Morningstar DBRS Finalizes Provisional Credit Ratings on American Credit Acceptance Receivables Trust 2025-1

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of notes issued by American Credit Acceptance Receivables Trust 2025-1 (ACAR 2025-1 or the Issuer):

-- $286,500,000 Class A Notes at AAA (sf)
-- $65,250,000 Class B Notes at AA (sf)
-- $127,500,000 Class C Notes at A (low) (sf)
-- $106,870,000 Class D Notes at BBB (low) (sf)
-- $52,880,000 Class E Notes at BB (low) (SF)

CREDIT RATING RATIONALE/DESCRIPTION
The 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 2025-1 provides for Class A, B, C, D, and E 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) 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 49 securitizations since 2011, including four transactions in 2024.

(4) 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:
-- The pool is seasoned by approximately three months and contains ACA originations from Q4 2017 through Q4 2024.
-- The cutoff date pool is expected to include 6.00% highly seasoned called collateral.
-- The weighted-average (WA) remaining term of the collateral pool is approximately 68 months.
-- The WA FICO score of the pool is 555 and 574 Vantage Score.

(5) The Morningstar DBRS CNL assumption is 28.75% based on the cut-off date pool composition.

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

(7) In January 2023, ACA received a Civil Investigation Demand or "CID" from the CFPB seeking information relating to certain servicing and collection practices. ACA cooperated with the CFPB, and final production of information was completed in March 2024. In June 2024, CA received a second CID from the CFPB, substantially similar in nature to the January 2023 CID. ACA has been cooperating with the CFPB, and it anticipates that information production will be completed by the end of March 2025. In October 2024, the CFPB issued a Notice and Opportunity to Respond and Advise ("NORA") letter indicating it is considering an enforcement action against ACA related to certain servicing and collection practices, specifically inadvertent repossessions and alleged power booking activities by the originating dealerships. In November 2024, ACA submitted a response to the NORA asserting that its servicing and collections practices are lawful and meet industry standards and applicable statutory requirements of other regulators. No assurances can be given as to the ultimate outcome of the CIDs, the NORA process or whether the CFPB will take any enforcement action, including potential litigation, against ACA regarding the foregoing matters.

(8) The legal structure and presence of legal opinions, which 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 62.80% of initial hard credit enhancement provided by the subordinated notes in the pool (47.00%), the reserve account (1.00%), and OC (14.80%). The credit ratings on the Class B, C, D, and E Notes reflect 54.10%, 37.10%, 22.85%, and 15.80% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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 Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in US dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Rating U.S. Retail Auto Loan Securitizations (August 06, 2024) https://dbrs.morningstar.com/research/437569.

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.

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 (November 18, 2024), https://dbrs.morningstar.com/research/443136
-- Operational Risk Assessment for U.S. ABS Originators and Servicers (December 05, 2024), https://dbrs.morningstar.com/research/444162
-- Legal Criteria for U.S. Structured Finance (December 03, 2024), https://dbrs.morningstar.com/research/444064

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