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Cash for your car

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"Our mission is to empower customers to sell and buy used vehicles seamlessly,” says CarZar co-founder and joint managing director, Fernando Azevedo Pinheiro, in an interview with finweek. 

Having first-hand experience of the pitfalls and difficulties that come with selling a second-hand car in South Africa, Brazilian-born Pinheiro decided that there had to be a better, simpler way to go about this transaction. 

When it came to selling his car, he failed to find a single dealership in Cape Town, where he is based, that was willing to take it off his hands. When he eventually managed to sell it, it was for much lower than the car was actually worth – and the offer came from a Johannesburg dealership. 

After meeting Michael Muller, who is joint MD of CarZar and has also experienced the joys of selling a car, the model began to take shape, and the two co-founders secured their first round of funding from SilverTree Capital.  

“We launched version 1.0 in April 2016 – it was very basic. We really believed in the model and we wanted to make it happen fast, so we acted quickly,” explains Pinheiro. 

And so the CarZar journey began. This online platform allows South Africans to sell their cars, at competitive prices, quickly and conveniently.  

Potential sellers simply go onto the CarZar website, enter the make, model and year of their vehicle, as well as its mileage, and a selling price range is generated. Should the seller be happy with the range, CarZar sends a fully trained, professionally equipped team of inspectors to assess the car, after which the selling price is confirmed. 

The CarZar service is completely free for sellers; the business generates revenue by selling the vehicles to its extensive network of dealerships at a mark-up.   

The dealerships that CarZar works with can rest assured that the vehicles they purchase are vouched for as well. “We take full responsibility for the vehicle inspection. If there is something wrong with the car that we did not pick up, we assume responsibility,” says Pinheiro. In this (rare) scenario, the dealership receives a discount or is fully refunded.   

Moving into the fast lane 

Pinheiro and Muller didn’t have auto industry experience and they had to learn all about buying and selling cars, as well as build up a network of dealerships. But, says Pinheiro, this wasn’t the biggest challenge when it came to CarZar.   

“Learning to buy and sell cars was not the tricky part, educating customers on how pricing and valuation works, was. Sometimes they don’t understand the reason for the price that is offered to them, since they don’t take into consideration the reconditioning costs of the vehicle and that retail price includes operational costs as well as profit of the dealership.”  

Sellers tend to expect that their car will fetch its book value, but, explains Pinheiro, this is just a benchmark and at the end of the day, a vehicle’s market value tends to be far below that.    

While it makes sense for insurance companies to use the book value of a vehicle in order to determine premiums (the higher the value of your car, the higher the premium you have to pay), this can lead to an overstated value, and expectation from the seller. Pinheiro’s aim has been to show customers that it is far more beneficial to sell a car for a fair price, and have the cash in hand. Further, by using CarZar, the seller has more freedom of choice than they would if they simply traded their vehicle in and became locked into a particular dealership, according to him.    

Shifting gears 

CarZar has proven its economic viability to its funders, and has secured three rounds of funding since launching.   

The CarZar team is happy with the young company’s performance, and Pinheiro believes they are on the right path to furthering the business.   

“In 2016 we had about 6 000 online bookings through our site, excluding enquiries we received offline. And we have been growing at around 30% per month,” he enthuses. 

As for expansion plans, the vision is ambitious, but Pinheiro insists that they want to perfect the business model in SA before scaling up.  

“We like to dream big,” says Pinheiro. “We really believe in this model. Our vision is to be the biggest car wholesaler in Africa.”  

He believes there is a great number of opportunities on the continent, but on the immediate agenda is establishing a presence in all of the major metros in SA – currently CarZar only operates in Cape Town and Johannesburg.   

When asked how long before African expansion becomes a reality, Pinheiro says that they will operate in SA for another year or two before tackling other markets. “Once we are an established brand in SA, we will be big enough, have a strong team, and will be able to manage operations here and abroad.” 

This article originally appeared in the 16 February edition of finweek. Buy and download the magazine here.

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