Venture-backed startup SureSale is attempting to challenge the dominance of Carfax, a longtime industry standard in the used car market, with a more comprehensive certification akin to a manufacturer's guarantee that a vehicle is in good shape.
The Santa Monica startup, which certifies pre-owned vehicles with a background and 150-point inspection check, announced it secured $7 million in Series A funding this week led by Upfront Ventures with participation from Coffin Capital and Ventures.
The funds will be used to expand their product into dealers across the country, create partnerships with other sellers and market.
Upfront, which was an investor in online car-buying platform TrueCar, sees the company becoming a "gold standard brand."
Americans bought 40 million used cars last year, many looking for a bargain as the average price of new car hit $33,982 last month, according to J.D. Power & Associates.
Certification of used cars is already offered by manufacturers and dealers, but there's millions of cars that aren't covered.
"There's three times as many used car purchases today" said co-founder Jeffrey Schwartz. "But there's a gap between the growth in used car buyers who want a quality used car vehicle and the inability of dealers to certify their cars at scale."
Schwartz founded the company with Donny Hall, who previously created CarSure, a coverage plan for vehicle repair. The company was purchased in 2017 for an undisclosed amount by Austin-based IAS, an insurance company that last year was acquired by Canada's iA Financial Group. Schwartz formerly headed Autobytel.
Schwartz, who recalls faxing leads to car dealers in the 1990s and being told the internet would never be 'a thing," will be taking advantage of the consumer shift to online sales. This year, SureSale anticipates certifying tens of thousands of cars. It has under 25 employees and contracts inspectors in 37 states.
Like other brick-and-mortar retailers, used car dealers have seen a dramatic shift over recent years as consumers look online for better prices. SureSale could give some an advantage by providing an under-the-hood look at their inventory.
Carfax has become the standard for car buyers. SureSale is differentiating itself by offering a pre-owned vehicle certificate much like those provided by car dealers.
The report includes an inspection, title and background check along with a 5-month warranty and extended protection plans. It's free for individual users, but SureSale charges dealers with the promise that it will raise their auto sales.
The company said it will launch the service for private buyers later this year.
The concept isn't new, said Ronald Montoya, senior consumer advice editor at Edmunds. "They are just packaging it all together and making it convenient," he said. It could appeal to dealers who find it a cheaper alternative to their own inspections. But he said, he's seen similar companies come and go.
"The used vehicle industry is the largest retail segment of the U.S. economy that, surprisingly, still has major untapped potential to create an independent, gold standard brand and maximize value for both dealers and consumers," said Upfront Ventures partner Kobie Fuller in a statement.