Credit Acceptance : 2023 Letter to Shareholders

Shareholder Letter

A message from our Chief Executive Officer

BACKGROUND

For more than 50 years, Credit Acceptance Corporation1 has made vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. We provide our nationwide network of dealers the ability to sell a vehicle to a consumer who, without us, they might otherwise have had to turn away.

The auto finance market is large and fragmented, with nearly $1.5 trillion in outstanding loan balances as of December 31, 2023. We compete with banks, credit unions, auto finance companies affiliated with auto manufacturers, independent auto finance companies, and "buy here, pay here" dealers. Our value proposition in the market is unique for two reasons. First, consumers are not denied the opportunity to purchase a vehicle based on their credit history. Vehicles are necessary in most areas of the country. By providing access to credit,2 we make it possible for consumers to purchase vehicles needed to maintain or find better employment, attend school, access health care, and buy more affordable groceries and other necessities. Second, for most of the vehicle sales we finance, the dealer shares in the cash flows from the loan after the loan is assigned to us.3 Dealers receive 80% of collections throughout the life of a loan. This compensation plan is a critical element of our success as it creates an alignment of interests between Credit Acceptance, the dealer, and the consumer. Through Credit Acceptance, the dealer directly benefits if the consumer's loan is repaid and the consumer builds or rebuilds their credit. Our program incentivizes the dealer to sell a quality vehicle at a price the customer can afford and that will last at least the term of the loan.

Our customers are people like Takisha S. from Toledo, Ohio. Takisha assists nurses in facilities, nursing homes, and hospitals. She enjoys providing transportation to patients in her community who need it. She dreamed of upgrading her sedan to a larger vehicle to help more people and earn additional income. But, like many Americans with impaired credit, Takisha had difficulty getting approved to finance her dream vehicle. Takisha had cosigned for a friend to purchase a vehicle. The friend ran into difficulty making payments during the COVID-19 pandemic, which caused Takisha's credit score to decline. Although she was turned down for financing at multiple dealerships in her pursuit of a larger vehicle, she did not give up. She found a dealer working with Credit Acceptance and got approved to purchase the van of her dreams. With her new van, Takisha helped more patients in her community and increased her income. In just one

• I also refer to Credit Acceptance Corporation as "Credit Acceptance", "the Company", "we", or "us" throughout this letter.

• Our company, like most of our competitors, is an indirect auto finance company, which means the financing contract is originated by the auto dealer and immediately assigned to us in exchange for compensation.

• The transaction between the dealer and the consumer is not a loan, but instead something called a retail installment contract. However, for simplicity and to conform to the language commonly used in the industry and used in our disclosures, I will refer in this letter to retail installment contracts as "loans" and to indirect auto finance companies as "lenders."

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year, she paid off her account and improved her credit. Takisha is now planning to finance a home.

While Takisha's story is inspiring, she's far from alone. Our potential market is huge-adults with no credit history (credit invisible), with limited credit information available through the credit bureaus (a thin file), and subprime credit are often ignored by mainstream lenders and have limited credit choices. According to an industry white paper published in 2022, citing Experian® data:

• 11% (28 million) of adults in the United States have no credit score and are considered credit invisible.
• An additional 8% (21 million) of adults have thin credit files or a limited credit history and are unscorable.
• Approximately 22% (57 million) of adults have a credit profile that is considered subprime.
• An additional 14% (35 million) of adults have credit profiles considered near prime.
• Only 44% (114 million) of adults have prime credit.

We make it possible for all of these individuals to finance a vehicle-alife-changing opportunity for many.

We also provide our dealers with a unique opportunity to grow their businesses and improve their financial futures. A business relationship with us creates incremental profit for the dealer, and the potential for incremental repeat and referral business. We have helped thousands of dealers build their businesses and continue to strengthen our dealer relationships.

Our dealers are like Sean and Tony, the owners of Champs Auto Sales in Detroit, Michigan. Champs had limited financing options for consumers when Sean and Tony purchased the dealership over 10 years ago. In 2021, Champs expanded its financing options through Credit Acceptance and began to offer financing to all consumers, including those who were credit impaired and credit invisible. Tony recently commented that Credit Acceptance helps Champs "put dreams in driveways." The experience is so meaningful that Champs customers often return for future vehicles and refer their friends and family to the dealership. Our consistent, fast-funding process also gave Sean and Tony the cash flow needed to build Champs' inventory to over 120 vehicles on the lot at any given time, from 20 to 30 vehicles previously. With additional cash flow and greater inventory, Champs now sells over 50 to 60 vehicles per month.

HISTORY

Our business model has been quite successful over time. I attribute our success over the last 25 years to three pillars: (1) our purpose; (2) our long-term strategy and goals; and (3) our values and beliefs.

First, our purpose is to make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. Arising from this purpose is our North Star: to change lives and create intrinsic value for dealers, consumers, team members, investors, and our communities. To do so, we must offer a

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great product and build a successful, profitable business. And when we serve our constituents well-when we change their lives in positive ways-our business will thrive.

Don Foss founded Credit Acceptance in 1972 on these beliefs. Don had learned early in his career as an auto dealer that many individuals could not acquire vehicles they need due to their lack of credit. Don witnessed traditional lending sources unfairly misjudge credit-impaired and credit-invisible applicants, assuming the applicants' less-than-prime credit made them undeserving of a second chance. Don started Credit Acceptance to help those individuals move their lives in a positive direction by providing them the opportunity to finance a vehicle and establish or reestablish positive credit history. Don served as our CEO until 2002 and continued to serve on our Board as Chairman until his retirement in 2017. Our purpose and North Star have guided our decisions, actions, and policies, in all phases of our evolution.

Second, we focus on the long-term success of the business and set big, hairy, audacious goals accordingly. Our second pillar was greatly influenced by one of our long-standing Board members. Before our initial public offering, we had limited competition and wrote highly profitable business. After we became publicly traded in 1992, competition intensified, and we struggled for several years in the mid- to late-1990s. One of the first changes the Board member made was to establish a minimum required return on capital. The message was clear: If we could not earn more than our cost of capital, we needed to give that capital back to shareholders. This message got leadership's attention, since at the time we were not meeting this minimum requirement. With the Board's help, we worked through those challenges and began focusing on a metric called "Economic Profit." This led to an increased focus on our core business under Brett Roberts, our CEO from 2002 to 2021, and our exit from several business lines and geographic locations. This focus, institutionalized by Brett, has since guided our success.

With our attention on Economic Profit, we wisely invested our capital and consistently earned a return on capital well above its cost, even in years when our loans performed worse than we expected. We invested in our core business and used excess capital to repurchase stock, buying approximately 40.4 million shares from 1999 through 2023.

Third, we have clear and unwavering values and beliefs. We began concentrating on building a great culture for our team members in 2001. Brett was confident that creating a strong culture and great work environment would help us create a financially successful business. In 2012, our team members were asked to describe our values and coined the phrase PRIDE: Positive, Respectful, Insightful, Direct, and Earnest. Those values are now organic to our culture and fully integrated into our hiring processes, workplace, communications, and performance management.

To retain our great people and environment, we have devoted a significant portion of our time to executing something we call Organizational Health-setting clear expectations, managing performance, providing training, maintaining effective incentive compensation plans, establishing the right environment, and providing the technology and processes required for operational excellence. We have positioned our team members to produce their best work by making decisions through the lens of Organizational Health.

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We are honored by the many workplace awards we have earned as a result of PRIDE and our focus on Organizational Health. The awards and recognition received by Credit Acceptance, from local awards to national ranking among the Fortune 100 Best Places to Work, provide outside confirmation of our great culture.

Our purpose, long-term focus on the business, and values have helped us navigate many challenges throughout our history. Most recently, we endured the global pandemic. We continue to manage changes in the competitive market and economic environment arising from the pandemic.

TODAY

Our purpose, strategy, and values remain relatively unchanged. We continue to offer a product that provides enormous benefits to our dealers and their customers; focus on the long-term success of the business; and provide a culture that attracts talented people around the country and enables them to perform to their potential. We apply lessons learned over the years to continue to improve.

To preserve and enhance these three pillars in our remote-first environment, we are continuing to:

• Provide exceptional leadership. The experience, consistency, and business knowledge of our leaders are key advantages. Our exceptional leaders now include:
• • Our executive leadership team, including nine individuals averaging 21 years of experience at Credit Acceptance and two new seasoned leaders experienced in Engineering, and Product & Marketing. I have been with the Company for over 20 years, primarily as the Chief Financial Officer, and became the Chief Executive Officer in May 2021.
  • Our senior leadership team, made up of vice presidents and senior vice presidents, includes 20 individuals with an average of 16 years of experience with the Company; and six new seasoned leaders experienced in their respective fields, including Engineering, Product, Marketing, and Sales.
  • Our mid-level leadership team, which includes managers and directors, of 329 individuals with an average of eight years of experience with the Company.
• Position our team members to produce their best work. Our great team members and culture allow us to thrive. We maintain a great culture, and continue to enhance it, through our PRIDE values, the dimensions of Organizational Health, and always listening. We continue to focus on our team members' wellbeing and mental health. For the ninth time in 10 years, Credit Acceptance was named to the FORTUNE 100 Best Companies to Work For® list. We moved up 15 spots from a year ago and ranked #34 on the 2023 list, our second highest ranking ever. People Magazine and Great Place to Work also named Credit Acceptance as one of the 2023 People Magazine Companies that Care for demonstrating outstanding respect, care, and concern for our team members and their communities. Other workplace-related accolades included our being named in Fortune's lists for Best Workplaces in Financial Services & Insurance, Best Workplaces for

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Millennials, and Best Workplaces for Women; our inclusion in Computerworld's Best Places to Work in IT; and our selection as one of the Detroit Free Press' Top Workplaces.

• Focus on retaining and attracting the best talent. We continue to build our bench strength-developing our internal talent and, when needed, recruiting the best external talent from anywhere in the country with our remote-first environment. Our team member base is a nod to our belief in diversity of experience and thought.
• Create a sense of belonging and focus on our purpose, goals, and values through engagement and collaboration remotely and in-person. This requires great intention when team members are no longer all located within the same building. Through top- down communications (virtual town halls, monthly management team meetings, and regional roundtables), we ensure that team members understand our shared purpose, goals, values, and beliefs. We offer team members opportunities throughout the year to strengthen their connections and foster cross-functional collaboration both virtually and in-person.

Today, consistent with how we addressed past macroeconomic challenges, we are leveraging our strengths to grow despite the ripple effects of the pandemic as described in the section of this letter entitled "Impact of Business Cycles on our Performance." Consistent with our historical operating principles, we use Economic Profit as a framework to evaluate business decisions and strategies, with an objective to maximize Economic Profit over the long term; we reinvest capital in the business, and we return that capital to shareholders through share repurchases to the extent we generate capital in excess of what is needed to fund and invest in the business, as described in the section of this letter entitled "Operating Principles."

IMPACT OF BUSINESS CYCLES ON OUR PERFORMANCE

It is important for shareholders to understand the impact of the external environment on our performance. Access to capital, competitive cycles, and economic cycles have affected our past results and are likely to affect our results in the future.

Summary

While inflation and used vehicle availability improved in 2023 from 2022, inflation remained elevated and used vehicles remained in short supply when compared to pre-pandemic levels. The industry witnessed a rising number of consumers fall behind on payments, resulting in lower than anticipated collections on consumer loans originated in 2021 and 2022. This caused many lenders to tighten access to credit, particularly for subprime consumers.

With a year-over-year increase in vehicle supply, decreasing vehicle values, and fewer lenders offering financing to those with less than prime credit, we experienced an increased demand for our product starting in mid-2022 and continuing through 2023. We were able to increase our margin of safety in the aggregate and grow our active dealer base, our loan assignment volume, and the average balance of our loan portfolio. We increased the initial spread to 21.3% in 2023 compared to 20.1% on loans assigned in 2022. Our unit and dollar volumes grew 18.6% and 14.4%, respectively, during a period with seven consecutive quarters of growth. The

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balance of our loan portfolio increased 10.4% from year-end 2022 to year-end 2023. As of year- end 2023, Credit Acceptance had the largest loan portfolio in its history-at $7.0 billion.

Access To Capital

The auto finance market historically has been sensitive to changes in access to capital. When access to capital decreased, competition in our market decreased.

Capital markets were inconsistent in 2023. In 2019 through mid-2022, with the exception of a period in 2020 due to the pandemic, capital markets were generally favorable to issuers. Starting in the second half of 2022, two factors adversely impacted access to, and the cost of, capital in our industry: (1) credit quality concerns related to loans originated in 2021 and 2022 (as explained below); and (2) interest rate volatility. The Fed increased interest rates 11 times from March 2022 to July 2023 to combat inflation, increasing the cost of borrowing. In the fourth quarter of 2023, market interest rate volatility declined, in part, due to the Fed's decision on November 1, 2023, to hold its target rate steady for the second consecutive time in 2023. A reduction in market expectations of rate volatility created more favorable conditions in the capital markets. As of the date of this letter, capital market conditions remain relatively favorable for debt issuers.

Conditions in the capital markets can make it more difficult to access the capital needed to fund our business. As a result, we have applied lessons from the past seeking to best position the Company if access to capital becomes limited. As of the date of this letter, we believe we have positioned the Company for continued success if access to capital becomes limited by: (1) completing seven offerings of senior notes with terms of five to eight years, two series of which are currently outstanding and together provides us with $1 billion of long-term debt capital; (2) lengthening the terms of certain asset-backed financings to over three years; and (3) increasing our revolving credit facilities to $1.6 billion currently from $540 million at the end of 2009. We maintain a considerable amount of available borrowing capacity under our revolving credit facilities at all times and renew these facilities well before they mature. Although the capital markets have periodically been volatile, we recently secured $700 million in new asset-backed financing and, as of March 31, 2024, had $1.4 billion of unused capacity under our revolving credit facilities.

Lengthening the term of our debt facilities, issuing higher-costlong-term debt, and keeping available a significant portion of our revolving credit facilities increase our funding costs and reduce short-term profitability.

Competitive Cycles

Competitive cycles tend to be related to access to capital, as mentioned above. When capital is easier to obtain, underwriting standards in the industry tend to drop (as a result of which, financing for credit-challenged consumers becomes more accessible and competition in our market increases), and loan profitability drops as advances become more competitive. Conversely, when capital is more difficult to obtain, underwriting standards in the industry tend to rise (as a result of which, financing for credit-challenged consumers becomes less accessible and our competition decreases), and loan profitability rises. Because we take a long view on the

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industry, price to maximize Economic Profit over the long term (as described below in the section of this letter entitled "Economic Profit"), and seek to best position the Company if access to capital becomes limited, we are less reactive to changes in access to capital. As a result, we will have difficulty growing, or will even shrink, our business at times; and we will be able to grow strongly at other times. Through several competitive cycles, we have applied past lessons learned and leveraged our strengths (e.g., our ability to predict aggregate performance, deploy risk-adjusted pricing, monitor loan performance, and execute key functions consistently) to successfully maintain our business despite tougher competition.

When capital markets were generally favorable to issuers in 2019 through mid-2022 and capital remained accessible, competition intensified from the fourth quarter of 2019 to the second quarter of 2022, and the number of loans assigned to us by dealers decreased year-over-year, eventually shrinking our portfolio.

When the cost of capital increased and loan performance moderated (as described below) in the second half of 2022, competition eased through 2023 as many lenders significantly tightened subprime lending parameters, while other lenders exited the subprime market altogether. As liquidity became an issue, credit unions also began pulling back on auto lending after growing their share of subprime in 2022.

Consistent with our historical practices, during the period of intense competition, we focused on our long-term strategy and maintained an aggregate margin of safety in the amount we advanced to dealers. We were able to enroll more new dealers and increase our active dealer base from mid-2022 to mid-2023 to address volume per dealer trends. After a modest increase in 2022, we experienced significant growth in our active dealers, reaching the highest level in our history - increasing both dealer enrollments (from 3,627 in 2022 to 5,605 in 2023, a 54.5% increase) and the number of active dealers (from 11,901 in 2022 to 14,174 in 2023, a 19.1% increase).

Economic Cycles

Economic cycles also affect our business. Most recently, our business felt the economic repercussions from the pandemic. The pandemic impacted vehicle supplies, vehicle prices, and our loan performance.

The ripple effects of the pandemic impacted vehicle supply. Starting in March 2020, government authorities placed limits on economic activity in an effort to slow the spread of COVID-19. Those limits disrupted the supply chain, which led to a lack of parts such as semiconductor chips needed for new vehicles. That, in turn, created vehicle shortages and drove up used vehicle prices throughout 2020, 2021, 2022, and the beginning of 2023. The used vehicle supply reached its lowest point in the first quarter of 2023, but then steadily increased throughout the year, according to a 2024 Cox Automotive report. Consistent with industry changes, vehicle inventory held by our dealers also modestly increased. As vehicle supply increased, vehicle values at auction began to decline, but remain elevated compared to pre- pandemic levels.

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A lack of parts impacted vehicle manufacturing. According to a December 2023 NADA report, small and mid-sized vehicles account for a much smaller share of vehicle sales (7.0% and 7.4%, respectively) than larger, more expensive vehicles, as manufacturers have increasingly focused on manufacturing crossovers and pickups (which made up 47.9% and 17.9%, respectively, of vehicle sales in 2023). The average price for subcompact sedans increased from $16,000 in 2018 to nearly $24,000 in 2023.

We believe the vehicle shortage and decreased availability of low-cost vehicles contributed to the significant decline from 2018 to 2022, and the more modest decline in 2023, in the percentage of used-vehicle loan originations for customers with subprime and deep subprime credit scores reported by Experian®. Dealers generally make higher profits on higher credit quality and cash customers. Given limited inventory and supply of low-cost vehicles, dealers were likely more willing to sell their limited vehicle supplies to higher credit quality and cash customers instead of those with less-than-prime credit.

The ripple effects of the pandemic also impacted loan performance. From the second half of 2020 to the first quarter of 2022, loan performance in the industry improved markedly following the distribution of federal stimulus payments and enhanced unemployment benefits due to the pandemic. This, coupled with access to capital, increased competition in our space. In the second quarter of 2022, loan performance moderated with the lapse of federal stimulus payments and enhanced unemployment benefits, the peak of vehicle values and prices due to supply shortages, and rising inflation. Many subprime lenders experienced higher than expected losses on their 2021 and 2022 originations. According to Experian®, the percentage of auto loans 60-days delinquent in 2023 continued to surpass pre-pandemic levels. This decreased competition in our space.

The level of uncertainty associated with our estimate of the amount and timing of future net cash flows from our loan portfolio likewise increased. But, because we understand forecasting collection rates is challenging, our business model is designed to produce acceptable returns in the aggregate even if loan performance is less than forecasted. During the first quarter of 2020, we applied a subjective adjustment to our forecasting model to reflect our best estimate of the future impact of the pandemic on future net cash flows ("COVID forecast adjustment"), which reduced our estimate of future net cash flows by $162.2 million, or 1.8%. We continued to apply the COVID forecast adjustment through the end of 2021, as it continued to represent our best estimate. During the first quarter of 2022, we determined that we had sufficient loan performance experience since the lapse of federal stimulus payments and enhanced unemployment benefits to refine our estimate of future net cash flows. Accordingly, during the first quarter of 2022, we removed the COVID forecast adjustment and enhanced our methodology for forecasting the amount and timing of future net cash flows from our loan portfolio using more recent data and new forecast variables, which increased our estimate of future net cash flows by $95.7 million, or 1.1%. Based on the loan performance described below, during the second quarter of 2023, we again adjusted our methodology for forecasting the amount and timing of future net cash flows from our loan portfolio using more recent loan performance and consumer loan prepayment data, which reduced our estimate of future net cash flows by $44.5 million, or 0.5%, and slowed our forecasted net cash flow timing. For the period from January 1, 2020 through December 31, 2023, the cumulative change to our

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forecast of future net cash flows from our loan portfolio has been an increase of $13.8 million, or 0.2%.

Loans assigned to us in 2018 through 2020 yielded forecasted collection results significantly better than our initial estimates, like others in the industry, reflecting the impact of the distribution of federal stimulus payments and enhanced unemployment benefits due to the pandemic. Loans originated by the Company during the highly competitive period of 2021 and 2022 yielded forecasted collection results significantly worse than our initial estimates, like others in the industry, with the lapse of federal stimulus payments and enhanced unemployment benefits, the peak of vehicle values and prices, and rising inflation. Consumer loan prepayments also have been lower in periods with less availability of consumer credit. Consistent with historical trends, during the first half of 2023, we experienced a decrease in consumer loan prepayments to below-average levels and, as a result, slowed our forecasted net cash flow timing. The below-average levels of consumer loan prepayments continued through the fourth quarter of 2023.

OPERATING PRINCIPLES

Economic Profit

We use a financial measure called Economic Profit to evaluate our financial results and determine profit-sharing for team members. We also use Economic Profit as a framework to evaluate business decisions and strategies, with an objective to maximize Economic Profit over the long term. Economic Profit measures how efficiently we utilize our total capital, both debt and equity, and is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business. Economic Profit differs from net income in that it includes a cost for equity capital. To the extent we generate capital in excess of what we believe is needed to maximize Economic Profit through investing in our business, we focus on maximizing Economic Profit per share (diluted) through our share repurchases approach outlined below. In the "Supplemental Financial Results" section following the signature page of this letter, we detail our past Economic Profit and Economic Profit per share (diluted) performance.

Investments in the Business

Our core product has remained essentially unchanged for 52 years. We provide innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. Consumers that benefit from our program consist primarily of individuals who have typically been turned away by other lenders. Traditional lenders have many reasons for declining a loan. We have always believed that a significant number of individuals, if given an opportunity to establish or reestablish a positive credit history, will take advantage of it. As a result of this belief, we have provided a life-changing opportunity to more than 4 million consumers.

Our financial success is a result of having a unique and valuable product and of putting in many years of hard work to develop the business. Consistent with recent years, in 2023, we made investments focused on enhancing the value of our product for our key constituents and

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preparing for future growth. I would like to highlight a couple of changes that we believe make a positive impact.

We invested in our Engineering, Product, and Marketing teams to further increase velocity, deliver great customer experiences, refresh our brand, and accelerate business value. The impact of technology on our business is significant. By becoming a "remote first" organization, we have been able to hire throughout the United States and compete for the best talent.

We have learned how to develop relationships with dealers that are profitable throughout our history. Forging a profitable relationship requires us to select the right dealer, align incentives, communicate constantly, and create processes to enforce standards. In our segment of the market, the dealer has significant influence over loan performance. Learning how to create relationships with dealers who share our passion for changing lives has been one of our most important accomplishments. This year, we brought in new seasoned leaders, professionals, and engineers with the skills needed to innovate and enhance our product to meet the needs of the dealer. We created opportunities to listen to the voice of the dealer through dealer visits, meetings, and celebrations. We refreshed our dealer-engagement approach through our cross- functional Go-To-Market team. This team focuses on effective and efficient sales and marketing processes with the goal of increasing dealer enrollments, increasing our active dealer base, and reducing churn. We also made it more convenient for dealers to do business with us by continuing to expand our financing options for dealers to provide more competitive deal structures and advances and offer more favorable interest rates for qualifying customers.

We invested in consumer experiences. After we take assignment of a consumer loan originated by a participating dealer, the consumer is welcomed to Credit Acceptance through our enhanced onboarding experience and receives useful account information through channels convenient to the consumer. Throughout the life of the loan, the consumers can access account information and payment channels through our mobile app, which we continued to enhance throughout the year.

We invested in our team members. We recruited new talent; recognized top talent; enhanced our benefits; and created professional development experiences through a mix of in-person and virtual events, such as town halls, monthly management meetings, regional roundtables, retreats for our Sales and Operations leaders, and Team Member Resource Group meetings. These events also furthered our shared sense of purpose and cross-functional collaboration to maintain productivity in a remote setting.

Share Repurchases

To the extent we generate capital in excess of what is needed to fund and re-invest in the business, we will return that capital to shareholders through share repurchases as we have done in the past. We have used excess capital to repurchase shares when prices are at or below our estimate of intrinsic value (which is the discounted value of estimated future cash flows). As long as the share price is at or below our estimate of intrinsic value, we prefer share repurchases to dividends for several reasons. First, repurchasing shares below intrinsic value increases the value of the remaining shares. Second, distributing capital to shareholders through a share repurchase gives shareholders the option to defer taxes by electing not to sell

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