With a more fixed cost structure, we expect to lever more strongly than in the previous model as demand picks up. We expect the impact of our omnichannel capabilities will continue to grow over time as consumers demand a more personalized experience that combines online and in-store progression. We believe that many of our competitors across the used car industry will not be able to deliver this experience in a simple and seamless manner. In closing, we’re confident we have the right strategy in place. Our consistent approach to control what we can and deliver the most customer-centric experience in the industry is driving sequential quarterly improvements across our business. We are well positioned to emerge from this cycle an even stronger company.
With that, we’ll be happy to take your questions. Operator?
Operator: Thank you. [Operator Instructions] We’ll go first with Daniel Imbro with Stephens. Your line is open. Please go ahead.
Daniel Imbro: Jon, Enrique, maybe just want to circle back on the cash provision just given the impressive results here. I’m trying to understand the puts and takes. So, the allowance came down quite a bit, Jon, I think you talked about maybe just tighter underwriting there. But it looks like net charge-offs are at maybe the highest level we’ve seen in over a decade. So, I guess how can you — can you help us reconcile those two factors? And how should we think about provisions has the credit improvement meant that nominally this is the right level of provisions going forward? Or how would you think about those trends as we move through the end of the year and the tax refund season?
Jon Daniels: Yes, Dan, absolutely appreciate the question and fully expected it. So first, let’s start on the provision piece. Our provision in the quarter is going to be made up of two components. It’s going to be our change in outlook on the losses that we expect on the existing book of business versus what we set at the end of Q2. Second, it’s going to be the required reserve on losses on the new originations. So let’s touch on the first piece. What I can tell you is if you look at our expectation at the beginning of Q2 and what we observed on that existing book of business over the course of Q3, there hasn’t been a lot of change. Let’s talk about the actuals and what we have observed because you referenced that. We publish on a monthly basis, our securitizations and how they’re performing.
It’s important to note that that’s about 60% of our receivables. We have a lot of stuff that has not yet been securitized. We’ve also mentioned that’s been tighter. But what you see out there in the securitizations, we certainly observed two separate books of business there. The pre-COVID and the early COVID stuff that came in markedly lower than our target, well below the 2% to 2.5%. We knew that was going to come back into more normalized levels, and that’s what we’re seeing on the new stuff. We’ve also said that we believe there’s front-loading occurring. If you look at those newer securitizations, especially in like the ’21, 3, the ’21, 4, the early ’22 stuff, there is a clear curve difference in when the losses come in. We think its front loaded.
All of that was contemplated when we set a reserve at the end of Q2. So largely, this first component of the provision did not — there wasn’t a major adjustment that we had to make, which means at the end of the day, our provision is primarily made up of our new originations, and we talked about this. Our new originations are significantly tighter. There’s very limited Tier 3 volume, there’s a test amount in Tier 2. And then our Tier 1 stuff, we’ve even been tightened there. So on that roughly $2 billion. It’s a tighter book of business. It’s a lower amount of overall loss. It’s a relatively modest required provision, and that is the bulk of the Q3 provision.
Operator: Our next question will come from Brian Nagel with Oppenheimer. Please go ahead.
Brian Nagel: You’re asking a nice continued solid progression here.
Bill Nash: Thank you.
Brian Nagel: My question, I guess, just looking first at the wholesale business, that definitely inflected stronger here in the fiscal third quarter. I guess the question I would have is explain more kind of what was behind that inflection in sales growth? And are there reasons — as you look at the wholesale business or the read-through over to your used car business, just given the natural kind of association with those two segments. And then just a quick follow-up. Any commentary I mean given what we saw here in Q3, any commentary how the quarter progressed and what we’re seeing into early Q4?
Bill Nash: Yes. Great. Thank you for the questions, Brian. So yes, we are pleased with the wholesale growth. I think it’s a combination of factors. I think one, there’s a little bit of year-over-year dynamics playing in last year, given where we were, given where we saw sales, things that were going on in the marketplace, we actually pulled back on our offers. So I think you’ve got a little bit of that reflecting in kind of the year-over-year growth. But I also feel really good about the innovation on the product side of things. So when you think about Max offer, one of the things with Max offer, we completed this quarter the rollout of our instant offer component of it. We still had a few markets that did not have instant offer, which meant they had to take pictures of vehicles and then get a value.
