Technology transforms Mexico's informal markets, especially used cars

Technology is increasingly reshaping Mexico's informal economy, where nearly 55 percent of the employed population works without formal contracts, social security, or access to credit. Historically, markets serving this population operated with inherent risks, lacking transparent pricing and verification mechanisms.

In recent years, technology platforms have begun to introduce standards into these informal sectors. The used car market, notorious for mechanical risks, documentation issues, and buyer uncertainty, is a prominent example. Companies like Kavak are professionalizing this business by implementing rigorous mechanical inspections, document verification, and data-driven valuations. They also offer warranties and return policies to mitigate transaction risks.

Before the advent of such platforms, it's estimated that up to 40 percent of informal used car transactions in Mexico involved fraud. Kavak's model involves a thorough evaluation of each vehicle's condition, aesthetics, and documentation before it enters their inventory. This provides buyers with verified information about the car's state and sellers with market-based valuations, moving away from discretionary negotiations that often favored irregular transactions due to information asymmetry.

Beyond inspections, Kavak has also established a financial arm providing credit products to individuals typically overlooked by conventional banks, including those without formal credit histories. The company has facilitated over $1 billion in financing to customers. This financial arm, coupled with strong transaction volumes, nearly 120,000 in 2025, a 40 percent increase, and achieving global profitability in December 2025, supported a $300 million Series F investment round led by Andreessen Horowitz in February 2026.