Auto financing made easy: our investment in AutoFi

It is no secret that the internet has brought in transparency to car prices, just like anything else. Within a matter of minutes, you can easily see how car prices compare in different locations and shop around. Driven by this, despite the fact that average car prices are going up, average dealer profit from a new vehicle sale has gone down quickly over time. According to Wall Street Journal, it has led dealers to lean more heavily on the financing component. This could be surprising for many, but we’ve reached a point where dealers make more money on loans than the cars they sell. According to NADA, roughly 90% of the new vehicles are sold with financing. Despite its crucial role, the auto financing process can still take significant time and require many steps, where customers typically are led to another department in a dealer and there is lots of data reentry. What if you could see your auto financing options just like you are buying something on Amazon or Apple? Even better, what if you could enter your details and get actual interest rates from a variety of lenders instantaneously from the comfort of your couch?

As more and more customers are starting their car purchase process online, winning the customers starts with a transparent digital purchasing experience — this is where AutoFi comes to play. AutoFi helps engage and empower customers with a transparent deal creation tool, incl. select finance/lease terms, trade-in estimation, rebate selection and scheduling a pickup. Once the customer enters their details, AutoFi provides a fast, mobile-first checkout experience via instantaneous credit decisions from a number of lending institutions. This is all possible due to deep integrations with key financial institutions in the ecosystem.

Very much like Plaid (acquired by Visa for $5.3B recently) and Stripe, AutoFi is building a next generation fintech API solution, and it exemplifies a three-sided network as shown below with mutual benefits and a potential network effect.

Consumers: Being used to Amazon or Apple style service, consumers want personalization, transparency, instant results and the convenience of applying for a credit from their couch.

Lenders: AutoFi has partnered with some of the most strategic lenders, such as Chase, Santander, and Bank of America. Lenders believe in the rise of ecommerce and omnichannel transaction capabilities, and AutoFi is the solution letting them have access to customers through different means and tap into growing next-generation customers.

Dealers: Dealers enjoy operational efficiency (vs. old school pen and paper applications along with lots of manual data reentry on the dealer), convenience (can easily send a link to any customer to fill out anywhere via sms or email), substantial boost in their lead to sales conversion (one dealer mentioned a 100%+ increase in their lead to sales ratio) and F&I penetration.

By establishing deep and strategic relationships, the AutoFi team has not only built a unique product but it has also executed flawlessly, where the company reached meteoric growth rates and achieved close to 10X growth YoY. We are convinced that AutoFi is well positioned to be the industry standard checkout for all automotive transactions, and we are privileged to join the journey!

Baris is an engineer with work experiences in venture capital and top-tier investment banking. At BMW i Ventures, Baris has been closely involved with the investments in AutoFi, Tekion, Zūm, Mapillary (acquired by Facebook), Xometry, Vera, Strivr and Life360 (ASX:360). Baris holds a Master of Engineering and Technology Management from Duke along with an MBA (Dean’s Fellow & Full Tuition Waiver) from UNC Kenan-Flagler Business School, where he led VCIC, the world’s largest venture capital competition. Please feel free to reach out on baris@bmwiventures.com, @BarisGSF over Twitter. For more details on BMW i Ventures, please visit www.bmwiventures.com.

Note: This story is a repost from the BMW i Ventures blog

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