Auto refinance company OpenRoad Lending will expand its direct-to-consumer financing options to include vehicle purchase loans following a significant investment by private equity firm Clarion Capital Partners.
Founded in 2009, OpenRoad offers digital auto refinance loans for consumers mainly in the subprime space, along with GAP and vehicle service products, according to a company statement. The investment, announced Monday, will allow the Dallas-based company to expand into auto purchases, lease buyouts and car insurance, Chief Executive Chris Goodman told Auto Finance News.
“Clarion brings to the table a very robust balance sheet and connections in the industry we did not have. We’re going to be able to expand beyond the auto refinance business to other products that touch the consumer in a direct-to-consumer fashion,” Goodman said. Clarion purchased a majority stake in OpenRoad, though the details of the transaction were not disclosed.
OpenRoad plans to use its newfound capital and connections to grow the company’s marketing reach and acquire businesses in line with its expansion goals, such as auto insurance or ancillary product providers, Goodman told AFN.
“Consumers are coming to us to refinance a car loan to get in a better financial position then they’re at today,” he said. “If we can save them money on their auto loan, we should be able to see if we can save them money on their automobile insurance, and even on other loans outside the auto space.”
Down the line, OpenRoad plans to offer direct loans to consumers who wish to purchase a new or used vehicle at a dealership, Goodman noted.
The investment also opens opportunities for OpenRoad to tap further into the prime space, especially in auto refinance. “As we expand into other products … those are full-spectrum opportunities, all the way from prime down to deep subprime that we’re playing in today,” Goodman said.
The Clarion transaction was financed through funds managed by Madison Capital Funding and PennantPark Investment Advisers, according to the statement. Clarion owns companies in the media and technology industries, but OpenRoad represents its first entrance into auto, Goodman said.
“OpenRoad’s exceptional customer value proposition, proven operational foundation, and commitment to meeting the needs of its lending partners is what attracted us to the business and what provides real opportunity for expansion,” said Matthew Feldman, managing director at Clarion.
Goodman and fellow OpenRoad founders will retain a large ownership stake and continue to run day-to-day operations.
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