Morningstar DBRS Assigns Provisional Credit Ratings to American Credit Acceptance Receivables Trust 2024-3

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of notes to be issued by American Credit Acceptance Receivables Trust 2024-3 (ACAR 2024-3 or the Issuer):

-- $198,460,000 Class A Notes at AAA (sf)
-- $44,620,000 Class B Notes at AA (sf)
-- $87,150,000 Class C Notes at A (low) (sf)
-- $71,920,000 Class D Notes at BBB (low) (sf)
-- $41,470,000 Class E Notes at BB (sf)

CREDIT RATING RATIONALE/DESCRIPTION
The provisional credit ratings are based on Morningstar DBRS' review of the following analytical considerations:

(1) Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization (OC), subordination, amounts held in the reserve fund, and excess spread. Credit enhancement levels are sufficient to support the Morningstar DBRS-projected cumulative net loss (CNL) assumption under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms on which they have invested. For this transaction, the ratings address the payment of timely interest on a monthly basis and principal by the final scheduled distribution date.

(2) ACAR 2024-3 provides for Class A, B, C, and D coverage multiples slightly below the Morningstar DBRS range of multiples set forth in the criteria for this asset class. Morningstar DBRS believes that this is warranted, given the magnitude of expected loss and structural features of the transaction.

(3) The consistent operational history of American Credit Acceptance, LLC (ACA or the Company) as well as the overall strength of the Company and its management team.
-- The ACA senior management team has considerable experience, with an approximate average of 19 years in banking, finance, and auto finance companies as well as an average of approximately 10 years of company tenure.

(4) ACA's operating history and its capabilities with regard to originations, underwriting, and servicing.
-- Morningstar DBRS has performed an operational review of ACA and considers the Company an acceptable originator and servicer of subprime automobile loan contracts.
-- ACA has completed 47 securitizations since 2011, including four transactions in 2023 and two in 2024.
-- ACA maintains a strong corporate culture of compliance and a robust compliance department.

(5) The credit quality of the collateral and the consistent performance of ACA's auto loan portfolio.
-- Availability of considerable historical performance data and a history of consistent performance on the ACA portfolio.
-- The statistical pool characteristics include the following: the pool is seasoned by approximately four months and contains ACA originations from Q3 2017 through Q2 2024, the cut-off date pool is expected to include 7.00% highly seasoned called collateral, the weighted-average (WA) remaining term of the collateral pool is approximately 68 months, and the WA FICO score of the pool is 552.

(6) The Morningstar DBRS CNL assumption is 28.30% based on the expected cut-off date pool composition.

(7) The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns June 2024 Update, published on June 28, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

(8) The legal structure and presence of legal opinions, which are expected to address the true sale of the assets to the Issuer, the nonconsolidation of each of the depositor and the Issuer with ACA, that the Issuer has a valid first-priority security interest in the assets, and the consistency with the Morningstar DBRS "Legal Criteria for U.S. Structured Finance."

Morningstar DBRS' credit ratings on the securities listed above address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related Monthly Interest Distributable Amount and the related Note Balance.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. The associated contractual payment obligation that is not a financial obligation for each of the rated notes is the related interest on unpaid Monthly Interest Distributable Amount.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

The rating on the Class A Notes reflects 63.20% of initial hard credit enhancement provided by the subordinated notes in the pool (46.70%), the reserve account (1.00%), and OC (15.50%). The credit ratings on the Class B, C, D, and E Notes reflect 54.70%, 38.10%, 24.40%, and 16.50% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

ACA is an independent full-service automotive financing and servicing company that provides (1) financing to borrowers who do not typically have access to prime credit-lending terms for the purchase of late-model vehicles and (2) refinancing of existing automotive financing.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS  
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) at https://dbrs.morningstar.com/research/427030.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the credit rating is Rating U.S. Retail Auto Loan Securitizations (May 9, 2024), https://dbrs.morningstar.com/research/432562.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating U.S. Structured Finance Transactions (April 15, 2024), https://dbrs.morningstar.com/research/431204
-- Operational Risk Assessment for U.S. ABS Servicers (March 21, 2024), https://dbrs.morningstar.com/research/430003
-- Operational Risk Assessment for U.S. ABS Originators (March 21, 2024), https://dbrs.morningstar.com/research/430004
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.