Westlake expands offering with Pagaya AI

Westlake Financial ’s ability to leverage Pagaya Technologies ’ AI-driven decision-making capabilities is contributing to growth in the lender’s full-spectrum portfolio. Following a Pagaya pilot in 2021, Westlake is working with the tech provider to offer improved decisions on applications for its more than 14,000 dealer partners, according to a release from the two companies. The move allows Los Angeles-based Westlake to expand beyond its credit box to reach a larger segment of borrowers, David Goff , vice president of marketing at Westlake, told Auto Finance News. “We’re always looking for ways to offer better callbacks for our dealers,” he said. “We’ve been innovative in wanting to capture more of the credit spectrum.” How it works When an application comes to Westlake through dealer management systems such as Dealertrack or RouteOne , the application automatically runs through Westlake’s AI-based decisioning technology and within seconds provides an approval, a conditional approval or a rejection, Goff said. “We are fully automated,” he said. “We have an automated decisioning engine. … No human looks at that deal.” Based on certain metrics, some applications also run through Pagaya’s decision engine at the same time, allowing Westlake to compare its own with Pagaya's version of the deal before passing it to the dealership, Goff said. “We’ll present to the dealer whichever [deal] we think is the most favorable [decision],” he said. Pagaya “can help fill the areas where we aren’t providing as a good of a callback and we can provide something better to our dealers.” Pagaya can sometimes offer lower rates or more favorable terms on a loan, Goff said. Pagaya’s AI-based credit decisioning uses machine learning and thousands of data points to assess a consumer’s creditworthiness, Ben Blatt , chief business officer at Pagaya, told AFN . Westlake originates the loan and presents it as a Westlake deal to the dealer, Westlake’s Goff said. Westlake receives a fee for originating the loan and selling it to Pagaya, he said. “We will buy that deal based on the Pagaya structure and requirements,” Goff said. “Then we will sell that portfolio over to Pagaya and we will continue to service it. Pagaya is helping us put together, through AI, the best [offering] that we can on any application that is coming to Westlake … to help capture those deals.” Pagaya’s API-based platform provides lenders with additional decisioning on applications, Blatt said. Pagaya then securitizes the loans on the auto ABS market; it has securitized $775 million in auto loans so far this year, a Pagaya spokesperson told AFN . “The product is credit underwriting and capital deployment,” Blatt said. “Westlake sends us an application to decision, it’s run through our machine learning models, and we come back with a downpayment, loan size, interest rate and [term]. Depending on the size and complexity of the partner, we can come back with a variety of different offers." Pagaya has a similar setup with auto lenders including Ally Financial , Flagship Credit Acceptance and Foursight Capital . Pagaya does not act as a lender, but buys finalized loans on a rolling basis, Blatt said. “Westlake is typically what we look for in a partner, which is a wide network of dealer groups and strong technology,” he said. Building full spectrum The Pagaya relationship coincides with Westlake’s efforts to position itself as a full spectrum lender, Goff said. More than half of Westlake’s portfolio is tied to consumers with a FICO credit score above 600, with the average FICO across the lender’s portfolio sitting at about 640 as the lender tests various programs in states with aggressive rates, he said. By comparison, Westlake’s average FICO about 12 years ago sat in the 530 range, Goff said. “We were initially founded as a subprime lender; we’ve moved up the spectrum,” Goff said. “We’ve built a full spectrum [program]. We buy all credit tiers. We have rates as low at 4.99% in some markets right now.” Westlake is also benefiting from a pullback by other auto lenders as macroeconomic pressures and rising interest rates contribute to affordability and profitability concerns, Goff said. Capital One , Citizens Bank , Fifth Third and PNC Financial are a few lenders that have scaled back or exited indirect auto lending to focus on higher-margin businesses in the past year. “We want to help sell more cars to dealers, because we know if we can keep working with dealers and giving them a way to sell more cars, the dealer is going to continue to look to Westlake,” Goff said. Westlake Technology Holdings has approximately $24 billion in assets under management and originates auto loans through a nationwide network of new- and used-auto and powersports dealers, according to Westlake. Auto Finance Summit, the premier industry event for auto lending and leasing, returns Oct. 29-31 at the Bellagio Las Vegas and features fireside chats with Vroom and Ford Credit. To learn more about the 2023 event and register, visit here .

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