Tricolor Auto expands SaaS venture

Tricolor Auto Acceptance is expanding its software-as-a-service venture Tricolor Financial following a pilot of the program last year. Tricolor tested the program in 2022 with 12 individual dealerships in the Dallas-Fort Worth area, closing about 100 deals as proof of concept, Tricolor Chief Executive Daniel Chu told Auto Finance News . “We successfully enabled dealers to transact with a segment of the population they previously couldn't, and we originated high-quality loans that had almost no default,” he said. Tricolor Financial’s software-as-a-service (SaaS) model, launched in 2021 , uses the company’s proprietary artificial intelligence-powered technology to allow dealerships to sell and finance new vehicles to Hispanic consumers who do not have a FICO score, Chu said. The venture is an expansion of Tricolor’s use of AI and machine learning to lend to thin- and no-file Hispanic consumers. “Franchise dealers have not had any source of financing to sell and finance a new vehicle to credit-invisible Hispanic [consumers],” Chu said. “With this software, they can score that profile and [if the borrower] scores sufficiently well, we provide the financing for them to execute the sale.” [caption id="attachment_57334523" align="alignnone" width="2048"] © Can Stock Photo / Greentellect [/caption] When a dealership receives an application from a Hispanic borrower who does not have a FICO score, they offramp the application to Tricolor Financial for decisioning, Chu said. Tricolor Financial charges dealers $750 per transaction, he said, noting dealers keep all retail profit from the sale. The SaaS program focuses on new-vehicle sales because Tricolor already sells and finances used cars, Chu added. Tapping into more consumers Tricolor plans to launch the SaaS product with manufacturers such as Ford and Toyota starting in the third quarter after establishing the program with dealer groups, Chu said. “There are a lot of compelling aspects to providing that technology to new-car dealers,” he said. “Toyota and Nissan, for example, are making investments in manufacturing facilities in the U.S. concentrated around producing more trucks and SUVs. If you want market share for a truck or an SUV, you need to consider winning that Hispanic consumer. “In a potential environment where the economy slows down, it will be a tremendous competitive advantage for dealers to be able to pull in a completely new segment of potential buyers to help them reach their own volume objectives,” Chu added. Tricolor Financial expands Tricolor’s addressable market by leveraging the existing dealer footprint in multiple states, Chu said, noting that the plan is to launch the SaaS product with dealership groups in parts of California, Georgia and North Carolina later this year. “We’re in about 20 markets in six states across the western U.S. and we would say our addressable market covers about half of the U.S. Hispanic population,” he said. “With an asset-light model, we could expand that to virtually the entire country and 100% of the addressable market.” Auto Finance Summit East, Auto Finance News’ new spring event, is set for May 10-12 at the JW Marriott Nashville featuring a fireside chat with Peter Muriungi, CEO of Chase Auto. Visit autofinance.live.

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