Data drives innovative approach to selling used cars

Still, used car values remain a whopping 49 per cent higher than they were in August 2019, just before COVID-19 hit.

According to Yosuke Hall, co-founder of the online used car dealership Carma, the average price declines cited don’t tell the full story of what’s going on in the market.

“It’s true that new car supply is coming back, but it depends on the manufacturer and the brand,” he says.

“Some brands have overcome their logistics problems and are readily available, but with some popular vehicles such as the Toyota RAV4 hybrid, the waiting time could be 12 or even 24 months.”

Hall adds that with interest rate uncertainties, the prestige market has had steeper declines than value brands.

For buyers, the used car “sticker shock” creates more angst to the buying process, which usually involves trudging to a distant dealer site and engaging in unpleasant negotiation.

A physical dealer also might stock only 20 used vehicles, with the buying decision guided by a 15-minute test drive.

Hall says that with more than 5000 physical dealerships across Australia, consumers face an overwhelming amount of choice and a lack of consistency.

Data leads the way

For the innovative Sydney-based start-up, the process can be made easier and seamless. Founded in 2021 by Hall and Lachlan MacGregor, Carma is an online platform that offers hundreds of quality-assured vehicles directly to consumers.

Carma is a single online destination to source and finance a quality used car, either via outright purchase or a trade in. The vehicles are owned by Carma and not third parties.

According to Hall, data plays a key role in sourcing and preparing Carma’s vehicles.

“There is so much data in the car industry, but it is not necessarily harnessed as well as in other industries,” he says. “We see this data usage as integral to understanding the pricing of vehicles and having better consumer offerings.”

Carma’s vehicle acquisition team uses data-driven techniques to review hundreds of used cars daily, with 90 per cent of them rejected.

Nonetheless, around 750 vehicles are listed for sale on the Carma site – including hard-to-find RAV4s, Toyota HiLuxes, Ford Rangers and electric vehicles.

Hall says while there are no hard and fast rules, Carma focuses on vehicles two to five years old, often with a transferable manufacturer’s warranty (it also offers a statutory three-month guarantee).

Typically, the cars sell for between $30,000 and $50,000.

Also guided by data, Carma has perfected a multi-stage and rigorous inspection process evaluating a vehicle’s exterior, interior and mechanical condition.

“There is so much data in the car industry, but it is not necessarily harnessed as well as in other industries. We see this data usage as integral to understanding the pricing of vehicles and having better consumer offerings.”

— Yosuke Hall, co-founder of Carma

The cars are subject to cosmetic and mechanical repair at Carma’s 50,000 square metre-facility, with all the work carried out in-house.

The cars are delivered to the customer’s door across greater Sydney, generously defined as anywhere between the Central Coast in the north, Wollongong in the south and the Blue Mountains.

While buyers can’t test-drive the cars, the Carma site enables an immersive online tour via the use of 360-degree cameras and extensive lighting.

Ultimately, buyers have the comfort of a no-questions-asked, seven-day returns policy – in effect, a seven-day test drive.

“The return rate runs in the low single digits and about half the time the customer has swapped to a different model,” Hall says.

Meanwhile, interstate and regional customers are free to pick up vehicles from Carma HQ at Sydney’s inner-city Alexandria, conveniently close to the airport.

With more than 130 employees Carma has achieved strong growth. Initially, US venture capital firm Tiger Global provided $28 million in seed funding. A subsequent $75 million ‘series A’ round last year was led by General Catalyst Partners and supported by participants including Tiger, local private equity house Five V Capital and family office Terrace Tower Group.

“It is still early days but we are in a fantastic position because we have come into the market first and established ourselves as both a used car dealership and a technology business,” says Hall.

To learn more, visit carma.com.au/