A VIE is an entity that either (i) has insufficient equity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. The Company consolidates VIEs for which it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. Assets recognized as a result of consolidating VIEs do not represent additional assets that could be used to satisfy claims against the Company's general assets. Liabilities recognized as a result of consolidating VIEs do not represent additional claims on the Company's general assets, rather they represent claims against the specific assets of the consolidated VIEs.

The Company has the power to direct significant activities of its VIEs when it has the ability to exercise discretion in the servicing of financial assets or control investment decisions. UACC generally retains a portion of the economic interests in UACC-sponsored asset-backed securitization transactions, which could be retained in the form of a portion of the senior interests, the subordinated interests, residual interests, or servicing rights.

UACC has developed a securitization program that involves selling finance receivables to securitization trusts through the private issuance of asset-backed securities which are collateralized by the finance receivables. UACC establishes and sponsors these transactions which create and pass along risks to the variable interest holders, specifically, consumer credit risk and pre-payment risk.

The securitization trusts established in connection with asset-backed securitization transactions are VIEs. For each VIE that UACC establishes in its role as sponsor of securitization transactions, it performs an analysis to determine if it is the primary beneficiary of the VIE.

For all securitization transactions consummated prior to the Acquisition Date, UACC consolidated VIEs and accounted for the transactions as secured borrowings. In September 2022, UACC exercised its option to repurchase the 2020-1 securitization debt. As a result, the securitization trust was dissolved and the VIE is no longer being consolidated by the Company. UACC is the primary beneficiary of the United Auto Credit 2021-1 securitization trust, as it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. These VIEs will continue to be consolidated on the Company's condensed consolidated financial statements. UACC has the power to direct significant activities of the securitization trusts as it has the ability to exercise discretion in the servicing of the related finance receivables. UACC also retained a portion of the economic interests in the 2021-1 asset-backed securitization transaction, in the form of residual interests in accordance with Regulation RR of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Risk Retention Rules"). The Risk Retention Rules require the Company to retain at least 5% of the beneficial interests issued by the securitization trusts. Refer to Note 12 - Long Term Debt for further details.

The VIE model allows for a measurement alternative when a reporting entity elects the fair value option and consolidates a collateralized financing entity (“CFE”). This measurement alternative eliminates the accounting mismatch that may arise from measurement differences between the CFE’s financial assets and third-party financial liabilities in earnings and attributes those earnings to the controlling equity interest in the consolidated income statement. The 2020-1 and 2021-1 securitizations trusts consolidated by UACC meet the definition of a CFE, therefore, the Company has elected to apply the measurement alternative when consolidating these VIEs. Refer to Note 16 - Financial Instruments and Fair Value Measurements for further detail.

UACC has three senior secured warehouse credit facilities. Through trusts, UACC entered into warehouse facility agreements with certain banking institutions, primarily to finance the purchase and origination of finance receivables as well as to provide funding for general operating activities. These trusts are secured by eligible finance receivables which are pledged as collateral for the warehouse facilities. These trusts are consolidated VIEs. Refer to Note 11 - Warehouse Credit Facilities of Consolidated VIEs for further details on the warehouse facilities.

Creditors or beneficial interest holders of VIEs for which the Company is the primary beneficiary generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to the Company. The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the condensed consolidated balance sheets (in thousands):


	As of September 30, 2022
	Securitization Vehicles		Warehouse Facilities1		Total
Current Assets:
Restricted Cash	$	10,133	$	9,356	$	19,489
Finance Receivables at fair value		5,344		5,597		10,941
Finance Receivables held for sale		—		137,077		137,077
Other assets		1,141		264		1,405
Total Current Assets		16,618		152,294		168,912
Finance Receivables at fair value		89,117		46,647		135,764
Total Assets	$	105,735	$	198,941	$	304,676
Current Liabilities:
Current portion of securitization debt	$	54,652	$	—	$	54,652
Warehouse credit facilities		—		135,453		135,453
Total Current Liabilities		54,652		135,453		190,105
Securitization debt, net of current portion		40,842		—		40,842
Other liabilities		97		407		504
Total Liabilities	$	95,591	$	135,860	$	231,451

1 Refer to Note 11 – Warehouse Credit Facilities of Consolidated VIEs for further details of the warehouse facilities.

The Company did not have any consolidated VIEs for the period ended December 31, 2021.

UACC establishes securitization trusts to purchase finance receivables. The securitization trusts issue asset-backed securities, which are collateralized by the finance receivables that UACC sells to the securitization trusts. Upon sale of the finance receivables to the securitization trusts, the Company recognizes a gain or loss on sales of finance receivables. On February 16, 2022 and July 14, 2022, UACC sold pools of finance receivables in the United Auto Credit 2022-1 and 2022-2 securitization transactions, respectively. The net proceeds from the sales are the fair value of the assets obtained as part of the transactions and typically include cash and at least 5% of the beneficial interests issued by the securitization trusts to comply with risk retention rules. During the three and nine months ended September 30, 2022, the Company sold $242.3 million and $523.7 million of rated asset-backed securities, respectively, and $17.3 million and $49.6 million of residual certificates, respectively, through securitization transactions. The total gain related to finance receivables sold pursuant to securitization transactions was $16.0 million and $45.6 million for the three and nine months ended September 30, 2022, respectively.

UACC retained the servicing rights to these finance receivables and received beneficial interests in the form of asset-backed securities. UACC owns an insignificant portion of these securities and receives an at market servicing fee. The securitization trusts used to affect these transactions are VIEs that the Company does not consolidate. As the servicer, UACC retained the power to direct the activities that are most significant to the entity, however, UACC concluded that it is not the primary beneficiary of the United Auto Credit 2022-1 and 2022-2 securitization trusts because its retained interests in the VIEs are insignificant. The beneficial interest retained by UACC included rated notes and unrated residual certificates issued by the 2022-1 and 2022-2 securitization trusts.

UACC has no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to UACC or its other assets and have no right to require UACC to repurchase the investments. UACC has no obligation to provide liquidity or contribute cash or additional assets to the VIEs and does not guarantee any asset-backed securities.

As of September 30, 2022, the assets UACC retains in the unconsolidated VIEs were approximately $24.0 million and are included in "Beneficial interests in securitizations" in the Company's condensed consolidated balance sheet. The beneficial interests in securitizations are subject to restrictions on transfer pursuant to UACC’s obligations as a sponsor under Risk Retention Rules. These securities are interests in securitization trusts, thus there are no contractual maturities.

The following table summarizes the amortized cost, the carrying amount, which is the fair value, and the maximum exposure to losses of UACC's assets related to unconsolidated VIEs (in thousands):


	As of September 30, 2022
	Aggregate Principal Balance		Carrying Value		Total Exposure
Rated notes	$	22,004	$	21,580	$	21,580
Certificates		—		2,404		2,404
Other assets		310		310		310
Total unconsolidated VIEs	$	22,314	$	24,294	$	24,294

Total exposure represents the estimated loss UACC would incur under severe, hypothetical circumstances, such as if the value of the interests in the securitization trusts and any associated collateral declined to zero. The Company believes the possibility of this is remote. As such, the total exposure presented above is not an indication of the Company's expected losses.