Disclosure: I am long shares of Credit Acceptance Corporation. Nothing here is a solicitation to buy or sell any securities. Please do your own research before making any investment.
After flying back and forth across Australia a few times over the last couple of weeks I have finally had a moment to review the Credit Acceptance ($CACC) quarterly call. For those of you not as engrossed in the subprime auto-lending market as myself, the company finds itself in an interesting historical context:
As a whole, the US subprime market has been facing severe turbulence, with many large dealers and lenders going out of business abruptly,
Volatility, first on the way up, and then on the way down, in the price of used vehicles has posed a serious question for the quality of existing loan books - especially those written over the last 3 years,
Capital has been exiting the market as impairments have been crippling for most players,
Credit Acceptance has faced some of these challenges, but finds itself in a remarkably different position than most of it’s “competitors". It’s a company of unusual quality, is widely reviled and generally misunderstood:
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