DEALER STARTS UP INTERNET AUCTION

Third-generation dealer Joseph Shaker recalls taking his friends to auto auctions and letting them put their cars on his lot to improve the value of their used-car buying and selling.

Now, he's doing what amounts to the same thing for anyone with CarDay, an online used-car auction that involves franchised dealers.

"Unlike other players in this space, CarDay realizes that a brick-and-mortar component is essential to successfully trading pre-owned cars online," says Mr. Shaker, CarDay's CEO who also is president of Hometown Auto Retailers Corp., a group of 11 franchised dealerships in New Jersey, New York, Connecticut, Massachusetts and Vermont.

"This is why CarDay embraces its franchised auto dealers, who manage customer transactions and fulfillment," says Mr. Shaker. "What is also important is that CarDay has found a solution to the trade-in issue, which to date has been a missing factor in some players' Internet car models."

In the CarDay plan, customers with used cars to sell go to the CarDay.com web site, enter their zip code and are referred to the nearest CarDay franchised dealer and calls or e-mails for an appointment.

A trained Internet agent helps the customer through the entire online auction process. It starts with a vehicle inspection, proceeds to taking eight digital pictures of the vehicle, which along with other vital information -including a Carfax vehicle history - is uploaded into the CarDay system.

The agent, who is an employee of the dealership, counsels the seller on issues such as wholesale prices, retail prices and the length of time (up to 21 days) that he wants his car up for bids.

A must-sell (reserve) price and a highest (trump) price are established, a $149 fee is collected and the seller drives away with the car.

The agent calls the seller when the vehicle sells and the seller drives the car back and drops it off. The buyer, who pays an extra $175 to use CarDay, comes to the dealership to close the deal.

"While the seller is sipping margaritas, we're taking calls and answering e-mails," Mr. Shaker explains. "The seller does nothing except come to the dealership to get put in the system."

Mr. Shaker insists CarDay offers a win-win-win proposition for everyone involved.

"If there's a 30% spread between wholesale and retail, we'd like to see the seller get 15% more than wholesale and the buyer pay 15% less than retail," he says. "And the dealer in the middle is getting used- car business he might not have had a chance to get and he has a chance to provide financing and additional warranties."

All CarDay vehicles are issued a six-month/6,000 powertrain warranty.

In addition to the ancillary business, Mr. Shaker says the dealer gets to keep 20% of what the vehicle brings in over the agreed-to wholesale price. The customer keeps the other 80%.

"CarDay is an advocate for buyers and sellers of used vehicles, and we help put consumers in charge of the process," says Mr. Shaker. "For the first time, dealers, buyers and sellers are in a cooperative arrangement where everybody wins in terms of price, convenience, quality and security. This is why CarDay will revolutionize the way used automobiles are bought and sold."

Headquartered in New York City, CarDay expects to make its money from buyer and seller fees. Apparently the financial community agrees with the model. Mr. Shaker got $25 million in first-round funding from Goldman Sachs, Odeon Capital Partners, Citigroup Investments and Sierra Ventures.

Dealers can become CarDay franchisees with an initial $2,700 investment in equipment and uniforms and by paying the $500 monthly franchise fee.

Some 55 dealers in the New England area were on board for CarDay's launch in April.

Mr. Shaker's goal is to have about 1,000 dealers nationwide late by 2001.