Credit Acceptance Corporation, based in Southfield, Michigan, provided insights into its fourth-quarter 2025 performance during a recent earnings call. Under the leadership of new CEO Vinayak Hegde, the company reported notable trends, including increased loan volume and investments in technology, despite some challenges in credit performance.
In his first earnings call as CEO, Hegde emphasized his commitment to “listening, learning, and charting a purposeful path forward.” He engaged with team members and dealers to identify opportunities for improvement in Credit Acceptance’s offerings. Hegde reaffirmed three primary strategic objectives: enhancing technology, improving dealer integration, and focusing on customer needs.
Technology Enhancements and Dealer Integration
Hegde highlighted the launch of a new contract origination experience tailored for franchise and large independent dealers during the fourth quarter. This initiative is designed to streamline processes for dealers who increasingly utilize aggregator platforms and integrated dealer systems rather than traditional lender portals.
The new system incorporates features such as RouteOne e-contracting integration, deal structuring tools, and expanded support for financial and insurance products. This upgrade aims to eliminate operational friction, particularly as loan unit volume has notably declined among franchise dealers. According to Hegde, loans from franchise dealers have shown slightly better credit performance compared to those from independent dealers. The company anticipates expanding the number of participating dealers in early 2026.
Responding to inquiries about competition, Hegde maintained that Credit Acceptance remains “customer focused and not competitive focused.” He emphasized the importance of rapid processing times, stating that technology investments have reduced the optimization process to less than two seconds.
Fourth-Quarter Performance Metrics
Chief Financial Officer Jay Martin reported that Credit Acceptance achieved growth in adjusted earnings per share despite a decline in overall loan performance and volume. During the quarter, the company financed approximately 72,000 contracts and generated $1.3 billion in collections, while distributing $48 million in dealer holdbacks.
The company onboarded over 1,200 new dealers, bringing the total number of active dealers to more than 9,800. However, Martin noted a year-over-year decline of 2.8% in active dealers and a 6.4% decrease in average unit volume per dealer. Sequentially, loan volumes showed improvement, with year-over-year declines narrowing. Loan unit volume fell by 9.1%, an improvement from the 16.5% decline recorded in the previous quarter.
In terms of market share, Credit Acceptance held 4.5% in the used vehicle financing segment for subprime consumers during the first two months of the fourth quarter, down from 5.4% in the same period in 2024.
Credit Performance and Future Outlook
Regarding credit performance, Martin indicated modest declines in recent vintages, attributing a 0.4% decrease in the 2023 vintage and a 0.2% decrease in the 2024 vintage to factors such as ongoing inflation affecting subprime consumers. He noted that changes in the company’s forecasts for future net cash flows had improved, with a decrease of $34.2 million (0.3%) in the fourth quarter compared to a more significant decline in the previous quarter.
Hegde confirmed that the company will continue to prioritize conservative underwriting and long-term strategies while refining credit scoring models.
In discussions about leverage and capital allocation, Martin stated that while leverage remains within an acceptable range, it is on the higher end. He explained that Credit Acceptance prioritizes maintaining capital for new originations and considers leverage and intrinsic value when deciding on share repurchases. The company was particularly active in buybacks during the fourth quarter, reflecting its belief in favorable market conditions.
Overall, Credit Acceptance’s fourth-quarter performance highlighted a balancing act between addressing operational challenges and investing in technology to enhance dealer integration and customer service. As the company looks to expand its dealer partnerships and refine its offerings, the focus remains on navigating a competitive landscape while supporting subprime consumers.
