Open Lending cert volume declines
The fintech’s refi business grew while OEM loan certs fell YoY
Automotive fintech Open Lending’s certified loan volume fell year over year in the second quarter as the industry faces continued supply chain challenges, prompting the company to continue leaning on refinance to boost loan volume.
The number of certified loans, or “certs,” in Q2 increased 1.3% sequentially but dipped 4% YoY to 44,531, accounting for $1.3 billion in auto originations, according to the fintech’s earnings presentation. Credit union and banks made up 87% of certs, while OEM certs accounted for 13%.
New-vehicle certs fell to 9.8% of total loans in Q2 compared with 16.9% a year ago, while used vehicles accounted for 90.2% of certs, up from 83.1% in Q2 2021, according to the presentation.
The percentage of indirect certs in Q2 fell 14.1 percentage points YoY to 51.7%, while refinance certs increased 13.8 percentage points YoY to 32.4%. Direct certs ticked up 30 basis points (bps) YoY to 15.9%.
“We have new accounts that are coming on that are … doing refi only initially before they look at other channels,” President and Chief Operations Officer Ross Jessup said on the company’s Q2 earnings call. “That’s what’s great about our business model is the ability to pivot when supply is limited.”
The decline in OEM certs was expected due to tight supply and a lack of incentives, Chief Executive John Flynn said on the call.
Increasing certification volume
Still, Open Lending’s penetration rate improved in Q2, Flynn said, noting the fintech added 18 new customers, including 10 lenders who began certifying loans in the quarter. The company’s top 10 non-OEM customers increased their certification volume by 33% YoY, he said.
The fintech expanded 84-month term offerings in April and has expanded loan amounts for indirect, Jessup said, noting the company continues to review any underwriting changes needed to navigate current market challenges.
Current run rates at universal banks, however, may contribute to a 20% YoY decline in auto originations for 2022, Flynn said. For the full year 2022, the company expects certified loans to total between 155,000 and 185,000.
The fintech originally expected origination volume to improve in the second half of 2022, but supply constraints due to continued COVID-19-related lockdowns in Asia and the war in Ukraine along with inflationary pressures has hampered auto transaction volume, Flynn said. “The results of high inflation and higher borrowing costs have pushed consumer sentiment to the lowest level seen in our company’s history,” he said.
Meanwhile, Open Lending continues to invest in its platform and infrastructure as well as on lender onboarding processes and growing its sales and management teams, Flynn said. “We’ve penetrated less than 2% of market share, leaving significant room for growth,” he said.
Shares of Open Lending Corp. [Nasdaq: LPRO] were trading at $10.86 as of 3:33 p.m. ET today, up 0.23% from market open. Open Lending has a market capitalization of $1.37 billion.
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