A digital marketplace that connects used car sellers to dealers in Brazil, InstaCarro chose Buy Now, Pay Later (BNPL) as its first financial service. A little over three months ago, the platform founded by Argentine Luca Cafici started offering the shopping modality to part of its over 4,000 dealers.
Through BNPL, shopkeepers can buy cars and pay off the vehicle’s total value plus a fixed fee in 30 days — in a few cases, the startup allows a slightly longer term. Between January and February, InstaCarro transacted BRL 4 million through BNPL. “Almost 20% of our transactions are already taking place through this modality, but because we are limiting [the access to the solution]. However, the demand is infinite; we think that 100% of sales could occur through this product,” said Cafici to the LABS. He believes that, at this pace, InstaCarro may close the year with BRL 50 million in revenues through BNPL. Growing 30% per month last year, the startup claims to have seen its annualized revenue reach BRL 500 million (about $100 million) in January.
InstaCarro charges a fee for each BNPL operation, which started at 2.5% of the car’s value and is now at 3.2%. Creating the financial services vertical makes perfect sense for InstaCarro since most companies that use the platform to buy cars are small, family-owned companies with difficulties accessing credit linked to cash flow. “We’ve been giving these customers what banks don’t. We were able to release this modality for them because they’ve been with us for a long time, and we have tools and data that banks don’t have [to evaluate them], in addition to a relationship that allows us to do this,” said Cafici.
Founded in 2015, operating only in São Paulo, InstaCarro expanded to 16 other cities last year, including capitals. The expansion was driven by the Series B round of BRL 115 million announced by the startup in August. It was also the round led by funds J Ventures, FJ Labs, and Rise Capital, which helped InstaCarro bring its first financial product to life.
Cafici told LABS that the startup is already talking to Banking as a Service fintechs (startups that offer white-label services such as digital accounts and credit cards) to start providing such services to its customers sometime in 2022.
“What we are building is an ecosystem. We want dealers to be able to do everything with us, buy cars, finance these cars, have their account, their credit card, and even finance the opening of a new store,” said Cafici.
How InstaCarro works
InstaCarro’s business model consists of a platform and a face-to-face service structure with physical stores and evaluators. When customers decide to sell their vehicles, they can take the car to one of the physical stores or have an evaluator come to their homes for the inspection. More than 150 items are evaluated, from aesthetics to mechanics. With the pandemic, the startup invested in the home assessment service, and, according to Cafici, almost all customers have chosen to carry out the inspection this way.
Based on this evaluation, InstaCarro defines the initial price of the vehicle’s online auction, that is, the initial price that will appear to its over 4,000 dealerships and resellers. The startup itself does the car registration on the platform and the auction organization.
The big advantage of the auction, according to Cafici, is that there is no consensus on the value of a used vehicle. Every car is a car. The auction, in turn, allows the exact vehicle to receive varied offers from different buyers until reaching the best offer for both ends of the business. “There are regions where the demand for a particular car is greater. As the platform works in several cities [17 cities, in six states], the person can sell the car to a dealer in another city who may pay a higher amount for the vehicle”, explains Cafici.
Both ends of the equation see only InstaCarro. That is, it is the startup that interacts with and pays the seller of the vehicle. And it is also the startup that offers cars to dealers and conducts the purchase transaction with them. “It is a market with a lot of informality and insecurity, so we shield both parties. We will be responsible if the car has a problem not identified in the inspection. In the same way, if the shopkeeper happens to give up the purchase, we are responsible.”
Cafici believes in the quality of service provided by InstaCarro to compete with competitors who were either born or arrived in the country after the startup. “We have a great rating on Reclame Aqui [the largest evaluation platform for consumer products and services in Brazil] and the best NPS in the segment. I think our growth proves that our customers like our service.” The company has 281 complaints (of which 277 were answered) on Reclame Aqui and an overall rating of 8.3.