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What changed in CONSUMER PORTFOLIO SERVICES, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CONSUMER PORTFOLIO SERVICES, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+252 added−270 removedSource: 10-K (2026-03-16) vs 10-K (2025-03-12)

Top changes in CONSUMER PORTFOLIO SERVICES, INC.'s 2025 10-K

252 paragraphs added · 270 removed · 211 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

66 edited+10 added−16 removed106 unchanged
Biggest changeThe tables below document the delinquency, repossession, and net credit loss experience of all such automobile contracts that we own as of the respective dates shown. 8 Delinquency, Repossession and Extension Experience December 31, 2024 December 31, 2023 December 31, 2022 Number of Number of Number of Contracts Amount Contracts Amount Contracts Amount Delinquency Experience (Dollars in thousands) Gross servicing portfolio (1) 201,441 $ 3,490,960 179,198 $ 2,970,066 170,658 $ 2,795,383 Period of delinquency (2) 31-60 days 14,643 243,068 13,337 210,200 13,434 201,764 61-90 days 7,244 114,633 6,717 104,144 5,481 80,146 91+ days 4,477 65,081 3,252 50,610 2,148 31,036 Total delinquencies (2) 26,364 422,782 23,306 364,954 21,063 312,946 Amount in repossession (3) 6,227 95,620 4,653 67,182 2,904 41,401 Total delinquencies and amount in repossession (2) 32,591 $ 518,402 27,959 $ 432,136 23,967 $ 354,347 Delinquencies as a percentage of gross servicing portfolio 13.1% 12.1% 13.0% 12.3% 12.3% 11.2% Total delinquencies and amount in repossession as a percentage of gross servicing portfolio 16.2% 14.8% 15.6% 14.5% 14.0% 12.7% Extension Experience Contracts with one extension, accruing 33,623 $ 601,049 33,920 $ 610,617 27,584 $ 464,323 Contracts with two or more extensions, accruing 47,227 701,158 42,462 563,308 38,714 417,682 80,850 1,302,207 76,382 1,173,925 66,298 882,005 Contracts with one extension, non-accrual (4) 3,483 53,018 2,367 38,933 981 14,792 Contracts with two or more extensions, non-accrual (4) 4,052 60,660 2,081 27,497 1,485 15,395 7,535 113,678 4,448 66,430 2,466 30,187 Total accounts with extensions 88,385 $ 1,415,885 80,830 $ 1,240,355 68,764 $ 912,192 (1) All amounts and percentages are based on the amount remaining to be repaid on each automobile contract.
Biggest changeThe tables below document the delinquency, repossession, and net credit loss experience of all such automobile contracts that we own as of the respective dates shown. 8 Delinquency, Repossession and Extension Experience Delinquency and Extension Experience (1) Total Managed Portfolio (Excludes Third Party Portfolio) December 31, 2025 December 31, 2024 December 31, 2023 Number of Number of Number of Contracts Amount Contracts Amount Contracts Amount Delinquency Experience (Dollars in thousands) Gross servicing portfolio (1) 212,718 $ 3,778,647 201,441 $ 3,490,960 179,198 $ 2,970,066 Period of delinquency (2) 31-60 days 15,639 272,499 14,643 243,068 13,337 210,200 61-90 days 7,163 118,304 7,244 114,633 6,717 104,144 91+ days 3,806 56,223 4,477 65,081 3,252 50,610 Total delinquencies (2) 26,608 447,026 26,364 422,782 23,306 364,954 Amount in repossession (3) 7,462 111,152 6,227 95,620 4,653 67,182 Total delinquencies and amount in repossession (2) 34,070 $ 558,178 32,591 $ 518,402 27,959 $ 432,136 Delinquencies as a percentage of gross servicing portfolio 12.5% 11.8% 13.1% 12.1% 13.0% 12.3% Total delinquencies and amount in repossession as a percentage of gross servicing portfolio 16.0% 14.8% 16.2% 14.8% 15.6% 14.5% Extension Experience Contracts with one extension 41,504 $ 759,863 37,106 $ 654,067 36,287 $ 649,551 Contracts with two or more extensions 58,326 927,980 51,279 761,818 44,543 590,804 Total accounts with extensions 99,830 $ 1,687,843 88,385 $ 1,415,885 80,830 $ 1,240,355 (1) All amounts and percentages are based on the amount remaining to be repaid on each automobile contract.
For contracts we service for third parties, we receive a base monthly servicing fee equal to 2.5%, and certain other incentive fees tied to credit performance. Collection Procedures. We believe that our ability to monitor performance and collect payments owed from sub-prime customers is primarily a function of our collection approach and support systems.
For contracts we service for third parties, we receive a base monthly servicing fee equal to 1% and 2.5%, and certain other incentive fees tied to credit performance. Collection Procedures. We believe that our ability to monitor performance and collect payments owed from sub-prime customers is primarily a function of our collection approach and support systems.
Contract interest rates and dealer acquisition fees are lower, and the maximum loan amount is somewhat higher, than the Alpha Plus program. Preferred - This program accommodates applicants with past non-performing credit, but who demonstrate a somewhat stronger history of recent performing credit than the Super Alpha program.
Contract interest rates and dealer acquisition fees are lower, and the maximum loan amount is somewhat higher, than the Alpha Plus program. 4 Preferred - This program accommodates applicants with past non-performing credit, but who demonstrate a somewhat stronger history of recent performing credit than the Super Alpha program.
In addition, certain securitization and non-securitization related debt contain cross-default provisions that would allow certain creditors to declare a default if a default occurred under a different facility. As of December 31, 2024, we were in compliance with all such covenants. Competition The automobile financing business is highly competitive.
In addition, certain securitization and non-securitization related debt contain cross-default provisions that would allow certain creditors to declare a default if a default occurred under a different facility. As of December 31, 2025, we were in compliance with all such covenants. Competition The automobile financing business is highly competitive.
The weighted average seasoning of our total owned portfolio, represented in the tables below, was 17 months, 19 months, and 17 months as of December 31, 2024, December 31, 2023, and December 31, 2022, respectively. Our financial results are dependent on the performance of the automobile contracts in which we retain an ownership interest.
The weighted average seasoning of our total owned portfolio, represented in the tables below, was 19 months, 17 months, and 19 months as of December 31, 2025, December 31, 2024, and December 31, 2023, respectively. Our financial results are dependent on the performance of the automobile contracts in which we retain an ownership interest.
We are not a party to any collective bargaining agreement. Available Information Our internet address is www.consumerportfolio.com .
We are not a party to any collective bargaining agreement. 15 Available Information Our internet address is www.consumerportfolio.com .
For the year ended December 31, 2024, our automated application decisioning system produced our initial decision within seconds on approximately 99% of those applications. Upon receipt an application, if the application meets certain minimum criteria, we immediately order two credit reports to document the buyer’s credit history and an alternative data credit score provided by a major credit reporting bureau.
For the year ended December 31, 2025, our automated application decisioning system produced our initial decision within seconds on approximately 99% of those applications. 2 Upon receipt an application, if the application meets certain minimum criteria, we immediately order two credit reports to document the buyer’s credit history and an alternative data credit score provided by a major credit reporting bureau.
We consider accounts that have had extensions and were active or paid off as of December 31, 2024 to be successful. Successful extensions result in continued payments of interest and principal (including payment in full in many cases).
We consider accounts that have had extensions and were active or paid off as of December 31, 2025, to be successful. Successful extensions result in continued payments of interest and principal (including payment in full in many cases).
The following table summarizes the average net acquisition fees we charged dealers and the weighted average annual percentage rate on contracts purchased for our own portfolio for the periods shown: 2024 2023 2022 2021 2020 Average net acquisition fee charged (paid) to dealers (1) $ (50 ) $ 98 $ (150 ) $ (65 ) $ 71 Average net acquisition fee as % of amount financed (1) -0.2% 1.3% -0.7% -0.3% 0.4% Weighted average annual percentage interest rate 20.4% 20.9% 18.4% 17.8% 19.3% (1) Not applicable to direct lending platform Our pricing strategy is driven by our objectives for new contract purchase quantities and maximizing our risk adjusted yield.
The following table summarizes the average net acquisition fees we charged dealers and the weighted average annual percentage rate on contracts purchased for our own portfolio for the periods shown: 2025 2024 2023 2022 2021 Average net acquisition fee charged (paid) to dealers (1) $ (209 ) $ (50 ) $ 98 $ (150 ) $ (65 ) Average net acquisition fee as % of amount financed (1) -0.9% -0.2% 1.3% -0.7% -0.3% Weighted average annual percentage interest rate 20.0% 20.4% 20.9% 18.4% 17.8% (1) Not applicable to direct lending platform Our pricing strategy is driven by our objectives for new contract purchase quantities and maximizing our risk adjusted yield.
In addition, we contact each customer by telephone to confirm that the customer understands and agrees to the terms of the related automobile contract. During this " welcome call, " we also ask the customer a series of open-ended questions about his application and the contract, which may uncover potential misrepresentations. Credit Scoring .
In addition, we contact most customers by telephone to confirm that the customer understands and agrees to the terms of the related automobile contract. During this " welcome call, " we also ask the customer a series of open-ended questions about his application and the contract, which may uncover potential misrepresentations. Credit Scoring .
Automobile contract purchase criteria are subject to change from time to time as circumstances may warrant. Prior to purchasing an automobile contract, our funding staff verify the customer’s employment, income, residency, and credit information by contacting various parties noted on the customer’s application, credit information bureaus and other sources.
Automobile contract purchase criteria are subject to change from time to time as circumstances may warrant. Prior to purchasing an automobile contract, our funding staff verify a majority of the customer’s employment, income, residency, and credit information by contacting various parties noted on the customer’s application, credit information bureaus and other sources.
The following table identifies the credit program, sorted from highest to lowest credit quality, under which we originated automobile contracts during the years ended December 31, 2024 and 2023.
The following table identifies the credit program, sorted from highest to lowest credit quality, under which we originated automobile contracts during the years ended December 31, 2025 and 2024.
As of December 31, 2024, approximately 72% of our active dealers were franchised new car dealers that sell both new and used vehicles, and the remainder were independent used car dealers. 1 We have in the past solicited credit applications directly from prospective automobile consumers through the internet under a program we refer to as our direct lending platform.
As of December 31, 2025, approximately 73% of our active dealers were franchised new car dealers that sell both new and used vehicles, and the remainder were independent used car dealers. 1 We have in the past solicited credit applications directly from prospective automobile consumers through the internet under a program we refer to as our direct lending platform.
A portion of the DealerTrack and Route One volume are applications from our pass-through arrangements with other lenders who send us applications from their dealers in cases where those lenders choose not to approve those applications. For the year ended December 31, 2024, such pass-through applications represented 41% of our total applications.
A portion of the DealerTrack and Route One volume are applications from our pass-through arrangements with other lenders who send us applications from their dealers in cases where those lenders choose not to approve those applications. For the year ended December 31, 2025, such pass-through applications represented 43% of our total applications.
Our employee population was 67% female, and 71% self-identified as ethnically diverse (defined as all EEOC classifications other than white).
Our employee population was 66% female, and 71% self-identified as ethnically diverse (defined as all EEOC classifications other than white).
Our upper credit tier products, which are our Meta, Preferred, Super Alpha, Alpha Plus and Alpha programs, accounted for approximately 89% of our new contract acquisitions for our own portfolio in 2024, 83% in 2023, and 80% in 2022, measured by aggregate amount financed.
Our upper credit tier products, which are our Meta, Preferred, Super Alpha, Alpha Plus and Alpha programs, accounted for approximately 90% of our new contract acquisitions for our own portfolio in 2025, 89% in 2024, and 83% in 2023, measured by aggregate amount financed.
In addition to new hire training, we provide mentor programs and management workshops. We offer an education costs assistance program to help with college tuition and costs incurred to obtain job related certifications and licenses. 15 Workforce Allocation and Diversity We had 933 employees as of December 31, 2024.
In addition to new hire training, we provide mentor programs and management workshops. We offer an education costs assistance program to help with college tuition and costs incurred to obtain job related certifications and licenses. Workforce Allocation and Diversity We had 928 employees as of December 31, 2025.
Dealers can send credit applications to us by entering the necessary data on our website or through one of two third-party application aggregators. For the year ended December 31, 2024, we received 3.3 million applications. Approximately 57% of all applications came through DealerTrack (the industry leading dealership application aggregator), 43% via another aggregator, Route One.
Dealers can send credit applications to us by entering the necessary data on our website or through one of two third-party application aggregators. For the year ended December 31, 2025, we received 3.3 million applications. Approximately 55% of all applications came through DealerTrack (the industry leading dealership application aggregator), 45% via another aggregator, Route One.
Dealers with which we do business are under no obligation to submit any automobile contracts to us, nor are we obligated to purchase any automobile contracts from them. During the year ended December 31, 2024, no dealer accounted for as much as 2% of the total number of automobile contracts we purchased.
Dealers with which we do business are under no obligation to submit any automobile contracts to us, nor are we obligated to purchase any automobile contracts from them. During the year ended December 31, 2025, no dealer accounted for as much as 1.5% of the total number of automobile contracts we purchased.
Since 1994, we have completed 103 term securitizations of approximately $20.6 billion in automobile contracts. We depend upon the availability of short-term warehouse credit facilities as interim financing for our contract purchases prior to the time we pool those contracts for a securitization.
Since 1994, we have completed 107 term securitizations of approximately $22.4 billion in automobile contracts. We depend upon the availability of short-term warehouse credit facilities as interim financing for our contract purchases prior to the time we pool those contracts for a securitization.
Since the applicant has limited credit history, the contract interest rate and dealer acquisition fees tend to be higher, and the loan amount, loan-to-value ratio, down payment, and payment-to-income ratio requirements tend to be more restrictive compared to our other programs. 4 Mercury / Delta – This program accommodates an applicant who may have had significant past non-performing credit including recent derogatory credit.
Mercury / Delta – This program accommodates an applicant who may have had significant past non-performing credit including recent derogatory credit. As a result, the contract interest rate and dealer acquisition fees tend to be higher, and the loan amount, loan-to-value ratio, down payment, and payment-to-income ratio requirements tend to be more restrictive compared to our other programs.
Contract Purchases and Outstanding Managed Portfolio $ in thousands Year Contracts Purchased in Period Managed Portfolio at Period End 2020 742,584 2,174,972 2021 1,146,321 2,249,069 2022 1,854,385 3,001,308 2023 1,357,752 3,194,623 2024 1,681,941 3,665,725 Our principal executive offices are in Las Vegas, Nevada. Most of our operational and administrative functions take place in Irvine, California.
Contract Purchases and Outstanding Managed Portfolio $ in thousands Year Contracts Purchased in Period Managed Portfolio at Period End 2021 1,146,321 2,249,069 2022 1,854,385 3,001,308 2023 1,357,752 3,194,623 2024 1,681,941 3,665,725 2025 1,638,326 3,898,425 Our principal executive offices are in Las Vegas, Nevada. Most of our operational and administrative functions take place in Irvine, California.
As of December 31, 2024, we had two such short-term warehouse facilities with a total maximum borrowing capacity of $535 million. Sub-Prime Auto Finance Industry Automobile financing is the second largest consumer finance market in the United States.
As of December 31, 2025, we had three such short-term warehouse facilities with a total maximum borrowing capacity of $702.5 million. Sub-Prime Auto Finance Industry Automobile financing is the second largest consumer finance market in the United States.
The sold notes (“2024-1 Notes”), issued by CPS Auto Securitization Trust 2024-1, consist of a single class with a coupon of 11.50%. As of December 31, 2024, the notes had a principal balance of $50.0 million. Generally, prior to a securitization transaction we fund our automobile contract acquisitions primarily with proceeds from warehouse credit facilities.
The sold notes (“2025-1 Notes”), issued by CPS Auto Securitization Trust 2025-1, consist of a single class with a coupon of 11.00%. As of December 31, 2025, the notes had a principal balance of $63.5 million. Generally, prior to a securitization transaction we fund our automobile contract acquisitions primarily with proceeds from warehouse credit facilities.
Certain of our securitization transactions and our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels.
Certain of our warehouse credit facilities and residual interest financings contain various financial covenants requiring certain minimum financial ratios. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels.
In this report, we refer to all of such contracts and loans as "automobile contracts." We were incorporated and began our operations in March 1991. From inception through December 31, 2024, we have purchased a total of approximately $23.0 billion of automobile contracts from dealers.
In this report, we refer to all of such contracts and loans as “automobile contracts.” We were incorporated and began our operations in March 1991. From inception through December 31, 2025, we have purchased a total of approximately $24.7 billion of automobile contracts from dealers.
We believe this improves our allocation of credit evaluation resources, enhances our competitiveness in the marketplace and manages the risk inherent in the sub-prime market. 6 Characteristics of Contracts. All the automobile contracts we purchase are fully amortizing and provide for level payments over the term of the automobile contract.
We believe this improves our allocation of credit evaluation resources, enhances our competitiveness in the marketplace and manages the risk inherent in the sub-prime market. Characteristics of Contracts. All the automobile contracts we purchase are fully amortizing and provide for level payments over the term of the automobile contract. All automobile contracts may be prepaid at any time without penalty.
Because we serve customers who are unable to meet certain credit standards, we incur greater risks, and generally receive interest rates higher than those charged in the prime credit market.
Because we serve customers who are unable to meet certain credit standards, we incur greater risks, and generally receive interest rates higher than those charged in the prime credit market. We also sustain a higher level of credit losses because of the higher risk customers we serve.
The table below compares certain characteristics, at the time of origination, of our contract purchases for the years ended December 31, 2024 and 2023: Contracts Purchased During the Year Ended December 31, 2024 December 31, 2023 Average Original Amount Financed $ 21,931 $ 20,845 Weighted Average Original Term 71 months 67 months Average Down Payment Percent 10.7% 10.7% Average Vehicle Purchase Price $ 20,499 $ 19,651 Average Age of Vehicle 7 years 7 years Average Age of Customer 42 years 42 years Average Time in Current Job 5 years 5 years Average Household Annual Income $ 74,655 $ 72,930 Dealer Compliance .
The table below compares certain characteristics, at the time of origination, of our contract purchases for the years ended December 31, 2025 and 2024: Contracts Purchased During the Year Ended December 31, 2025 December 31, 2024 Average Original Amount Financed $ 22,652 $ 21,931 Weighted Average Original Term 71 months 71 months Average Down Payment Percent 10.6% 10.7% Average Vehicle Purchase Price $ 20,906 $ 20,499 Average Age of Vehicle 7 years 7 years Average Age of Customer 41 years 42 years Average Time in Current Job 5 years 5 years Average Household Annual Income $ 76,433 $ 74,655 Dealer Compliance .
Applicants approved in this fashion are free to shop for and purchase a vehicle from a dealer of their choosing, after which we entered into a note and security agreement directly with the consumer. We terminated our direct lending platform in September 2023 and we do not intend to originate any such loans going forward.
Applicants approved in this fashion are free to shop for and purchase a vehicle from a dealer of their choosing, after which we entered into a note and security agreement directly with the consumer. We terminated our direct lending platform in September 2023, however, we intend to continue servicing our existing direct loans.
To the extent that we do not receive such state registration within three months of purchasing the automobile contract, our dealer compliance group will work with the dealer to rectify the situation. If these efforts are unsuccessful, we generally will require the dealer to repurchase the automobile contract.
To the extent that we do not receive such state registration within three months of purchasing the automobile contract, our dealer compliance group will work with the dealer to rectify the situation.
Our current short-term funding capacity is $535 million, comprising two credit facilities. The first credit facility was established in May 2012. This facility was most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period through July 2027.
Our current short-term funding capacity is $702.5 million, comprising three credit facilities. The first credit facility was established in May 2012. This facility was most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period through July 2027. In addition, the capacity was increased from $200 million to $335 million in December 2024.
We are subject to supervision and examination by the Consumer Financial Protection Bureau (the “CFPB”), a federal agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The CFPB has rulemaking, supervisory and enforcement authority over “non-banks,” including us.
Certain of these laws also regulate our servicing activities, including our methods of collection. 14 We are subject to supervision and examination by the Consumer Financial Protection Bureau (the “CFPB”), a federal agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The CFPB has rulemaking, supervisory and enforcement authority over “non-banks,” including us.
Such services are licensed and/or bonded as required by law. Upon repossession it is stored until it is picked up by a wholesale auction that we designate, where it is kept until sold. Prior to sale, the customer has the right to redeem the vehicle by paying the contract in full.
Upon repossession it is stored until it is picked up by a wholesale auction that we designate, where it is kept until sold. Prior to sale, the customer has the right to redeem the vehicle by paying the contract in full.
In support of our collection activities, we maintain a computerized collection system specifically designed to service automobile contracts with sub-prime customers. We engage a nearshore third-party call center to supplement the efforts the collectors in our five branch locations.
In support of our collection activities, we maintain a computerized collection system specifically designed to service automobile contracts with sub-prime customers. We engage a nearshore third-party call center to supplement the efforts the collectors in our five branch locations. As of December 31, 2025, our nearshore partner had approximately 80 agents assigned to our portfolio.
As a result, the contract interest rate and dealer acquisition fees tend to be higher, and the loan amount, loan-to-value ratio, down payment, and payment-to-income ratio requirements tend to be more restrictive compared to our other programs.
Since the applicant has limited credit history, the contract interest rate and dealer acquisition fees tend to be higher, and the loan amount, loan-to-value ratio, down payment, and payment-to-income ratio requirements tend to be more restrictive compared to our other programs.
Specifically, our funding guidelines generally limit the maximum principal amount of a purchased automobile contract to 125% of wholesale book value in the case of used vehicles or to 125% of the manufacturer’s invoice in the case of new vehicles, plus, in each case, sales tax, licensing and, when the customer purchases such additional items, a service contract or a product to supplement the customer’s casualty policy in the event of a total loss of the related vehicle.
This perspective is used to assign application and structure allowances and limits related to price, term, amount of down payment, monthly payment, and interest rate; type of vehicle; and principal amount of the automobile contract in relation to the value of the vehicle. 5 Specifically, our funding guidelines generally limit the maximum principal amount of a purchased automobile contract to 125% of wholesale book value in the case of used vehicles or to 125% of the manufacturer’s invoice in the case of new vehicles, plus, in each case, sales tax, licensing and, when the customer purchases such additional items, a service contract or a product to supplement the customer’s casualty policy in the event of a total loss of the related vehicle.
Our recent history of term securitizations is summarized in the table below: Recent Asset-Backed Securitizations $ in thousands Period Number of Term Securitizations Amount of Receivables 2018 4 883,452 2019 4 1,014,124 2020 3 741,867 2021 4 1,145,002 2022 4 1,537,383 2023 4 1,352,114 2024 4 1,533,854 From time to time we have also completed financings of our residual interests in other securitizations that we and our affiliates previously sponsored.
We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year. 12 Our recent history of term securitizations is summarized in the table below: Recent Asset-Backed Securitizations $ in thousands Period Number of Term Securitizations Amount of Receivables 2019 4 1,014,124 2020 3 741,867 2021 4 1,145,002 2022 4 1,537,383 2023 4 1,352,114 2024 4 1,533,854 2025 4 1,727,785 From time to time we have also completed financings of our residual interests in other securitizations that we and our affiliates previously sponsored.
Although a dealer would be obligated to repurchase automobile contracts that involve a breach of such warranty, there can be no assurance that the dealer will have the financial resources to satisfy its repurchase obligations. Certain of these laws also regulate our servicing activities, including our methods of collection.
Although a dealer would be obligated to repurchase automobile contracts that involve a breach of such warranty, there can be no assurance that the dealer will have the financial resources to satisfy its repurchase obligations.
As of December 31, 2024, our nearshore partner had approximately 47 agents assigned to our portfolio. 7 We attempt to make telephonic contact with delinquent customers from one to 20 days after their monthly payment due date, depending on our risk-based assessment of the customer’s likelihood of payment during early stages of delinquency.
We attempt to make telephonic contact with delinquent customers from one to 20 days after their monthly payment due date, depending on our risk-based assessment of the customer’s likelihood of payment during early stages of delinquency.
We also sustain a higher level of credit losses because of the higher risk customers we serve. 2 Contract Acquisitions When a retail automobile buyer elects to obtain financing from a dealer, the dealer takes a credit application to submit to its financing sources. Typically, a dealer will submit the buyer’s application to more than one financing source for review.
Contract Acquisitions When a retail automobile buyer elects to obtain financing from a dealer, the dealer takes a credit application to submit to its financing sources. Typically, a dealer will submit the buyer’s application to more than one financing source for review.
Additional information about our extensions is provided in the tables below: For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Average number of extensions granted per month 7,540 6,926 4,689 Average number of outstanding accounts 189,460 176,438 162,264 Average monthly extensions as % of average outstandings 4.0% 3.9% 2.9% 11 December 31, 2024 December 31, 2023 December 31, 2022 Number of Contracts Amount Number of Contracts Amount Number of Contracts Amount (Dollars in thousands) Contracts with one extension 37,106 $ 654,067 36,287 $ 649,551 28,565 $ 479,114 Contracts with two extensions 22,452 382,301 19,335 326,552 13,730 180,547 Contracts with three extensions 13,300 214,194 10,109 133,207 9,837 108,986 Contracts with four extensions 7,462 99,071 6,784 67,735 7,938 76,220 Contracts with five extensions 4,645 43,264 5,197 42,734 5,425 45,519 Contracts with six extensions 3,420 22,988 3,118 20,576 3,269 21,806 88,385 $ 1,415,885 80,830 $ 1,240,355 68,764 $ 912,192 Gross servicing portfolio (Excludes Third Party Portfolio) 201,441 $ 3,490,960 179,198 $ 2,970,066 170,658 $ 2,795,383 Non-Accrual Receivables It is not uncommon for our obligors to fall behind in their payments.
Additional information about our extensions is provided in the tables below: For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Average number of extensions granted per month 9,183 7,540 6,926 Average number of outstanding accounts 210,100 189,460 176,438 Average monthly extensions as % of average outstanding accounts 4.4% 4.0% 3.9% 11 December 31, 2025 December 31, 2024 December 31, 2023 Number of Number of Number of Contracts Amount Contracts Amount Contracts Amount (Dollars in thousands) Contracts with one extension 41,504 $ 759,863 37,106 $ 654,067 36,287 $ 649,551 Contracts with two extensions 24,171 421,363 22,452 382,301 19,335 326,552 Contracts with three extensions 14,963 246,175 13,300 214,194 10,109 133,207 Contracts with four extensions 9,490 146,777 7,462 99,071 6,784 67,735 Contracts with five extensions 5,754 77,884 4,645 43,264 5,197 42,734 Contracts with six or more extensions 3,948 35,781 3,420 22,988 3,118 20,576 99,830 $ 1,687,843 88,385 $ 1,415,885 80,830 $ 1,240,355 Gross servicing portfolio (Excludes Third Party Portfolio) 212,718 $ 3,778,647 201,441 $ 3,490,960 179,198 $ 2,970,066 Non-Accrual Receivables It is not uncommon for our obligors to fall behind in their payments.
We then advise the applicant as to whether we would grant them credit and on what terms. The following table sets forth the geographical sources of the automobile contracts we originated (based on the addresses of the customers as stated on our records) during the years ended December 31, 2024 and 2023.
The following table sets forth the geographical sources of the automobile contracts we originated (based on the addresses of the customers as stated on our records) during the years ended December 31, 2025, and 2024.
Servicing and Collections We currently service all automobile contracts that we own as well as those automobile contracts we service for third parties. We organize our servicing activities based on the tasks performed by our personnel.
If these efforts are unsuccessful, we generally will require the dealer to repurchase the automobile contract. 6 Servicing and Collections We currently service all automobile contracts that we own as well as those automobile contracts we service for third parties. We organize our servicing activities based on the tasks performed by our personnel.
In a securitization and in our warehouse credit facilities, we are required to make certain representations and warranties, which are generally similar to the representations and warranties made by dealers in connection with our purchase of the automobile contracts.
This facility has a two year revolving period to October 2027, with an optional amortization period through April 2029. 13 In a securitization and in our warehouse credit facilities, we are required to make certain representations and warranties, which are generally similar to the representations and warranties made by dealers in connection with our purchase of the automobile contracts.
(4) We do not recognize interest income on accounts past due more than 90 days. 9 Net Credit Loss Experience (1) Total Managed Portfolio (Excludes Third Party Portfolio) Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Average portfolio outstanding $ 3,209,988 $ 2,913,571 $ 2,539,110 Net charge-offs as a percentage of average portfolio (2) 7.6% 6.5% 4.5% (1) All amounts and percentages are based on the principal amount scheduled to be paid on each automobile contract contracts.
(3) Amount in repossession represents the contract balance on financed vehicles that have been repossessed but not yet liquidated. 9 Net Credit Loss Experience (1) Total Managed Portfolio (Excludes Third Party Portfolio) Year Ended December 31, 2025 2024 2023 (Dollars in thousands) Average portfolio outstanding $ 3,693,796 $ 3,209,988 $ 2,913,571 Net charge-offs as a percentage of average portfolio (2) 7.8% 7.6% 6.5% (1) All amounts and percentages are based on the principal amount scheduled to be paid on each automobile contract contracts.
However, we intend to continue servicing our existing direct loans. As of December 31, 2024, automobile contracts under the direct lending platform represented 1.6% of our outstanding managed portfolio. For the year ended December 31, 2024 approximately 91% of the automobile contracts originated under our programs consisted of financing for used cars and 9% consisted of financing for new cars.
As of December 31, 2025, automobile contracts under the direct lending and refinance platform represented 0.9% of our outstanding managed portfolio. For the year ended December 31, 2025, approximately 90% of the automobile contracts originated under our programs consisted of financing for used cars and 10% consisted of financing for new cars.
As of December 31, 2024, we had 122 sales representatives, and in that month, we received applications from 8,600 dealers in 47 states.
As of December 31, 2025, we had 118 sales personnel, and in that month, we received applications from 7,700 dealers in 47 states.
All such financings have involved identification of specific automobile contracts, sale of those automobile contracts (and associated rights) to one of our special-purpose subsidiaries, and issuance of asset-backed securities to be purchased by institutional investors.
All such financings have involved identification of specific automobile contracts, sale of those automobile contracts (and associated rights) to one of our special-purpose subsidiaries, and issuance of asset-backed securities to be purchased by institutional investors. Depending on the structure, these transactions may be accounted for under generally accepted accounting principles as sales of the automobile contracts or as secured financings.
From time to time, we sell certain charged off accounts to unaffiliated purchasers who specialize in collecting such accounts. Contracts originated since January 2018 are accounted for at fair value and the economic impact of late payments is incorporated into the estimated net yield on those contracts.
Contracts originated since January 2018 are accounted for at fair value and the economic impact of late payments is incorporated into the estimated net yield on those contracts.
In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers and acquisitions in 2002, 2003, 2004 and 2011. Contract purchase volumes and managed portfolio levels for the five years ended December 31, 2024 are shown in the table below. Managed portfolio comprises both contracts we owned and those we were servicing for third parties.
Contract purchase volumes and managed portfolio levels for the five years ended December 31, 2025, are shown in the table below. Managed portfolio comprises both contracts we owned and those we were servicing for third parties.
Broken out by function, our human capital was allocated thus: 14 were senior management personnel; 552 were servicing personnel; 195 were automobile contract origination personnel; 122 were sales personnel; 50 were various administrative personnel including human resources, legal, accounting and systems.
Broken out by function, our human capital was allocated thus: 15 were senior management personnel; 545 were servicing personnel; 182 were automobile contract origination personnel; 118 were sales personnel (98 of whom were sales representatives); 68 were various administrative personnel including human resources, legal, accounting and systems or on leave.
As of December 31, 2024, the notes had a principal balance of $50.0 million. On March 31, 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million.
The sold notes (“2021-1 Notes”), issued by CPS Auto Securitization Trust 2021-1, consist of a single class with a coupon of 7.86%. As of December 31, 2025, the notes had a principal balance of $31.2 million. On March 31, 2024, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million.
In addition, the capacity was increased from $200 million to $335 million in December 2024. 13 In November 2015, we entered into another $100 million facility. In June 2022, we increased the capacity of our credit agreement with Ares Agent Services, L.P. from $100 million to $200 million.
In November 2015, we entered into a $100 million facility with Ares Agent Services, L.P. In June 2022, we increased the capacity of our credit agreement from $100 million to $200 million. This facility was most recently renewed in March 2024, extending the revolving period to March 2026, followed by an amortization period to March 2028.
While we believe that we can obtain from dealers sufficient automobile contracts for purchase at attractive prices by consistently applying reasonable underwriting criteria and making timely purchases of qualifying automobile contracts, there can be no assurance that we will do so. 14 Regulation Numerous federal and state consumer protection laws, including the federal Truth-In-Lending Act, the federal Equal Credit Opportunity Act, the federal Fair Debt Collection Practices Act and the Federal Trade Commission Act, regulate consumer credit transactions.
While we believe that we can obtain from dealers sufficient automobile contracts for purchase at attractive prices by consistently applying reasonable underwriting criteria and making timely purchases of qualifying automobile contracts, there can be no assurance that we will do so.
Automobile contracts less than 31 days delinquent are not included. The delinquency aging categories shown in the tables reflect the effect of extensions. (3) Amount in repossession represents the contract balance on financed vehicles that have been repossessed but not yet liquidated.
Automobile contracts less than 31 days delinquent are not included. The delinquency aging categories shown in the tables reflect the effect of extensions.
Contracts Purchased During the Year Ended December 31, 2024 December 31, 2023 Number Percent (1) Number Percent (1) Texas 5,985 7.8% 4,620 7.1% Ohio 5,643 7.3% 4,015 6.2% California 4,583 6.0% 3,911 6.0% Illinois 4,399 5.7% 4,482 6.9% Florida 4,148 5.4% 3,489 5.4% Georgia 3,432 4.5% 2,598 4.0% Other States 48,819 63.4% 42,022 64.5% Total 77,009 100.0% 65,137 100.0% (1) Percentages may not total to 100.0% due to rounding. 3 The following table sets forth the geographic concentrations of our outstanding managed portfolio as of December 31, 2024 and 2023.
Contracts Purchased During the Year Ended December 31, 2025 December 31, 2024 Number Percent (1) Number Percent (1) Ohio 5,654 7.8% 5,643 7.3% Texas 5,100 7.0% 5,985 7.8% Illinois 4,287 5.9% 4,399 5.7% California 3,824 5.3% 4,583 6.0% Florida 3,815 5.3% 4,148 5.4% Georgia 3,611 5.0% 3,432 4.5% Other States 46,226 63.7% 48,819 63.4% Total 72,517 100.0% 77,009 100.0% (1) Percentages may not total to 100.0% due to rounding.
In addition, laws in a number of states impose limitations on the amount of finance charges that may be charged by dealers on credit sales. The so-called Lemon Laws enacted by various states provide certain rights to purchasers with respect to automobiles that fail to satisfy express warranties.
The so-called Lemon Laws enacted by various states provide certain rights to purchasers with respect to automobiles that fail to satisfy express warranties.
The table below summarizes the status, as of December 31, 2024, for accounts that received extensions from 2013 through 2023: Period of Extension # of Extensions Granted Active or Paid Off at December 31, 2024 % Active or Paid Off at December 31, 2024 Charged Off > 6 Months After Extension % Charged Off > 6 Months After Extension Charged Off % Charged Off Avg Months to Charge Off Post Extension 2013 23,398 11,131 47.6% 11,282 48.2% 985 4.2% 23 2014 25,773 10,423 40.4% 14,485 56.2% 865 3.4% 25 2015 53,319 21,965 41.2% 30,051 56.4% 1,303 2.4% 26 2016 80,897 35,108 43.4% 42,954 53.1% 2,835 3.5% 26 2017 133,847 55,504 41.5% 68,124 50.9% 10,219 7.6% 23 2018 121,531 57,265 47.1% 53,268 43.8% 10,998 9.0% 20 2019 71,548 42,621 59.6% 22,507 31.5% 6,420 9.0% 19 2020 83,170 56,198 67.6% 23,305 28.0% 3,667 4.4% 21 2021 47,010 33,486 71.2% 12,288 26.1% 1,236 2.6% 19 2022 56,142 39,610 70.6% 14,578 26.0% 1,954 3.5% 15 2023 83,113 65,309 78.6% 14,545 17.5% 3,259 3.9% 11 We view these results as a confirmation of the effectiveness of our extension program.
The table below summarizes the status, as of December 31, 2025, for accounts that received extensions from 2014 through 2024: Period of Extension # of Extensions Granted Active or Paid Off at December 31, 2025 % Active or Paid Off at December 31, 2025 Charged Off > 6 Months After Extension % Charged Off > 6 Months After Extension Charged Off % Charged Off Avg Months to Charge Off Post Extension 2014 25,773 10,417 40.4% 14,489 56.2% 870 3.4% 25 2015 53,319 21,929 41.1% 30,059 56.4% 1,331 2.5% 26 2016 80,897 34,904 43.1% 43,016 53.2% 2,977 3.7% 26 2017 133,847 54,630 40.8% 68,378 51.1% 10,839 8.1% 23 2018 121,531 55,606 45.8% 53,745 44.2% 12,180 10.0% 20 2019 71,548 40,517 56.6% 23,121 32.3% 7,910 11.1% 19 2020 83,170 54,032 65.0% 24,886 29.9% 4,252 5.1% 23 2021 47,010 31,622 67.3% 14,152 30.1% 1,236 2.6% 23 2022 56,142 35,118 62.6% 19,070 34.0% 1,954 3.5% 19 2023 83,113 53,500 64.4% 26,354 31.7% 3,259 3.9% 16 2024 90,484 71,622 79.2% 16,221 17.9% 2,641 2.9% 11 We view these results as a confirmation of the effectiveness of our extension program.
Generally, such a decision will occur between the 60th and 90th day past the customer’s payment due date, but could occur sooner or later, depending on the specific circumstances. Contracts originated since January 2018 are accounted for at fair value and the economic impact of repossessions is incorporated into the estimated net yield on those contracts.
Generally, such a decision will occur between the 60th and 90th day past the customer’s payment due date, but could occur sooner or later, depending on the specific circumstances.
These laws mandate certain disclosures with respect to finance charges on automobile contracts and impose certain other restrictions. In most states, a license is required to engage in the business of purchasing automobile contracts from dealers.
In most states, a license is required to engage in the business of purchasing automobile contracts from dealers. In addition, laws in a number of states impose limitations on the amount of finance charges that may be charged by dealers on credit sales.
Contracts Purchased During the Year Ended (1) December 31, 2024 December 31, 2023 (dollars in thousands) Program Amount Financed Percent (1) Amount Financed Percent (1) Meta $ 55,241 3.3% $ 45,319 3.3% Preferred 278,044 16.5% 175,122 12.9% Super Alpha 338,156 20.1% 265,385 19.5% Alpha Plus 372,345 22.1% 179,526 13.2% Alpha 424,433 25.2% 383,512 28.2% Standard 116,159 6.9% 103,499 7.6% Mercury / Delta 27,554 1.6% 52,250 3.8% First Time Buyer 37,317 2.2% 52,313 3.9% Third Parties 32,692 1.9% 100,826 7.4% $ 1,681,941 100.0% $ 1,357,752 100.0% (1) Percentages may not total to 100.0% due to rounding. 5 We attempt to control misrepresentation regarding the customer’s credit worthiness by carefully screening the automobile contracts we originate, by establishing and maintaining professional business relationships with dealers, and by including certain representations and warranties by the dealer in the dealer agreement.
Contracts Purchased During the Year Ended (1) December 31, 2025 December 31, 2024 (dollars in thousands) Program Amount Financed Percent (1) Amount Financed Percent (1) Meta $ 78,907 4.8% $ 55,241 3.3% Preferred 298,374 18.2% 278,044 16.5% Super Alpha 316,449 19.3% 338,156 20.1% Alpha Plus 319,020 19.5% 372,345 22.1% Alpha 448,450 27.4% 424,433 25.2% Standard 120,616 7.4% 116,159 6.9% Mercury / Delta 22,858 1.4% 27,554 1.6% First Time Buyer 19,395 1.2% 37,317 2.2% Third Parties 14,257 0.9% 32,692 1.9% $ 1,638,326 100.0% $ 1,681,941 100.0% (1) Percentages may not total to 100.0% due to rounding.
We do not record an expense for provision for credit losses on these receivables because such credit losses are included in our computation of the appropriate level yield. Since 1994 we have conducted 103 term securitizations of automobile contracts that we originated under our regular programs.
For these receivables, we recognize interest income on a level yield basis using that internal rate of return as the applicable interest rate. We do not record an expense for provision for credit losses on these receivables because such credit losses are included in our computation of the appropriate level yield.
Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date. For these receivables, we recognize interest income on a level yield basis using that internal rate of return as the applicable interest rate.
We then periodically (i) recognize interest and fee income on the contracts, (ii) recognize interest expense on the securities issued in the transaction and (iii) record as expense a provision for credit losses on the contracts. Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date.
Outstanding Managed Portfolio as of December 31, 2024 December 31, 2023 Amount Percent (1) Amount Percent (1) ($ in millions) California $ 275.2 7.5% $ 274.7 8.6% Texas 287.3 7.8% 237.6 7.4% Ohio 265.5 7.2% 232.7 7.3% Illinois 204.3 5.6% 173.3 5.4% Florida 185.0 5.0% 160.2 5.0% Pennsylvania 168.3 4.6% 152.8 4.8% All others 2,280.1 62.2% 1,963.3 61.5% Total $ 3,665.7 100.0% $ 3,194.6 100.0% (1) Percentages may not total to 100.0% due to rounding.
Outstanding Managed Portfolio as of December 31, 2025 December 31, 2024 Amount Percent (1) Amount Percent (1) ($ in millions) Texas $ 301.8 7.7% $ 287.3 7.8% Ohio 289.2 7.4% 265.5 7.2% California 255.9 6.6% 275.2 7.5% Illinois 225.9 5.8% 204.3 5.6% Florida 200.3 5.1% 185.0 5.0% Pennsylvania 166.9 4.3% 168.3 4.6% All others 2,458.4 63.1% 2,280.1 62.2% Total $ 3,898.4 100.0% $ 3,665.7 100.0% (1) Percentages may not total to 100.0% due to rounding. 3 We purchase automobile contracts from dealers at a price generally computed as the total amount financed under the automobile contracts, adjusted for an acquisition fee, which may be comprised of multiple components and which may either increase or decrease the automobile contract purchase price we pay.
Depending on the structure, these transactions may be accounted for under generally accepted accounting principles as sales of the automobile contracts or as secured financings. 12 When structured to be treated as a secured financing for accounting purposes, the subsidiary is consolidated with us.
When structured to be treated as a secured financing for accounting purposes, the subsidiary is consolidated with us. Accordingly, the sold automobile contracts and the related debt appear as assets and liabilities, respectively, on our consolidated balance sheet.
Removed
Under our direct lending platform, the applicant submits a credit application directly to us via our website, or in some cases, through a third-party who accepts such applications and refers them to us for a fee. In either case, we process the application with the same automated application decisioning process as described above for applications from dealers.
Added
In December 2025, CPS began to originate loans directly to consumers for the refinancing of an existing loan from other lenders secured by an automobile. The credit, underwriting, purchase and servicing procedures with respect to such contracts are substantially the same as those purchased from dealers.
Removed
We purchase automobile contracts from dealers at a price generally computed as the total amount financed under the automobile contracts, adjusted for an acquisition fee, which may be comprised of multiple components and which may either increase or decrease the automobile contract purchase price we pay.
Added
The following table sets forth the geographic concentrations of our outstanding managed portfolio as of December 31, 2025, and 2024.
Removed
This perspective is used to assign application and structure allowances and limits related to price, term, amount of down payment, monthly payment, and interest rate; type of vehicle; and principal amount of the automobile contract in relation to the value of the vehicle.
Added
We attempt to control misrepresentation regarding the customer’s credit worthiness by carefully screening the automobile contracts we originate, by establishing and maintaining professional business relationships with dealers, and by including certain representations and warranties by the dealer in the dealer agreement.
Removed
All automobile contracts may be prepaid at any time without penalty.
Added
Contracts originated since January 2018 are accounted for at fair value and the economic impact of repossessions is incorporated into the estimated net yield on those contracts. 7 If we elect to repossess the vehicle, we assign the task to an independent national repossession service. Such services are licensed and/or bonded as required by law.
Removed
For contracts originated prior to January 2018, which are not accounted for at fair value, we suspend interest accruals on contracts where the vehicle has been repossessed and reclassify the remaining automobile contract balance to other assets.
Added
From time to time, we sell certain charged off accounts to unaffiliated purchasers who specialize in collecting such accounts.
Removed
In addition, we apply a specific reserve to such contracts so that the net balance represents the estimated remaining balance after the proceeds of the sale of the vehicle are applied, net of related costs. If we elect to repossess the vehicle, we assign the task to an independent national repossession service.
Added
Since 1994 we have conducted 107 term securitizations of automobile contracts that we originated under our regular programs. As of December 31, 2025, 19 of those securitizations are active and all are structured as secured financings.
Removed
For contracts originated prior to January 2018, which are not accounted for at fair value, we suspend interest accruals on contracts once an automobile contract becomes greater than 90 days delinquent. We do not recognize additional interest income until the borrower makes sufficient payments to be less than 90 days delinquent.
Added
The sold notes (“2024-1 Notes”), issued by CPS Auto Securitization Trust 2024-1, consist of a single class with a coupon of 11.50%. As of December 31, 2025, the notes had a principal balance of $49.8 million. On March 20, 2025, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $65.0 million.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA Pandemic or Other Public Health Emergency Could Have Adverse Effects The extent to which obligors on our automobile contracts may be adversely affected by a pandemic or other public health emergency, by loss of employment, and by related efforts of governments to slow the spread of a disease outbreak throughout the nation and world cannot be predicted.
Biggest changeThe timing of any economic changes is uncertain, and weakness in the economy could have an adverse effect on our business and that of the dealers from which we purchase automobile contracts and result in reductions in our revenues or the cash flows available to us. 27 A Pandemic or Other Public Health Emergency Could Have Adverse Effects The extent to which obligors on our automobile contracts may be adversely affected by a pandemic or other public health emergency, by loss of employment, and by related efforts of governments to slow the spread of a disease outbreak throughout the nation and world cannot be predicted.
If executed, these strategies could reduce the earnings available to our shareholders. We Need Substantial Liquidity to Operate Our Business. We have historically funded our operations principally through internally generated cash flows, sales of debt and equity securities, including through securitizations and warehouse credit facilities, borrowings under senior secured debt agreements and sales of subordinated notes.
If executed, these strategies could reduce the earnings available to our shareholders. 16 We Need Substantial Liquidity to Operate Our Business. We have historically funded our operations principally through internally generated cash flows, sales of debt and equity securities, including through securitizations and warehouse credit facilities, borrowings under senior secured debt agreements and sales of subordinated notes.
These restrictions may limit our ability to receive distributions in respect of the residual interests from our securitization facilities, which may limit our ability to generate earnings. Risks Related to Fair Value Accounting Receivables we’ve acquired since January 1, 2018 are accounted for based on the fair value method of accounting.
These restrictions may limit our ability to receive distributions in respect of the residual interests from our securitization facilities, which may limit our ability to generate earnings. 26 Risks Related to Fair Value Accounting Receivables we’ve acquired since January 1, 2018 are accounted for based on the fair value method of accounting.
See "Cautionary Note Regarding Forward-Looking Statements." 16 Risks Related to Our Business We Require a Substantial Amount of Cash to Service Our Substantial Debt. To service our existing substantial indebtedness, we require a significant amount of cash. Our ability to generate cash depends on many factors, including our successful financial and operating performance.
See "Cautionary Note Regarding Forward-Looking Statements." Risks Related to Our Business We Require a Substantial Amount of Cash to Service Our Substantial Debt. To service our existing substantial indebtedness, we require a significant amount of cash. Our ability to generate cash depends on many factors, including our successful financial and operating performance.
The credit spread between the interest rates payable on our securitization trust debt and the rates payable on risk-free investments has varied. The Federal Reserve increased interest rates multiple times in 2022 and 2023. As a result, we experienced increased interest expense in 2023. In 2024, the Federal Reserve lowered short term interest rates.
The credit spread between the interest rates payable on our securitization trust debt and the rates payable on risk-free investments has varied. The Federal Reserve increased interest rates multiple times in 2022 and 2023. As a result, we experienced increased interest expense in 2023. In 2024 and 2025, the Federal Reserve lowered short term interest rates.
If actual credit losses were to exceed our estimates, we might be required to change our estimates, which could result in a fair value adjustment to those receivables or reduced interest income for those receivables in subsequent periods. 22 In addition, under the terms of our warehouse credit facilities, we are not able to borrow against defaulted automobile contracts, including automobile contracts that are, at the time of default, funded under our warehouse credit facilities, which will reduce the overcollateralization of those warehouse credit facilities and possibly reduce the amount of cash flows available to us.
If actual credit losses were to exceed our estimates, we might be required to change our estimates, which could result in a fair value adjustment to those receivables or reduced interest income for those receivables in subsequent periods. 21 In addition, under the terms of our warehouse credit facilities, we are not able to borrow against defaulted automobile contracts, including automobile contracts that are, at the time of default, funded under our warehouse credit facilities, which will reduce the overcollateralization of those warehouse credit facilities and possibly reduce the amount of cash flows available to us.
No assurance can be given as to whether any of such hypothetical proceedings might materially and adversely affect us. 23 If we fail to comply with applicable laws and regulations, such failure could result in penalties, litigation losses and expenses, damage to our reputation, or the suspension or termination of our licenses to conduct business, which would materially adversely affect our results of operations, financial condition and stock price.
No assurance can be given as to whether any of such hypothetical proceedings might materially and adversely affect us. 22 If we fail to comply with applicable laws and regulations, such failure could result in penalties, litigation losses and expenses, damage to our reputation, or the suspension or termination of our licenses to conduct business, which would materially adversely affect our results of operations, financial condition and stock price.
We sometimes refer to these future cash flows as "excess spread cash flows." Under the financial structures we have used to date in our securitizations and warehouse credit facilities, excess spread cash flows that would otherwise be paid to the holder of the residual interest are first used to increase overcollateralization or are retained in a spread account within the securitization trusts or the warehouse facility to provide liquidity and credit enhancement for the related securities.
We sometimes refer to these future cash flows as “excess spread cash flows.” Under the financial structures we have used to date in our securitizations and warehouse credit facilities, excess spread cash flows that would otherwise be paid to the holder of the residual interest are first used to increase overcollateralization or are retained in a spread account within the securitization trusts or the warehouse facility to provide liquidity and credit enhancement for the related securities.
In the event delinquencies, defaults or net losses on automobile contracts exceed these levels, the terms of the securitization or warehouse credit facility: · may require increased credit enhancement, including an increase in the amount required to be on deposit in the spread account to be accumulated for the particular pool; and · in certain circumstances, may permit affected parties to require the transfer of servicing on some or all of the securitized or warehoused contracts from us to an unaffiliated servicer.
In the event net losses on automobile contracts exceed these levels, the terms of the securitization or warehouse credit facility: · may require increased credit enhancement, including an increase in the amount required to be on deposit in the spread account to be accumulated for the particular pool; and · in certain circumstances, may permit affected parties to require the transfer of servicing on some or all of the securitized or warehoused contracts from us to an unaffiliated servicer.
While the specific terms and mechanics vary among transactions, our securitization and warehousing agreements generally provide that we will receive excess spread cash flows only if the amount of overcollateralization and spread account balances have reached specified levels and/or the delinquency, defaults or net losses related to the automobile contracts in the automobile contract pools are below certain predetermined levels.
While the specific terms and mechanics vary among transactions, our securitization and warehousing agreements generally provide that we will receive excess spread cash flows only if the amount of overcollateralization and spread account balances have reached specified levels and/or the net losses related to the automobile contracts in the automobile contract pools are below certain predetermined levels.
If interest rates in general should rise, our expenses would likewise rise, which could have a material adverse effect on our financial position, liquidity, results of operation and our ability to enter into future financing transactions. 21 If We Are Unable to Compete Successfully with our Competitors, Our Results of Operations May Be Impaired.
If interest rates in general should rise, our expenses would likewise rise, which could have a material adverse effect on our financial position, liquidity, results of operation and our ability to enter into future financing transactions. 20 If We Are Unable to Compete Successfully with our Competitors, Our Results of Operations May Be Impaired.
Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could adversely affect our financial position, liquidity, results of operation and our ability to enter into future financing transactions. 20 We sell repossessed automobiles at wholesale auction markets located throughout the United States.
Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could adversely affect our financial position, liquidity, results of operation and our ability to enter into future financing transactions. 19 We sell repossessed automobiles at wholesale auction markets located throughout the United States.
Because the rules place an upper limit on the degree to which we may use financial leverage, our securitization structures may require more capital of us, or may release less cash to us, than might be the case in the absence of such rules. 24 If We Experience Unfavorable Litigation Results, Our Results of Operations May Be Impaired.
Because the rules place an upper limit on the degree to which we may use financial leverage, our securitization structures may require more capital of us, or may release less cash to us, than might be the case in the absence of such rules. 23 If We Experience Unfavorable Litigation Results, Our Results of Operations May Be Impaired.
In April 2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020, and then on a regular quarterly schedule from January 2021 through January 2025.
In April 2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020, and then on a regular quarterly schedule from January 2021 through January 2026.
Similar periods of losses began in the quarter ended March 31, 1999 through the quarter ended December 31, 2000 and also from the quarter ended September 30, 2003 through the quarter ended March 31, 2005. We expect to earn quarterly profits during 2025; however, there can be no assurance as to that expectation.
Similar periods of losses began in the quarter ended March 31, 1999 through the quarter ended December 31, 2000 and also from the quarter ended September 30, 2003 through the quarter ended March 31, 2005. We expect to earn quarterly profits during 2026; however, there can be no assurance as to that expectation.
In April 2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020, and then on a regular quarterly schedule from January 2021 through January 2025.
In April 2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020, and then on a regular quarterly schedule from January 2021 through January 2026.
However, if the market conditions for asset-backed securitizations should reverse, we would expect a material adverse effect on our results of operations. 19 Our Results of Operations Will Depend on Cash Flows from Our Residual Interests in Our Securitization Program and Our Warehouse Credit Facilities.
However, if the market conditions for asset-backed securitizations should reverse, we would expect a material adverse effect on our results of operations. 18 Our Results of Operations Will Depend on Cash Flows from Our Residual Interests in Our Securitization Program and Our Warehouse Credit Facilities.
Both warehouse credit facilities have a revolving period during which we may receive advances secured by contributed automobile contracts, followed by an amortization period during which no further advances may be made, but prior to which outstanding advances are due and payable.
All warehouse credit facilities have a revolving period during which we may receive advances secured by contributed automobile contracts, followed by an amortization period during which no further advances may be made, but prior to which outstanding advances are due and payable.
Such systems problems could materially and adversely affect our results of operations, financial conditions and cash flows. 25 A Breach in the Security of Our Systems Could Result in the Disclosure of Confidential Information, Subject us to Liability.
Such systems problems could materially and adversely affect our results of operations, financial conditions and cash flows. 24 A Breach in the Security of Our Systems Could Result in the Disclosure of Confidential Information, Subject us to Liability.
We identify important factors that could cause actual results to differ, generally in the “Risk Factors” section of this report, and also under the caption “Cautionary Note Regarding Forward-Looking Statements.” One reason for our expectation is that we have had positive net income in each of the thirteen fiscal years ended December 31, 2024, although not in every quarter within that period.
We identify important factors that could cause actual results to differ, generally in the “Risk Factors” section of this report, and also under the caption “Cautionary Note Regarding Forward-Looking Statements.” One reason for our expectation is that we have had positive net income in each of the fourteen fiscal years ended December 31, 2025, although not in every quarter within that period.
These restrictions may also significantly limit or prohibit us from engaging in certain transactions, including the following: · incurring or guaranteeing additional indebtedness; · making capital expenditures in excess of agreed upon amounts; · paying dividends or other distributions to our shareholders or redeeming, repurchasing or retiring our capital stock or subordinated obligations; · making investments; · creating or permitting liens on our assets or the assets of our subsidiaries; · issuing or selling capital stock of our subsidiaries; · transferring or selling our assets; · engaging in mergers or consolidations; · permitting a change of control of our company; · liquidating, winding up or dissolving our company; · changing our name or the nature of our business, or the names or nature of the business of our subsidiaries; and · engaging in transactions with our affiliates outside the normal course of business. 26 These restrictions may limit our ability to obtain additional sources of capital, which may limit our ability to generate earnings.
These restrictions may also significantly limit or prohibit us from engaging in certain transactions, including the following: · incurring or guaranteeing additional indebtedness; · making capital expenditures in excess of agreed upon amounts; · paying dividends or other distributions to our shareholders or redeeming, repurchasing or retiring our capital stock or subordinated obligations; · making investments; · creating or permitting liens on our assets or the assets of our subsidiaries; · issuing or selling capital stock of our subsidiaries; · transferring or selling our assets; · engaging in mergers or consolidations; · permitting a change of control of our company; · liquidating, winding up or dissolving our company; · changing our name or the nature of our business, or the names or nature of the business of our subsidiaries; and · engaging in transactions with our affiliates outside the normal course of business.
We specialize in the purchase and servicing of automobile contracts to finance automobile purchases by sub-prime customers, those who have limited credit history, low income, or past credit problems. Such automobile contracts entail a higher risk of non-performance, higher delinquencies and higher losses than automobile contracts with more creditworthy customers.
We specialize in the purchase and servicing of automobile contracts to finance automobile purchases by sub-prime customers, those who have limited credit histories or past credit problems. Such automobile contracts entail a higher risk of non-performance, higher delinquencies and higher losses than automobile contracts with more creditworthy customers.
A deterioration in economic conditions and certain economic factors, such as reduced business activity, high unemployment, interest rates, housing prices, energy prices (including the price of gasoline), increased consumer indebtedness (including of obligors on the receivables), lack of available credit, the rate of inflation (such as the recent increase in inflation) and consumer perceptions of the economy, as well as other factors, such as terrorist events, civil unrest, cyber-attacks, public health emergencies, extreme weather conditions or significant changes in the geopolitical environment (such as the ongoing military conflict between Ukraine and Russia and the conflict in Israel) and/or public policy, including increased state, local or federal taxation, could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables we originate.
A deterioration in economic conditions and certain economic factors, such as reduced business activity, high unemployment, interest rates, housing prices, energy prices (including the price of gasoline), increased consumer indebtedness (including of obligors on the receivables), lack of available credit, the rate of inflation (such as the recent increase in inflation) and consumer perceptions of the economy, as well as other factors, such as terrorist events, civil unrest, cyber-attacks, public health emergencies, extreme weather conditions or significant changes in the geopolitical environment (such as the ongoing military conflict between Ukraine and Russia and the conflicts in the Middle East, and recent U.S. action taken in Venezuela) and/or public policy, including increased state, local or federal taxation, could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables we originate.
During the years ended December 31, 2024 and 2023, no single dealer accounted for as much as 2% of the automobile contracts we purchased. The agreements we have with dealers to purchase automobile contracts do not require dealers to submit a minimum number of automobile contracts for purchase.
During the years ended December 31, 2025, and 2024, no single dealer accounted for as much as 1.5% of the automobile contracts we purchased. The agreements we have with dealers to purchase automobile contracts do not require dealers to submit a minimum number of automobile contracts for purchase.
Our Substantial Indebtedness Could Adversely Affect Our Financial Health and Prevent Us From Fulfilling Our Obligations Under Our Existing Indebtedness We currently have and will continue to have a substantial amount of outstanding indebtedness. At December 31, 2024, we had approximately $3,131.0 million of debt outstanding.
Our Substantial Indebtedness Could Adversely Affect Our Financial Health and Prevent Us From Fulfilling Our Obligations Under Our Existing Indebtedness We currently have and will continue to have a substantial amount of outstanding indebtedness. At December 31, 2025, we had approximately $3,483.4 million of debt outstanding.
Upon sale of the notes, funds advanced under one or more warehouse credit facilities are repaid from the proceeds. Our current short-term funding capacity is $535 million, comprising two credit facilities.
Upon sale of the notes, funds advanced under one or more warehouse credit facilities are repaid from the proceeds. Our current short-term funding capacity is $702.5 million, comprising three credit facilities.
Our access to financing sources depends upon our financial position, general market conditions, availability of bank liquidity, the bank regulatory environment, our compliance with covenants imposed under our financing agreements, the credit quality of the collateral we can pledge to support secured financings, and other factors beyond our control.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Liquidity”. 17 Our access to financing sources depends upon our financial position, general market conditions, availability of bank liquidity, the bank regulatory environment, our compliance with covenants imposed under our financing agreements, the credit quality of the collateral we can pledge to support secured financings, and other factors beyond our control.
We are generally unable to determine whether or to what extent economic or social factors will affect the performance of our portfolio of automobile contracts, but caution that a recession or depression in local, regional or national economies would be expected to increase delinquencies and losses, which would adversely affect our financial condition and results of operations. 28 If an Increase in Interest Rates Results in a Decrease in Our Cash Flows from Excess Spread, Our Results of Operations May Be Impaired.
We are generally unable to determine whether or to what extent economic or social factors will affect the performance of our portfolio of automobile contracts, but caution that a recession or depression in local, regional or national economies would be expected to increase delinquencies and losses, which would adversely affect our financial condition and results of operations.
Our ability to make payments of principal or interest on, or to refinance, our indebtedness will depend on our future operating performance, and our ability to enter into additional credit facilities and securitization transactions as well as other debt financings, which, to a certain extent, are subject to economic, financial, competitive, regulatory, capital markets and other factors beyond our control. 18 If we are unable to generate sufficient cash flows in the future to service our debt, we may be required to refinance all or a portion of our existing debt or to obtain additional financing.
Our ability to make payments of principal or interest on, or to refinance, our indebtedness will depend on our future operating performance, and our ability to enter into additional credit facilities and securitization transactions as well as other debt financings, which, to a certain extent, are subject to economic, financial, competitive, regulatory, capital markets and other factors beyond our control.
We Do Not Intend to Pay Dividends on Our Common Stock. We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Item 1B. Unresolved Staff Comments Not applicable.
We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Item 1B. Unresolved Staff Comments Not applicable.
There can be no assurance that we will continue to be successful with that strategy. Periods of Significant Losses. From time to time throughout our history we have incurred net losses, most recently over the period beginning with the quarter ended September 30, 2008 and ending with the quarter ended September 30, 2011.
From time to time throughout our history we have incurred net losses, most recently over the period beginning with the quarter ended September 30, 2008 and ending with the quarter ended September 30, 2011.
Such debt consisted primarily of $2,594.4 million of securitization trust debt, and also included $410.9 million of warehouse lines of credit, $99.2 million of residual interest financing debt and $26.5 million in subordinated renewable notes.
Such debt consisted primarily of $2,986.6 million of securitization trust debt, and also included $324.9 million of warehouse lines of credit, $143.0 million of residual interest financing debt and $29.0 million in subordinated renewable notes.
Among other things, we use such cash liquidity to: · acquire automobile contracts; · fund overcollateralization in warehouse credit facilities and securitizations; · pay securitization fees and expenses; · fund spread accounts in connection with securitizations; · satisfy working capital requirements and pay operating expenses; · pay taxes; and · pay interest expense. 17 Historically we have matched our liquidity needs to our available sources of funding by reducing our acquisition of new automobile contracts, at times to merely nominal levels.
Among other things, we use such cash liquidity to: · acquire automobile contracts; · fund overcollateralization in warehouse credit facilities and securitizations; · pay securitization fees and expenses; · fund spread accounts in connection with securitizations; · satisfy working capital requirements and pay operating expenses; · pay taxes; and · pay interest expense.
There can be no assurance that any refinancing will be possible or that any additional financing could be obtained on acceptable terms. The inability to service or refinance our existing debt or to obtain additional financing would have a material adverse effect on our financial position, liquidity and results of operations.
The inability to service or refinance our existing debt or to obtain additional financing would have a material adverse effect on our financial position, liquidity and results of operations.
Because there historically has been low trading volume in our common stock, there can be no assurance that our stock price will not decline as additional shares are sold in the public market. As of December 31, 2024, our directors and executive officers collectively owned 13.0 million shares of our common stock, or approximately 61% of total shares outstanding.
Because there historically has been low trading volume in our common stock, there can be no assurance that our stock price will not decline as additional shares are sold in the public market.
In addition, the failure to comply with any of the covenants of one or more of our debt agreements could cause a default under other debt agreements that may be outstanding from time to time. A default, if not waived, could result in acceleration of the related indebtedness, in which case such debt would become immediately due and payable.
These restrictions may limit our ability to obtain additional sources of capital, which may limit our ability to generate earnings. In addition, the failure to comply with any of the covenants of one or more of our debt agreements could cause a default under other debt agreements that may be outstanding from time to time.
If the allowance is inadequate, then we would recognize the losses in excess of the allowance as an expense and our results of operations could be adversely affected. Receivables originated since January 2018 are recorded at fair value and incorporate estimates include the timing and severity of future credit losses.
Receivables originated since January 2018 are recorded at fair value and incorporate estimates include the timing and severity of future credit losses.
If such estimated value were to be materially different from our recorded value, we might be required to adjust the recorded value of our receivables.
If such estimated value were to be materially different from our recorded value, an adjustment to the recorded value of our receivables will be required. A downward readjustment in recorded value would correspondingly reduce our income and book value.
Because We Are Subject to Many Restrictions in Our Existing Credit Facilities and Securitization Transactions, Our Ability to Pay Dividends or Engage in Specified Transactions May Be Impaired.
If we are unable to effectively manage the risks associated with the use of AI, including operational, regulatory, data security, or reputational risks, our business, financial condition, and results of operations could be adversely affected. 25 Because We Are Subject to Many Restrictions in Our Existing Credit Facilities and Securitization Transactions, Our Ability to Pay Dividends or Engage in Specified Transactions May Be Impaired.
Our business is directly related to sales of new and used automobiles, which are sensitive to employment rates, prevailing interest rates and other domestic economic conditions. Delinquencies, repossessions and losses generally increase during economic slowdowns or recessions.
Risks Related to General Factors If The Economy of All or Certain Regions of the United States Falls into Recession, Our Results of Operations May Be Impaired. Our business is directly related to sales of new and used automobiles, which are sensitive to employment rates, prevailing interest rates and other domestic economic conditions.
Removed
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Liquidity”.
Added
Historically we have matched our liquidity needs to our available sources of funding by reducing our acquisition of new automobile contracts, at times to merely nominal levels. There can be no assurance that we will continue to be successful with that strategy. Periods of Significant Losses.
Removed
For our receivables originated prior to January 2018, we maintain an allowance for credit losses on automobile contracts held on our balance sheet, which reflects our estimates of probable credit losses that can be reasonably estimated.
Added
If we are unable to generate sufficient cash flows in the future to service our debt, we may be required to refinance all or a portion of our existing debt or to obtain additional financing. There can be no assurance that any refinancing will be possible or that any additional financing could be obtained on acceptable terms.
Removed
A downward readjustment in recorded value would correspondingly reduce our income and book value. 27 Risks Related to General Factors If The Economy of All or Certain Regions of the United States Falls into Recession, Our Results of Operations May Be Impaired.
Added
Our Use of Artificial Intelligence May Expose Us to Risks That Could Impact our Business, Financial Conditions, and Results of Operations. We use artificial intelligence (“AI”) in certain aspects of our business operations, and we or our third-party service providers may expand the use of these technologies in the future.
Removed
The timing of any economic changes is uncertain, and weakness in the economy could have an adverse effect on our business and that of the dealers from which we purchase automobile contracts and result in reductions in our revenues or the cash flows available to us.
Added
AI may be used to support functions such as customer service, servicing operations, data analysis, compliance monitoring, and other processes related to our auto finance activities. Implementing and maintaining these technologies may require significant investments in infrastructure, personnel, data management, and training.
Added
There can be no assurance that these investments will deliver the anticipated benefits or that AI technologies can be successfully integrated into our existing systems and processes without disruption.
Added
If we are unable to effectively implement or adapt to evolving technologies, including AI, as quickly or successfully as our competitors, our operational efficiency, relationships with automobile dealers, and ability to compete in the auto finance market could be adversely affected. In addition, the legal and regulatory environment relating to AI is evolving and uncertain.
Added
New or changing laws, regulations, or supervisory expectations could limit how we use AI technologies, require modifications to our systems or processes, or increase compliance costs. Failure to comply with applicable requirements could expose us to regulatory scrutiny or enforcement actions. We may also rely on AI technologies developed or supported by third-party vendors.
Added
As a result, we may be dependent on those vendors’ development practices, training data, and risk controls, over which we may have limited visibility or control.
Added
Although we seek to manage and oversee our third-party vendors through our vendor risk management and oversight processes, we may not be able to fully mitigate risks arising from their technologies, practices, or controls, and certain risks may remain outside of our control.
Added
The limited transparency of certain AI models may make it more difficult to monitor model performance, identify errors or bias, and demonstrate compliance with regulatory requirements. AI systems may produce inaccurate or unintended results, reflect biases in the data used to train them, or otherwise operate in ways that are inconsistent with our policies, regulatory obligations, or customer expectations.
Added
A default, if not waived, could result in acceleration of the related indebtedness, in which case such debt would become immediately due and payable.
Added
Delinquencies, repossessions and losses generally increase during economic slowdowns or recessions.
Added
If an Increase in Interest Rates Results in a Decrease in Our Cash Flows from Excess Spread, Our Results of Operations May Be Impaired.
Added
As of December 31, 2025, our directors and executive officers collectively owned 12.2 million shares of our common stock, or approximately 56% of total shares outstanding. 28 We Do Not Intend to Pay Dividends on Our Common Stock. We have never declared or paid any cash dividends on our common stock.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+0 added−0 removed9 unchanged
Biggest changeWe have an incident reporting portal available to all employees to submit any issues they suspect may pose a risk to our information technology (“IT”) systems and security. 29 We use the results of the above-described tools and strategies to assess the sufficiency of the safeguards in place to manage material risks from cybersecurity threats, to enhance such safeguards, or implement new safeguards, as necessary.
Biggest changeWe use the results of the above-described tools and strategies to assess the sufficiency of the safeguards in place to manage material risks from cybersecurity threats, to enhance such safeguards, or implement new safeguards, as necessary. We have several safeguards in place to manage material risks from cybersecurity threats.
Risk Factors of this Report, including the risk factors titled “If We Experience Problems with Our Originations, Accounting or Collection Systems, Our Results of Operations May Be Impaired” and “A Breach in the Security of Our Systems Could Result in the Disclosure of Confidential Information, or Subject us to Liability.” Governance The Senior Vice President of Systems and the Vice President of IT are responsible for assessing and managing material risks from cybersecurity threats through the implementation of the Company’s information security policies and processes.
Risk Factors of this Report, including the risk factors titled “If We Experience Problems with Our Originations, Accounting or Collection Systems, Our Results of Operations May Be Impaired” and “A Breach in the Security of Our Systems Could Result in the Disclosure of Confidential Information, or Subject us to Liability.” 29 Governance The Senior Vice President of Systems and the Vice President of IT are responsible for assessing and managing material risks from cybersecurity threats through the implementation of the Company’s information security policies and processes.
They regularly report on the status of these matters to the Executive Vice President of Risk, Systems, and IT. The Board, as a whole, is responsible for risk oversight, including cybersecurity risk.
They regularly report on the status of these matters to the Executive Vice President of Risk, Systems, and IT. Our Board of Directors, as a whole, is responsible for risk oversight, including cybersecurity risk.
We require our service providers to maintain appropriate safeguards for the security of consumer information. We cannot assure that our information security policies and processes will be effective in protecting us from cybersecurity threats. Risks from cybersecurity threats have not materially affected us.
We require our service providers to maintain appropriate safeguards for the security of consumer information. We cannot assure that our information security policies and processes will be effective in protecting us from cybersecurity threats. Risks from cybersecurity threats have no t materially affected us.
In addition, we have a disaster recovery program designed to help us respond to and recover from an interruption of critical IT services. As part of our overall risk management processes, we engage in a multi-departmental strategy to assess and incorporate the above processes and involve other departments as needed, including IT, Systems, Risk Management, and Legal.
As part of our overall risk management processes, we engage in a multi-departmental strategy to assess and incorporate the above processes and involve other departments as needed, including IT, Systems, Risk Management, and Legal.
We have several safeguards in place to manage material risks from cybersecurity threats. We have security awareness training for our employees, including ongoing simulated phishing email campaigns. We utilize firewalls, anti-virus software, encryption on stored data and communication channels, secure web portals for remote access to our systems, password security, and two-factor authentication.
We have security awareness training for our employees, including ongoing simulated phishing email campaigns. We utilize firewalls, anti-virus software, encryption on stored data and communication channels, secure web portals for remote access to our systems, password security, and two-factor authentication. We continuously update our software and security patches. We restrict inbound email attachments, certain websites, and cloud-based drives.
We continuously update our software and security patches. We restrict inbound email attachments, certain websites, and cloud-based drives. We monitor and restrict information transfers to and from unauthorized IP addresses. We also have physical security safeguards for our locations and data centers. We back up our systems and data regularly.
We monitor and restrict information transfers to and from unauthorized IP addresses. We also have physical security safeguards for our locations and data centers. We back up our systems and data regularly. In addition, we have a disaster recovery program designed to help us respond to and recover from an interruption of critical IT services.
This includes the use of intrusion detection systems, log analysis, and real-time monitoring of critical systems.
This includes the use of intrusion detection systems, log analysis, and real-time monitoring of critical systems. We have an incident reporting portal available to all employees to submit any issues they suspect may pose a risk to our information technology (“IT”) systems and security.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−1 removed1 unchanged
Biggest changeThe annual base rent is approximately $2.5 million through 2029. 30 The remaining three regional servicing centers occupy a total of approximately 65,000 square feet of leased space in Chesapeake, Virginia; Maitland, Florida; and Oak Brook, Illinois. The termination dates of such leases range from 2025 to 2031. The annual base rent for these facilities total approximately $1.4 million.
Biggest changeOur operating headquarters are located in Irvine, California, where we currently lease approximately 69,000 square feet of general office space from an unaffiliated lessor. The annual base rent is approximately $2.5 million through 2029. The remaining three regional servicing centers occupy a total of approximately 76,000 square feet of leased space in Chesapeake, Virginia; Maitland, Florida; and Oak Brook, Illinois.
Removed
Our operating headquarters are located in Irvine, California, where we currently lease approximately 69,000 square feet of general office space from an unaffiliated lessor.
Added
The termination dates of such leases range from 2029 to 2032. The annual base rent for these facilities total approximately $1.5 million.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

4 edited+0 added−8 removed1 unchanged
Biggest changeThere can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of December 31, 2024, our best estimate of probable incurred losses for legal contingencies, including the matters identified above. The amount of losses that may ultimately be incurred cannot be estimated with certainty.
Biggest changeWe record at each measurement date our best estimate of probable incurred losses for legal contingencies, if any. The amount of losses that may ultimately be incurred cannot be estimated with certainty. However, based on such information as is available to us, the Company is not currently a party to any such material legal proceedings.
We note, however, that in light of the uncertainties inherent in contested proceedings there can be no assurance that the ultimate resolution of these matters will not be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period.
We note, however, that in light of the uncertainties inherent in contested proceedings there can be no assurance that the ultimate resolution of these matters will not be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period. 30
Accordingly, we believe that the ultimate resolution of such legal proceedings and contingencies should not have a material adverse effect on our consolidated financial condition.
Accordingly, we believe that the ultimate resolution of legal proceedings should not have a material adverse effect on our consolidated financial condition.
For the most part, we have legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular circumstances of each case.
For the most part, we have legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular circumstances of each case. In General. There can be no assurance as to the outcomes of the matters described above.
Removed
Following our filing of a complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim on October 16, 2019 alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had repossessed.
Removed
The complaint seeks primarily damages, injunctive relief, waiver of contract deficiencies, and attorney fees and interest. The defendant’s contract provided for resolution of disputes exclusively by arbitration, and exclusively on an individual basis, not a class basis. Nevertheless, in August 2021, the court denied our motion to compel arbitration, without opinion.
Removed
In April 2024 a motion for certification of a class was filed. Prior to the motion being ruled upon, summary judgment was granted in our favor, disposing of the claims against CPS.
Removed
An appeal of the summary judgment ruling was filed on October 25, 2024 and a cross appeal of the denial of the motion to compel arbitration was filed on October 31, 2024. Wage and Hour Claim.
Removed
On September 24, 2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that we incorrectly classified our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain other employee protective provisions of California and federal law.
Removed
The complaint sought injunctive relief, an award of unpaid wages, liquidated damages, and attorney fees and interest. The plaintiff purported to act on behalf of a class of similarly situated employees and ex-employees. We believe that our compensation practices with respect to our sales representatives are compliant with applicable law.
Removed
In August 2023, the parties settled by agreement the claims of the plaintiff and a California settlement class for $1.1 million. The settlement was approved by the court on October 9, 2024. Under the settlement, the Company paid, after September 30, 2024, $1.1 million to the settlement administrator. In General.
Removed
However, based on such information as is available to us, we believe that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified above, as of December 31, 2024 does not exceed $3.2 million.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

15 edited+6 added−5 removed3 unchanged
Biggest changeCatrina Ralston , 49, has been Senior Vice President of Human Resources since December 2022. Prior to that, she was Vice President - Human Resources since March 2016. She joined the Company in 1997 as an Operations Clerk and transferred into the Human Resources Department in 2001 where she held a series of successively more responsible positions.
Biggest changeShe joined the Company in 1997 as an Operations Clerk and transferred into the Human Resources Department in 2001 where she held a series of successively more responsible positions. Prior to joining CPS, Ms. Ralston worked as a customer service representative for the City of Virginia Beach Parks & Recreation Department.
Item 4. Mine Safety Disclosures Not applicable. 31 Information about Our Executive Officers Set forth below are the names, ages, offices held, tenure, and certain biographical information of each of our executive officers as of the filing of this report: Charles E.
Item 4. Mine Safety Disclosures Not applicable. Information about Our Executive Officers Set forth below are the names, ages, offices held, tenure, and certain biographical information of each of our executive officers as of the filing of this report: Charles E.
Bradley, Jr ., 65, has been our Chief Executive Officer since January 1992, a director since our formation in March 1991, and was elected Chairman of the Board of Directors in July 2001. Prior to that he was our President from March 1991 to December 2022.
Bradley, Jr ., 66, has been our Chief Executive Officer since January 1992, a director since our formation in March 1991, and was elected Chairman of the Board of Directors in July 2001. Prior to that he was our President from March 1991 to December 2022.
Lavin was previously engaged as an associate at a large law firm and a spin off start up law firm. Danny Bharwani , 57, has been Chief Financial Officer since September 2022 and Executive Vice President – Finance since December 2022.
Lavin was previously engaged as an associate at a large law firm and a spin off start up law firm. Danny Bharwani , 58, has been Chief Financial Officer since September 2022 and Executive Vice President – Finance since December 2022.
Lavin, 52, has been President since December 2022, Chief Operating Officer since February 2019, and our Chief Legal Officer since March 2014.
Lavin, 53, has been President since December 2022, Chief Operating Officer since February 2019, and our Chief Legal Officer since March 2014.
Robinson, 62, has been Executive Vice President of Sales and Originations since December 2022. Prior to that she was Senior Vice President of Sales and Originations from June 2020 to December 2022 and Senior Vice President of Originations from April 2007 to June 2020. Prior to that, she held the position of Vice President of Originations since August 1998.
Prior to that she was Senior Vice President of Sales and Originations from June 2020 to December 2022 and Senior Vice President of Originations from April 2007 to June 2020. Prior to that, she held the position of Vice President of Originations since August 1998.
Prior to that she was the Vice President of Legal from January 2020 to June 2023, the Assistant Vice President of Legal/Corporate Counsel from December 2018 to January 2020, and Corporate Counsel from December 2015 to December 2018. Ms. Reynoso is a California barred attorney. Susan Ryan , 53, has been Senior Vice President of Servicing since June 2023.
Lisette Reynoso , 38, has been Senior Vice President and General Counsel since June 2023. Prior to that she was the Vice President of Legal from January 2020 to June 2023, the Assistant Vice President of Legal/Corporate Counsel from December 2018 to January 2020, and Corporate Counsel from December 2015 to December 2018. Ms. Reynoso is a California barred attorney.
Prior to that she was the Vice President of Collections from March 2015 to June 2023. She started with the Company in 2003 as a Deficiency Supervisor where she took on more responsibility over time. Prior to joining CPS, she was a Deficiency Supervisor with The Finance Company.
Susan Ryan , 54, has been Senior Vice President of Servicing since June 2023. Prior to that she was the Vice President of Collections from March 2015 to June 2023. She started with the Company in 2003 as a Deficiency Supervisor where she took on more responsibility over time.
Prior to that she was the Vice President of Originations from March 2017 to June 2023. She started with the Company in March 1997 as a Loan Processor and held a series of more senior positions within the Originations Department. Ms. Baumeister was previously a personal banker with Western Financial.
She started with the Company in March 1997 as a Loan Processor and held a series of more senior positions within the Originations Department. Ms. Baumeister was previously a personal banker with Western Financial. 31 Charles Gonel , 45, has been Senior Vice President of Servicing since June 2023.
She joined the Company in June 1991 as an Operations Specialist, and held a series of successively more responsible positions. Previously, Ms. Robinson held an administrative position at Greco & Associates. Michele Baumeister , 58, has been Senior Vice President of Originations since June 2023.
She joined the Company in June 1991 as an Operations Specialist, and held a series of successively more responsible positions. Previously, Ms. Robinson held an administrative position at Greco & Associates. Christopher Terry, 58, has been Executive Vice President of Risk Management, Systems, and IT since December 2022.
Steve Schween , 62, has been Senior Vice President of Systems since December 2022. Previously, he was Vice President of Systems from February 2014. He joined in the Company in 2000 as a Systems Analyst and took on more responsibility over time. Mr. Schween was previously a Systems Analyst with Jeunique International. 33 PART II
Prior to joining CPS, she was a Deficiency Supervisor with The Finance Company. Steve Schween , 63, has been Senior Vice President of Systems since December 2022. Previously, he was Vice President of Systems from February 2014. He joined in the Company in 2000 as a Systems Analyst and took on more responsibility over time. Mr.
Charles Gonel , 44, has been Senior Vice President of Servicing since June 2023. Prior to that he was the Vice President of Collections from March 2015 to June 2023. He joined the Company in March 2008 as a Collections Analyst and transferred into the Risk Management Department in 2010 where he held a sequence of increasingly more responsible positions.
Prior to that he was the Vice President of Collections from March 2015 to June 2023. He joined the Company in March 2008 as a Collections Analyst and transferred into the Risk Management Department in 2010 where he held a sequence of increasingly more responsible positions. Prior to joining CPS, he was a Quality Assurance Analyst with AT&T Wireless.
Christopher Terry, 57, has been Executive Vice President of Risk Management, Systems, and IT since December 2022. Prior to that he was our Senior Vice President of Risk Management, Systems, and IT from October 2018 to December 2022, and Senior Vice President of Risk Management from May 2017 to October 2018.
Prior to that he was our Senior Vice President of Risk Management, Systems, and IT from October 2018 to December 2022, and Senior Vice President of Risk Management from May 2017 to October 2018. Prior to that, he was our Senior Vice President of Servicing from May 2005 to August 2013.
He joined us in January 1995 as a loan officer, held a series of successively more responsible positions, and was promoted to Vice President - Asset Recovery in June 1999. Mr. Terry was previously a branch manager with Norwest Financial from 1990 to October 1994. Teri L.
He was Senior Vice President of Asset Recovery from August 2013 to May 2017 and from January 2003 to May 2005. He joined us in January 1995 as a loan officer, held a series of successively more responsible positions, and was promoted to Vice President - Asset Recovery in June 1999. Mr.
Prior to that, he was our Senior Vice President of Servicing from May 2005 to August 2013. He was Senior Vice President of Asset Recovery from August 2013 to May 2017 and from January 2003 to May 2005.
Noel Jackson, 54, has been the Senior Vice President of Asset Recovery since May 2025. Prior to that, she was the Vice President of Asset Recovery from December 2021 to May 2025, the Vice President of Collections from April 2019 to December 2021 and the Vice President of Asset Recovery from April 2017 to April 2019. Ms.
Removed
April Crisp , 38, has been the Senior Vice President of Compliance and Regulatory Affairs since June 2023. Prior to that, she was the Vice President of Legal from August 2016 to June 2023, and the Assistant Vice President of Legal from November 2013 to August 2016. Ms. Crisp is a California barred attorney.
Added
Robert Riedl, 62, rejoined the Company as the Senior Executive Vice President, Chief Risk Officer in August 2025. From 2021 to July 2025, he was Chief Investment Officer at Lobel Financial Corporation, a family-owned auto finance company. Since 2017 he has been a partner at a Greendoor Partners, a boutique investment and advisory firm.
Removed
Prior to joining CPS, he was a Quality Assurance Analyst with AT&T Wireless. 32 John P. Harton , 60, has been Senior Vice President – Business Development since June 2020.
Added
He initially joined CPS in 2003 through 2015 and held a number of different senior positions within the Company including Chief Operating Officer, Chief Investment Officer, Chief Financial Officer and Senior Vice President of Risk Management. Previously, from 2000 to 2002, Mr. Riedl was a Principal at Northwest Capital Appreciation, a private equity firm.
Removed
Prior to that he was Senior Vice President – Program Development from March 2019 to June 2020, Senior Vice President – Marketing from March 2014 to March 2019 , and Vice President – Marketing from April 2010 to March 2014.
Added
For a year prior to joining Northwest Capital, Mr. Riedl served as Senior Vice President for one of its portfolio companies, SLP Capital. Mr. Riedl was an investment banker for ContiFinancial Services, Jefferies & Company and PaineWebber from 1986 to 1999. Teri L. Robinson, 63, has been Executive Vice President of Sales and Originations since December 2022.
Removed
He joined the Company in April 1996 as a loan officer, held a series of successively more responsible positions, and was promoted to Vice President - Originations in June 2007. Mr. Harton was previously a branch manager with American General Finance from 1990 to March 1996.
Added
Terry was previously a branch manager with Norwest Financial from 1990 to October 1994. Michele Baumeister , 59, has been Senior Vice President of Originations since June 2023. Prior to that she was the Vice President of Originations from March 2017 to June 2023.
Removed
Prior to joining CPS, Ms. Ralston worked as a customer service representative for the City of Virginia Beach Parks & Recreation Department. Lisette Reynoso , 37, has been Senior Vice President and General Counsel since June 2023.
Added
Jackson was previously an Executive Director at a non-profit organization. Catrina Ralston , 50, has been Senior Vice President of Human Resources since December 2022. Prior to that, she was Vice President - Human Resources since March 2016.
Added
Schween was previously a Systems Analyst with Jeunique International. 32 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed4 unchanged
Biggest changeIssuer Purchases of Equity Securities in the Fourth Quarter Total Number of Average Total Number of Shares Purchased as Part of Publicly Approximate Dollar Value of Shares that May Yet be Purchased Shares Price Paid Announced Plans or Under the Plans or Period(1) Purchased per Share Programs(2) Programs October 2024 – $ – – $ 6,259,660 November 2024 – – – 6,259,660 December 2024 – – – 6,259,660 Total – $ – – (1) Each monthly period is the calendar month.
Biggest changeIssuer Purchases of Equity Securities in the Fourth Quarter Period(1) Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 2025 93,448 $ 8.03 93,448 $ 8,799,317 November 2025 50,966 8.43 50,966 8,369,685 December 2025 142,837 8.79 142,837 7,113,716 Total 287,251 $ 8.48 287,251 (1) Each monthly period is the calendar month.
(2) Through December 31, 2024, our board of directors had authorized the purchase of up to $123.2 million of our outstanding securities, which program was first announced in our annual report for the year 2002, filed on March 26, 2003.
(2) Through December 31, 2025, our board of directors had authorized the purchase of up to $128.2 million of our outstanding securities, which program was first announced in our annual report for the year 2002, filed on March 26, 2003.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

73 edited+10 added−25 removed75 unchanged
Biggest changeWe plan to adjust our levels of automobile contract purchases and the related capital requirements to match anticipated releases of cash from the trusts and related spread accounts. 47 Capitalization Over the period from January 1, 2022 through December 31, 2024 we have managed our capitalization by issuing and refinancing debt as summarized in the following table: Year Ended December 31, 2024 2023 2022 (Dollars in thousands) RESIDUAL INTEREST FINANCING: Beginning balance $ 49,875 $ 49,623 $ 53,682 Issuances 50,000 – – Payments – – (4,311 ) Capitalization of deferred financing costs (970 ) – – Amortization of deferred financing costs 271 252 252 Ending balance $ 99,176 $ 49,875 $ 49,623 SECURITIZATION TRUST DEBT: Beginning balance $ 2,265,446 $ 2,108,744 $ 1,759,972 Issuances 1,492,017 1,235,534 1,411,018 Payments (1,162,184 ) (1,078,432 ) (1,060,052 ) Capitalization of deferred financing costs (9,316 ) (7,888 ) (8,681 ) Amortization of deferred financing costs 8,421 7,488 6,487 Ending balance $ 2,594,384 $ 2,265,446 $ 2,108,744 SUBORDINATED RENEWABLE NOTES: Beginning balance $ 17,188 $ 25,263 $ 26,459 Issuances 12,589 586 4,004 Payments (3,288 ) (8,661 ) (5,200 ) Ending balance $ 26,489 $ 17,188 $ 25,263 Residual Interest Financing.
Biggest changeCapitalization Over the period from January 1, 2023 through December 31, 2025 we have managed our capitalization by issuing and refinancing debt as summarized in the following table: Year Ended December 31, 2025 2024 2023 (Dollars in thousands) RESIDUAL INTEREST FINANCING: Beginning balance $ 99,176 $ 49,875 $ 49,623 Issuances 65,000 50,000 – Payments (20,493 ) – – Capitalization of deferred financing costs (999 ) (970 ) – Amortization of deferred financing costs 298 271 252 Ending balance $ 142,982 $ 99,176 $ 49,875 SECURITIZATION TRUST DEBT: Beginning balance $ 2,594,384 $ 2,265,446 $ 2,108,744 Issuances 1,665,300 1,492,017 1,235,534 Payments (1,271,962 ) (1,162,184 ) (1,078,432 ) Capitalization of deferred financing costs (10,455 ) (9,316 ) (7,888 ) Amortization of deferred financing costs 9,307 8,421 7,488 Ending balance $ 2,986,574 $ 2,594,384 $ 2,265,446 SUBORDINATED RENEWABLE NOTES: Beginning balance $ 26,489 $ 17,188 $ 25,263 Issuances 5,535 12,589 586 Payments (3,038 ) (3,288 ) (8,661 ) Ending balance $ 28,986 $ 26,489 $ 17,188 45 Residual Interest Financing On June 30, 2021, we completed a $50 million securitization of residual interests from other previously issued securitizations.
Credit and underwriting functions are performed primarily in our California branch with certain of these functions also performed in our Florida and Nevada branches. We service our automobile contracts from our California, Nevada, Virginia, Florida, and Illinois branches.
Credit and underwriting functions are performed primarily in our California branch with certain of these functions also performed in our Florida, Nevada, and Virginia branches. We service our automobile contracts from our California, Nevada, Virginia, Florida, and Illinois branches.
Subject to any recourse against dealers, we will bear the risk of loss on repossession and resale of vehicles under automobile contracts that we repurchase. 36 In a securitization, the related special purpose subsidiary may be unable to release excess cash to us if the credit performance of the securitized automobile contracts falls short of pre-determined standards.
Subject to any recourse against dealers, we will bear the risk of loss on repossession and resale of vehicles under automobile contracts that we repurchase. In a securitization, the related special purpose subsidiary may be unable to release excess cash to us if the credit performance of the securitized automobile contracts falls short of pre-determined standards.
On each monthly payment date, the 2021-1 and 2024-1 Notes are entitled to interest at the coupon rate and, if necessary, a principal payment necessary to maintain a specified minimum collateral ratio. Securitization Trust Debt.
On each monthly payment date, the 2021-1, 2024-1, and 2025-1 Notes are entitled to interest at the coupon rate and, if necessary, a principal payment necessary to maintain a specified minimum collateral ratio. Securitization Trust Debt.
Of those, the factor most subject to our control is the rate at which we purchase automobile contracts. 45 We are and may in the future be limited in our ability to purchase automobile contracts due to limits on our capital.
Of those, the factor most subject to our control is the rate at which we purchase automobile contracts. We are and may in the future be limited in our ability to purchase automobile contracts due to limits on our capital.
We may retain or sell subordinated asset-backed securities issued by the trust or by a related entity. 37 We structure our securitizations to include internal credit enhancement for the benefit the investors (i) in the form of an initial cash deposit to an account ( " spread account " ) held by the trust, (ii) in the form of overcollateralization of the senior asset-backed securities, where the principal balance of the senior asset-backed securities issued is less than the principal balance of the automobile contracts, (iii) in the form of subordinated asset-backed securities, or (iv) some combination of such internal credit enhancements.
We may retain or sell subordinated asset-backed securities issued by the trust or by a related entity. 36 We structure our securitizations to include internal credit enhancement for the benefit the investors (i) in the form of an initial cash deposit to an account ( " spread account " ) held by the trust, (ii) in the form of overcollateralization of the senior asset-backed securities, where the principal balance of the senior asset-backed securities issued is less than the principal balance of the automobile contracts, (iii) in the form of subordinated asset-backed securities, or (iv) some combination of such internal credit enhancements.
While the specific terms and mechanics of each spread account vary among transactions, our securitization agreements generally provide that we will receive excess cash flows, if any, only if the amount of credit enhancement has reached specified levels and the delinquency or net losses related to the automobile contracts in the pool are below certain predetermined levels.
While the specific terms and mechanics of each spread account vary among transactions, our securitization agreements generally provide that we will receive excess cash flows, if any, only if the amount of credit enhancement has reached specified levels and the net losses related to the automobile contracts in the pool are below certain predetermined levels.
Interest expense is affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those contracts and, more significantly, on the interest rates on these facilities. Employee costs and general and administrative expenses are incurred as applications and automobile contracts are received, processed and serviced.
Interest expense is affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those contracts and on the interest rates on these facilities. Employee costs and general and administrative expenses are incurred as applications and automobile contracts are received, processed and serviced.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations for the years ended December 31, 2024 and 2023 should be read in conjunction with our consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations for the years ended December 31, 2025 and 2024 should be read in conjunction with our consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K.
All of our active securitizations are structured as secured financings. 35 When structured to be treated as a secured financing for accounting purposes, the subsidiary is consolidated with us. Accordingly, the sold automobile contracts and the related debt appear as assets and liabilities, respectively, on our consolidated balance sheet.
All of our active securitizations are structured as secured financings. 34 When structured to be treated as a secured financing for accounting purposes, the subsidiary is consolidated with us. Accordingly, the sold automobile contracts and the related debt appear as assets and liabilities, respectively, on our consolidated balance sheet.
Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness. As of December 31, 2024, we were in compliance with all such financial covenants.
Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness. As of December 31, 2025, we were in compliance with all such financial covenants.
For the year ended December 31, 2024, our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables.
For the year ended December 31, 2025, our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables.
In addition, certain securitization and non-securitization related debt contain cross-default provisions that would allow certain creditors to declare default if a default occurred under a different facility. As of December 31, 2024, we were in compliance with all such covenants.
In addition, certain securitization and non-securitization related debt contain cross-default provisions that would allow certain creditors to declare default if a default occurred under a different facility. As of December 31, 2025, we were in compliance with all such covenants. 46
Our recent history of term securitizations is summarized in the table below: Recent Asset-Backed Securitizations $ in thousands Period Number of Term Securitizations Amount of Receivables 2018 4 883,452 2019 4 1,014,124 2020 3 741,867 2021 4 1,145,002 2022 4 1,537,383 2023 4 1,352,114 2024 4 1,533,854 Generally, prior to a securitization transaction we fund our automobile contract acquisitions primarily with proceeds from warehouse credit facilities.
Our recent history of term securitizations is summarized in the table below: Recent Asset-Backed Securitizations $ in thousands Period Number of Term Securitizations Amount of Receivables 2019 4 1,014,124 2020 3 741,867 2021 4 1,145,002 2022 4 1,537,383 2023 4 1,352,114 2024 4 1,533,854 2025 4 1,727,785 Generally, prior to a securitization transaction we fund our automobile contract acquisitions primarily with proceeds from warehouse credit facilities.
In December 2024, we increased the capacity from $225 million to $335 million. At December 31, 2024 there was $269.6 million outstanding under this facility. Facility Established in November 2015. On November 24, 2015, we entered into an additional $100 million one-year warehouse credit line with affiliates of Credit Suisse Group and Ares Management LP.
In December 2024, we increased the capacity from $225 million to $335 million. At December 31, 2025 there was $197.1 million outstanding under this facility. Facility Established in November 2015. On November 24, 2015, we entered into an additional $100 million one-year warehouse credit line with affiliates of Credit Suisse Group and Ares Management LP.
At December 31, 2024 there was $50.0 million outstanding under this facility. On March 22, 2024, we completed a $50 million securitization of residual interests from previously issued securitizations.
At December 31, 2025 there was $31.2 million outstanding under this facility. On March 22, 2024, we completed a $50 million securitization of residual interests from previously issued securitizations.
Finance Receivables Measured at Fair Value Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we consider the price paid on the purchase date as the fair value for such receivable.
Such policies are described below. Finance Receivables Measured at Fair Value Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we consider the price paid on the purchase date as the fair value for such receivable.
Since 1994 we have conducted 103 term securitizations of automobile contracts that we originated under our regular programs. As of December 31, 2024, 17 of those securitizations are active and all are structured as secured financings. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year.
Since 1994 we have conducted 107 term securitizations of automobile contracts that we originated under our regular programs. As of December 31, 2025, 19 of those securitizations are active and all are structured as secured financings. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year.
Renewed notes bear interest at the rate we are offering at that time to other investors with similar note maturities. Based on the terms of the individual notes, interest payments may be required monthly, quarterly, annually or upon maturity. At December 31, 2024 there were $26.5 million of such notes outstanding.
Renewed notes bear interest at the rate we are offering at that time to other investors with similar note maturities. Based on the terms of the individual notes, interest payments may be required monthly, quarterly, annually or upon maturity. At December 31, 2025 there were $29.0 million of such notes outstanding.
See "Cautionary Note Regarding Forward-Looking Statements." 34 Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
See “Cautionary Note Regarding Forward-Looking Statements.” 33 Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
At December 31, 2024 there was $145.6 million outstanding under this facility. Capital Resources Securitization trust debt is repaid from collections on the related receivables, and becomes due in accordance with its terms as the principal amount of the related receivables is reduced.
At December 31, 2025 there was $118.3 million outstanding under this facility. Capital Resources Securitization trust debt is repaid from collections on the related receivables, and becomes due in accordance with its terms as the principal amount of the related receivables is reduced.
Net cash provided by operating activities for the years ended December 31, 2024, 2023 and 2022 was $233.8 million, $238.0 million and $215.9 million, respectively. Net cash from operating activities is generally provided by net income from operations adjusted for significant non-cash items such as our provision for credit losses and interest accretion on fair value receivables.
Net cash provided by operating activities for the years ended December 31, 2025, and 2024 was $289.0 million and $233.8 million, respectively. Net cash from operating activities is generally provided by net income from operations adjusted for significant non-cash items such as our provision for credit losses and interest accretion on fair value receivables.
Our current short-term funding capacity is $535 million, comprising two credit facilities. The first credit facility was established in May 2012. This facility was most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period through July 2027. In addition, the capacity was increased to $335 million in December 2024.
Our current short-term funding capacity is $702.5 million, comprising three credit facilities. The first credit facility was established in May 2012. This facility was most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period through July 2027. In addition, the capacity was increased from $200 million to $335 million in December 2024.
Contract Purchases and Outstanding Managed Portfolio $ in thousands Year Contracts Purchased in Period Managed Portfolio at Period End 2020 742,584 2,174,972 2021 1,146,321 2,249,069 2022 1,854,385 3,001,308 2023 1,357,752 3,194,623 2024 1,681,941 3,665,725 Our principal executive offices are in Las Vegas, Nevada. Most of our operational and administrative functions take place in Irvine, California.
Contract Purchases and Outstanding Managed Portfolio $ in thousands Year Contracts Purchased in Period Managed Portfolio at Period End 2021 1,146,321 2,249,069 2022 1,854,385 3,001,308 2023 1,357,752 3,194,623 2024 1,681,941 3,665,725 2025 1,638,326 3,898,425 Our principal executive offices are in Las Vegas, Nevada. Most of our operational and administrative functions take place in Irvine, California.
Since 2011, we treated all 53 of our securitizations of automobile contracts as secured financings for financial accounting purposes, and the asset-backed securities issued in such securitizations remain on our consolidated balance sheet as securitization trust debt. We had $2,594.4 million of securitization trust debt outstanding at December 31, 2024. Subordinated Renewable Notes Debt.
Since 2011, we treated all 57 of our securitizations of automobile contracts as secured financings for financial accounting purposes, and the asset-backed securities issued in such securitizations remain on our consolidated balance sheet as securitization trust debt. We had $2,986.6 million of securitization trust debt outstanding at December 31, 2025. Subordinated Renewable Notes Debt.
In January 2025, we completed another securitization with $442.4 million of notes sold. Cash proceeds from this securitization were used to pay down the outstanding balance on our two warehouse credit facilities thus increasing the amounts available for borrowing under these facilities.
In January 2026, we completed another securitization with $345.6 million of notes sold. Cash proceeds from this securitization were used to pay down the outstanding balance on our warehouse credit facilities thus increasing the amounts available for borrowing under these facilities.
Results for the years ended December 31, 2024 and 2023 include marks of $21.0 and $12.0 million, respectively, to the carrying value of the portion of the receivables portfolio accounted for at fair value.
Results for the years ended December 31, 2025, and 2024 include marks of $6.5 and $21.0 million, respectively, to the carrying value of the portion of the receivables portfolio accounted for at fair value.
Revenues for the years ended December 31, 2024 and 2023 include fair value marks of $21.0 and $12.0 million, respectively, to the carrying value of the portion of the receivables portfolio accounted for at fair value.
Revenues for the years ended December 31, 2025 and 2024 include fair value marks of $6.5 and $21.0 million, respectively, to the carrying value of the portion of the receivables portfolio accounted for at fair value.
The blended interest rates of our recent securitizations are summarized in the table below: Blended Cost of Funds on Recent Asset-Backed Term Securitizations Period Blended Cost of Funds January 2021 1.11% April 2021 1.65% July 2021 1.55% October 2021 2.09% January 2022 2.54% April 2022 4.83% July 2022 6.02% October 2022 8.48% January 2023 6.48% April 2023 7.17% July 2023 7.13% October 2023 7.89% January 2024 6.51% April 2024 6.69% June 2024 6.56% September 2024 5.52% Interest expense on warehouse lines of credit was $19.3 million for the year ended December 31, 2024 compared to $19.2 million in the prior year.
The blended interest rates of our recent securitizations are summarized in the table below: Blended Cost of Funds on Recent Asset-Backed Term Securitizations Period Blended Cost of Funds January 2022 2.54% April 2022 4.83% July 2022 6.02% October 2022 8.48% January 2023 6.48% April 2023 7.17% July 2023 7.13% October 2023 7.89% January 2024 6.51% April 2024 6.69% June 2024 6.56% September 2024 5.52% January 2025 5.88% May 2025 5.96% July 2025 5.43% October 2025 5.72% Interest expense on warehouse lines of credit was $27.4 million for the year ended December 31, 2025 compared to $19.3 million in the prior year.
In this report, we refer to all of such contracts and loans as "automobile contracts." We were incorporated and began our operations in March 1991. From inception through December 31, 2024, we have purchased a total of approximately $23.0 billion of automobile contracts from dealers.
In this report, we refer to all of such contracts and loans as “automobile contracts.” We were incorporated and began our operations in March 1991. From inception through December 31, 2025, we have purchased a total of approximately $24.7 billion of automobile contracts from dealers.
This 20.8% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $7.3 million for the year ended December 31, 2024 and $9.3 million in the prior year period. Expenses .
This 38.3% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $5.2 million for the year ended December 31, 2025 and $7.3 million in the prior year period. 38 Expenses .
The average balance of securitization trust debt increased 11.3% to $2,596.6 million for the year ended December 31, 2024 compared to $2,333.5 million for the year ended December 31, 2023. The annualized average rate on our securitization trust debt was 6.2% for the year ended December 31, 2024 compared to 5.2% in the prior year period.
The average balance of securitization trust debt increased 13.8% to $2,955.3 million for the year ended December 31, 2025 compared to $2,596.6 million for the year ended December 31, 2024. The annualized average rate on our securitization trust debt was 6.3% for the year ended December 31, 2025 compared to 6.2% in the prior year period.
Our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions.
Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions.
We currently have and will continue to have a substantial amount of outstanding indebtedness. At December 31, 2024, we had approximately $3,130.9 million of debt outstanding.
We currently have and will continue to have a substantial amount of outstanding indebtedness. At December 31, 2025, we had approximately $3,483.4 million of debt outstanding.
Results of Operations Comparison of Operating Results for the year ended December 31, 2024 with the year ended December 31, 2023 Revenues . During the year ended December 31, 2024, our revenues were $393.5 million, an increase of $41.5 million, or 11.8%, from the prior year revenues of $352.0 million.
Results of Operations Comparison of Operating Results for the year ended December 31, 2025 with the year ended December 31, 2024 Revenues . During the year ended December 31, 2025, our revenues were $434.5 million, an increase of $41.0 million, or 10.4%, from the prior year revenues of $393.5 million.
Such debt consisted primarily of $2,594.4 million of securitization trust debt, and also included $410.9 million of warehouse lines of credit, $99.2 million of residual interest financing debt and $26.5 million in subordinated renewable notes. Although we believe we are able to service and repay our debt, there is no assurance that we will be able to do so.
Such debt consisted primarily of $2,986.6 million of securitization trust debt, and also included $324.9 million of warehouse lines of credit, $143.0 million of residual interest financing debt and $29.0 million in subordinated renewable notes. 43 Although we believe we are able to service and repay our debt, there is no assurance that we will be able to do so.
Net cash used in investing activities for the year ended December 31, 2024, 2023 and 2022 was $769.7 million, $359.5 million and $713.9 million, respectively. Cash used in investing activities generally relates to purchases of automobile contracts. Purchases of finance receivables were $1,653.0 million (includes acquisition fees paid), $1,251.0 million and $1,673.2 million in 2024, 2023 and 2022, respectively.
Net cash used in investing activities for the year ended December 31, 2025, and 2024 was $590.1 million, and $769.7 million, respectively. Cash used in investing activities generally relates to purchases of automobile contracts. Purchases of finance receivables were $1,639.0 million (includes acquisition fees paid), and $1,653.0 million in 2025, and 2024, respectively.
In the event delinquencies or net losses on the automobile contracts exceed such levels, the terms of the securitization may require increased credit enhancement to be accumulated for the particular pool. There can be no assurance that collections from the related trusts will continue to generate sufficient cash.
In the event net losses on the automobile contracts exceed such levels, the terms of the securitization may require increased credit enhancement to be accumulated for the particular pool. There can be no assurance that collections from the related trusts will continue to generate sufficient cash. Our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios.
The table below shows the average balance and interest yield of our loan portfolio for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 (Dollars in thousands) Average Interest Average Interest Balance Interest Yield Balance Interest Yield Interest Earning Assets Loan portfolio $ 3,209,988 $ 363,962 11.3% $ 2,913,571 $ 329,219 11.3% 40 Other income was $8.5 million for the year ended December 31, 2024 compared to $10.8 million for the year ended December 31, 2023.
The table below shows the average balance and interest yield of our loan portfolio for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 (Dollars in thousands) Average Interest Average Interest Balance Interest Yield Balance Interest Yield Interest Earning Assets Loan portfolio $ 3,693,796 $ 422,698 11.4% $ 3,209,988 $ 363,962 11.3% Other income was $5.3 million for the year ended December 31, 2025 compared to $8.5 million for the year ended December 31, 2024.
In addition, certain securitization and non-securitization related debt contain cross-default provisions that would allow certain creditors to declare a default if a default occurred under a different facility. As of December 31, 2024 we were in compliance with all such financial covenants.
Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. In addition, certain securitization and non-securitization related debt contain cross-default provisions that would allow certain creditors to declare a default if a default occurred under a different facility. As of December 31, 2025 we were in compliance with all such financial covenants.
As of December 31, 2024, we had unrestricted cash of $11.7 million and $124.1 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of December 31, 2024, we had approximately $23.0 million of such eligible collateral. During 2024, we completed four securitizations aggregating $1,453.9 million of notes sold.
As of December 31, 2025, we had unrestricted cash of $6.3 million and $375.3 million aggregate available borrowings under our three warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of December 31, 2025, we had approximately $11.9 million of such eligible collateral. During 2025, we completed four securitizations aggregating $1,665.3 million of notes sold.
The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $21.0 million. Interest income for the year ended December 31, 2024 increased $34.7 million, or 10.6%, to $364.0 million from $329.2 million in the prior year.
The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $6.5 million. Interest income for the year ended December 31, 2025 increased $58.7 million, or 16.1% to $422.7 million from $364.0 million in the prior year.
At December 31, 2024 there was $50.0 million outstanding under this facility. 48 The agreed valuation of the collateral for the 2021-1 and 2024-1 Notes is the sum of the amounts on deposit in the underlying spread accounts for each related securitization and the over-collateralization of each related securitization, which is the difference between the outstanding principal balances of the related receivables less the principal balance of the outstanding notes issued in the related securitization.
The agreed valuation of the collateral for the 2021-1, 2024-1, and 2025-1 Notes is the sum of the amounts on deposit in the underlying spread accounts for each related securitization and the over-collateralization of each related securitization, which is the difference between the outstanding principal balances of the related receivables less the principal balance of the outstanding notes issued in the related securitization.
We purchase automobile contracts from dealers for a cash price approximately equal to their principal amount, adjusted for an acquisition fee which may either increase or decrease the automobile contract purchase price. Those automobile contracts generate cash flow, however, over a period of years.
Repayments of securitization debt were $1,272.0 million, and $1,124.1 million in 2025, and 2024, respectively. We purchase automobile contracts from dealers for a cash price approximately equal to their principal amount, adjusted for an acquisition fee which may either increase or decrease the automobile contract purchase price. Those automobile contracts generate cash flow, however, over a period of years.
The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses.
The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. The fair value mark in the current period also includes an increase in our estimates of cash receipts from interest.
The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the years ended, December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Amount Amount ($ in millions) Contracts purchased (dollars) $ 1,681.9 $ 1,357.8 Contracts purchased (units) 77,009 65,137 Managed portfolio outstanding (dollars) $ 3,491.0 $ 2,970.1 Managed portfolio outstanding (units) 201,441 179,198 Number of Originations staff 195 185 Number of Sales staff 122 105 Number of Servicing staff 552 529 Number of other staff 64 71 Total number of employees 933 890 41 General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications.
The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the years ended, December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Amount Amount ($ in millions) Contracts purchased (dollars) $ 1,638.3 $ 1,681.9 Contracts purchased (units) 72,517 77,009 Managed portfolio outstanding (dollars) $ 3,778.6 $ 3,491.0 Managed portfolio outstanding (units) 212,718 201,441 Number of Originations staff 182 195 Number of Sales staff 118 122 Number of Servicing staff 545 552 Number of other staff 68 64 Total number of employees 913 933 General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications.
Cash used or provided by financing activities is primarily related to the issuance of securitization trust debt, reduced by the amount of repayment of securitization trust debt and net proceeds or repayments on our warehouse lines of credit and other debt.
Cash used or provided by financing activities is primarily related to the issuance of securitization trust debt, reduced by the amount of repayment of securitization trust debt and net proceeds or repayments on our warehouse lines of credit and other debt. We issued $1,665.3 million in new securitization trust debt in 2025 compared to $1,453.9 million in 2024.
The primary reason for the increase in interest income is the 10.2% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio stayed the same at 11.3% in the prior year period to 11.3% in the current year period.
The primary reason for the increase in interest income is the 15.1% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio increased to 11.4% from 11.3% in the prior year period.
The average balance of the notes increased from $20.9 million in the prior year to $22.9 million for the year ended December 31, 2024. The average interest rate on our subordinated notes was 9.8% during 2024 compared to 8.7% million in 2023.
Interest expense on our subordinated renewable notes was $2.8 million in 2025 compared to $2.2 million in the prior year. The average balance of the notes increased from $22.9 million in the prior year to $28.2 million for the year ended December 31, 2025.
Contractual Obligations The following table summarizes our material contractual obligations as of December 31, 2024 (dollars in thousands): Payment Due by Period (1) Less than 2 to 3 4 to 5 More than Total 1 Year Years Years 5 Years Long Term Debt (2) $ 26,489 $ 8,445 $ 5,284 $ 6,911 $ 5,849 Operating and Finance Leases $ 22,544 $ 4,857 $ 4,804 $ 4,792 $ 8,091 (1) Securitization trust debt, in the aggregate amount of $2,594.4 million as of December 31, 2024, is omitted from this table because it becomes due as and when the related receivables balance is reduced by payments and charge-offs.
Contractual Obligations The following table summarizes our material contractual obligations as of December 31, 2025 (dollars in thousands): Payment Due by Period (1) Less than 2 to 3 4 to 5 More than Total 1 Year Years Years 5 Years Long Term Debt (2) $ 28,986 $ 8,457 $ 8,547 $ 5,525 $ 6,457 Operating and Finance Leases $ 29,223 $ 5,220 $ 5,811 $ 5,925 $ 12,267 (1) Securitization trust debt, in the aggregate amount of $2,986.6 million as of December 31, 2025, is omitted from this table because it becomes due as and when the related receivables balance is reduced by payments and charge-offs.
In November 2015, we entered into another $100 million facility. In June 2022, we doubled the capacity for this facility from $100 million to $200 million. This facility was most recently renewed in March 2024, extending the revolving period to March 2026, followed by an amortization period to March 2028.
In November 2015, we entered into a $100 million facility with Ares Agent Services, L.P. In June 2022, we increased the capacity of our credit agreement from $100 million to $200 million. This facility was most recently renewed in March 2024, extending the revolving period to March 2026, followed by an amortization period to March 2028.
Interest expense represented 52.3% of total operating expenses in 2023. Interest on securitization trust debt increased by $39.6 million, or 32.6%, for the year ended December 31, 2024 compared to the prior year.
Interest expense represented 57.1% of total operating expenses in 2025. Interest on securitization trust debt increased by $25.9 million, or 16.1%, for the year ended December 31, 2025 compared to the prior year.
(2) Long-term debt represents subordinated renewable notes. 46 We anticipate repaying debt due in 2025 with a combination of cash flows from operations and the potential issuance of new debt.
We anticipate repaying debt due in 2026 with a combination of cash flows from operations and the potential issuance of new debt.
In the prior period, our income tax expense was $15.6 million, also representing a 26% effective tax rate. 44 Liquidity and Capital Resources Liquidity Our business requires substantial cash to support our purchases of automobile contracts and other operating activities.
For the year ended December 31, 2025, we recorded income tax expense of $8.7 million, representing a 31% effective tax rate. In the prior period, our income tax expense was $8.2 million, representing a 30% effective tax rate. Liquidity and Capital Resources Liquidity Our business requires substantial cash to support our purchases of automobile contracts and other operating activities.
The following table presents the components of interest income and interest expense and a net interest yield analysis for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 (Dollars in thousands) Annualized Annualized Average Average Average Average Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate Interest Earning Assets Loan portfolio $ 3,209,988 $ 363,962 11.3% $ 2,913,571 $ 329,219 11.3% Interest Bearing Liabilities Warehouse lines of credit $ 178,518 19,292 10.8% $ 181,742 19,192 10.6% Residual interest financing 91,803 8,702 9.5% 50,000 4,199 8.4% Securitization trust debt 2,596,554 161,014 6.2% 2,333,472 121,408 5.2% Subordinated renewable notes 22,886 2,249 9.8% 20,936 1,832 8.7% $ 2,889,761 191,257 6.6% $ 2,586,150 146,631 5.7% Net interest income/spread $ 172,705 $ 182,588 Net interest margin (3) 5.4% 6.3% Ratio of average interest earning assets to average interest bearing liabilities 111% 113% (1) Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.
The average interest rate on our subordinated notes was 9.8% during 2025 and in 2024. 40 The following table presents the components of interest income and interest expense and a net interest yield analysis for the years ended December 31, 2025, and 2024: Year Ended December 31, 2025 2024 (Dollars in thousands) Annualized Annualized Average Average Average Average Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate Interest Earning Assets Loan portfolio $ 3,693,796 $ 422,698 11.4% $ 3,209,988 $ 363,962 11.3% Interest Bearing Liabilities Warehouse lines of credit $ 288,006 $ 27,373 9.5% $ 178,518 $ 19,292 10.8% Residual interest financing. 146,512 15,010 10.2% 91,803 8,702 9.5% Securitization trust debt 2,955,300 186,870 6.3% 2,596,554 161,014 6.2% Subordinated renewable notes 28,183 2,771 9.8% 22,886 2,249 9.8% $ 3,418,001 232,024 6.8% $ 2,889,761 191,257 6.6% Net interest income/spread $ 190,674 $ 172,705 Net interest margin (3) 5.2% 5.4% Ratio of average interest earning assets to average interest bearing liabilities 108% 111% (1) Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.
Cash provided by investing activities primarily results from principal payments and other proceeds received on finance receivables. Net cash provided by financing activities were $547.9 million and $84.2 million in 2024 and 2023, respectively. Net cash used in financing activities for the year ended December 31, 2022 was $484.2 million.
Cash provided by investing activities primarily results from principal payments and other proceeds received on finance receivables. 42 Net cash provided by financing activities were $335.9 million and $547.9 million in 2025 and 2024, respectively.
In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers and acquisitions in 2002, 2003, 2004 and 2011. Contract purchase volumes and managed portfolio levels for the five years ended December 31, 2024 are shown in the table below. Managed portfolio comprises both contracts we owned and those we were servicing for third parties.
Contract purchase volumes and managed portfolio levels for the five years ended December 31, 2025 are shown in the table below. Managed portfolio comprises both contracts we owned and those we were servicing for third parties.
Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $987.8 million in 2025, $696.4 million in 2026, $470.5 million in 2027, $275.1 million in 2028, $126.6 million in 2029, and $38.0 million in 2030.
Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $1,168.0 million in 2026, $825.5 million in 2027, $498.4 million in 2028, $294.8 million in 2029, $156.3 million in 2030, and $43.6 million in 2031. (2) Long-term debt represents subordinated renewable notes.
General and administrative expenses were $54.7 million, an increase of $4.7 million, or 9.4%, compared to the previous year and represented 14.9% of total operating expenses. Interest expense for the year ended December 31, 2024 increased by $44.6 million to $191.3 million, or 30.4%, compared to $146.6 million in the previous year.
General and administrative expenses were $52.9 million, a decrease of $1.8 million, or 3.4%, compared to the previous year and represented 13.0% of total operating expenses. 39 Interest expense for the year ended December 31, 2025 increased by $40.7 million to $232.0 million, or 21.3%, compared to $191.3 million in the previous year.
Under both structures, recourse to us by holders of the asset-backed securities and by the trust, for failure of the automobile contract obligors to make payments on a timely basis, is limited to the automobile contracts included in the securitizations or warehouse credit facilities, the spread accounts and our retained interests in the respective trusts. 38 Accrual for Contingent Liabilities We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued.
Under both structures, recourse to us by holders of the asset-backed securities and by the trust, for failure of the automobile contract obligors to make payments on a timely basis, is limited to the automobile contracts included in the securitizations or warehouse credit facilities, the spread accounts and our retained interests in the respective trusts. 37 Uncertainty of Capital Markets and General Economic Conditions We depend upon the availability of warehouse credit facilities and access to long-term financing through the issuance of asset-backed securities collateralized by our automobile contracts.
Total operating expenses were $366.1 million for the year ended December 31, 2024, compared to $290.9 million for the prior year, an increase of $75.2 million, or 25.8%. The increase is primarily due to increases in interest expense, employee costs and the amount of reductions to provision for credit losses expenses.
Total operating expenses were $406.5 million for the year ended December 31, 2025, compared to $366.1 million for the prior year, an increase of $40.4 million, or 11.0%. The increase is primarily due to increases in interest expense.
Employee costs increased by $8.0 million or 9.1%, to $96.2 million during the year ended December 31, 2024, representing 26.3% of total operating expenses. Employee costs were $88.1 million in the prior year, or 30.3% of total operating expenses. The increase in employee costs can be attributed to the increase in our outstanding managed portfolio.
Employee costs decreased by $823,000 or 0.9%, to $95.4 million during the year ended December 31, 2025, representing 23.5% of total operating expenses. Employee costs were $96.2 million in the prior year, or 26.3% of total operating expenses.
Since 1994, we have completed 103 term securitizations of approximately $20.6 billion in contracts. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year. However, we completed only three securitizations in 2020.
Since 1994, we have completed 107 term securitizations of approximately $22.4 billion in contracts. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year. Financial Covenants Our warehouse credit facilities and our residual interest financings contain various financial covenants requiring certain minimum financial ratios.
The legacy portfolio balance decreased from $27.6 million on December 31, 2023 to $5.4 million on December 31, 2024. Finance receivables that we have originated since January 2018 are accounted for at fair value. Under the fair value method of accounting, we recognize interest income net of expected credit losses.
The allowance applies only to our finance receivables originated through December 2017, which we refer to as our legacy portfolio. The legacy portfolio balance decreased from $5.4 million on December 31, 2024 to $520,000 on December 31, 2025. Finance receivables that we have originated since January 2018 are accounted for at fair value.
Sales expense increased by $1.5 million to $22.8 million during the year ended December 31, 2024 and represented 6.2% of total operating expenses. We purchased $1,681.9 million of new contracts during the year ended December 31, 2024 compared to $1,357.8 million in the prior year period.
We purchased $1,638.3 million of new contracts during the year ended December 31, 2025 compared to $1,681.9 million in the prior year period. Occupancy expenses were $5.5 million in 2025 which is down from $5.6 million in 2024. Depreciation and amortization expenses increased to $881,000 compared to $862,000 in the prior year.
Thus, no provision for credit loss expense is recorded for finance receivables measured at fair value. Sales expense consists primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases and sales of ancillary products and services that we offer our dealers.
Under the fair value method of accounting, we recognize interest income net of expected credit losses. Thus, no provision for credit loss expense is recorded for finance receivables measured at fair value. Sales expense consists primarily of commission-based compensation paid to our employee sales representatives.
Such releases represent a material portion of the cash that we use to fund our operations. An unexpected deterioration in the performance of securitized automobile contracts could therefore have a material adverse effect on both our liquidity and results of operations.
An unexpected deterioration in the performance of securitized automobile contracts could therefore have a material adverse effect on both our liquidity and results of operations. 35 Critical Accounting Estimates We believe that our accounting policies related to Finance Receivables at Fair Value and Term Securitizations are the most critical to understanding and evaluating our reported financial results.
(2) Net of deferred fees and direct costs.
(2) Net of deferred fees and direct costs. (3) Net interest income divided by average interest earning assets.
For the year ended December 31, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $5.3 million. In the prior year period, we recorded similar reductions to provision for credit losses in the amount of $22.3 million.
In the prior year period, we recorded similar reductions to provision for credit losses in the amount of $5.3 million. The adjustments recorded to reduce provisions for credit losses in both periods were primarily due to better than expected credit performance for these receivables.
The increase was due to higher rates of our credit lines during 2024 compared to 2023. The average yield of our warehouse debt was 10.8% during 2024 compared to 10.6% million in 2023. In June 2021, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million.
The increase was primarily due to the higher utilization of our credit lines during the year compared to last year. The average balance of our warehouse debt was $288.0 million during the year 2025, compared to $178.5 million in 2024. The average yield of our warehouse debt was 9.5% during 2025 compared to 10.8% million in 2023.
In March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million.
In June 2021, March 2024, and again in March 2025, we completed a securitization of residual interests from other previously issued securitizations in the amount of $50 million, $50 million, and $65 million, respectively. Interest expense on residual interest financing was $15.0 million for the year ended December 31, 2025, compared to $8.7 million in the prior year.
In this residual interest financing transaction, qualified institutional buyers purchased $40.0 million of asset-backed notes secured by residual interests in thirteen CPS securitizations consecutively conducted from September 2013 through December 2016, and an 80% interest in a CPS affiliate that owns the residual interests in the four CPS securitizations conducted in 2017.
In the transaction, a qualified institutional buyer purchased $65.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in five CPS securitizations issued from October 2023 through September 2024. The sold notes (“2025-1 Notes”), issued by CPS Auto Securitization Trust 2025-1, consist of a single class with a coupon of 11.00%.
On May 16, 2018, we completed a $40.0 million securitization of residual interests from previously issued securitizations.
At December 31, 2025 there was $49.8 million outstanding under this facility. On March 20, 2025, we completed a $65 million securitization of residual interests from previously issued securitizations.
Removed
However, we completed only three securitizations in 2020. In April 2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020.
Added
In October 2025, we entered into a new $167.5 million facility. This facility has a two year revolving period to October 2027, with an optional amortization period through April 2029.
Removed
Critical Accounting Estimates We believe that our accounting policies related to (a) Finance Receivables at Fair Value, (b) Allowance for Finance Credit Losses, (c) Term Securitizations, (d) Accrual for Contingent Liabilities and (e) Income Taxes are the most critical to understanding and evaluating our reported financial results. Such policies are described below.
Added
Such releases represent a material portion of the cash that we use to fund our operations.
Removed
Our legal counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that it is both probable that a liability has been incurred and the amount of the loss can be reasonably determined.
Added
Year Ended December 31, 2025 Compared to December 31, 2024 Total Change Due Change Due Change to Volume to Rate Interest Earning Assets (In thousands) Loan portfolio $ 58,736 $ 54,856 $ 3,880 Interest Bearing Liabilities Warehouse lines of credit 8,081 11,832 (3,751 ) Residual interest financing 6,308 5,186 1,122 Securitization trust debt 25,856 22,246 3,610 Subordinated renewable notes 522 521 1 40,767 39,785 982 Net interest income/spread $ 17,969 $ 15,071 $ 2,898 41 For the year ended December 31, 2025, we recorded a reduction to provision for credit losses on finance receivables in the amount of $2.9 million.
Removed
We have recorded a liability as of December 31, 2024, which represents our best estimate of probable incurred losses for legal contingencies at that date. The amount of losses that may ultimately be incurred cannot be estimated with certainty.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed8 unchanged
Biggest changeTo mitigate, but not eliminate, the long-term risk relating to interest rates payable by us in securitizations, we have usually structured our term securitization transactions to include pre-funding structures, whereby the amount of notes issued exceeds the amount of contracts initially sold to the trusts. We may continue to use pre-funding structures in our securitizations.
Biggest changeTo mitigate, but not eliminate, the long-term risk relating to interest rates payable by us in securitizations, we may structure our term securitization transactions to include pre-funding structures, whereby the amount of notes issued exceeds the amount of contracts initially sold to the trusts.
Despite these mitigation strategies, an increase in prevailing interest rates would cause us to receive less excess spread cash flows on automobile contracts, and thus could adversely affect our earnings and cash flows. 49
Despite these mitigation strategies, an increase in prevailing interest rates would cause us to receive less excess spread cash flows on automobile contracts, and thus could adversely affect our earnings and cash flows.

Other CPSS 10-K year-over-year comparisons