CPS originations up 51.7%

Consumer Portfolio Services ’ originations increased in the fourth quarter as the company looked to grow its portfolio in 2025 and enhance funding time. The lender’s purchased contracts totaled $457.8 million in Q4, up 51.7% year over year and 2.7% quarter over quarter , according to the company’s Feb. 25 earnings release. Full-year originations came in at $1.7 billion, up 23.9% YoY. Originations growth was driven by multiple factors, including the addition of 25 sales reps in 2023 and new territories that set the base for growth in 2024, Mike Lavin , president, chief operating officer and chief legal officer at CPS, said during today’s earnings call. “It typically takes about nine months for those reps to season and get their pipeline full and develop the territory, and we started to see the impact of those hires at the tail end of 2023 and mostly through the year [in] 2024,” he said. “In 2024, we hired 42 new sales reps and opened new territories in anticipation of our growth goals for 2025.” Irvine, Calif.-based Consumer Portfolio Services (CPS) also increased its volume of originations with large dealer groups, defined as those with 10-plus car lots per dealer, to 28% from 20%, Lavin said. Outstandings totaled $3.5 billion as of Dec. 31, up 17.5% YoY and 4.8% compared with Sept. 31, 2024, according to the release. Same-day funding increases CPS has lowered its funding time to under two days compared with four in 2022, and increased same-day funding to 13% of deals in 2024 from 7% in 2023, Lavin said. Second-day funding also improved to 37% in 2024 from 20% in 2023. The subprime lender’s average APR remained around 20% and payment-to-income (PTI) ratios were flat, Lavin said. The average FICO was 571 and the average amount financed increased by $1,000 per deal to $22,300, while average loan-to-value ratio (LTV) sat at 119%, he said. Credit performance top of mind The past year was one of “cautious growth” as the company waited for credit conditions to improve, CPS Chief Executive Charles Bradley said during the earnings call. “2022 was a difficult year and parts of 2023 in terms of credit performance,” he said. “We wanted to grow, but we didn’t want to run away with bad credit. ... 2024 is proving out to be much better.” Credit performance worsened slightly in Q4, with receivables 31-plus days delinquent up 18 basis points (bps) YoY to 12.11%, according to the release. Annualized net charge-offs rose 28 bps YoY to 8.02%, and recovery rates fell to 27.2% compared with 34.3% a year prior. “While the [delinquencies] went up a tick, it did not rise to the level of our expectations, which is a great trend,” Lavin said. “We expect [delinquencies] to improve as the 2024 vintages flow through the portfolio.” “While the [delinquencies] went up a tick, it did not rise to the level of our expectations, which is a great trend." -- Mike Lavin, CPS CPS decreased its provision for credit losses to $730,000 in Q4, or 01% of the portfolio, compared with $1.6 million, or 0.2% of the portfolio, a year prior, according to the release. The lender will further tighten credit in 2025, Lavin said. “[We’re] looking to give better pricing to our better performing dealers and to tighten LTVs, PTI, [debt-to-income] in the nonperforming pockets of the country.” Technology wins CPS used AI-based technology to eliminate applications with synthetic identity fraud , saving the company about $4.6 million in 2024, Lavin said. “We're looking to layer in another fraud score by one of the big three credit bureaus that has no overlap with our current fraud score, which we think will save us another $6 million to $7 million in 2025 in addition to the roughly $5 million from the other score,” he said. In 2024, CPS also piloted a voice AI chatbot that matches “human results with promises to pay received and the hang-up rate,” Lavin said, noting the company will formally implement the bot by next week. “We think the better use of the AI technology is to reallocate our human collectors from working the easier accounts and putting the human collectors on the harder accounts,” he said. ABS deal Meanwhile, CPS came to market with a $442 million subprime auto asset-backed securitization deal on Jan. 14, according to Finsight , which monitors securities. “ Capital markets remain very strong ,” Bradley said. “It appears there's good access to money in terms of growth capital, which is necessary for us to keep going.” Register here for the free Auto Finance News webinar “Funding Strategies: From Warehousing to Private to ABS” at 11 a.m. ET on March 11. Consumer Portfolio Services [ Nasdaq: CPSS ] shares were trading down 1.3% from market open at $10.02 as of market close today. CPS has a market capitalization of $214.5 million. Auto Finance Summit East 2025 is set for May 12-14 at the JW Marriott Nashville featuring fireside chats with Santander Consumer USA and Chase Auto. Visit autofinance.live for more information. Early-bird registration is available here .

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