Innovation in Lending

3 Ways Machine Learning Can Make Auto Lenders More Money

Ken Garcia

March 3, 2021

2021 is looking more promising for auto lenders than previously expected. Supply is tight, but auto loan originations are forecasted to remain at a healthy 14 million in the first half of 2021 with a greater share of loans shifting to the prime and above tiers, according to TU’s 2021 Consumer Credit Forecast

Post-COVID Opportunity and Challenges

There is an opportunity for growth, but success hinges on adopting a new approach. With traditional consumer credit scores scrambled and rising consumer expectations for instant approvals, auto lenders are challenged with finding new ways to make better and faster decisions to grow portfolios safely. 

Driving Toward A Healthier Portfolio 

Curtis Wagner, Director of Client Operations at Zest AI, recently spoke on this topic at the AFSA 2021 Vehicle Finance Conference. His session “Driving toward a healthier portfolio” explored how auto lenders are using machine learning models and better pricing strategies for safer portfolio growth. “ML models use more credit variables and stronger math that enable lenders to identify better borrowers and increase approvals without added risk,” said Curtis. With more accurate risk prediction capabilities, auto lenders can then re-shape pricing tiers with pricing that more accurately reflects borrower risk. By better matching risk with price, auto lenders acquire new customers and expand margins. Our research suggests that ML-based yield optimization can produce gains of $500,000 to $4 million for every $100 million in originations, depending on a lender’s specific portfolio risk characteristics.  

3 Ways Machine Learning Can Make Auto Lenders More Money

If you missed the session, download our latest guide: 3 Ways Machine Learning Can Make Auto Lenders More Money to discover how auto lenders are using machine learning models to raise approvals and reduce losses, improve approved loan yield, and develop a competitive advantage to thrive in the new normal. 

Download 3 Ways Machine Learning Can Make Auto Lenders More Money


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