Dealers that combine AI-based financing capabilities with in-store sales processes are seeing increased profit per vehicle driven by capturing consumers earlier in the process.
San Mateo, Calif.-based Upstart’s dealer base using the fintech’s AI-based lending platform and financing has seen improvements in profitability compared with transactions through other lenders, Alex Rouse, general manager of auto, told Auto Finance News.
San Jose, Calif.-based Del Grande Dealer Group, for example, saw on average a 58% higher profit per vehicle compared with transactions through other lending partners during the month of September when using Upstart’s AI-based lending platform, Rouse said.
The dealership signed onto Upstart’s auto retail application platform in late 2021 and has been using the fintech’s AI-based financing capabilities since February 2022, an Upstart spokesperson told AFN.
Upstart’s platform allows consumers to browse a dealership’s inventory and estimate their monthly payment and trade-in value before finishing the process in-store, Rouse said.
“Consumers are used to browsing products and buying them,” he said. “The increase in transparency and convenience gets consumers to buy more [finance and insurance products] than they would have otherwise, so we see higher profit per vehicle and backend profitability when dealerships use our platform. When [consumers] get to the financing stage, they see Upstart AI-powered offers and offers from other lenders.”
Del Grande Dealer Group has seen a 44% increase on average in funded loans over the past three months using Upstart’s AI-based financing compared with results from the dealership’s other lending partners, according to data provided by the dealership to Upstart. Del Grande sells new and used vehicles at 19 dealerships throughout Northern California, according to the company’s website.
‘Significant’ jump in originations
Upstart facilitates automated, AI-powered financing for banks and credit unions across automotive loans and refinancing, personal loans, and home equity lines of credit, according to the company.
The fintech expects a significant jump in origination volume within 12 months on the heels of planned platform and geographical expansions, Rouse said, without providing specific loan production data.
Upstart’s originations in the third quarter of 2023 totaled $29 million across 1,208 contracts, a decline of 49% year over year on a dollar basis, according to the company’s most recent earnings release.
Upstart’s retail auto loan product is active with 710 dealers across the United States, a company spokesperson told AFN.
The fintech offers dealer management system tools to an estimated 74% of U.S. dealers through integrations with DMS providers including Tekion, CDK Global and DealerTrack along with Market Scan’s payments platform, according to Upstart.
This quarter, Upstart plans to expand AI lending capabilities to dealerships in Alabama, Arizona, Colorado, Connecticut, Maine, Minnesota, Mississippi, Montana, Oklahoma, Rhode Island, Utah, Washington and Wyoming, according to the company.
Upstart, which is based in San Mateo, Calif. and Columbus, Ohio., also offers auto refinance in 46 states and Washington, D.C., according to the company’s website.
Early-bird registration is now available for the second annual Auto Finance Summit East, May 1-3 in Nashville, Tenn., which gathers lenders, dealers and fintech innovators in an event designed to bring the power of technology to a cross section of industry players. Early-bird pricing ends March 15. Visit AutoFinance.Live to learn more.
