UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 000-20202

CREDIT ACCEPTANCE CORPORATION

(Exact name of registrant as specified in its charter)

MICHIGAN		38-1999511
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification)
25505 WEST TWELVE MILE ROAD, SUITE 3000
SOUTHFIELD, MICHIGAN		48034-8339
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 248-353-2700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.

The number of shares of Common Stock, par value $0.01, outstanding on April 25, 2008 was 30,492,238.

 

 

TABLE OF CONTENTS

PART I. - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Income Statements - Three months ended March 31, 2008 and 2007			1
Consolidated Balance Sheets - As of March 31, 2008 and December 31, 2007			2
Consolidated Statements of Cash Flows - Three months ended March 31, 2008 and 2007			3
Notes to Consolidated Financial Statements			4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			26
ITEM 4. CONTROLS AND PROCEDURES			26
PART II. - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			27
ITEM 6. EXHIBITS			28
SIGNATURES			29
INDEX OF EXHIBITS			30
Certification of Chief Executive Officer Pursuant to Section 302
Certification of Chief Financial Officer Pursuant to Section 302
Certification of Chief Executive Officer Pursuant to Section 906
Certification of Chief Financial Officer Pursuant to Section 906

PART I. - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CREDIT ACCEPTANCE CORPORATION

(Dollars in thousands, except per share data)		Three Months Ended
		March 31,
		2008				2007
Revenue:
Finance charges		$	63,675			$	51,413
License fees			65				82
Other income			7,038				5,856
Total revenue			70,778				57,351
Costs and expenses:
Salaries and wages			17,740				11,861
General and administrative			7,124				5,917
Sales and marketing			4,642				4,472
Provision for credit losses			2,649				3,873
Interest			10,864				8,288
Other expense			34				25
Total costs and expenses			43,053				34,436
Operating income			27,725				22,915
Foreign currency (loss) gain			(13	)			4
Income from continuing operations before provision for income taxes			27,712				22,919
Provision for income taxes			10,131				7,532
Income from continuing operations			17,581				15,387
Discontinued operations
Gain (loss) from discontinued United Kingdom operations			56				(38	)
Provision (credit) for income taxes			17				(11	)
Gain (loss) from discontinued operations			39				(27	)
Net income		$	17,620			$	15,360
Net income per common share:
Basic		$	0.59			$	0.51
Diluted		$	0.57			$	0.49
Income from continuing operations per common share:
Basic		$	0.58			$	0.51
Diluted		$	0.57			$	0.49
Gain (loss) from discontinued operations per common share:
Basic		$	—			$	—
Diluted		$	—			$	—
Weighted average shares outstanding:
Basic			30,106,881				30,054,349
Diluted			30,891,227				31,283,695

See accompanying notes to consolidated financial statements.

CREDIT ACCEPTANCE CORPORATION

(Dollars in thousands, except per share data)		As of
		March 31,				December 31,
		2008				2007
		(Unaudited)
ASSETS:
Cash and cash equivalents		$	60			$	712
Restricted cash and cash equivalents			82,456				74,102
Restricted securities available for sale			3,036				3,290
Loans receivable (including $16,644 and $16,125 from affiliates as of March 31, 2008 and December 31, 2007, respectively)			1,048,393				944,698
Allowance for credit losses			(113,825	)			(134,145	)
Loans receivable, net			934,568				810,553
Property and equipment, net			21,283				20,124
Income taxes receivable			18,058				20,712
Other assets			20,317				12,689
Total Assets		$	1,079,778			$	942,182
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Liabilities:
Accounts payable and accrued liabilities		$	83,739			$	79,834
Line of credit			87,400				36,300
Secured financing			544,027				488,065
Mortgage note and capital lease obligations			7,387				7,765
Deferred income taxes, net			71,330				64,768
Total Liabilities			793,883				676,732
Shareholders’ Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued			—				—
Common stock, $.01 par value, 80,000,000 shares authorized, 30,493,423 and 30,240,859 shares issued and outstanding as of March 31, 2008 and December 31, 2007, respectively			305				302
Paid-in capital			6,913				4,134
Retained earnings			278,621				261,001
Accumulated other comprehensive income, net of tax of $(30) and $(7) at March 31, 2008 and December 31, 2007, respectively			56				13
Total Shareholders’ Equity			285,895				265,450
Total Liabilities and Shareholders’ Equity		$	1,079,778			$	942,182

See accompanying notes to consolidated financial statements.

CREDIT ACCEPTANCE CORPORATION

(Dollars in thousands)		Three Months Ended
		March 31,
		2008				2007
Cash Flows From Operating Activities:
Net income		$	17,620			$	15,360
Adjustments to reconcile cash provided by operating activities:
Provision for credit losses			2,649				3,873
Depreciation			1,231				1,048
Loss on retirement of property and equipment			—				66
Provision for deferred income taxes			6,539				10,544
Stock-based compensation			908				437
Change in operating assets and liabilities:
Increase in accounts payable and accrued liabilities			3,905				5,692
Decrease (increase) in income taxes receivable			2,654				(3,191	)
Increase in other assets			(7,628	)			(1,527	)
Net cash provided by operating activities			27,878				32,302
Cash Flows From Investing Activities:
Increase in restricted cash and cash equivalents			(8,354	)			(8,693	)
Purchases of restricted securities available for sale			—				(504	)
Proceeds from sale of restricted securities available for sale			271				—
Maturities of restricted securities available for sale			49				201
Principal collected on Loans receivable			164,483				160,972
Advances to dealers and accelerated payments of dealer holdback			(179,973	)			(212,052	)
Purchases of Consumer Loans			(94,060	)			(14,124	)
Payments of dealer holdback			(17,242	)			(20,620	)
Net change in other receivables			63				—
Purchases of property and equipment			(2,390	)			(1,262	)
Net cash used in investing activities			(137,153	)			(96,082	)
Cash Flows From Financing Activities:
Borrowings under line of credit			204,600				156,900
Repayments under line of credit			(153,500	)			(158,400	)
Proceeds from secured financing			131,200				155,500
Repayments of secured financing			(75,238	)			(98,847	)
Principal payments under mortgage note and capital lease obligations			(378	)			(381	)
Repurchase of common stock			(66	)			—
Proceeds from stock options exercised			1,458				332
Tax benefits from stock based compensation plans			482				459
Net cash provided by financing activities			108,558				55,563
Effect of exchange rate changes on cash			65				(12	)
Net decrease in cash and cash equivalents			(652	)			(8,229	)
Cash and cash equivalents, beginning of period			712				8,528
Cash and cash equivalents, end of period		$	60			$	299
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest		$	11,217			$	7,808
Cash paid during the period for income taxes			217				332
Supplemental Disclosure of Non-Cash Transactions:
Property and equipment acquired through capital lease obligations		$	—			$	51

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of actual results achieved for full fiscal years. The consolidated balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2007 for Credit Acceptance Corporation (the “Company”, “Credit Acceptance”, “we”, “our” or “us”). Certain prior period amounts have been reclassified to conform to the current presentation, including interest and penalties related to tax for the first quarter 2007, that were reclassified to provision for income taxes.

     The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

2. DESCRIPTION OF BUSINESS

     Since 1972, Credit Acceptance has provided auto loans to consumers, regardless of their credit history. Our product is offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our product, but who actually end up qualifying for traditional financing.

     We refer to dealers who participate in our program and who share our commitment to changing consumers’ lives as “dealer-partners”. Upon enrollment in our financing program, the dealer-partner enters into a dealer servicing agreement with Credit Acceptance that defines the legal relationship between Credit Acceptance and the dealer-partner. The dealer servicing agreement assigns the responsibilities for administering, servicing, and collecting the amounts due on retail installment contracts (referred to as “Consumer Loans”) from the dealer-partners to us.

     We are an indirect lender from a legal perspective, meaning the Consumer Loan is originated by the dealer-partner and immediately assigned to us. If we discover a misrepresentation by the dealer-partner relating to a Consumer Loan assigned to us, we can demand that the Consumer Loan be repurchased for the current balance of the Consumer Loan less the amount of any unearned finance charge plus the applicable termination fee, which is generally $500. Upon receipt of such amount in full, we will reassign the Consumer Loan and our security interest in the financed vehicle to the dealer-partner.

     We have two primary programs: the Portfolio Program and the Purchase Program. During the three months ended March 31, 2008, 70% of loans were assigned to us under the Portfolio Program and 30% were assigned to us under the Purchase Program. Prior to January 1, 2008, dealer-partners had the option to assign Consumer Loans under either program and signed a separate agreement for each program type. Beginning January 1, 2008, dealer-partners that enroll in our program have two options. Dealer-partners choosing option one pay a one-time enrollment fee of $9,850 and have access to both the Portfolio Program and the Purchase Program. Dealer-partners choosing the second option to defer payment of the enrollment fee only have access to the Portfolio Program and agree to allow us to keep 50% of their first accelerated dealer holdback payment. This payment, called Portfolio Profit Express, is paid to qualifying dealer-partners after a pool of 100 Consumer Loans has been closed. After the first accelerated dealer holdback payment, the dealer-partner is granted access to the Purchase Program. Under the Portfolio Program, we advance money to dealer-partners (referred to as a “Dealer Loan”) in exchange for the right to service the underlying Consumer Loan. Under the Purchase Program, we buy the Consumer Loan from the dealer-partner (referred to as a “Purchased Loan”) and keep all amounts collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as “Loans”.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

2. DESCRIPTION OF BUSINESS — (Concluded)

     Portfolio Program

     As payment for the vehicle, the dealer-partner generally receives the following:

(i.)   (ii.)   (iii.)

a down payment from the consumer; a cash advance from us; and after the advance has been recovered by us, the cash from payments made on the Consumer Loan, net of certain collection costs and our servicing fee (“dealer holdback”).

     We record the amount advanced to the dealer-partner as a Dealer Loan, which is classified within Loans receivable in our consolidated balance sheets. Cash advanced to dealer-partners is automatically assigned to the originating dealer-partner’s open pool of advances. At the dealer-partner’s option, a pool containing at least 100 Consumer Loans can be closed and subsequent advances assigned to a new pool. All advances due from a dealer-partner are secured by the future collections on the dealer-partner’s portfolio of Consumer Loans assigned to us. For dealer-partners with more than one pool, the pools are cross-collateralized so the performance of other pools is considered in determining eligibility for dealer holdback. We perfect our security interest in the Dealer Loans by taking possession of the Consumer Loans.

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

	•		First, to reimburse us for certain collection costs;
	•		Second, to pay us our servicing fee;
	•		Third, to reduce the aggregate advance balance and to pay any other amounts due from the dealer-partner to us; and
	•		Fourth, to the dealer-partner as payment of dealer holdback.

     Dealer-partners have an opportunity to receive a portion of the dealer holdback on an accelerated basis at the time a pool of 100 or more Consumer Loans is closed. The amount paid to the dealer-partner is calculated using a formula that considers the forecasted collections and the advance balance on the closed pool. If the collections on Consumer Loans from a dealer-partner’s pool are not sufficient to repay the advance balance, the dealer-partner will not receive dealer holdback or accelerated dealer holdback.

     Since typically the combination of the advance and the consumer’s down payment provides the dealer-partner with a cash profit at the time of sale, the dealer-partner’s risk in the Consumer Loan is limited. We cannot demand repayment from the dealer-partner of the advance except in the event the dealer-partner is in default of the dealer servicing agreement. Advances are made only after the Consumer Loan is approved, accepted and assigned to us and all other stipulations required for funding have been satisfied. The dealer-partner can also opt to repurchase Consumer Loans assigned under the Portfolio Program at their own discretion.

     For accounting purposes, the transactions described under the Portfolio Program are not considered to be loans to consumers. Instead, our accounting reflects that of a lender to the dealer-partner. The classification as a Dealer Loan for accounting purposes is primarily a result of (i) the dealer-partner’s financial interest in the Consumer Loan and (ii) certain elements of our legal relationship with the dealer-partner. The cash amount advanced to the dealer-partner is recorded as an asset on our balance sheet. The aggregate amount of all advances to an individual dealer-partner, plus accrued income, less repayments comprises the amount of the Dealer Loan recorded in Loans receivable.

Purchase Program

     We began offering a Purchase Program on a limited basis in March of 2005. The Purchase Program differs from our traditional Portfolio Program in that the dealer-partner receives a single upfront payment from us at the time of origination instead of a cash advance and dealer holdback. Purchase Program volume increased significantly beginning in 2007 as the program was offered to additional dealer-partners.

     For accounting purposes, the transactions described under the Purchase Program are considered to be originated by the dealer-partner and then purchased by us. The cash amount paid to the dealer-partner is recorded as an asset on our balance sheet. The aggregate amount of all amounts paid to purchase Consumer Loans from dealer-partners, plus accrued income, less repayments, comprises the amount of Purchased Loans recorded in Loans receivable.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

3. SIGNIFICANT ACCOUNTING POLICIES

Restricted Cash and Cash Equivalents

     The carrying amount of restricted cash and cash equivalents approximate their fair value due to the short maturity of these instruments. Restricted cash and cash equivalents increased to $82.5 million as of March 31, 2008 from $74.1 million at December 31, 2007. The balance consists of: i) $64.0 million of cash collections related to secured financings, and ii) $18.5 million of cash held in trusts for future vehicle service contract claims. The claims reserve associated with the trusts are included in accounts payable and accrued liabilities in the consolidated balance sheets.

New Accounting Pronouncements

     Fair Value Measurements. In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods of those fiscal years. The adoption of SFAS 157 for financial assets and liabilities did not have a material impact on our consolidated financial statements.

     Fair Value Option for Financial Assets and Liabilities. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure financial assets and liabilities (except for those that are specifically exempted from SFAS 159) at fair value. The election to measure a financial asset or liability at fair value can be made on an instrument-by-instrument basis and is irrevocable. The difference between carrying value and fair value at the election date is recorded as a transition adjustment to opening retained earnings. Subsequent changes in fair value are recognized in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. At this time, we have not elected to measure any financial asset or liabilities at fair value under SFAS 159.

     Disclosures About Derivative Instruments and Hedging Activities. In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are currently evaluating the impact that SFAS 161 will have on our consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

4. LOANS RECEIVABLE

A summary of changes in Loans receivable is as follows (in thousands):

		Three Months Ended March 31, 2008
		Dealer Loans				Purchased Loans				Other Loans				Total
Balance, beginning of period		$	803,539			$	140,453			$	706			$	944,698
New loans (1)			179,973				104,958				—				284,931
Transfers (2)			(1,515	)			1,515				—				—
Dealer holdback payments			17,242				—				—				17,242
Net cash collections on loans			(145,531	)			(30,130	)			—				(175,661	)
Write-offs			(22,728	)			(13	)			—				(22,741	)
Recoveries			—				5				—				5
Other			—				—				(15	)			(15	)
Currency translation			(66	)			—				—				(66	)
Balance, end of period		$	830,914			$	216,788			$	691			$	1,048,393

		Three Months Ended March 31, 2007
		Dealer Loans				Purchased Loans				Other Loans				Total
Balance, beginning of period		$	724,093			$	29,926			$	552			$	754,571
New loans (1)			213,220				16,630				—				229,850
Transfers (2)			(1,168	)			1,168				—				—
Dealer holdback payments			20,620				—				—				20,620
Net cash collections on loans			(154,634	)			(10,428	)			—				(165,062	)
Write-offs			(4,155	)			(137	)			—				(4,292	)
Recoveries			—				12				—				12
Other			—				—				139				139
Currency translation			12				—				—				12
Balance, end of period		$	797,988			$	37,171			$	691			$	835,850

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

4. LOANS RECEIVABLE — (Concluded)

A summary of changes in the Allowance for credit losses is as follows (in thousands):

		Three Months Ended March 31, 2008
		Dealer Loans				Purchased Loans				Total
Balance, beginning of period		$	133,201			$	944			$	134,145
Provision for credit losses (1)			2,243				236				2,479
Write-offs			(22,728	)			(13	)			(22,741	)
Recoveries			—				5				5
Currency translation			(63	)			—				(63	)
Balance, end of period		$	112,653			$	1,172			$	113,825

		Three Months Ended March 31, 2007
		Dealer Loans				Purchased Loans				Total
Balance, beginning of period		$	127,881			$	910			$	128,791
Provision for credit losses (2)			3,451				286				3,737
Write-offs			(4,155	)			(150	)			(4,305	)
Recoveries			—				12				12
Currency translation			14				—				14
Balance, end of period		$	127,191			$	1,058			$	128,249

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

5. DEBT

     We currently use four primary sources of debt financing: (i) a revolving secured line of credit with a commercial bank syndicate; (ii) a revolving secured warehouse facility with an institutional investor; (iii) SEC Rule 144A asset-backed secured financings (“Term ABS 144A”) with qualified institutional investors; and (iv) a residual credit facility with an institutional investor. General information for each of our financing transactions in place as of March 31, 2008 is as follows (dollars in thousands):

Wholly owned

Issue

Financing

Interest Rate at

Financings

Subsidiary *

Number

Close Date

Maturity Date

Amount

March 31, 2008

Revolving Line of Credit

n/a

n/a

January 25, 2008

June 22, 2010

$

153,500

Either Eurodollar rate plus 125 basis points (3.95%) or the prime rate minus 165 basis points (3.60%)

Revolving Secured Warehouse Facility*

CAC Warehouse Funding Corp. II

2003-2

February 12, 2008

February 11, 2009

$

325,000

Commercial paper rate plus 65 basis points (3.69%)

Term ABS 144A 2006-2*

Credit Acceptance Funding LLC 2006-2

2006-2

November 21, 2006

n/a (1)

$

100,000

Fixed rate (5.38%)

Term ABS 144A 2007-1*

Credit Acceptance Funding LLC 2007-1

2007-1

April 12, 2007

n/a (2)

$

100,000

Fixed rate (5.32%)

Term ABS 144A 2007-2*

Credit Acceptance Funding LLC 2007-2

2007-2

October 29, 2007

n/a (3)

$

100,000

Fixed rate (6.22%)**

Residual Credit Facility*

Credit Acceptance Residual Funding LLC

2006-3

September 11, 2007

September 9, 2008

$

50,000

LIBOR plus 145 basis points (4.15%) or the commercial paper rate plus 145 basis points (4.49%)

Additional information related to the amounts outstanding on each facility is as follows (dollars in thousands):

		Three Months Ended
		March 31,
		2008				2007
Revolving Line of Credit
Maximum outstanding balance		$	101,500			$	63,100
Weighted average outstanding balance			65,140				42,322
Revolving Secured Warehouse Facility
Maximum outstanding balance		$	285,789			$	264,000
Weighted average outstanding balance			257,758				216,526

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

5. DEBT — (Continued)

		As of March 31,				As of December 31,
		2008				2007
Revolving Line of Credit
Balance outstanding		$	87,400			$	36,300
Letter(s) of credit			173				173
Amount available for borrowing			65,927				38,527
Interest rate			3.60	%			5.60	%
Revolving Secured Warehouse Facility
Balance outstanding		$	285,789			$	198,100
Amount available for borrowing			92,989				226,900
Contributed Loans			356,217				254,294
Interest rate			3.69	%			5.76	%
Term ABS 144A 2006-2
Balance outstanding		$	58,238			$	89,965
Contributed Dealer Loans			119,068				129,950
Interest rate			5.38	%			5.38	%
Term ABS 144A 2007-1
Balance outstanding		$	100,000			$	100,000
Contributed Dealer Loans			125,004				130,841
Interest rate			5.32	%			5.32	%
Term ABS 144A 2007-2
Balance outstanding		$	100,000			$	100,000
Contributed Dealer Loans			125,003				132,695
Interest rate			6.22	%			6.22	%
Residual Credit Facility
Balance outstanding		$	—			$	—
Contributed Dealer Loans			—				—
Interest rate			4.49	%			4.60	%

Line of Credit Facility

     During the first quarter of 2008, we increased the amount of our line of credit facility with a commercial bank syndicate from $75.0 million to $153.5 million. In addition, the maturity of the line of credit facility was extended from June 20, 2009 to June 22, 2010. There were no other material changes to the terms of the line of credit facility.

     Borrowings under the credit facility are subject to a borrowing-base limitation. This limitation equals 80% of the net book value of Loans, less a hedging reserve (not exceeding $1.0 million), the amount of letters of credit issued under the line of credit, and the amount of other debt secured by the collateral which secures the line of credit. Borrowings under the credit agreement are secured by a lien on most of our assets. We must pay annual and quarterly fees on the amount of the facility.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

5. DEBT — (Continued)

Revolving Secured Warehouse Facility

     This facility is used to provide financing to our subsidiary CAC Warehouse Funding Corp. II (“Warehouse Funding”). During the first quarter of 2008, we extended the maturity of our revolving warehouse facility from February 13, 2008 to February 11, 2009 and reduced the amount of the facility from $425.0 million to $325.0 million. The reduction in the amount of the facility is due to one of the two institutional investors (the “Nonextending Investor”) not renewing their participation in the facility. The outstanding principal balance owing to the Nonextending Investor will be repaid in monthly installments of $10.8 million until their debt is reduced to zero. As of March 31, 2008, the outstanding balance owing to the Nonextending Investor was $53.8 million. The amount owing to the Nonextending Investor does not reduce the amount available to be borrowed under the $325.0 million facility.

     Under this facility we can contribute Loans to Warehouse Funding in return for cash and equity in the subsidiary. In turn, Warehouse Funding pledges the Loans as collateral to institutional investors to secure financing that will fund the cash portion of the purchase price of the Loans. The financing provided to Warehouse Funding under the facility is limited to the lesser of 80% of the net book value of the contributed Loans or the facility limit.

     The agreement requires that certain amounts outstanding under the facility be refinanced within 360 days of the most recent renewal. The most recent renewal occurred on February 12, 2008 as described above. If such refinancing does not occur, the transaction will cease to revolve, will amortize as collections are received and, at the option of the institutional investors, may be subject to acceleration and foreclosure.

     Warehouse Funding is liable for any amounts due under the facility. Even though Warehouse Funding and the Company are consolidated for financial reporting purposes, the financing is non-recourse to us. As Warehouse Funding is organized as a separate legal entity from the Company, assets of Warehouse Funding (including the conveyed Loans) will not be available to satisfy the general obligations of the Company. All of Warehouse Funding’s assets have been encumbered to secure its obligations to its creditors.

     Interest on borrowings under the facility has been limited to a maximum rate of 6.75% through interest-rate-cap agreements executed in the first quarter of 2008 and fourth quarter of 2007. Warehouse Funding pays us a monthly servicing fee equal to 6% of the collections received with respect to the conveyed Loans. The fee is paid out of the collections. Except for the servicing fee and holdback payments due to dealer-partners, we do not have any rights in any portion of such collections until all outstanding principal, accrued and unpaid interest, fees and other related costs are paid in full.

Term ABS 144A Financings

     In 2006 and 2007, four of our wholly owned subsidiaries, Credit Acceptance Funding LLC 2006-1, Credit Acceptance Funding LLC 2006-2, Credit Acceptance Funding LLC 2007-1 and Credit Acceptance Funding LLC 2007-2 (the “Funding LLCs”), each completed a secured financing transaction in which they received $100.0 million. In connection with these transactions, we conveyed Dealer Loans to each Funding LLC for cash and the sole membership interest in that Funding LLC. In turn, each Funding LLC conveyed the Dealer Loans to a respective trust that issued $100.0 million in notes to qualified institutional investors. In each transaction, the notes were rated “Aaa” by Moody’s Investor Service and “AAA” by Standard & Poor’s Rating Services. Financial insurance policies were issued in connection with the transactions. The policies guarantee the timely payment of interest and ultimate repayment of principal on the final scheduled distribution date.

     Each financing has a specified revolving period during which we may be required, and are likely, to convey additional Dealer Loans to each Funding LLC. Each Funding LLC will then convey them to their respective trust, to maintain the financing at the $100.0 million level. (The proceeds of the initial Dealer Loan conveyances to the Funding LLCs were used to purchase Dealer Loans, on an arm’s-length basis, from Warehouse Funding.) At the end of the revolving period, the debt outstanding under each financing will begin to amortize.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

5. DEBT — (Concluded)

     The financings create loans for which the trusts are liable and which are secured by all the assets of each trust. Such loans are non-recourse to us, even though the trusts, the Funding LLCs and the Company are consolidated for financial reporting purposes. Because the Funding LLCs are organized as separate legal entities from the Company, their assets (including the conveyed Dealer Loans) are not available to satisfy our general obligations. We receive a monthly servicing fee on each financing equal to 6% of the collections received with respect to the conveyed Dealer Loans. The fee is paid out of the collections. Aside from the servicing fee and payments due to dealer-partners, we do not receive, or have any rights in the collections. However, in our capacity as Servicer of the Dealer Loans, we do have a limited right to exercise a “clean-up call” option to purchase Dealer Loans from the Funding LLCs under certain specified circumstances. Alternatively, when a trust’s underlying indebtedness is paid in full, either through collections or through a prepayment of the indebtedness, the trust is to pay any remaining collections over to its Funding LLC as the sole beneficiary of the trust. The collections will then be available to be distributed to us as the sole member of the respective Funding LLC.

     The table below sets forth certain additional details regarding the outstanding Term ABS 144A Financings (dollars in thousands):

						Net Book Value of Dealer				Expected
Term ABS 144A		Issue				Loans Conveyed at				Annualized
Financing		Number		Close Date		Closing		Revolving Period		Rates *
Term ABS 144A 2006-2		2006-2		November 21, 2006		$125,600		12 months		7.4%
								(Through November 15, 2007)
Term ABS 144A 2007-1		2007-1		April 12, 2007		$125,700		12 months		7.2%
								(Through April 15, 2008)
Term ABS 144A 2007-2		2007-2		October 29, 2007		$125,000		12 months		8.0%
								(Through October 15, 2008)

     For additional information regarding the outstanding Term ABS 144A Financings, see Note 12 to the consolidated financial statements.

Residual Credit Facility

     Another wholly owned subsidiary, Credit Acceptance Residual Funding LLC (“Residual Funding”), has a $50.0 million secured credit facility with an institutional investor. This facility allows Residual Funding to finance its purchase of trust certificates from special-purpose entities (the “Term SPEs”) that have purchased Dealer Loans under our term securitization transactions. Historically, the Term SPEs’ residual interests in Dealer Loans, represented by their trust certificates, have proven to have value that increases as their term securitization obligations amortize. This facility enables the Term SPEs to realize and distribute to us up to 70% of that increase in value prior to the time the related term securitization senior notes are paid in full.

     Residual Funding’s interests in Dealer Loans, represented by its purchased trust certificates, are subordinated to the interests of term securitization senior noteholders. However, the entire arrangement is non-recourse to us. Residual Funding is organized as a separate legal entity from the Company. Therefore its assets, including purchased trust certificates, are not available to satisfy our general obligations, even though Residual Funding and the Company are consolidated for financial reporting purposes

Debt Covenants

     As of March 31, 2008, we are in compliance with various restrictive debt covenants that require the maintenance of certain financial ratios and other financial conditions. The most restrictive covenants require a minimum ratio of our assets to debt and a minimum ratio of our earnings before interest, taxes and non-cash expenses to fixed charges. The covenants also limit the maximum ratio of our funded debt to tangible net worth. Additionally, we must maintain, as of the end of the year, consolidated net income of not less than $1.00 for the two consecutive quarters then ending. Some of the debt covenants may indirectly limit the payment of dividends on common stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

6. FAIR VALUE MEASUREMENTS

     Effective January 1, 2008, we adopted SFAS No. 157, which clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. The preferred inputs, which we use, are referred to as Level 1 inputs. Level 1 inputs are observable inputs such as quoted prices for identical instruments in active markets. The following table provides the fair value measurements of applicable assets and liabilities using Level 1 inputs as of March 31, 2008 (in thousands):

		Fair Value
Assets
Restricted securities available for sale		$	3,036
Derivative instruments			6
Liabilities
Derivative instruments		$	1,323

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

7. RELATED PARTY TRANSACTIONS

     In the normal course of our business, we have Dealer Loans with affiliated dealer-partners owned or controlled by: (i) our majority shareholder and Chairman; and (ii) a member of the Chairman’s immediate family. Our Dealer Loans to affiliated dealer-partners and non-affiliated dealer-partners are on the same terms.

     Affiliated Dealer Loan balances were $16.6 million and $16.1 million as of March 31, 2008 and December 31, 2007, respectively. Affiliated Dealer Loan balances were 2.0% of total consolidated Dealer Loan balances as of March 31, 2008 and December 31, 2007. A summary of related party Dealer Loan activity is as follows (dollars in thousands):

		Three Months Ended								Three Months Ended
		March 31, 2008								March 31, 2007
		Affiliated								Affiliated
		dealer-partner				% of				dealer-partner				% of
		activity				consolidated				activity				consolidated
New loans		$	3,687				2.0	%		$	4,212				2.0	%
Affiliated dealer-partner revenue		$	985				2.0	%		$	1,218				2.6	%
Dealer holdback payments		$	539				3.1	%		$	557				2.7	%

     Beginning in 2002, entities owned by our majority shareholder and Chairman began offering secured lines of credit to third parties in a manner similar to a program previously offered by us. In December 2004, our majority shareholder and Chairman sold his ownership interest in these entities; however, he continues to have indirect control over these entities and has the right or obligation to reacquire the entities under certain circumstances until December 31, 2014 or the repayment of the related purchase money note.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

8. CAPITAL TRANSACTIONS

     Net Income Per Share

     Basic net income per share has been computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share has been computed by dividing net income by the total of the weighted average number of common shares and dilutive common stock equivalents outstanding. Dilutive common stock equivalents included in the computation represent shares issuable upon assumed exercise of stock options that would have a dilutive effect using the treasury stock method. The share effect is as follows:

		Three Months Ended
		March 31,
		2008				2007
Weighted average common shares outstanding			30,106,881				30,054,349
Dilutive effect of common stock equivalents			784,346				1,229,346
Weighted average common shares and common stock equivalents			30,891,227				31,283,695

     The computation of diluted net income per share for the three months ended March 31, 2008 excludes the effect of the potential exercise of stock options to purchase 110,000 shares, because the effects of including them would have been anti-dilutive. There were no stock options that would be anti-dilutive for the three months ended March 31, 2007.

     Stock Compensation Plans

     Pursuant to our Incentive Compensation Plan (the “Incentive Plan”), which was approved by shareholders on May 13, 2004, we reserved 1.0 million shares of our common stock for the future granting of restricted stock, restricted stock units, stock options, and performance awards to employees, officers, and directors at any time prior to April 1, 2014.

     During the three months ended March 31, 2008, we granted 80,123 shares of restricted stock to employees and officers under the Incentive Plan, all of which vest over a three year period. During the three months ended March 31, 2008, a total of 20,198 restricted stock shares vested. At March 31, 2008 and December 31, 2007, we had 260,500 and 201,872 shares of restricted stock outstanding, respectively. Shares available for future grants under the Incentive Plan totaled 435,389 at March 31, 2008. We recognized $0.3 million and $0.1 million of expense related to restricted stock grants during the three months ended March 31, 2008 and 2007, respectively.

     On February 22, 2007, the compensation committee approved an award of 300,000 restricted stock units to our Chief Executive Officer. Each restricted stock unit represents and has a value equal to one share of our common stock. The restricted stock units will be earned over a five year period based upon the annual increase in our adjusted economic profit. Any earned shares will be distributed on February 22, 2014. As of March 31, 2008, 60,000 restricted stock units have been earned. We recognized $0.6 million and $0.4 million of expense related to the award of restricted stock units during the three months ended March 31, 2008 and 2007, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

9. BUSINESS SEGMENT INFORMATION

     We have two reportable business segments: United States and Other. The United States segment primarily consists of the United States automobile financing business. We are currently liquidating all businesses classified in the Other segment.

     Selected segment information is set forth below (in thousands):

		Three Months Ended
		March 31,
		2008				2007
Revenue:
United States		$	70,760			$	57,313
Other			18				38
Total revenue		$	70,778			$	57,351
Income (loss) from continuing operations before provision for income taxes:
United States		$	27,861			$	22,924
Other			(149	)			(5	)
Total income from continuing operations before provision for income taxes		$	27,712			$	22,919

		As of				As of
		March 31, 2008				December 31, 2007
Segment Assets
United States		$	1,078,405			$	940,307
Other			1,373				1,875
Total Assets		$	1,079,778			$	942,182

10. DEFERRED DEBT ISSUANCE COSTS

     As of March 31, 2008 and December 31, 2007, deferred debt issuance costs were $3.3 million (net of accumulated amortization of $2.7 million and $2.0 million, respectively). Expenses associated with the issuance of debt instruments are capitalized and amortized as interest expense over the term of the debt instrument on a level-yield basis for term secured financings and on a straight-line basis for lines of credit and revolving secured financings.

11. COMPREHENSIVE INCOME

     Our comprehensive income information is set forth below (in thousands):

		Three Months Ended
		March 31,
		2008				2007
Net income		$	17,620			$	15,360
Unrealized gain on securities available for sale			43				11
Comprehensive income		$	17,663			$	15,371

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Concluded)
(UNAUDITED)

12. SUBSEQUENT EVENT

     On April 18, 2008, we completed a $150 million asset-backed non-recourse secured financing agreement (Term ABS 144A 2008-1). Pursuant to this transaction, we will contribute loans to a wholly owned special purpose entity which will transfer the loans to a trust, which will issue notes to a qualified institutional investor. We may borrow up to the lesser of 80% of the contributed loans or $150 million during the first twelve months of the financing after which the financing will amortize based upon the cash flows on the contributed loans. We initially contributed loans having a net book value of $86.5 million and borrowed $69.0 million in floating rate debt. The proceeds of the financing will be used to repay outstanding indebtedness.

     The initial borrowing on the financing was rated “A” by Standard & Poor’s Rating Services. Since an insurance policy covering the timely payment of interest and ultimate payment of principal was not issued in connection with this financing, this rating was based upon the structure of the financing which considered, among other factors, loss and cash flow coverage ratios in various scenarios. Our prior transactions were rated “AAA” by Standard & Poor’s Rating Services and “Aaa” by Moody’s Investor Service at the time that they were issued. This rating was based on the rating of the insurer which provided the insurance policy.

     We will receive 6.0% of the cash flows related to the underlying Consumer Loans to cover servicing expenses. The remaining 94.0%, less amounts due to dealer-partners for payments of dealer holdback, will be used to pay principal and interest on the notes as well as the ongoing costs of the financing. This transaction represents our seventh sale of notes to qualified institutional investors under SEC Rule 144A.

     We entered into an interest rate swap to convert the $69.0 million in floating rate debt into fixed rate debt bearing a rate of 6.3% with an expected annualized cost of approximately 6.9% including underwriter’s fees and other costs. We have designated the interest rate swap as a hedge as defined under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. Since this swap is designated as a hedge the effective portion of changes in the fair value will be recorded in other comprehensive income and the ineffective portion of changes in fair value will be recorded in interest expense. The fair value of the interest rate swap is based on quoted market values, which are influenced by a number of factors, including interest rates, amount of debt outstanding, and number of months until maturity.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in Item 8 - Financial Statements and Supplementary Data, of our 2007 Annual Report on Form 10-K, as well as Item 1- Consolidated Financial Statements, in this Form 10-Q.

Critical Success Factors

     Critical success factors for us include access to capital and the ability to accurately forecast Consumer Loan performance.

     Our strategy for accessing the capital required to grow is to: (i) maintain consistent financial performance, (ii) maintain modest financial leverage, and (iii) maintain multiple funding sources. Our funded debt to equity ratio is 2.2:1 at March 31, 2008. We currently use four primary sources of debt financing: (i) a revolving secured line of credit with a commercial bank syndicate; (ii) a revolving secured warehouse facility with an institutional investor; (iii) SEC Rule 144A asset-backed secured borrowings (“Term ABS 144A”) with qualified institutional investors; and (iv) a residual credit facility with an institutional investor.

     At the time of Consumer Loan acceptance or purchase, we forecast future expected cash flows from the Consumer Loan. Based on these forecasts, an advance or one time payment is made to the related dealer-partner at a level designed to achieve an acceptable return on capital. If Consumer Loan performance equals or exceeds our original expectation, it is likely our target return on capital will be achieved.

Consumer Loan Performance

     Since the cash flows available to repay the Loans are generated, in most cases, from the underlying Consumer Loans, the performance of the Consumer Loans is critical to our financial results. The following table presents forecasted Consumer Loan collection rates, advance rates (includes amounts paid to acquire Purchased Loans), the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of March 31, 2008. Payments of dealer holdback and accelerated payments of dealer holdback are not included in the advance percentage paid to the dealer-partner. All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest). The table includes both Dealer Loans and Purchased Loans.

		As of March 31, 2008
Year of		Forecasted						% of Forecast
Origination		Collection %		Advance %		Spread %		Realized
1999		72.1%		48.7%		23.4%		99.5%
2000		72.4%		47.9%		24.5%		99.1%
2001		67.3%		46.0%		21.3%		98.7%
2002		70.4%		42.2%		28.2%		98.4%
2003		74.0%		43.4%		30.6%		98.2%
2004		73.5%		44.0%		29.5%		95.2%
2005		74.1%		46.9%		27.2%		89.1%
2006		70.6%		46.6%		24.0%		67.2%
2007		70.6%		46.5%		24.1%		30.1%
2008		69.7%		44.2%		25.5%		3.7%

     During the first quarter of 2008, we implemented a new methodology for forecasting future collections on Consumer Loans. The new methodology increased the dollar amount of overall forecasted collections by 0.3%. While the new methodology produces overall collection rates that are very similar to those produced by the prior methodology, the new methodology utilizes a more sophisticated approach which allowed us to expand the number of variables on which the forecast is based. As a result, we believe the new forecast improves the precision of our estimates in two respects: (1) the new forecast is believed to be more accurate when applied to a smaller group of Consumer Loans which allows us to forecast more accurately at the dealer pool level and more precisely measure the performance of specific segments of our portfolio and (2) the new forecast is believed to be more sensitive to changes in Consumer Loan performance and will allow us to react more quickly to changes in Consumer Loan performance. The following table summarizes the differences by Consumer Loan origination year between the old and the new forecast methods as of December 31, 2007:

		Forecasted Collection % as of December 31, 2007
Loan Origination Year		New Methodology		Old Methodology		Variance
1999		72.0%		72.3%		-0.3%
2000		72.4%		72.8%		-0.4%
2001		67.3%		67.8%		-0.5%
2002		70.6%		71.0%		-0.4%
2003		74.1%		74.6%		-0.5%
2004		73.5%		73.7%		-0.2%
2005		73.8%		74.3%		-0.5%
2006		70.9%		69.9%		1.0%
2007		71.1%		70.2%		0.9%

     The following table presents forecasted Consumer Loan collection rates, advance rates (includes amounts paid to acquire Purchased Loans), the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of March 31, 2008 for Purchased Loans and Dealer Loans separately:

						Forecasted
		Loan Origination Year				Collection %				Advance %				Spread %
Purchased Loans			2007				71.8	%			49.4	%			22.4	%
			2008				70.2	%			46.9	%			23.3	%
Dealer Loans			2007				70.3	%			45.8	%			24.5	%
			2008				69.4	%			42.8	%			26.6	%

     Although the advance rate on Purchased Loans is higher as compared to the advance rate on Dealer Loans, Purchased Loans do not require us to pay dealer-holdback. As a result, Purchased Loans are expected to produce similar returns on capital as compared to Dealer Loans of comparable size. Because Purchased Loans are larger on average than Dealer Loans, the average return on capital is lower but the per unit economic profit is higher.

     Accurately forecasting future collection rates is critical to our success. The risk of a forecasting error declines as Consumer Loans age. For example, the risk of a material forecasting error for business written in 2003 is very small since 98.2% of the total amount forecasted has already been realized. In contrast, our forecast for recent Consumer Loans is less certain. If we produce disappointing operating results, it will likely be because we overestimated future Consumer Loan performance. Although we believe our forecasted collection rates are as accurate as possible, there can be no assurance that our estimates will be accurate or that Consumer Loan performance will be as expected.

     The following table compares our forecast of Consumer Loan collection rates as of March 31, 2008, with the forecast as of December 31, 2007 (restated using our new loan forecasting methodology) for Dealer Loans and Purchased Loans:

		March 31, 2008		December 31, 2007
Loan Origination Year		Forecasted Collection %		Forecasted Collection %		Variance
1999		72.1%		72.0%		0.1%
2000		72.4%		72.4%		0.0%
2001		67.3%		67.3%		0.0%
2002		70.4%		70.6%		-0.2%
2003		74.0%		74.1%		-0.1%
2004		73.5%		73.5%		0.0%
2005		74.1%		73.8%		0.3%
2006		70.6%		70.9%		-0.3%
2007		70.6%		71.1%		-0.5%

     During the latter part of 2007 and during 2008, we began to reduce advance rates, which positively impacted the return on capital of new originations. There were no other material changes in our credit policy or pricing that impacted the quarter ended March 31, 2008.

Results of Operations

     Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

     The following is a discussion of our results of operations and income statement data on a consolidated basis.

(Dollars in thousands, except per share data)		Three Months								Three Months
		Ended								Ended
		March 31,				% of				March 31,				% of
		2008				Revenue				2007				Revenue
Revenue:
Finance charges		$	63,675				90.0	%		$	51,413				89.7	%
License fees			65				0.1				82				0.1
Other income			7,038				9.9				5,856				10.2
Total revenue			70,778				100.0				57,351				100.0
Costs and expenses:
Salaries and wages			17,740				25.1				11,861				20.6
General and administrative			7,124				10.1				5,917				10.3
Sales and marketing			4,642				6.6				4,472				7.8
Provision for credit losses			2,649				3.7				3,873				6.8
Interest			10,864				15.3				8,288				14.5
Other expense			34				—				25				—
Total costs and expenses			43,053				60.8				34,436				60.0
Operating income			27,725				39.2				22,915				40.0
Foreign currency (loss) gain			(13	)			—				4				—
Income from continuing operations before provision for income taxes			27,712				39.2				22,919				40.0
Provision for income taxes			10,131				14.3				7,532				13.1
Income from continuing operations			17,581				24.9				15,387				26.9
Discontinued operations
Gain (loss) from discontinued United Kingdom operations			56				0.1				(38	)			(0.1	)
Provision (credit) for income taxes			17				—				(11	)			—
Gain (loss) from discontinued operations			39				0.1				(27	)			(0.1	)
Net income		$	17,620				25.0	%		$	15,360				26.8	%
Net income per common share:
Basic		$	0.59							$	0.51
Diluted		$	0.57							$	0.49
Income from continuing operations per common share:
Basic		$	0.58							$	0.51
Diluted		$	0.57							$	0.49
Gain (loss) from discontinued operations per common share:
Basic		$	—							$	—
Diluted		$	—							$	—
Weighted average shares outstanding:
Basic			30,106,881								30,054,349
Diluted			30,891,227								31,283,695

Continuing Operations

     Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

     For the three months ended March 31, 2008, income from continuing operations increased to $17.6 million from $15.4 million in 2007. Income from continuing operations per diluted share increased to $0.57 from $0.49 in 2007. The increase in income from continuing operations was primarily due to a 31.0% increase in the average outstanding balance of our Loan portfolio, which was primarily the result of an increase in the number of dealer-partners actively participating in our programs. The positive impact of our Loan growth was partially offset by a decline in the yield on our Loan portfolio primarily due to the continued impact of pricing changes made during 2006 and early 2007 in response to a difficult competitive environment. In addition, during the first quarter of 2008, we implemented a new methodology for forecasting future collections on Consumer Loans, which increased income from continuing operations by $2.1 million as higher forecasted collections reduced the amount of Loan impairment.

     Finance Charges. Finance charges increased by 23.8% as average Loans receivable increased 31.0%. Finance charges grew slower than Loans receivable due to the continued impact of pricing changes made during 2006 and early 2007 in response to a difficult competitive environment. Loans receivable increased as a result of an increase in the number of new Loans and an increase in the average Loan amount. The increase in the number of new Loans was primarily due to an increase in the number of active dealer-partners, partially offset by lower volume per active dealer-partner. Lower volume per dealer-partner is primarily the result of pricing changes made during 2007 and the first quarter of 2008 partially offset by an improving competitive environment. The increase in the average Loan amount was due to an increase in the percentage of Purchased Loans accepted by us. On average, the amount paid to acquire a Purchased Loan is larger than the amount advanced on a Dealer Loan.

     The following table summarizes the changes in active dealer-partners and corresponding Consumer Loan unit volume:

		Three Months Ended March 31,
		2008				2007				% change
Consumer Loan unit volume			40,217				34,669				16.0
Active dealer-partners (1)			2,292				1,903				20.4
Average volume per active dealer-partner			17.5				18.2				(3.8	)
Consumer Loan unit volume from dealer-partners active both periods			28,374				28,406				(0.1	)
Dealer-partners active both periods			1,281				1,281				—
Average volume per dealer-partner active both periods			22.1				22.2				(0.1	)
Consumer Loan unit volume from new dealer-partners			3,011				2,386				26.2
New active dealer-partners (2)			347				322				7.8
Average volume per new active dealer-partner			8.7				7.4				17.6
Attrition (3)			-18.1	%			-17.6	%

     Beginning January 1, 2008, dealer-partners that enroll in our program have two options. Dealer-partners choosing option one pay a one-time enrollment fee of $9,850 and have access to both the Portfolio Program and the Purchase Program. Dealer-partners choosing the second option to defer payment of the enrollment fee only have access to the Portfolio Program and agree to allow us to keep 50% of their first accelerated dealer holdback payment. This payment, called Portfolio Profit Express, is paid to qualifying dealer-partners after a pool of 100 Consumer Loans has been closed. After the first accelerated dealer holdback payment the dealer-partner is granted access to the Purchase Program. While we will lose enrollment fee revenue on those dealer-partners choosing the second option and not reaching 100 Consumer Loans or otherwise failing to qualify for a Portfolio Profit Express payment, we estimate that we will realize higher per dealer-partner enrollment fee revenue from those dealer-partners choosing this option and qualifying for a Portfolio Profit Express payment. Based on the historical average of Portfolio Profit Express payments, we expect average enrollment fee revenue per dealer-partner for those dealer-partners electing the deferred option and qualifying for the Portfolio Profit Express payment will be approximately $12,000. Through March 31, 2008, 114 dealer-partners that have enrolled under the deferred option have earned Portfolio Profit Express payments. The amount kept by the Company (50% of the first Portfolio Profit Express payment) averaged $12,200 per dealer-partner. Approximately 79% of the dealer-partners that enrolled during the three months ended March 31, 2008 took advantage of the deferred enrollment option.

     Other Income. The increase for the three months ended March 31, 2008 was primarily due to profit sharing payments received from vehicle service contract and guaranteed asset protection providers of $2.9 million compared to $1.2 million in the prior year. Profit sharing payments from third parties are received once a year, if eligible. Since we have only received these payments since 2007, the amounts of these payments are currently not estimable due to a lack of historical information. As a result, the revenue related to these payments is recognized in the period the payments are received.

     Salaries and Wages. The increase for the three months ended March 31, 2008, as a percentage of revenue, was primarily due to an increase in headcount to support Loan growth. While the increase in headcount was proportionate to the increase in Loan volume, pricing changes caused revenue growth to be less than the growth in Loans receivable.

     Sales and Marketing. The decrease for the three months ended March 31, 2008, as a percentage of revenue, was primarily a result of the discontinuance of certain dealer-partner support programs and lower utilization of various other dealer-partner programs.

     Provision for Credit Losses. The decrease in the provision for the three months ended March 31, 2008 was primarily due to the implementation of a new methodology for forecasting future collections on Consumer Loans. The new methodology increased the dollar amount of overall forecasted collections by 0.3%. Implementation of the new methodology resulted in a reversal of $3.4 million in provision for credit losses as higher forecasted collections reduced the amount of Loan impairment. For additional information, see discussion of Critical Accounting Estimates. The impact of the new forecasting methodology was partially offset by an increase in Loans receivable, which increased the provision for credit losses required to reduce the carrying value of Loans to maintain the initial yield established at the inception of each Dealer Loan or pool of Purchased Loans.

     Interest. The increase for the three months ended March 31, 2008 was primarily due to an increase of $172.1 million in the amount of average outstanding debt as a result of borrowings used to fund new Loans. The increase in interest expense was partially offset by our cost of debt which decreased to 7.4% as of March 31, 2008 from 8.0% as of March 31, 2007.

     Provision for Income Taxes. The effective tax rate increased to 36.6% for the three months ended March 31, 2008 from 32.9% primarily due to a decrease in our reserve for uncertain tax positions recorded in the first quarter of 2007.

Liquidity and Capital Resources

     We need capital to fund new Loans and pay dealer holdback. Our primary sources of capital are cash flows from operating activities, collections of Consumer Loans and borrowings through four primary sources of financing: (i) a revolving secured line of credit with a commercial bank syndicate; (ii) a revolving secured warehouse facility with an institutional investor; (iii) SEC Rule 144A asset-backed secured borrowings (“Term ABS 144A”) with qualified institutional investors; and (iv) a residual credit facility with an institutional investor. There are various restrictive debt covenants for each source of financing and we are in compliance with those covenants as of March 31, 2008. For information regarding these financings and the covenants included in the related documents, see Note 5 to the consolidated financial statements, which are incorporated herein by reference.

     Cash and cash equivalents decreased to $0.1 million at March 31, 2008 from $0.7 million at December 31, 2007. Our total balance sheet indebtedness increased to $638.8 million at March 31, 2008 from $532.1 million at December 31, 2007. This increase was primarily a result of borrowings used to fund new Loans in 2008.

     Restricted cash and cash equivalents increased to $82.5 million at March 31, 2008 from $74.1 million at December 31, 2007. The balance at March 31, 2008 consists of: i) $64.0 million of cash collections related to secured financings, and ii) $18.5 million of cash held in trusts for future vehicle service contract claims. The claims reserve associated with the trusts are included in accounts payable and accrued liabilities in the consolidated balance sheets.

Restricted Securities Available for Sale

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

     Restricted securities available for sale consisted of the following:

(in thousands)		As of March 31, 2008
						Gross				Gross
						Unrealized				Unrealized				Estimated
		Cost				Gains				Losses				Fair Value
US Government and agency securities		$	1,584			$	70			$	—			$	1,654
Corporate bonds			1,366				23				(7	)			1,382
Total restricted securities available for sale		$	2,950			$	93			$	(7	)		$	3,036

(in thousands)		As of December 31, 2007
						Gross				Gross
						Unrealized				Unrealized				Estimated
		Cost				Gains				Losses				Fair Value
US Government and agency securities		$	1,584			$	40			$	—			$	1,624
Corporate bonds			1,686				10				(30	)			1,666
Total restricted securities available for sale		$	3,270			$	50			$	(30	)		$	3,290

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

(in thousands)		As of March 31, 2008								As of December 31, 2007
						Estimated								Estimated
		Cost				Fair Value				Cost				Fair Value
Contractual Maturity
Within one year		$	1,047			$	1,058			$	1,096			$	1,100
Over one year to five years			1,903				1,978				2,174				2,190
Total restricted securities available for sale		$	2,950			$	3,036			$	3,270			$	3,290

Contractual Obligations

     A summary of the total future contractual obligations requiring repayments as of March 31, 2008 is as follows (in thousands):

		Payments Due by Period
		Total				< 1 Year				1-3 Years				Other
Long-term debt, including current maturities and capital leases (1)		$	638,814			$	463,290			$	175,524			$	—
Operating lease obligations			2,314				826				881				607
Purchase obligations (2)			1,400				1,235				165				—
Other long-term obligations (3)			10,072				—				—				10,072
Total contractual obligations (4)		$	652,600			$	465,351			$	176,570			$	10,679

     Based upon anticipated cash flows, management believes that cash flows from operations and its various financing alternatives will provide sufficient financing for debt maturities and for future operations. Our ability to borrow funds may be impacted by many economic and financial market conditions. If the various financing alternatives were to become limited or unavailable to us, our operations could be materially and adversely affected.

Critical Accounting Estimates

     Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we review our accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2007 discusses several critical accounting estimates, which we believe involve a high degree of judgment and complexity. There have been no material changes to the estimates and assumptions associated with these accounting estimates from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2007, except for the following:

     The recognition of finance charge revenue and the allowance for credit losses involve significant estimates based on our forecast of future collections. During the first quarter of 2008, we implemented a new methodology for forecasting future collections on Consumer Loans. The new methodology increased the dollar amount of overall forecasted collections by 0.3%. While the new methodology produces overall collection rates that are very similar to those produced by the prior methodology, the new methodology utilizes a more sophisticated approach which allowed us to expand the number of variables on which the forecast is based. As a result, we believe the new forecast improves the precision of our estimates in two respects: (1) the new forecast is believed to be more accurate when applied to a smaller group of Consumer Loans which allows us to forecast more accurately at the dealer pool level and more precisely measure the performance of specific segments of our portfolio and (2) the new forecast is believed to be more sensitive to changes in Consumer Loan performance and will allow us to react more quickly to changes in Consumer Loan performance. Implementation of the new methodology resulted in a reversal of $3.4 million in provision for credit losses as higher forecasted collections reduced the amount of Loan impairment. In conjunction with our implementation of the new forecasting methodology, we reevaluated our forecast of future collections on old, fully-reserved Dealer Loans. As a result, we wrote off $22.7 million of Dealer Loans and the related Allowance for Credit Losses as we are no longer forecasting any future collections on these Dealer Loans. This write-off had no impact on net income for the first quarter of 2008 as all of these Dealer Loans were fully-reserved.

Off-Balance Sheet Arrangements

     We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Forward-Looking Statements

     We make forward-looking statements in this report and may make such statements in future filings with the Securities and Exchange Commission. We may also make forward-looking statements in our press releases or other public or shareholder communications. Our forward-looking statements are subject to risks and uncertainties and include information about our expectations and possible or assumed future results of operations. When we use any of the words “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “assume,” “forecast,” “estimate,” “intend,” “plan” or similar expressions, we are making forward-looking statements.

     We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements. These forward-looking statements represent our outlook only as of the date of this report. While we believe that our forward-looking statements are reasonable, actual results could differ materially since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of our Form 10-K for the year ended December 31, 2007, other risk factors discussed herein or listed from time to time in our reports filed with the Securities and Exchange Commission and the following:

	•		Our inability to accurately forecast and estimate the amount and timing of future collections could have a material adverse effect on results of operations.
	•		Due to increased competition from traditional financing sources and non-traditional lenders, we may not be able to compete successfully.
	•		We may be unable to continue to access funding sources and obtain capital on favorable terms needed to maintain and grow the business.
	•		We may not be able to generate sufficient cash flow to service our outstanding debt and fund operations.
	•		Requirements under credit facilities to meet financial and portfolio performance covenants.
	•		Interest rate fluctuations may adversely affect our borrowing costs, profitability and liquidity.
	•		The substantial regulation to which we are subject could result in potential liability.
	•		Adverse changes in economic conditions, or in the automobile or finance industries or the non-prime consumer market, could adversely affect our financial position, liquidity and results of operations and our ability to enter into future financing transactions.
	•		Litigation we are involved in from time to time may adversely affect our financial condition, results of operations and cash flows.
	•		We are dependent on our senior management and the loss of any of these individuals or an inability to hire additional personnel could adversely affect our ability to operate profitably.
	•		Our inability to properly safeguard confidential consumer information.
	•		Our operations could suffer from telecommunications or technology downtime or increased costs.
	•		Natural disasters, acts of war, terrorist attacks and threats or the escalation of military activity in response to such attacks or otherwise may negatively affect our business, financial condition and results of operations.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Refer to our Annual Report on Form 10-K for the year ended December 31, 2007 for a complete discussion of our market risk. There have been no material changes to the market risk information included in our 2007 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES.

     Evaluation of disclosure controls and procedures.

     (a) Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

     (b) Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. - OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock Repurchases

     In 1999, our board of directors approved a stock repurchase program which authorizes us to purchase common shares in the open market or in privately negotiated transactions at price levels we deem attractive. As of March 31, 2008, we have repurchased approximately 20.4 million shares under the stock repurchase program at a cost of $399.2 million. Included in the stock repurchases to date are 12.5 million shares of common stock purchased through four modified Dutch auction tender offers at a cost of $304.4 million. As of March 31, 2008, we have authorization to repurchase up to $29.1 million of our common stock.

     The following table summarizes stock repurchases for the three months ended March 31, 2008:

										Total Number of				Maximum Dollar Value
										Shares Purchased as				that May Yet Be Used
		Total Number								Part of Publicly				to Purchase Shares
		of Shares				Average Price				Announced Plans				Under the Plans
Period		Purchased				Paid per Share				or Programs				or Programs
January 1 to January 31, 2008			—			$	—				—			$	29,113,295
February 1 to February 29, 2008			4,009	*			—				—				29,113,295
March 1 to March 31, 2008			—				—				—				29,113,295
			—			$	—				—

ITEM 6. EXHIBITS

     See Index of Exhibits following the signature page, which is incorporated herein by reference.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CREDIT ACCEPTANCE CORPORATION
		(Registrant)
		By:		/s/ Kenneth S. Booth
		Kenneth S. Booth
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)
		April 29, 2008