Michael Vellucci

Credit Acceptance Corp. Is Overvalued And Riddled With Risk

Business Overview:

Credit Acceptance Corporation (NASDAQ:CACC) is the market leader in the subprime auto lending market. The Company partners with auto dealerships to offer consumer loans for used vehicles to customers with low credit that would otherwise have a difficult time finding an auto loan from traditional lending sources. It also generates revenues through the sale of extended vehicle service contracts ("VSCs"), which are basically extended warranties on which CACC underwrites the insurance. CACC markets themselves, through its dealership partners, as "guaranteed credit approval", providing credit to customers regardless of credit history. Make no mistake, CACC lends to the riskiest segment of the market, realizing default rates on its loans during the past decade in the range of...

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