Point-of-sale at the car dealership or robo calls asking you to pay for an extended warranty are what consumers are most used to.
Meanwhile, traditional insurance is mainly for collisions, but what happens when a belt breaks or you push the “start” button and nothing happens? That’s where a new startup wants to change the way you care for your car.
Aptly named, CarmaCare launched its proprietary “healthcare-for-your-car” subscription service three months ago to take over where traditional car insurance leaves off and to provide an easier way to buy extended warranties.
The company, founded in 2021 by Jonathan Palan, who previously founded AutoFi and was an executive at LendingClub and Kiavi, is now supported by $4.5 million in new funding raised at the end of 2022.
In addition to the funding, the company announced that it has a new CEO, Jamie Ahern, who was previously with LearnVest and former chief operating officer of Kin Insurance.
CarmaCare is innovating in the $35 billion car warranty and service contract industry that Ahern described as “predatory in nature.”
“Wear-and-tear failures are 15 times more likely, but insurance is not designed to handle those, which opens up a huge need to handle these,” Ahern told TechCrunch.
Here’s how CarmaCare works: Its vehicle service plans work by limiting the cost of repairs due to mechanical failures and also include roadside assistance and support for unexpected breakdowns. Users can choose between a $100 and $250 deductible for covered repairs that include, for example, replacement parts and powertrain, electronic, and mechanical components.
Users also have access to the “Virtual Garage” feature, which Ahern explained can provide repair triaging and unbiased opinions on the cost of needed repairs. With interest rates rising on both new and used cars amid inflation, he said that this is more of an incentive for someone to keep their existing car on the road longer.
“People are often afraid to take their car to the shop due to a feeling of being taken advantage of,” Ahern said. “Virtual Garage is like ‘TeleDoc for your car,’ and now that most people have technology-connected cars, often an experienced mechanic can tell what is going on and give estimates. Now when you go to the garage, you can tell them what might be the problem and the estimate, so if the mechanic quotes you something quite higher, you have information to help.”
The capital infusion was led by Inspired Capital and included Twelve Below, Revelry and 81 Collection. The company intends to invest in its product and technology team and in customer acquisition strategies and hiring underwriters and data scientists.
“With nearly half of Americans falling into debt over car repairs, the need for a consumer-friendly company like CarmaCare has never been greater,” said Mark Batsiyan, partner at Inspired Capital, in a written statement. “Both Jonathan and Jamie are seasoned operators who deeply understand the consumer need for a better solution.”
Meanwhile, the company is still in the early stages. It has some revenue, but since its product just launched three months ago, Ahern declined to disclose growth metrics other than to say “early traction has exceeded expectations.”
CarmaCare is currently direct-to-consumer, but Ahern said there are opportunities to pursue in B2B2C, and the company is in talks with companies and other partners. It is also looking to raise a small debt facility to begin financing customers and other new products.
New funding helps CarmaCare accelerate its ‘healthcare-for-your-car’ service by Christine Hall originally published on TechCrunch