The lending arm of Ford Motor Co. has tapped a San Francisco startup to make it easier for its customers to buy and finance a car without going into a showroom.
Ford Motor Credit Co. said Monday that it would use software developed by AutoFi Inc. to let car buyers shop for a Ford or Lincoln car and secure a loan online through its dealers' websites. As part of the new deal, Ford Motor Credit also announced an equity investment in AutoFi, though it didn't disclose the amount.
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AutoFi doesn't make any credit decisions or loans itself. The company operates a marketplace where dealers can select which banks, credit unions or other lenders can pitch loans to car buyers. Customers can choose among competing offers and, after they purchase a vehicle using AutoFi's service, the company gets paid a fee by both the dealer and the lender.
"Our approach from the beginning was not to be, 'We're a Silicon Valley disrupter that's come to take out the manufacturers and the dealers,'" said AutoFi Chief Executive Kevin Singerman in an interview.
While this new service promises to help streamline the buying process, laws in many states require customers to visit a showroom to complete the paperwork on a new-car purchase, which often must be signed in person.
The auto-loan market expanded rapidly since the financial crisis, surpassing $1 trillion in outstanding balances for the first time in 2015, according to the Federal Reserve Bank of New York. During the third quarter, lenders extended $150 billion in auto loans, tying a record, according to the Federal Reserve Bank of New York.
Other fintech companies are also eyeing the auto-finance market. In August, car-buying firm TrueCar Inc. announced a deal with J.P. Morgan Chase & Co. to simplify the process of finding a vehicle and getting an auto loan online. In October, online lender LendingClub Corp. announced it would start refinancing outstanding auto loans for borrowers.
Mr. Singerman co-founded AutoFi in 2015 after a stint as a corporate-development executive at LendingClub. "There was a lot of innovation that was being brought for most other consumer finance products, but auto was really lacking," he said.
The deal with AutoFi comes a few months after Ford Motor Credit warned analysts that 2017 profit before taxes would be $300 million lower than previously forecast due in part to falling values on used cars. The Dearborn, Mich., auto maker has also been maneuvering to position itself more like a tech company, committing to big investments in projects like fully autonomous vehicles.
Christina Rogers contributed to this article.