CREDIT ACCEPTANCE CORP

Liquidity and Capital Resources

We need capital to maintain and grow our business. Our primary sources of capital are cash flows from operating activities, collections of Consumer Loans, and borrowings under: (1) our revolving secured line of credit facility; (2) Warehouse facilities; (3) Term ABS financings; and (4) senior notes. There are various restrictive covenants to which we are subject under each financing arrangement, and we were in compliance with those covenants as of December 31, 2024. For information regarding these financings and the covenants included in the related documents, see Note 9 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.

On February 16, 2024, we extended the $100.0 million Term ABS 2021-1 financing and extended the date on which the financing will cease to revolve from December 16, 2024 to February 17, 2026.

On February 27, 2024, we completed a $200.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 7.8% (including upfront fees and other costs), and it will revolve for 36 months, after which it will amortize based upon the cash flows on the underlying Loans.

On March 28, 2024, we completed a $500.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 6.4% (including upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.

On June 17, 2024, we extended the maturity of our revolving secured line of credit facility from June 22, 2026 to June 22, 2027. The interest rate on borrowings under the facility has changed from the Bloomberg Short-Term Bank Yield Index rate plus 187.5 basis points to the Secured Overnight Financing Rate (“SOFR”) plus 197.5 basis points.

On June 20, 2024, we completed a $550.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 6.5% (including upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.

On June 21, 2024, we increased the financing amount on the Term ABS 2022-2 financing from $200.0 million to $300.0 million and extended the date on which the financing will cease to revolve from December 15, 2025 to June 15, 2027.

On September 19, 2024, we increased the financing amount on Warehouse Facility II from $400.0 million to $500.0 million and extended the date on which the facility will cease to revolve from April 30, 2026 to September 20, 2027. The interest rate on borrowings under the facility has been decreased from SOFR plus 230 basis points to SOFR plus 185 basis points.

On September 19, 2024, we extended the date on which the $500.0 million Term ABS 2019-2 financing will cease to revolve from August 15, 2025 to September 15, 2026 and increased the interest rate under the financing from 5.15% to 5.43%.

On September 26, 2024, we completed a $600.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 5.2% (including upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.

On December 5, 2024, we increased the financing amount on Warehouse Facility V from $200.0 million to $250.0 million and extended the date on which the facility will cease to revolve from December 29, 2025 to December 29, 2027. The maturity of the facility was also extended from December 27, 2027 to December 27, 2029. The interest rate on borrowings under the facility has been decreased from SOFR plus 245 basis points to SOFR plus 185 basis points.

On December 20, 2024, we completed a $300.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes. The financing has an expected average annualized cost of 6.3% (including upfront fees and other costs), and it will revolve for 36 months, after which it will amortize based upon the cash flows on the underlying Loans.

Cash and cash equivalents increased to $343.7 million as of December 31, 2024 from $13.2 million as of December 31, 2023. As of December 31, 2024 and December 31, 2023, we had $1,734.9 million and $1,505.8 million, respectively, in unused and available lines of credit. Our total balance sheet indebtedness increased to $6,352.9 million as of December 31, 2024 from $5,067.5 million as of December 31, 2023, primarily due to the growth in new Consumer Loan assignments and stock repurchases.

A summary as of December 31, 2024 of our material financial obligations requiring future repayments is as follows:

(1)The amounts presented consist solely of principal and do not reflect deferred debt issuance costs of $37.7 million and unamortized debt discount of $1.3 million. We are also obligated to make interest payments at the applicable interest rates, as discussed in Note 9 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. Based on the actual principal amounts outstanding under our revolving secured line of credit facility, our Warehouse facilities, our Term ABS financings, and our senior notes as of December 31, 2024, the forecasted principal amounts outstanding on all other debt, and the actual interest rates in effect as of December 31, 2024, interest is expected to be approximately $397.8 million during 2025; $271.8 million during 2026; and $180.9 million during 2027 and thereafter.

(2)We have contractual obligations to pay Dealer Holdback to Dealers. Payments of Dealer Holdback are contingent upon the receipt of consumer payments and the repayment of advances. The amounts presented represent our forecast as of December 31, 2024.

(3)A lease liability of $1.6 million is recognized within accounts payable and accrued liabilities in our consolidated balance sheet as of December 31, 2024.

(4)Purchase obligations consist primarily of contractual obligations related to our information system needs.

Based upon anticipated cash flows, management believes that cash flows from operations and our various financing alternatives will provide sufficient financing for debt maturities and for future operations. Our ability to borrow funds may be impacted by economic and financial market conditions. If the various financing alternatives were to become limited or unavailable to us, our operations and liquidity could be materially and adversely affected.

Market Risk

We are exposed primarily to market risks associated with movements in interest rates. Our policies and procedures prohibit the use of financial instruments for speculative purposes.

Interest Rate Risk. 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. Assuming that we maintain a level amount of floating rate debt, an increase in interest rates may result in higher interest expense for our floating rate debt facilities. From time to time, we may manage that risk through the use of derivatives such as interest rate caps.

As of December 31, 2024, we had $0.1 million of floating rate debt outstanding under our revolving secured lines of credit, without interest rate protection. For every 100-basis-point increase in interest rates on our revolving secured lines of credit, annual after-tax earnings would decrease by a negligible amount, assuming we maintain a level amount of floating rate debt.

As of December 31, 2024, we had interest rate cap agreements outstanding to manage the interest rate risk on Warehouse Facility V and Warehouse Facility VIII. However, as of December 31, 2024, there was no floating rate debt outstanding under these facilities.

As of December 31, 2024, we did not have a balance outstanding under Warehouse Facility II, Warehouse IV, and Warehouse Facility VI, which do not have interest rate protection.

As of December 31, 2024, we had $100.0 million in floating rate debt outstanding under Term ABS 2021-1, without interest rate protection. For every 100-basis-point increase in interest rates on Term ABS 2021-1, annual after-tax earnings would decrease by approximately $0.8 million, assuming we maintain a level amount of floating rate debt.

As of December 31, 2024, we had $300.0 million in floating rate debt outstanding under Term ABS 2022-2, without interest rate protection. For every 100-basis-point increase in interest rates on Term ABS 2022-2, annual after-tax earnings would decrease by approximately $2.3 million, assuming we maintain a level amount of floating rate debt.

New Accounting Updates Not Yet Adopted

See Note 2 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference, for information concerning the following new accounting updates and the impact of the implementation of these updates on our financial statements:

•Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative

•Improvements to Income Tax Disclosures

•Disaggregation of Income Statement Expenses

Forward-Looking Statements

We make forward-looking statements in this report and may make such statements in future filings with the SEC. We may also make forward-looking statements in our press releases or other public or shareholder communications. Our forward-looking statements are subject to risks and uncertainties and include information about our expectations and possible or assumed future results of operations. When we use any of the words “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “assume,” “forecast,” “estimate,” “intend,” “plan,” “target,” or similar expressions, we are making forward-looking statements.

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. These forward-looking statements represent our outlook only as of the date of this report. While we believe that our forward-looking statements are reasonable, actual results could differ materially 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 this Form 10-K, which is incorporated herein by reference, and the risks and uncertainties discussed elsewhere in this Form 10-K and in our other reports filed or furnished from time to time with the SEC.