Credit Acceptance Corporation is a unique option for investors looking to buy auto related stocks. The company provides auto financing to subprime and bad/no credit borrowers. The company offers a compelling value proposition to both auto dealers and consumers.

Increasing dealer sales while helping bad credit borrowers

Credit Acceptance Corporation effectively allows auto dealers to sell cars to those customers who would otherwise be unable to purchase cars due to the lack of financing options. The company has partnered with a network of auto dealers throughout the US rather than repurchasing loans that a dealer originates.

Credit Acceptance Corporation also reports transactions to the three big credit bureaus of the country. That makes it attractive for borrowers to seek financing from the company as it allows them to improve their credit scores.

Credit Acceptance Corp’s stock performance makes it one of the best financial stocks

Credit Acceptance stock is up 74% since hitting a low in early April 2020. For comparison, the S&P500 is up 53% since March 23rd, 2020. So, it has beaten the broader index by some margin. The stock was actually up 140% till about 10th August and was counted among the top financial stocks this year. However, a lawsuit by the Massachusetts attorney general has led to a fall in the price of the stock in recent weeks.

The Mass Lawsuit

Citron Research had, in March 2020, highlighted in its report that Credit Acceptance Corporation was relying on aggressive debt collection practices. The Massachusetts Attorney General also believes that investors were not provided the correct information about the company’s loans. Allegedly, Credit Acceptance Corporation did not disclose to investors that it topped off the pools of loans that were packaged and securitized with higher-risk loans. Meanwhile, national shareholder rights litigation company The Schall Law Firm has announced that it is investigating the claims on behalf of the investors of Credit Acceptance Corporation.

Financial Stock To Buy