Back in April at LendIt USA 2016, Lending Club teased that they would be announcing a new consumer lending product in June. This was pushed back following the subsequent news that rocked the marketplace lending industry. Now just a few months later Lending Club has officially announced their move into auto lending with a refinance product focused on prime consumers.
We spoke with Todd Denbo, Vice President of Consumer Auto Lending at Lending Club to learn more about the product and his experience prior to joining Lending Club. Todd has been with the company for a year and a half and his previous experience includes nearly 17 years at Wells Fargo. He worked in consumer lending on the credit card side and also led direct auto for a number of years at Wells Fargo.
While the entire outstanding debt for auto loans totals $1 trillion, Lending Club estimates that the refinance market stands at $40 billion annually today. Todd believes the market opportunity for auto refinance is at least double that size if the process for obtaining a loan was more simple. The problem in the auto refinance space is that the process is cumbersome and consumers equate the pain of refinancing an auto loan to that of going through a mortgage refinance.
According to Todd, the major player in auto refinance is Capital One along with some banks and credit unions. Most banks don’t focus on refinancing auto loans since they have deep relationships with dealers who markup the loans. Since consumers usually negotiate on the price of a vehicle and fail to shop around for credit, consumers are paying more than they need to. According to Lending Club, consumers pay 200 bps higher interest rates than they should. This 200bps difference is $1,350 the consumer could otherwise be saving over the life of the loan. [Read more…]