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Auto Loans

What is AutoFi? How it Works and Potential Benefits

If you’ve ever gone through the car-buying experience, the results of surveys asking consumers which part of the experience they hate the most shouldn’t surprise you. Next to haggling over the price of a car, those surveyed said arranging and negotiating car financing was the worst. The process really hasn’t changed much over the last several decades and car buyers dread it as much as they ever have.

That’s why the launch of AutoFi’s fully online sales and multi-lender solution is one of the more anticipated recent fintech. Founded in 2015 by industry leaders from PayPal, Lending Club, and SunGard, San Francisco-based AutoFi is set to bring relief to millions of car buyers in the trillion dollar auto finance market.

What Exactly Does AutoFi Do?

AutoFi’s basic premise it to match dealers and auto lenders to provide car buyers a quicker, more straightforward, and more transparent financing experience. Its B2B software solution is designed to simplify the auto lending process for dealers, lenders, and car buyers. With its extensive network of lenders, AutoFi has created a seamless digital experience, allowing car buyers to arrange for their own financing at the point-of-sale (the dealer) or with an online car purchase. Once the request for lender offers goes out, car buyers receive a number of offers, allowing them to select the most competitive.

How Do Car Buyers Benefit from AutoFi?

With AutoFi’s online financing platform, car buyers now have access to a complete end-to-end process for purchasing their cars online — from researching cars on a dealer’s website; to making offers and negotiating; to clicking “Buy Now” and then getting an automated credit decision.

Car buyers can expect to receive competitive offers from AutoFi’s network of banks, online lenders, and iLendingDIRECT’s credit unions – all competing for the car buyer’s financing business in real time. All of this can be done using AutoFi’s smartphone app.

For buyers who prefer to do their car shopping on site with a dealer, they can still use their smartphone app or a digital kiosk located in the dealership to complete the car purchase and arrange financing. Either way, AutoFi’s streamlined process drastically reduces the amount of time car buyers typically spend in the financing stage of their purchase from hours to minutes.

More importantly, the process also bypasses the awkward and agonizing time spent with the dealer’s financing manager who wants to upsell buyers with expensive vehicle protection and warranty packages. With AutoFi, buyers can not only select their own loan terms, but they can choose the add-ons they want and then e-sign the loan documents online. In essence, AutoFi removes the worst aspect of the car-buying experience and puts the car buyer in control of the process.

Where Does AutoFi Go from Here?

Within a few months of winning LendIt’s annual PitchIt award in 2016, investor capital began to stream in bringing AutoFi’s seed funding to nearly $30 million. AutoFi also received a major equity investment from Ford Credit which is now partnering with the fintech company to bring its technology to Ford and Lincoln dealers throughout the U.S. AutoFi originally targeted the used car market but will use the Ford experience to create a white label solution for other brands in the new car market.

AutoFi recently announced a partnership with Tricor Automotive Group, a large Canadian auto conglomerate with more than 200 dealerships across several brands. AutoFi also recently announced its partnership with iLendingDIRECT to offer its financing solution to a large network of credit unions.

Who is AutoFi’s Competition?

For now, AutoFi stands alone as the only B2B financing solution for auto dealers, and its stunning growth reflects that unique position. Car companies generate a sizable portion of the revenue from car financing; so, in a sense, AutoFi could be viewed as a competitor for that line of business. However, AutoFi has done a brilliant job of positioning itself as a key partner to help car companies win back customers by improving upon an outdated and dreaded process.

Car sales have been slipping over the last couple of years and dealers need all the help they can get to improve the car-buying experience. With AutoFi, the car dealers win because they can close more sales quickly through a streamlined and automated process. The lenders are also winners because they are able to expand their reach to more customers. Of course, the biggest winners are car buyers who can more easily access competitive financing without having to endure an experience many would rank right up there with getting a root canal.