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Beepi aims to change the way you shop for used cars

Beepi, an Internet-based used car retailer that delivers vehicles to buyers' homes before they've taken them for a test drive, is raising another $300 million in venture capital to fund its expansion nationwide.

The Silicon Valley start-up, which is changing the way people buy and sell preowned vehicles, currently operates in California, Arizona and Texas. It hopes to have a presence in every major city by the end of the year.

The company's planned growth comes as customers start to warm up to the idea of buying a used car online, even though it may seem a little strange at first.

"It is definitely a little scary to make such a major investment without ever having sat in the car or driven it," said Miles Johnson, a Mountain Valley, California, resident who recently bought a 2012 Honda Civic through the site.

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Similar to how retailers sell shoes online to customers who haven't tried them on, Beepi is taking a digital approach to cars and trucks, albeit with a much higher price tag.

The company's business plan is pretty straightforward: to remove the hassle of finding, negotiating and ultimately buying or selling a used vehicle. It only handles models that are less than 6 years old, have fewer than 60,000 miles and have never been in accident. Technicians at the company's Fremont, California, distribution center perform a 185-point inspection to ensure they're in good condition. In addition, buyers have 10 days to return the vehicle.

The company is targeting $350 million in revenue this year, up from $100 million last year.

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"People nowadays are used to buying things online. They are used to transacting with Amazon, they are used to transacting with others and so buying a car online is the next logical step," said Owen Savir, who started Beepi last year with a friend.

Dan Delima of Millbrae, California, holds a check from Beepi after selling his Nissan LEAF (on the flatbed truck behind him) to the used car website.
Phil LeBeau | CNBC
Dan Delima of Millbrae, California, holds a check from Beepi after selling his Nissan LEAF (on the flatbed truck behind him) to the used car website.

For those selling their car, Beepi guarantees a sale within 30 days at a price $1,000 higher than they would get from a local dealer—something it's able to do, in part, because it doesn't have as heavy a cost structure. It determines the price through a proprietary algorithim that calculates how much a particular model is selling for in different areas.

Dan Delima, who lives in Millbrae, California, said selling his 2013 Nissan LEAF through Beepi made sense because of the convenience. Earlier this month a Beepi truck pulled up in front of his home, loaded his vehicle on the flatbed and he was given a check for $20,000.

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"Just meeting one set of people to inspect my car and take the photos was way worth it," Delima said.

Beepi is not alone in racing to alter the way used cars are bought and sold. Driveshift.com is another start-up connecting buyers and sellers online. Like Beepi, it looks to attract customers by eliminating the hassle of visiting auto dealers to negotiate or take a test drive. But different from Beepi, Driveshift.com also offers to bring vehicles to prospective buyers for test drives before they buy a particular model.

More than 40 million used cars are sold in the U.S. each year, with a good percentage of the deals done privately after owners listed their car or truck in a classified ad. Millions more sell through dealers. In both cases haggling for the best price is a big part of the process.

Despite Beepi's guarantees, there is sure to be hesitation from some consumers. Although shoppers are becoming more comfortable making big-ticket purchases on the Web, many prefer to touch, feel or otherwise test products before they hand over their credit card. Conventional wisdom dictates drivers should take a car for a spin before they commit.

For people like Johnson, however, buying a car or truck online is the way of the future. As he looked at the Civic he just bought, he couldn't wait to get the keys into the ignition and take it for a drive.

"It's the moment of truth. I finally get to test it out and see exactly how it works," he said. "I don't think I am in for any surprises."

Questions? Comments? BehindTheWheel@cnbc.com.

UPDATE: This story was updated to include news about Beepi's new round of funding.