Westlake: Subprime Auto Loans Origination Process

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What was the dealer mix at Westlake in terms of the percentage of franchises and independents, and how did it evolve?

Why do they offer DealerCenter? It's exactly that. If you think about having a franchise use DealerCenter, you're either asking them to use two systems or completely switch to yours. That never really worked well, which is why Westlake integrated with systems like CUDL and RouteOne, because these systems were already built into the franchise platforms. The competitive advantage for DealerCenter was really built around the independents, giving them a management tool for their business.

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What's so difficult about originating subprime loans with today's ML tools? Couldn't you find alternative data on past cohorts, train a model, and get the same outcome?

What makes it difficult is that dealers are always asking for more. Competitors against Westlake, when they enter the dealership, try to buy paper that no one else is willing to buy at the current setup. They end up buying over-leveraged paper, which defaults, and they can't compete.

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What do you mean, no?

Where are you going to get the LTVs? If they have two auto loans and you buy it, you'll have to figure out which is which. You'll need to determine what's registered to that individual and estimate the income and vehicle value. That's just the beginning.

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