CarNow, Cion Digital partner for crypto payments, financing at dealerships

Digital retail software provider CarNow has partnered with blockchain orchestration platform Cion Digital to allow consumers to purchase and finance vehicles with cryptocurrency. Through Cion Digital’s platform, consumers will be able to use cryptocurrency such as Bitcoin and Ethereum, among others, to place a deposit on a vehicle, make a down payment or pay for the vehicle in full at the 5,000 dealers on CarNow’s platform, CarNow co-founder and Senior Vice President of Sales Tim Cox told Auto Finance News . The platform also allows options to combine both crypto and fiat currencies in the same transaction. The move is designed to open new revenue sources for dealers as more consumers — especially younger consumers — acquire digital assets, Cox said. In fact, 31% of consumers aged 18 to 29 said that they have invested in, traded or used a cryptocurrency, according to a November 2021 Pew Research study. Cox and Cion President Fred Brothers estimate that number is closer to 50%, they said. “You can't look at the news and not see crypto,” Brothers said. “Mostly it's been focused on crypto as an investment. For younger folks, that's cryptocurrencies as a speculative investment. For older folks with more assets, the conversation is a little more around cryptocurrency as a diversification strategy. “We think crypto is an asset. [And] as more people put more of their wallet, it turns into crypto as payment — crypto as a spendable currency,” he said. For example, CarNow is in talks to onboard an Atlanta-based used Ferrari dealership whose customers have been requesting the ability to pay for the luxury, high-ticket vehicles using their crypto assets for years, Cox said. “The Ferrari dealer is the extreme,” Cox said. “At the same time, when you have 50% of millennials in this country owning some sort of cryptocurrency, it opens up the avenue that they probably didn’t know they had when they’re buying that Honda Accord.” Crypto payment transactions at CarNow dealers should start flowing in the second quarter, Brothers said. Crypto as collateral for financing Cion Digital is also working on building a “competitive loan marketplace” that allows consumers to use their cryptocurrency assets as collateral to secure financing for their purchase, Brothers said, noting that the marketplace is expected to launch in Q3. Cion will connect potential borrowers with crypto-lending companies that extend capital against a consumer’s crypto assets, Brothers said, but declined to name specific companies. The process is akin to borrowing against a brokerage account, a home equity line of credit or even traditional auto loans that are collateralized against the vehicle. There are also protocols on blockchain, such as AAVE and Compound , that create “automated liquidity pools,” that Cion can tap into that use blockchain-enabled automated underwriting capabilities. Brothers said. Automated liquidity pools are “a collection of tokens or digital assets stored in a smart contract . These pools, among other things, help to facilitate decentralized trading and reduce the danger of washout,” according to the Blockchain Counsil , a group of blockchain experts. “This is some of the real value of using the new blockchain technology stacks,” Brothers said. Millennials are “one of the fastest-growing wage-earner populations [and] one of the fastest-growing car-buying populations,” Brother said. “If they’re not into banks or [certificate of deposit accounts] or mutual funds — if they hold their assets in crypto — they may have a thin file from a credit standpoint." That’s where crypto collateralized loans come in, he said, noting that thin-file borrowers with a large volume of crypto assets have the potential to secure lower interest rates that they would from traditional lenders. “If I qualify for the best rate today and I've got a bunch of crypto, there's not a lot of room [to improve] those rates,” Brothers said. “But if a millennial walks in and they're getting a six or a six-and-a-half percent offer and they actually have nontraditional assets, it could be dramatically better than what they would qualify [with] their credit bureau.” Slow roll While cryptocurrency has made a splash in larger financial markets, its integration into the automotive retail and auto finance markets has been slow going, with only a handful of companies accepting cryptocurrency as payment or using cryptocurrency in the financing process. Online peer-to-peer automotive marketplace Tred began accepting cryptocurrency as payment in February. Tesla also accepted Bitcoin as payment for four months in 2021, and still held about $2 billion of Bitcoin on its balance sheet as of December 2021 after purchasing $1.5 billion in Q1 2021, according to a filing with the U.S. Securities and Exchange Commission . Meanwhile, Carnomaly.io , an automotive blockchain and cryptocurrency company, launched a decentralized automotive lending platform in June 2021 that allows cryptocurrency holders to use their digital currency as capital to lend to consumers looking to purchase a car. Auto Finance Innovation Summit, the premier event for technology in auto finance, returns April 25-26 in San Diego. The event will showcase today’s technology and tomorrow’s innovation-driven opportunities to position your company for success in this fast-paced digital era. To learn more about the 2022 event and register, visit www.AutoFinanceInnovation.com

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