Millions of Americans make a car payment every month. This portfolio puts you on the receiving end.
The Auto Finance Portfolio will acquire whole auto loans through the end of 2026, providing investors with direct exposure to an asset-backed cash flow stream. Managed in partnership with Parrotfish, a New York-based investment firm led by Stuart Kronick, former head of structured credit at Jefferies, the portfolio leverages a discretionary forward flow program to acquire newly originated loans at 12%+ below face value.
Groundfloor has officially launched the Auto Finance Portfolio, a $2 million offering that gives accredited investors exposure to a diversified pool of whole auto loans. The portfolio targets a 13.6% rate of return over a 6-year duration, with monthly distributions from the start. The offering opens October 20, 2026, and closes in 3 months or when fully subscribed.
This piece covers why auto loans deserve a place in a diversified private credit allocation, what separates a strong auto loan investment from a risky one, and how the portfolio works, with insights from the Parrotfish investment team that selects the loans.
Why Invest in Auto Loans in a Volatile Market?
Interest rates, inflation, and equity markets have been unpredictable, and many accredited investors want income that doesn’t depend on market sentiment. Auto loans offer one source: each payment comes from a borrower’s monthly commitment on a secured asset. Auto finance is also one of the largest consumer lending markets in the country, second only to mortgages, according to the Parrotfish team. Large institutions dominate most of it, which leaves room for a smaller, selective buyer to choose what it purchases.
A car is a necessity, not a luxury
The automobile is the primary way most Americans get to work: more than 75% of workers commute by car, and 90% of households own at least one vehicle.[1] For most households outside major cities, a vehicle is how people get to work and run daily life. Losing it can unravel everything else, and that shapes payment behavior. The car payment is accordingly among the most resilient obligations in the consumer financial stack, historically paid ahead of credit cards and second only to housing.[2][3]
“A car is a nondiscretionary asset for a consumer, more so than anything else,” said Stuart Kronick of Parrotfish. “I could sleep in my car, but I can’t drive my house to work.”
Jacob Zeldin of Parrotfish described what the team has seen reviewing credit reports line by line.
“The number of people with sub-600 FICO scores who are delinquent on mortgages and unsecured loans, but making every payment current on their auto loan, is incredibly surprising.”
Used-car borrowers are not all the same
It is easy to assume anyone financing a used car through an independent dealer has weak credit. “Not everyone who buys from independent auto dealers is inherently subprime,” Kronick said. Many buyers simply want a reliable vehicle at a better price than new. When sticker prices rise, more buyers shift from new to used, and independent dealers and their financing partners serve that demand. This portfolio focuses on near-prime and sub-prime loans, so returns are priced for credit risk.
Traditional lenders have stepped back
Inflation pushes buyers toward older, more affordable used vehicles, the core of independent dealer inventory. Independent dealerships account for more than half of retail used vehicle sales,[4] yet remain constrained in their access to financing.[5][6]
The car payment is accordingly among the most resilient obligations in the consumer financial stack, historically paid ahead of credit cards and second only to housing.[2][3]Since 2023, banks and many legacy non-bank lenders have pulled back from auto finance. Falling vehicle values and several high-profile bankruptcies tied to weak controls have made traditional capital scarce. Independent dealers face a liquidity gap, which has created an opening to buy assets at steeper discounts with fewer competing buyers.
What Separates a Strong Auto Loan Investment From a Risky One?
Results depend on how selectively loans are chosen. Parrotfish has built its approach on a few principles.
The dealer matters as much as the borrower. Dealers with strong repair and service operations tend to see fewer defaults, because borrowers whose cars break down can get them fixed and keep paying. A dealer that sells a service plan with the loan is a positive signal, even though it adds to the borrower’s balance. “That consumer, when the car is in trouble, doesn’t have to come out of pocket to bring it in,” Kronick said.
The team pulls vehicle history and valuation data to compare each loan to the car behind it, so a default still leaves an asset to recover against. It also prefers vehicles bought for family and work use, such as SUVs and trucks, over sedans.
Seeing the whole picture matters. Adverse selection, where a seller offers only the loans it wants to be rid of, is a known risk. The team insists on full loan tapes. “We don’t like getting cherry-picked,” Kronick said. “We want to see all the information and do that selection ourselves.”
Human judgment matters. “You could automate a lot of things and use models and AI to help with analysis,” Kronick said, “but at the end of the day, these businesses are hands-on.”
A $2 million program is small relative to the auto loan market, so the team can choose loans rather than fill a large facility. “We’re not buying the market,” Kronick said. “If you do it in a reasonably sized way, you can pick and choose which parts of the market you want to buy.”
Why Do Dealers Sell Auto Loans at a Discount?
Investors new to auto finance often ask why a dealer would sell a loan for less than face value, and whether the loans on offer are the ones nobody else wants. The answer is that dealers are in the business of selling cars, not holding loans. Independent dealers often originate too few loans to interest large banks, and keeping loans on their own books means taking on collections and servicing, a different business from buying and selling vehicles.
“They’d rather make $300 on 20 cars than $500 on two cars,” Kronick said. Selling loans frees up cash to buy more inventory and sell more cars. For borrowers, the sale is largely invisible: the servicer may change, and they get a letter or call about where to send payments.
What Is the Groundfloor Auto Finance Portfolio?
The portfolio is a pool of whole auto loans purchased throughout Q4 2026, primarily to near-prime and sub-prime borrowers buying used vehicles from independent and franchise dealers. Groundfloor holds the loans through a Groundfloor subsidiary, which we manage in partnership with Parrotfish, a New York-based specialty finance firm led by Stuart Kronick, former head of the Structured Credit Group at Jefferies. Groundfloor manages the vehicle, the investor experience, and the monthly distributions. Parrotfish selects the loans.
“We work for the LPs. We don’t work for a bigger check down the line.”
Because loans are bought on an ongoing basis, capital not yet deployed is warehoused on Groundfloor Notes, which reduces cash drag.
What rate can investors target?
The portfolio targets a 13.6% rate of return. Returns are variable and not guaranteed.
How long is the investment term?
The duration is 6 years, with an average loan term of 60 months. About 75% of the cost basis is designed to amortize within the first 24 months, and investors receive monthly distributions rather than a single payout at maturity. For investors wary of a longer commitment, that matters: the amount still invested in later years is much smaller than the headline duration suggests.
Why Invest in the Auto Finance Portfolio?
Loans are bought at a discount
Every loan is acquired at no more than 88 cents on the dollar, a 12%+ discount to face value, while the portfolio receives 100% of the receivables and coupon interest. The discount acts as a first-loss cushion designed to absorb approximately 70% of projected net losses.
First-look access to loan flow
Through a forward flow program with Automatic USA, a platform that connects used-auto dealers with funding sources, the portfolio gets first-look access to newly originated loans within 48 hours of origination, before secondary-market bidding begins.
Selectivity, not obligation
The portfolio has the right, but not the obligation, to buy loans, with no minimum volume or quota. If loan quality slips or market conditions change, purchases can slow or stop without penalty.
“We’re not guys who have a billion-dollar warehouse facility that we have to fill up with auto loans.”
A hard asset behind every loan
If a borrower stops paying, there is a vehicle behind the loan, and repossession is a faster, better-understood process than foreclosure on a home. Recovery is not guaranteed because vehicles can lose value, but the collateral and the embedded discount add protection that unsecured consumer credit lacks.
“You’ll get your car repossessed sooner than you get kicked out of your home. And if you get your car repossessed, you can’t go to your job anymore. Everything just snowballs from there.”
Stuart Kronick, Parrotfish
How Loans Are Selected: Two Layers of Underwriting
Each loan passes through two layers of review before purchase.
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Algorithmic pricing and structuring
Karus, a credit intelligence platform trained on millions of loan outcomes, prices each loan and structures it to a target yield using borrower, vehicle, and dealer data.
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Manual portfolio review
Parrotfish reviews the eligible monthly loan flow and selects which loans to acquire, applying the dealer, vehicle, and full-portfolio checks described above.
What Investors Should Expect: Defaults Are Priced In
Auto loans to near-prime and sub-prime borrowers will have defaults, and an honest look at this investment starts there. In the base case, the model assumes 21.4% of loans default and 35% of the value is recovered on those defaults, for a 13.9% net loss. The 12%+ purchase discount, the vehicle collateral, and the high coupon on each loan are built to absorb those losses and still deliver the target return. We also show the downside, because investors should see the full range of modeled outcomes.
The People Behind the Loans
Loans in this portfolio finance everyday purchases: a used car from a local dealer, bought by someone who needs it for work and family life.
“You’re lending money to people you see every day,” said Jeffrey Zinn. “They may be your child’s teacher at school. They may be someone who drives for a rideshare. These are everyday people in your community making a good financial decision to buy a used car from a local operator.”
The dealers are part of that community too. Many independent lots have served the same town for decades, employing local people and giving buyers an alternative to expensive new vehicles. “This is part of an ecosystem that doesn’t get a lot of Super Bowl ads,” Zinn said, “but it is a core, fundamental function in a community.”
Who Is This Offering For?
The portfolio is available to accredited investors through Reg D. It may suit investors who want private credit exposure with a target rate above typical bond portfolios, monthly income, and diversification across many individual loans backed by vehicles. It carries real risks, including borrower default, vehicle depreciation, and limited liquidity over the term. Please read the offering documents carefully before investing.
Frequently Asked Questions
This article is for informational purposes only and is not an offer to sell or a solicitation of an offer to buy securities. The offering is available only to accredited investors under Regulation D and is made solely through the offering documents. Target returns are projections, not guarantees, and actual results may vary. Auto loans carry risks including borrower default, collateral depreciation, and limited liquidity. You may lose some or all of your investment. Past performance is not indicative of future results.
