Credit Acceptance Plunges 9.8%: What's Behind the Sharp Drop and What’s Next?

Summary
• CACC shares cratered 9.8% intraday, trading as low as $434.02 amid post-earnings fallout.
• Earnings missed estimates by 15.75%, with EPS at $8.56 vs. $10.16, while operating expenses surged 25% YoY.
• Loan portfolio hit a record $9.1 billion, but older vintages underperformed forecasts by 0.5%, signaling operational strain.

Credit Acceptance (CACC) is trading in a freefall after a disastrous Q2 2025 earnings report, with a 9.8% intraday drop dragging it to a 14-month low. The stock’s collapse follows a stark earnings miss, ballooning costs, and deteriorating loan performance in older vintages. Meanwhile, the broader auto finance sector remains under pressure, with sector leader Ally Financial (ALLY) also slipping 1.2%. Traders are now parsing technicals and options data to gauge whether this selloff is a buying opportunity or a deeper crisis.

Earnings Miss and Vintage Underperformance Trigger Sharp Selloff
CACC’s 9.8% drop stems from a confluence of earnings underperformance and deteriorating loan performance. The company’s Q2 2025 EPS of $8.56 fell short of estimates by 15.75%, while operating expenses surged 25% YoY, driven by a $23.4 million contingent legal loss and rising G&A costs. More critically, older loan vintages (2022–2024) underperformed forecasts by 0.5%, eroding confidence in its forecasting models. CEO Ken Booth acknowledged the challenges, noting inflation and scorecard changes have distorted risk assessments. Investors reacted swiftly, selling off shares as the stock’s 52-week high of $560 becomes a distant memory.

Auto Finance Sector Under Pressure as Ally Financial Slides
The auto finance sector is broadly struggling, with Ally Financial (ALLY) down 1.2% on the day. CACC’s collapse mirrors sector-wide headwinds, including inflationary pressures, tighter credit standards, and regulatory scrutiny. While CACC’s subprime niche is uniquely exposed to loan performance volatility, its peer Ally is also grappling with higher provisions and cost inflation. The sector’s challenges are compounded by Trump-era tariffs, which have pushed European automakers like Stellantis and GM to report multi-billion-dollar losses. For CACC, the selloff reflects both company-specific risks and a broader sector malaise.

Bearish Technicals and Options Playbook: Leveraging the Selloff
Technical Indicators:
• 200-day MA: $488.17 (Below current price)
• RSI: 39.36 (Oversold territory)
• MACD: -0.47 (Bearish divergence)
• Bollinger Bands: Price at 442.01 (Near lower band)
• K-line pattern: Short-term bearish, long-term ranging

CACC is in a sharp bearish consolidation, with support levels at $490.15 (Bollinger lower band) and $488.17 (200-day MA). The RSI in oversold territory suggests a potential rebound, but the MACD and K-line pattern indicate continued short-term weakness. Aggressive short-term traders may consider bearish options, while longer-term investors could eye dips for accumulation.

Top Options:
• CACC20250815C440 (Call, 440 strike, Aug 15):
- IV: 43.11% (High)
- LVR: 29.24% (Strong leverage)
- Delta: 0.51 (Neutral exposure)
- Theta: -1.12 (High time decay)
- Gamma: 0.0104 (Moderate sensitivity)
- Turnover: 8,521 (High liquidity)
- Price change: 4.02%
Why it stands out: This call option offers high leverage and liquidity, ideal for a short-term bounce trade if the stock tests the $440 level. A 5% rebound from $442.01 would yield a ~$10.50 payoff (max(ST - 440, 0)).

• CACC20260116C450 (Call, 450 strike, Jan 16):
- IV: 0.36% (Negligible)
- LVR: 87,722% (Outlier)
- Delta: 0.0134 (Low exposure)
- Theta: -0.0016 (Minimal decay)
- Gamma: 0.0321 (Moderate sensitivity)
- Turnover: 0
- Price change: 0.00%
Why it stands out: Despite its absurd leverage ratio, this deep-out-of-the-money call is a speculative long-term play for a 2026 rebound. However, its near-zero turnover and IV make it unsuitable for most traders.

Action Alert: For a bearish bias, the CACC20250815C440 call is the most viable short-term play, offering high liquidity and leverage. If the stock breaks below $434.02 (intraday low), consider adding to a short position or hedging with puts.

Backtest Credit Acceptance Stock Performance
After an intraday plunge of -10%, the performance of CACC has historically shown positive short-to-medium-term gains. The 3-day win rate is 51.57%, the 10-day win rate is 51.05%, and the 30-day win rate is 60.28%. While the returns over these periods are modest, with a maximum return of 3.44% over 30 days, the ETF has a tendency to recover and even exceed its pre-plunge levels.

CACC at Crossroads: Will the Selloff Correct or Deepen?
CACC’s 9.8% selloff has exposed structural weaknesses in its forecasting models and cost management, but the stock’s oversold RSI and discounted valuation (P/E 12.8) hint at a potential rebound. The key resistance is $472.49 (intraday high), while support lies at $434.02. For now, the stock remains in a bearish consolidation, with the broader sector also struggling (ALLY down 1.2%). Investors should monitor the 2022–2024 vintage performance and regulatory risks in subprime lending. A sustained break below $434.02 could signal deeper trouble, but a rebound above $472.49 might rekindle confidence. Watch for the $440 level to hold—CACC’s next move could hinge on this critical threshold.