Doug Busk: Used car price is a decline, which has helped address affordability issues the inventory situation is better than it was, but it’s not where it was pre-pandemic and used car prices are still elevated. Where it goes from here, I think is anyone’s guess. We don’t have the ability to predict the future. So we’ll just — we’ll have to see.
John Hecht: So with that in mind, I mean, maybe it seems like a more confusing picture. Would you consider yourself a more selective or is there ways for you to tighten given that uncertainty or is it just sort of just keep eyes wide open and is a day-to-day thing?
Doug Busk: I mean we always build a very significant margin of safety into the way we price our loans. We recognize that if you’re writing a 60-month volume, there’s a whole host of things you can’t predict that will occur over the next 60 months. What will inflation do, what will unemployment do, what will used car prices do. So the way that we address all those uncertainties is by building a significant margin of safety and the way that we price. We’re writing business that generally produces very high returns, and we price our business so that if loan performance is worse than expected, our loans are still highly likely to be profitable.
John Hecht: Okay. I appreciate the color. Thank you guys very much.
Operator: Thank you. One moment while we prepare for the next question. Next question will be coming from Ray Cheesman of Anfield Capital. Your line is open.
Ray Cheesman: Thank you. Doug, just following up on John’s question. As you look forward now, I’m guessing you have a model of what you expect the world to do. I’m wondering, if you would be willing to share any of your modeling assumptions like where do you think unemployment will be at the end of the year or where do you think the 10-year will be at end of the year, the things that would drive that CECL model?
Doug Busk: I mean, like I just said in the last question, there’s a whole bunch of things that are unforecastable. So we don’t attempt to forecast the things that are unforecastable. We just address those uncertainties by pricing our loans of the big margin of safety. So when we put together our forecast of future cash flows, they’re based on actual loan performance and the historical performance of loans with similar attributes and those forecasts historically have been pretty accurate.
Ray Cheesman: As we proceed into 2023, and we read a lot of the press from the various talking heads about lower tax rebates and exhaustion of savings. Is your expectation that your pricing and risk adjustments are underway to protect you? So you’re adjusting your terms on the fly and you’re maintaining margins and maintaining profitability and — it’s just that over the course of the last couple of quarters, the water seems to the €“ the tide is going out on the economy. And I just want to make sure that I’m confident you guys are greedy as historically, I’m sorry to say it that way, but you’re a highly profitable company, and I just want to make sure that CACC stays that way.
Doug Busk: Yeah. I mean we — when we’re making decisions about how to price our loans, we are certainly considering what we are experiencing from a loan performance perspective.
Ray Cheesman: And then just one more, the fact that the used car market is dropping, I guess I saw recently, Ally (ph) expects 13% and other people expect between 10% and 20% that’s not great news for prior vintages, but it actually should be good for growth of future vintages, right?
Doug Busk: I would agree with that.
Ray Cheesman: Okay. Then thank you very much. You’ve given me some confidence, Doug. Thank you.
Operator: Thank you. One moment while we prepare for the next question. Our next question will be coming from of Bank of America. Your line is open.
