Cazoo founder takes swipe at car dealers as he labels current used car sales model ‘flawed on every level’

Time 7:50 am, November 17, 2020

Cazoo founder Alex Chesterman says he was attracted to the used car industry because it had a ‘complete lack of online penetration’.

In a wide ranging interview with The Times, the Zoopla founder takes a swipe at traditional car dealers as he lays out the problems with the market, which the paper calls ‘flawed on every level’.

Taking aim at short test drives, haggling and a ‘significant gender bias’ where ‘women feel particularly disadvantaged’, Chesterman explains why he feels the market is shifting in Cazoo’s favour.

He told the paper: ‘You’re given seven minutes for a test drive. This is the second largest purchase you are likely to make after a property and the experience is really not a great one.’

The article adds: ‘Britons buy about eight million used cars a year and Mr Chesterman believes the market is flawed on every level…the process is inconvenient. Buyers must travel miles to showrooms, which typically have only a couple of dozen cars to view.’

Chesterman reveals Cazoo has sold 10,000 cars in 11 months and is ‘poised’ to break through the £150m revenue mark.

As a comparison, listed motor group Marshall generated £903m from used car sales in 2019, while listed car supermarket Motorpoint clocked up over £1bn in used car sales in its last financial year.

The report also suggests that Cazoo is planning to offer its own loans in the future where as currently it deals with finance companies.

And it also states Cazoo ‘plans to generate money from service and repairs after buying the Imperial Cars chain in July’.

This is an interesting revelation and one that would see the company move further away from an online-only sales model to a more traditional dealer model.

The purchase of Imperial Car Supermarkets has seen the online retailer set up distribution hubs where customers can collect their cars, moving away from its direct-to-customer delivery model.

Chesterman also tells the paper that next year Cazoo will set up a ‘Netflix for cars’ package that will provide a car for a monthly fee that will also include tax, MOT and maintenance, breakdown and insurance. 

He says this is designed to ‘appeal to people who want more flexibility and less commitment’.

Commenting on the rumour that Cazoo will soon go public he tells The Times that the used car dealer has ‘no need’ to raise capital.

He added: ‘We’ll think about it at some point in the future, but not for the time being.’

Last month, Car Dealer reported that Cazoo made a loss of £19m in its first year of business, according to accounts filed at Companies House.

The used car dealer – which has attracted £450m of investment, valuing it at £2bn – posted the loss, but directors were comfortable the business was a ‘going concern’.

Many have been making online sales a success for years, including leasing broker Vanarama.

Car Dealer visited their head office and met CEO Andy Alderson for an exclusive tour, in which Cazoo is discussed. You can watch that video at the top of this post.

Cazoo will shortly face more rivals in the online sales world when Big Motoring World’s Peter Waddell and industry stalwart John Bailey launch Carzam.

It is believed the launch has been delayed until after the second lockdown.

Auction house BCA has also rolled out its Cinch platform which sells used cars direct to consumers from its own stock as well as dealer partners.

We interviewed Jason Cranswick about the launch in an exclusive video you can watch below.

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Car Dealer has been covering the motor trade since 2008 as both a print and digital publication. In 2020 the title went fully digital and now provides daily motoring updates on this website for the car industry. A digital magazine is published once a month.

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