John Rowan: Okay. And then just to touch on the competitive environment a little bit. I was hoping you guys would kind of talk a little bit about the what you’re seeing out of the smaller competitors in your space? Are they retrenching? And again, I want to go down market a little bit here with the guys that you compete with, how is their funding looking? And just trying to understand where you sit competitively speaking?
DougBusk: The market for used vehicles financed to subprime consumers is very large and very fragmented. The top 5 industry participants account for maybe 25% of the business, the top 20, somewhere around 50%, but the other 50% consists of hundreds if not thousands of firms. So I don’t really have terribly insightful observations about what’s happening at any individual competitor. I think it’s still fair to say that the competitive environment is more favorable than it was 12 or 15 months ago.
John Rowan: Okay. All right. That’s it for me. Thank you.
Operator: Our next question comes from the line of Robert Wildhack from Autonomous Research. Your line is open.
Robert Wildhack: Hi, guys. Doug, just on that last point. When you say the competitive environment is more favorable than it was 12 or 15 months ago, that means more favorable, i.e., better for Credit Acceptance?
DougBusk: Correct.
Robert Wildhack: Okay. Great. And then I wanted to ask about the 2022 vintage. Expected collection is there now 3.2 percentage points below the initial forecast, which is a very significant delta for you historically. So what is it about that vintage that’s performing so poorly?
DougBusk: Simply put, the loans are just performing worse than loans with similar characteristics have historically. What we saw this quarter is a continuation of the trend that we observed in the last three quarters of 2022. We didn’t see that trend in the first quarter. It’s difficult to say why, it could be unique seasonal factors that occur during tax season, but it’s a continuation of the trend that we saw for most of 2022. It’s impossible to say exactly why this has occurred, but it’s probably due to a few factors. The early ’22 loans were originated in a pretty intense competitive environment, which generally hurts loan performance. We’ve seen some decline in used car prices. And as we know, I think inflation, though it has moderated, has an impact on the subprime consumer. So I think that – all those things are probably contributing to the relatively poor performance that we’ve seen on the ’22 originations.
Robert Wildhack: Sorry, just one more, if I could. The provision for new loans this quarter was less than $1,000 per unit, and that’s the second quarter in a row where that’s been pretty low historically because I think it’s usually like $1,300, $1,400, $1,500. Does that mean you’ve tightened the underwriting criteria at all?
DougBusk: No, and just due to the mechanics of the calculation, what drives the upfront provision is just a difference between the contractual and expected yield. So the expected yield will be what we expect to earn based on the forecasted cash flows at origination, the contractual yield is just what the yield would be if the customer made all the payments on time. We’ve seen a higher initial spread on the recent loan originations, which has reduced the difference between the contractual and expected yields, and that’s resulted in decline in the provision that we report when we originate a loan, a bit of a mechanical answer.
Robert Wildhack: Okay. And lower difference between contractual and expected equals a lower provision, all else equal?
DougBusk: That’s correct.
Robert Wildhack: Okay. Thank you.
Operator: Our next question will come from the line of Vincent Caintic from Stephens. Your line is open.
