Credit Acceptance Corp.'s net income fell in 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 in legal costs, including a $12 million shareholder lawsuit settlement.
However, Credit Acceptance brought in more auto loans during the second quarter from more dealerships. It added $974.9 million in new financing, up 22 percent from a year earlier, across 73,340 loans, 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 in the second quarter, a 1.9 percent increase.
Shares in Credit Acceptance rose 1 percent to $588 in after-hours trading 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