Kavak has signed a $1.2 billion U.S. financing deal with BACS (Banco de Crédito y Securitización) that will both allow the digital auto retail to buy more vehicles and make it easier for its clients to obtain financing, Ambito.com reports.

At the core of the agreement is the creation of an escrow account (to be managed by BACS), which is an innovation in the local market, according to Kavak Argentina general manager Mariano Segarra.

“We buy the cars in our [Kavak’s] name and transfer ownership to the escrow account,” he said, before it is transferred to the purchaser.

This will allow Kavak to increase the volume of vehicles that it purchases.

“It’s an important step that reinforces our operation in the country. This is the first stage. Later on, we can increase the amount or add more banks,” Segarra said.

The other key feature of the deal is that it will make it easier for Kavak’s customers to finance their purchases.

“Currently, just 5% to 6% of used vehicles [in Argentina] are purchased using some type of financing. The rate is really low,” according to Segarra.

“For some time now, we have been working on this at Kavak with Banco Supervielle and Banco Santander. Today we are financing 20% of our operations.”

Segarra said that while Kavak’s sales continued to expand in Argentina during 2022, they did so at a slower rate than in the previous year.

He noted that used car sales in the country rose by 15% year-on-year (y-o-y) in December and by 13% y-o-y in January, adding that Kavak’s growth was in line with this.

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