There’s a new way to buy used cars (and not a moment too soon)

The new way to buy a used car

Lesson summary

Hello again and welcome to Plain English lesson number 313. I’m Jeff; JR is the producer; and this full lesson can be found online at PlainEnglish.com/313.

Coming up today: a new generation of startups is aiming to revolutionize the process of buying a secondhand car—and not a moment too soon! The market is ripe for disruption and on today’s lesson, we’ll talk about three ways these innovative new companies are changing car buying for the better. The expression is “nooks and crannies”—not, I would say, an essential part of your vocabulary, but a good phrase to know nonetheless. And JR has a nostalgic song of the week.

The new way to buy a used car

Last week, we talked about why it’s so miserable to buy a used car. This week, we’ll talk about the companies around the world that are working to make the process less painful—even, dare I say, fun.

This new generation of startups aims to bring a customer service mindset and advanced technology to a market that is often seen as shady. There are several of these platforms around the world, but I’ll focus on three of them today: Cazoo in the UK; Carvana in the US; and Kavak in Mexico. All three are well-established national or international platforms. Kavak just became Mexico’s first unicorn: its first private company to be valued at over $1 billion. These three are the biggest players, but the market around the world is heating up. In Brazil, Volanty and Carflix have both raised venture capital from foreign funds. List auto is active in Canada. Auto1 and Heycar are active in Europe. Checkars, recently acquired by Kavak, is in Argentina.

Together, these startups are changing the process of buying a high-quality secondhand car. Here are the three biggest changes.

First, the platforms shrink distances. When you look to buy a used car, geography is a significant barrier to finding the product you want. Unlike most products that can be shipped by mail, cars cannot easily be shipped or delivered; this is especially true when the seller is an individual. Even most dealerships will only deliver within a small radius. Therefore, buyers face a limited pool of potential cars to buy. This is especially difficult in countries like Brazil or Colombia, where the distances are as great as the roads are bad. If a seller and buyer are more than a few hours apart, the sale doesn’t happen.

But large platforms nationalize the market by promising to deliver the vehicle to the customer’s door. In this way, they shrink the distances and open up a much larger pool of buyers and sellers. When there are more buyers and sellers, there’s a greater chance that satisfying matches can be made. It looks fun, too. Kavak’s cars are delivered on a clear trailer, towed by a pickup. Cazoo has custom-built branded flat-bed trucks for car delivery. Carvana promises you can pick your car up at a giant car vending machine. This is a bit of a gimmick, but it’s a staging ground for car pickups. You arrive at the storage location and see your car through a window in a tower high above the ground. When you confirm your identity, the machine dramatically lowers the car to the ground and you can drive it away.

But hold on: even if the platforms can deliver a car to your door, would you buy a used car without inspecting it first, free delivery or not? That brings us to the second way the platforms aim to change car buying: they take care of the inspections and they put their own reputations behind them. Remember last Thursday I described the problem of asymmetric information? The new platforms try to solve that problem by performing their own inspections and maintenance on the cars on their sites. Many online platforms just connect buyers and sellers—this is what Uber and Airbnb do, right? But the new carbuying platforms are the ones selling you the car. In this way, they control the quality of the cars they are selling and they put their own brand reputation behind it.

They have invested heavily in building this trust. Carvana details all the inspection and restoration procedures it performs. They do multiple test drives and inspect the engine, transmission, suspension, tires, brakes, undercarriage, interior and exterior. They even promise to fix cosmetic damage like scratches. If there’s cosmetic damage they can’t fix, like stains or dents, they classify them in one of three levels, so the buyer knows exactly what defects come with the car.

Cazoo, in the UK, has a massive central warehouse in England where the cars are all refurbished and prepared for sale. Kazak has a dozen inspection centers spread out across Mexico. With national—and now international—reputations to defend, the platforms cannot gain by defrauding customers and selling them cars in bad condition. So they have every incentive to only sell quality cars, fix most defects, and disclose any imperfections.

If you’ve been listening a while, you know that I tend to be cautious when making big decisions. Even with the inspection and the reputation of the seller, I personally would still be wary of buying a car online if I haven’t driven it first. And these companies have the answer to that objection, too: you can often drive the car for a while—at least seven days—and return it for a full refund if you’re not happy. In that way, the platforms provide peace of mind to buyers who select a car without driving it first. They are borrowing from some more mature direct-to-consumer companies that also offer generous free returns in order to provide peace of mind to their customers.

That leads us to the third way these platforms are aiming to disrupt the market: customer service. This is where Uber was so revolutionary. Uber took an industry—taxi cabs—that had an abysmal reputation for customer service and revolutionized the industry with the customer front and center. Carbuying platforms aim to do the same thing. Cazoo provides free insurance for seven days, giving you the freedom to arrange your own car insurance in the days after your purchase. Their listings include an innovative way to see photos of every nook and cranny of the car, inside and out. Kazoo lets you make an online appointment to see your car via videocall. All platforms now emphasize their sanitization protocols and contactless processes.

The platforms also provide financing. This was one of the big problems with the used-car market that we discussed last week. Banks simply do not trust the quality of the cars bought and sold by individuals, so they often don’t lend in the used car market, especially in developing countries. People who want bank loans for a used car often cannot get one, so they resort to buying expensive new cars instead. But if the quality of a secondhand car is guaranteed by a big company, then banks’ concern about their security is partially alleviated. Kavak, Cazoo and Carvana all offer financing on the cars they sell. The smaller platforms can’t offer this at first, but as platforms grow, they can enter into partnerships with banks to offer their customers financing.

This revolution was overdue. Cars are a very large purchase for most families and the whole process is unpleasant and fraught with danger. They won’t fully replace the individual market for used cars. The platforms won’t buy very old cars, or cars in poor condition. There will always be the individual market for those lower-value, lower-priced cars. But at least now buyers looking for higher-quality secondhand cars have the option to buy from a reputable seller. Now if only someone would shake up the market for new cars in a similar way!

Any experience with these platforms?

Last week I told you about my 1998 Toyota Corolla, which I owned for twelve fantastic, glorious years. I loved that car. I sold it when I moved to New York in 2014. I spent three years without a car, but when I moved back here to Chicago in 2016, I bought a new car, a Mazda3. It’s definitely more economical to buy a secondhand car, but I knew I was going to keep the car for a long time—a decade or longer. And I just didn’t trust the used-car buying experience. I didn’t trust myself to be able to inspect it. I didn’t want to run the risk. At the time, Carvana was new and I just didn’t trust it. They were pushing this gimmick of buying the car from a vending machine: I just wasn’t ready for that. But if I were looking to get a car today, I would give serious consideration to these platforms.

I’d love to hear from you—if any of you have purchased a car from a platform like this, Kavak especially. I’d love to hear how it went. Post in our free Facebook group; you can join by visiting PlainEnglish.com/Facebook.