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(1)	Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.  Payments of Dealer Holdback (as defined below) and accelerated Dealer Holdback are not included.

•	a down payment from the consumer;

•	a cash advance from us; and

•	after the advance balance (cash advance and related Dealer Loan fees and costs) has been recovered by us, the cash from payments made on the Consumer Loan, net of certain collection costs and our servicing fee (“Dealer Holdback”).

•	first, to reimburse us for certain collection costs;

•	second, to pay us our servicing fee, which generally equals 20% of collections;

•	third, to reduce the aggregate advance balance and to pay any other amounts due from the Dealer to us; and

•	fourth, to the Dealer as payment of Dealer Holdback.

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•	assigned at least 100 Consumer Loans under the Portfolio Program;

•	franchise dealership; or

•	independent dealership that meets certain criteria upon enrollment.

•

Finance charges, which are comprised of: (1) servicing fees earned as a result of servicing Consumer Loans assigned to us by Dealers under the Portfolio Program; (2) finance charge income from Purchased Loans; (3) fees earned from our third party ancillary product offerings; (4) monthly program fees of $599, charged to Dealers under the Portfolio Program; and (5) fees associated with certain Loans;

•	Premiums earned on the reinsurance of vehicle service contracts; and

•	Other income, which primarily consists of ancillary product profit sharing, remarketing fees, interest, Dealer enrollment fees, Dealer support products and services and GPS Starter Interrupt Devices (“GPS-SID”) fees.  For additional information, see Note 8 to the consolidated financial statements contained in Item 8 to this Form 10-K, which is incorporated herein by reference.

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(1)	Active Dealers are Dealers who have received funding for at least one Loan during the period.

•	the Dealer's refusal to allow us to audit its records relating to the Consumer Loans assigned to us;

•	the Dealer, without our consent, is dissolved; merges or consolidates with an entity not affiliated with the Dealer; or sells a material part of its assets outside the course of its business to an entity not affiliated with the Dealer; or

•	the appointment of a receiver for, or the bankruptcy or insolvency of, the Dealer.

•	any unreimbursed collection costs on Dealer Loans;

•	any unpaid advances and all amounts owed by the Dealer to us; and

•	a termination fee equal to 15% of the then outstanding amount of the Consumer Loans assigned to us.

•	the consumer and Dealer have signed a Consumer Loan contract; and

•	we have received the executed Consumer Loan contract and supporting documentation in either physical or electronic form.

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•	the Consumer Loan has been legally assigned to us; and

•	we have made a funding decision and generally have provided funding to the Dealer in the form of either an advance under the Portfolio Program or one-time purchase payment under the Purchase Program.

•	change pricing or charge the Dealer fees for future Consumer Loan assignments;

•	reassign the Consumer Loans back to the Dealer and require repayment of the related advances and/or purchase payments; or

•	terminate our relationship with the Dealer.

•	an individual Consumer Loan may be reassigned within 180 days of assignment. We require repayment of the related advance or purchase payment and, if requested more than 90 days after assignment, payment of a fee; and

•	all Consumer Loans assigned under the Portfolio Program may be reassigned through termination of the Dealer servicing agreement, as described under "Dealer Servicing Agreement," above.

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•	The collection system, which assigns Consumer Loans to collectors through a predictive dialer and records all collection activity, including:

•	details of past phone conversations with the consumer;

•	collection letters sent;

•	promises to pay;

•	broken promises;

•	repossession orders; and

•	collection attorney activity.

•	The servicing system, which maintains a record of all transactions relating to Consumer Loan assignments and is a primary source of data utilized to:

•	determine the outstanding balance of the Consumer Loans;

•	forecast future collections;

•	analyze the profitability of our program; and

•	evaluate our proprietary credit scoring system.

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(1)	Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.  Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

(2)	Active Dealers are Dealers who have received funding for at least one Loan during the year.

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•	On May 7, 2019, we received a subpoena from the Office of the New York State Attorney General, relating to the Company’s origination and collection policies and procedures in the state of New York.

•	On April 22, 2019, we received a civil investigative demand from the Bureau of Consumer Financial Protection (the “Bureau”) seeking, among other things, certain information relating to the Company’s origination and collection of Consumer Loans, TPPs and credit reporting.

•

On August 14, 2017, we received a subpoena from the Attorney General of the State of Mississippi, relating to the origination and collection of non-prime auto loans in the state of Mississippi. The Company cooperated with the inquiry. On April 23, 2019, the Attorney General of the State of Mississippi, on behalf of the State of Mississippi, filed a complaint in the Chancery Court of the First Judicial District of Hinds County, Mississippi, alleging that the Company engaged in unfair and deceptive trade practices in subprime auto lending, loan servicing, vehicle repossession and debt collection in the State of Mississippi in violation of the Mississippi Consumer Protection Act. The complaint seeks injunctive relief, including civil penalties and disgorgement, and payment of the State’s attorney’s fees and costs. The Company intends to vigorously defend itself in this matter.

•	On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the Company’s repossession and sale policies and procedures in the state of Maryland.

•	On December 9, 2014, we received a civil investigative subpoena from the U.S. Department of Justice pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 directing us to produce certain information relating to subprime automotive finance and related securitization activities.

•

On December 4, 2014, we received a civil investigative demand from the Office of the Attorney General of the Commonwealth of Massachusetts relating to the origination and collection of non-prime auto loans in Massachusetts. On November 20, 2017 we received a second civil investigation demand from the Office of the Attorney General seeking updated information on its original civil investigation demand, additional information related to the Company's origination and collection of Consumer Loans, and information regarding securitization activities. In connection with this inquiry, we were informed by representatives of the Office of the Attorney General that it believes that the Company may have engaged in unfair and deceptive acts or practices related to the origination and collection of auto loans, which may have caused some of the Company’s representations and warranties contained in securitization documents to be inaccurate.  The investigation relating to the origination, collection and securitization of non-prime auto loans and securities transactions by the Office of the Attorney General remains ongoing.

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•	incur and guarantee debt;

•	pay dividends or make other distributions on or redeem or repurchase our stock;

•	make investments or acquisitions;

•	create liens on our assets;

•	sell assets;

•	merge with or into other companies; and

•	enter into transactions with stockholders and other affiliates.

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•	our ability to obtain additional financing for Consumer Loan assignments, working capital, debt refinancing or other purposes could be impaired;

•	a substantial portion of our cash flows from operations will be dedicated to paying principal and interest on our debt, reducing funds available for other purposes;

•	we may be vulnerable to interest rate increases, as some of our borrowings, including those under our revolving credit facility, bear interest at variable rates;

•	we could be more vulnerable to adverse developments in our industry or in general economic conditions;

•	we may be restricted from taking advantage of business opportunities or making strategic acquisitions; and

•	we may be limited in our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate.

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ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(1)	On November 7, 2019, our board of directors authorized the repurchase by us from time to time in the open market or in privately negotiated transactions of up to one million shares of our common stock. The authorization, which was announced on November 13, 2019, does not have a specified expiration date.

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(1)	No dividends were paid during the periods presented.

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ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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(1)

Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment.  Contractual repayments include both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates in the table.

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(1)	Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.

(2)	Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.  Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

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(1)	Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program as a percentage of the initial balance of the Consumer Loans.  Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

(2)	Presented as a percentage of total forecasted collections.

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(1)	The forecasted collection rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.

(1)	The forecasted collection rates and advance rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.

(2)	Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program as a percentage of the initial balance of the Consumer Loans.  Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

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(1)	Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.  Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

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(1)	Active Dealers are Dealers who have received funding for at least one Consumer Loan during the period.

(1)	New active Dealers are Dealers who enrolled in our program and have received funding for their first Loan from us during the period.

(2)	Attrition is measured according to the following formula:  decrease in Consumer Loan unit volume from Dealers who have received funding for at least one Loan during the comparable period of the prior year but did not receive funding for any Loans during the current period divided by prior year comparable period Consumer Loan unit volume.

(1)	Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.  Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

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•	An increase of $19.1 million in cash-based incentive compensation expense primarily due to an improvement in Company performance measures.

•	Excluding the change in cash-based incentive compensation expense, salaries and wages expense increased $6.4 million, primarily due to an increase in the number of team members in our support function.

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(1)

The amounts presented consist solely of principal and do not reflect deferred debt issuance costs of $29.1 million and unamortized debt discount of $0.8 million. We are also obligated to make interest payments at the applicable interest rates, as discussed in Note 9 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.  Based on the actual principal amounts outstanding under our revolving secured line of credit, our Warehouse facilities, and our senior notes as of December 31, 2019, the forecasted principal amounts outstanding on all other debt and the actual interest rates in effect as of December 31, 2019, interest is expected to be approximately $161.3 million during 2020; $112.2 million during 2021; and $227.7 million during 2022 and thereafter.

(2)	We have contractual obligations to pay Dealer Holdback to our Dealers.  Payments of Dealer Holdback are contingent upon the receipt of consumer payments and the repayment of advances.  The amounts presented represent our forecast as of December 31, 2019.

(3)	A lease liability of $2.8 million is recognized within accounts payable and accrued liabilities in our consolidated balance sheets.

(4)	Purchase obligations consist primarily of contractual obligations related to our information system and facility needs.

(5)	The amounts presented consist solely of reserves for uncertain tax positions.  Payments are contingent upon examination and would occur in the periods in which the uncertain tax positions are settled.

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•	Leases.

•	Accounting for Costs of Implementing Cloud Computing.

•	Measurement of Credit Losses on Financial Instruments.

•	Simplifying the Accounting for Income Taxes.

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Principal Business.  Since 1972, Credit Acceptance Corporation (referred to as the “Company”, “Credit Acceptance”, “we”, “our” or “us”) has offered financing programs that enable automobile dealers to sell vehicles to consumers, regardless of their credit history.  Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.

Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable ones.  Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that we provide consumers with an opportunity to improve their lives by improving their credit score and move on to more traditional sources of financing.

We refer to automobile dealers who participate in our programs and who share our commitment to changing consumers’ lives as “Dealers”.  Upon enrollment in our financing programs, the Dealer enters into a Dealer servicing agreement with us that defines the legal relationship between Credit Acceptance and the Dealer. The Dealer servicing agreement assigns the responsibilities for administering, servicing, and collecting the amounts due on retail installment contracts (referred to as “Consumer Loans”) from the Dealers to us. We are an indirect lender from a legal perspective, meaning the Consumer Loan is originated by the Dealer and assigned to us.

Substantially all of the Consumer Loans assigned to us are made to consumers with impaired or limited credit histories. The following table shows the percentage of Consumer Loans assigned to us with either FICO^® scores below 650 or no FICO^® scores:

		For the Years Ended December 31,
Consumer Loan Assignment Volume		2019			2018			2017
Percentage of total unit volume with either FICO® scores below 650 or no FICO® scores		95.9	%		95.6	%		95.6	%

We have two programs: the Portfolio Program and the Purchase Program.  Under the Portfolio Program, we advance money to Dealers (referred to as a “Dealer Loan”) in exchange for the right to service the underlying Consumer Loans. Under the Purchase Program, we buy the Consumer Loans from the Dealers (referred to as a “Purchased Loan”) and keep all amounts collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as “Loans”. The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last three years:

		Unit Volume						Dollar Volume (1)
For the Years Ended December 31,		Dealer Loans			Purchased Loans			Dealer Loans			Purchased Loans
2017		72.5	%		27.5	%		68.5	%		31.5	%
2018		69.7	%		30.3	%		67.2	%		32.8	%
2019		67.2	%		32.8	%		64.3	%		35.7	%

(1)	Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.  Payments of Dealer Holdback (as defined below) and accelerated Dealer Holdback are not included.

Portfolio Program

As payment for the vehicle, the Dealer generally receives the following:

•	a down payment from the consumer;

•	a non-recourse cash payment (“advance”) from us; and

•	after the advance balance (cash advance and related Dealer Loan fees and costs) has been recovered by us, the cash from payments made on the Consumer Loan, net of certain collection costs and our servicing fee (“Dealer Holdback”).

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We record the amount advanced to the Dealer as a Dealer Loan, which is classified within Loans receivable in our consolidated balance sheets. Cash advanced to the Dealer is automatically assigned to the Dealer’s open pool of advances. Prior to August 5, 2019, we generally required Dealers to group advances into pools of at least 100 Consumer Loans. Beginning August 5, 2019, Dealers may also elect to close a pool containing at least 50 Consumer Loans and assign subsequent advances to a new pool. Unless we receive a request from the Dealer to keep a pool open, we automatically close each pool based on the Dealer's election. All advances within a Dealer’s pool are secured by the future collections on the related Consumer Loans assigned to the pool. For Dealers with more than one pool, the pools are cross-collateralized so the performance of other pools is considered in determining eligibility for Dealer Holdback. We perfect our security interest with respect to the Dealer Loans by obtaining control or taking possession of the Consumer Loans, which list us as lien holder on the vehicle title.

The Dealer servicing agreement provides that collections received by us during a calendar month on Consumer Loans assigned by a Dealer are applied on a pool-by-pool basis as follows:

•	first, to reimburse us for certain collection costs;

•	second, to pay us our servicing fee, which generally equals 20% of collections;

•	third, to reduce the aggregate advance balance and to pay any other amounts due from the Dealer to us; and

•	fourth, to the Dealer as payment of Dealer Holdback.

If the collections on Consumer Loans from a Dealer’s pool are not sufficient to repay the advance balance and any other amounts due to us, the Dealer will not receive Dealer Holdback. Certain events may also result in Dealers forfeiting their rights to Dealer Holdback, including becoming inactive before assigning 100 Consumer Loans.

Dealers have an opportunity to receive an accelerated Dealer Holdback payment each time a pool of Consumer Loans is closed. The amount paid to the Dealer is calculated using a formula that considers the number of Consumer Loans assigned to the pool and the related forecasted collections and advance balance.

Since typically the combination of the advance and the consumer’s down payment provides the Dealer with a cash profit at the time of sale, the Dealer’s risk in the Consumer Loan is limited.  We cannot demand repayment of the advance from the Dealer except in the event the Dealer is in default of the Dealer servicing agreement.  Advances are made only after the consumer and Dealer have signed a Consumer Loan contract, we have received the executed Consumer Loan contract and supporting documentation in either physical or electronic form, and we have approved all of the related stipulations for funding. 

For accounting purposes, the transactions described under the Portfolio Program are not considered to be loans to consumers.  Instead, our accounting reflects that of a lender to the Dealer. The classification as a Dealer Loan for accounting purposes is primarily a result of (1) the Dealer’s financial interest in the Consumer Loan and (2) certain elements of our legal relationship with the Dealer.

Purchase Program

The Purchase Program differs from our Portfolio Program in that the Dealer receives a one-time payment from us at the time of assignment to purchase the Consumer Loan instead of a cash advance at the time of assignment and future Dealer Holdback payments. For accounting purposes, the transactions described under the Purchase Program are considered to be originated by the Dealer and then purchased by us.

Program Enrollment

Beginning August 5, 2019, Dealers may enroll in our Portfolio Program without incurring an enrollment fee. Prior to August 5, 2019, Dealers enrolled in our Portfolio Program by (1) paying an up-front, one-time fee of $9,850, or (2) agreeing to allow us to retain 50% of their accelerated Dealer Holdback payment(s) on the first 100 Consumer Loan assignments.

Access to the Purchase Program is typically only granted to Dealers that meet one of the following:

•	assigned at least 100 Consumer Loans under the Portfolio Program;

•	franchise dealership; or

•	independent dealership that meets certain criteria upon enrollment.

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Principles of Consolidation

The consolidated financial statements include our accounts and our wholly-owned subsidiaries.  All significant intercompany transactions have been eliminated. Our primary subsidiaries as of December 31, 2019 are:  Buyer’s Vehicle Protection Plan, Inc. (“BVPP”), Vehicle Remarketing Services, Inc. (“VRS”), VSC Re Company (“VSC Re”), CAC Warehouse Funding Corporation II, CAC Warehouse Funding LLC IV, CAC Warehouse Funding LLC V, CAC Warehouse Funding LLC VI, CAC Warehouse Funding LLC VII, CAC Warehouse Funding LLC VIII, Credit Acceptance Funding LLC 2016-3, Credit Acceptance Funding LLC 2017-1, Credit Acceptance Funding LLC 2017-2, Credit Acceptance Funding LLC 2017-3, Credit Acceptance Funding LLC 2018-1, Credit Acceptance Funding LLC 2018-2 and Credit Acceptance Funding LLC 2018-3, Credit Acceptance Funding LLC 2019-1, Credit Acceptance Funding LLC 2019-2 and Credit Acceptance Funding LLC 2019-3.

Business Segment Information

We currently operate in one reportable segment which represents our core business of offering financing programs that enable Dealers to sell vehicles to consumers regardless of their credit history. For information regarding our one reportable segment and related entity wide disclosures, see Note 15 to the consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The accounts which are subject to significant estimation include the allowance for credit losses, finance charge revenue, premiums earned, contingencies, and uncertain tax positions.  Actual results could materially differ from those estimates.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of readily marketable securities with original maturities at the date of acquisition of three months or less. As of December 31, 2019 and 2018, we had $186.1 million and $25.1 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

Restricted cash and cash equivalents consist of cash pledged as collateral for secured financings and cash held in a trust for future vehicle service contract claims. As of December 31, 2019 and 2018, we had $326.7 million and $303.0 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents reported in our consolidated balance sheets to the total shown in our consolidated statements of cash flows:

(In millions)	As of December 31,
	2019				2018				2017
Cash and cash equivalents	$	187.4			$	25.7			$	8.2
Restricted cash and cash equivalents	330.3				303.6				255.6
Total cash and cash equivalents and restricted cash and cash equivalents	$	517.7			$	329.3			$	263.8

Restricted Securities Available for Sale

Restricted securities available for sale consist of amounts held in a trust for future vehicle service contract claims. We determine the appropriate classification of our investments in debt securities at the time of purchase and reevaluate such determinations at each balance sheet date. Debt securities for which we do not have the intent or ability to hold to maturity are classified as available for sale, and stated at fair value with unrealized gains and losses, net of income taxes included in the determination of comprehensive income and reported as a component of shareholders’ equity.

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Loans Receivable and Allowance for Credit Losses

Consumer Loan Assignment. For legal purposes, a Consumer Loan is considered to have been assigned to us after the following has occurred:

•	the consumer and Dealer have signed a Consumer Loan contract; and

•	we have received the executed Consumer Loan contract and supporting documentation in either physical or electronic form.

For accounting and financial reporting purposes, a Consumer Loan is considered to have been assigned to us after the following has occurred:

•	the Consumer Loan has been legally assigned to us; and

•	we have made a funding decision and generally have provided funding to the Dealer in the form of either an advance under the Portfolio Program or one-time purchase payment under the Purchase Program.

Portfolio Segments and Classes. We are considered to be a lender to our Dealers for Consumer Loans assigned under our Portfolio Program and a purchaser of Consumer Loans assigned under our Purchase Program. As a result, our Loan portfolio consists of two portfolio segments: Dealer Loans and Purchased Loans. Each portfolio segment is comprised of one class of Consumer Loan assignments, which is Consumer Loans originated by Dealers to finance purchases of vehicles and related ancillary products by consumers with impaired or limited credit histories.

Dealer Loans.  Amounts advanced to Dealers for Consumer Loans assigned under the Portfolio Program are recorded as Dealer Loans and are aggregated by Dealer for purposes of recognizing revenue and evaluating impairment. We account for Dealer Loans based on forecasted cash flows instead of contractual cash flows as we do not expect to collect all of the contractually specified amounts due to the credit quality of the underlying Consumer Loans. The outstanding balance of each Dealer Loan included in Loans receivable is comprised of the following:

•	the aggregate amount of all cash advances paid;

•	finance charges;

•	Dealer Holdback payments;

•	accelerated Dealer Holdback payments; and

•	recoveries.

Less:

•	collections (net of certain collection costs);

•	write-offs; and

•	transfers.

An allowance for credit losses is maintained at an amount that reduces the net asset value (Dealer Loan balance less the allowance) to the value of forecasted future cash flows discounted at the yield established at the time of assignment. This allowance calculation is completed for each individual Dealer. Future cash flows are comprised of estimated future collections on the Consumer Loans, less any estimated Dealer Holdback payments. We write off Dealer Loans once there are no forecasted future cash flows on any of the associated Consumer Loans, which generally occurs 120 months after the last Consumer Loan assignment.

Future collections on Dealer Loans are forecasted for each individual Dealer based on the historical performance of Consumer Loans with similar characteristics, adjusted for recent trends in payment patterns. Dealer Holdback is forecasted for each individual Dealer based on the expected future collections and current advance balance of each Dealer Loan. Cash flows from any individual Dealer Loan are often different from estimated cash flows at the time of assignment. If such difference is favorable, the difference is recognized prospectively into income over the remaining life of the Dealer Loan through a yield adjustment. If such difference is unfavorable, a provision for credit losses is recorded immediately as a current period expense and a corresponding allowance for credit losses is established. Because differences between estimated cash flows at the time of assignment and actual cash flows occur often, an allowance is required for a significant portion of our Dealer Loan portfolio. An allowance for credit losses does not necessarily indicate that a Dealer Loan is unprofitable, and seldom are cash flows from a Dealer Loan insufficient to repay the initial amounts advanced to the Dealer.

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Purchased Loans.  Amounts paid to Dealers for Consumer Loans assigned under the Purchase Program are recorded as Purchased Loans and are aggregated into pools based on the month of purchase for purposes of recognizing revenue and evaluating impairment. We account for Purchased Loans based on forecasted cash flows instead of contractual cash flows as we do not expect to collect all of the contractually specified amounts due to the credit quality of the assigned Consumer Loans. The outstanding balance of each Purchased Loan pool included in Loans receivable is comprised of the following:

•	the aggregate amount of all amounts paid during the month of purchase to purchase Consumer Loans from Dealers;

•	finance charges;

•	recoveries; and

•	transfers.

Less:

•	collections (net of certain collection costs); and

•	write-offs.

An allowance for credit losses is maintained at an amount that reduces the net asset value (Purchased Loan pool balance less the allowance) to the value of forecasted future cash flows discounted at the yield established at the time of assignment. This allowance calculation is completed for each individual monthly pool of Purchased Loans. Future cash flows are comprised of estimated future collections on the pool of Purchased Loans. We write off pools of Purchased Loans once there are no forecasted future cash flows on any of the Purchased Loans included in the pool, which generally occurs 120 months after the month of purchase.

Future collections on Purchased Loans are forecasted for each individual pool based on the historical performance of Consumer Loans with similar characteristics, adjusted for recent trends in payment patterns. Cash flows from any individual pool of Purchased Loans are often different from estimated cash flows at the time of assignment. If such difference is favorable, the difference is recognized prospectively into income over the remaining life of the pool of Purchased Loans through a yield adjustment. If such difference is unfavorable, a provision for credit losses is recorded immediately as a current period expense and a corresponding allowance for credit losses is established.

Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. We transfer the Dealer’s outstanding Dealer Loan balance to Purchased Loans in the period this forfeiture occurs. During the fourth quarter of 2017, we enhanced our accounting methodology for transferring loans. Beginning in the fourth quarter of 2017, we:

•	transfer the related Dealer Loan allowance for credit losses balance to Purchased Loans in the period this forfeiture occurs; and

•	aggregate these Purchased Loans by Dealer for purposes of recognizing revenue and evaluating impairment.

Prior to the fourth quarter of 2017, we:

•	reversed the Dealer Loan allowance for credit losses balance through Dealer Loan provision for credit losses and established a new allowance for credit losses in Purchased Loans through Purchased Loan provision for credit losses; and

•	aggregated these Purchased Loans by month of purchase for purposes of recognizing revenue and evaluating impairment.

Credit Quality.  Substantially all of the Consumer Loans assigned to us are made to individuals with impaired or limited credit histories or higher debt-to-income ratios than are permitted by traditional lenders. Consumer Loans made to these individuals generally entail a higher risk of delinquency, default and repossession and higher losses than loans made to consumers with better credit. Since most of our revenue and cash flows are generated from these Consumer Loans, our ability to accurately forecast Consumer Loan performance is critical to our business and financial results. At the time the Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on these forecasts, an advance or one-time purchase payment is made to the related Dealer at a price designed to maximize economic profit, a non-GAAP financial measure that considers our return on capital, our cost of capital and the amount of capital invested.

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We monitor and evaluate the credit quality of Consumer Loans on a monthly basis by comparing our current forecasted collection rates to our initial expectations. We use a statistical model that considers a number of credit quality indicators to estimate the expected collection rate for each Consumer Loan at the time of assignment. The credit quality indicators considered in our model include attributes contained in the consumer’s credit bureau report, data contained in the consumer’s credit application, the structure of the proposed transaction, vehicle information and other factors. We continue to evaluate the expected collection rate of each Consumer Loan subsequent to assignment primarily through the monitoring of consumer payment behavior. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast.  Since all known, significant credit quality indicators have already been factored into our forecasts and pricing, we are not able to use any specific credit quality indicators to predict or explain variances in actual performance from our initial expectations. Any variances in performance from our initial expectations are the result of Consumer Loans performing differently than historical Consumer Loans with similar characteristics. We periodically adjust our statistical pricing model for new trends that we identify through our evaluation of these forecasted collection rate variances.

When overall forecasted collection rates underperform our initial expectations, the decline in forecasted collections has a more adverse impact on the profitability of the Purchased Loans than on the profitability of the Dealer Loans. For Purchased Loans, the decline in forecasted collections is absorbed entirely by us. For Dealer Loans, the decline in the forecasted collections is substantially offset by a decline in forecasted payments of Dealer Holdback.

Methodology Changes. During 2017, we enhanced our methodology for transferring Loans and updated our net cash flow timing model. For additional information regarding these methodology changes, see Note 5 to the consolidated financial statements. For the three year period ended December 31, 2019, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

Property and Equipment

Purchases of property and equipment are recorded at cost.  Depreciation is provided on a straight-line basis over the estimated useful life of the asset. Estimated useful lives are generally as follows: buildings – 40 years, building improvements – 10 years, data processing equipment – 3 years, software – 5 years, office furniture and equipment – 7 years, and leasehold improvements – the lesser of the lease term or 7 years. The cost of assets sold or retired and the related accumulated depreciation are removed from the balance sheet at the time of disposition and any resulting gain or loss is included in operations. Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and improvements are capitalized. We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Costs incurred during the application development stage of software developed for internal use are capitalized and generally depreciated on a straight-line basis over five years. Costs incurred to maintain existing software are expensed as incurred. For additional information regarding our property and equipment, see Note 6 to the consolidated financial statements.

Deferred Debt Issuance Costs

Deferred debt issuance costs associated with secured financings and senior notes are included as a deduction from the carrying amount of the related debt liability, and deferred debt issuance costs associated with our revolving secured line of credit are included in other assets.  Expenses associated with the issuance of debt instruments are capitalized and amortized as interest expense over the term of the debt instrument using the effective interest method for asset-backed secured financings (“Term ABS”) and senior notes and the straight-line method for lines of credit and revolving secured warehouse (“Warehouse”) facilities. For additional information regarding deferred debt issuance costs, see Note 9 to the consolidated financial statements.

Derivative Instruments

We rely on various sources of financing, some of which contain floating rates of interest and expose us to risks associated with increases in interest rates. We manage such risk primarily by entering into interest rate cap agreements (“derivative instruments”). These derivative instruments are not designated as hedges, and changes in their fair value increase or decrease interest expense.

We recognize derivative instruments as either other assets or accounts payable and accrued liabilities on our consolidated balance sheets. For additional information regarding our derivative instruments, see Note 10 to the consolidated financial statements.

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Finance Charges

Finance charges is comprised of: (1) servicing fees earned as a result of servicing Consumer Loans assigned to us by Dealers under the Portfolio Program; (2) finance charge income from Purchased Loans; (3) fees earned from our third party ancillary product offerings; (4) monthly program fees charged to Dealers under the Portfolio Program; and (5) fees associated with certain Loans. We recognize finance charges under the interest method such that revenue is recognized on a level-yield basis based upon forecasted cash flows. For Dealer Loans only, certain direct origination costs such as salaries and credit reports are deferred and the net costs are recognized as an adjustment to finance charges over the life of the related Dealer Loan on a level-yield basis.

We provide Dealers the ability to offer vehicle service contracts to consumers through our relationships with Third Party Providers (“TPPs”). A vehicle service contract provides the consumer protection by paying for the repair or replacement of certain components of the vehicle in the event of a mechanical failure. The retail price of the vehicle service contract is included in the principal balance of the Consumer Loan. The wholesale cost of the vehicle service contract is paid to the TPP, net of an administrative fee retained by us. We recognize our fee as part of finance charges on a level-yield basis based upon forecasted cash flows. The difference between the wholesale cost and the retail price to the consumer is paid to the Dealer as a commission. Under the Portfolio Program, the wholesale cost of the vehicle service contract and the commission paid to the Dealer are charged to the Dealer’s advance balance. TPPs process claims on vehicle service contracts that are underwritten by third party insurers. We bear the risk of loss for claims on certain vehicle service contracts that are reinsured by us. We market the vehicle service contracts directly to our Dealers.

We provide Dealers the ability to offer Guaranteed Asset Protection (“GAP”) to consumers through our relationships with TPPs. GAP provides the consumer protection by paying the difference between the loan balance and the amount covered by the consumer’s insurance policy in the event of a total loss of the vehicle due to severe damage or theft. The retail price of GAP is included in the principal balance of the Consumer Loan. The wholesale cost of GAP is paid to the TPP, net of an administrative fee retained by us. We recognize our fee as part of finance charges on a level-yield basis based upon forecasted cash flows. The difference between the wholesale cost and the retail price to the consumer is paid to the Dealer as a commission. Under the Portfolio Program, the wholesale cost of GAP and the commission paid to the Dealer are charged to the Dealer’s advance balance. TPPs process claims on GAP contracts that are underwritten by third party insurers.

Program fees represent monthly fees charged to Dealers for access to our Credit Approval Processing System (“CAPS”); administration, servicing and collection services offered by us; documentation related to or affecting our program; and all tangible and intangible property owned by Credit Acceptance. We charge a monthly fee of $599 to Dealers participating in our Portfolio Program and we collect it from future Dealer Holdback payments. As a result, we record program fees under the Portfolio Program as a yield adjustment, recognizing these fees as finance charge revenue over the forecasted net cash flows of the Dealer Loan.

Reinsurance

VSC Re, our wholly-owned subsidiary, is engaged in the business of reinsuring coverage under vehicle service contracts sold to consumers by Dealers on vehicles financed by us. VSC Re currently reinsures vehicle service contracts that are offered through one of our TPPs. Vehicle service contract premiums, which represent the selling price of the vehicle service contract to the consumer, less fees and certain administrative costs, are contributed to a trust account controlled by VSC Re. These premiums are used to fund claims covered under the vehicle service contracts. VSC Re is a bankruptcy remote entity. As such, our exposure to fund claims is limited to the trust assets controlled by VSC Re and our net investment in VSC Re.

Premiums from the reinsurance of vehicle service contracts are recognized over the life of the policy in proportion to expected costs of servicing those contracts. Expected costs are determined based on our historical claims experience.  Claims are expensed through a provision for claims in the period the claim was incurred. Capitalized acquisition costs are comprised of premium taxes and are amortized as general and administrative expense over the life of the contracts in proportion to premiums earned. 

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We have consolidated the trust within our financial statements based on our determination of the following:

•	We have a variable interest in the trust. We have a residual interest in the assets of the trust, which is variable in nature, given that it increases or decreases based upon the actual loss experience of the related service contracts. In addition, VSC Re is required to absorb any losses in excess of the trust's assets.

•	The trust is a variable interest entity. The trust has insufficient equity at risk as no parties to the trust were required to contribute assets that provide them with any ownership interest.

•

We are the primary beneficiary of the trust. We control the amount of premiums written and placed in the trust through Consumer Loan assignments under our Programs, which is the activity that most significantly impacts the economic performance of the trust. We have the right to receive benefits from the trust that could potentially be significant. In addition, VSC Re has the obligation to absorb losses of the trust that could potentially be significant.

Stock-Based Compensation Plans

We have stock-based compensation plans for team members and non-employee directors, which are described more fully in Note 14 to the consolidated financial statements. We apply a fair-value-based measurement method in accounting for stock-based compensation plans and recognize stock-based compensation expense over the requisite service period of the grant as salaries and wages expense.

Employee Benefit Plan

We sponsor a 401(k) plan that covers substantially all of our team members. We offer matching contributions to the 401(k) plan based on each enrolled team members’ eligible annual gross pay (subject to statutory limitations). Our matching contribution rate is equal to 100% of the first 4% participants contribute and an additional 50% of the next 2% participants contribute, for a maximum matching contribution of 5% of each participant’s eligible annual gross pay. For the years ended December 31, 2019, 2018 and 2017, we recognized compensation expense of $7.1 million, $5.3 million, and $4.6 million, respectively, for our matching contributions to the plan.

Income Taxes

Provisions for federal, state and foreign income taxes are calculated on reported pre-tax earnings based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes.

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

We follow a two-step approach for recognizing uncertain tax positions. First, we evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more-likely-than-not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. Second, for positions that we determine are more-likely-than-not to be sustained, we recognize the tax benefit as the largest benefit that has a greater than 50% likelihood of being sustained. We establish a reserve for uncertain tax positions liability that is comprised of unrecognized tax benefits and related interest. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. We recognize interest and penalties related to uncertain tax positions in provision for income taxes. For additional information regarding our income taxes, see Note 11 to the consolidated financial statements.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expenses were $0.3 million for the year ended December 31, 2019, $0.2 million for the year ended December 31, 2018 and $0.4 million for the year ended December 31, 2017.

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New Accounting Update Adopted During the Current Year

Leases. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which required lessees to recognize a right-of-use asset and related lease liability for leases classified as operating leases at the commencement date that have lease terms of more than 12 months. This ASU retains the classification distinction between finance leases and operating leases.

The standard required application using a retrospective transition method. Our population of leases consists of operating leases for office space and office equipment. The adoption of ASU 2016-02 on January 1, 2019 required us to record a $2.7 million right-of-use asset and a $2.8 million lease liability on our consolidated balance sheets as of December 31, 2019. The right-of-use asset and the lease liability were recognized within other assets and accounts payable and accrued liabilities, respectively, in our consolidated balance sheets. The adoption of ASU 2016-02 did not materially change the recognition of operating lease expense in our consolidated statements of income.

New Accounting Updates Not Yet Adopted

Accounting for Costs of Implementing Cloud Computing. In August 2018, the FASB issued ASU 2018-15, which reduces complexity in the accounting for costs of implementing a cloud computing service arrangement. This standard aligns the accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software. Under the current guidance, the classification of an arrangement as either a software license or a service contract determines whether or not we capitalize implementation costs. If an arrangement meets the definition of a software license, implementation costs are capitalized. If an arrangement meets the definition of a service contract, implementation costs are expensed as incurred. Under the new guidance, implementation costs will be capitalized regardless of their classification. ASU 2018-15 is effective for fiscal years, and interim periods, beginning after December 15, 2019. Early application is permitted, but we have not yet adopted ASU 2018-15. The adoption of ASU 2018-15 will change how we account for our cloud computing arrangements. However, we do not believe that its adoption will have a material impact on our consolidated financial statements and related disclosures.

Measurement of Credit Losses on Financial Instruments. In June 2016, the FASB issued ASU 2016-13, which included an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance for credit losses based on the difference between contractual future net cash flows and its estimate of expected future net cash flows. The new guidance also changes the scope of the special accounting for loans acquired with significant credit deterioration. ASU 2016-13 is effective for fiscal years, and interim periods, beginning after December 15, 2019. Early application is permitted, but we have not yet adopted ASU 2016-13. We believe the adoption of ASU 2016-13 will have a material impact on our consolidated financial statements and related disclosures as it will change our accounting policies for Loans.

Application of CECL to Existing Loans

We believe that Loans outstanding prior to the adoption date will qualify for transition relief under ASU 2016-13 and will be accounted for as purchased financial assets with credit deterioration (“PCD Method”). Under the PCD Method, on the adoption date, we will:

•	calculate an effective interest rate based on expected future net cash flows; and

•	increase the Loans receivable and related allowance for credit losses balances by the present value of the difference between contractual future net cash flows and expected future net cash flows discounted at the effective interest rate. This “gross-up” will not impact the net carrying amount of Loans (Loans receivable less allowance for credit losses) or net income.

For each reporting period subsequent to adoption, we will:

•	recognize finance charge revenue using the effective interest rate that was calculated on the adoption date based on expected future net cash flows; and

•	adjust the allowance for credit losses so that the net carrying amount of each Loan equals the present value of expected future net cash flows discounted at the effective interest rate. The adjustment to the allowance for credit losses will be recognized as either provision for credit losses expense or a reversal of provision for credit losses expense.

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Application of CECL to Future Loans

We believe that Consumer Loans assigned subsequent to the adoption of ASU 2016-13 will not qualify for the PCD Method and will be accounted for as originated financial assets (“Originated Method”). While the cash flows we expect to collect at the time of assignment are significantly lower than the contractual cash flows owed to us due to credit quality, our Loans do not qualify for the PCD Method because the assignment of the Consumer Loan occurs a moment after the Consumer Loan is originated by the Dealer, so “a more-than-insignificant deterioration in credit quality since origination” has not occurred. In addition, Dealer Loans also do not qualify for the PCD Method because Consumer Loans assigned under the Portfolio Program are considered to be advances under Dealer Loans originated by us rather than Consumer Loans purchased by us.

Under the Originated Method, at the time of assignment, we will:

•	calculate the effective interest rate based on contractual future net cash flows;

•	record a Loan receivable equal to the advance paid to the Dealer under the Portfolio Program or purchase price paid to the Dealer under the Purchase Program; and

•	record an allowance for credit losses equal to the difference between the initial Loan receivable balance and the present value of expected future net cash flows discounted at the effective interest rate. The initial allowance for credit losses will be recognized as provision for credit losses expense.

For each reporting period subsequent to assignment, we will:

•	recognize finance charge revenue using the effective interest rate that was calculated at the time of assignment based on contractual future net cash flows; and

•	adjust the allowance for credit losses so that the net carrying amount of each Loan equals the present value of expected future net cash flows discounted at the effective interest rate. The adjustment to the allowance for credit losses will be recognized as either provision for credit losses expense or a reversal of provision for credit losses expense.

We believe the Originated Method will result in financial reporting that is inconsistent with the economics of our Loans as:

•	the effective interest rate will be significantly inflated for contractual amounts that were not expected to be collected at the time of assignment; and

•	the provision for credit losses expense recognized at the time of assignment does not represent an economic loss to us.

The net Loan income (finance charge revenue less provision for credit losses expense) that we will recognize over the life of a Loan equals the cash we collect from the underlying Consumer Loan less the cash we pay to the Dealer. While the total amount of net Loan income we will recognize over the life of the Loan is not impacted by the new guidance, the timing of when we will recognize this income changes significantly. We believe that recognizing net Loan income on a level-yield basis over the life of the Loan based on expected future net cash flows matches the economics of our business. The Originated Method diverges from economic reality by requiring us to recognize a significant provision for credit losses expense at the time of assignment for contractual amounts we never expected to realize and finance charge revenue in subsequent periods that is significantly in excess of our expected yields.

Evaluation of the Fair Value Option

Under ASC 825, Financial Instruments, we have the ability to choose to measure Loans at fair value on an instrument-by-instrument basis at specified election dates, with changes in fair value reported in net income (the fair value option). Dealer Loans are only eligible for fair value election at the time a new active Dealer assigns the first Consumer Loan under the Portfolio Program. All Purchased Loans are eligible for fair value election at the time of assignment. The fair value election may not be revoked once an election is made. In May 2019, the FASB issued ASU 2016-13, which also allows us to irrevocably elect the fair value option for all of our existing Loans upon adoption of CECL.

Given that we believe CECL will result in financial reporting that is inconsistent with the economics of our Loans, we evaluated the fair value option as an alternative to CECL. The fair value of our Loans would be determined by calculating the present value of future expected net cash flows estimated by us utilizing a discount rate based on market participant discount rates for comparable investments. While we believe the fair value option would likely result in financial reporting that approximates the economics of our Loans in a stable rate environment, this option could cause our reported results to be volatile in periods when interest rates are rapidly changing.

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Based on our evaluation, we intend to account for our Loans under CECL and not elect the fair value option based on the following:

•	We want to minimize volatility in our reported results related to a changing interest rate environment. In addition, we believe the election of the fair value option could materially adversely affect our financial position, liquidity and results of operations in a financial crisis period due to the impact of rapidly increasing market participant discount rates on fair value.

•

We have modified our revolving secured line of credit and warehouse facilities so that the adoption of CECL will not materially impact the amount we are able to borrow under these facilities or materially impact our ability to comply with the financial covenants in these facilities. We believe that we will be able to structure our Term ABS financings issued after the adoption of CECL so that the amount that we will be able to borrow will not be materially impacted.

•	We believe we will be able to quantify and explain to shareholders how CECL diverges from economic reality.

Estimated Financial Statement Impact of the Adoption of CECL

We have developed, refined and validated CECL models that we ran in parallel with our current accounting throughout 2019. Provided below are our best estimates of the expected financial statement impact of the adoption of CECL based on our implementation efforts to date. These estimates are subject to further refinement as we finalize reviews of models, methodologies and judgements.

Upon adoption of CECL on January 1, 2020, we increased our Loans receivable and the related allowance for credit losses balances by approximately $2.5 billion each. These increases did not impact the net carrying amount of Loans (Loans receivable less allowance for credit losses) or net income. This estimate reflects the impact of our adoption of a partial write-off policy on January 1, 2020 in connection with our adoption of CECL. Under our partial write-off policy, we write off the amount of the outstanding balance of the Loan, if any, that exceeds 200% of the present value of future expected net cash flows as we deem this amount to be uncollectable.

For Consumer Loans assigned subsequent to the adoption of CECL on January 1, 2020, the total amount of net Loan income we will recognize over the life of the Loan is not impacted by the adoption of CECL, but the timing of when we will recognize this income changes significantly. The provision for credit losses expense recorded at the time of assignment will vary based on the characteristics of each Consumer Loan. Based on recent Consumer Loan assignments, we estimate the provision for credit losses expense recorded at the time of assignment will be approximately 12% to 15% of the amount of the Loan at the time of assignment. An equivalent amount will be recorded as additional finance charge revenue over the life of the Loan. To the extent the characteristics of future Consumer Loan assignments differ from recent Consumer Loan assignments, the actual amount of provision for credit losses expense recorded at the time of assignment under CECL could vary from this estimate, and such variance could be material.

Given the significant change in timing of net Loan income recognition for new Consumer Loan assignments discussed above, we believe the amount of net income that we will report in 2020 under CECL will be significantly lower than what would be reported under current GAAP. The ultimate financial statement impact of CECL will depend on Consumer Loan assignment volume and the percentage of Consumer Loans assigned to us as Purchased Loans, the size and composition of our Loan portfolio, the Loan portfolio’s credit quality and economic conditions at the time of adoption as well as any refinements to our models, methodologies and judgements. Using reasonable estimates for the preceding factors, we believe net income for the year ending December 31, 2020 will be approximately 30% to 60% lower under CECL than what would be reported under current GAAP, with the greatest impact occurring in the quarter of adoption (approximately 50% to 80% lower). To the extent those factors differ from our current estimates, the actual impact of CECL on net income for the year ending December 31, 2020 could vary from this expectation, and such variance could be material.

Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued ASU 2019-12, which intends to enhance and simplify various aspects of the income tax accounting guidance, including requirements impacting the allocation of income tax expense to certain legal entities and interim-period accounting for enacted changes in tax law. ASU 2019-12 is effective for fiscal years, and interim periods, beginning after December 15, 2020. Early application is permitted, but we have not yet adopted ASU 2019-12. We are currently assessing the impact the adoption of ASU 2019-12 will have on our consolidated financial statements and related disclosures.

Subsequent Events

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of December 31, 2019 for items that could potentially be recognized or disclosed in these financial statements. For additional information regarding subsequent events, see Note 18 to these consolidated financial statements.

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The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate their value.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents.  The carrying amounts approximate their fair value due to the short maturity of these instruments.

Restricted Securities Available for Sale.  The fair value of U.S. Government and agency securities and corporate bonds is based on quoted market values in active markets.  For asset-backed securities, mortgage-backed securities and commercial paper we use model-based valuation techniques for which all significant assumptions are observable in the market.

Loans Receivable, net.  The fair value is determined by calculating the present value of expected future net cash flows estimated by us utilizing a discount rate comparable with the rate used to calculate the value of our Loans under our non-GAAP floating yield methodology.

Revolving Secured Line of Credit.  The fair value is determined by calculating the present value of the debt instrument based on current rates for debt with a similar risk profile and maturity.

Secured Financing.  The fair value of our Term ABS financings is determined using quoted market prices; however, these instruments trade in a market with a low trading volume.  For our warehouse facilities, the fair values are determined by calculating the present value of each debt instrument based on current rates for debt with similar risk profiles and maturities.

Senior Notes.  The fair value is determined using quoted market prices in an active market.

Mortgage Note. The fair value is determined by calculating the present value of the debt instrument based on current rates

for debt with a similar risk profile and maturity.

A comparison of the carrying amount and estimated fair value of these financial instruments is as follows:

(In millions)	As of December 31,
	2019								2018
	Carrying Amount				Estimated Fair Value				Carrying Amount				Estimated Fair Value
Assets
Cash and cash equivalents	$	187.4			$	187.4			$	25.7			$	25.7
Restricted cash and cash equivalents	330.3				330.3				303.6				303.6
Restricted securities available for sale	59.3				59.3				58.6				58.6
Loans receivable, net	6,685.2				6,777.2				5,763.3				5,855.1
Liabilities
Revolving secured line of credit	$	—			$	—			$	171.9			$	171.9
Secured financing	3,339.7				3,397.5				3,092.7				3,100.9
Senior notes	1,187.8				1,257.6				544.4				556.3
Mortgage note	11.3				11.3				11.9				11.9

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Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.  We group assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1    Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates or assumptions that market participants would use in pricing the asset or liability.

The following table provides the level of measurement used to determine the fair value for each of our financial instruments measured or disclosed at fair value:

(In millions)	As of December 31, 2019
	Level 1				Level 2				Level 3				Total Fair Value
Assets
Cash and cash equivalents (1)	$	187.4			$	—			$	—			$	187.4
Restricted cash and cash equivalents (1)	330.3				—				—				330.3
Restricted securities available for sale (2)	47.5				11.8				—				59.3
Loans receivable, net (1)	—				—				6,777.2				6,777.2
Liabilities
Revolving secured line of credit (1)	$	—			$	—			$	—			$	—
Secured financing (1)	—				3,397.5				—				3,397.5
Senior notes (1)	1,257.6				—				—				1,257.6
Mortgage note (1)	—				11.3				—				11.3
(In millions)	As of December 31, 2018
	Level 1				Level 2				Level 3				Total Fair Value
Assets
Cash and cash equivalents (1)	$	25.7			$	—			$	—			$	25.7
Restricted cash and cash equivalents (1)	303.6				—				—				303.6
Restricted securities available for sale (2)	47.9				10.7				—				58.6
Loans receivable, net (1)	—				—				5,855.1				5,855.1
Liabilities
Revolving secured line of credit (1)	$	—			$	171.9			$	—			$	171.9
Secured financing (1)	—				3,100.9				—				3,100.9
Senior notes (1)	556.3				—				—				556.3
Mortgage note (1)	—				11.9				—				11.9

(1)	Measured at amortized cost with fair value disclosed.

(2)	Measured at fair value on a recurring basis.

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Restricted securities available for sale consist of the following:

(In millions)	As of December 31, 2019
	Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
Corporate bonds	$	25.3			$	0.5			$	—			$	25.8
U.S. Government and agency securities	21.3				0.4				—				21.7
Asset-backed securities	11.2				0.1				—				11.3
Mortgage-backed securities	0.5				—				—				0.5
Total restricted securities available for sale	$	58.3			$	1.0			$	—			$	59.3
(In millions)	As of December 31, 2018
	Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
Corporate bonds	$	23.4			$	—			$	(0.2	)		$	23.2
U.S. Government and agency securities	24.8				0.1				(0.2		)		24.7
Asset-backed securities	9.4				—				(0.1		)		9.3
Mortgage-backed securities	1.4				—				—				1.4
Total restricted securities available for sale	$	59.0			$	0.1			$	(0.5	)		$	58.6

The fair value and gross unrealized losses for restricted securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

(In millions)	Securities Available for Sale with Gross Unrealized Losses as of December 31, 2019
	Less than 12 Months								12 Months or More
	Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses				Total Estimated Fair Value				Total Gross Unrealized Losses
Corporate bonds	$	1.4			$	—			$	—			$	—			$	1.4			$	—
U.S. Government and agency securities	1.9				—				—				—				1.9				—
Asset-backed securities	1.9				—				—				—				1.9				—
Mortgage-backed securities	—				—				—				—				—				—
Total restricted securities available for sale	$	5.2			$	—			$	—			$	—			$	5.2			$	—

(In millions)	Securities Available for Sale with Gross Unrealized Losses as of December 31, 2018
	Less than 12 Months								12 Months or More
	Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses				Total Estimated Fair Value				Total Gross Unrealized Losses
Corporate bonds	$	12.0			$	(0.1	)		$	6.5			$	(0.1	)		$	18.5			$	(0.2	)
U.S. Government and agency securities	2.2				—				10.5				(0.2		)		12.7				(0.2		)
Asset-backed securities	4.7				—				3.3				(0.1		)		8.0				(0.1		)
Mortgage-backed securities	—				—				1.4				—				1.4				—
Total restricted securities available for sale	$	18.9			$	(0.1	)		$	21.7			$	(0.4	)		$	40.6			$	(0.5	)

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The cost and estimated fair values of debt securities by contractual maturity were as follows (securities with multiple maturity dates are classified in the period of final maturity).  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(In millions)		As of December 31,
		2019								2018
Contractual Maturity		Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
Within one year		$	5.7			$	5.7			$	1.7			$	1.7
Over one year to five years		50.8				51.8				55.1				54.7
Over five years to ten years		1.5				1.5				0.8				0.8
Over ten years		0.3				0.3				1.4				1.4
Total restricted securities available for sale		$	58.3			$	59.3			$	59.0			$	58.6

Loans receivable consists of the following:

(In millions)	As of December 31, 2019
	Dealer Loans				Purchased Loans				Total
Loans receivable	$	4,623.3			$	2,597.9			$	7,221.2
Allowance for credit losses	(428.0		)		(108.0		)		(536.0		)
Loans receivable, net	$	4,195.3			$	2,489.9			$	6,685.2
(In millions)	As of December 31, 2018
	Dealer Loans				Purchased Loans				Total
Loans receivable	$	4,141.0			$	2,084.2			$	6,225.2
Allowance for credit losses	(378.1		)		(83.8		)		(461.9		)
Loans receivable, net	$	3,762.9			$	2,000.4			$	5,763.3

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A summary of changes in Loans receivable is as follows:

(In millions)	For the Year Ended December 31, 2019
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	4,141.0			$	2,084.2			$	6,225.2
New Consumer Loan assignments (1)	2,424.5				1,347.7				3,772.2
Principal collected on Loans receivable	(2,049.4		)		(921.8		)		(2,971.2		)
Accelerated Dealer Holdback payments	58.8				—				58.8
Dealer Holdback payments	138.5				—				138.5
Transfers (2)	(87.2		)		87.2				—
Write-offs	(4.4		)		(0.5		)		(4.9		)
Recoveries (3)	1.5				1.1				2.6
Balance, end of period	$	4,623.3			$	2,597.9			$	7,221.2
(In millions)	For the Year Ended December 31, 2018
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	3,518.1			$	1,530.9			$	5,049.0
New Consumer Loan assignments (1)	2,414.8				1,181.0				3,595.8
Principal collected on Loans receivable	(1,873.0		)		(703.7		)		(2,576.7		)
Accelerated Dealer Holdback payments	52.6				—				52.6
Dealer Holdback payments	128.9				—				128.9
Transfers (2)	(78.2		)		78.2				—
Write-offs	(25.2		)		(3.4		)		(28.6		)
Recoveries (3)	3.0				1.2				4.2
Balance, end of period	$	4,141.0			$	2,084.2			$	6,225.2
(In millions)	For the Year Ended December 31, 2017
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	3,209.0			$	998.0			$	4,207.0
New Consumer Loan assignments (1)	1,968.3				904.8				2,873.1
Principal collected on Loans receivable	(1,729.9		)		(459.6		)		(2,189.5		)
Accelerated Dealer Holdback payments	47.1				—				47.1
Dealer Holdback payments	131.6				—				131.6
Transfers (2)	(93.1		)		93.1				—
Write-offs	(16.4		)		(5.7		)		(22.1		)
Recoveries (3)	1.5				0.3				1.8
Balance, end of period	$	3,518.1			$	1,530.9			$	5,049.0

(1)	The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program.  The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

(2)	Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.  We transfer the Dealer’s outstanding Dealer Loan balance and the related allowance for credit losses balance to Purchased Loans in the period this forfeiture occurs.

(3)	Represents collections received on previously written off Loans.

 

During the fourth quarter of 2017, we transferred $89.0 million of Dealer Loans along with the related allowance for credit losses balance of $31.8 million to Purchased Loans. Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. Substantially all of these transfers relate to Dealers where events had occurred in prior periods that met our criteria for forfeiture. However, while we intended to exercise our rights to Dealer Holdback in the period the forfeiture event occurred, we did not exercise our rights for these Dealers until the fourth quarter of 2017. We also enhanced our accounting methodology for transferring Loans. In the fourth quarter of 2017, we began transferring the related allowance for credit losses balance to Purchased Loans. Prior to the fourth quarter of 2017, rather than transferring the related allowance for credit losses balance to Purchased Loans, we reversed the balance through Dealer Loan provision for credit losses and established a new allowance for credit losses in Purchased Loans through Purchased Loan provision for credit losses.

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Contractual net cash flows are comprised of the contractual repayments of the underlying Consumer Loans for Dealer Loans and Purchased Loans, less the related Dealer Holdback payments for Dealer Loans.  The difference between the contractual net cash flows and the expected net cash flows is referred to as the nonaccretable difference.  This difference is neither accreted into income nor recorded in our balance sheets.  We do not believe that the contractual net cash flows of our Loan portfolio are relevant in assessing our financial position.  We are contractually owed repayments on many Consumer Loans, primarily those older than 120 months, where we are not forecasting any future net cash flows.

The excess of expected net cash flows over the outstanding balance of Loans receivable, net is referred to as the accretable yield and is recognized on a level-yield basis as finance charge income over the remaining lives of the Loans.  A summary of changes in the accretable yield is as follows:

(In millions)	For the Year Ended December 31, 2019
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	1,283.0			$	782.5			$	2,065.5
New Consumer Loan assignments (1)	971.6				561.2				1,532.8
Accretion (2)	(897.5		)		(480.7		)		(1,378.2		)
Provision for credit losses	65.9				10.5				76.4
Forecast changes	(7.9		)		22.5				14.6
Transfers (3)	(33.3		)		42.2				8.9
Balance, end of period	$	1,381.8			$	938.2			$	2,320.0
(In millions)	For the Year Ended December 31, 2018
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	1,088.6			$	576.9			$	1,665.5
New Consumer Loan assignments (1)	990.2				488.4				1,478.6
Accretion (2)	(816.3		)		(369.3		)		(1,185.6		)
Provision for credit losses	48.0				8.9				56.9
Forecast changes	2.0				40.3				42.3
Transfers (3)	(29.5		)		37.3				7.8
Balance, end of period	$	1,283.0			$	782.5			$	2,065.5
(In millions)	For the Year Ended December 31, 2017
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	982.6			$	348.1			$	1,330.7
New Consumer Loan assignments (1)	803.0				377.9				1,180.9
Accretion (2)	(766.6		)		(253.6		)		(1,020.2		)
Provision for credit losses	103.4				25.9				129.3
Forecast changes	(5.6		)		41.7				36.1
Transfers (3)	(28.2		)		36.9				8.7
Balance, end of period	$	1,088.6			$	576.9			$	1,665.5

(1)	The Dealer Loans amount represents the net cash flows expected at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related advances paid to Dealers.  The Purchased Loans amount represents the net cash flows expected at the time of assignment on Consumer Loans assigned under our Purchase Program, less the related one-time payments made to Dealers.

(2)	Represents finance charges excluding the amortization of deferred direct origination costs for Dealer Loans.

(3)	Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.  We transfer the Dealer’s outstanding Dealer Loan balance, the related allowance for credit losses balance and related expected future net cash flows to Purchased Loans in the period this forfeiture occurs.

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Additional information related to new Consumer Loan assignments is as follows:

(In millions)	For the Year Ended December 31, 2019
	Dealer Loans				Purchased Loans				Total
Contractual net cash flows at the time of assignment (1)	$	3,810.6			$	2,953.3			$	6,763.9
Expected net cash flows at the time of assignment (2)	3,396.1				1,908.9				5,305.0
Fair value at the time of assignment (3)	2,424.5				1,347.7				3,772.2
(In millions)	For the Year Ended December 31, 2018
	Dealer Loans				Purchased Loans				Total
Contractual net cash flows at the time of assignment (1)	$	3,827.4			$	2,610.7			$	6,438.1
Expected net cash flows at the time of assignment (2)	3,405.0				1,669.4				5,074.4
Fair value at the time of assignment (3)	2,414.8				1,181.0				3,595.8
(In millions)	For the Year Ended December 31, 2017
	Dealer Loans				Purchased Loans				Total
Contractual net cash flows at the time of assignment (1)	$	3,131.6			$	1,973.7			$	5,105.3
Expected net cash flows at the time of assignment (2)	2,771.3				1,282.7				4,054.0
Fair value at the time of assignment (3)	1,968.3				904.8				2,873.1

(1)

The Dealer Loans amount represents the repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we would be required to make if we collected all of the contractual repayments.  The Purchased Loans amount represents the repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Purchase Program.

(2)	The Dealer Loans amount represents the repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we expected to make.  The Purchased Loans amount represents the repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Purchase Program.

(3)	The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program.  The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

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Credit Quality

We monitor and evaluate the credit quality of Consumer Loans assigned under our Portfolio and Purchase Programs on a monthly basis by comparing our current forecasted collection rates to our initial expectations.  For additional information regarding credit quality, see Note 2 to the consolidated financial statements.  The following table compares our forecast of Consumer Loan collection rates as of December 31, 2019, with the forecasts as of December 31, 2018, as of December 31, 2017, and at the time of assignment, segmented by year of assignment:

		Forecasted Collection Percentage as of (1)												Current Forecast Variance from
Consumer Loan Assignment Year		December 31, 2019			December 31, 2018			December 31, 2017			Initial Forecast			December 31, 2018			December 31, 2017			Initial Forecast
2010		77.8	%		77.7	%		77.6	%		73.6	%		0.1	%		0.2	%		4.2	%
2011		74.8	%		74.7	%		74.7	%		72.5	%		0.1	%		0.1	%		2.3	%
2012		73.9	%		73.8	%		73.8	%		71.4	%		0.1	%		0.1	%		2.5	%
2013		73.5	%		73.5	%		73.5	%		72.0	%		0.0	%		0.0	%		1.5	%
2014		71.7	%		71.7	%		71.7	%		71.8	%		0.0	%		0.0	%		-0.1	%
2015		65.4	%		65.4	%		65.5	%		67.7	%		0.0	%		-0.1	%		-2.3	%
2016		64.1	%		64.2	%		64.8	%		65.4	%		-0.1	%		-0.7	%		-1.3	%
2017		64.8	%		65.5	%		65.6	%		64.0	%		-0.7	%		-0.8	%		0.8	%
2018		65.1	%		65.0	%		—			63.6	%		0.1	%		—			1.5	%
2019		64.6	%		—			—			64.0	%		—			—			0.6	%

(1)

Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment.  Contractual repayments include both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates in the table.

Consumer Loans assigned in 2010 through 2013 and 2018 have yielded forecasted collection results materially better than our initial estimates, while Consumer Loans assigned in 2015 and 2016 have yielded forecasted collection results materially worse than our initial estimates. For Consumer Loans assigned in 2014, 2017 and 2019, actual results have been close to our initial estimates.

For the year ended December 31, 2019, forecasted collection rates improved for Consumer Loans assigned in 2019, declined for Consumer Loans assigned in 2017 and were generally consistent with expectations at the start of the period for all other assignment years presented.

For the year ended December 31, 2018, forecasted collection rates improved for Consumer Loans assigned in 2018, declined for Consumer Loans assigned in 2016 and were generally consistent with expectations at the start of the period for all other assignment years presented.

In addition to the statistical model used to forecast collection rates, we use a model to forecast the timing of future net cash flows. During the fourth quarter of 2017, we updated our net cash flow timing model to incorporate more recent data. The revised forecast resulted in an expected cash flow stream with a lower net present value as compared to the prior forecast, as less cash flows were expected in earlier periods and more cash flows were expected in later periods.

The reduction in net present value was primarily the result of a change in the expected timing of cash flows from longer-term Consumer Loans. Due to our limited historical experience with longer-term Consumer Loans, our prior model relied on extrapolations from the historical performance of shorter-term Consumer Loans to predict the timing of future net cash flows on longer-term Consumer Loans. We used our additional historical experience on these longer-term loans to refine our estimate.

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The revision to our net cash flow timing forecast did not impact the amount of undiscounted net cash flows we expected to receive. As a result, the dollar amount of future net portfolio revenue (finance charges less provision for credit losses) was not impacted by the revision. However, the revision did impact the period in which those net revenues are recorded as a portion of the impact of the revised timing estimate was recorded as a current period expense and a portion was recorded as a yield adjustment. For the fourth quarter of 2017, the revision increased provision for credit losses by $41.6 million, reduced finance charge revenue by $7.3 million and reduced net income by $30.8 million. The revision reduced the yield on our Loan portfolio by 90 basis points, which impacts the timing of revenue recognition in future periods.

Advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program are aggregated into pools for purposes of recognizing revenue and evaluating impairment.  As a result of this aggregation, we are not able to segment the carrying amounts of the majority of our Loan portfolio by year of assignment.  We are able to segment our Loan portfolio by the performance of the Loan pools.  Performance considers both the amount and timing of expected net cash flows and is measured by comparing the balance of the Loan pool to the discounted value of the expected future net cash flows of each Loan pool using the yield established at the time of assignment.  The following table segments our Loan portfolio by the performance of the Loan pools:

(In millions)	As of December 31, 2019
	Loan Pool Performance Meets or Exceeds Initial Estimates												Loan Pool Performance Less than Initial Estimates
	Dealer Loans				Purchased Loans				Total				Dealer Loans				Purchased Loans				Total
Loans receivable	$	1,591.3			$	2,006.9			$	3,598.2			$	3,032.0			$	591.0			$	3,623.0
Allowance for credit losses	—				—				—				(428.0		)		(108.0		)		(536.0		)
Loans receivable, net	$	1,591.3			$	2,006.9			$	3,598.2			$	2,604.0			$	483.0			$	3,087.0
(In millions)	As of December 31, 2018
	Loan Pool Performance Meets or Exceeds Initial Estimates												Loan Pool Performance Less than Initial Estimates
	Dealer Loans				Purchased Loans				Total				Dealer Loans				Purchased Loans				Total
Loans receivable	$	1,355.1			$	1,392.1			$	2,747.2			$	2,785.9			$	692.1			$	3,478.0
Allowance for credit losses	—				—				—				(378.1		)		(83.8		)		(461.9		)
Loans receivable, net	$	1,355.1			$	1,392.1			$	2,747.2			$	2,407.8			$	608.3			$	3,016.1

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A summary of changes in the allowance for credit losses is as follows:

(In millions)	For the Year Ended December 31, 2019
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	378.1			$	83.8			$	461.9
Provision for credit losses	65.9				10.5				76.4
Transfers (1)	(13.1		)		13.1				—
Write-offs	(4.4		)		(0.5		)		(4.9		)
Recoveries (2)	1.5				1.1				2.6
Balance, end of period	$	428.0			$	108.0			$	536.0
(In millions)	For the Year Ended December 31, 2018
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	366.0			$	63.4			$	429.4
Provision for credit losses	48.0				8.9				56.9
Transfers (1)	(13.7		)		13.7				—
Write-offs	(25.2		)		(3.4		)		(28.6		)
Recoveries (2)	3.0				1.2				4.2
Balance, end of period	$	378.1			$	83.8			$	461.9
(In millions)	For the Year Ended December 31, 2017
	Dealer Loans				Purchased Loans				Total
Balance, beginning of period	$	309.3			$	11.1			$	320.4
Provision for credit losses	103.4				25.9				129.3
Transfers (1)	(31.8		)		31.8				—
Write-offs	(16.4		)		(5.7		)		(22.1		)
Recoveries (2)	1.5				0.3				1.8
Balance, end of period	$	366.0			$	63.4			$	429.4

(1)	Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.  We transfer the Dealer’s outstanding Dealer Loan balance and the related allowance for credit losses balance to Purchased Loans in the period this forfeiture occurs.

(2)	Represents collections received on previously written off Loans.

Property and equipment consists of the following:

(In millions)	As of December 31,
	2019				2018
Land and land improvements	$	2.7			$	2.7
Building and improvements	54.5				33.2
Data processing equipment and software	41.3				37.3
Office furniture and equipment	3.9				3.8
Leasehold improvements	2.4				2.2
Total property and equipment	104.8				79.2
Less: Accumulated depreciation on property and equipment	(45.1		)		(39.0		)
Total property and equipment, net	$	59.7			$	40.2

Depreciation expense on property and equipment was $7.3 million, $5.4 million and $6.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

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A summary of reinsurance activity is as follows:

(In millions)	For the Years Ended December 31,
	2019				2018				2017
Net assumed written premiums	$	51.8			$	55.8			$	42.4
Net premiums earned	51.0				46.6				41.1
Provision for claims	30.1				26.0				22.7
Amortization of capitalized acquisition costs	1.3				1.2				1.0

The trust assets and related reinsurance liabilities are as follows:

(In millions)			As of December 31,
	Balance Sheet location		2019				2018
Trust assets	Restricted cash and cash equivalents		$	0.9			$	0.3
Trust assets	Restricted securities available for sale		59.3				58.6
Unearned premium	Accounts payable and accrued liabilities		44.1				43.3
Claims reserve (1)	Accounts payable and accrued liabilities		1.8				1.6

(1)	The claims reserve represents our liability for incurred-but-not-reported claims and is estimated based on historical claims experience.

The following tables present information about incurred and paid claims development for the five-year period ended December 31, 2019:

(Dollars in millions)
		Cumulative Incurred Claims																				As of December 31, 2019
Incident Year		As of December 31,																				Claims Reserve				Cumulative Number of Reported Claims
		2015				2016				2017				2018				2019
2015		$	33.1			$	33.4			$	33.4			$	33.4			$	33.4			$	—			32,909
2016						25.7				26.0				26.0				26.0				—				25,215
2017										22.3				22.5				22.6				—				20,461
2018														25.8				25.7				—				22,305
2019																		30.1				1.8				23,480
Total																		$	137.8			$	1.8			124,370

(In millions)		Cumulative Paid Claims
		As of December 31,
Incident Year		2015				2016				2017				2018				2019
2015		$	31.9			$	33.4			$	33.4			$	33.4			$	33.4
2016						24.7				26.0				26.0				26.0
2017										21.3				22.5				22.6
2018														24.2				25.7
2019																		28.3
Total																		$	136.0

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Other income consists of the following:

	For the Years Ended December 31,
(In millions)	2019				2018				2017
Ancillary product profit sharing	$	37.9			$	30.6			$	23.9
Remarketing fees	12.0				11.2				10.9
Interest	8.5				5.0				2.2
Dealer enrollment fees	4.7				4.3				3.9
Dealer support products and services	2.5				4.1				4.8
GPS-SID fees	1.9				6.4				11.1
Other	1.1				0.8				0.6
Total	$	68.6			$	62.4			$	57.4

Ancillary product profit sharing consists of payments received from Third Party Providers (“TPPs”) based upon the performance of vehicle service contracts and Guaranteed Asset Protection (“GAP”) contracts, and is recognized as income over the life of the vehicle service contracts and GAP contracts.

Remarketing fees consist of fees retained from the sale of repossessed vehicles by Vehicle Remarketing Services, Inc. (“VRS”), our wholly-owned subsidiary that is responsible for remarketing vehicles for Credit Acceptance. VRS coordinates vehicle repossessions with a nationwide network of repossession contractors, the redemption of the vehicles by the consumers, and the sale of the vehicles through a nationwide network of vehicle auctions. VRS recognizes income from the retained fees at the time of the sale and does not retain a fee if a repossessed vehicle is redeemed by the consumer prior to the sale.

Interest consists of income earned on cash and cash equivalents, restricted cash and cash equivalents, and restricted securities available for sale. Interest income is generally recognized over time as it is earned.  Interest income on restricted securities available for sale is recognized over the life of the underlying financial instruments using the interest method.

Dealer enrollment fees include fees from Dealers that enrolled in our Portfolio Program prior to August 5, 2019. Depending on the enrollment option selected by the Dealer, Dealers may have enrolled by paying us an upfront, one-time fee, or by agreeing to allow us to retain 50% of their accelerated Dealer Holdback payment(s) on the first 100 Consumer Loan assignments. For additional information regarding program enrollment, see Note 2 to the consolidated financial statements. A portion of the $9,850 upfront, one-time fee is considered to be Dealer support products and services revenue. The remaining portion of the $9,850 fee is considered to be a Dealer enrollment fee, which is amortized on a straight-line basis over the estimated life of the Dealer relationship. The 50% portion of the accelerated Dealer Holdback payment(s) on the first 100 Consumer Loan assignments is also considered to be a Dealer enrollment fee.  We do not recognize any of this Dealer enrollment fee until the Dealer has met the eligibility requirements to receive an accelerated Dealer Holdback payment and the amount of the first payment, if any, has been calculated. Once an accelerated Dealer Holdback payment has been calculated, we defer the 50% portion that we keep and recognize it on a straight-line basis over the remaining estimated life of the Dealer relationship. Beginning August 5, 2019, Dealers may enroll in our Portfolio Program without incurring an enrollment fee.

Dealer support products and services consist of income earned from products and services provided to Dealers to assist with their operations, including sales and marketing, purchasing supplies and materials and acquiring vehicle inventory. Income is recognized in the period the product or service is provided.

GPS-SID fees consist of fees we received from a TPP for providing Dealers in certain states the ability to purchase GPS Starter Interrupt Devices ("GPS-SID"). Through this program, Dealers could install GPS-SID on vehicles financed by us that can be activated if the consumer fails to make payments on their account, and can result in the prompt repossession of the vehicle.  Dealers purchased GPS-SID directly from the TPP and the TPP paid us a vendor fee for each device sold. GPS-SID fee income was recognized when the units were sold. Effective during the second quarter of 2019, we no longer provide Dealers the ability to purchase GPS-SID through this program. We allowed Dealers to install previously purchased GPS-SID on vehicles financed by us until September 1, 2019.

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The following table disaggregates our other income by major source of income and timing of the revenue recognition:

(In millions)	For the Year Ended December 31, 2019
	Ancillary product profit sharing				Remarketing fees				Interest				Dealer enrollment fees				Dealer support products and services				GPS-SID fees				Other				Total Other Income
Source of income
Third Party Providers	$	37.9			$	—			$	8.5			$	—			$	—			$	1.9			$	1.1			$	49.4
Dealers	—				12.0				—				4.7				2.5				—				—				19.2
Total	$	37.9			$	12.0			$	8.5			$	4.7			$	2.5			$	1.9			$	1.1			$	68.6
Timing of revenue recognition
Over time	$	37.9			$	—			$	8.5			$	4.7			$	—			$	—			$	—			$	51.1
At a point in time	—				12.0				—				—				2.5				1.9				1.1				17.5
Total	$	37.9			$	12.0			$	8.5			$	4.7			$	2.5			$	1.9			$	1.1			$	68.6

Debt consists of the following:

(In millions)		As of December 31, 2019
		Principal Outstanding				Unamortized Debt Issuance Costs				Unamortized Discount				Carrying Amount
Revolving secured line of credit (1)		$	—			$	—			$	—			$	—
Secured financing (2)		3,355.6				(15.9		)		—				3,339.7
Senior notes		1,201.8				(13.2		)		(0.8		)		1,187.8
Mortgage note		11.3				—				—				11.3
Total debt		$	4,568.7			$	(29.1	)		$	(0.8	)		$	4,538.8
(In millions)		As of December 31, 2018
		Principal Outstanding				Unamortized Debt Issuance Costs				Unamortized Discount				Carrying Amount
Revolving secured line of credit (1)		$	171.9			$	—			$	—			$	171.9
Secured financing (2)		3,108.7				(16.0		)		—				3,092.7
Senior notes		550.0				(4.5		)		(1.1		)		544.4
Mortgage note		11.9				—				—				11.9
Total debt		$	3,842.5			$	(20.5	)		$	(1.1	)		$	3,820.9

(1)	Excludes deferred debt issuance costs of $3.2 million and $2.9 million as of December 31, 2019 and December 31, 2018, respectively, which are included in other assets.

(2)	Warehouse facilities and Term ABS.

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General information for each of our financing transactions in place as of December 31, 2019 is as follows:

(Dollars in millions)

Financings

Wholly-owned Subsidiary

Maturity Date

Financing Amount

Interest Rate as of December 31, 2019

Revolving Secured Line of Credit

n/a

06/22/22

$

340.0

At our option, either LIBOR plus 187.5 basis points or the prime rate plus 87.5 basis points

Warehouse Facility II (1)

CAC Warehouse Funding Corp. II

07/12/22

(2)

$

400.0

LIBOR plus 175 basis points (3)

Warehouse Facility IV (1)

CAC Warehouse Funding LLC IV

07/26/22

(2)

$

300.0

LIBOR plus 200 basis points (3)

Warehouse Facility V (1)

CAC Warehouse Funding LLC V

08/17/21

(4)

$

100.0

LIBOR plus 190 basis points (3)

Warehouse Facility VI (1)

CAC Warehouse Funding LLC VI

09/30/22

(2)

$

75.0

LIBOR plus 200 basis points

Warehouse Facility VII (1)

CAC Warehouse Funding LLC VII

12/16/21

(5)

$

150.0

Commercial paper rate plus 200 basis points (3)

Warehouse Facility VIII (1)

CAC Warehouse Funding LLC VIII

07/26/22

(2)

$

200.0

LIBOR plus 190 basis points (3)

Term ABS 2016-3 (1)

Credit Acceptance Funding LLC 2016-3

10/15/18

(2)

$

350.0

Fixed rate

Term ABS 2017-1 (1)

Credit Acceptance Funding LLC 2017-1

02/15/19

(2)

$

350.0

Fixed rate

Term ABS 2017-2 (1)

Credit Acceptance Funding LLC 2017-2

06/17/19

(2)

$

450.0

Fixed rate

Term ABS 2017-3 (1)

Credit Acceptance Funding LLC 2017-3

10/15/19

(2)

$

350.0

Fixed rate

Term ABS 2018-1 (1)

Credit Acceptance Funding LLC 2018-1

02/17/20

(2)

$

500.0

Fixed rate

Term ABS 2018-2 (1)

Credit Acceptance Funding LLC 2018-2

05/15/20

(2)

$

450.0

Fixed rate

Term ABS 2018-3 (1)

Credit Acceptance Funding LLC 2018-3

08/17/20

(2)

$

398.3

Fixed rate

Term ABS 2019-1 (1)

Credit Acceptance Funding LLC 2019-1

02/15/21

(2)

$

402.5

Fixed rate

Term ABS 2019-2 (1)

Credit Acceptance Funding LLC 2019-2

08/15/22

(6)

$

500.0

Fixed rate

Term ABS 2019-3 (1)

Credit Acceptance Funding LLC 2019-3

11/15/21

(2)

$

351.7

Fixed rate

2021 Senior Notes

n/a

02/15/21

(7)

$

151.8

Fixed rate

2023 Senior Notes

n/a

03/15/23

(7)

$

250.0

Fixed rate

2024 Senior Notes

n/a

12/31/24

$

400.0

Fixed rate

2026 Senior Notes

n/a

03/15/26

$

400.0

Fixed rate

Mortgage Note

Chapter 4 Properties, LLC

08/06/23

$

12.0

LIBOR plus 150 basis points

(1)	Financing made available only to a specified subsidiary of the Company.

(2)	Represents the revolving maturity date. The outstanding balance will amortize after the revolving maturity date based on the cash flows of the pledged assets.

(3)	Interest rate cap agreements are in place to limit the exposure to increasing interest rates.

(4)	Represents the revolving maturity date. The outstanding balance will amortize after the revolving maturity date and any amounts remaining on August 17, 2023 will be due on that date.

(5)	Represents the revolving maturity date. The outstanding balance will amortize after the revolving maturity date and any amounts remaining on December 16, 2023 will be due on that date.

(6)	Represents the revolving maturity date. The Company has the option to redeem and retire the indebtedness after the revolving maturity date. If we do not elect this option, the outstanding balance will amortize based on the cash flows of the pledged assets.

(7)

On January 17, 2020, we used a portion of the net proceeds from the 2024 senior notes to redeem the remaining $151.8 million outstanding principal amount of the 2021 senior notes. We intend to use the remaining net proceeds from the 2024 senior notes, together with borrowings under our revolving credit facility and cash on hand to the extent available, to redeem in full the $250.0 million outstanding principal amount of the 2023 senior notes on or around March 15, 2020.

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Additional information related to the amounts outstanding on each facility is as follows:

(In millions)	For the Years Ended December 31,
	2019				2018
Revolving Secured Line of Credit
Maximum outstanding principal balance	$	282.9			$	265.4
Average outstanding principal balance	77.2				40.6
Warehouse Facility II
Maximum outstanding principal balance	$	201.0			$	201.0
Average outstanding principal balance	78.0				3.3
Warehouse Facility IV
Maximum outstanding principal balance	$	100.0			$	99.0
Average outstanding principal balance	1.1				0.5
Warehouse Facility V
Maximum outstanding principal balance	$	35.0			$	99.0
Average outstanding principal balance	0.9				1.1
Warehouse Facility VI
Maximum outstanding principal balance	$	—			$	75.0
Average outstanding principal balance	—				0.4
Warehouse Facility VII
Maximum outstanding principal balance	$	101.5			$	150.0
Average outstanding principal balance	7.1				7.8
Warehouse Facility VIII
Maximum outstanding principal balance	$	145.3			$	—
Average outstanding principal balance	7.2				—

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(Dollars in millions)	As of December 31,
	2019				2018
Revolving Secured Line of Credit
Principal balance outstanding	$	—			$	171.9
Amount available for borrowing (1)	340.0				178.1
Interest rate	—		%		4.38		%
Warehouse Facility II
Principal balance outstanding	$	—			$	—
Amount available for borrowing  (1)	400.0				400.0
Loans pledged as collateral	—				—
Restricted cash and cash equivalents pledged as collateral	1.0				1.0
Interest rate	—		%		—		%
Warehouse Facility IV
Principal balance outstanding	$	—			$	—
Amount available for borrowing (1)	300.0				250.0
Loans pledged as collateral	—				—
Restricted cash and cash equivalents pledged as collateral	1.0				1.0
Interest rate	—		%		—		%
Warehouse Facility V
Principal balance outstanding	$	—			$	—
Amount available for borrowing (1)	100.0				100.0
Loans pledged as collateral	—				—
Restricted cash and cash equivalents pledged as collateral	1.0				1.0
Interest rate	—		%		—		%
Warehouse Facility VI
Principal balance outstanding	$	—			$	—
Amount available for borrowing (1)	75.0				75.0
Loans pledged as collateral	—				—
Restricted cash and cash equivalents pledged as collateral	—				0.1
Interest rate	—		%		—		%
Warehouse Facility VII
Principal balance outstanding	$	—			$	—
Amount available for borrowing (1)	150.0				150.0
Loans pledged as collateral	—				—
Restricted cash and cash equivalents pledged as collateral	1.0				1.0
Interest rate	—		%		—		%
Warehouse Facility VIII
Principal balance outstanding	$	—			$	—
Amount available for borrowing (1)	200.0				—
Loans pledged as collateral	—				—
Restricted cash and cash equivalents pledged as collateral	—				—
Interest rate	—		%		—		%
Term ABS 2016-1
Principal balance outstanding	$	—			$	125.3
Loans pledged as collateral	—				320.8
Restricted cash and cash equivalents pledged as collateral	—				29.6
Interest rate	—		%		4.41		%
Term ABS 2016-2
Principal balance outstanding	$	—			$	184.5
Loans pledged as collateral	—				335.0
Restricted cash and cash equivalents pledged as collateral	—				28.3
Interest rate	—		%		3.20		%

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Term ABS 2016-3
Principal balance outstanding	$	51.8			$	300.6
Loans pledged as collateral	219.5				392.7
Restricted cash and cash equivalents pledged as collateral	23.5				30.7
Interest rate	3.60		%		2.59		%
Term ABS 2017-1
Principal balance outstanding	$	120.9			$	350.0
Loans pledged as collateral	292.8				429.8
Restricted cash and cash equivalents pledged as collateral	26.1				30.9
Interest rate	3.19		%		2.78		%
Term ABS 2017-2
Principal balance outstanding	$	277.2			$	450.0
Loans pledged as collateral	426.7				548.4
Restricted cash and cash equivalents pledged as collateral	35.1				39.4
Interest rate	2.83		%		2.72		%
Term ABS 2017-3
Principal balance outstanding	$	303.2			$	350.0
Loans pledged as collateral	393.0				426.1
Restricted cash and cash equivalents pledged as collateral	29.3				28.6
Interest rate	2.91		%		2.88		%
Term ABS 2018-1
Principal balance outstanding	$	500.0			$	500.0
Loans pledged as collateral	609.5				614.5
Restricted cash and cash equivalents pledged as collateral	43.8				41.8
Interest rate	3.24		%		3.24		%
Term ABS 2018-2
Principal balance outstanding	$	450.0			$	450.0
Loans pledged as collateral	550.4				552.2
Restricted cash and cash equivalents pledged as collateral	37.6				36.3
Interest rate	3.68		%		3.68		%
Term ABS 2018-3
Principal balance outstanding	$	398.3			$	398.3
Loans pledged as collateral	487.7				578.8
Restricted cash and cash equivalents pledged as collateral	32.3				33.6
Interest rate	3.72		%		3.72		%
Term ABS 2019-1
Principal balance outstanding	$	402.5			$	—
Loans pledged as collateral	490.2				—
Restricted cash and cash equivalents pledged as collateral	31.9				—
Interest rate	3.53		%		—		%
Term ABS 2019-2
Principal balance outstanding	$	500.0			$	—
Loans pledged as collateral	628.5				—
Restricted cash and cash equivalents pledged as collateral	38.6				—
Interest rate	3.13		%		—		%
Term ABS 2019-3
Principal balance outstanding	$	351.7			$	—
Loans pledged as collateral	428.6				—
Restricted cash and cash equivalents pledged as collateral	27.2				—
Interest rate	2.56		%		—		%

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2021 Senior Notes
Principal balance outstanding	$	151.8			$	300.0
Interest rate	6.125		%		6.125		%
2023 Senior Notes
Principal balance outstanding	$	250.0			$	250.0
Interest rate	7.375		%		7.375		%
2024 Senior Notes
Principal balance outstanding	$	400.0			$	—
Interest rate	5.125		%		—		%
2026 Senior Notes
Principal balance outstanding	$	400.0			$	—
Interest rate	6.625		%		—		%
Mortgage Note
Principal balance outstanding	$	11.3			$	11.9
Interest rate	3.21		%		3.85		%

(1)	Availability may be limited by the amount of assets pledged as collateral.

Revolving Secured Line of Credit Facility

We have a $340.0 million revolving secured line of credit facility with a commercial bank syndicate. Borrowings under the revolving secured line of credit facility, including any letters of credit issued under the facility, are subject to a borrowing-base limitation.  This limitation equals 80% of the value of Loans, as defined in the agreement, less a hedging reserve (not exceeding $1.0 million), and the amount of other debt secured by the collateral which secures the revolving secured line of credit facility.  Borrowings under the revolving secured line of credit facility agreement are secured by a lien on most of our assets.

Warehouse Facilities

We have six Warehouse facilities with total borrowing capacity of $1,225.0 million. Each of the facilities is with a different lender or group of lenders. Under each Warehouse facility, we can contribute Loans to our wholly-owned subsidiaries in return for cash and equity in each subsidiary.  In turn, each subsidiary pledges the Loans as collateral to lenders to secure financing that will fund the cash portion of the purchase price of the Loans.  The financing provided to each subsidiary under the applicable facility is generally limited to the lesser of 80% of the value of the contributed Loans, as defined in the agreements, plus the restricted cash and cash equivalents pledged as collateral on such Loans or the facility limit.

The financings create indebtedness for which the subsidiaries are liable and which is secured by all the assets of each subsidiary.  Such indebtedness is non-recourse to us, even though we are consolidated for financial reporting purposes with the subsidiaries.  Because the subsidiaries are organized as legal entities separate from us, their assets (including the contributed Loans) are not available to our creditors.

The subsidiaries pay us a monthly servicing fee equal to 6% of the collections received with respect to the contributed Loans.  The servicing fee is paid out of the collections.  Except for the servicing fee and holdback payments due to Dealers, if a facility is amortizing, we do not have any rights in any portion of such collections until all outstanding principal, accrued and unpaid interest, fees and other related costs have been paid in full.  If a facility is not amortizing, the applicable subsidiary may be entitled to retain a portion of such collections provided that the borrowing base requirements of the facility are satisfied.

Term ABS Financings

We have wholly-owned subsidiaries (the “Funding LLCs”) that have completed secured financing transactions with qualified institutional investors or lenders. In connection with these transactions, we contributed Loans on an arms-length basis to each Funding LLC for cash and the sole membership interest in that Funding LLC. In turn, each Funding LLC, other than that of Term ABS 2019-2, contributed the Loans to a respective trust that issued notes to qualified institutional investors. The Funding LLC for the Term ABS 2019-2 transaction pledged the Loans to a lender. The Term ABS 2016-3, 2017-1, 2017-2, 2017-3, 2018-1, 2018-2, 2018-3, 2019-1 and 2019-3 transactions each consist of three classes of notes.

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Each financing at the time of issuance has a specified revolving period during which we are likely to contribute additional Loans to each Funding LLC. Each Funding LLC (other than that of Term ABS 2019-2) will then contribute the Loans to its respective trust. At the end of the applicable revolving period, the debt outstanding under each financing will begin to amortize.

The financings create indebtedness for which the trusts or Funding LLCs are liable and which is secured by all the assets of each trust or Funding LLC. Such indebtedness is non-recourse to us, even though we are consolidated for financial reporting purposes with the trusts and the Funding LLCs. Because the Funding LLCs are organized as legal entities separate from us, their assets (including the contributed Loans) are not available to our creditors. We receive a monthly servicing fee on each financing equal to 6% of the collections received with respect to the contributed Loans. The fee is paid out of the collections. Except for the servicing fee and Dealer Holdback payments due to Dealers, if a facility is amortizing, we do not have any rights in any portion of such collections until all outstanding principal, accrued and unpaid interest, fees and other related costs have been paid in full. If a facility is not amortizing, the applicable subsidiary may be entitled to retain a portion of such collections provided that the borrowing base requirements of the facility are satisfied. However, in our capacity as servicer of the  Loans, we do have a limited right to exercise a “clean-up call” option to purchase Loans from the Funding LLCs and/or the trusts under certain specified circumstances. For those Funding LLCs with a trust, when the trust’s underlying indebtedness is paid in full, either through collections or through a prepayment of the indebtedness, the trust is to pay any remaining collections over to its Funding LLC as the sole beneficiary of the trust. For all Funding LLCs, after the indebtedness is paid in full, any remaining collections will ultimately be available to be distributed to us as the sole member of the respective Funding LLC.

The table below sets forth certain additional details regarding the outstanding Term ABS financings:

(Dollars in millions)
Term ABS Financings		Close Date		Net Book Value of Loans Contributed at Closing				Revolving Period
Term ABS 2016-3		October 27, 2016		$	437.8			Through October 15, 2018
Term ABS 2017-1		February 23, 2017		437.8				Through February 15, 2019
Term ABS 2017-2		June 29, 2017		563.2				Through June 17, 2019
Term ABS 2017-3		October 26, 2017		437.6				Through October 15, 2019
Term ABS 2018-1		February 22, 2018		625.1				Through February 17, 2020
Term ABS 2018-2		May 24, 2018		562.6				Through May 15, 2020
Term ABS 2018-3		August 23, 2018		500.1				Through August 17, 2020
Term ABS 2019-1		February 21, 2019		503.1				Through February 15, 2021
Term ABS 2019-2		August 28, 2019		625.1				Through August 15, 2022
Term ABS 2019-3		November 21, 2019		439.6				Through November 15, 2021

Senior Notes

On December 18, 2019, we issued $400.0 million aggregate principal amount of 5.125% senior notes due 2024 (the “2024 senior notes”). The 2024 senior notes were issued pursuant to an indenture, dated as of December 18, 2019, among the Company, as issuer, the Company’s subsidiaries Buyers Vehicle Protection Plan, Inc. and Vehicle Remarketing Services, Inc., as guarantors (collectively, the “Guarantors”), and U.S. Bank National Association, as trustee.

The 2024 senior notes mature on December 31, 2024 and bear interest at a rate of 5.125% per annum, computed on the basis of a 360-day year composed of twelve 30-day months and payable semi-annually on June 30 and December 31 of each year, beginning on June 30, 2020. We used a portion of the net proceeds from the 2024 senior notes to repurchase or redeem all of the $300.0 million outstanding principal amount of our 6.125% senior notes due 2021 (the “2021 senior notes”), of which $148.2 million was repurchased on December 18, 2019 and the remaining $151.8 million was redeemed on January 17, 2020. We intend to use the remaining net proceeds from the 2024 senior notes, together with borrowings under our revolving credit facility and cash on hand to the extent available, to redeem in full the $250.0 million outstanding principal amount of our 7.375% senior notes due 2023 (the “2023 senior notes”) on or around March 15, 2020. During the fourth quarter of 2019, we recognized a pre-tax loss on extinguishment of debt of $1.8 million related to the repurchase of the 2021 senior notes in the fourth quarter of 2019 and the irrevocable notice given in December 2019 for the redemption of the remaining 2021 senior notes in the first quarter of 2020.

On March 7, 2019, we issued $400.0 million aggregate principal amount of 6.625% senior notes due 2026 (the “2026 senior notes”). The 2026 senior notes were issued pursuant to an indenture, dated as of March 7, 2019, among the Company, as issuer, the Guarantors, and U.S. Bank National Association, as trustee.

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The 2026 senior notes mature on March 15, 2026 and bear interest at a rate of 6.625% per annum, computed on the basis of a 360-day year composed of twelve 30-day months and payable semi-annually on March 15 and September 15 of each year, beginning on September 15, 2019. We used the net proceeds from the offering of the 2026 senior notes for general corporate purposes, including repayment of outstanding borrowings under our revolving secured line of credit facility.

On March 30, 2015, we issued $250.0 million aggregate principal amount of 2023 senior notes pursuant to an indenture, dated as of March 30, 2015, among the Company, as issuer, the Guarantors, and U.S. Bank National Association, as trustee.

The 2023 senior notes mature on March 15, 2023 and bear interest at a rate of 7.375% per annum, computed on the basis of a 360-day year composed of twelve 30-day months and payable semi-annually on March 15 and September 15 of each year, beginning on September 15, 2015. The 2023 senior notes were issued at a price of 99.266% of their aggregate principal amount, resulting in gross proceeds of $248.2 million, and a yield to maturity of 7.5% per annum. We used the net proceeds from the offering of the 2023 senior notes for general corporate purposes, including repayment of outstanding borrowings under our revolving secured line of credit facility. We intend to use the remaining net proceeds from the 2024 senior notes, together with borrowings under our revolving credit facility and cash on hand to the extent available, to redeem in full the $250.0 million outstanding principal amount of the 2023 senior notes on or around March 15, 2020.

On January 22, 2014, we issued $300.0 million aggregate principal amount of 2021 senior notes pursuant to an indenture, dated as of January 22, 2014, among the Company, the Guarantors, and U.S. Bank National Association, as trustee.

The 2021 senior notes mature on February 15, 2021 and bear interest at a rate of 6.125% per annum, computed on the basis of a 360-day year composed of twelve 30-day months and payable semi-annually on February 15 and August 15 of each year, beginning on August 15, 2014. We used the net proceeds from the 2021 senior notes, together with borrowings under our revolving credit facilities, to redeem in full the $350.0 million aggregate principal amount of our 9.125% first priority senior secured notes due 2017 (the “2017 senior notes”) on February 21, 2014. During the first quarter of 2014, we recognized a pre-tax loss on extinguishment of debt of $21.8 million related to the redemption of the 2017 senior notes. We used a portion of the net proceeds from the 2024 senior notes to repurchase or redeem all of the $300.0 million outstanding principal amount of the 2021 senior notes, of which $148.2 million was repurchased on December 18, 2019 and the remaining $151.8 million was redeemed on January 17, 2020.

All of the 2021, 2023, 2024 and 2026 senior notes (the "senior notes") are guaranteed on a senior basis by the Guarantors, which are also guarantors of obligations under our revolving secured line of credit facility. Other existing and future subsidiaries of ours may become guarantors of the senior notes in the future. The indentures for the senior notes provide for a guarantor of the senior notes to be released from its obligations under its guarantee of the senior notes under specified circumstances.

Mortgage Note

On August 6, 2018, we entered into a $12.0 million mortgage note with a commercial bank that is secured by a first mortgage lien on a building acquired by us and an assignment of all leases, rents, revenues and profits under all present and future leases of the building. The note matures on August 6, 2023, and bears interest at LIBOR plus 150 basis points.

Principal Debt Maturities

The scheduled principal maturities of our debt as of December 31, 2019 are as follows:

(In millions)
Year		Revolving Secured Line of Credit Facility				Warehouse Facilities				Term ABS Financings (1)				Senior Notes				Mortgage Note				Total
2020		$	—			$	—			$	1,376.0			$	151.8			$	0.7			$	1,528.5
2021		—				—				1,017.2				—				0.7				1,017.9
2022		—				—				915.5				—				0.7				916.2
2023		—				—				46.9				250.0				9.2				306.1
2024		—				—				—				400.0				—				400.0
Thereafter		—				—				—				400.0				—				400.0
Total		$	—			$	—			$	3,355.6			$	1,201.8			$	11.3			$	4,568.7

 

(1)	The principal maturities of the Term ABS transactions are estimated based on forecasted collections.

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Debt Covenants

As of December 31, 2019, we were in compliance with our covenants under the revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions. These covenants require a minimum ratio of (1) our net earnings, adjusted for specified items, before income taxes, depreciation, amortization and fixed charges to (2) our fixed charges. These covenants also limit the maximum ratio of our funded debt less unrestricted cash and cash equivalents to tangible net worth. Additionally, we must maintain consolidated net income of not less than $1 for the two most recently ended fiscal quarters.  Some of these covenants may indirectly limit the repurchase of common stock or payment of dividends on common stock. Our Warehouse facilities also contain covenants that measure the performance of the contributed assets.

Our Term ABS financings also contain covenants that measure the performance of the contributed assets.  As of December 31, 2019, we were in compliance with all such covenants.  As of the end of the year, we were also in compliance with our covenants under the senior notes indentures.

Interest Rate Caps.  We utilize interest rate cap agreements to manage the interest rate risk on certain secured financings.  The following tables provide the terms of our interest rate cap agreements that were in effect as of December 31, 2019 and 2018:

(Dollars in millions)
As of December 31, 2019
Facility Amount				Facility Name		Purpose		Start		End		Notional				Cap Interest Rate (1)
$	400.0			Warehouse Facility II		Cap Floating Rate		12/2017		12/2020		$	205.0			5.50	%
300.0				Warehouse Facility IV		Cap Floating Rate		05/2017		04/2021		100.0				6.50	%
						Cap Floating Rate		05/2018		04/2021		150.0				6.50	%
						Cap Floating Rate		07/2019		07/2023		50.0				6.50	%
												300.0
100.0				Warehouse Facility V		Cap Floating Rate		08/2018		08/2023		75.0				6.50	%
150.0				Warehouse Facility VII		Cap Floating Rate		12/2017		11/2021		143.8				5.50	%
200.0				Warehouse Facility VIII		Cap Floating Rate		08/2019		08/2023		200.0				5.50	%

(Dollars in millions)
As of December 31, 2018
Facility Amount				Facility Name		Purpose		Start		End		Notional				Cap Interest Rate (1)
$	400.0			Warehouse Facility II		Cap Floating Rate		12/2017		12/2020		$	205.0			5.50	%
250.0				Warehouse Facility IV		Cap Floating Rate		04/2016		04/2019		25.0				5.50	%
						Cap Floating Rate		05/2017		04/2021		75.0				6.50	%
						Cap Floating Rate		05/2018		04/2021		150.0				6.50	%
												250.0
100.0				Warehouse Facility V		Cap Floating Rate		08/2018		08/2023		75.0				6.50	%
125.3				Term ABS 2016-1		Cap Floating Rate		04/2016		02/2019		64.2				5.00	%
150.0				Warehouse Facility VII		Cap Floating Rate		12/2017		11/2021		150.0				5.50	%

 

(1)	Rate excludes the spread over the corresponding LIBOR or commercial paper rate.

The interest rate caps have not been designated as hedging instruments.  As of December 31, 2019 and 2018, the interest rate caps had a fair value of $0.1 million and $0.0 million, respectively, as the capped rates were significantly above market rates.

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Information related to the effect of derivative instruments not designated as hedging instruments on our consolidated statements of income for the years ended December 31, 2019, 2018 and 2017 is as follows:

(In millions)				Amount of Loss Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments				For the Years Ended December 31,
		Location		2019				2018				2017
Interest rate caps		Interest expense		$	(0.1	)		$	(0.1	)		$	(0.1	)

Income Tax Provision

The income tax provision consists of the following:

(In millions)	For the Years Ended December 31,
	2019				2018				2017
Income before provision for income taxes:	$	855.9			$	755.1			$	583.8
Current provision for income taxes:
Federal	94.1				110.9				184.6
State	18.7				19.5				13.5
	112.8				130.4				198.1
Deferred provision for income taxes:
Federal	70.7				35.0				(88.4		)
State	14.8				14.3				2.7
	85.5				49.3				(85.7		)
Interest and penalties expense:
Interest	1.5				1.4				1.2
Penalties	—				—				—
	1.5				1.4				1.2
Provision for income taxes	$	199.8			$	181.1			$	113.6

Deferred Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities consist of the following:

(In millions)	As of December 31,
	2019				2018
Deferred tax assets:
Allowance for credit losses	$	128.3			$	110.1
Stock-based compensation	15.5				16.5
Deferred state net operating loss	3.6				4.3
Other, net	13.2				7.0
Total deferred tax assets	160.6				137.9
Deferred tax liabilities:
Valuation of Loans receivable	471.3				363.9
Deferred Loan origination costs	1.6				1.5
Other, net	10.2				9.2
Total deferred tax liabilities	483.1				374.6
Net deferred tax liability	$	322.5			$	236.7

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The deferred state net operating loss tax asset arising from the operating loss carryforward for state income tax purposes is expected to expire at various times beginning in 2028, if not utilized.  During 2018, we wrote off $3.4 million of this deferred tax asset as we determined that we would not be able to utilize a state net operating loss carryforward prior to its expiration. We do not anticipate expiration of the remaining net operating loss carryforwards prior to their utilization.

Effective Income Tax Rate

A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is as follows:

	For the Years Ended December 31,
	2019			2018			2017
U.S. federal statutory income tax rate	21.0	%		21.0	%		35.0	%
Effect of the 2017 Tax Act	—	%		-0.7	%		-17.1	%
State income taxes	3.1	%		3.5	%		1.7	%
Excess tax benefits from stock-based compensation plans	-0.9	%		-0.1	%		-0.4	%
Other	0.1	%		0.3	%		0.3	%
Effective income tax rate	23.3	%		24.0	%		19.5	%

U.S. federal statutory income tax rate

The enactment of the 2017 Tax Act in December 2017 lowered our federal statutory income tax rate from 35.0% in 2017 to 21.0% in 2018 and 2019.

Effect of the 2017 Tax Act

While the lower federal statutory income tax rate was not effective until 2018, the 2017 Tax Act resulted in a one-time reversal of $99.8 million of provision for income taxes in 2017 as we were required to revalue deferred taxes and uncertain tax positions at the lower federal statutory income tax rate. In 2018, we reversed a provisional valuation allowance related to stock-based compensation that we had established in 2017 upon enactment of the 2017 Tax Act, which resulted in a $5.5 million reversal of provision for income taxes in 2018.

State income taxes

The decrease in our state income tax rate from 2018 to 2019 was primarily the result of the write-off of a deferred state net operating loss tax asset during 2018. The increase in our state income tax rate from 2017 to 2018 was primarily the result of the write-off of a deferred state net operating loss tax asset during 2018, an increase in the percentage of income reserved for uncertain tax positions and higher effective income tax rates in certain state tax jurisdictions.

Excess tax benefits from stock-based compensation plans

During the first quarter of each year, we receive a tax benefit upon the vesting of restricted stock and the conversion of restricted stock units to common stock based on the fair value of the shares. The amount by which this tax benefit exceeds the grant-date fair value that was recognized as stock-based compensation expense is referred to as an excess tax benefit. Excess tax benefits are recognized in provision for income taxes and reduce our effective income tax rate. The increase in excess tax benefits from 2018 to 2019 was primarily the result of an increase in the number of restricted stock units that were converted to common stock due to the timing of long-term stock award grants.

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Unrecognized Tax Benefits

The following table is a summary of changes in gross unrecognized tax benefits:

(In millions)	For the Years Ended December 31,
	2019				2018				2017
Unrecognized tax benefits at January 1,	$	38.7			$	31.9			$	27.7
Additions for tax positions of the current year	10.0				10.2				6.7
Additions for tax positions of prior years	—				—				0.3
Reductions for tax positions of prior years	—				—				(0.4		)
Settlements	(2.3		)		—				—
Reductions as a result of a lapse of the statute of limitations	(4.7		)		(3.4		)		(2.4		)
Unrecognized tax benefits at December 31,	$	41.7			$	38.7			$	31.9

 

The total amount of gross unrecognized tax benefit that, if recognized, would favorably affect our effective income tax rate in future periods, was $41.7 million as of December 31, 2019.  Accrued interest related to uncertain tax positions was $8.9 million and $7.5 million as of December 31, 2019 and 2018, respectively.

We are subject to income tax in federal and state jurisdictions. We are generally no longer subject to tax examinations on federal returns filed for years prior to 2016 and state returns filed for years prior to 2012.

Basic net income per share has been computed by dividing net income by the basic number of weighted average shares outstanding.  Diluted net income per share has been computed by dividing net income by the diluted number of weighted average shares outstanding using the treasury stock method.  The share effect is as follows:

	For the Years Ended December 31,
	2019			2018			2017
Weighted average shares outstanding:
Common shares	18,614,719			19,144,785			19,245,188
Vested restricted stock units	285,537			301,282			252,531
Basic number of weighted average shares outstanding	18,900,256			19,446,067			19,497,719
Dilutive effect of restricted stock and restricted stock units	76,304			86,245			61,217
Dilutive number of weighted average shares outstanding	18,976,560			19,532,312			19,558,936

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The following table summarizes our stock repurchases for the years ended December 31, 2019, 2018, and 2017:

(Dollars in millions)		For the Years Ended December 31,
		2019							2018							2017
Stock Repurchases		Number of Shares Repurchased			Cost				Number of Shares Repurchased			Cost				Number of Shares Repurchased			Cost
Open Market (1)		669,752			$	282.2			336,743			$	127.1			588,580			$	119.1
Other (2)		42,696			18.2				6,185			2.0				21,680			4.4
Total		712,448			$	300.4			342,928			$	129.1			610,260			$	123.5

(1)

Represents repurchases under authorizations by the board of directors for the repurchase of shares by us from time to time in the open market or in privately negotiated transactions. On November 7, 2019, the board of directors authorized the repurchase of up to one million shares of our common stock in addition to the board’s prior authorizations. As of December 31, 2019, we had authorization to repurchase 769,713 shares of our common stock.

(2)	Represents shares of common stock released to us by team members as payment of tax withholdings upon the vesting of restricted stock and restricted stock units and the conversion of restricted stock units to common stock.

Pursuant to our Amended and Restated Incentive Compensation Plan (the “Incentive Plan”), we can grant stock-based awards in the form of restricted stock, restricted stock units and stock options to team members, officers, directors, and contractors at any time prior to March 26, 2022.  On March 26, 2012, our board of directors approved an amendment to our Incentive Plan, increasing the number of shares authorized for issuance by 500,000 shares, to 2.0 million shares.  The shares available for future grants under the Incentive Plan totaled 121,621 as of December 31, 2019.

Restricted Stock

We grant performance-based and time-based shares of restricted stock to team members in accordance with our Incentive Plan.  The grant-date fair value per share is estimated to equal the market price of our common stock on the date of grant. Based on the terms of individual restricted stock grant agreements, shares vest under one of the following methods:

•	Over a period of 15 years, based on continuous employment and a combination of the cumulative improvement in our annual adjusted economic profit, a non-GAAP financial measure, and the attainment of annual adjusted economic profit targets.

•	Over a period of three years, based on continuous employment.

 

A summary of the non-vested restricted stock activity under the Incentive Plan for the year ended December 31, 2019 is presented below:

Restricted Stock		Number of Shares			Weighted Average Grant-Date Fair Value Per Share
Non-vested as of December 31, 2018		150,647			$	117.41
Granted		5,301			441.54
Vested		(17,971	)		148.14
Forfeited		(474	)		363.16
Non-vested as of December 31, 2019		137,503			$	125.04

The grant-date weighted average fair value of shares granted in 2019, 2018 and 2017 was $441.54, $317.87, and $200.79, respectively.  The total fair value of shares vested was $7.9 million in 2019, $4.8 million in 2018 and $5.6 million in 2017.

 

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Restricted Stock Units

 

We grant performance-based restricted stock units to team members and directors in accordance with our Incentive Plan. The grant-date fair value per share is estimated to equal the market price of our common stock on the date of grant. Each restricted stock unit represents and has a value equal to one share of common stock. Based on the terms of individual restricted stock grant agreements, restricted stock units vest under one of the following methods:

 

•	Over a period of ten years, based on continuous employment and the cumulative improvement in our annual adjusted economic profit.

•	Over a period of five years, based upon the compounded annual growth rate in our adjusted economic profit.

•	Over a period of one to four years, based on continuous employment and the compounded annual growth rate in our adjusted EPS, a non-GAAP financial measure.

 

A summary of the restricted stock unit activity under the Incentive Plan for the year ended December 31, 2019, is presented below:

Restricted Stock Units		Number of Restricted Stock Units			Weighted Average Grant-Date Fair Value Per Share				Aggregate Intrinsic Value (2) (in millions)				Weighted Average Remaining Contractual Term (in years)
Outstanding as of December 31, 2018		516,773			$	127.07
Granted		3,000			453.64
Converted		(87,842	)		106.54
Forfeited		(3,100	)		206.45
Outstanding as of December 31, 2019 (1)		428,831			$	132.99			$	189.7			4.1
Vested as of December 31, 2019		285,250			$	124.67			$	126.2			3.6

 

(1)	No RSUs outstanding at December 31, 2019 were convertible to shares of common stock.

(2)	The intrinsic value of RSUs is measured by applying the closing stock price as of December 31, 2019 to the applicable number of units.

 

The grant-date weighted average fair value of RSUs granted in 2019, 2018 and 2017 was $453.64, $363.11, and $206.45, respectively. The total intrinsic value of RSUs converted to common stock during 2019, 2018 and 2017 was $36.9 million, $0.5 million, and $6.9 million, respectively.  

Stock-based compensation expense

Stock-based compensation expense consists of the following:

(In millions)	For the Years Ended December 31,
	2019				2018				2017
Restricted stock	$	3.0			$	2.7			$	2.9
Restricted stock units	4.6				7.6				12.5
Total	$	7.6			$	10.3			$	15.4

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While the stock-based awards are often expected to vest in equal, annual installments over the corresponding requisite service periods of the grants, the related stock-based compensation expense is not recognized on a straight-line basis over the same periods.  Each installment is accounted for as a separate award and as a result, the fair value of each installment is recognized as stock-based compensation expense on a straight-line basis over the related expected vesting period.  Assuming performance targets are achieved in the periods currently estimated, we expect to recognize the remaining expense for stock-based awards outstanding as of December 31, 2019 over a weighted average period of 1.7 years, as follows:

(In millions)
For the Years Ended December 31,		Restricted Stock Units				Restricted Stock				Total Projected Expense
2020		$	2.8			$	1.9			$	4.7
2021		0.6				1.2				1.8
2022		0.1				0.9				1.0
2023		—				0.7				0.7
2024		—				0.5				0.5
Thereafter		—				0.5				0.5
Total		$	3.5			$	5.7			$	9.2

Business Segment Overview

We identify operating segments as components of our business for which separate financial information is regularly evaluated by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance.  We periodically review and redefine our segment reporting as internal management reporting practices evolve and the components of our business change.  Currently, the CODM reviews consolidated financial statements and metrics to allocate resources and assess performance.  Thus, we have determined that we operate in one reportable operating segment.  The consolidated financial statements reflect the financial results of our one reportable operating segment.

Geographic Information

For the three years ended December 31, 2019, 2018 and 2017, all of our revenues were derived from the United States.  As of December 31, 2019 and 2018, all of our long-lived assets were located in the United States.

Products and Services Information

Our primary product consists of financing programs that enable Dealers to sell vehicles to consumers, regardless of their credit history. We also provide Dealers the ability to offer or purchase ancillary products on vehicles financed by us.

Major Customer Information

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Litigation and Other Legal Matters

In the normal course of business and as a result of the consumer-oriented nature of the industry in which we operate, we and other industry participants are frequently subject to various consumer claims, litigation and regulatory investigations seeking damages, fines and statutory penalties. The claims allege, among other theories of liability, violations of state, federal and foreign truth-in-lending, credit availability, credit reporting, consumer protection, warranty, debt collection, insurance and other consumer-oriented laws and regulations, including claims seeking damages for alleged physical and mental harm relating to the repossession and sale of consumers' vehicles and other debt collection activities. As the assignee of Consumer Loans originated by Dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against Dealers. We may also have disputes and litigation with Dealers. The claims may allege, among other theories of liability, that we breached our Dealer servicing agreement. We may also have disputes and litigation with vendors and other third parties. The claims may allege, among other theories of liability, that we breached a license agreement or contract. The damages, fines and penalties that may be claimed by consumers, regulatory agencies, Dealers, vendors or other third parties in these types of matters can be substantial. The relief requested by plaintiffs varies but may include requests for compensatory, statutory and punitive damages and injunctive relief, and plaintiffs may seek treatment as purported class actions. Current actions to which we are a party include the following matters.

On May 7, 2019, we received a subpoena from the Office of the New York State Attorney General, relating to the Company’s origination and collection policies and procedures in the state of New York. We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

On April 22, 2019, we received a civil investigative demand from the Bureau of Consumer Financial Protection (the “Bureau”) seeking, among other things, certain information relating to the Company’s origination and collection of Consumer Loans, TPPs and credit reporting. We cannot predict the eventual scope, duration or outcome of this investigation at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

On August 14, 2017, we received a subpoena from the Attorney General of the State of Mississippi, relating to the origination and collection of non-prime auto loans in the state of Mississippi. The Company cooperated with the inquiry. On April 23, 2019, the Attorney General of the State of Mississippi, on behalf of the State of Mississippi, filed a complaint in the Chancery Court of the First Judicial District of Hinds County, Mississippi, alleging that the Company engaged in unfair and deceptive trade practices in subprime auto lending, loan servicing, vehicle repossession and debt collection in the State of Mississippi in violation of the Mississippi Consumer Protection Act. The complaint seeks injunctive relief, including civil penalties and disgorgement, and payment of the State’s attorney’s fees and costs. We cannot predict the duration or outcome of this lawsuit at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this lawsuit. The Company intends to vigorously defend itself in this matter.

On June 14, 2017, we were informed that the Bureau’s Office of Fair Lending and Equal Opportunity is investigating whether the Company may have violated the Equal Credit Opportunity Act ("ECOA") and Regulation B. On February 6, 2020, we were notified by the Bureau that they have completed their examination, they identified two matters requiring action and these matters will be addressed through the supervisory process. 

On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the Company’s repossession and sale policies and procedures in the state of Maryland. We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

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On February 19, 2016, we received a First Amended Complaint filed by Westlake Services d/b/a Westlake Financial Service and Nowcom Corporation, alleging that the Company has attempted to monopolize the indirect financing profit sharing program market in violation of Section 2 of the Sherman Act and seeking, among other things, injunctive relief and unspecified money damages, which, if awarded, would likely be trebled pursuant to the Sherman Act. The case was filed in the United States District Court, Central District of California, Western Division. On April 6, 2016, the Court dismissed the claims brought by Nowcom Corporation. On January 5, 2018, the Court entered judgment in favor of the Company, dismissing the case with prejudice on the merits and ordering that the Company be awarded its costs of suit from Westlake Services, LLC. On February 2, 2018, Westlake Services, LLC filed a Notice of Appeal with the Court. On July 13, 2018, Westlake Services, LLC filed its appellate brief with the United States Court of Appeals for the Ninth Circuit. On September 14, 2018, we filed our response to Westlake Services, LLC’s appellate brief. On October 19, 2018, Westlake Services, LLC filed its reply brief. On February 5, 2020, the United States Court of Appeals for the Ninth Circuit affirmed the January 5, 2018 judgment entered in favor of the Company, dismissing the case with prejudice.

On December 9, 2014, we received a civil investigative subpoena from the U.S. Department of Justice pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 directing us to produce certain information relating to subprime automotive finance and related securitization activities. We have cooperated with the inquiry, but cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

On December 4, 2014, we received a civil investigative demand from the Office of the Attorney General of the Commonwealth of Massachusetts relating to the origination and collection of non-prime auto loans in Massachusetts. On November 20, 2017 we received a second civil investigation demand from the Office of the Attorney General seeking updated information on its original civil investigation demand, additional information related to the Company's origination and collection of Consumer Loans, and information regarding securitization activities. In connection with this inquiry, we were informed by representatives of the Office of the Attorney General that it believes that the Company may have engaged in unfair and deceptive acts or practices related to the origination and collection of auto loans, which may have caused some of the Company’s representations and warranties contained in securitization documents to be inaccurate.  The investigation relating to the origination, collection and securitization of non-prime auto loans and securities transactions by the Office of the Attorney General remains ongoing. We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

An adverse ultimate disposition in any action to which we are a party or otherwise subject could have a material adverse impact on our financial position, liquidity and results of operations.

Lease Commitments

We lease office space and office equipment.  We expect that in the normal course of business, leases will be renewed or replaced by other leases.  Total rental expense on all operating leases was $1.8 million for 2019, $2.2 million for 2018, and $1.5 million for 2017.  Contingent rentals under the operating leases were insignificant. Our total minimum future lease commitments under operating leases as of December 31, 2019 are as follows:

(In millions)
Year		Minimum Future Lease Commitments
2020		$	1.6
2021		1.2
2022		0.6
2023		—
2024		—
Total		$	3.4

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The following quarterly financial data for the years ended December 31, 2019 and 2018 has been prepared in accordance with GAAP:

(In millions, except per share data)		2019
		Quarters Ended
Income Statement Data		March 31				June 30				September 30				December 31
Revenue		$	353.8			$	370.6			$	378.7			$	385.9
Income before provision for income taxes		206.3				215.3				219.1				215.2
Net income		164.4				164.4				165.4				161.9
Net income per share (1):
Basic		$	8.67			$	8.68			$	8.73			$	8.63
Diluted		$	8.65			$	8.68			$	8.73			$	8.60
(In millions, except per share data)		2018
		Quarters Ended
Income Statement Data		March 31				June 30				September 30				December 31
Revenue		$	295.6			$	315.4			$	332.0			$	342.8
Income before provision for income taxes		157.7				198.0				198.4				201.0
Net income		120.1				151.0				151.0				151.9
Net income per share (1):
Basic		$	6.18			$	7.76			$	7.76			$	7.82
Diluted		$	6.17			$	7.75			$	7.75			$	7.79

(1)	Basic and diluted net income per share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted net income per share.

On January 17, 2020, we used a portion of the net proceeds from the 2024 senior notes to redeem the remaining $151.8 million outstanding principal amount of the 2021 senior notes. For additional information regarding this transaction, see Note 9 to these consolidated financial statements.

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

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ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)	The weighted average exercise price in this column does not take into account restricted stock units that are outstanding under the Incentive Plan, which have no exercise price.

(b)	For additional information regarding our equity compensation plans, including grants of restricted stock units, see Note 14 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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