FORM 8-K

Silver Triangle Building
25505 West Twelve Mile Road
Southfield, MI 48034-8339
(248) 353-2700
creditacceptance.com

NEWS RELEASE

FOR IMMEDIATE RELEASE

Date: October 31, 2008

Investor Relations: Douglas W. Busk
Treasurer
(248) 353-2700 Ext. 4432
IR@creditacceptance.com

NASDAQ Symbol: CACC

CREDIT ACCEPTANCE ANNOUNCES
THIRD QUARTER 2008 EARNINGS

Southfield, Michigan — October 31, 2008 — Credit Acceptance Corporation (NASDAQ: CACC) (referred to as the “Company”, “we”, “our”, or “us”) announced consolidated net income of $20.7 million, or $0.67 per diluted share, for the three months ended September 30, 2008 compared to consolidated net income of $14.7 million, or $0.47 per diluted share, for the same period in 2007. For the nine months ended September 30, 2008 consolidated net income was $48.6 million, or $1.57 per diluted share, compared to consolidated net income of $42.4 million, or $1.36 per diluted share, for the same period in 2007.

Adjusted net income, a non-GAAP financial measure, for the three months ended September 30, 2008 was $22.3 million, or $0.72 per diluted share, compared to $15.8 million, or $0.51 per diluted share, for the same period in 2007. For the nine months ended September 30, 2008 adjusted net income was $59.2 million, or $1.91 per diluted share, compared to adjusted net income of $46.8 million, or $1.50 per diluted share, for the same period in 2007.

Refer to our Form 10-Q, filed today with the Securities and Exchange Commission and included on our website at creditacceptance.com, for a complete discussion of the results of operations and financial data for the three and nine months ended September 30, 2008.

Operating Results

Results for the three and nine months ended September 30, 2008, compared to the same periods in 2007, include the following:


	% Change
	Three Months Ended			Nine Months Ended
	September 30, 2008			September 30, 2008
Consumer loan unit volume		26.9	%		22.0	%
Consumer loan dollar volume		27.5	%		32.0	%
Number of active dealer-partners		16.2	%		19.2	%
Average loans receivable balance, net		37.7	%		35.0	%

Loan Performance

The following table compares our forecast of consumer loan collection rates as of September 30, 2008, with the forecasts as of June 30, 2008, as of December 31, 2007, and at the time of assignment, segmented by year of assignment:


	Forecasted Collection Percentage as of				Variance in Forecasted Collection Percentage from
Loan Assignment	September 30,	June 30,	December 31,	Initial	June 30,	December 31,	Initial
Year	2008	2008	2007 (1)	Forecast	2008	2007	Forecast
1999	72.1%	72.1%	72.0%	73.6%	0.0%	0.1%		-1.5	%
2000	72.5%	72.5%	72.4%	72.8%	0.0%	0.1%		-0.3	%
2001	67.4%	67.4%	67.3%	70.4%	0.0%	0.1%		-3.0	%
2002	70.4%	70.4%	70.6%	67.9%	0.0%	-0.2%		2.5	%
2003	73.9%	74.0%	74.1%	72.0%	-0.1%	-0.2%		1.9	%
2004	73.5%	73.5%	73.5%	73.0%	0.0%	0.0%		0.5	%
2005	74.1%	74.1%	73.8%	74.0%	0.0%	0.3%		0.1	%
2006	70.3%	70.2%	70.9%	71.4%	0.1%	-0.6%		-1.1	%
2007	68.2%	68.2%	71.1%	70.7%	0.0%	-2.9%		-2.5	%
2008	68.2%	69.0%	—	69.7%	-0.8%	—		-1.5	%


(1)		These forecasted collection percentages differ from those previously reported in our Annual Report on Form 10-K for the year ended December 31, 2007 and our 2007 earnings release as they have been revised for a new methodology for forecasting future collections on loans that we implemented during the first quarter of 2008.

Both GAAP net income and adjusted net income, for the three and nine months ended September 30, 2008, were negatively impacted by a reduction in our forecasted collection rates during the second quarter of 2008. We forecast future loan cash flows by comparing loans in our current portfolio to historical loans with the same attributes. The attributes include both variables captured at loan origination like credit bureau data, application data, loan data and vehicle data as well as variables captured subsequent to loan origination such as collection and delinquency data. Our forecast as of March 31, 2008 assumed that loans within our current portfolio would produce similar collection rates as produced by historical loans with the same attributes. During the second quarter of 2008, we modified our forecasting methodology, which now assumes that loans originated in 2006, 2007 and 2008 will perform 100 to 300 basis points worse than historical loans with the same attributes.

During the third quarter, actual loan performance for 2007 and prior originations was consistent with our revised forecast. As a result, forecasted collection rates on 2007 and prior loans remained consistent with our forecasts for these same loans three months ago. Actual loan performance was slightly worse than expected for 2008 originations. As a result, the table above shows a decline in the forecasted collection rate for 2008 loans from 69.0% to 68.2%. The forecasted collection rate for 2008 loans as of September 30, 2008 includes both loans that were in our portfolio as of June 30, 2008 and loans received during the most recent quarter. The following table summarizes the change in our forecast for each of these segments:


	Forecasted Collection Percentage as of
	September 30,			June 30,
2008 Loan Assignment Period	2008			2008			Variance
January 1, 2008 through June 30, 2008		68.3	%		69.0	%		-0.7	%
July 1, 2008 through September 30, 2008		68.0	%		—			—

As a result of the current economic uncertainty, we are cautious about our forecasts of future collection percentages. However, we believe our current estimates are reasonable for the following reasons:

	•		Our forecasts start with the assumption that loans in our current portfolio will perform like historical loans with similar attributes.

	•		We reduced our forecasts during the second quarter on loans originated in 2006 through 2008 by 100 to 300 basis points based on recent trends and a concern about the worsening economic environment.

	•		Actual loan performance during the third quarter was consistent with our forecast as of June 30, 2008 for loans originated in 2007 and prior periods.

	•		Actual loan performance during the third quarter was slightly below our forecast as of June 30, 2008 for loans originated during the first six months of 2008, and our forecasted collection rate for these loans was reduced accordingly.

	•		We have reduced the forecasted collection rate used at loan inception to price new loan originations. As of September 1, 2008, the forecasted collection rate used at loan inception is approximately 300 basis points lower than identical loans originated a year ago.

	•		Our current forecasting methodology, when applied against historical data, produces a consistent result as the loans age.

If the economic environment continues to deteriorate, our loan collection rates may continue to decline. Knowing this, we set prices at loan inception to increase the likelihood of achieving an acceptable return on capital, even if collection results are worse than we currently forecast. A 100 basis point change in the collection rate impacts the after-tax return on capital by approximately 30 basis points for dealer loans, and approximately 65 basis points for purchased loans.

The following table presents forecasted consumer loan collection rates, advance rates (includes amounts paid to acquire purchased loans), the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of September 30, 2008. Payments of dealer holdback and accelerated payments of dealer holdback are not included in the advance percentage paid to the dealer-partner. All amounts are presented as a percentage of the initial balance of the consumer loan (principal + interest). The table includes both dealer loans and purchased loans.


	As of September 30, 2008
	Forecasted			% of Forecast
Loan Assignment Year	Collection %	Advance %	Spread %	Realized
1999	72.1%	48.7%	23.4%	99.6%
2000	72.5%	47.9%	24.6%	99.2%
2001	67.4%	46.0%	21.4%	98.7%
2002	70.4%	42.2%	28.2%	98.3%
2003	73.9%	43.4%	30.5%	97.8%
2004	73.5%	44.0%	29.5%	96.7%
2005	74.1%	46.9%	27.2%	94.0%
2006	70.3%	46.6%	23.7%	78.5%
2007	68.2%	46.5%	21.7%	48.1%
2008	68.2%	44.9%	23.3%	15.1%

The following table presents forecasted consumer loan collection rates, advance rates (includes amounts paid to acquire purchased loans), and the spread (the forecasted collection rate less the advance rate) as of September 30, 2008 for purchased loans and dealer loans separately:


			Forecasted
	Loan Assignment Year		Collection %			Advance %			Spread %
Purchased loans		2007		68.0	%		48.9	%		19.1	%
		2008		67.5	%		47.2	%		20.3	%

Dealer loans		2007		68.2	%		45.9	%		22.3	%
		2008		68.6	%		43.7	%		24.9	%

Although the advance rate on purchased loans is higher as compared to the advance rate on dealer loans, purchased loans do not require the Company to pay dealer holdback. The increase in the spread between the forecasted collection rate and the advance rate occurred as a result of pricing changes implemented during the first nine months of 2008.

Loan Volume

The Company experienced strong demand for its product during the quarter. During 2008, the competitive environment has allowed the Company to reduce advance rates and maintain strong growth in unit volumes. The following table summarizes changes in loan volume and active dealer-partners during the most recent quarter:


	Three Months Ended September 30,
	2008			2007			% change
Consumer loan unit volume		27,636			21,784			26.9	%
Active dealer-partners (1)		2,270			1,953			16.2	%

Average volume per active dealer-partner		12.2			11.2			8.9	%

Consumer loan unit volume from dealer-partners active both periods		18,393			17,293			6.4	%
Dealer-partners active both periods		1,244			1,244			0.0	%

Average volume per dealer-partners active both periods		14.8			13.9			6.4	%

Consumer loan unit volume from new dealer-partners		1,792			1,190			50.6	%
New active dealer-partners (2)		300			258			16.3	%

Average volume per new active dealer-partners		6.0			4.6			30.4	%

Attrition (3)		20.6	%		19.5	%


(1)		Active dealer-partners are dealer-partners who have received funding for at least one dealer loan or purchased loan during the period.

(2)		New active dealer-partners are dealer-partners who enrolled in our program and have received funding for their first dealer loan or purchased loan from us during the periods presented.

(3)		Attrition is measured according to the following formula: decrease in consumer loan unit volume from dealer-partners who have received funding for at least one dealer loan or purchased loan during the comparable period of the prior year but did not receive funding for any dealer loans or purchased loans during the current period divided by prior year comparable period consumer loan unit volume.

The increase in unit volume for the quarter resulted from increased volume per active dealer-partner as well as an increase in the number of active dealer-partners.

The following table summarizes consumer loan dollar growth in each of the last seven quarters compared with the same period in the previous year:


Year over Year
Growth in Consumer Loan Dollar Volume
Three Months Ended	% Change
March 31, 2007		41.1	%
June 30, 2007		43.9	%
September 30, 2007		2.2	%
December 31, 2007		23.3	%
March 31, 2008		28.5	%
June 30, 2008		40.6	%
September 30, 2008		27.5	%

Unit volume and dollar volume grew at roughly the same rate during the third quarter of 2008 due to various pricing changes implemented at the end of the second quarter and in the third quarter of 2008 that have reduced the average loan size.

The following table summarizes key information regarding purchased loans:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
New purchased loan unit volume as a percentage of total unit volume		30.8	%		25.5	%		31.6	%		14.0	%

Net purchased loan receivable balance as a percentage of the total net receivable balance as of the end of the period		30.0	%		12.1	%		30.0	%		12.1	%

Access to Capital

Since the beginning of 2008, we have:

	•		Expanded our bank line of credit to $153.5 million and renewed to June 2010

	•		Renewed our $325.0 million warehouse facility to August 2009

	•		Completed a $150.0 million asset-backed secured financing with an institutional investor

	•		Completed a $50.0 million two-year revolving warehouse facility with another institutional investor

	•		Renewed our $50.0 million residual credit facility to August 2009

Based on our available capital, we are targeting a 10% reduction in year-over-year consumer loan unit volume for the fourth quarter of 2008. Our target growth rate in 2009 will depend on our success in securing additional financing and renewing our existing debt facilities. If no additional capital is obtained, during the first six months of 2009, we expect to continue to target unit volumes that are approximately 10% lower than the prior year comparable period.

In August of 2009, our $325.0 million warehouse facility and our $50.0 million residual credit facility (collectively referred to as the “maturing facilities”) mature. If we are unsuccessful in renewing the maturing facilities, and alternative financing cannot be obtained, additional reductions in loan origination volumes will be required. Given current conditions in the credit markets, there can be no assurance that the maturing facilities will be renewed or that alternative financing will be obtained. In the event that the maturing facilities are not renewed, no further advances would be made under the maturing facilities. Assuming the Company continues to be in compliance with all debt covenants, the amount outstanding would be repaid over time as the collections on the loans securing the maturing facilities are received.

The following table summarizes targeted loan origination volumes under two scenarios: (1) the maturing facilities are renewed (or replaced) but no other additional capital is obtained during 2009; and (2) no additional capital is obtained during 2009 and the maturing facilities are not renewed.


	Estimated Loan Origination Volume for the Years Ended December 31,
			2009
			Assuming Maturing		Assuming Maturing
			Facilities are Renewed		Facilities are Not Renewed
(Dollars in thousands)	2008		(or Replaced)		(or Replaced)
Loan dollar volume	$	800,000	$	600,000	$	550,000
Average loans receivable balance, net	$	1,000,000	$	1,100,000	$	1,050,000

Adjusted Financial Results

Adjusted financial results are provided to help shareholders understand our financial performance. The financial data below is non-GAAP, unless labeled otherwise. We use adjusted financial information internally to measure financial performance and to determine incentive compensation. The table below shows our results following adjustments to reflect non-GAAP accounting methods. These adjustments are explained in the table footnotes and the subsequent “Floating Yield Adjustment” and “License Fee Yield Adjustment” sections. Measures such as adjusted average capital, adjusted net income, adjusted net income per diluted share, adjusted net income plus interest expense after-tax, adjusted return on capital, adjusted revenue, adjusted operating expenses, and economic profit are all non-GAAP financial measures. These non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.

Adjusted financial results for the three and nine months ended September 30, 2008, compared to the same periods in 2007, include the following:


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
(Dollars in thousands, except per share data)	2008			2007			% Change			2008			2007			% Change
Adjusted average capital	$	1,031,581		$	724,884			42.3	%	$	961,944		$	687,604			39.9	%
Adjusted net income	$	22,260		$	15,754			41.3	%	$	59,220		$	46,786			26.6	%
Adjusted interest expense after-tax	$	7,081		$	5,689			24.5	%	$	19,996		$	16,870			18.5	%
Adjusted net income plus interest expense after-tax	$	29,341		$	21,443			36.8	%	$	79,216		$	63,656			24.4	%
Adjusted return on capital		11.4	%		11.8	%		-3.4	%		11.0	%		12.3	%		-10.6	%
Cost of capital		6.5	%		7.1	%		-8.5	%		6.5	%		7.1	%		-8.5	%
Economic profit	$	12,636		$	8,606			46.8	%	$	32,466		$	26,971			20.4	%
GAAP diluted weighted average shares outstanding		31,024,455			31,139,612			-0.4	%		30,994,466			31,228,893			-0.8	%
Adjusted net income per diluted share	$	0.72		$	0.51			41.2	%	$	1.91		$	1.50			27.3	%

Economic profit increased 46.8% and 20.4% for the three and nine months ended September 30, 2008, respectively, as compared to the same periods in 2007. Economic profit is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business.

For the three months ended September 30, 2008, adjusted average capital grew by 42.3% and adjusted return on capital declined from 11.8% to 11.4%. For the nine months ended September 30, 2008, adjusted average capital grew by 39.9% while the adjusted return on capital declined from 12.3% to 11.0%.

Although the return on capital is lower as compared to the prior year period, the return on capital improved during the third quarter of 2008 as compared to the second quarter of 2008. As we discussed in prior quarters, the decline in the return on capital experienced through the first quarter of 2008 was the result of lower yields produced by loans originated in 2006 and 2007 as a result of pricing reductions made during these periods in response to a difficult competitive environment. During the latter part of 2007 and during 2008, we increased prices which positively impacted the yield and return on capital of new originations. While the sequential improvement in the return on capital was less than it would have been had we not reduced our estimate of future loan collection rates during the second quarter of 2008, the return on capital improved to 11.4% during the quarter compared to 10.8% during the second quarter of 2008.

The following table shows adjusted revenue and adjusted operating expenses as a percentage of adjusted average capital and the percentage change in adjusted average capital for each of the last seven quarters, compared to the same periods in the prior year:


	Three Months Ended
	Sept. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sept. 30,			Jun. 30,			Mar. 31,
	2008			2008			2008			2007			2007			2007			2007
Adjusted revenue as a percentage of adjusted average capital		28.9	%		28.5	%		30.7	%		31.7	%		32.5	%		32.3	%		35.7	%


Adjusted operating expenses as a percentage of adjusted average capital		10.8	%		11.3	%		13.6	%		14.7	%		13.6	%		13.6	%		14.1	%


Adjusted return on capital		11.4	%		10.8	%		10.7	%		10.7	%		11.8	%		11.8	%		13.5	%


Percentage change in adjusted average capital compared to the same period in the prior year		42.3	%		39.6	%		37.5	%		35.5	%		34.2	%		29.4	%		20.8	%

The following tables show how non-GAAP measures reconcile to GAAP measures. All after-tax adjustments are calculated using a 37% tax rate as we estimate that to be our long term average effective tax rate. Amounts do not recalculate due to rounding.


	Three Months Ended September 30,									Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2008			2007			% Change			2008			2007			% Change
Adjusted net income
GAAP net income	$	20,657		$	14,742			40.1	%	$	48,621		$	42,432			14.6	%
Floating yield adjustment (after-tax)		1,183			1,265						8,955			1,964
License fee yield adjustment (after-tax)		506			925						1,703			3,632
Gain from discontinued United Kingdom segment and other related items (after-tax)		(326	)		(1,273	)					(330	)		(1,082	)
Litigation		—			91						—			406
Interest expense related to interest rate swap agreement		(179	)		—						(23	)		—
Adjustment to record taxes at 37% (1)		419			4						294			(566	)

Adjusted net income (1)	$	22,260		$	15,754			41.3	%	$	59,220		$	46,786			26.6	%


Adjusted net income per diluted share	$	0.72		$	0.51			41.2	%	$	1.91		$	1.50			27.3	%
Diluted weighted average shares outstanding		31,024,455			31,139,612			-0.4	%		30,994,466			31,228,893			-0.8	%

Adjusted average capital
GAAP average debt	$	706,637		$	477,930			47.9	%	$	659,193		$	454,595			45.0	%
GAAP average shareholders’ equity		308,990			243,922			26.7	%		293,219			231,788			26.5	%
Floating yield adjustment		18,002			8,348						12,135			7,669
License fee yield adjustment		(2,048	)		(5,316	)					(2,603	)		(6,448	)

Adjusted average capital	$	1,031,581		$	724,884			42.3	%	$	961,944		$	687,604			39.9	%


Adjusted return on capital
Adjusted net income	$	22,260		$	15,754					$	59,220		$	46,786
Adjusted interest expense after-tax		7,081			5,689						19,996			16,870

Adjusted net income plus interest expense after-tax	$	29,341		$	21,443			36.8	%	$	79,216		$	63,656			24.4	%


Adjusted return on capital (2)		11.4	%		11.8	%		-3.4	%		11.0	%		12.3	%		-10.6	%


Economic profit
Adjusted return on capital		11.4	%		11.8	%					11.0	%		12.3	%
Cost of capital (3)		6.5	%		7.1	%					6.5	%		7.1	%

Adjusted return on capital in excess of cost of capital		4.9	%		4.7	%					4.5	%		5.2	%
Adjusted average capital	$	1,031,581		$	724,884					$	961,944		$	687,604

Economic profit	$	12,636		$	8,606			46.8	%	$	32,466		$	26,971			20.4	%


(1)		In prior year reports, we adjusted income taxes by equalizing the tax rate between the two periods presented. Beginning in the first quarter of 2008, we changed our methodology to normalize the tax rate to 37%, as we estimate that to be our long term average effective tax rate. As a result of this change, the adjustment to income taxes and adjusted net income for the three and nine months ended September 30, 2007 differ from what was reported in the prior year.

(2)		Adjusted return on capital is defined as annualized adjusted net income plus adjusted interest expense after-tax divided by adjusted average capital.

(3)		The cost of capital includes both a cost of equity and a cost of debt. The cost of equity capital is determined based on a formula that considers the risk of the business and the risk associated with our use of debt. The formula utilized for determining the cost of equity capital is as follows: (the average 30 year treasury rate + 5%) + [(1 — tax rate) x (the average 30 year treasury rate + 5% — pre-tax average cost of debt rate) x average debt/(average equity + average debt x tax rate)]. For the three months ended September 30, 2008 and 2007, the average 30 year treasury rate was 4.5% and 4.9%, respectively. The adjusted pre-tax average cost of debt was 6.4% and 7.6%, respectively. For the nine months ended September 30, 2008 and 2007, the average 30 year treasury rate was 4.5% and 4.9%, respectively. The adjusted pre-tax average cost of debt was 6.4% and 7.9%, respectively.


	Quarter Ended
	Sept. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sept. 30,			Jun. 30,			Mar. 31,
(Dollars in thousands)	2008			2008			2008			2007			2007			2007			2007
Adjusted net income
GAAP net income	$	20,657		$	10,344		$	17,620		$	12,481		$	14,742		$	12,331		$	15,359
Floating yield adjustment (after-tax)		1,183			9,536			(1,765	)		1,591			1,265			617			82
License fee yield adjustment (after-tax)		506			653			544			1,353			925			1,143			1,564
(Gain) loss from discontinued United Kingdom segment and other related items (after-tax)		(326	)		35			(39	)		(219	)		(1,273	)		164			27
Litigation		—			—			—			—			91			315			—
Interest expense related to interest rate swap agreement		(179	)		(375	)		532			302			—			—			—
Adjustment to record taxes at 37%		419			(2	)		(123	)		(643	)		4			378			(948	)

Adjusted net income	$	22,260		$	20,191		$	16,769		$	14,865		$	15,754		$	14,948		$	16,084


Adjusted revenue
GAAP total revenue	$	80,107		$	75,005		$	70,778		$	63,232		$	61,058		$	58,286		$	57,351
Floating yield adjustment		1,880			15,137			(2,800	)		2,525			2,008			979			130
License fee yield adjustment		804			1,036			863			2,150			1,470			1,814			2,483
Provision for credit losses		(8,278	)		(20,782	)		(2,479	)		(6,345	)		(5,629	)		(3,968	)		(3,723	)

Adjusted revenue	$	74,513		$	70,396		$	66,362		$	61,562		$	58,907		$	57,111		$	56,241


Adjusted average capital
GAAP average debt	$	706,637		$	686,148		$	584,794		$	515,031		$	477,930		$	473,141		$	412,715
GAAP average shareholders’ equity		308,990			295,771			274,897			256,838			243,922			233,465			217,977
Floating yield adjustment		18,002			9,326			9,076			9,784			8,348			8,073			6,587
License fee yield adjustment		(2,048	)		(2,626	)		(3,136	)		(4,011	)		(5,316	)		(6,345	)		(7,684	)

Adjusted average capital	$	1,031,581		$	988,619		$	865,631		$	777,642		$	724,884		$	708,334		$	629,595


Adjusted revenue as a percentage of adjusted average capital		28.9	%		28.5	%		30.7	%		31.7	%		32.5	%		32.3	%		35.7	%


Adjusted return on capital
Adjusted net income	$	22,260		$	20,191		$	16,769		$	14,865		$	15,754		$	14,948		$	16,084
Adjusted interest expense after-tax		7,081			6,602			6,313			5,928			5,689			5,960			5,221

Adjusted net income plus interest expense after-tax	$	29,341		$	26,793		$	23,082		$	20,793		$	21,443		$	20,908		$	21,305


Adjusted return on capital (3)		11.4	%		10.8	%		10.7	%		10.7	%		11.8	%		11.8	%		13.5	%


Adjusted operating expenses
GAAP salaries and wages	$	16,766		$	16,699		$	17,740		$	16,823		$	13,620		$	13,092		$	11,861
GAAP general and administrative		6,975			6,627			7,124			6,729			7,266			7,359			5,917
GAAP sales and marketing		4,088			4,542			4,642			4,990			3,835			4,144			4,472
Litigation		—			—			—			—			(145	)		(500	)		—

Adjusted operating expenses	$	27,829		$	27,868		$	29,506		$	28,542		$	24,576		$	24,095		$	22,250


Adjusted operating expenses as a percentage of adjusted average capital		10.8	%		11.3	%		13.6	%		14.7	%		13.6	%		13.6	%		14.1	%


Percentage change in adjusted average capital compared to the same period in the prior year		42.3	%		39.6	%		37.5	%		35.5	%		34.2	%		29.4	%		20.8	%

Floating Yield Adjustment

The purpose of this adjustment is to modify the calculation of our GAAP-based finance charge revenue so that favorable and unfavorable changes in expected cash flows from loans receivable are treated consistently. To make the adjustment understandable, we must first explain how GAAP requires us to account for finance charge revenue, our primary revenue source.

Finance charge revenue equals the cash inflows from our loan portfolio less cash outflows to acquire the loans. Our GAAP finance charge revenue is based on estimates of future cash flows and is recognized on a level-yield basis over the estimated life of the loan. With the level-yield approach, the amount of finance charge revenue recognized from a loan in a given period, divided by the loan asset, is a constant percentage. Under GAAP, favorable changes in expected cash flows are treated as increases to the yield and are recognized over time, while unfavorable changes are recorded as a current period expense. The non-GAAP methodology that we use (the “floating yield” method) is identical to the GAAP approach except that, under the “floating yield” method, all changes in expected cash flows (both positive and negative) are treated as yield adjustments and therefore impact earnings over time. The GAAP treatment always results in a lower carrying value of the loan receivable asset, but may result in either higher or lower earnings for any given period depending on the timing and amount of expected cash flow changes.

We believe floating yield earnings are a more accurate reflection of the performance of our business, since both favorable and unfavorable changes in estimated cash flows are treated consistently.

License Fee Yield Adjustment

The purpose of this adjustment is to make revenue from license fees comparable across time periods. In 2001, we began charging dealer-partners a monthly licensing fee for access to our internet-based Credit Approval Processing System, also known as CAPS.

Effective January 1, 2007, we implemented a change in the way these fees are charged designed to positively impact dealer-partner attrition. We continue to charge a monthly license fee of $599, but instead of collecting the fee in the current period, we collect it from future dealer holdback payments.

As a result of this change, (as of January 1, 2007) we record license fees on a GAAP basis as a yield adjustment, recognizing these fees as finance charge revenue over the term of the dealer loan because collection is dependent on the future cash flows of the loan. Previously, we had recorded the fee as license fee revenue in the month the fee was charged. The current GAAP treatment is more consistent with the cash economics of the business.

To allow for proper comparisons between periods, we make an adjustment to our financial results as though license fees had always been recorded as a yield adjustment. The license fee adjustment will become less significant in future periods. The license fee adjustment is projected to be $2.1 million, $0.8 million and $0.3 million in 2008, 2009 and 2010, respectively. The adjustment will be immaterial starting in 2011.

Cautionary Statement Regarding Forward-Looking Information

We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements. Statements in this release that are not historical facts, such as those using terms like “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “assume,” “forecast,” “estimate,” “intend,” “plan”, “target” and those regarding our future results, plans and objectives, are “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this release. Actual results could differ materially from these forward-looking statements since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of our Form 10-K for the year ended December 31, 2007, other risk factors discussed herein or listed from time to time in our reports filed with the Securities and Exchange Commission and the following:

	•		Our inability to accurately forecast and estimate the amount and timing of future collections could have a material adverse effect on results of operations.

	•		We may be unable to continue to access or renew funding sources and obtain capital on favorable terms needed to maintain and grow the business.

	•		The conditions of the U.S. and international capital markets may adversely affect lenders the Company has relationships with, causing us to incur additional cost and reducing our sources of liquidity which may adversely affect our financial position, liquidity and results of operations.

	•		Due to increased competition from traditional financing sources and non-traditional lenders, we may not be able to compete successfully.

	•		We may not be able to generate sufficient cash flow to service our outstanding debt and fund operations.

	•		Requirements under credit facilities to meet financial and portfolio performance covenants.

	•		Interest rate fluctuations may adversely affect our borrowing costs, profitability and liquidity.

	•		The substantial regulation to which we are subject could result in potential liability.

	•		Adverse changes in economic conditions, or in the automobile or finance industries or the non-prime consumer market, could adversely affect our financial position, liquidity and results of operations and our ability to enter into future financing transactions.

	•		Litigation we are involved in from time to time may adversely affect our financial condition, results of operations and cash flows.

	•		We are dependent on our senior management and the loss of any of these individuals or an inability to hire additional personnel could adversely affect our ability to operate profitably.

	•		Our inability to properly safeguard confidential consumer information.

	•		Our operations could suffer from telecommunications or technology downtime or increased costs.

	•		Natural disasters, acts of war, terrorist attacks and threats or the escalation of military activity in response to such attacks or otherwise may negatively affect our business, financial condition and results of operations.

Other factors not currently anticipated by management may also materially and adversely affect our results of operations. We do not undertake, and expressly disclaim any obligation, to update or alter our statements whether as a result of new information, future events or otherwise, except as required by applicable law.

Description of Credit Acceptance Corporation

Since 1972, Credit Acceptance has provided auto loans to consumers, regardless of their credit history. Our product is 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 product, but who actually end up qualifying for traditional financing.

Without our product, consumers are often unable to purchase a vehicle or they purchase an unreliable one and are not provided the opportunity to improve their credit standing. As we report to the three national credit reporting agencies, a significant number of our consumers improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded on the NASDAQ under the symbol CACC. For more information, visit creditacceptance.com.

CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in thousands, except per share data)	2008			2007			2008			2007
Revenue:
Finance charges	$	75,617		$	56,743		$	210,119		$	162,240
Other income		4,490			4,315			15,771			14,455

Total revenue		80,107			61,058			225,890			176,695


Costs and expenses:
Salaries and wages		16,766			13,620			51,205			38,573
General and administrative		6,975			7,266			20,726			20,542
Sales and marketing		4,088			3,835			13,272			12,451
Provision for credit losses		8,383			5,931			31,792			13,602
Interest		10,954			9,030			31,702			26,781
Other expense		2			16			59			74

Total costs and expenses		47,168			39,698			148,756			112,023


Operating income		32,939			21,360			77,134			64,672
Foreign currency (loss) gain		(2	)		26			(15	)		64

Income from continuing operations before provision for income taxes		32,937			21,386			77,119			64,736
Provision for income taxes		12,606			7,917			28,828			23,387

Income from continuing operations		20,331			13,469			48,291			41,349

Discontinued operations
Gain (loss) from discontinued United Kingdom operations		504			(9	)		548			(280	)
Provision (credit) for income taxes		178			(1,282	)		218			(1,363	)

Gain from discontinued operations		326			1,273			330			1,083

Net income	$	20,657		$	14,742		$	48,621		$	42,432


Net income per common share:
Basic	$	0.68		$	0.49		$	1.61		$	1.41

Diluted	$	0.67		$	0.47		$	1.57		$	1.36


Income from continuing operations per common share:
Basic	$	0.67		$	0.45		$	1.60		$	1.38

Diluted	$	0.66		$	0.43		$	1.56		$	1.32


Gain from discontinued operations per common share:
Basic	$	0.01		$	0.04		$	0.01		$	0.04

Diluted	$	0.01		$	0.04		$	0.01		$	0.03


Weighted average shares outstanding:
Basic		30,310,053			30,015,048			30,223,586			30,069,639
Diluted		31,024,455			31,139,612			30,994,466			31,228,893

CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS


	As of
	September 30,			December 31,
	2008			2007
(Dollars in thousands, except per share data)	(Unaudited)
ASSETS:
Cash and cash equivalents	$	934		$	712
Restricted cash and cash equivalents		82,993			74,102
Restricted securities available for sale		3,933			3,290

Loans receivable (including $16,067 and $16,125 from affiliates as of September 30, 2008 and December 31, 2007, respectively)		1,155,591			944,698
Allowance for credit losses		(119,184	)		(134,145	)

Loans receivable, net		1,036,407			810,553


Property and equipment, net		21,550			20,124
Income taxes receivable		10,012			20,712
Other assets		14,527			12,689

Total Assets	$	1,170,356		$	942,182


LIABILITIES AND SHAREHOLDERS’ EQUITY:
Liabilities:
Accounts payable and accrued liabilities	$	79,845		$	79,834
Line of credit		82,900			36,300
Secured financing		602,429			488,065
Mortgage note and capital lease obligations		6,608			7,765
Deferred income taxes, net		78,848			64,768

Total Liabilities		850,630			676,732


Shareholders’ Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued		—			—
Common stock, $.01 par value, 80,000,000 shares authorized, 30,570,110 and 30,240,859 shares issued and outstanding as of September 30, 2008 and December 31, 2007, respectively		306			302
Paid-in capital		9,983			4,134
Retained earnings		309,622			261,001
Accumulated other comprehensive (loss) income, net of tax of $105 and $(7) at September 30, 2008 and December 31, 2007, respectively		(185	)		13

Total Shareholders’ Equity		319,726			265,450

Total Liabilities and Shareholders’ Equity	$	1,170,356		$	942,182


Michigan	000-20202	38-1999511

(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)


Item 2.02. Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURES
EX-99.1


		CREDIT ACCEPTANCE CORPORATION

		By: /s/ Kenneth S. Booth Kenneth S. Booth
		Chief Financial Officer
		November 4, 2008

Table of Contents

Table of Contents

Table of Contents


25505 West Twelve Mile Road
Southfield, Michigan		48034-8339

(Address of principal executive offices)		(Zip Code)