Contxto – A global pandemic isn’t putting the brakes on Kavak, a platform for used cars. In fact, the Mexican startup has recently launched a series of products that address the current circumstances and turn them into promising opportunities. It even opened offices in Guadalajara, Mexico.
Car sales on hold?
It’s easy to assume that car sales have virtually stopped because of the Covid-19 pandemic. And that assumption is correct.
According to the Mexican Association for the Car Industry (AMIA), last April, only 34,903 new cars were sold. That’s a 64.5 percent drop in comparison to last year. As dealerships’ doors remain closed and people self-quarantine, buying a brand new car just isn’t in the cards.
However, the used car market operates differently and in Latin America is often carried out person-to-person. It’s within this segment that Kavak wants to make a difference.
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The startup’s platform values how much a car is worth. It then makes the owner three offers to buy the car off. If the seller chooses among these alternatives the parties then arrange for Kavak to carry out an in-person inspection of the vehicle. Should everything check out, the startup buys the car to resell it on its own platform.
But with Covid-19 new market opportunities have arisen according to the startup.
Kavak is giving used cars a fintech touch
Car owners in the ongoing crisis may find themselves in a double bind. On the one hand, they need money for their business, to maintain their families, etc. so they’re considering selling the family car. And on the other hand, they need that vehicle to move around as self-isolation continues.
Given this situation, Kavak is playing a bit at being a fintech.
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That’s because it’s letting car owners take out loans, putting their vehicle as collateral in case of non-payment. The terms for the loan are determined by the startup’s algorithms. It’s also offering car loan refinancing.
“Just five percent of used cars are financed in the country,” noted Federico Ranero, COO at Kavak.
“We’re already financing nearly half of our sales directly or through our partners because we’re seeing a lot of people with no prior credit history or with low incomes but that really need a car this year.”
It’s certainly not the first time we’re seeing startups from one industry dip their toes into another within the Covid-19 context..
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-ML
