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Why AI-Powered Financing Is a Must-Have for Auto Dealers


Alex Rouse, VP/GM Auto @ Upstart

In my last article, I told you about all of the ways that connected retailing in the age of Apple, Amazon, and AI can deliver on the metrics that matter for dealers. Now, I want to show you how an innovative approach to vehicle financing can produce the same results.

First, the problem. There are a couple, actually. For one, inflation has pushed car prices higher, and rising interest rates have made borrowing more expensive. That puts ownership of a much-needed vehicle out of reach for many. Potential car buyers might have a chance if traditional financing could connect them with loans that were right for them—but it doesn’t.

As a result, dealers are losing out, too. The inability to get consumers the loans they need is just one more problem that dealers have had to contend with in recent years, from the pandemic-caused slowdown to chip shortages that limited inventory and then the economic troubles that have hurt their customers. These days, dealers are seeing fewer sales and tighter margins on the sales they do make. In short, the current approach to auto financing is a lose-lose situation for all involved.

The solution: AI-powered financing.

AI has the power to better assess risk than traditional credit scores while making the financing process faster and easier to manage. Here at Upstart, we use more than 120 billion cells of performance data and more than 1,600 variables [1] to more accurately predict the likelihood that a borrower will pay back a loan. Combined with the ability to tailor each deal to the individual borrower, this accuracy translates into more approvals, higher gross, and more cars sold. And we do it with speed: Approvals are instant, deals can be updated without new applications, and verifications are automated.

Here’s a quick list of the benefits our dealer partners enjoy thanks to AI-powered financing: instant credit decisioning on all applications, all-digital document signing with one-day funding, competitive reserve rates, more funding for buyers to purchase F&I products, no look-to-book restrictions, and dealer fees as low as $0.

These are powerful features that dealers can use to tap into the $775 billion auto loans market, and already some dealers are leveraging Upstart’s AI-financing capability to do just that. When Upstart loan offers were presented alongside those from traditional lenders at Buckeye Honda in Columbus, Ohio, Upstart had the lowest rate 71% of the time [2], giving customers greater access to more affordable credit—and a better chance at buying a car.

Now step back and think about this as part of a connected auto retailing platform that offers consumers a seamless online-to-in-store experience and dealers an easily integrated set of features to more successfully execute the sales process. The combination of a retail solution with financing made it possible for Del Grande Dealer Group (DGDG), the largest family-owned automotive group in the San Francisco Bay Area, to better position back-end products in the car-buying journey. And the increased loan approvals for potential borrowers helped sell more of them. In fact, Upstart-powered loans generated a 58% higher profit per vehicle retailed (PVR) than non-Upstart-funded loans across all of DGDG’s dealerships in a single month [3].

An end-to-end platform that includes AI-powered financing delivers a better buying experience that helps dealers win over customers and increase their back-end gross. For those customers, it delivers opportunity—the opportunity to afford a car when they otherwise could not. This is why we’re so excited to have announced that Upstart’s AI-powered financing will be available nationwide by the end of this quarter, reaching 90% of U.S. consumers. The national availability of Upstart-powered auto loans will enable dealers to approve more borrowers across the full credit spectrum, with a back-end gross as much as 50% higher than the industry average, while delivering the exceptional digital-first experience customers demand [4].

This rollout is especially important to those of us at Upstart because increasing access to credit is at the heart of our mission as a company. We were founded in 2012 with the goal of providing access to credit as a way to unlock opportunity, mobility, and thus the pursuit of the American dream. To get auto loans into the hands of car buyers, we decided to focus our efforts on the entire car-buying experience, and we’re proud of the results so far. Upstart’s auto retail platform is delivering bigger profits and a more efficient sales process for dealers and greater satisfaction for consumers.

About Upstart Auto Retail

Upstart Auto Retail is a leader in modern automotive retail solutions, providing the most seamless and flexible connected retailing platform for dealers to increase sales efficiency and customer satisfaction.

Visit us today at upstart.com/dealers or reach out to dealers@upstart.com

[1] Variables refers to raw variables and combined variables considered in our AI models. A “raw” variable is a non-combined, conceptually distinct unit of data, such as “applicant-reported savings.” A “combined” variable is data that has been transformed, combined, or otherwise engineered from a raw variable or set of raw variables, such as “applicant-reported savings” divided by “loan amount.”

[2] Findings are based on information collected by Upstart between 4/1/23-6/14/23. Findings are based on offers provided through Upstart’s dealer software and does not account for deals done through other systems.

[3] Findings are from September 2023 reported by Upstart. Average back-end gross for Upstart-funded loans was $2,754 while non-Upstart funded loans were $1,514.

[4] In an internal study, Upstart compared data on Upstart-funded loans through a leading dealer partner from November 2023 to industry data over the course of 2023, sourced from JM&A. Average back-end gross for Upstart-funded loans was $2,533 while the industry average was $1,818.