With $50 million in new funding, the online used car marketplace Shift is hoping to drive off the stereotypes and outrace the stigma associated with buying used cars.
In the U.S., buying a used car is a rite of passage that most people go through at least once in their lives. In fact, there were about 41.5 million used cars sold in the U.S. last year alone.
For most of those people, here’s how the experience goes. They get a lift or catch a bus to the shadier outskirts of town past the new car dealerships where row after row of shiny new cars sit gleaming in the late-summer sun.
Looking longingly out the window at the freshly washed, buffed and polished new cars, they pass by, and arrive instead at a parking lot with some newly-cleaned, older-model cars; some cars with clear damage to their bodies – dinged fenders, broken tail lights, scuffed doors; and some rusting carcasses that have picked over with only their rusting shells propped up on cinder blocks among the shoots of weeds.
There’s a bull market in used car sales right now, thanks to tight supplies coming out of the recession. Automakers severely cut back on their new car stock in the wake of the financial crisis, since no one was buying, which has led to a sellers market now as people now shop around for their first set of wheels.
Shift is hoping to take a chunk out of that market, with a new model that provides transparency, service, and convenience. In the process the company is hoping to challenge the dominance of Craigslist and used car lots across the United States.
With the $50 million in new money, which landed in the company’s checking account on Thursday from investors led by Goldman Sachs and including Shift’s Series A investors DFJ and Highland Capital Partners, San Francisco-based Shift is hoping to expand beyond its Bay Area and Los Angeles roots.
“We think that any city with 250,000 people or more could have an awesome Shift marketplace,” says Shift chief executive and co-founder, George Arison,
What differentiates Shift from other used car outlets is the transparency and quality control that the company brings to the market. Would-be buyers get to test drive their cars on0-demand, with a Shift employee bringing the car to a user.
“We don’t want to make a lot of money on the car itself. Marketplaces win when they offer a better product for less money. George Arison - CEO, Shift
All of the company’s cars are certified. “Every car goes through an inspection,” says Arison. “If a car is in good shape then it meets the bar. If we find something with the car that is wrong we help the seller recondition the car.”
Beyond working with owners to fix cars, Shift also handles the paperwork involved in transferring the car from one owner to another.
Shift has a pricing algorithm that it uses to take the guesswork out of that part of the process and is looking to layer on other services in the future. Arison envisions Shift as a full service operation, providing regular maintenance for vehicles, and financing options for would-be buyers.
“We don’t want to make a lot of money on the car itself,” he says. “Marketplaces win when they offer a better product for less money. Pay less than you would at a dealership and have the seller make more money than if they had taken the car to a dealer.”
Shift isn’t Arison’s first time behind the wheel of a transportation startup. He previously worked on developing Taxi Magic, a ride hailing application that’s now operating as Curb.
Now, with Goldman Sachs’ new commitment the company hopes to bring consumers more options to own their own cars — right at their front doors.