12 Questions to Discover DriverUp
DriverUp sees the need for alternative lending in the auto space. They are focused on providing competitive loans to borrowers while providing higher returns for investors. See our full interview below as they describe their business model and how they benefit investors.
LendingRobot: How would you describe DriverUp in one sentence?
DriverUp: DriverUp is a next-generation auto finance company that uniquely leverages technology and data to deliver a superior customer experience.
LendingRobot: Where did the idea come from?
DriverUp: The company was founded in 2012 with the idea of combining technology-focused origination, underwriting and servicing with substantial auto finance industry experience. DriverUp has created a successful platform that has originated over \$600MM of loans since launch and has an opportunity to scale the business substantially.
LendingRobot: What makes you unique from others in your space?
DriverUp: DriverUp has a strong ability to generate unique collateralized credit opportunities that are priced appropriately and competitively. By leveraging unique data elements and continually improving its proprietary credit models, expanding its geographical reach, and enhancing operational capabilities, DriverUp creates value for its dealers and borrowers, particularly in the lower range of credit scores.
LendingRobot: Who is your typical investor?
DriverUp: Typical investors include insurance companies, family offices, credit opportunity funds, and other medium-sized investors who are looking to gain access to the auto finance marketplace through a proven platform.
LendingRobot: How do your investors choose their investing strategy?
DriverUp: In order to promote diversification for our investors and balance across multiple funding sources, investors are allocated a random selection of recently-originated loans. To facilitate the investment process, each loan is structured as a participation interest.
LendingRobot: How does your investment fit into an investor’s portfolio?
DriverUp: The investment is designed to generate positive net interest income (after credit and administrative costs), typically in the mid- to high single digits.
LendingRobot: What is a typical loan like on DriverUp?
DriverUp: The typical loan is sized at approximately \$13k, has an APR in the high teens, carries a payment in the range of \$300-$350 per month, is collateralized by an auto, and has a term of 60 months.
LendingRobot: Could you describe your risk assessment and credit model?
DriverUp: Drawing from a universe of over 1,200 available variables, the credit model incorporates those having the greatest impact on loan performance based on an extensive back testing process. Variables are incorporated from traditional credit, alternative credit, trended credit, and debit bureau attributes, which reduces the probability of loan default vs. competing and prior-generation credit models. The underwriting guidelines are continuously reviewed for risks and opportunities, with adjustments made quickly to capture opportunities and minimize unfavorable exposures.
LendingRobot: What are three milestone numbers for DriverUp?
– 2,500+ dealer relationships across 37 states
– 150+ employees
– Issued inaugural \$135MM securitization rated by S&P and Kroll
LendingRobot: What are the goals you can share for the next year?
– Launch fourth generation scorecard and credit model
– Increase rate of new loan originations to \$300MM annually
– Grow marketplace investment balances by at least 50% and diversify other funding sources
LendingRobot: What is your greatest challenge?
DriverUp: It’s a constant balancing act to get credit, collateral and pricing right in a competitive marketplace such as auto lending. The senior leadership of DriverUp has many years of experience in auto and consumer finance through several credit and market cycles and is highly focused on analyzing trends such as used car prices, making decisions that directly affect the portfolio, and educating investors on this asset class.
LendingRobot: If you had one wish for your niche in the alternative lending space, what would it be?
DriverUp: More medium-sized investors who understand the auto lending industry.
Special thanks to DriverUp in making time for this interview. We hope you enjoyed learning about DriverUp!
- Vanessa Hoying
- 1 Comment
If DriverUp wants more people to use its marketplace, maybe it needs to make its historical returns, or at least SOME information about the investment available on its site and viewable without first creating an account. There’s a lot of data once you setup an account (including historical logs of all its loans) but many won’t get that far. Marketplace lending in general has shifted towards institutional investors but insofar as they’re still interested in retail investors, most people won’t invest time creating accounts on various sites without knowing what they’re getting into.