Solera’s “captive-like” indirect lending program Solera Auto Finance has spread quickly, growing from fewer than five dealerships in April to nearly 2,300 by the end of July.

“There’s been a really good reception to our product,” Solera Auto Finance CEO Kenn Wardle told Automotive News last week in an update on the business. He also expressed confidence that discipline in payment-to-income ratios would allow the lender and its consumers to weather inflation.

Solera Auto Finance has expanded geographically faster than anticipated. When Solera announced the auto finance lender in March at the NADA Show, it expected the initiative to reach about 20 states by the end of 2022. As of Aug. 2, the lender had spread to 39 states, according to Wardle, who said he thought his company could potentially reach all 50 states by the end of the year.

Wardle said Solera had received “such a really strong reception” at the NADA Show that it recognized the need in the marketplace and decided, “Let’s just see what we can do.”

Solera Auto Finance focuses on near-prime and subprime used-vehicle customers and offers what it calls competitive rates, though it retains its own brand name rather than offering a white-label option to dealerships. Retailers who use Solera for a dealership management system can earn rebates on their DMS bill by sending a “handful of loans” each month to Solera Auto Finance.

Wardle said strong demand from the growing dealership base was motivated by both the DMS savings and the “captive-like” nature of the company.

“We sent over deals, received good financing terms and hit our goal numbers with no effort,”Bill Dangra, general manager of Marietta, Ga.-based Drive a Dream, said in a statement Aug. 2. The Solera Auto Finance dealership received a 40 percent rebate on its Solera DMS.

About 45 percent of Solera Auto Finance’s partner dealerships were franchised operations; the other 55 percent were independents, Wardle said. As far as he knew, the independent pool did not included any “buy here, pay here” retailers.

Wardle said Solera Auto Finance sticks to customers with 520 to 680 credit scores. He said he is extremely focused on payment-to-income ratios and is a proponent of bills representing no more than high single-digit or low double-digit percentages of customer income.

Wardle said he believed this payment ceiling for high subprime or near-prime borrowers meant “you’re setting them up for success.” A consumer could still absorb inflationary pressures such as higher gas prices, he said.

“It’s always seemed to work long term,” said Wardle, whose career in the subprime market dates to 1996.

Solera Auto Finance also protects itself by lending a “safe” amount in relation to vehicle values, facilitating a dealership’s needs but limiting the lender’s risk should it need to repossess a vehicle, according to Wardle. He said its target is lending between 110 and 120 percent of vehicle value.

Solera this spring expected to use artificial intelligence to render immediate decisions on loans. Wardle said Solera Auto Finance has the capability to automatically decline loan applications now and it expected to introduce speedy automated loan approvals in the next 60 days. The company said it funds loans more quickly than competitors and will cut the time to “mere hours” as Solera’s artificial intelligence improves.