Car Dealer Cazoo Collapses Into Administration: What Next?

Cazoo, a UK-based online car company, has gone into administration, leaving 200 employees unsure about their future.

Founded by serial entrepreneur Alex Chesterman, who also launched property marketplace Zoopla, Cazoo was once a UK unicorn, boasting a $8 billion valuation.

Now, just 6 years after its launch, the company has gone into administration.

Cazoo’s Success

Cazoo was propelled to success during the pandemic, when people were largely shopping online. The company allowed people to buy, part-exchange, sell and finance vehicles online with the option to do everything from home – a very different model from traditional car dealerships.

At the time of launch, Cazoo went hard on marketing, sponsoring Premier League football teams Aston Villa and Everton – no cheap feat. At its peak, according to The BBC, the company employed 4,500 people and was starting to expand to other markets across Europe.

Financial Troubles

Despite its initial success, Cazoo struggled financially. In 2023, multiple news outlets recorded that the company reported a loss of £700 million in the previous financial year. This led the company to streamline its operations, cutting 700 jobs, restructuring their leadership and abandoning global expansion efforts.

Cazoo attributed these losses to a drop in consumer spending and competition, though the loss was no small feat.

The company pivoted to become more of an online marketplace than owning inventory themselves, but slowly began shrinking until it announced that it was going into administration.

Now Teneo, the appointed administrator, is looking for people to buy Cazoo’s remaining assets, including its online marketplace. Despite trying to fight growing loans, the company just couldn’t keep up with the money needed, which led to the difficult decision by stakeholders to start selling off areas of the business.

Now, it’s uncertain whether another company will purchase the marketplace and retain the company’s 200 strong workforce, though SkyNews reported some interest from buyers such as BMW, Car Gurus and more.

What Happens When A Company Goes Into Administration?

When a company goes into administration, it means it is unable to pay its debts and has to bring in a third party called an administrator to take over.

The administrator assesses the business and makes a decision of how to help pay off the company debts. The idea is that this third party acts in the interests of the businesses that are owed money, ensuring they get back as much as possible.

In some cases, this might mean taking over the business to ensure cashflow remains constant, or looking for areas of the business to restructure or sell to release funds.

Whilst it can be a difficult time for owners and stakeholders in the business, it also tends to be a difficult time for employees. Many times going into administration means cutting jobs as part of a restructuring plan, but factors like redundancies can be long legal processes.

Ultimately, the entire process will end in one of several outcomes. Either, the company will find a buyer who can inject some more capital into the company and take over operations, or they might sell off parts of the business to regain some financial stability.

If no solution is found, a company will enter into liquidation where all assets are sold and the company closes down officially.

What Can We Learn From Cazoo?

Cazoo’s journey shows how difficult it can be to disrupt an industry, especially whilst navigating financial headwinds like the pandemic and a rise in inflation.

Ultimately, any business looking to redefine how people react with an age-old market can face issues, but there’s certainly a lot to learn from it.