CACC — Q2 2026 Financial Report Analysis

Credit Acceptance lends to car buyers with weak or no credit, by financing loans that used-car dealers write and then hand over ("assign") to it. In the second quarter of 2026 (April–June) its GAAP net income rose 55.5% to $135.9 million and diluted earnings per share rose 70.6% to $12.66. Most of that jump was not new lending: revenue grew only 0.6%. Profit rose because last year's quarter carried a $23.4 million legal charge, interest costs fell, the tax rate dropped, and the company kept buying back its own shares.

At a glance

• Revenue $587.4 million, up 0.6%. The loan book is flat at about $8.0 billion, so revenue barely moved. Growth in profit came from lower costs, not a bigger business.
• EPS $12.66, up 70.6%, versus net income up 55.5%. The gap is buybacks: the diluted share count fell 8.8% in a year. In the first half the company spent $320.3 million on buybacks, more than the $271.7 million it earned.
• Loan volume turned the corner late in the quarter. Units were down 1.0% for the quarter, but the company says monthly units grew year over year in June and that July units were up 28.0%, after four straight quarters in which units fell 9% or more.

Results table

Credit Acceptance does not report an "operating income" line, because interest on its debt is a core cost of running a lending business. The margin above is income before taxes divided by total revenue. It also does not disclose a bank-style net interest margin, so this report uses the general figures rather than bank metrics.

Takeaway: The headline 70.6% EPS jump is mostly accounting and capital return, not a stronger business. Strip out last year's $23.4 million legal charge and pre-tax income grew about 19%; strip out the lower tax rate and buybacks too, and the company's own adjusted return on capital moved only from 9.3% to 9.8%. The real news is the volume turn in June and July. That will show whether the loan book can grow again after a year of shrinking.

Where the profit increase came from

The company's 10-Q lists four drivers of the $48.5 million increase in net income:

• Operating expenses fell $21.4 million (13.8%). General and administrative expense fell $19.1 million "primarily due to the recognition of a $23.4 million contingent loss during the three months ended June 30, 2025 related to previously disclosed legal matters." A contingent loss is money set aside for a likely legal payout. Salaries and wages fell $5.6 million (6.7%) "primarily due to a reduction in headcount." The G&A decline was partly offset by "higher professional services costs related to strategic market analysis initiatives," and sales and marketing expense rose to $29.9 million from $26.6 million.
• Provision for credit losses fell $13.4 million (7.8%). A provision is the expense a lender books for loan repayments it no longer expects to collect. The part tied to changes in the forecast for existing loans fell $19.7 million, to $81.6 million. The part booked up front on new loans rose $6.3 million, to $77.6 million (see below).
• Interest expense fell $10.7 million (9.1%). Average debt fell to $6.35 billion from $6.58 billion, and the average cost of that debt fell to 6.8% from 7.2%.
• Finance charges rose $5.5 million (1.0%). This was mainly "higher contractual yields on more recent Consumer Loan assignments," meaning newer loans carry higher interest rates.

Compared with the previous quarter (Q1 2026), GAAP net income was flat ($135.9 million vs $135.8 million), while adjusted net income rose to $130.1 million from $117.3 million, helped by a 5.0% drop in adjusted operating expenses after the headcount reduction.

How the loans are performing

This business depends on how accurately it forecasts what borrowers will repay. Each quarter Credit Acceptance updates that forecast for every group of loans (grouped by the year the loan was made).

• Total expected future cash flow from the loan book fell $39.1 million (0.3%) this quarter. That is a smaller cut than the $55.8 million (0.5%) a year ago.
• Loans made in 2023, 2024 and 2025 got worse again. Their forecast collection rates each slipped 0.2–0.3 points in the quarter. The 2022 loans are now expected to collect 59.3% of what borrowers owed, against 67.5% expected when they were made. The 2023 loans are 4.6 points short of their original forecast and the 2024 loans 2.1 points short.
• The 2025 and 2026 loans are close to plan. They are within 0.1 points of their original forecasts. These two years make up about 56% of all expected future cash flow ($4.10 billion and $2.50 billion of $11.75 billion).
• Borrowers are repaying more slowly than expected. The company again "slowed our forecasted net cash flow timing" because prepayments (borrowers paying loans off early) "remained below historical averages." Slower repayment means capital stays tied up longer for the same total cash.

Volume: a turn late in the quarter

Unit volume fell 1.0% to 84,615 loans. Dollar volume edged up 0.1% to $1.0 billion. That is the smallest decline in a year: units fell 14.6% in Q2 2025, 16.5% in Q3 2025, 9.1% in Q4 2025 and 4.3% in Q1 2026. The company says units "returned to year-over-year growth in June" and that July units were up 28.0%. Part of that July figure reflects a weak comparison: Q3 2025 was the worst quarter of the decline.

The dealer network is growing but each dealer is sending fewer loans. Active dealers reached a record 11,004 (up 3.3%), and the company enrolled 1,456 new dealers. However, average loans per active dealer fell 3.8%, and dealers who were active in both years sent 5.3% fewer loans.

The mix is moving toward "purchased loans": 31.5% of units, up from 28.4%. With a purchased loan, Credit Acceptance pays the dealer once, up front. With a "dealer loan", it advances part of the money now and shares later collections with the dealer. Purchased loans written in 2026 have a thinner spread (expected collections minus the amount paid out) of 20.3%, compared with 21.1% for 2025 purchased loans. That mix shift is why the up-front provision per new loan rose 10.0%.

What the headline numbers hide

• Tax rate. The effective tax rate fell to 19.4% from 25.8%. The 10-Q attributes the drop to a research and development tax credit, a quarter with few of the state tax law changes that had raised the rate a year earlier, and excess tax benefits from stock option exercises (versus a deficiency last year). At last year's 25.8% rate, net income would have been about $125 million, or roughly $11.65 per share. The tax rate alone added about $1 to EPS. The company's adjusted figures apply a flat 25% rate and remove $9.4 million of this benefit.
• One-off in the comparison year. Excluding the $23.4 million legal charge from Q2 2025, pre-tax income grew about 19% (to $168.6 million from $141.2 million), not 43%.
• Part of the drop in provisions also comes from the base year. Q2 2025's forecast-change provision included a one-time $16.5 million from a change in forecasting method for some 2024 loans. Without that change, the year-ago forecast cut was $37.2 million (0.3%), about the same as this quarter's $39.1 million. In other words, underlying credit performance has not improved year over year; it is about the same.
• Buybacks drive EPS more than earnings do. Diluted shares fell 8.8%, from 11.77 million to 10.73 million. In the first half the company bought back 628,221 shares (5.9% of the shares outstanding at the start of the year) for $320.3 million. That is about 118% of first-half net income. Debt did not rise to fund this: total debt is about $6.29 billion, down from $6.35 billion at year-end. But unrestricted cash fell to just $1.4 million, and the company relies on $1.4 billion of available credit lines for liquidity.
• Cash flow looks better than it is. First-half operating cash flow was $656.3 million against $271.7 million of net income. For a lender this gap mostly reflects the $298.8 million non-cash credit-loss provision that is added back, plus a $58.8 million drop in taxes receivable (a refund). A more useful check is that principal collected on loans ($1.81 billion) covered about 88% of the $2.07 billion paid out for new loans in the half, so the book is roughly holding its size.
• GAAP vs adjusted. Adjusted EPS ($12.12) is below GAAP EPS ($12.66) this quarter, the reverse of a year ago. The company's "floating yield adjustment" spreads changes in expected collections over the life of loans instead of booking them immediately. That adjustment plus the tax normalization outweighed the add-back of the $159.2 million provision.

Legal settlement

The New York Attorney General lawsuit and a multi-state investigation are close to settling. According to the 10-Q, the parties agreed on material terms, including "a potential cash payment by us of $75.5 million," and the New York action was dismissed in June, pending a final agreement. The company booked contingent losses of $15.0 million in Q3 2025 and $35.8 million in Q4 2025, on top of the $23.4 million in Q2 2025. Those charges are why G&A expense fell so sharply this year. No new charge was booked this quarter.

Outlook

The company does not give earnings guidance. What it does point to:

• Volume. Management highlights "monthly unit volume returned to year-over-year growth in June, which continued into July." If the July pace continues into Q3, the loan book can grow for the first time in about a year. Average capital was down 3.9% year over year.
• Costs. Management expects "further gains in call handling and unit economics" as it expands an AI call-center agent. That agent handled 67% of inbound servicing calls in June, up from 27% in March. Adjusted operating expenses were 6.2% of capital this quarter, down from 6.6% in Q1.

Our read: earnings power is steady rather than rising. Adjusted return on capital of 9.8% is in line with the 9.2–9.8% range of the past eight quarters. Two things will decide the trend. First, whether the 2023–2025 loans keep slipping. They lost another 0.2–0.3 points this quarter, and they hold most of the expected future cash. Second, whether faster volume comes at the cost of thinner spreads, as the shift toward purchased loans suggests. The Q3 report should also show the definitive legal settlement and whether the tax rate goes back to about 25%. Without a repeat of this quarter's tax benefits, GAAP EPS would come in lower.

This is the first Credit Acceptance report published on this site, so there is no earlier outlook to check against. The full 10-Q was filed on August 4, 2026, the same day as the earnings release.