Credit Acceptance Loan Volume Turns Positive as AI Cuts Costs
Credit Acceptance posted diluted earnings of $12.66 a share in the second quarter as unit volume swung to growth for the first time in two years.
Credit Acceptance (CACC) reported diluted earnings of $12.66 a share for the second quarter, up from $12.40 in the first quarter and $7.42 a year earlier, as the used-vehicle lender's unit volume trajectory turned from shrinking to growing. Net income was roughly flat sequentially at $135.9 million against $135.8 million in the first quarter but rose 55.5% from $87.4 million in the year-ago period.
The quarter marked an inflection rather than a one-time beat. Consumer loan unit volume fell just 1.0% year over year in the second quarter, a sharp deceleration from declines of 4.3% in the first quarter, 9.1% in the fourth quarter of 2023 and 16.5% in the third quarter of 2023. Dollar volume turned slightly positive, up 0.1%, for the first time since mid-2024. The improvement carried into the following months: monthly unit volume rose year over year in June and accelerated further in July, when unit volume was up 28.0%. Chief Executive commentary shifted accordingly, moving from the first quarter's description of "moderation in unit volume declines" to language citing "strengthening origination trends" and "continued momentum".
Adjusted net income, which strips out one-time items, rose to $130.1 million, or $12.12 a diluted share, from $117.3 million, or $10.71, in the first quarter and $118.3 million, or $10.05, a year earlier, a 10.0% year-over-year gain that followed a sequential dip to $126.0 million in the fourth quarter of 2023.
Operating expenses fell 13.8%, or $21.4 million, year over year, driven mainly by a 42.3% drop in general and administrative expense that reflected the absence of a $23.4 million legal contingent loss booked in the second quarter of 2023; a separate $35.8 million contingent loss had hit fourth-quarter 2023 results and was excluded from adjusted figures. Credit Acceptance also continued scaling an AI-enabled call-center system, with 67% of inbound service calls routed to AI agents in June, up from 27% in March and 6% in December. Active dealer relationships reached a record 11,004, though new dealer enrollments slipped to 1,456 from 1,526 in the prior quarter.
Credit quality metrics improved alongside volume. The forecasted collection rate on 2026-vintage loans rose to 67.1% as of June 30 from 66.3% at the end of March, driven by a stronger initial forecast of 67.9% on loans assigned in the second quarter versus 67.6% in the first. Pricing trends diverged by origination channel: the spread on newly assigned dealer loans widened to 22.4% for the 2026 vintage from 22.1% for 2025, while the spread on purchased loans compressed to 20.3% from 21.1% over the same period. The purchased-loan channel itself kept gaining share, rising to 31.5% of unit volume and 34.8% of dollar volume from 28.0% and 30.8% in the first quarter.
Adjusted return on capital improved to 9.8% from 9.3% a year earlier, lifting economic profit 25.8% to $52.6 million and economic profit per diluted share 38.0% to $4.90. Liquidity rose to $1.4 billion as of June 30 from $1.3 billion at the end of March, though it remained below the $1.7 billion reported at year-end 2023. The forecasted net cash flow decline widened to $39.1 million, or 0.3%, from just $9.1 million, or 0.1%, in the first quarter, though it remained smaller than the $55.8 million, or 0.5%, decline reported a year earlier.
Share repurchases slowed for a third straight quarter, with Credit Acceptance spending $141.4 million on 262,963 shares, or 2.5% of shares outstanding, down from $178.9 million on 365,258 shares in the first quarter and $191.4 million on roughly 425,000 shares in the fourth quarter of 2023.