Advanced financial modeling used to inform investment in automotive finance platform
We built a complex multi-variable financial model for a high net worth individual considering entry into the automotive finance market. Our model included use of advanced Excel capabilities including scenario modeling, data tables and iterative calculations. Our materials were used by the investor to raise capital for his venture with sovereign wealth funds.
Results and Impact
Our financial modeling confirmed the attractiveness of the near-prime automotive finance market. Conservative scenarios estimated 17% IRR with stretch scenarios exceeding 35%+. We summarized the financial estimates in a investment presentation used to raise capital with from outside investors, resulting in successful round of seed funding.
Context
Client's family had a long history of similar investments in other areas of the automotive finance market. Attempting to apply this successful framework to a new customer segment, the investor engaged our team's support to confirm that the fundamentals of the business were not materially altered by differences in the new segment.
Approach
Our team executed a series of 10 interviews with automotive finance professionals across the prime and sup-prime lending industry to gain understanding of market dynamics and trends. We used these insights to inform assumptions in our financial model. In developing scenarios, we outlined three potential paths to market: "deep sub-prime" focused, "sub-prime" focused and "near-prime" focused strategies. Even in stressed scenarios, our modeling suggested high potential for returns for the investor.
