Credit Acceptance Corp.’s net income fell during the second quarter to $107.4 million, down 63 percent from a year earlier, dragged down mainly by a need to set aside $178 million as a precaution against auto loan losses.
Credit Acceptance said loans had been performing worse than in the second quarter of 2021.
“It’s tough to say precisely why it occurred,” Chief Treasury Officer Doug Busk said during an earnings call.
He said potential reasons for Credit Acceptance collecting less than expected included the end of stimulus and unemployment support, depleted consumer savings and inflation.
“I can’t predict the future better than anyone else,” Busk said, but he called future diminished loan performance “probably a reasonable assumption” if inflation and other conditions remained steady.
The company’s revenue fell 3 percent to $457.4 million during the quarter.
Net income also was impacted by higher expenses, including $8.5 million in stock options, $7 million in new technology hires and $15.4 million from a $12 million shareholder lawsuit settlement and other legal costs.
However, Credit Acceptance brought in a larger number of auto loans during the second quarter from a larger number of dealerships. It added $974.9 million in new financing, up 22 percent from a year earlier, across 73,340 loans, which were up 5.1 percent. The discrepancy between these percentage gains stemmed from larger advance payouts to dealerships driving up the financing total, Credit Acceptance said.
Credit Acceptance funded loans from 8,494 dealers during the second quarter, a 1.9 percent increase.
Shares in Credit Acceptance rose 1 percent to $588 in after hours trading on Monday.
Q2 revenue: $457.4 million, down 3 percent from a year earlier.
Q2 net income: $107.4 million, down 63 percent from a year earlier.
Q2 adjusted net income: $188.2 million, down 18 percent.
