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A Shift in Buying and Selling Used Cars

George Arison

Founder and CEO, Shift

For many of us working at Shift, cars are more than a job; they’re a passion that connects us to a fundamental aspect of the American experience. There are few rites of passage more symbolic and positive than a 16-year-old getting his or her driver’s license. It’s a moment that represents freedom and possibility, and those themes extend beyond adolescence and into adulthood. And that is a major reason why we are so frustrated that most people have such terrible experience buying and selling cars.

For too many people in the U.S., the prospect of participating in the used-car market ranks somewhere between a root canal and a tax audit on the list of worst possible experiences. Sure, we’re frustrated, but we also see an opportunity.

The price of gas is incredibly low right now, and car sales have never been higher. About 17.5 million cars were purchased in the U.S. last year, setting an all-time record. Year-over-year sales have increased for the last six consecutive years now, and we’ve seen nothing to indicate that a change in that trend is imminent in the short or medium term. Car ownership is here to stay.

In fact, the most reliable data suggests that the ever-elusive and all-important millennial generation is choosing car ownership at an extraordinary rate. According to a recent report by JD Powers & Associates, long considered the premier American research firm for making sense of the car industry, millennials surpassed Generation X in car purchases two years ago. In 2014, they actually accounted for 27 percent of new car sales in the U.S., up from 18 percent in 2010.

The car marketplace is a $1.2 trillion industry begging for innovation. Yet, the used car industry is filled with antiquated practices that make no sense in the digital age, and we’re working to correct that. We want to bring the great values of the digital age — big data, transparency, and fair pricing — and to ultimately create a better, fairer way for customers.

Running on Empty

Take the Kelly Blue Book, which is still considered the go-to text for setting a used car’s price.  However, the static prices KBB offers are obviously the result of inflexible algorithms and depreciation curves, which do a disservice to buyers and sellers alike. KBB’s pricing tool for used cars asks prospective sellers to describe their cars as one of four conditions — poor, fair, good, or excellent. However, cars don’t only come in four discrete conditions, and damages or defects can be hard to categorize based on an over-simplified checklist.

Furthermore, KBB’s suggested prices are based on very wide geographical regions like the midwest or the west coast. Both Seattle and San Diego are cities on the west coast, and yet, the former averages 38 inches of rain per year while the latter experiences a measly 9.9 inches. The difference is paramount when considering the health of a car — not to mention that such wide groupings make it impossible to offer accurate prices based on what is actually for sale nearby. While a certain model might be worth $18,000 in theory, its value will be lower if there are a number of similar options available, and KBB has no means of offering the consumer insight into his or her local inventory.

And that’s just one example! There are so many others that it would be impossible to list them all here. They do, however, extend to almost the entire industry, touching on financing, repair, and logistics. In each of these categories, there is a better way to service this economy.

Souped-Up Solutions

Shift combines new technology and operational excellence to provide consumers a better, fairer experience. We’re using machine learning and data processing to predict consumers’ tastes while offering real-time pricing based on the enormous multitude of factors that impact the used-car industry.

Before listing a car for sale, we first take into account the popularity of the brand, the quality of the manufacturer, the options it possesses, the environments in which the car has been driven and stored, the miles on the odometer, and whether miles were accrued on a snowy road or a sunny highway. We consider all of these aspects and many more to determine the fairest possible prices.

Of course, none of this is easy. We’re creating a two-sided marketplace that services buyers and sellers, which requires extraordinary logistics and relies on cutting-edge technology, tightly honed operations, and top-flight engineering. All of these come together so that the seller can give us his or her car knowing that Shift will put it through a rigorous inspection process and then on the market with a fair, trusted, and objective verdict on the car’s condition and value. Our logistics allow us to deliver cars directly to buyers’ house so that they can test drive as their convenience around their neighborhoods. The entire process is simplified and transparent. Everyone wins.

George Arison

Founder and CEO, Shift

George Arison is the founder and CEO of Shift, an online marketplace disrupting the $1.2T car industry by fundamentally transforming the experience of buying and selling a car. Previously, George co-founded Taxi Magic…