Credit Acceptance 3Q Profits Accelerate Despite Downturn in Active Dealer Volume

Net income at Credit Acceptance Corp. shot up 50% year over year in the third quarter, though average volume per active dealer declined — 2.9% — for the first time in 2018, Chief Executive Brett Roberts said in an earnings call yesterday.

“This quarter was down a little bit from the trend line, and volume per dealer was the culprit,” Roberts said. “We don’t have any explanation other than we expect the competitive environment has something to do with it.”

Despite the decline in volume per active dealer, Credit Acceptance added nearly 1,000 dealers to its network — a 12.2% increase from 3Q17. An increase in the number of dealers helped push loan volume up 9.4% year over year, to 86,005 units.

“The best measure is a forecast for every contract we originate,” Roberts said. “We have a forecast for how that contract will perform. The message from this quarter — and really the last several quarters — is that the forecast is very stable.”

Credit Acceptance’s forecasted collection rates improved last quarter to 63.8%, compared with 63.5% when the loans were originated.

“We have benefited from operating expenses or operating leverage over a long period of time as we’ve grown,” Roberts added. “So that’s what contributed to the improvement.”