to 5.1% on the most recent securitization in Q4, driven by higher treasury rates. Despite a volatile macroeconomic backdrop, the transaction was supported by a broad and diversified investor base and achieved the lowest credit spread since late 2021.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.