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iMotors.Com: Giving Used Car Sales a Good Name

Buying a used car has always been a lot like a root canal without anesthesia.

First are the sales people with bad teeth, bad taste, bad manners and clothes so tacky that they defy parody. Then there is the car you want: Was it really owned by a little old lady who drove it only to church? Or was the owner really a bootlegger who ran moonshine in the Rocky Mountains and recently abandoned it in a North Carolina hog farm flood after being rear-ended by a beer truck?

Web sites such as CarsDirect.com and Autoweb.com/ have flourished in the new car market, thanks to better pricing than brick-and-mortar dealerships and the ability to avoid dealing with new car sales people, making for a less painful experience that most people would still like to avoid.

"Buying a used car is a broken consumer experience," said Gus Tai, partner with Trinity Ventures, one of the original cliff dwellers along Menlo Park's Sand Hill Road and an investor in iMotors.com. Tai said he sees iMotors.com as the Starbucks of used cars. "For the first time, we can deliver a better product, a better purchasing experience and higher quality than the consumer has ever seen before."

iMotors.com began life three years ago as Auto Choice, a Northern California used-car superstore which pioneered a Vehicle Certification Center that mechanically inspected used cars and thoroughly investigated their history to make sure they had not been involved in serious accidents or natural disasters such as floods.

Founders Adam Simms and Eli Halliwell said the iMotors idea came from an effort to drive incremental sales at the Auto Choice store. "In December 1998, we realized if we took away the store altogether and substituted it with the Internet, we had a rapidly scalable model that improves value, takes expense out of the process, and increases customer satisfaction," said Simms.

Up to that point, Auto Choice had been financed by two rounds of venture financing -- $5.4 million in April 1997 and $1 million in August 1998 -- from Oak Investment Partners and Global Retail Partners. Realizing that the best solution was a clicks-and-mortar solution with a WebVan-like infrastructure, they went for the big bucks. In April 1999, Oak and GRP joined Trinity Ventures, Paul Allen's Vulcan Ventures, and Rosewood Capital in a $9.2 round followed by a $57.7 million round in October from GRP, Oak, Trinity and Vulcan along with new investors, Moore Capital Management, MeriTech Capital Partners.

With $73.3 million behind it, iMotors launched its web operation in September with a "virtual inventory" of more than 1 million late model (1994 and newer) vehicles they can source from dealerships, auctions and individuals. The company promises that the prices they charge will be "hundreds or thousands less" than the retail Kelley Blue Book, the main authority on used car pricing.

Prospective purchasers specify the year, make and model of the car they would like to buy along with options, color choices and the maximum mileage they will consider. After signing a Search and Locate agreement, the would-be buyer pays a $250 fee (applied to the purchase price) that is refundable if iMotors can't find the car they want or if the consumer decides not to buy one that is located.

Once the car is located, iMotors buys it, has its mechanics inspect it and make any repairs or maintenance needed. Every car they sell comes with a free three-month/3,000 mile warranty (longer terms can be purchased) and a seven-day/700-mile return policy which will allow the buyer to turn the car back in to iMotors for a full refund if they are not satisfied for any reason.

In addition to the warranties and inspection, iMotors investigates the history of every car it sells and prepares what they call an "AutoBiography"that includes a complete title history detailing every change of ownership and verifying that the vehicle bears a clean title, accurate odometer and is free of flood damage or salvaged title. This latter could be vital in the coming months. Consumer protection experts have been warning that they expect a deluge of used cars damaged in the recent East Coast hurricane floods to start hitting the market this year and next.

iMotors has live people to talk to and takes trade-ins. Purchasers can pick up their car at the nearest iMotors service center. The service is available currently in Northern California, will launch later this month in Southern California and will be rolling out nationwide early next year.


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