Solera Auto Finance leans into prime EV financing

Solera Auto Finance is prioritizing its new electric vehicle loan product over its nonprime product on the heels of its freshly inked partnership with climate finance company Tenet that is bringing EV offerings to Solera’s indirect network.

Solera Auto Finance (SAF) offers Tenet’s EV loans — including charger and charger installation financing — to its dealer network in California, Colorado, Oregon, Texas and Washington, SAF Chief Executive Kenneth Wardle told Auto Finance News.

“In the short term, this EV product is our primary focus right now,” Wardle said.”While we still do get applications in the door for our core [nonprime] product, we’ve really throttled back on that.”

The shift in strategy comes as costs of funds continue to rise in tandem with the Federal Reserve’s benchmark interest rate and delinquencies reach pre-pandemic levels.

“We’re just taking a very cautious approach to the market, and largely to the consumer as well,” Wardle said. “As we continue to see what the Fed is doing with interest rates and so forth, that will help us determine when to pivot to at least an equal focus on the nonprime consumer.”

The move marks Tenet’s first foray into indirect auto financing following the launch o commercial fleet financing for small business in May.

Plug-and-play

For Tenet’s part, integrating into SAF’s indirect network was a simple plug-and-play, Tenet Chief Executive Alex Liegl told AFN.

“Our platform is built to be interoperable and integrate seamlessly with third-party B2B2C platforms, making it a simple plug-and-play EV sales solution for Solera Auto Finance and our partners,” Liegl said.

Tenet’s underwriting guidelines and credit box are built into SAF’s platform, and the loans are passed through and sold to other lenders and investors that Tenet works with, Wardle said, noting that Tenet will continue to service the loans.

Tenet “does everything,” Wardle said.”After we hit the fund button and the cash goes to the dealership, we have a reconciliation period and then, after that reconciliation period, they take over the servicing of the loans.”

While Tenet did not provide origination expectations through the partnership, Liegl said he expects the partnership to reach thousands of EV customers. Already, demand has been “pretty strong” from dealers since the offering launched about three weeks ago, particularly in California, Texas and Washington, SAF’s Wardle said.

Targeting markets for growth

Westlake, Texas-based SAF is focusing its sales force on used franchise dealers in its network in states where EV adoption and demand is already high, Wardle said.

For example, “there’s a dealership out here in the Texas area, and about 80% of their lot is EVs,” he said.”So, we’re able to go out and find the dealerships with a decent concentration of EV volume and really market to them the way the financing works through the Tenet platform.”

SAF has about 10 to 12 reps out in the marketplace, Wardle said, noting that it also has a team of dedicated underwriters and funders assigned to the product.

“The sales folks are out there soliciting applications, teaching the dealership what deals will get approved versus which ones won’t,” Wardle said.

“Historically, that dealership has looked to us to provide nonprime auto lending, so it’s a little

bit of a retraining of our dealer customers,” he said.

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