How you buy, sell, and trade-in used cars is broken. Reverse Dealer, a business in Alberta wants to change it all.
There’s a small business in Red Deer, Alberta that you’ve probably never heard of. But they’ve got an idea that goes against the way used car business has been done for a hundred years.
Typically, when you want to get rid of your car, you have two options: 1) You can trade it in, or 2) you can sell it privately.
For most people, option one goes something like this:
“Hi I’d like to trade-in my car”
“Sure, it has all these issues, plus the market is flooded with those, and no one is buying them, so best we can give you is $9,000.”
“But you’re selling them for $14,000!”
“Yes, but yours is going to be difficult to sell…”
Those who know this, can’t stand it, try to sell privately; option two. An interaction that goes something like this:
Car listed on a classifieds site like Kijiji for $12,000.
Two emails from interested parties asking “is it still available?”
Three more offering $5,000.
One says they want to come see it, sets up a time, doesn’t show up.
Another one comes to see it, tries to haggle the price down to $6,000 after wasting an hour of your time kicking the tires.
It’s usually at this point that many private sellers just give up and go to a dealership and do the trade-in.
The trade-in method only really benefits the dealership in the middle. The seller gets less than what they want/know the car is worth. The buyer who buys that car from the dealer later pays a price higher than if it were a private sale. The dealer in the middle takes a healthy cut for essentially facilitating what the original seller and eventual buyer couldn’t do on their own.
This model of business is as old as cars, and isn’t likely to go away anytime soon.
Reverse Dealer wants to change this by facilitating this conversation within a format that both sellers and buyers recognize as formal, but without the low-ball or markup on either end.
So how does it work?
Around for two years now, founder Chris Schellenberger’s business model is rather ingenious. As he explained it to Motor1 Canada, it’s not the typical high markup business model used car dealerships are used to, it’s a “much lower profit margin business than a used car dealership”.
“Reverse Dealer is an alternative to a dealership. The reason we exist is because most people who want to trade-in instead of trading-in to a dealership and losing money or tired of trying to sell private on [something like] Kijiji," says Schellenberger. "They bring it to us and we retail it to the public for you at a flat rate. That way the majority of the money goes to the person that owns the vehicle, the seller, as opposed to a dealership.”
When Reverse Dealer takes in a vehicle, it does a proper vehicle inspection, what they call a “live market analysis” to determine what your vehicle could sell for, photograph it and create a listing for it on their site.
Sellers can opt to leave the vehicle with Reverse Dealer or have Schellenberger (or one of his associates) pickup the car whenever there’s a viewing arranged for it. They do all the leg work to close a deal, get the paperwork signed and hand you a cheque at the end of it all.
There’s a flat listing fee of $50, plus $50 per month to store the vehicle at Reverse Dealer's lot and a transaction fee of $1,000 (when the vehicle sells).
According to Schellenberger, a vehicle that comes to Reverse Dealer sells in an average of 30 days. They offer financing options for buyers along with warranties through a third-party vehicle warranty company.
They even let buyers buy a vehicle with BitCoin currency, and are working towards being able to sell vehicles for BitCoin as well.
Schellenberger sees this concept as one that could scale to a national level. "Any community with a population of 100,000 or more would be a candidate for a Reverse Dealer," he says.
Photo: Reverse Dealer via Facebook, Motor1 archives