Credit Acceptance’s Q3 2025 Results: A Tale of Two Metrics

The latest quarterly figures from subprime auto lender Credit Acceptance paint a complex picture for investors. The company's performance presented a clear divergence between profitability and top-line growth, set against a backdrop of a tightening market for its core customer base.

For the third quarter of 2025, Credit Acceptance reported a net income of $108.2 million, a significant increase from the $78.8 million recorded in the prior-year period. On a per-share basis, the adjusted diluted earnings per share came in at $10.28, surpassing the analyst consensus estimate of $9.87.

However, total revenue of $582.4 million fell short of the market's expectation of $593.77 million. The company's overall loan portfolio continued to expand, reaching a record $9.1 billion, which marks a 2% year-over-year increase.

This portfolio growth contrasts sharply with a pronounced contraction in new business. The volume of newly assigned consumer loans declined by 16.5% in unit count and 19.4% in value compared to the same quarter last year. Furthermore, lower forecasted collection rates for loan vintages from 2022 to 2024 reduced net cash flows from the portfolio by $58.6 million.

Key Q3 2025 Figures:
* Adjusted Diluted EPS: $10.28 (Estimate: $9.87)
* Total Revenue: $582.4 million (Estimate: $593.77 million)
* Loan Portfolio Value: $9.1 billion
* New Loan Volume (Value): Down 19.4% year-over-year

Should investors sell immediately? Or is it worth buying Credit Acceptance?

Navigating a Challenging Macroeconomic Landscape

The macroeconomic environment is creating headwinds. Analysts project over 3 million vehicle repossessions in the United States for 2025, a level not seen since the Great Recession. Soaring vehicle prices and elevated borrowing costs are placing considerable strain on lower-income borrowers, Credit Acceptance's primary market.

In this competitive climate, the company's market share within the subprime segment has decreased from 6.5% to 5.1%. Concurrently, management has taken steps to fortify its financial position, securing extensions on several revolving credit facilities and negotiating more favorable terms. For instance, the interest rate on one $75 million facility was reduced from SOFR plus 210 basis points to SOFR plus 185 basis points.

Analyst Sentiment and Strategic Focus

Market experts remain cautious in their outlook. The consensus rating among analysts currently stands at "Reduce," with an average 12-month price target of $465.00. With the stock recently trading at $461.29, it has effectively reached this average target, suggesting limited near-term upside based on prevailing forecasts.

Strategically, Credit Acceptance is emphasizing portfolio stability and disciplined underwriting for new originations. The company is also investing in operational modernization, including upgrades to its CAPS origination system, aimed at enhancing processing speed and the product experience for its dealer network. These efforts are deemed critical for navigating the persistently competitive market.