Why we invested in Carmoola, a UK-based startup rewriting the rules of car financing

Why we invested in Carmoola,  a UK-based startup rewriting the rules of car financing

InMotion Ventures has participated in a £27M seed round for Carmoola, a UK-based startup rewriting the rules of car financing. The round was led by VentureFriends, with participation from InMotion Ventures, BCI, Truesight Ventures and Clocktower Ventures

Alex Smout, Principal at InMotion Ventures, explores why we invested

The Market: 

Car financing is a great enabler of affordability, but the buying process has long been a source of consumer frustration. Endless acronyms and pricing options make it a confusing, stressful process, and many nuanced complexities are only revealed once a vehicle is selected. Or worse, years after signing a contract with a balloon payment looming.

This confusion results in a distinct lack of consumer power, with a quarter admitting to not understanding their options when taking out finance agreements. And in the world of comparison websites, where every purchase is relentlessly optimised, car finance stands apart. 72% of buyers simply take the first product recommended by the dealer (1).

Equally, beginning finance discussions only after a vehicle is selected makes budgeting hugely difficult. Monthly payments are by far the most important factor for consumers choosing finance (2). Yet a £300 monthly budget buys a car anywhere from £11,000 to £20,000, depending on payment terms and contract length. Shortlisting cars is a gamble, and there’s always the chance of having finance applications rejected after a vehicle is selected – an awkward and stressful moment for all.

What Carmoola does:

The used car financing market in the UK alone is worth a staggering £23bn (3), yet financing accounts for only 30% of used car dealership sales (4) vs over 70% of new cars (5). A new approach to purchasing will benefit everyone: making cars more accessible and affordable for consumers, whilst increasing sales for retailers.

Founded in 2021 by Aidan Rushby, Amy McKechnie, Roman Sumnikov, and Igor Gordiichuk; Carmoola is simplifying financing. The team is encouraging consumers to rethink the way they pay for a second hand car, by telling them what they can afford, before the search for a vehicle begins.

The business uses thousands of data points and fully automated decision making technology to provide a budget and finance approval in sixty seconds. Would-be buyers are then allocated a virtual credit card that gives them freedom to buy any vehicle instantly: online or at a physical dealership.

Carmoola’s process saves on more than just time. Cutting out the middleman removes broker fees: passing savings of up to 15% to consumers and unlocking significantly more choice when it comes to vehicles they can afford. The post-purchase experience has been rebuilt entirely. Customers have the power to adjust terms, payments can be paused without penalty, and monthly expenditure can be altered depending on personal circumstances: a far cry from the complexities of traditional products. It might only be early in their journey, but Carmoola is already paving the way in automotive financing innovation. 

Why we invested

In an increasingly digital era transparency, convenience and personalisation are non negotiable. Leading fintechs have been quick to acknowledge the importance of a user-centric approach, driving significant competitive advantage as a result, but the car financing sector has failed to keep pace with expectations. 

As consumers ask questions of outdated processes, we’re investing in businesses prioritising user experience in markets ripe for disruption. By removing the awkwardness of financing, flipping the process on its head, and putting the consumer first, Carmoola is set to become the go-to-destination for anyone looking to finance their vehicles, and we believe the industry has a lot to learn from this customer-first approach.

With this Seed round Aidan and his team have an exceptional consortium of investors, including: VentureFriends, BCI, Truesight Ventures, Clocktower Ventures – and a number of high profile angels. The founders bring a wealth of experience in fast-moving, scale up businesses, having all met at their previous venture. We look forward to supporting them as they grow their game-changing approach to purchasing.

We’re always interested to speak to exciting and transformative companies within the space, so if you are a founder, or know a company we should meet, please do get in touch with me or the InMotion Ventures team, either on LinkedIn or via investments@inmotionventures.com.

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Footnotes:

1) RAC

2) Autotrader

3) KPMG

4) Apex insights

5) The Financial Times

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