According to the Federal Reserve, Americans have $ 1.2 trillion in car loans. And while these debts can be refinanced, even US car owners who know that this is an option face a complicated task.
MotoRefi, a new fintech startup founded by QED Investors in 2017, has developed an automatic refinancing platform that handles the entire process, from determining the best interest rates to paying off the old lender and renaming the vehicle.
Now the company is preparing to expand its platform and make it accessible to the masses. A $ 8.6 million fund was raised in a Series A financing round led by Accomplice and Link Ventures. Motley Fool Ventures, CMFG Ventures (part of the CUNA Mutual Group) and Gaingels also participated in the round. The round follows on $ 4.7 million in seed capital that MotoRefi is funding announced in March 2019.
MotoRefi also wins two new board members, Rob Chaplinsky, managing director of Link Ventures, and Rachel Holt, former Uber executive and co-founder of a new VC company, Construct Capital.
Car loan debt is the same as student loan debt in the United States, said Kevin Bennett, CEO of MotoRefi. And yet the majority of car owners don't know that refinancing their car loan is an option at all, he added. A 2017 Harris survey found that 47% of Americans knew they could refinance their car loan.
"People buy their home loans while most only get their auto loans from the dealer they bought their car from, so their prices are artificially high," Bennett said in a recent interview. "Meanwhile, auto loan co-operatives can be great, but they may not have the resources to reach consumers."
MotoRefi wants to step in here. Bennett said the MotoRefi platform could save customers an average of $ 100 a month on car payments.
Holt, an early investor in MotoRefi, said during her time at Uber that she saw firsthand how many car loan drivers the drivers had with them. Dealers do not make money from selling cars, but from financing, said Holt. "I saw this problem and was looking for startups that were trying to solve this problem," she added.
The US car refinancing market is around $ 40 billion, according to TransUnion. However, according to data published at the TransUnion Financial Services Summit, this market could be two to three times larger. This is an opportunity that has prompted companies like Lending Tree to launch automatic refinancing products.
According to Bennett, MotoRefi is already being expanded to include new lenders and partners. The new funds will be used to hire more employees and to invest in the technology platform.
The startup also started separate pilot programs with progressives and chime in January. As part of these pilot projects, Progressive and Chime offer their customers direct refinancing options in addition to working with partner programs such as Credit Karma – a company supported by QED Investors.