Digital retail provider and car loan underwriter AI Upstart is poised for significant growth this year, predict it would mediate $1.5 billion in auto finance volume in 2022.
“We have enough confidence to release an actual number,” CEO Dave Girouard said on a Feb. 15 earnings call.
According to Jason Schmidt, vice president of investor relations, the $1.5 billion in auto loans projected for 2022 would be an increase from a 2021 volume that was not reported because it was too low to report. significant for the publicly traded Upstart. The company has only been recommending auto loans and helping partner lenders assess these loans since September 2020, starting with refinancing and then moving to indirect lending.
“We now have the confidence to invest the resources necessary to unleash the model and technological improvement in auto lending that has made Upstart the leader in the personal lending category,” Girouard said.
Upstart CFO Sanjay Datta declined to break down the proportion of refinanced and indirect auto loans in the $1.5 billion estimate on the call.
However, he said more mature refinancing activity would drive auto volume through the first half of the year. Customers refinanced approximately 5,800 auto loans through Upstart.com in 2021.
Retailing indirect loans from dealerships was at a “much earlier stage,” Datta said.
Michia Rohrssen, vice president and general manager of Upstart Auto Retail, said Automotive News that Upstart began piloting indirect auto loans in November. But one large-scale deployment would take place this year, he said, calling the initiative “the future of Upstart”.
Upstart is also looking to increase usage of the Upstart Auto Retail digital platform in 2022, according to Rohrssen. The platform was associated with nearly $4 billion in vehicle sales last year. The company launched a mobile-optimized version of the software in March.
Upstart Auto Retail was formerly Prodigy, which Upstart acquired in April 2021. Rohrssen was a co-founder of Prodigy. The acquisition brought some retailers to Upstart, but the company’s dealer ranks have swelled since then.
Upstart worked with a network of 199 dealers during the second quarter of 2021. By the fourth quarter, that number had more than doubled to 410.
“Similar to Upstart.com, we expect Upstart Auto Retail to become a significant aggregator of [loan] request,” Upstart wrote in a government filing.
The company announced last month that Upstart Auto Retail had been certified as Subaru’s first “Build and Price” supplier and was added to ranks of Volkswagen’s preferred digital suppliers.
Rohrssen said dealers chose Upstart loans for customers at eight times the planned rate.
“We had high hopes,” he said, but the result was “much more.”
Upstart’s artificial intelligence looks at variables beyond traditional factors like credit score, with the goal of helping indirect and refinance lenders approve more loans with less risk. In addition to auto loans, the company facilitates personal loans and credit consolidation, playing a part in an overall borrowing of $11.75 billion in 2021.
Rohrssen said dealers are surprised because Upstart’s underwriting is “fundamentally different” from the norm. Sometimes the rate offered is much worse than that of a traditional lender, but often it’s much better, Rohrssen said. Upstart often finds that it is the only lender to have approved the customer’s credit, he said.
Upstart also makes sub-second decisions, according to Rohrssen, who said rivals take an average of 30 to 50 minutes for approval. The company reported a 69% auto-approval rate for all of its loan types in 2021.