By on October 14, 2020

Used car retailer Shift is going public today, and continues its promise to make car shopping a breeze during these here Quarantine Times. But will their not-so-unique (and now public) model make a dent in the market?

Though they’ve been around since 2014, your author hadn’t heard of Shift until this writing. Working on a consignment model, Shift allows you to buy or sell a car through their service and skip the dealership. Much like CarMax, Shift owns the cars it has on sale, has its own process of inspection, takes its own pictures, and is a no-haggle dealer. The prices are fair, they say, because they keep track of actual cars for sale in the marketplace.

Given The Current Year, Shift is selling on safety. You can browse, trade, finance, and complete a purchase online from the comfort of your home. They offer a concierge program for their cars as well (if they’re close enough), where someone will bring a car to you for a no-fee test drive. Speaking of fees, it’s not cheap dealing with Shift. They won’t tell you what they charge on their site, but it was elsewhere online. When you sell your car to Shift the seller pays 8 percent of its assigned value. Later, they’ll charge the buyer of any car a 3.75 percent service fee on the car’s value. Nearly 12 percent on each ride sold. The concierge fee exists on all purchases, test drive or no. Shift says it helps to pay for the inspection, paperwork, and other niceties they provide. Forking over $1,875 so I don’t have to visit a dealer for my used $50,000 BMW sounds a bit steep.

The company has big-name financial backers like Goldman Sachs, BMW, and the Renault-Nissan-Mitsubishi group. Announced in the summer, the company sought (and completed) a reverse merger. A new company was created, Insurance Acquisition Corp, which was created solely to acquire Shift. This special purpose acquisition vehicle (SPAC) will raise $185M of capital by selling shares, and then combine with Shift for a total company value of $730M, per Reuters. It’s an easier way to go public, and avoids lots of regulatory filings because the public company is brand new and essentially a shell for what it’s about to buy. Catch them on the Nasdaq, SFT.

Doing some investigating into Shift, I thought I’d see if there’s a store near me, and what car I might have delivered. With my Ohio ZIP code inputted, Shift showed me they had 1,404 cars. “All local,” I thought, not bad. But no! They have 1,404 cars in their system total. Their site filtered to the closest car to me, a Focus, which was in San Diego. A little more snooping told me Shift’s locations were limited to four places in California, with an additional location in Portland. The company’s site doesn’t say “By the way we service California and Oregon only, Ohio resident,” but they were willing to cover $350 of the cross-country shipping if I bought the Focus then and there without seeing it. Generous!

This IPO is surely a way to expand rapidly. But with the proliferation of “buy without a salesman” car services already in place across the nation (Zoom, Carvana, CarMax), breaking out of 1,400 cars in California may prove challenging. And all those investors will want a quick return.

[Image: Shutterstock]

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40 Comments on “Used Car Retailer Shift Goes Public Wednesday, Ready for Quarantine Shoppers...”


  • avatar
    ajla

    “Nearly 12 percent on each ride sold.”
    Lol, no.

    “By the way we service California and Oregon only”
    Lol, no.

    • 0 avatar
      FreedMike

      You’re right, but outfits like Carmax have shown that there are plenty of people who will pay more for a seamless, stress-free carbuying experience.

      • 0 avatar
        ajla

        IMO buying a used car that you haven’t driven or even seen in person is not a “stress-free carbuying experience”. It’s even worse in this case because it requires my ’17 Camry SE to be traveling from San Diego to the Atlantic coast.

        Carmax I get. You pay a little more and in exchange you don’t have to endure so much car dealer scumbaggery. The shopping experience is still pretty conventional though.

        But stuff like Vroom and Carvana and this I don’t see nearly so much appeal. I’m sure they all have return processes if the Altima you bought is trash but it’s probably a major PITA to go through it..

        • 0 avatar
          FreedMike

          The “car dealer scumbaggery” you get with Carmax is getting fleeced on price.

          YMMV, I suppose – I wouldn’t buy a used car I’ve never driven, or had checked out by a mechanic, but there are people who are totally fine with that. My (soon-to-be ex) GF is one of them. She actually paid something like sixteen grand for a used Accent with 35,000 miles in 2015. I was finding WAY better deals than that out there, and told her so. Even offered to make the deal for her. Nope…she’d done business with this place before and didn’t want to deal with the BS.

          Like I said…YMMV.

          (Filed under “reasons she is the soon-to-be ex.”)

        • 0 avatar

          Appeal is that if you are Snowflake you do everything on cell phone and then they deliver car and thats it. If you are Boomer or X-man then yeah, go to dealership – you deserved it.

        • 0 avatar
          dukeisduke

          A coworker bought an Acura TL at Carvana, and he discovered that the backup camera had a foggy image, and there were a couple of undisclosed dents, like one on the roof. He ended up returning it, then buying an older but nicer TL off the used car lot of a new car (luxury car) dealer.

          I can’t see buying a used car sight unseen, and not being able to at drive it and look it over.

          They do have a seven-day return policy, and he did say it was a bit of a pain, having to back out the financing.

          • 0 avatar
            FreedMike

            That’s pretty much the same story I consistently hear about Carvana – they don’t seem to be too picky about the cars they buy, and getting your money back is something of a hassle. If you’re super-picky, you’re probably best off using a “brick and mortar” dealer.

            Still, what they’re doing seems to be working for them and customers, as they’re growing.

          • 0 avatar
            28-Cars-Later

            Carvana is likely just sending a wholesaler to the block and buying whatever is on the shopping list. I wouldn’t be surprised if they were *not* opting for post sale inspection at the block (because that costs several hundred bucks a unit) and their “eleventy point quality inspection” only consists of a minimum wage lot boy looking over what the wholesaler delivers before the units are put in those ridiculous glass buildings.

            @Freed

            They have a defined margin, likely a defined financing bonus, and probably some less overhead than the competition. Its not a horrible concept, that is: buy new-used from the block and sell it at non-negotiable pricing but even with less personnel overhead there is still building costs and transport overhead. The model could be improved upon. This, combined with ultra high valuations for new-used, means AA and AAA credit can shop new for slightly more so why buy from you? Depending on the model, how much do I save?

            MY18 Subbie Forester Prem: $21,9

            https://www.carvana.com/vehicle/1559772

            MY21 Subbie Forester Prem: $27,7 [!!]

            https://www.subaru.com/vehicles/forester/index.html/FOR-compare-wrapper-modal

            So assuming no factory incentives, I save 22.5% over new (rounding those figures up). But Subbies require a service at 40K miles, think its diff oil, tires, possibly brakes. I know my brother laid out at least a grand for it last year… so now my savings drops to 18% after recon because I know Carvana is not paying to perform this service before I buy. In reality even Subaru offers incentives on new cars (which aren’t usually great) but if we assuming $500 for new now my savings drop to 16%. But what about warranty? Carvana offers a 100 Day/4,189 mile (wtf with that number?) included warranty, but an extended warranty of 24 months or 60K miles is 1,350, with 48 mo/90K being $1,950. Opting for the lesser one, now we’re down to a 12% savings. Yeah, this isn’t as great as it seems.

            Depending on the projected wholesale of the ’21, I’ll spend the roughly 12% for getting zero miles and a 3/36 because most of the cars today are not stalwarts of reliability. If we didn’t live in clown world, wholesale would be 20% less and this option would be a lot more attractive, but we don’t so I ask: who is buying these again?

            BONUS: In 2018 my mother starting getting anxiety over her MY03 Liberty, and because everyone in my family but me drinks the Suburu Kool Aide, we had to have one. I found I believe an MY16 Forester Limited or higher (came with leather and a moonroof) with 12K miles for 21,9 at a local Subbie dealer. I checked wholesale which was low 20s or high 19s and thought 10% isn’t bad on something like that so I called my brother and said take her to look at it. As I recall, he pretty much told her she was buying it and I don’t think she’s put more than 10K on it since. Today in [THE CURSED YEAR] Carvana wants to sell me a lesser trim with triple the miles and one MY older for the same price? Clown world.

  • avatar
    FreedMike

    I’m going with this being irrational exuberance on the market’s part, but when you have that kind of exuberance, there’s usually a hot concept at play. In this case, even if you take away the “contactless” buying process that has obvious current appeal, people are just sick and tired of the bulls**t they get from car dealers, and they’ll pay more for a hassle-free experience. Makes sense that the market has noticed this.

    Personally, I think there’s a message here for traditional dealerships – clean up your act, or watch your used car business start going elsewhere.

    • 0 avatar

      I can see how a less car-focused consumer would find it worthwhile to pay for ease of use. Especially when I consider the two experiences I had buying used cars in the past year, neither of which were great. Volkswagen jerked me around for two months for a few hundred dollars. Then the sleazy Chevrolet dealer that had the $500 fabric protection on every car.

      Time-consuming and stressful stuff for the average consumer.

      • 0 avatar
        FreedMike

        Did you buy the Lexus from a Chevy dealer?

        • 0 avatar

          No, that was the search for an Equinox for my grandma. The one that came from a Honda dealer instead.

          GS came from an independent “luxury” dealer. It wasn’t as clean as I expected inside or out, didn’t seem like they tried even given they knew I came from far away. The rest of the experience (besides awful Uber from airport) was fine.

          • 0 avatar
            ajla

            “It wasn’t as clean as I expected inside or out, didn’t seem like they tried even given they knew I came from far away.”

            That might be a blessing. Most “independent” dealers I’ve dealt with just turn on the Armor-All hose for vehicle prep. I’ve been in way too many used cars that look and feel like a glazed donut.

          • 0 avatar
            FreedMike

            Corey had the pleasure of properly cleaning his new ride once he got home.

            Next time I buy something, I might just pick up something out of town and drive it home – it’d be a fun little mini-vacation.

          • 0 avatar
            Old_WRX

            “It wasn’t as clean as I expected…”

            Agree with ajla. The “professional” detailing can be pretty rough. They like to compound off half the paint, spray black stuff on all sorts of stuff under the hood, and use tons of harsh cleaning stuff that probably leaves the interior about as safe a place to be as a toxic waste dump.

  • avatar
    JMII

    Forking over $1,875 so I don’t have to visit a dealer for my used $50,000 BMW sounds a bit steep.

    Doesn’t sound that bad to me. Your typical dealer will have various add-ons sneaked on in the F&I department anyway. Fabric protection, license plates screws, air in tires… whatever BS they stuff in there.

    I’ve bought from CarMax before and based on my calculations it cost me about $2K more on a $24k purchase. With used vehicles its hard to judge as you can never find that perfect apples-to-apples comparison. However the experience was straight forward, painless and fast. For some people there is value in paying a bit extra for a better experience.

    • 0 avatar

      I have attempted to shop CarMax cars before, but I can’t get past the high point of entry. I know I’ll find what I want at a better price! But again, that’s beyond normal consumer tolerance level.

    • 0 avatar
      jack4x

      “Your typical dealer will have various add-ons sneaked on in the F&I department anyway. Fabric protection, license plates screws, air in tires… whatever BS they stuff in there.”

      I’d say it’s far from a sure thing that this place won’t use those tactics also.

  • avatar
    -Nate

    I hope this works out .

    I’ll prolly continue buying junkers but too many hate the $tealership hassle .

    -Nate

  • avatar
    trackratmk1

    Shift is another company that can’t get their business model straight. Are they a consignment company? No, they tried that and it failed. So now they are an online-only dealership. Beepi tried that and went bankrupt. Carvana tried and is on the same path.

    Invest at your own risk. SPACs are the hot way to cash grab during market mania for worthless companies. See NKLA.

  • avatar
    jkross22

    Buyer ignorance and lack of experience with negotiation kills most customers when buying or leasing a car.

    Shaft (sorry, it’s too easy) is just the latest incarnation of that business model.

    CPO vehicles used to be great, but my anecdotal experience is that dealer service departments got lazy while the CPO warranty coverage and duration has been cut in half.

    Caveat emptor. If buying used, get a PPI done by AAA or some other party who knows what they’re doing.

  • avatar
    28-Cars-Later

    Ten to fifteen percent is usually the margin the new car dealers receive when selling used cars (receive != what they advertise). 10K wholesale is always advertised 11,9 to 12,9 or more and goes up from there. This company now will collect that amount without [most] the overhead of a new car dealership and can do so from cloud servers and minimal IT/dev staff. That’s why the vampire squid is backing it.

    Revenue or sold figures are not provided in the article but my guess is this scam is worth nowhere near $730 million, esp if total inventory is about 1,500 units (at 15K per unit aggregate, that’s only $22,500,000).

    Another thought I have is where are they getting new units? If they go to the block, they will be paying the buyer’s fees which used to be 2.5% (don’t know now). So the bulk of their revenue is when *they* buy yours, and they eat 2.5% or more of their revenue when they sell it to you. I can come to only two logical conclusions, 1. the pricing which cannot be negotiated will be significantly inflated vs wholesale and then you pay on top of that for the uber koolness and/or 2. units will be sourced from private party by calculating average trade and then upping it by some trivial amount. This is because you will end up paying the same or slightly more to them to dispose of your car than trade at a dealer, but it will be similar. In this way, they collect their 8% while still providing the “service” of car disposal and populate inventory. This scam, er model, is similar to CarMax save the defined fees in addition to the quotes prices which AFAIK CarMax does not charge.

    • 0 avatar
      28-Cars-Later

      Corey, after reviewing your article again I find this confusing. How can they operate on consignment if they own the cars they are selling. Consignment selling is defined as “agreement to pay a supplier of goods after the goods are sold.” or collect a percentage from the seller when they consigner sells the product for them. If Shift owns the cars, they are not selling them on consignment. Could it be both, they sell some on consignment and own others similar to any other dealer?

      “Working on a consignment model, Shift allows you to buy or sell a car through their service and skip the dealership. Much like CarMax, Shift owns the cars it has on sale, has its own process of inspection, takes its own pictures, and is a no-haggle dealer.”

      • 0 avatar

        I found some more information. Initially they were a consignment lot and switched over in 2019 to their current “peer-to-peer” method.

        • 0 avatar
          28-Cars-Later

          Thanks. So they are setting up the deals between two private parties for 12% or are they taking possession and then reselling as their own product?

        • 0 avatar
          trackratmk1

          I was confused by this too. If they don’t own the cars, that’s consignment. If they do own the cars, that’s a standard dealership. There’s not a lot of grey area for them to play in… their website now states they own the cars so they are just like Vroom and CVNA now. This “peer to peer” nonsense is just fluffery to make them sound different.

          • 0 avatar
            trackratmk1

            Some consignment stores actually take title and become an active buyer and seller at the time the sale happens, rather than just facilitate the sale and signing over title from old owner to new owner (consignmentshop staying invisible). Neither of those things are the case here since Shift is buying trades and making offers on outright private sales. They’re an online dealer plain and simple.

  • avatar

    I did some research two years ago on Shift, Carvana and other companies like CarMax and Vroom. Despite test drive which was a plus there was something fishy about Shift. It is BTW our local Bay Area company. It was something like they were not professionals but something like nerds or Indian programmers and have no clue about cars. I liked Carvana but the problems was that delivery (from East coast) was very costly and if you return car (test drive only after it is delivered and you paid) you loose delivery fee which is in thousands. And then very likely truck driver will manage to damage car – they do not really care. And they will deliver car in the middle of night and you have to checkout car in dark. No, I would go to dealership instead and try to negotiate or CPO with 7 years of OEM warranty. CPO car will cost the same or less in dealership.

  • avatar
    dukeisduke

    Some of these Internet sales ideas aren’t so great. Last year we bought a used car for our daughter (a 2012 Forte) from a local seller through TRED.com, a person-to-person outfilt. The car was okay, but not as clean as we’d like. Then, I got rear-ended on the way home from taking delivery, and the car was totaled.

    Under TRED’s model, the seller signs the title and mails it to TRED, and they handle the title transfer. The problem was, I had a car that was totaled, a title not in my name (I didn’t even have it yet). And, it turned out that the seller (he was moving to the UK, the reason for selling the car, along with everything else he and his wife owned) didn’t even sign the title correctly. He just signed his name over the whole block where you’re supposed to sign your name and write in the odometer reading.

    So, it took tons of calls to TRED (to get them to mail the title to me), and and going through the bonded title process with my county, since the ownership chain was broken. That cost me $350, plus paying the sales tax on the car. All this to get a title I could hand over to the insurance company of the woman that hit me, so I could surrender the car and get a payoff. What a complete cluster.

  • avatar
    tomLU86

    The conventional car-buying, or even leasing, process is often a hassle filled with irritation, annoyance, and even harassment, as your new car dealer, protected by his/her state’s laws, tries to fleece you, at every turn.

    Carvanna makes it easier and spares you this harassment. But, how do they do it? Well, it seems to me, they charge more up front. You pay more for less hassle.

    But, if you google Carvanna, and their CEO, chances are, you will find that a lot of Carvanna’s success is contingent on cheap money and low interest rates. They sell to a lot of sub-prime borrowers.

    Apparently (I jest, as I state the obvious), most people must finance even used cars. THis is the dealers’, or Carvanna’s, ace in the hole: WE FINANCE.

    As others have noted, the business itself loses money, though the CEO is a millionaire. The CEO’s father is a convicted felon–some type of fraud during the Saving and Loan crisis that is too complicated for me to relay. IN any case, he was convicted of breaking the law–yet did not serve time in prison, just 3 years probation. Must be nice. And the CEO, and pere, are both very wealthy people.

    Just sayin’…. it’s this type of thing that makes people–let’s call them, some of the masses– angry and resentful.

    So these nifty internet outfits are really little better, and probably worse, than your neighborhood con artist at your friendly new car dealer. Just as Walmart first, now Amazon, displaced local businesses, by optimizing and cutting costs, and concentrating the profits far from Main Street, this is what these outfits are doing. But they are costing the consumer more money, and adding to the debt bubble that will turn our lives upside down when it pops.

    • 0 avatar
      trackratmk1

      Great comment ^^^

      DriveTime is the father’s company. CVNA is the son’s. Although CVNA doesn’t buy inventory from DriveTime anymore, they still send all of their financing through them. Imagine all the opportunity for financial chicanery.

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