New data from the auto industry shows that many South Africans are opting to buy second-hand vehicles, as the cost of a brand new vehicle is not always a financially viable option. I personally was in the market for a “new” used car in the last few months as my family had outgrown my trusty little Hyundai. The advantages of buying used is the wide variety of makes and models you can find for your specific budget and the fact that the car you buy won’t devalue as quickly as a new model. The disadvantages of buying used is that you never really know what issues you may encounter, from mechanical difficulties and undisclosed damage to trouble finding replacement parts. 

One of the dealerships I visited regularly while car shopping (online and in person) was We Buy Cars. What I appreciated most is the inclusion of the Dekra inspection report, which detailed the damage and issues on the vehicle. This goes some way in mitigating the risk of the unknown. For every vehicle I was interested in, I read the report, went onto Start My Car to get prices on the parts which needed replacement, and then did the maths to work out how much it would cost me all in all. Browsing Start My Car also gives you a good indication of which cars have lots of spares available and which car’s you will struggle to find spares. 

Twice I came close to buying a vehicle from them, only to find out that another buyer had beat me to it. So, while you need to do your thorough research, you also need to quick. 

With this context, I found an interesting article by Adele Shevel from Business Live. 

Zero to R3.7bn in 20 years: the WeBuyCars story 

From humble beginnings, second-hand car dealer WeBuyCars today sells 8,000 vehicles a month, has eight warehouses across SA and employs 1,200 people. And it still sees plenty of room for growth 

BL PREMIUM 

03 JUNE 2021 - 05:00 ADELE SHEVEL 

Dirk van der Walt: The ‘big thinker’ behind WeBuyCars. Picture: Supplied 

Second-hand car salesmen have long had dubious reputations — but WeBuyCars’ Faan van der Walt goes a long way towards shattering that image. The executive director of one of SA’s biggest secondhand car businesses, he’s a former teacher who on weekends gives Sunday school classes. 

Van der Walt’s love of cars goes back a long time: it was his father who taught him how to fix vehicles, working with him on the family cars. So by the time he founded WeBuyCars in 2001, he’d spent a fair number of years repairing dilapidated rides. 

Even when he studied teaching and was working as a teacher, he was always buying and selling cars on the side. 

"I got to know which cars to buy and what to look out for, and also [how to] build my capital," he tells the FM. 

Upon getting married, Van der Walt and his wife decided to head to London to earn money as teachers — and to save. "We decided we would go and live there for two years and live off one person’s salary. And we managed to do that," he says. 

When they returned to SA in the early 2000s, they brought back R300,000. They bought a house and car with R190,000; the rest was capital for the newly formed business. In that, they were soon joined by Van der Walt’s brother Dirk, whose marketing qualification proved to be a good fit. "I’m very focused and organised, while he’s more the dreamer, the explorer, the big thinker," says Van der Walt. 

"It was still not the idea to have this big business," he says. "In fact, it never was." 

Yet here he is, with a company that today buys about 8,000 cars a month, employs 1,200 people and is in the process of opening its eighth warehouse (in Germiston; the other facilities are in Durban, Gqeberha, Cape Town and around Gauteng). 

"People started noticing our business in recent years, but it’s been a really long and slow journey for more than 20 years, which probably laid a very solid foundation. We’ve paid our dues and learnt our lessons and made great contacts." 

WeBuyCars has vertically integrated e-commerce and physical infrastructure, offering finance, insurance and other products. It buys most of its vehicles from individuals and, to a lesser extent, small companies, rather than purchasing fleet disposals from car rental companies. With more than 1,000 registered dealers on the WeBuyCars system, about 40% of sales go to dealerships and the balance to private individuals. 

All the vehicles WeBuyCars purchases undergo an independent quality check by inspection company Dekra. That report is displayed on the company website, showing the condition of each vehicle and what work might need to be done. Other services include warranties, service plans and other value-added products such as tracking or insurance. 

Faan van der Walt: We’ve paid our dues and learnt our lessons. Picture: Supplied 

The best-selling vehicles are Volkswagen Polo, Polo Vivo, Ford Figo, Kia Rio and Hyundai i20 — generally those cars that sell in high volumes when they are new, says Van der Walt. "When you look at us, we typically have what you [see] when you stop at the traffic light, and it’s a true representation of what you’d find there." 

The company is arguably the biggest second-hand car dealer in SA, in a solid sector. There are about 11-million cars registered and licensed in the country. WeBuyCars data shows that a vehicle is likely to change hands five or six times in its lifetime: clients who buy new vehicles tend to keep them for about six years, and those who buy second-hand keep their cars for an average of just more than three years. 

But with disposable incomes under strain and new vehicle prices rising, consumers are expected to trade down from new to used vehicles. And the disruption of global vehicle production during the pandemic has led to stock shortages of certain new vehicles, driving up demand for used vehicles even further. 

In addition to its new Germiston warehouse, WeBuyCars is planning on expanding to smaller towns to meet demand. And there are plans afoot to venture into the kind of space occupied by US company Carvana. It’s a platform that allows customers to buy a car online and have it delivered to their home. The return policies and mechanisms are such that if a customer is not happy, they can return the vehicle and secure a refund with the click of a button. 

Van der Walt believes that it is the industry’s role to ensure people are educated and make the right choice when buying a vehicle. 

"We’ve seen people come in here and say: ‘I’ve got R100,000.’ Now, with R100,000 you can buy a very old BMW X5 with 300,000km on the clock, and it’s bound to be costly to maintain. Or you can be responsible and buy a Kia Picanto that is two years old, and … you’re going to be happy you bought the car," he says. 

"We need to guide people and help them make the right decision, and help educate the sales staff to do that. We need to do that as an industry, to make sure we take that seriously." 

Unlike in Europe, where people are less concerned about what they drive, in SA your car is "like an extension of who you are, and it reflects your personality. And it varies from province to province," Van der Walt says. 

On this count, WeBuyCars is able to offer some interesting insights. The typical KwaZulu-Natal customer, for example, will tend to sell a newer vehicle of a higher value because they move onto the next vehicle sooner. These vehicles tend to be financed, so WeBuyCars settles the bank finance. 

In the Western Cape, in contrast, customers tend to buy their vehicles cash and keep them longer, and their cars’ service histories are more intact, so it’s overall a more financially responsible customer. "Gauteng is a mix of the two," says Van der Walt. 

The price range of the vehicles runs across a wide spectrum. Right now, there are a number of vehicles under R30,000 for sale on the company’s website — though as Van der Walt points out, these are typically "fixer-uppers". The most expensive was a Porsche Cayenne Turbo — "sold for R2.2m" recently. 

While WeBuyCars has an IT department of analysts and data scientists working on formulas and algorithms to determine prices, people are also sent out to assess vehicles in a way that technology can’t. "Our hit rate is very high on valuations, and right now a large percentage of our business is repeat and referral business," says Van der Walt. 

People started noticing our business in recent years, but it’s been a really long and slow journey for more than 20 years 

Faan van der Walt 

"We never had a big plan. We had a turnover of R400m without having a budget." 

Today, turnover is probably close to R10bn. 

And while the company does have a budget now, "we still work on gut feel with many things", he says. 

"I had to decide whether to buy a piece of land for development and I was speaking to one of our shareholders. He was in London [and] I convinced him; I said: ‘Listen, just trust me on this one.’ I don’t have numbers, so it’s nice to have shareholders like that; they back you." 

Five years ago, WeBuyCars was restructured to accommodate new shareholders; the largest of these is private equity firm Fledge Capital (it’s in the process of exiting the company). 

Then Naspers wanted in on the action. Though that acquisition was stymied by the Competition Commission last March, it did draw attention to the growing business. 

And so, in September, Transaction Capital, owner of SA Taxi, came on board. Based on an enterprise value of R3.69bn, the price for a 49.9% stake in WeBuyCars was a maximum of R1.84bn. Last week, the partners agreed to increase Transaction Capital’s shareholding to 74.9% (the remaining shares will be held by the family trusts of the founding shareholders). 

Van der Walt has been impressed with Transaction Capital. "They’re also 20 years old, they’re also very entrepreneurial, the founders are still heavily involved in the businesses and they’re South African … Santaco [the SA National Taxi Council] owns a large part of SA Taxi; it has this local flavour [which] I think is a really good fit for us." 

Van der Walt still sees room for significant growth — he estimates the company’s market share is 7%-8% in a fragmented market. "We could grow it to 10,000 [vehicle sales a month] within the next year, possibly 20,000 over the next five years; we mean to expand the offering." 

That means keeping up with shifting trends in car ownership and financing. Some parts of the world operate on subscription models that allow clients to use various vehicles; others are focused on short-term rental finance models. 

"It’s a combination of … what an Uber would be and what traditional ownership would be," says Van der Walt. "And then the finance models — your traditional WesBank finance model is on the decline; you’d have maintenance included in there, your insurance, even fuel perhaps, and tracking." 

Amid all this, does he miss teaching? "I do, but I teach Sunday school, so that helps," Van der Walt says. In any event, he explains, "managing 1,200 people is also a bit like teaching".