Britain’s motorists are not short of options when it comes to buying and selling used vehicles online.
There are general marketplaces such as GumTree and eBay, online dealers such as CarGiant and established classified ad sites such as Motors.co.uk. Even Auto Trader, once a cherished print directory for car enthusiasts, has gone digital only.
But a group of new entrants with snappy names such as Carspring, Carsnip and Tootle has set out to shake up the UK market for second-hand cars.
The challengers are eyeing a significant prize. More than 7m cars change hands on the UK’s second-hand car market each year. This makes the segment three times bigger than the new car market by volume and, with an average transaction price of about £6,500, worth a similar amount — more than £45bn, according to BCA Marketplace.
“The reason I was interested in the auto space was the sheer size of it,” says Langley Steinert, the co-founder of TripAdvisor who went on to set up CarGurus, an online portal that launched in the UK in December. “It’s a huge category.”
Not only is the market big. British customers are embracing second-hand car finance deals with the same appetite that has driven new car sales to record levels. The online entrants say this gives them greater scope to increase transparency and convenience versus bricks and mortar dealerships.
A similar trend has taken hold across the Atlantic, with the rise of online dealerships in the US, such as Beepi, Vroom and Shift.
Britons are also more willing to shop online than other Europeans.
“Germans are more emotional about their cars — they want to smell the leather,” says Peter Baumgart, co-founder and managing director of Carspring. “Here [in the UK], people are more convenience orientated.”
But the large UK second-hand car market also has one rather large incumbent. About two-thirds of used cars sold in the UK appear as classified ads on Auto Trader. The company is responsible for about 80 per cent of the time Britons spend looking for a second-hand car online. Many challengers have tried unsuccessfully to prise customers away.
Auto Trader, which listed in London in March 2015, considers itself a “digital automotive marketplace” and 70 per cent of traffic is on mobile devices. It has sought to innovate by introducing such products as i-Control, which helps dealers price vehicles more accurately.
Those dealers — who handle about two-thirds of actual used car transactions in the UK, with the remainder sold privately — are meanwhile keen to grab a portion of the online market themselves.
“They’re all investing,” says Mike Allen, analyst at Zeus Capital. “All of the dealerships have got a digital strategy and are using it as a way to grow.”
However, armed with a belief that the industry is “ripe for disruption” — as Mr Steinert puts it — the new entrants are trying to offer something different.
Set up in 2007, CarGurus is already a proven proposition in the US. The company is trying to increase transparency by using widely sourced data to assess the quality of used car prices.
Search results are ranked by how aggressive the listing is, based on how far below the “market rate” the car is selling for. Dealers can pay to list their inventory and access full customer information.
But results are also ranked according to a dealers’ reputation according to users of the site.
The site also details how long the car has been on the market and the price history. “If it’s been on the market for 120 days and has had five price drops the dealer’s probably pretty anxious to sell that car,” says Mr Steinert.
Tootle is focused on helping consumers sell their cars — mainly to dealers. That puts it into competition with We Buy Any Car, whose parent company BCA Marketplace listed last year, and which is the UK’s biggest used-car buyer.
Tootle tries to create a better price for drivers by allowing dealers to secretly bid against each other for the asset. That means users get prices up to 20 per cent better than on Webuyanycar.com, says Dominic Perks, head of investor Hambro Perks.
“Tootle isn’t in the world to disrupt,” he says. “It’s helping consumers get the very best, and least stressful, deal.”
Mr Perks says the site is also helping dealers who tend to find it hard to buy the cars they want at the right price. Rather than using auction houses, Tootle offers a way of going direct to the consumer.
“The current buying channels are very inefficient,” says Mr Perks.
Unlike other new entrants, which are simply attempting to match cars, sellers and buyers, Carspring follows the model of CarGiant, the UK’s largest online dealership, and actually holds its own stock.
The 10-month-old company — a start-up backed by Germany’s Rocket Internet — lets buyers transact entirely online, handles paperwork and inspections and, upon delivery, gives motorists 14 days to hand back the car.
That model, which the company compares to Amazon, makes Carspring a UK-wide service in what is traditionally a highly localised second-hand car market.
Carspring has sold almost 200 cars in the past five months, with less than 3 per cent returned so far.
Carsnip is attacking the root cause of many problems associated with the used car market: finding cars. Many cars are not displayed online by dealers on sites such as Auto Trader because they have to pay to list them.
Carsnip does not charge dealers to list on the site — shunning the traditional, classified ads model — but instead “crawls” the web to try to build a complete picture of all the cars on sale in the UK.
Pitching itself as a “Google-type thing” for cars — and counting Alphabet’s head of special projects, Adrian Aoun, as an investor — the company is trying to create a more natural way of searching. The term “Audi A3 VW Golf Seat Leon £20000”, for example, returns each of those models priced between £18,000 and £22,000.
“In the car business the search is broken for the consumer,” says Alastair Campbell, who founded the business last year.
Eventually, Carsnip plans to move to a pay-per-click model that would allow dealers to move up the search rankings. It also plans to embed its search bar on consumer websites.
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