FRANKFURT, Sept 29 (Reuters) - AUTO1 Group, the European digital used-car trading platform, is starting preparations for a 2021 stock market flotation, seeking to benefit from high technology valuations and to raise cash for future growth, people close to the matter said.

The company has hired Goldman Sachs, Citi and BNP Paribas as global coordinators of the initial public offering, which may value Auto1 at upward of 5 billion euros ($5.87 billion), the people said.

The deal may take place as early as the second quarter of 2021, they added.

AUTO1 declined to comment, while the banks either declined to comment or had no immediate comment.

Founded eight years ago in Berlin, AUTO1 has grown to cover 30 European markets and has traded more than 2 million cars across its three platforms. Revenue rose by 21% to 3.5 billion euros in 2019.

U.S. rival Vroom floated on Nasdaq in June and its shares have since gained more than 130%, while another competitor Carvana expects record third quarter sales.

In 2018, Japan's Softbank took a stake in Auto1 at a valuation of 2.9 billion euros.

In July of this year, AUTO1 raised 255 million euros from investors, in the form of convertible notes, to develop its retail brand Autohero.

Used car markets in Europe were brought to a standstill by the sudden arrival of the coronavirus pandemic in March, which forced the weeks-long closure of vehicle registration offices in many countries.

But as they have reopened, demand for used cars has recovered, with travellers increasingly preferring their own vehicle to taking public transport, AUTO1 co-CEO Christian Bertermann told Reuters at the time of the July fund raising. ($1 = 0.8523 euros) (Editing by Tom Sims and Jane Merriman)