Layoffs, funding delays reported at Solera Auto Finance

Solera Auto Finance has laid off dealership sales representatives and stalled funding loans purchased from dealerships, two former employees told Automotive News, after the company experienced explosive growth last year.

Dealers reported delays in reimbursement from Solera Auto Finance, which launched in 2022 with plans to serve as a "captive-like" auto finance option for dealerships and consumers.

Two recently dismissed Solera Auto Finance area sales managers told Automotive News that they and their colleagues were summoned to a companywide conference call. They requested anonymity, one citing fear of retaliation.

One of the sales managers recalled being "gung-ho" about the call he said occurred Jan. 12. Solera Auto Finance was having issues funding loans sent in by dealerships; he thought the call would reveal a solution.

Instead, the managers were fired effective immediately, according to the second manager. The layoffs affected most of a 39-person sales force, he said. A handful of other former Solera Auto Finance sales managers have announced being dismissed via LinkedIn posts.

"In response to the current challenging economic conditions, Solera Auto Finance made the difficult decision to restructure on Jan. 12," Amy Casas, spokesperson for parent company Solera, wrote in an email Tuesday.

The first manager reported being told by a colleague on the underwriting side of the business about layoffs among Solera Auto Finance's loan "buyers" and "funders." The second manager estimated Solera Auto Finance had around two dozen personnel in each of the two jobs prior to the layoffs. Solera would not confirm the total number of layoffs.

"Solera Auto Finance continues to operate to facilitate current and future business opportunities," Casas wrote in response to the report of buyer and funder layoffs.

Solera announced Solera Auto Finance at the NADA Show in March 2022 and expected to reach 20 states by the end of the year. By August, it had reached 39 states and was working with more than 2,000 dealerships.

Solera Auto Finance had been aggressive in seeking business, the second Solera Auto Finance sales manager said. The company had reached a rate of $25 million a month in loans, "and that's when they hit the brakes on everything," he said.

"Solera Auto Finance's entry into the automotive lending space was a success and well received by dealers," Casas said in the statement. However, she said the current credit environment and consumer outlook "necessitates we take a more prudent approach for the time being."

The first manager estimated Solera Auto Finance began to fall behind in funding deals in the fall.

A general manager at a southern U.S. independent dealership, who asked not to be identified given his Solera business relationship, described how the first loan he sent to Solera Auto Finance flopped around that time.

He said Solera had agreed in October to buy a loan for a BMW 4 Series. The deal was "100 percent good to go" and contracted, he said — but then Solera Auto Finance shortly thereafter declared it wouldn't fund the deal.

"Any deal that has been returned is in accordance with the applicable dealer agreement between Solera Auto Finance and the individual dealer," Casas said.

The first Solera Auto Finance sales manager said the company sent dealers their funding for October's deals in November. It planned to cover the November loans in December, but "they never got around to that," he said. (One dealer client who "complained enough" was reimbursed for his November business, but that was the exception, the manager said.)

"Solera Auto Finance continues to fund deals," Casas wrote in response to allegations of fall funding delays.

The second sales manager said representatives were barred from asking internally when their auto retailers would receive the money owed them.

"Sales representatives always had direct contact with and access to Underwriters and Funding staff," Casas responded.

Despite its funding delays, Solera Auto Finance still wanted to collect more loans from dealerships and their customers, according to the second sales manager. "We were still instructed to push for contracts," he said.

Casas said the lender "adapted its underwriting standards to the current macroeconomic conditions and the business will continue to evolve as changes occur in the automotive lending space."

The company instructed representatives to tell dealers funding would come, the second manager said. However, it would wait 30 to 60 days before making the dealer whole, he said.

"It's gross mismanagement," he said.

In some cases, Solera Auto Finance had even collected the first or even second payment from the consumer without reimbursing the dealer for the loan, the first sales manager said.

A finance manager at a Mississippi franchised dealership, who requested anonymity because of his relationship with a Solera Auto Finance representative, said he had sent the lender two deals in September and October and is still awaiting funding. In both cases, the borrowers already had made their first payment to the lender.

"I really like the company," he said. "I wish they would get [their business] situated."

Casas said receiving payments before funding isn't unusual in the industry.

"As normal course of business in the automotive lending space, if the first payment was due prior to funding Solera Auto Finance would obtain such payment," she wrote. "No payment was ever cashed unless a loan was funded."

Once funding delays stretched beyond the three weeks Solera Auto Finance was publicly promising, the former Solera managers said they began to warn dealerships delays were possible.

Casas said Solera Auto Finance leadership never instructed personnel to tell dealerships that funding would come in three weeks.

The second manager said he would encourage applications but with caveats such as, "I don't know when it's gonna fund, if it's gonna fund" and "If you need the cash flow, don't send it to me."

The owner of Indiana and Florida independent dealerships recounted having a November Indiana deal fail to receive funding until January — long enough that he had to transmit the title to Solera to stay compliant with Indiana law despite not yet receiving payment. Another dealership owner, who requested anonymity out of concern for jeopardizing relationships with lenders, said a Florida loan saw a similar lag before funding around the beginning of December. The "industry norm" is for lenders to pay dealers in three to five days when they purchase a retailer's paper, he said.

Such a delay in cash flow would have been a problem when he was starting out in the industry, he said. "You'll put small dealers out of business," he added.