- Car financing fintech Carmoola has raised $125 million in a mix of debt and equity.
- The London-based startup offers credit for used car purchases and incentivizes EVs.
- Check out the 12-slide pitch deck it used to help raise the fresh funds below.
Car financing fintech Carmoola has raised $10.3 million in a Series A round led by QED Investors and a further $115 million in debt.
The London-based startup, founded in 2022, employs a buy now, pay later approach to car financing by offering loans for used car purchases in the UK. Users can type in the registration number of the vehicle they want to buy and be assessed for credit purposes within minutes, through the startup’s proprietary tech underwriting platform.
Traditionally, purchases on finances are arranged through brokers or car dealerships and often come at a premium price with poor customer service, Carmoola’s CEO Aidan Rushby told Insider. A frustrating and expensive personal journey led to the former CEO of home rental company MoveBubble, moving into the car financing sector.
“I was blown away by how bad the experience was to finance a car with limited customer service and brokers taking a 15 to 20% cut of the disbursement,” Rushby said. “By cutting out the middlemen, we deliver a lower cost of acquisition and pass those savings on to the consumer.”
The service is not dissimilar to a buy now, pay later proposition, with Rushby comparing the platform to services like Klarna or fellow UK fintech Zilch. Users are assessed on their creditworthiness, offered a repayment plan, and then given a virtual card to use to purchase a vehicle from a physical dealership or through an online marketplace. Typical financing deals tend to run between three to five years with APRs ranging from around 6.9% to 24.9%. The company also offers a discounted APR for purchases of electric vehicles in a bid to incentivize customers to make greener choices.
The equity funding was led by Nubank-backers QED Investors with participation from existing investors VentureFriend and InMotion Ventures alongside $115 million in debt financing from UK bank NatWest. The round follows a $32.7 million seed round, also comprised of debt and equity in April 2022.
The fresh capital will go towards expanding Carmoola’s offering at a time when existing players will be struggling, Rushby said. The change in the interest rate environment and higher inflation will lead to margin compression on the loan book of larger rivals who underwrote deals prior to the energy crisis precipitated by Russia’s invasion of Ukraine.
“Car finance is one of the best-performing asset classes during downturns which makes it a great time to invest in a lending business in a new cycle,” he added.
Carmoola will increase its headcount from 17 staff to 23 by the end of the year and plans to be profitable by early 2024, Rushby added.
Check out Carmoola’s 12-slide pitch deck below: