Shift is a startup that wants to make owning a car as easy as ordering from Amazon

Rachel Pak, special to
Key Points
  • Shift is a virtual used car dealer that wants to make buying a used car as easy as ordering from Amazon.
  • The company's backers include Goldman Sachs, BMW, and several venture capital firms.
  • 'Shift is the future of car ownership,' the CEO told CNBC.
Shift buys and sells used cars.
Source: Shift

Buying a car can be an exercise in frustration — but Shift wants to make it seamless and stress-free.

The virtual used car dealership is looking to disrupt the auto purchasing process in a few ways, which include delivering cars for on-demand test drives, and helping finance loans from a smartphone.

This on-demand business model is all part of Shift's push to ameliorate the car buying experience and make it as easy as buying something online from Amazon. It's part of an increasingly competitive landscape that includes names like Vroom and Carvana, which went public in the spring and is valued at around $2 billion.

In order to break into and stay ahead in the trillion dollar used car market, Shift relies heavily on technology and convenience. The company will bring a car for a test drive directly to a home, office, or anywhere that is most convenient for the potential buyer.

While Shift's focus was on removing the hassle of physical dealerships, the startup recognizes that cars are one of the most expensive purchases people will ever make, and is attempting to bring the benefits of a traditional test drive to the modern consumer, CEO George Arison explained to CNBC recently.

"Our on-demand test drive is our competitive advantage," Arison said. "Data shows that nearly 90 percent of consumers want a test drive before purchasing a car, which makes complete sense… Customers want to touch, feel, smell and drive a car before agreeing to buy it."

Arison's own car buying experience inspired him to find an easier way and establish the startup, which has raised over $110 million from a wide range of investors that include Goldman Sachs, DFJ Capital and even BMW.

"It started by not being able to get a loan for a car I wanted to buy out from a lease," Arison told CNBC. "I went to four banks and all of them rejected me, saying I had to go to a dealer. I finally went to a dealer, and the same banks that had rejected me, then gave me a loan."

Through his own experience, Arison learned about indirect and direct loans and got a sense of how the traditional used car space was for consumers.

'This is why they love Shift'

Shift used cars
Source: Shift

Shift currently operates in Los Angeles, Orange County, San Diego, San Francisco, and San Jose. Arison is looking to expand to 8-10 markets by the end of 2018. At the same time, the company is working on becoming a one-stop shop for car buying and maintenance, and plans to break into oil and brake changes.

Meanwhile, Shift's efforts are attracting a surprising generation: Millennials, whom recent data suggest have slowly warmed to owning cars, especially as the job market improves.

Nearly 80 percent of that age bracket now owns a car, while 75 percent who don't are planning on buying one, according to a 2017 study by Accel + Qualtrics study.

"The conventional wisdom on this is wrong -- millennials are buying cars, just later," Arison said. "Owning a car is as American as apple pie. People want to be able to take their kids to the movies, drive to Yosemite, and have the general freedom a car affords."

According to Shift's data, Millennials represent half of all Shift buyers – more than double those of AutoNation, the largest car dealership in the country whose clientele is about 22 percent Millennial.

Shift is also capitalizing on the fact that millennials want experiences, rather than simple sales.

"They dislike 'Big Box retail, they prefer for things to be done online and brought to them. This is why they love Shift," Arison said.

Shift's engineering team is comprised of former employees from tech giants like Google, Facebook, Dropbox, and Twitter, and they want to digitize the entire car buying process by utilizing strategies like machine learning.

At the moment, Shift is working on a product called "Zero Touch," which will allow a customer to get a loan and buy a car online without interacting with a sales associate.

In the coming years Shift faces stiff competition the likes of Carmax, one of the largest players in the used car market, which has moved more than 1/3 of its inventory to Millennials.

"Carmax disrupted the industry over 20 years ago by offering a high integrity, transparent and stress-free way to buy a car that customers want and need," said CEO and President Bill Nash to CNBC. He added the company was test-driving online sales of its own.

However Arison sees room in the used car market for multiple winners. Although Shift is still growing in a very competitive space, he feels confident about the company's path forward.

"Shift is the future of car ownership," Arison said.