The U.S. auto finance arm of Volkswagen is investing in a California startup that enables car shoppers to arrange loans over their mobile phones.
The financing deal provides a shot in the arm for AutoGravity, which has established itself as an early leader in the race to update the auto financing process for the smartphone era.
A press release announcing the deal Thursday did not include its financial terms. But a source familiar with the matter said that VW Credit is providing $30 million in equity financing to AutoGravity.
“AutoGravity has experienced substantial growth since our first app hit the marketplace in the summer of 2016,” Andy Hinrichs, the startup’s CEO, said in the press release. “This investment will help us accelerate in the face of rapidly growing consumer and industry demand.”
For VW Credit, of Herndon, Va., the deal amounts to a bet on AutoGravity’s technology. Last month, VW Credit launched its own smartphone app, which is powered by AutoGravity.
AutoGravity’s business model involves partnering both with lenders and local car dealers. An AutoGravity spokeswoman said the Irvine, Calif., company has partnerships with nine lenders and is operating in 49 states.
Car shoppers who use AutoGravity can choose from up to four loan offers. The idea is to let the consumer select from some of the offers that would get made — whether by banks or other lenders — if the buyer sought financing at a dealership.
VW is the second major car manufacturer to invest in AutoGravity. The startup received earlier funding from Daimler Financial Services, which is the financing arm for Mercedes-Benz.