Lendbuzz Co-founder Amitay Kalmar Speaks at Auto Finance Summit East

Lendbuzz Co-founder and CEO Amitay Kalmar, speaking as part of a panel discussion at this year’s Auto Finance Summit East 2024, used the subject of Lendbuzz’s ongoing expansion into major metro areas to share a number of insights into how AI-powered credit models adjust to regional differences.

“An individual consumer in Texas doesn’t necessarily have the same income patterns, spending patterns, cash balances or stability of cash flow. [There are] different vehicle models that they’re purchasing and the dealerships that they’re using are different,” Kalmar said. “The model that was developed based on data from East Coast consumers might not be as accurate for a new geography.”

He also noted that it can take up to 18 months for a credit model to adjust to a new market and perform as well as the models for established markets do, with default and delinquency rates increasing during that adjustment period.

“You need 18 months of originations and payment signals coming in. There are leading indicators like first-month defaults and three-month defaults, but these are not sufficient,” Kalmar continued, “To train the model, you need to do significant originations for models to be more accurate. That is a period where we know we’re going to have higher credit losses and are prepared to stomach it.

Once adjustments within the credit model are made, “Then we decide whether we want to be more or less aggressive in that territory to accelerate growth or grow slower,” he said.

“Every quarter we have an updated model that generates an updated score that’s slightly more accurate than the model that was used to that date,” Kalmar said. “Where we see big improvements is usually when we expand significantly into a new geography.”

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