Credit Acceptance Corporation (NASDAQ:CACC) Q4 2023 Earnings Call Transcript

Vincent Caintic: Okay. And then on for the forecasted collections. I’m wondering if there’s any macro assumptions that are baked into there, I guess the — for instance, the Manheim Index with used car sales and used car prices or Fed rate cuts or anything like that. I don’t know if that has any influence on your forecasted collections. So if you could talk about that.

Douglas Busk: We don’t include macro variables like unemployed rates or inflation rates or GDP or anything like that. We do have depreciation curve that we end up using to model forecasted collection rates. So that’s factored in. But no one really knows what is going to happen to used vehicle prices over a 60-month loan term. So the way that we deal with uncertainty associated with used car prices and all the other uncertainties is just by building up pretty significant margin of safety into our loan pricing when they are originated. We do that. So even a loan performance is worse than expected, our loans are still likely to produce that effective levels of profitability.

Vincent Caintic: Okay. And last one for me. So I understand you have forecast collections and maybe change underwriting or change some variables to get to your desired results. But when you think about the consumer that you’re lending to just if you can — if you have any views about how that consumer health is doing, are trends getting better as you — over the past couple of quarters?

Douglas Busk: It’s pretty early to say. Thus far, the 2023 loans are performing better at the same age than the 2022 loans were. But again, that book of business really isn’t all that season. We have made adjustments as we’ve seen the underperformance of the ’21 and ’22 loans. We’ve incorporated — we’re always making changes to our forecast based on recent trends and loan performance. So we have made adjustments to our forecast there. But I think it’s too early to have a conclusive comment on consumer health.

Operator: With no further questions in the queue, I would like to turn the call back over to Mr. Martin for any additional or closing remarks.

Jay Martin: We would like to thank everyone for their support and for joining us on the conference call today. If you have any additional follow-up questions, please direct them to our Investor Relations mailbox at ir@creditacceptance.com. We look forward to talking to you again next quarter. Thank you.

Operator: Once again, this does conclude today’s conference. We thank you for your participation.