Cars.com is entering the auto finance market with the acquisition of CreditIQ, whose technology and digital retailing platform allow customers to receive online loan approvals and buy finance and insurance products from dealerships.
The $30 million deal, which closed Nov. 5 and includes the possibility of another $50 million tied to performance, broadens Chicago-based Cars.com's product lineup beyond vehicle listings and dealership software tools. CEO Alex Vetter told analysts on an earnings call this month that merging CreditIQ's technology with Cars.com's tools will create a faster, more seamless car-buying experience for consumers and deploy dealerships' resources more efficiently.
CFO Sonia Jain told analysts on the call that Cars.com is working to roll out the CreditIQ platform in the first quarter of 2022.
CreditIQ CEO and co-founder Bill Liatsis told Automotive News that the company was considering raising additional funding to grow the business before being introduced to Cars.com and deciding to sell instead.
"We thought we had the right partnership," Liatsis said.
Liatsis said the CreditIQ platform allows an auto purchase transaction to be handled online up until the point the customer needs to sign the contract. That step must be done physically, and so the dealer isn't removed from the process entirely, he said.
However, no dealership recalculations will be necessary, Liatsis said.
"We're sending in a deal that's contract-ready," he said.
Digital used-vehicle retailers such as Vroom and Carvana have found success bringing more of the auto sale online, according to Vetter.
"We're going to bring that same power to our 20,000-dealer network," he said on the earnings call.
Cars.com had 19,029 dealership customers at the end of the third quarter, up 5 percent from the prior year.
The company would not disclose the number of dealerships using CreditIQ today. Vetter told analysts it was "a relatively small customer base" that will expand with the combination of CreditIQ's platform and existing Cars.com products — including dealership websites, the Online Shopper digital retail tool and its vehicle listings marketplace.
Dealerships using any of those Cars.com products can incorporate CreditIQ, and the platform will remain available to dealerships that aren't Cars.com customers at all.
Jain said the revenue stream from CreditIQ will be a transaction model with lenders based on the number of funded loans. Jain added there is an opportunity for a lending-as-a-service model that CreditIQ's team already has pursued, in which Cars.com could sell the technology as a white-labeled tool to other customers.
Lenders would have the opportunity to use Cars.com and CreditIQ to win new dealership business, Vetter told Automotive News. But dealerships could continue to use whichever lenders they wished, he said.
Interest rates displayed to consumers include the dealer's markup, according to Vetter. CreditIQ also supports selling F&I products online to the customer, and it is configurable by the dealerships, Liatsis said.
But Liatsis said CreditIQ wasn't intended to eliminate F&I managers.
"We don't look at the F&I manager as [an] antiquated part," he said.