Latest / Auto Collabs / The Future of Financing is Faster with Keishawn Batts of Upstart

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The Future of Financing is Faster with Keishawn Batts of Upstart · Auto Collabs

• 0:00
  You know what the funny thing about listening to your own content? [upbeat music] This is Auto Collabs. Number one, I don't do it much. But when I do- No... I'm usually in the car.
• 0:15
  And I have to say, I had a long drive the other day, and I popped in, uh, and the Auto Collabs episode that we did with John Fitzpatrick. Okay. And, and, uh, sometimes w- we just, we just make me laugh.
• 0:28
  [laughs] I just, uh, [laughs] just smiling about it. I don't know. I appreciate you guys, the fact that we get to do this. We, we make me laugh. [laughs] That's a good- We make me laugh.
• 0:39
  [laughs] That's a good podcast name for some future thing. That's the next Auto Collabs shirt. Right. We make me laugh. We make me laugh.
• 0:44
  [laughs] That's- Every time I get into the car, it, it auto plays whatever was y- you know, in the, in the podcast reel, and it's always either an Auto Collabs or a Dealer Playbook. And my kids, I don't know if it's
• 0:58
  that they're enamored or they're disgusted, but- Probably disgusted... disgusted. Yeah. They're like, "You listen to your own show?" [laughs] And so it's just like- And that's your son says it like that. [laughs] Yeah.
• 1:11
  That's my 15-year-old. He's like, "What? You like your v- Oh... you like your own voice?" Well- "Are you your only listener?" [laughs] I sure hope not. That's so right. I sure hope not. No.
• 1:25
  I mean, we get to talk with Keshon Batts again, um, with Upstart, and he's, he's been, he's been on the show a few times and we've had some webinars with him.
• 1:32
  Always brings just a great energy and passion, some laughs, some great insights. So looking forward to this conversation. We'll see if we can make me laugh again, uh, with Keshon Batts.
• 1:44
  [upbeat music] All right, we're here again with our good friend, Keshon Batts. Thanks for joining us again. Always a pleasure. Oh, man. So, um, look, seasons are moving along. We're having lots of conversations.
• 1:58
  Since we talked last, uh, uh, there have been a few things [laughs] that have gone on in the industry.
• 2:03
  Um, but, but first, for the people who haven't seen you, haven't heard from you, just give us a brief overview about your career in automotive. Just set the table for 60 seconds, then we're gonna get into some stuff.
• 2:14
  Yes. I'm the third bearded brother of the Asotokon team. This is actually- Yes... also my, my third time being a part [laughs] of one of these casts, so I'm excited about that.
• 2:24
  [laughs] But, uh, I've been a part of the auto finance and auto family for about 20 years. I started my career very in a humble way. Uh, I was detailing cars at a Porsche dealership in Richmond, Virginia.
• 2:35
  But throughout my career I've, I've worked in sales at a dealership, I worked in finance, and shortly after graduating college, I took the fortunate turn to indirect lending.
• 2:46
  So I've been a part of the banking industry for the last 15, uh, to 20 years. And what's been really exciting about that the most is I've seen the industry evolve so much, right?
• 2:56
  Like, I'll never forget, like, in the first couple of years I was dealing with Cash for Clunkers, right? And now we're talking about electric vehicle market penetration and, you know- Right... digital retailing.
• 3:05
  And, you know, I think I was part of, like, a, a pilot when DealerTrack and RouteOne first, like, got off the launch with, with the bank I was working at. So I've seen it come a long way.
• 3:14
  Uh, today I get the fortunate pleasure of leading our dealer success team at Upstart Auto Retail, where we have the great mission of making access to credit more affordable for customers at a dealership, and we utilize that with our digital retailing tool.
• 3:27
  So I get the chance to have the fortune of leading an amazing sales force that's out there every day, uh, helping our dealers in the best of times and more challenging times to sell more cars.
• 3:38
  Well, definitely- Now- Go ahead. Yeah... you left out my favorite part, though.
• 3:41
  [laughs] Because you have a new venture that you're doing, which is our f- one of our favorite things, which is what we're doing right now, but you're the co-host of a new podcast. Oh. Is that right? That is right.
• 3:52
  That is right. Shameless plug.
• 3:54
  Uh, Upstart does have their own podcast, Leadership in the Dealership, where I get the fortune of talking with some of my long friends and new friends about their business and how everyone is looking through a different lens in the automotive industry now and preparing for whatever comes around the corner next.
• 4:13
  So yes, uh, that is a, a new venture of mine and I'm really excited about it every week. So good. So cool. Hey, you mentioned, you mentioned highs, lows, challenges. Um, gonna, gonna shift the conversation here.
• 4:23
  Obviously, just getting through still, I know residual's gonna last for a while, but, like, major DMS outage and you being on the finance side and having a tool that helps move things along, what have you, what have you seen, like, as far as resiliency, and what has this kind of revealed to you, especially on the finance side, and how to help dealers, you know, get finance transactions pushed through?
• 4:43
  No, I, I think resiliency is the right word. Again, in my few decades of being in the automotive industry, that's all dealers ever do, right? They're always resilient.
• 4:52
  Whether it's a pandemic, whether it's some federal mandate for Cash for Clunkers or the, the introduction of direct-to-consumer sales, like, dealerships are resilient.
• 5:02
  And I think because, you know, as many of us know, dealerships are so diverse in generations and ages.
• 5:09
  Like, you have people that have done it when all it was was paper, you have people that have done it when all it is is digital.
• 5:15
  So one of the things I'm really impressed by is, one, the resiliency of these dealers that, "Hey, I can't use my DMS. Go find that stack of 100-page, uh, printer paper we have in the back- [laughs]...
• 5:24
  and let's work on some four squares," right? "Let's put some of these cars on the road and find a lender that is still operating where we can get these deals funded. Like, let's find a workaround," right?
• 5:33
  Like, that is really exciting to me. And the thing that, like, the automotive industry doesn't get a lot of credit for is, like, the community. Like, you log into LinkedIn- Right...
• 5:41
  or you talk to somebody, they, they're on the phone talking to one- Sure... of their buddies across the country. They're talking to their, their competitor next door. They own- Yep...
• 5:48
  the Ford dealership, they're talking to the other Ford store. And, like, everybody's just working together, right? Like- So true... forget profit and market share in the time of need. Like, everybody's working together.
• 5:58
  And I think that's what really excites me, um, just, just to be a part of this community.That's amazing. You, you said it.
• 6:04
  I mean, the- there is a s- we take it for granted very often in the industry, but that is legit how it is. It's not like, "Oh, I wonder if someone is going through," or, "I wonder if someone will help me."
• 6:15
  It's like, no, there is a massive, uh, Rolodex, we'll use that word- [laughs]... but everyone's got... I know, I know what it means. So do you.
• 6:24
  Um, everybody's got, uh, dozens of numbers and friends that they can call in 20 groups all across the country from social media that are just ready to be like, "I'll help you. What do you need?" Yeah.
• 6:34
  Care for competitors or not. I love it. Yeah. So good. Industry like none other, I, I will say that. Like, they're always willing to help.
• 6:40
  But once everything goes back to normal, they're back to competing about VDP placement. Oh, then they're back in. It's like- Yeah [laughs]... it's like football.
• 6:45
  It's like, "Hey, off the field we're this, but once we get on that field, I'm gonna hit you as hard as I can." [laughs] Yeah, yeah, exactly. Exactly.
• 6:50
  Uh, what are, what are some of the other challenges that you're seeing out there? Uh, especially we have a high rate environment. Uh, it's a big topic of conversation constantly. A lot of negative equity running around.
• 6:59
  Um, you know, what, what are some of these, how are these things playing out and how are you addressing them? Yeah, I- I think all of those things that you mentioned align to, like, credit tightening, right?
• 7:07
  We're seeing a worsening of credit portfolios. You're seeing a rise in delinquency. Haven't really seen the same in, like, charge-offs quite yet, but that goes into lenders traditionally tightening their business.
• 7:17
  To your point, negative equity. "Oh, I don't wanna do 130% advance at 75 months anymore," right? [laughs] "Because I don't know where this market is going. Like, customers are underperforming."
• 7:27
  So I think dealers and all the things they're doing are seeing that squeeze as well, where maybe they're not making as much on gross because they need to cut their deal $1,000 or $2,000 to fit the customer's payment they're looking for, as well as fixing the, uh, the approval offer they're getting back from a lender.
• 7:44
  So I think the dealers are feeling that friction in both areas, right? Interest rates have gone up. "I bought a, a Audi A4 and I was paying $450 a month. I'm buying another Audi A4. Why is my payment now $700," right?
• 7:57
  Like, customers don't understand that. Right. Right?
• 7:59
  So I think the dealers have to get creative in ways that make purchases more affordable, and they have to get creative in their structures in not only how they're purchasing these vehicles at auction aisles, but the profit they're expecting to receive when they're submitting these loans to lenders to fit within that space of tightening.
• 8:20
  So I think the dealers are feeling it, consumers are, but again, like we talked about before, like, they're still resilient. Like, the SAR is still relatively respectful for the remainder of this year.
• 8:30
  And again, I think that speaks to the dealers finding a way. Yeah. Isn't that... You know, I, I've had a lot of conversations recently about the SAR, like whe- whether or not you can actually impact it, right?
• 8:41
  Like, like, as an industry, we're just gonna sell the amount of cars.
• 8:46
  [laughs] It's, it's your decision on whether or not you get your fair share for your market, um, and, and whether or not you can, you know, create the margins that make sense.
• 8:56
  I, I, you know, when I look at a deal and the structure, when it comes to, like, the price, y- I mean, you have the four, the four classic things, right?
• 9:03
  It's, like, the price, the interest rate, the trade, the down payment. That's what you get. The, the term- [laughs]... right? It's, like, basically, what? Five things. That's, that's what you get to deal with.
• 9:13
  And so, um, when it comes to creativity, it's, it's, it's almost not as much in kind of, like, okay, the customer's ready to buy the car.
• 9:23
  There's actually some pre-work that has to be done to make sure that you're ready to have those conversations, like from an inventory perspective or, um, you know, uh, knowing who your lenders are, making sure you have the right lenders for your client base, all of that type of stuff.
• 9:38
  Um, when it comes to that pre-work and, like, having it set up, where are you seeing dealers focus the most attention right now? Yeah.
• 9:46
  It, it really is dealers getting consumers more educated about what to expect at a dealership. Mm-hmm.
• 9:52
  Whether it's a dealer putting their as low as rate available from the OEM or captive on their website, or a partnership they have with the lender that's placing that rate.
• 10:02
  Like, dealers are, in my opinion, doing a better job of disarming customers with information that they're supplying on their website, right?
• 10:09
  Which allows those things that we just talked about to be a little bit easier, right? Mm-hmm. Whether it's rebates that OEMs are now putting back into the market, or in the sense of extended terms.
• 10:18
  I think dealers are doing a great job to be more transparent where they can or where they, they're comfortable with, that then disarms the customer, whether it's fixed prices, rebates, again, trade-in offers, like, you know, guaranteed trade offers.
• 10:33
  Like, they're doing really creative things to ensure the customer has a better experience, is more equipped with information, and thus makes it easier for the salesperson, the GSM, and the finance manager when it's time to close the deal.
• 10:44
  So again, I, I think re- resiliency is just something we continue to talk about. Like, I haven't seen many challenges put in front of dealers over the two decades where they're like, "Ah, you know, I'm tapping out."
• 10:55
  Like, "High interest rates, I'm out," right? Like, "I don't have any inventory, I'm out."
• 10:58
  Like, no, the dealers will just move to something else and, and, and figure it out, and I think in this current restriction that we have around lending, I think they're figuring it out. That's funny you mentioned that.
• 11:09
  Who... What, what over the last 50 years made dealers tap out? You know, "You'll pay me how much for my store?" [laughs] Well- [laughs]...
• 11:20
  my sales are up right now, but [laughs] Which, which I think [laughs] which I think is probably, like, the most, like, it's go out, go out with your boots on, right? Yeah. Like, go out, get a lot from that. Let...
• 11:30
  I'm gonna shift the conversation for a second. Um, th- it has to do with a lot of the themes, right?
• 11:34
  Resiliency, what are we doing when things are changing, how are we leveraging technology and the resources at hand to do so? Big conversation around AI-powered financing. Um, that is g- a growing topic.
• 11:45
  You know, in a lot of ways it's kind of been used for a while. But can you help educate us on how is AI-powered financing being really leveraged for auto lending right now?
• 11:55
  And, and maybe explain to us, like, it seems like a broad thing, but how does it actually work? Yeah. AI lending is at the cornerstone of, like, the future of automotive, right? Whether it's the-...
• 12:07
  older bank that's been around hundreds of years where they're using a antiquated loan origination system. They're, they're, they're looking for something new.
• 12:14
  Or organizations like us, that it's the heart and, and brain of our organization, where it just, um, allows better access to credit for customers.
• 12:24
  I think, you know, you use the term AI, it's a variety of different things. You know, Apple's talking about it, ChatGPT released something.
• 12:31
  But I think from a lending perspective, what it really does is removes a lot of the unconscious or rather conscious bias that humans have when they- Hm... create a credit buy box, right?
• 12:42
  Or when they look at someone's debt to income, or they look at an individual with a thin file, right?
• 12:47
  Like, it's really hard for a credit risk officer that's been at a bank for 30 years to look at a thin file registered nurse out of, like, Chapel Hill, North Carolina and say they should get a $90,000 car, right? Yeah.
• 13:04
  Their registered nurse is always gonna have a job, probably has no debt, and, like, is the probably the most employable person in America, right?
• 13:12
  [laughs] The only problem that registered nurse maybe has is that she went to UNC Chapel Hill. [laughs] Oh, here we go. [laughs] That's about the only problem that that registered nurse is gonna have.
• 13:20
  I, it was gonna trigger somebody out there, like, but- Yeah... you, you get the point, right? Like, you look at all of those things, and the traditional model's like, "Oh, this person doesn't have any credit.
• 13:29
  They've never shown the ability. Oh, yeah, they make 70, 80 grand a year, but they've never done a thing," right?
• 13:34
  Like, that's where AI uses a variety of different variables, where they're looking at a person's job, job type, uh, the history of their addresses.
• 13:43
  Variety of different things that, yes, some of the banks do deliver that in a very great way, but AI takes it one step further that it learns off of that behavior over the period of time so that, you know, you don't have to wait until
• 13:58
  there's a recession or there's something bad happens. The model is just continuing to learn based on customer behavior. So there are gonna be times when the AI model gets tighter before everyone else does- Mm-hmm...
• 14:08
  but it's going to protect them. And that AI model will loosen up before everyone else does as well, because it's constantly learning on customer behavior. And that is to the benefit of the consumer, right?
• 14:18
  Like, I, I don't know, like, uh, electric vehicles or, or as some of these OEMs move to the US, uh, the model will learn something about electric vehicle residuals or the value of those m- those vehicles on the secondhand market.
• 14:33
  It may say, "Well, you know what? We'll give this person 180% advance," because we know that if they go to sell it, they're probably gonna get that money back.
• 14:41
  So, like, there's more things that are additive to variables beyond just a, a traditional model that just learns on 13 variables, right? The great AI- Right... models out there have thousands of them.
• 14:52
  And, and I think the, the probably bigger trigger for that is, like, we saw over the last four years a massive hiring influx into the industry of, like, net new personnel that also then got elevated into management positions.
• 15:09
  And that, that person now has to make decisions reading credit profiles, reading bureau scores, understanding all of this. Even on, on just like you said, how to structure that deal and who to send it to, right?
• 15:23
  Even if it's prime credit. It's like, what about this prime credit, this car, this lender advance, this down payment tells me where to get the best option. Yeah.
• 15:32
  You know, especially if it's not a manufacturer financing type deal.
• 15:36
  Um, like, leveraging that to s- to allow that person to spend the time in management where they're best, which is probably coaching, and not having to do the tasks of, like, deciding where to send a deal for max profitability and lowest, uh, lowest possible payment, right?
• 15:52
  For sure. Those things are... will speed up career pathing in our industry, too. Oh, for sure.
• 15:59
  It gives people more time to focus on the thing that they're there for, and that's to get customers in and out of the dealership and delighted in their experience, right?
• 16:06
  And having AI financing, again, as we think about the other things it does from an income verification and address verification, like, removes the steps. Mm-hmm. Like, how many car guys have lost a deal because- Oh...
• 16:15
  they had to go home and print out- Look... their W2 or bank- You wanna preach to a guy- [laughs]... talk about removing steps. Come on now. [laughs] So, I mean, and, like, to your point, right?
• 16:25
  There's a guy that's pretty reputable in the industry and, like, you wanna go buy a nice car, and they're like, "Hey, we need your W2. We need to verify who you are." Like, really? You guys know who I am. Like- [laughs]
• 16:36
  ... like, I wanna talk to your owner. But, like, again- [laughs]... those are some of the things AI lending does, right? They look at your behaviors, they look at your checking account, your savings account.
• 16:43
  They look at, like, just variables on you that's like, all right, there's a high probability Kyle is, is telling us the truth about his income. Like, we don't need to...
• 16:51
  There's a high probability Kyle lives where he says he lives, right? [laughs] Um, it removes some of those things that, you know, banks tend to be conservative with. Oh my goodness. What do you think- That's so cool...
• 17:03
  so you're kinda living on the edge of the future a little bit, because seeing all this stuff going on and, and, like, leveraging AI financing.
• 17:09
  What do you see the state of dealership financing going, being in, like, 10 years from now? 10 years from now. Where are we, where are we going? Five years from now. I won't, I won't send you to 2030.
• 17:19
  Yeah, I was about to say, wow, 2034. Wow. Yeah. I think five years from now, I think it's faster.
• 17:24
  I think as you think of all the things that have shifted any industry, you know, uh, obviously the easy one is to talk about the Apple iPhone, right? Like, we're only really, what,
• 17:35
  15 years removed from, like, the first iPhone? Like, look how far we're- we've gotten.
• 17:39
  And I think organizations like us that are, like, disrupting the industry and finding ways to present AI financing, and as dealers adopt and find that value, things speed up.
• 17:50
  And that makes us better, but then it also makes our competitors better. And what does that do? That makes all the dealers better.
• 17:55
  So I think the traditional model where there's this bad urban myth that finance managers wanna keep you in a dealership for two hours, that's not true.
• 18:04
  It's just the resources that they have through their channels, their lenders, and fax machines, and whatever else- Yeah.
• 18:10
  Hey, if they could get you out of there in seven minutes, they'd love itThey'd love it, and they'd make more money if they could do it, right? Yeah.
• 18:16
  Like, 'cause the guy's not angry that he thought he was gonna spend his Saturday in this convertible, and he's spending all day in the dealership, right? [laughs] He's just in and out.
• 18:23
  So he, of course, he's gonna buy that warranty now. So I think the future is much quicker, right? Lender decisions- I agree...
• 18:30
  the process to do more things digitally, uh, the n- the, the removing of stipulations or just some of the paperwork that's involved, right?
• 18:41
  Like, I think that's where we are five years from now, and I think everybody is better for it: the consumer, the salesperson, the GSM, the finance manager, the finance director, the GM, and the, the lenders, right?
• 18:53
  Like, it, it reduces cost as well. So, uh, I think that's where we are five years from now. A two-way- Man, I pray you're right 'cause I was all preaching that in 2017, and we were moving to it.
• 19:03
  And, and- We didn't get it, right? I'm telling you what- We're faster- We're faster... than we were in 2017.
• 19:08
  I, I would say there are a lot of people in the industry that are faster, but I think as an industry we have to be known for being faster.
• 19:14
  And, and, uh, that's what I'm hoping- Yeah, we got a, we got a little bit of a lift there. Got a little bit of a lift.
• 19:19
  I think the thing that we talked about earlier, just being a community, all it takes is one really good organization to speed it up. And you guys know, the community will be like, "Oh, who is that?
• 19:29
  Oh, they did what for you?" Right. The 20 groups start talking, right? Like, that's one of the most powerful things in our community is the 20 groups, right? You get a couple 20 groups like, "You did what with who?"
• 19:38
  "Oh, yeah. Now I wanna try them out," right? Like, some of our best referrals- Absolutely... come from 20 groups. And they already have this halo effect, like, "I heard you did so and so for-" High trust. Absolutely.
• 19:47
  So- Right... it, it's, it's, it's viral almost, right? You know, as organizations continue to perform well, other dealers in the community will hear about it, and we'll all get better for it, so.
• 19:58
  I lo- hey, look, now you're speaking our language, and I think that's because you're a part of this community. Hey, uh, Keesean, as always, it is just a massive pleasure hanging out with you.
• 20:07
  Uh, we, we go highs and lows. We get excited. Uh, we talk real talk. And, uh, you are definitely a bright, uh, light in our industry.
• 20:15
  Thanks for doing all that you do and, and for being a part of this episode of Auto Collapse. Absolutely. Always a pleasure, guys. Hopefully, I get invited for a fourth time this year.
• 20:21
  But thank you as always, and hope to see you guys in person at some point too. Soon. It's coming. Life's coming. [upbeat music] All right, Kyle.
• 20:32
  Five years ago, you said in that interview, you've been saying it's gonna be really easy five years from now, and you said that five years ago, and we just said it on that show again. Man, I...
• 20:42
  This, the, the reality is, is I think that there are pockets of our industry that make it super easy to buy a car, right?
• 20:48
  And, and the-- moving that to, like, a wholesale change where it's just, like, buying a car is easy, that that's a, that that's a reality, um, we're still a ways from there.
• 21:01
  But, you know, technology companies like Upstart and some others out there are doing everything they possibly can to equip dealers with the technology tools r- uh, necessary for that.
• 21:12
  But the process and the change management that comes along with that is definitely no joke.
• 21:17
  Uh, so, you know, I, I'm hopeful that in the next five years that we've cracked that code because I think the manufacturers, the consumers, the, the net new players a- as OEMs are demanding it out of us.
• 21:30
  Um, but yeah, we'll, we'll see. You're like, "We'll see." We'll see. We gotta put, like, a timer clock somewhere now counting down five years- Oh, good...
• 21:39
  so that in five years we're reminded to do another episode to see if it's still... This reminds me of, it's a little bit like when Best Buy 20 years ago said that they were gonna update their computer system- No...
• 21:50
  next year. Stop. That's how it feels. [laughs] That's kinda how it feels. Oh, man. Like, "No, we promise we're updating the system next year," and then 16 years went by. And it's still on DOS. And, and here we are.
• 22:03
  [laughs] Green blinking cursor. They're like, "We did update our system. It's called Everyone Shops on Amazon." Yeah, right. [laughs] Oh. "We just moved everything to the internet." [laughs] Gotcha. Got 'em. Oh, my gosh.
• 22:16
  Well, look, we hope you had a good time with us. Uh, we really enjoy, uh, doing these episodes, bringing some of the thought leadership to the industry.
• 22:22
  So on behalf of Kyle Monsarr, Michael Cirillo, and myself, thanks for joining us today on Auto Collapse. You make me laugh.
• 22:30
  [upbeat music] [laughs] Sign up for our free and fun to read daily email for a free shot of relevant news in automotive, retail, media, and pop culture. You can get it now at asotu.com. That's A-S-O-T-U dot com.
• 22:44
  If you love this podcast, please leave us a review and share it with a friend. Thanks again for listening. We'll see you next time.
• 22:51
  [upbeat music] Welcome to Auto Collapse. [laughs] Why are we recording? [laughs] Are we rolling yet?
• 23:09
  Not yet.