CREDIT ACCEPTANCE CORP (CACC)

ITEM 2.           MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in Item 8 - Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the year ended December 31, 2025, as well as Part I - Item 1 - Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Overview

We make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.

For the three months ended June 30, 2026, consolidated net income was $135.9 million, or $12.66 per diluted share, compared to consolidated net income of $87.4 million, or $7.42 per diluted share, for the same period in 2025. The increase was primarily due to decreases in operating expenses and provision for credit losses.

Our financial results for the three months ended June 30, 2026 included the following:

•$8.0 billion average balance of our Loan portfolio, consistent with the second quarter of 2025.

•Consumer Loan assignment unit volume declined 1.0% to 84,615 while dollar volume grew 0.1% to $1.0 billion, compared to the second quarter of 2025. Monthly unit volume returned to year-over-year growth in June, which continued into July.

•Forecasted net cash flows from our Loan portfolio declined by $39.1 million, or 0.3%, compared to a decline of $55.8 million, or 0.5%, in the second quarter of 2025.

•262,963 shares, or 2.5% of the shares outstanding at the beginning of the quarter, were repurchased at a cost of $141.4 million.

•$43.5 million in Dealer Holdback and accelerated Dealer Holdback payments to Dealers.

•$1.4 billion in liquidity (amounts available for borrowing under revolving lines of credit and unrestricted cash and cash equivalents) as of June 30, 2026.

For the six months ended June 30, 2026, consolidated net income was $271.7 million, or $25.04 per diluted share, compared to consolidated net income of $193.7 million, or $16.11 per diluted share, for the same period in 2025. The increase was primarily due to decreases in provision for credit losses, interest expense, and operating expenses.

Our financial results for the six months ended June 30, 2026 included the following:

•$7.9 billion average balance of our Loan portfolio, consistent with the first six months of 2025.

•Consumer Loan assignment unit volume of 180,607 and dollar volume of $2.1 billion, down 2.8% and 2.0%, respectively, compared to the first six months of 2025.

•Forecasted net cash flows from our Loan portfolio declined by $48.2 million, or 0.4%, compared to a decline of $76.7 million, or 0.7%, in the first six months of 2025.

•628,221 shares, or 5.9% of the shares outstanding at the beginning of the year, were repurchased at a cost of $320.3 million.

•$90.6 million in Dealer Holdback and accelerated Dealer Holdback payments to Dealers.

Company highlights for the three months ended June 30, 2026 included the following:

•Enrolled 1,456 new Dealers in our programs with a record 11,004 active dealers during the quarter, reflecting continued engagement across our Dealer network.

•Made continued progress executing our product roadmap, including the following initiatives:

•Deal optimization: Enhanced our deal structuring experience, which helps Dealers find an optimal deal. 90% of active Dealers used the new capability during the quarter.

•AI-enabled call-center agent: 67% of inbound customer service and account solutions calls were routed to the AI agent in June, up from 27% in March, driving improved efficiency, enabling faster 24/7 customer self-service, and reducing cost-to-serve at scale. This performance reflects continued expansion of a production-deployed AI capability that is now integrated into core servicing workflows. We expect further gains in call handling and unit economics as we scale this platform throughout 2026.

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•Named one of the 100 Best Companies to Work For® by Great Place to Work® and Fortune magazine for the twelfth time, with a #18 ranking, our highest ranking ever.

Critical Success Factors

Critical success factors include our ability to:

•accurately forecast Consumer Loan performance;

•access capital on acceptable terms; and

•maintain or grow Consumer Loan volume at the level and on the terms that we anticipate.

These factors support our long-term objective of maximizing economic profit, a non-GAAP financial measure we use to evaluate our financial results, determine profit-sharing for team members, and assess business decisions and strategies. Economic profit measures how efficiently we utilize our total capital, both debt and equity, and is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business.

Consumer Loan Metrics

At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on the amount and timing of these forecasts and expected expense levels, an advance or one-time purchase payment is made to the related Dealer at a price designed to maximize economic profit.

We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate for each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast. By comparing our current expected collection rate for each Consumer Loan with the rate we projected at the time of assignment, we are able to assess the accuracy of our initial forecast. The following table compares our aggregated forecast of Consumer Loan collection rates as of June 30, 2026, with the aggregated forecasts as of March 31, 2026, December 31, 2025 and at the time of assignment, segmented by year of assignment:

(1)Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment, including both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans because the contractual amount owed is not removed from the denominator used to calculate these rates. Any declines in forecasted collection rates for Consumer Loans assigned in the most recent quarter primarily reflect the impact of cancellations rather than underlying Consumer Loan performance.

(2)The forecasted collection rate for 2026 Consumer Loans as of June 30, 2026 includes both Consumer Loans that were in our portfolio as of March 31, 2026 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates for each of these segments:

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For the three months ended June 30, 2026, forecasted collection rates declined for Consumer Loans assigned in 2023 through 2025 and were generally consistent with expectations at the start of the period for all other assignment years presented. For Consumer Loans assigned in 2026, the increase in forecasted collection rate from March 31, 2026 was primarily due to a higher initial forecast on Consumer Loans assigned during the second quarter. For the six months ended June 30, 2026, forecasted collection rates improved for Consumer Loans assigned in 2021, declined for Consumer Loans assigned in 2023 through 2025, and were generally consistent with expectations at the start of the period for all other assignment years presented.

The changes to our forecast of future net cash flows from our Loan portfolio (forecasted collections less forecasted Dealer Holdback payments) for each of the last eight quarters are shown in the following table:

The decreases in forecasted net cash flows for the quarterly periods presented above were composed of ordinary decreases in forecasted net cash flows and the following adjustment applied to our forecasting methodology:

During the second quarter of 2025, we applied an adjustment to our methodology for forecasting the amount of future net cash flows from our Loan portfolio, which reduced the forecasted collection rates for Consumer Loans assigned in 2024. Consumer Loans assigned in 2024 prior to the implementation of our scorecard adjustment during the third quarter of 2024 had underperformed relative to the forecast adjustment we implemented during the second quarter of 2024. Accordingly, in the second quarter of 2025, we applied an adjustment to that segment of the Consumer Loans assigned in 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends. Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses. The implementation of this forecast adjustment during the second quarter of 2025 red

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes contained in Item 8 of this Form 10-K, which is incorporated herein by reference.

Overview

We make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers, regardless of their credit history. Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.

For the year ended December 31, 2025, consolidated net income was $423.9 million, or $36.38 per diluted share, compared to $247.9 million, or $19.88 per diluted share, for the same period in 2024. The increase in consolidated net income was primarily due to a decrease in provision for credit losses and an increase in finance charges, partially offset by an increase in operating expenses. Our results for the year ended December 31, 2025 included:

•$8.0 billion average balance of our Loan portfolio, which represented a 5.7% increase from 2024.

•A 12.6% and 16.5% year-over-year decline in Consumer Loan unit and dollar volumes, respectively, as compared to 2024.

•$169.5 million, or 1.5%, decrease in forecasted net cash flows from our Loan portfolio, which represented a smaller decrease compared to 2024.

•$725.4 million in the repurchase of approximately 1,514,000 shares, or 12.6% of the shares outstanding at the beginning of the year.

•The enrollment of 5,752 new Dealers, with 15,745 active Dealers during 2025, which is our highest ever number of active Dealers in a calendar year.

•$230.8 million in Dealer Holdback and accelerated Dealer Holdback payments to Dealers.

•$74.2 million contingent loss related to previously disclosed legal matters.

•$1.7 billion in unrestricted cash and cash equivalents and unused and available revolving lines of credit as of December 31, 2025.

•12 workplace awards, including reaching #34 on Great Place to Work® and Fortune magazine's 100 Best Companies to Work For® list and #2 on the 2025 Top Workplaces USA list in the 1,000-2,499 employee company size category.

For the year ended December 31, 2024, consolidated net income was $247.9 million, or $19.88 per diluted share, compared to $286.1 million, or $21.99 per diluted share, for the same period in 2023. The decrease in consolidated net income was primarily due to increases in interest expense and provision for credit losses, partially offset by an increase in finance charges. Our results for the year ended December 31, 2024 included:

•$7.5 billion average balance of our Loan portfolio, which represented a 13.6% increase from 2023.

•A 16.1% and 11.3% year-over-year growth in Consumer Loan unit and dollar volumes, respectively, as compared to 2023.

•$314.0 million, of 3.1%, decrease in forecasted net cash flows from our Loan portfolio, which represented a larger decrease compared to 2023.

•An increase in our cost of debt from 5.5% to 7.2%.

•$313.3 million in the repurchase of approximately 590,000 shares, or 4.7% of the shares outstanding at the beginning of the year.

•The enrollment of 6,088 new Dealers, with 15,463 active Dealers during 2024.

•$300.2 million in Dealer Holdback and accelerated Dealer Holdback payments to Dealers.

•$23.7 million loss during the second quarter of 2024 related to the sale of one of our two office buildings. The building was sold to reduce excess office space and eliminate the associated annual operating costs of approximately $2.1 million.

•13 workplace awards, including reaching #39 on Great Place to Work® and Fortune magazine's 100 Best Companies to Work For® list and #9 on the 2024 Top Workplaces USA list in the 1,000-2,499 employee company size category.

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Critical Success Factors

Critical success factors include our ability to accurately forecast Consumer Loan performance, access capital on acceptable terms, and maintain or grow Consumer Loan volume at the level and on the terms that we anticipate, with the objective to maximize economic profit over the long term. Economic profit is a non-GAAP financial measure we use to evaluate our financial results and determine profit-sharing for team members. We also use economic profit as a framework to evaluate business decisions and strategies. Economic profit measures how efficiently we utilize our total capital, both debt and equity, and is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business.

Consumer Loan Metrics

At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on the amount and timing of these forecasts and expected expense levels, an advance or one-time purchase payment is made to the related Dealer at a price designed to maximize economic profit.

We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate for each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast. By comparing our current expected collection rate for each Consumer Loan with the rate we projected at the time of assignment, we are able to assess the accuracy of our initial forecast. The following table compares our aggregated forecast of Consumer Loan collection rates as of December 31, 2025, with the aggregated forecasts as of December 31, 2024, as of December 31, 2023, and at the time of assignment, segmented by year of assignment:

(1)Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment. Contractual repayments include both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates.

For the year ended December 31, 2025, forecasted collection rates improved for Consumer Loans assigned in 2020 and 2025, declined for Consumer Loans assigned in 2022 through 2024, and were generally consistent with expectations at the start of the period for all other assignment years presented.

For the year ended December 31, 2024, forecasted collection rates improved for Consumer Loans assigned in 2019, declined for Consumer Loans assigned in 2021 through 2024, and were generally consistent with expectations at the start of the period for all other assignment years presented.

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The changes to our forecast of future net cash flows from our Loan portfolio (forecasted collections less forecasted Dealer Holdback payments) are shown in the following table:

The decreases in forecasted net cash flows for the years ended December 31, 2025, 2024, and 2023, were composed of ordinary decreases in forecasted net cash flows and the following adjustments applied to our forecasting methodology:

During the second quarter of 2025, we applied an adjustment to our methodology for forecasting the amount of future net cash flows from our Loan portfolio, which reduced the forecasted collection rates for Consumer Loans assigned in 2024. Consumer Loans assigned in 2024 prior to the implementation of our scorecard adjustment during the third quarter of 2024 had underperformed relative to the forecast adjustment we implemented during the second quarter of 2024. Accordingly, in the second quarter of 2025, we applied an adjustment to that segment of the Consumer Loans assigned in 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends. Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses. The implementation of this forecast adjustment during the second quarter of 2025 reduced forecasted net cash flows by $18.6 million, or 0.2%, and increased provision for credit losses by $16.5 million.

During the second quarter of 2024, we applied an adjustment to our methodology for forecasting the amount of future net cash flows from our Loan portfolio, which reduced the forecasted collection rates for Consumer Loans assigned in 2022 through 2024. Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters. Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022. During the second quarter of 2024, we determined that we had sufficient Consumer Loan performance experience to estimate the magnitude by which we expected Consumer Loans assigned in 2022 through 2024 would likely underperform our historical collection rates on Consumer Loans with similar characteristics. Accordingly, we applied an adjustment to Consumer Loans assigned in 2022 through 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends. Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses. The implementation of this forecast adjustment during the second quarter of 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased provision for credit losses by $127.5 million.

During the second quarter of 2023, we adjusted our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan prepayment data. We had experienced a decrease in Consumer Loan prepayments to below-average levels and, as a result, slowed our forecasted net

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