AI-driven fintech Pagaya is expanding in auto and POS lending following its initial focus on personal lending. 

“Auto is one of [Pagaya’s] growth drivers. It’s a relatively new asset class for them, so growth prospects are still strong,” Kyle Joseph, managing director and research analyst at investment banking company Stephens, told FinAi News’ sister publication Auto Finance News. 

“Auto is one of their growth drivers.” — Kyle Joseph, research analyst, Stephens

Pagaya purchases loans originated under its underwriting criteria from lenders and securitizes the loans to fund further originations. It works with auto lenders including Ally Financial, Consumer Portfolio Services, Exeter Finance, Flagship Credit Acceptance, Foursight Capital, OneMain Financial, Stellantis Financial Services and Westlake Financial.  

“We are expanding existing partner relationships across our growing set of products and growing access from newer partners,” Pagaya Chief Executive Gal Krubiner said during Pagaya’s Nov. 10 earnings call. “This disciplined growth is demonstrated through our steady application to funding conversion, which has remained at 1%. At the same time, we continue to drive new high-potential partnerships to the platform.” 

Stock up 12.8% 

In fact, shares of Pagaya Technologies [Nasdaq: PGY] jumped Nov. 10 on the earnings release, rising more than 20% at 9:30 a.m. ET from market close on Nov. 7. Shares closed Nov. 10 up 12.8% from market open at $27.58. Pagaya has a market capitalization of $2.1 billion.  

Pagaya’s shares were under pressure ahead of the earnings results as investors “anticipated there would be auto weakness, but that didn’t come to fruition,” Stephens’ Joseph said.  

The auto finance market has faced scrutiny following recent bankruptcy filings, some lenders pausing auto originations and rising delinquency levels. 

Tapping new funding

The fintech has also been able to tap additional funding sources recently. Pagaya on Nov. 3 announced a $500 million forward-flow agreement with global alternative investment firm Castlelake.   

The agreement marks Pagaya’s first forward-flow deal for auto loans and is a step toward diversifying its funding for auto, like what the fintech did for personal loans, Ralph Leung, chief operating officer and chief commercial officer for the fintech, said, noting the money will be used to grow loan origination volume. 

Pagaya’s auto deal with Castlelake expands its relationship with the firm, which also agreed to buy up to $2.5 billion of personal consumer loans in a forward-flow agreement established in July. This followed Pagaya’s $2.4 billion forward-flow deal with asset manager Blue Owl Capital for personal loans inked in February, and a previous $1 billion forward-flow deal with Castlelake in August 2024. 

“That allowed us to diversify the personal loan funding strategy, which worked well,” Leung said, noting the company is employing the same strategy for auto loans.  

The fintech on Sept. 29 issued a $367 million auto ABS deal backed by subprime loans, according to Creditflow, which monitors securities. This followed a $390 million subprime auto ABS transaction on July 15. 

Editor’s note: A version of this article first appeared on Auto Finance News, a sister publication to FinAi News.

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