<PAGE>
                                                                EXHIBIT 4(f)(42)


                               THIRD AMENDMENT TO
                 SECOND AMENDED AND RESTATED SECURITY AGREEMENT

         This Third Amendment to Second Amended and Restated Security Agreement
("Third Amendment") dated as of August 30, 2002, by and between Credit
Acceptance Corporation, a Michigan corporation (the "Company"), the Subsidiaries
of the Company from time to time parties hereto, including the undersigned
subsidiaries (collectively, with the Company, and either or any of them, the
"Debtors" and individually, each a "Debtor") and Comerica Bank, a Michigan
banking corporation ("Comerica"), as agent (in such capacity, the "Collateral
Agent") for the benefit of the "Lenders", the "Noteholders" and the "Future Debt
Holders" (each as referred to in the Security Agreement, defined below).


                                R E C I T A L S:

         A. Pursuant to the Credit Agreement, the Senior Debt Documents and the
Intercreditor Agreement (each as defined in the Security Agreement), Debtors
executed and delivered to the Collateral Agent that certain Second Amended and
Restated Security Agreement dated as of June 11, 2001.

         B. Debtors and the Collateral Agent entered into that certain First
Amendment to Second Amended and Restated Security Agreement ("First Amendment")
dated as of September 7, 2001 and that certain Second Amendment to Second
Amended and Restated Security Agreement ("Second Amendment") dated as of June
10, 2002, amending the Security Agreement referred to in Recital A on the terms
set forth therein (such Security Agreement, as amended by the First Amendment
and the Second Amendment, the "Security Agreement").

         C. Company and Debtors intend, concurrently with this Third Amendment,
to consummate the Stapled Stock Restructuring.

         D. Debtors and the Collateral Agent, with the concurrence of the Banks
(as defined in the Intercreditor Agreement), desire to further amend the
Security Agreement as set forth below.

         NOW THEREFORE, the parties agree as follows:

         1. Section 1.1 of the Security Agreement is amended, as follows:

         (a) The following new definitions are added to Section 1.1, and
inserted in appropriate alphabetical order:

         "Assignation" is defined in Section 2.1(i) of this Agreement.

         "Consent and Release" shall mean that certain consent and release
letter issued by the Collateral Agent on July 3, 2002 and relating to certain
Releases and Transfers (as part of the Stapled Stock Restructuring) described in
such letter.


<PAGE>





         (b) The following definitions are amended and restated in their
entirety, as follows:

         "T & C Subsidiary" shall mean CAC (TCI) Ltd., a company established
under the laws of the Turks & Caicos Islands.

         2. Section 2.1 of the Security Agreement is hereby amended, as
follows:

         (a) Section 2.1(i) is amended to add, at the end of said Section
(immediately preceding the semicolon) the following:

                  "and any monies and other property from time to time received,
                  receivable or otherwise distributed or distributable in
                  respect of or in exchange for the T&C Subisidiary's
                  partnership interest in CAC Scotland to the extent such
                  partnership interest has been pledged and assigned, for
                  collateral purposes, to the Collateral Agent, for and on
                  behalf of the Benefited Parties pursuant to that certain
                  Assignation in Security by and among the T&C Subsidiary, the
                  Collateral Agent, CAC International Holdings, L.L.C. and CAC
                  Scotland (as amended from time to time, the "Assignation");"

         (b) Section 2.1 is amended and restated in its entirety, as follows:

                  "(l) the Proceeds, in cash or otherwise, of any of the
                  property described in the foregoing clauses (a) through (k)
                  and all liens, security, rights, remedies and claims of such
                  Debtor with respect thereto, including without limitation any
                  such Proceeds deposited from time to time in the Special
                  Account or in any other cash collateral account maintained by
                  a Debtor with the Collateral Agent under, or in connection
                  with, this Agreement or any other Financing Agreement and all
                  such Debtor's rights in each such account."

         3. Section 4.14 of the Security Agreement is hereby amended to add a
new clause (c), as follows:

                  "(c) Concurrently with the effective date of the Third
                  Amendment, the Collateral Agent shall establish, for the
                  benefit of the Benefited Parties in the name of the Collateral
                  Agent, a segregated non-interest bearing blocked account (the
                  "Receiving Account") under which CAC (TCI) and the other
                  Debtors shall have no withdrawal or other rights (whether or
                  not a Default or Event of Default has occurred and is
                  continuing), such account being subject to the security
                  interest and lien established by this Agreement. All
                  dividends, distributions and other sums paid (or payable) in
                  respect of CAC (TCI)'s partnership interest in CAC Scotland
                  assigned, for collateral purposes, to the Collateral Agent,
                  for and on behalf of

                                       2

<PAGE>





                  the Benefited Parties pursuant to the Assignation, shall be
                  received and held by Collateral Agent for the benefit of the
                  Benefited Parties, and thereafter promptly deposited by
                  Collateral Agent to the Receiving Account established under
                  this clause (c). So long as no Default or Event of Default has
                  occurred and is continuing, the Collateral Agent shall
                  promptly transfer all such sums on deposit in the Receiving
                  Account to another account, as specified from time to time in
                  writing by CAC (TCI). Upon the occurrence and during the
                  continuance of any Default or Event of Default, all such sums
                  on deposit in the Receiving Account shall be retained in the
                  Receiving Account for disposition in accordance with this
                  Agreement. Furthermore, CAC (TCI) shall cause all dividends,
                  distributions and other sums paid (or payable) in respect of
                  its partnership interest in CAC Scotland assigned for
                  collateral purposes, to the Collateral Agent, for and on
                  behalf of the Benefited Parties pursuant to the Assignation,
                  to be paid directly by CAC Scotland to the Collateral Agent in
                  accordance with the terms of the Assignation, and shall cause
                  any such dividends, distributions or other sums received by
                  any other Person, including without limitation any Debtor, to
                  be promptly delivered and paid over to the Collateral Agent
                  for disposition according to the terms hereof.

         4. Pursuant to the Consent and Release, the First Amendment and each of
the changes contained therein was rescinded and set aside so that such
amendments shall have no further force and effect, provided, however, that the
Security Agreement, as amended by the Second Amendment and the Third Amendment,
shall otherwise remain in full force and effect according to its terms.

         5. Concurrently with the effective date of this Third Amendment:

         (a) CAC South Dakota shall be considered, and deemed to be, for all
purposes of the Security Agreement, a Debtor under the Security Agreement as
fully as though CAC South Dakota had executed and delivered the Security
Agreement at the time originally executed and delivered by the existing Debtors,
and hereby ratifies and confirms (as of the effective date of this Third
Amendment) its obligations under the Security Agreement, all in accordance with
the terms hereof.

         (b) Schedule A to the Security Agreement shall be deemed to be amended
to add CAC South Dakota and the information pertaining thereto, as shown on
Attachment 1 hereto, and Schedule B to the Security Agreement shall be amended
to add a reference to CAC South Dakota and the information pertaining thereto,
as shown on Attachment 1 hereto.

         (c) CAC Reinsurance shall be considered, and deemed to be, solely for
purposes of the stock pledge over all of its shares of stock in the T&C
Subsidiary, granted under Section 2.1(i) and (l) of the Security Agreement, a
Debtor under the Security Agreement as fully as though CAC Reinsurance had
executed and delivered the Security Agreement at the time


                                       3
<PAGE>





originally executed and delivered by the existing Debtors, and hereby ratifies
and confirms (as of the effective date of this Third Amendment), its obligations
under the Security Agreement (to the extent relating thereto), all in accordance
with the terms hereof.

         (d) To effectuate the pledge by the Company and CAC Reinsurance of all
of the shares of capital stock of the T&C Subsidiary, the replacement Schedule D
(Pledged Shares) to the Security Agreement set forth on Attachment 2 hereto,
adding CAC South Dakota and the T&C Subsidiary and deleting CAC Canada, shall be
deemed to replace in its entirety the existing Schedule D (Pledged Shares) to
the Security Agreement, and Schedule E to the Security Agreement shall be
amended to add a reference to CAC South Dakota and under such reference, the
word "none".

         (e) The T&C Subsidiary shall be considered, and deemed to be, solely
for purposes of the grant of a security interest and lien over all of its
property described in Sections 2.1(i) and 2.1(l) of the Security Agreement and
the maintenance of the Receiving Account to be established under Section 4.14(c)
of the Security Agreement, a Debtor under the Security Agreement as fully as
though the T&C Subsidiary had executed and delivered the Security Agreement at
the time originally executed and delivered by the existing Debtors, and hereby
ratifies and confirms (as of the effective date of this Third Amendment), its
obligations under the Security Agreement (to the extent relating thereto), all
in accordance with the terms hereof.

         (f) The Collateral Agent, for itself and for and on behalf of each of
the Banks, confirms its consent to the Stapled Stock Restructuring.

         6. Debtors shall deliver to Collateral Agent, within 10 days from the
date hereof, opinions of counsel in form and substance reasonably satisfactory
to the Collateral Agent confirming the due authorization, execution and delivery
by Debtors of this Amendment and such other matters as reasonably required by
Collateral Agent.

         7. Except as expressly modified hereby, all the terms and conditions of
the Security Agreement shall remain in full force and effect. Except as
expressly set forth herein, nothing in this Amendment shall constitute a waiver
of any term or condition of the Security Agreement or any of the rights and
remedies provided to the Secured Party thereunder or as otherwise provided by
law.

                     [SIGNATURES FOLLOW ON SUCCEEDING PAGES]


                                       4
<PAGE>



         IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the day and year first written above.

                                    DEBTORS:

                                    CREDIT ACCEPTANCE CORPORATION

                                    By:  /s/ Douglas W. Busk
                                        ----------------------------------------
                                    Name:  Douglas W. Busk
                                          --------------------------------------
                                    Title: Chief Financial Officer and Treasurer
                                           -------------------------------------
                                    Address for Notices:
                                    Credit Acceptance Corporation
                                    25505 W. 12 Mile Road, Suite 3000
                                    Southfield, Michigan 48034
                                    Fax No.: 248-827-8542
                                    Telephone No.: 248-353-2700
                                    Attention: Jim Murray



                                    AUTO FUNDING AMERICA OF NEVADA INC.
                                    CREDIT ACCEPTANCE CORPORATION
                                    LIFE INSURANCE COMPANY
                                    BUYERS VEHICLE PROTECTION PLAN, INC.
                                    CAC LEASING, INC.
                                    VEHICLE REMARKETING SERVICES, INC.
                                    CREDIT ACCEPTANCE CORPORATION OF
                                    NEVADA, INC.
                                    CREDIT ACCEPTANCE CORPORATION OF
                                    SOUTH DAKOTA

                                    By:  /s/ Douglas W. Busk
                                        ----------------------------------------
                                    Name: Douglas W. Busk
                                          --------------------------------------
                                    Title: Chief Financial Officer and Treasurer
                                           -------------------------------------
                                    Address for Notices:
                                    c/o Credit Acceptance Corporation
                                    25505 W. 12 Mile Road, Suite 3000
                                    Southfield, Michigan 48034
                                    Fax No.: 248-827-8542
                                    Telephone No.: 248-353-2700
                                    Attention: Jim Murray



                                       5

<PAGE>




                                    CAC REINSURANCE LIMITED

                                    By:  /s/ Douglas W. Busk
                                        ----------------------------------------
                                    Name: Douglas W. Busk
                                          --------------------------------------
                                    Title: Chief Financial Officer and Treasurer
                                           -------------------------------------
                                    Address for Notices:
                                    c/o Credit Acceptance Corporation
                                    25505 W. 12 Mile Road, Suite 3000
                                    Southfield, Michigan 48034
                                    Fax No.: 248-827-8542
                                    Telephone No.: 248-353-2700
                                    Attention: Jim Murray


                                    CAC (TCI), LTD.

                                    By:  /s/ Douglas W. Busk
                                        ----------------------------------------
                                    Name: Douglas W. Busk
                                          --------------------------------------
                                    Title: Chief Financial Officer and Treasurer
                                           -------------------------------------
                                    Address for Notices:
                                    c/o Credit Acceptance Corporation
                                    25505 W. 12 Mile Road, Suite 3000
                                    Southfield, Michigan 48034
                                    Fax No.: 248-827-8542
                                    Telephone No.: 248-353-2700
                                    Attention: Jim Murray


                                    COLLATERAL AGENT:
                                    ----------------

                                    COMERICA BANK as Collateral Agent

                                    By: /s/ Caryn Dorfman
                                        ----------------------------------------
                                    Name: Caryn Dorfman
                                         ---------------------------------------
                                    Title: Assistant Vice President
                                           -------------------------------------
                                    Address for Notices:
                                    Metropolitan Loans D
                                    One Detroit Center, 6th Floor
                                    500 Woodward Avenue
                                    Detroit, Michigan 48226
                                    Fax No.: 313/222-3503
                                    Telephone No.:313/222-6034
                                    Attention: Scott D. Dorn


                                       6
<PAGE>
                                                                EXHIBIT 4(f)(42)


                                  ATTACHMENT 1
                           (AMENDING SCHEDULES A AND B
                                       TO
                               SECURITY AGREEMENT)


SCHEDULE A        (AMENDMENTS ONLY)








SCHEDULE B        (AMENDMENTS ONLY)



<PAGE>
                                                                EXHIBIT 4(f)(42)


                                  ATTACHMENT 2
                  REPLACEMENT SCHEDULE D TO SECURITY AGREEMENT

                                 Pledged Shares


<TABLE>
<CAPTION>
                                                                                  Pledged Shares as %
                                                                                  of Total Shares       Total Shares
                                                 Certificate     No. of Pledged   Issued and            Issued and
Issuer                           Owner           No.             Shares           Outstanding           Outstanding
<S>                              <C>             <C>             <C>              <C>                   <C>
Auto Funding America of          Company         1               1,000            100%                  1,000
Nevada, Inc.

Buyers Vehicle Protection        Company         1               1,000            100%                  1,000
Plan, Inc.

CAC Leasing, Inc.                Company         1               1,000            100%                  1,000

Vehicle Remarketing              Company         1               10               100%                  10
Services, Inc.

Credit Acceptance                Company         2               100,000          100%                  100,000
Corporation Life Insurance
Company

Credit Acceptance                Company         1               1,000            100%                  1,000
Corporation of Nevada, Inc.

Credit Acceptance                Company         1               1,000            100%                  1,000
Corporation of South
Dakota, Inc.

CAC (TCI) Limited                Company         1,2             4,500            90%                   5,000

CAC (TCI) Limited                CAC             3               500              10%                   5,000
                                 Reinsurance

The entire Non-Specified
Interest of Company in the
Titling Subsidiary,
evidenced by Certificate
No. 1 under the Titling
Subsidiary Agreements

</TABLE>