Upstart revamps AI-based auto refinance model in Q1

Artificial intelligence (AI)-based lending platform Upstart is now using its own auto lending performance data to power its auto refinance model as the company continues to attract auto lenders and dealerships, contributing to a record in loan transactions in the first quarter of 2022.

Bank partners originated 465,537 auto and personal loans in Q1 on Upstart’s platform, totaling $4.5 billion, an increase of 174% YoY, according to the company’s Monday earnings release. First-quarter revenue clocked in at $310 million, up 156% YoY.

“We continue to make rapid progress with our auto refinance product. In the first quarter, we transacted more than 11,000 auto refi loans on our platform, almost twice as many as we did in all of 2021,” Chief Executive Dave Girouard said during the earnings call. “We also launched our first AI model for auto refi that is partially trained by our own auto lending performance data.”

Upstart’s auto refinance platform historically pulled from a combination of the company’s personal unsecured loan data and third party data, a spokesperson told Auto Finance News. Upstart now has enough auto loan repayment data to power the AI-based refinance model.

The company now works with 57 banks and credit unions, up from 42 in February, Girouard said. “At this point, we’re adding about a lender per week,” he said, noting Upstart also works with 11 lenders that do not require a minimum FICO score, up from seven in the prior quarter.

During the quarter, Upstart “more than doubled the rate of instant approvals for auto refi applicants,” Girouard added. Twelve lenders currently fund auto refinance loans through Upstart’s platform, Girouard said.

Eyes on growth

Upstart also expanded its dealership footprint to 525 locations as of the first quarter, up from 410 during the during the previous quarter and 162 compared with same period a year ago, according to the earnings presentation. Dealership partners span multiple OEMs, including Toyota, Subaru and VW, Girouard said.

The additions follow a year of growth in auto finance on Upstart’s platform in 2021, and a rebranding of its auto loan product to Upstart Auto Retail following the acquisition of Prodigy Software in the second quarter.

Upstart also is accelerating the launch of Upstart Auto Retail following success at a few dealerships in California, Girouard said. “Our auto teams are working quickly to smooth some of the product edges, filling in a few missing features and completing integrations with various legacy dealer systems, all in the interest of moving toward a broad-based rollout,” he said, noting a nationwide rollout is planned for Q3 and Upstart plans to bring lenders onto the product in early 2023.

Upstart funds auto refi loans from its own balance sheet, but eventually will funnel the loans to its bank partners and investors, freeing up capital for the auto retail product, Chief Financial Officer Sanjay Datta said on the call.

Shares of Upstart [Nasdaq: UPST] were trading at $33.61 as of market close today, down 56.42% from market open. Upstart has a market capitalization of $2.85 billion.

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