Credit Acceptance has eliminated its $9,850 dealer-enrollment fee in an effort to expand its dealer network. The lender disclosed the change, which was implemented Aug. 5, in its third-quarter SEC filing.
“Beginning Aug. 5, 2019, dealers may enroll in our Portfolio Program without incurring an enrollment fee,” according to CAC’s third-quarter filing. “Prior to Aug. 5, 2019, dealers enrolled in our Portfolio Program by (1) paying an up-front, one-time fee of $9,850, or (2) agreeing to allow us to retain 50% of their accelerated dealer holdback payment(s) on the first 100 consumer loan assignments.”
In its Portfolio Program, Credit Acceptance advances a portion of the expected future cash flows to the dealer at origination. The lender then takes 20% of the amount collected on a loan as a servicing fee and applies the remainder to the dealer loan. Once the loan is repaid, CAC keeps 20% of subsequent collections and pays 80% to the dealer as a dealer holdback.
“We eliminated the fee, obviously, to get rid of an obstacle to growing the dealer program,” Chief Financial Officer Ken Booth said on a call last week. “But it’s hard to say how that will play out in the enrollment metrics going forward.”
CAC signed 951 new dealers last quarter — compared with 936 in the prior-year period — and recorded $1.4 million in enrollment fees. “There will be some runoff” in recognition of the fee, Booth said. “It will gradually wind down from $1.4 million this quarter to nothing over the next year or so,” he added.
Through September, CAC had 12,553 active dealers.