Start-up snapshot: A new way of selling used cars

CarZar founders and managing directors Fernando Azevedo Pinheiro (left) and Michael Miller

CarZar is a South African online platform through which users can sell their used cars. Upon entering the website, customers are prompted to enter the details of the car they wish to sell. CarZar then provides customers with an estimated quote and requests they book an inspection of the vehicle – which can take place at either the company’s inspection centre or a location of the user’s choice. Following the inspection they make an a cash offer, which customers can then accept or decline.

How we made it in Africa spoke to CarZar founders Fernando Azevedo Pinheiro and Michael Miller about their experience 10 months in.

1. How did you finance your start-up?

Since this is a very capital intensive business model, we needed to find the right partner that we could work well with and that is also relevant in the tech-space in Africa. Silvertree Capital, a South-African based venture capital firm, was a really good fit and it has been with us since the beginning. We pitched them our business model, they saw potential and decided to support us with seed funding to validate the concept, and then the next round to finance growth.

2. If you were given US$1m to invest in your company now, where would it go?

Without a doubt we’d invest more in marketing, product improvement and operations – as we look forward to extending our coverage across South Africa. We are a tech-company and the core product is at the very heart of our business. Our mission is to empower customers to sell their vehicle seamlessly. Although we’ve been collecting great feedback from all our customers, we believe in continuously improving and bettering ourselves to exceed customers’ expectations.

3. What risks does your business face?

There are several challenges, but the most difficult one for us to educate the general public about how the pricing and valuation works in the auto trade industry.

Sometimes they don’t understand why the price we are offering is fair, because they tend to use classifieds or book value as a reference and because they still need to get familiar with recondition costs. While some consumers look to online classifieds and insurance calculators to check the trade value of their vehicle, these don’t tend to be the most accurate, because they state the asking price, but what the car eventually sells for is almost always way lower. They are generally quite disconnected from the actual market value, and overstate the value of a car, especially for less common vehicles.

Websites like CarZar are the most reliable source for vehicle pricing. We’ve developed a unique pricing algorithm able to calculate a quote estimate by taking into account market and historical data as well as fluctuations of supply/demand in the market.

In a few words, customers got used to trading-in, while it is way better to sell your car for a fair price. With cash in hand, customers have higher bargaining power, more freedom of choice and they don’t need to be locked-in with one dealership.

4. So far, what has proven to be the most successful form of marketing?

We are very performance driven, so online campaigns have been working well for us – but we are also exploring offline medias. We are a 10-month-old company, so it is still too soon to say what is the most successful one, because we test a lot of different things and strategy changes from month to month.

5. Describe your most exciting entrepreneurial moment.

Obviously, our most exciting entrepreneurial moment has been our first online car purchase. We really got the feeling that the hard work we had done in the previous months was producing the positive results we had expected!

6. What has been the biggest mistake you have made in your start-up, and what have you learned from it?

We faced several challenges, however, the biggest mistake has been to hire wrong profiles for important roles. But we’ve learned the lesson – never sacrifice the quality of human resources. It will affect your business growth and the right choice will pay off in the long term.