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Helping customers avoid those dreaded lemons

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Long frustrated with the wealth destruction associated with the buying and selling of used vehicles in South Africa, a new start-up has ambitious plans to disrupt the notoriously onerous and risky second-hand vehicle market.

Launched by three former colleagues in March 2017 after several months of discreet market testing, getWorth uses data and uses machine learning models – or artificial intelligence – to analyse the risk and price profile of used vehicles.

According to getWorth director and co-founder Colin Morgan, this approach not only ensures that the seller receives a price that is close to retail value for their vehicle, but also that they receive immediate payment for the car.

“We pay out cash on day one and remove all the hassle associated with a private sale. The seller is paid a trade amount, similar to what other online car buyers or dealerships would pay. 

“We then market and sell the car, and when it sells, we pay the seller the profit in the deal – being the balance of the selling price, less our fees. The seller also gets to set the selling price for a period – 60 days, for example,” he tells finweek.

On the other end of the transaction, getWorth offers the car buyer a seven-day, 700km money-back guarantee on most of its vehicles.

“It’s like a seven-day test drive,” says Morgan, who adds that the company’s lean cost structure allows lowers its fees when compared with conventional car dealers.

Ensuring provenance 

While the large online car-trading sites offer cash and convenience, they typically operate as wholesalers and on-sell the vehicles to traditional dealers. This, Morgan argues, adds a middleman and often results in the vehicle’s service and sale history being lost in the process.

All vehicles purchased by the business are subject to a 100-point inspection, which is available to the buyer for full disclosure.

After inspection, getWorth reconditions the car before it is advertised for sale. A single “curator” is responsible for this entire process and enables the company to provide what it calls the “provenance” of the vehicle.

Morgan adds that the extensive use of technology in the buying, pricing, risking and selling of a vehicle creates a more complex process than a straightforward buy-and-sell.

“However, we are not a pure tech business – more a blend of tech, financial and auto. We looked at various approaches, but we realised that we had to be strong in all three areas to address the real market challenges. 

“We use our tech to inform both ours and our customers decisions – we do not hold all the cards but rather make the playing field as even as possible by fairly balancing all parties’ outcomes,” he elaborates.

Funding boost

Originally trading in “stealth” mode to protect the business’s intellectual property, the founders self-funded the initial stages of the business, working out of an office above one of their garages. 

Their first investment success came after the girlfriend of a potential investor used the fledging company to sell her Audi A1. “She became our first client, and it went really well,” says Morgan.

The company has since announced a new investment from an unnamed international source that has increased the total committed funding for the business to R18.5m.
 
“We have received phenomenal interest and enquiries from international auto industry players regarding the unique and innovative approach we have adopted in the local market,” notes GetWorth co-founder Jamie Surkont.

“They were impressed by how strong the proposition is and how positive the customer response has been. To give you an idea, our average bonus paid out to sellers has been R40 000 over and above their trade value,” he explains.
 
The funding will not only be used to improve getWorth’s technology, but will also assist with working capital to grow the business.

A portion of the funding will also be channelled towards developing a pipeline of other new products for the used car market.
 
“The most exciting is a bridging product that will assist people who are underwater on their vehicle loans, helping them to trade out in a responsible and un-hurried manner,” Surkont adds.

Quality control

Morgan concedes that attracting customers to the concept hasn’t been without its struggles, describing the number of sellers looking to offload lemons or accident-damaged cars as “alarming”.
As a result, the business has developed a fastidious vehicle review system.

“We are very precise in our buying processes and stand behind what we sell. We don’t just buy any car. Some weeks we end up killing two-thirds of potential purchases because we are unable and or unsatisfied with the vehicles’ background or quality.

“Encouragingly, we’ve had customers whose cars we have turned away come back and buy cars from us just because they saw how thorough we were,” he notes.

The company has also encountered challenges in communicating the unique value proposition to potential customers, as most people are accustomed to the traditional used car market and its way of doing business.

“The fact that it is new and interesting does attract some early adopters, but a greater proportion of people are not willing to spend effort to understand,” Morgan says. 

He adds that getWorth has lost several deals because of its policy of deliberately unbundling transactions. 

“Rather than blending the new car price and options, trade-in and financing arrangements, we separate the elements and attempt to price each portion transparently. 

“For example, a potential buyer will walk away because someone else is offering a higher trade-in, but not realising that the higher price on the car that they are buying is subsidising it. We haven’t overcome this challenge and we’ll continue to lose deals,” he says.

He hopes a change in customer price perception will solve this dilemma.

“We hope that the pain we take now will pay back in the long term. The disciple of a data-driven approach gives us something we can understand, own and justify both to ourselves and our customers,” he explains.

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