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A Cape Town startup is looking to change the way customers buy and sell cars on the internet, by using machine learning and what it says is a unique payment model.
The startup launched its platform last month after trading for six months to gain proof of concept.
Get\Worth co-founder Mark Ridgway – a former CEO of TransUnion Receivables – says the company was able to conclude about R20-million in deals through the platform in March.
The startup’s model is different from other online car dealers such as CarZAR.co.za and WeBuyCars.co.za.
‘We think this is almost first world. No one is providing a product to the seller (like this)’ – get\Worth co-founder
When get\Worth takes ownership of the car, the seller is able to get immediate cash in hand, just like most other online car dealerships.
However, get\Worth claims their model is unique as the seller is then also able to get a further payment based on the difference in the trade and retail price that the dealer is able to conclude after subtracting its fees.
“We are offering more than cash, we are offering value too,” says Ridgway. “We think this is almost first world. We’ve researched it. No one is providing a product to the seller (like this).”
The company charges buyers’ fees that are calculated as R7500 on each sale plus 1% of the retail price as well as a financing fee.
After refurbishing the car, the company takes an average of between 60 and 90 days to reach the best possible sale price for the vehicle.
Buyers are able to tap vehicle finance and get seven days or 700km after the sale of a vehicle in which they are able to return it for a money back guarantee.
As an example, Ridgway says the company was able to pay a seller an extra R160 000 on a Mercedes-Benz GL350 following the initial R380 000 the seller got on the trade value of the car, before get\Worth were able to sell it to a buyer for R569 000. Fees made up the difference of R19 000.
In another example he provided, a seller was able to get a retail price of R229 000 for their 2013 Audi A1 1.4t Ambition S-Tronic after a search for a buyer after 40 days, upon initially securing a trade price of R175 500 with the company (and after factoring in repair costs).
After the deduction of fees the seller was able to get a further R27 000
Ridgway says the founders as well as friends and family have together invested about R10-million in the startup and are now in talks with various investors to obtain R4-million in funding.
The company’s lean operation also helps to cut costs as the company has no fancy showroom, operating instead from an industrial area of Montague Gardens, where vehicles purchased from sellers are stored in a warehouse.
To calculate the best trade price for a client’s car the startup deploys machine learning algorithms which consider variables such as retail price points and the car’s age and mileage.
“When you get older you get a bit grumpy”
Initially the three sought to buy an existing dealership with the idea of doing things differently. However, they found that the industry structure was facing huge change and decided it would be better to lead rather than follow. “It’s about disrupting things,” says Ridgway.
While he says the startup will mostly target millennials who are looking to the internet to buy cars, he and fellow co-founders Jamie Surkont (a former CEO of Electronic Toll Collection) and Colin Morgan (former business manager) are all over the age of 40. “When you get older you get a bit grumpy,” admits Ridgway, who is 55.
The company admits that its main barrier is that of communication and differentiation, because the product is novel and more complex than a straightforward traditional buy or sell.
Another challenge is that the company had to reject 40% of the 205 deals valued at R36-million that passed through the platform during March.
Ridgway says deals were rejected either because sellers’ vehicles were too old, had very high mileage, because the seller was from an outlying area, or because the seller’s vehicle financing debt with the bank exceeded the vehicle’s possible trade price.
Currently there are 17 vehicles up for sale and 25 deals in the pipeline which represents about R8-million in potential revenue, with average deals valued at about R250 000, he says.
In the short term, the company, which has seven employees (including the founders) will focus on South Africa and Ridgway says plans are already underway to open a branch in Johannesburg.
The company has lodged patents on certain aspects of its product and the founders intend to find offshore partners to assist a roll-out in selected countries.
Their immediate aim is to reach 1000 vehicle deals per month and expand to covering other assets and providing additional services, citing financial products as one example.