I bought UPST earlier this year and made a lot of money and then gave it all back and then some. I couldn’t understand why UPST has suffered such a drastic decline. Then I applied to them for an auto loan and I thought I would share my experience with the board.
I’m in the market for a new car and I’m shopping interest loan rates. Honda has offered me 1.99% for 60 months. Capital One offered me 2.49% and Penfed Credit Union offered me 1.99%. I applied to UPST who has partnered with Customers Bank. It was very easy to apply online but, they offered me 13.47% for 60 months. Holy Smokes! They must not want me as a customer.
The board has said in the past that their target market are those with less than stellar credit and my credit score is 836 so that kind of makes sense.
My question is then what the size of their TAM really is? If they don’t want customers with good credit and they don’t want sub prime customers that will lose them money, then what size of the sliver of the total auto loan market TAM is their target? Is that sliver of TAM enough to give them the auto loan growth rate we think they need. We have been counting on growth in auto loans to maintain their growth rates.
I’ve turned skeptical and I sold my 6% position and put the money into CRWD and ZI.
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Why would you risk 6% if you don’t know the growth prospects and TAM estimate sizes, which have been discussed over and over? Is Saul has taught nothing, it has been to know what you are investing in.
Use the search buttons on the right of your post and you can google search Saul’s board for keywords that will show you plenty of good work done by others. Learning to SEARCH Saul’s board is an invaluable tool that so many seem to not be aware of.
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Did you apply it as a personal loan ? If so then the high interest rate makes sense as UPST treats it as an unsecured loan.
From their website, UPST is in Auto refinance category. So if you want to refinance an existing auto loan it would be more realistic comparison.
For new auto loans, right now the options are through dealers who license their software Prodigy or as an unsecured loans (which would not be competitive for most people).
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My major concern is the market they target, not the market of all loans. Are they focused on ALL borrowers, or just borrowers with low or missing FICO scores? Several others have posted similar results for applications.
I am still in UPST, but a little sorry I didn’t cut more on the Q3 results.
numbers exercise for their market
From UPST website - Less than 48% of Americans have access to prime credit (read: FICO score enabled) - but 80% of Americans have never defaulted on a credit product.
So they are targeting the 4 out of 5 that will pay in the half of Americans that would payback but don’t even have the chance to get approved by traditional lenders.
There are 210 million adults in the US, so 0.8 x 105 = 84 million as a target
A CNBC article on 2020 mentioned that nearly one quarter of Americans (22%) have a personal loan (let’s not count auto or mortgages yet)and that the average being $16k in balance
Personal loan balance underserved possible TAM = 84M x 0.22 x $16000 = 296B
maybe they don’t want to borrow as much, so let’s say that is half of that average balance.
TAM is then 148 billion dollars
So when UPST tells you that the personal loan TAM is 81B, they are underselling it - 
- their data came from mostly 2020 where the personal loan business slowed to a halt compared to 2019.
Of course, I understand that UPST only makes about 7% of a loan as a fee, and their penetration in that market is already 12%, but the opportunity is still big relative to their present revenue.
Bottomline, if you are on this board and have a FICO Score, you are not the target customer…
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