Cazoo enters administration as new buyers sought
Mon, 20 May 2024
The future of online car dealer Cazoo is in doubt after the business officially entered administration this week.
The move comes after Cazoo earlier revealed it had failed to secure emergency funding. Administrators Teneo will now focus on selling parts of the business, which has been a prominent sports sponsor in recent years, with several existing automotive businesses reportedly already interested.
Potential suitors include Cazoo rival Cinch, along with car supermarket Motorpoint.
The administrators told Sky News almost 100 car dealers have expressed an interest in trading on the platform – and it hopes to conclude a sale in the coming weeks.
It marks a dramatic turn in fortunes for Cazoo, which was founded in 2018 and floated on the New York Stock Exchange for £6.4bn in 2021.
It once employed more than 5000 people but has cut thousands of jobs in recent years as it focused on survival. It now employs a few hundred people and is currently valued at around £30m.
In March, the business transitioned from an online car retailer, selling vehicles it owned, into an online marketplace, serving ads for cars owned by third parties. It has also wound up other parts of the business, including a Cazoo car leasing division.
Bosses say Cazoo is currently burning around £30m every quarter. It has carried out a series of restructurings in recent years, including a debt-for-equity swap in December that was worth more than £500m.
Cazoo says it has sold around 120,000 cars in the UK. The online retailer’s grey and orange trucks were a familiar sight on UK roads, although it did later pivot from pure online deliveries to adding a series of regional ‘handover centres’.
In an earlier filing that it intended to appoint administrators, Cazoo warned that if certain subsidiaries go into administration, it may consider putting the entire group into administration – or even winding it up.
Cazoo has sold off most of the cars it owned, has cut staff numbers and paid down stocking loans. It is also trying to terminate leases on those regional handover centres.
In 2021, Cazoo lost £531m, and in 2022, it lost £525m. Its shares have fallen more than 90% over the past year – and are down 99.9% since its stock market debut.
What happens if you've already paid for a car and are waiting delivery?
If you have already purchased a car and you find out a dealer has gone into administration while waiting for delivery, it is important to take immediate action. Try the dealer for starters and if you don’t get any response, call the administrator.
Professional organisations will have customer service operations in place. If you have made any payments using a credit card, they should be covered by the Consumer Credit Act if there are any problems. And while debit card payments aren’t covered in the same way, there is still a degree of protection. What’s more, any finance agreements will be with a separate finance house, rather than the dealer itself, which should provide further protection.
The important thing is to get clarity on all aspects you’re unsure about, ideally in writing, and make sure there are no loose ends. This will allow you to separate yourself from the dealer’s administration process – and not be one of the creditors chasing outstanding sums of money.
The Cazoo administrators say the business does not hold any customer deposits, and all customer vehicle deliveries have been completed.
What happens to a car warranty if a company goes into administration?
If a car still has part of the original manufacturer’s warranty remaining, it is still valid even if the dealer that sold you the car goes into administration. All you need to do is keep up the service schedule with an approved garage. Extended warranties are usually purchased from a third-party provider too, so should also be unaffected. Cazoo’s Extended Warranty package is provided by The Warranty Group, part of the giant Assurant group.
The administrators say Cazoo customers with extended warranties are not expected to be affected.
What happens to cars on finance if a company goes into administration?
Finance agreements are again often with third party finance providers, rather than dealers or companies themselves. The dealer will have taken a commission on the deal, but the loan itself will be managed by the finance house. It is them you’ll be paying them each month, not a car dealer or company, so the deal should theoretically be unaffected by any administration processes.
Should you buy a car from a company in administration?
While you may be reluctant to purchase from a company in administration, the business is still technically a going concern. The role of the administrators is to salvage parts or all of the business, so will be incentivised to ensure business can carry as normally as possible.
This means that if you see the car that you want for a company that is in administration, you can still buy it with a reasonable degree of confidence. However, many will, understandably, prefer to wait and see what happens, in order to not get caught up in the administration process itself.
Will a warranty and service plan still be valid if the company goes bust?
