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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2009

OR

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT

For the transition period from  ________________ to
________________

Commission file Number:000-52209

CARBIZ INC.(Exact
name of registrant as specified in its charter)

|Ontario, Canada                 | Not Applicable                   
|------------------------------- | ---------------------------------
|(State or other jurisdiction of | (IRS Employer Identification No.)
|incorporation or organization)  |                                  

7115 16thStreet East, Suite 105Sarasota, Florida 34243(Address of principal
executive offices)

(941) 952-9255(Registrant's telephone
number, including area code)

Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of theExchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X]    No
[   ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of regulation S-T (Section 229.405) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such
files). Yes [   ]    No [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):

|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [   ] | Smaller reporting company [X]
|----------------------------- | ----------------------- | --------------------------- | -----------------------------
|                              |                         | (Do not check if a smaller  |                              
|                              |                         | reporting company)          |                              

Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act): Yes [ 
 ]    No [X]

As of June 15, 2009, 104,560,373 common shares of the Registrant
were issued and outstanding.

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CARBIZ INC.

FORM 10-Q

For the Quarterly Period Ended April 30, 2009

INDEX

|PART
      I  | Financial
      Information                                                                 | 1 
|------------- | ------------------------------------------------------------------------------------------- | --
|Item
      1. | Financial
      Statements                                                                  | 1 
|Item
      2. | Managements
      Discussion and Analysis of Financial Condition and Results of Operations | 18
|Item
      3. | Quantitative
      and Qualitative Disclosures about Market Risk                            | 26
|Item
      4T | Controls
      and Procedures                                                               | 26
|              |                                                                                             |   
|PART
      II | Other
      Information                                                                     | 28
|Item
      1. | Legal
      Proceedings                                                                     | 28
|Item
      2. | Unregistered
      Sales of Equity Securities and Use of Proceeds                           | 28
|Item
      4. | Submission
      of Matters to a Vote of Security Holders                                   | 29
|Item
      5. | Other
      Information                                                                     | 29
|Item
      6. | Exhibits                                                                                    | 29

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

Except for statements of historical fact, certain information
contained herein constitutes forward-looking statements, within Section 21E of
the Securities Exchange Act of 1934, as amended (the Exchange Act). In some
cases, you can identify the forward-looking statements by our use of the words
such as may, will, should, could, expect, plan, estimate,
predict, potential, continue, believe, anticipate, intend, expect,
or the negative or other variations of these words, or other comparable words or
phrases.

Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause our actual results or
achievements to be materially different from any of our future results or
achievements expressed or implied by such forward-looking statements. Such
factors include, but are not limited to the following:

| | (i)     | whether we are successful in implementing our business
      strategy;                                                                                                                                                                                               
| | ------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |         |                                                                                                                                                                                                                                                                      
| | (ii)    | our ability to increase revenues in the future and to
      continue as a going concern;                                                                                                                                                                             
| |         |                                                                                                                                                                                                                                                                      
| | (iii)   | our ability to obtain additional financing on terms
      favorable to us, if at all, if our operating revenues fail to
    increase;                                                                                                                                
| |         |                                                                                                                                                                                                                                                                      
| | (iv)    | our ability to attract and retain key
personnel;                                                                                                                                                                                                                     
| |         |                                                                                                                                                                                                                                                                      
| | (v)     | the impact on the market price of our common shares of
      the concentration of common share ownership by our directors, officers and
      greater than 5% shareholders, which may delay, deter or prevent actions
      that would result in a change of control;
| |         |                                                                                                                                                                                                                                                                      
| | (vi)    | the significant fluctuation of the market price of our
      common shares;                                                                                                                                                                                          
| |         |                                                                                                                                                                                                                                                                      
| | (vii)   | costly difficulties we may face in the assimilation of
      the operations, technologies and products of companies that we may acquire
      in the future;                                                                                                         
| |         |                                                                                                                                                                                                                                                                      
| | (viii)  | the adequacy of our insurance coverage to cover all
      losses or liabilities that may be incurred in our operations;                                                                                                                                              
| |         |                                                                                                                                                                                                                                                                      
| | (ix)    | our dividend policy;                                                                                                                                                                                                                                                 
| |         |                                                                                                                                                                                                                                                                      
| | (x)     | the impact on our financial position, liquidity and
      results of operations if we underestimate the default risk of sub-prime
      borrowers;                                                                                                                   
| |         |                                                                                                                                                                                                                                                                      
| | (xi)    | general economic conditions;                                                                                                                                                                                                                                         
| |         |                                                                                                                                                                                                                                                                      
| | (xii)   | general competition;                                                                                                                                                                                                                                                 
| |         |                                                                                                                                                                                                                                                                      
| | (xiii)  | our ability to comply with federal and state government
      regulations;                                                                                                                                                                                           
| |         |                                                                                                                                                                                                                                                                      
| | (xiv)   | potential infringement by us of third parties
      proprietary rights;                                                                                                                                                                                             
| |         |                                                                                                                                                                                                                                                                      
| | (xv)    | defects in our products;                                                                                                                                                                                                                                             
| |         |                                                                                                                                                                                                                                                                      
| | (xvi)   | our compliance with privacy laws;                                                                                                                                                                                                                                    
| |         |                                                                                                                                                                                                                                                                      
| | (xvii)  | our ability to obtain adequate remedies in the event that
      our intellectual property rights are violated;                                                                                                                                                       
| |         |                                                                                                                                                                                                                                                                      
| | (xviii) | our ability to develop and market on a timely and
      cost-effective basis new products that meet changing market conditions,
      and                                                                                                                            
| |         |                                                                                                                                                                                                                                                                      
| | (xix)   | the risk factors identified in our most recent Annual
      Report on Form 10-K, including factors identified under the headings
      Description of Business, Risk Factors and Managements Discussion and
      Analysis or Plan of Operation.              

Although we believe that expectations reflected in these
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, achievements or other future events. Moreover,
neither we nor anyone else assumes responsibility for the accuracy and
completeness of these forward-looking statements. We are under no duty to update
any of these forward-looking statements after the date of this report. You
should not place undue reliance on these forward-looking statements. Unless
otherwise indicated, all dollar amounts expressed herein are in U.S. dollars.

---

|PART 1  FINANCIAL INFORMATION             
|-------------------------------------------
|Item 1. Financial Statements               
|CARBIZ INC.                                
|Condensed
      Consolidated Balance Sheets

|                                                                            |   | April 30, 2009 |   |   | January 31, 2009 |  
|--------------------------------------------------------------------------- | - | -------------- | - | - | ---------------- | -
|                                                                            |   | (unaudited)    |   |   |                  |  
|ASSETS                                                                      |   |                |   |   |                  |  
|CURRENT                                                                     |   |                |   |   |                  |  
|Cash and cash
      equivalents                                             | $ | 782,833        |   | $ | 674,624          |  
|Accounts receivable, net                                                    |   | 81,430         |   |   | 85,649           |  
|Current portion of
      notes receivable, net                              |   | 2,522,717      |   |   | 5,945,345        |  
|Net investment in direct financing and
      sales-type leases              |   | 8,335,799      |   |   | -                |  
|Inventory                                                                   |   | 5,789,802      |   |   | 2,923,696        |  
|Prepaid and other assets                                                    |   | 552,974        |   |   | 333,046          |  
|                                                                            |   | 18,065,555     |   |   | 9,962,360        |  
|NON-CURRENT                                                                 |   |                |   |   |                  |  
|Notes receivable, less
      current portion                                |   | 4,834,661      |   |   | 13,999,053       |  
|Net investment in direct financing and                                      |   |                |   |   |                  |  
|sales-type leases, less current portion                                     |   | 3,473,250      |   |   | -                |  
|Deferred financing costs                                                    |   | -              |   |   | 625,197          |  
|Property plant and
      equipment, net                                     |   | 624,722        |   |   | 596,415          |  
|                                                                            | $ | 26,998,188     |   | $ | 25,183,025       |  
|                                                                            |   |                |   |   |                  |  
|LIABILITIES                                                                 |   |                |   |   |                  |  
|CURRENT                                                                     |   |                |   |   |                  |  
|Accounts payable and accrued
      liabilities                              | $ | 4,001,483      |   | $ | 4,527,041        |  
|Notes Payable                                                               |   |                |   |   |                  |  
|Line of credit                                                              |   | 4,942,282      |   |   | 36,696,175       |  
|Inventory floor plan                                                        |   | 7,199,054      |   |   | 4,596,590        |  
|Short Term                                                                  |   | 335,725        |   |   | -                |  
|Related party                                                               |   | -              |   |   | 200,000          |  
|Current portion of capital lease
      obligation                           |   | 1,327          |   |   | 2,620            |  
|Current portion of
      convertible debentures                             |   | 44,689         |   |   | 255,113          |  
|Derivative liabilities                                                      |   | 10,255,638     |   |   | 11,796,217       |  
|Deferred revenue                                                            |   | 81,661         |   |   | 1,985            |  
|                                                                            |   | 26,861,859     |   |   | 58,075,741       |  
|                                                                            |   |                |   |   |                  |  
|NON-CURRENT                                                                 |   |                |   |   |                  |  
|Line of Credt, less
      current portion                                   |   | 4,942,281      |   |   | -                |  
|Convertible debenture, less current
      portion                           |   | 302,827        |   |   | 1,855,330        |  
|                                                                            |   |                |   |   |                  |  
|                                                                            |   | 32,106,967     |   |   | 59,931,071       |  
|                                                                            |   |                |   |   |                  |  
|COMMITMENTS AND CONTIGENCIES                                                |   | -              |   |   | -                |  
|                                                                            |   |                |   |   |                  |  
|STOCKHOLDERS' DEFICIENCY                                                    |   |                |   |   |                  |  
|COMMON SHARES                                                               |   | 20,818,928     |   |   | 19,364,233       |  
|Unlimited shares
      authorized, 102,520,603 and 87,744,296 common shares |   |                |   |   |                  |  
|issued and outstanding at April 30, 2009 and January 31, 2009               |   |                |   |   |                  |  
|ADDITIONAL PAID-IN CAPITAL                                                  |   | 7,702,447      |   |   | 6,788,937        |  
|ACCUMULATED OTHER COMPREHENSIVE LOSS                                        |   | (385,197       | ) |   | (385,197         | )
|ACCUMULATED DEFICIT                                                         |   | (33,244,957    | ) |   | (60,516,019      | )
|                                                                            |   | (5,108,779     | ) |   | (34,748,046      | )
|                                                                            | $ | 26,998,188     |   | $ | 25,183,025       |  

The accompanying notes are an integral part of these condensed
consolidated financial statements.

1

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|CARBIZ INC.                                    
|-----------------------------------------------
|Condensed Consolidated Statements of Operations
|(Unaudited)                                    

|                                            |   | For the three months ended |  
|------------------------------------------- | - | -------------------------- | -
|                                            |   | April 30,                  |  
|                                            |   | 2009                       |  
|SALES                                       |   |                            |  
|Used car sales                              | $ | 4,753,463                  |  
|Used car sales from sales
      type leases |   | 2,104,738                  |  
|Consulting and collection services          |   | 185,399                    |  
|Interest and lease income                   |   | 1,471,774                  |  
|                                            |   | 8,515,374                  |  
|COST OF SALES                               |   |                            |  
|Used car costs                              |   | 4,630,483                  |  
|Consulting and collection
      services    |   | 237,295                    |  
|                                            |   | 4,867,778                  |  
|GROSS PROFIT                                |   | 3,647,596                  |  
|                                            |   |                            |  
|OPERATING EXPENSES                          |   |                            |  
|Personnel expenses                          |   | 559,043                    |  
|Selling expenses                            |   | 156,991                    |  
|Professional fees                           |   | 298,194                    |  
|Provision for credit losses                 |   | 1,589,046                  |  
|Other operating expenses                    |   | 1,247,615                  |  
|                                            |   | 3,850,889                  |  
|OPERATING LOSS                              |   | (203,293                   | )
|                                            |   |                            |  
|INTEREST AND OTHER EXPENSES                 |   | (961,832                   | )
|GAIN (LOSS) ON DERIVATIVE LIABILITIES       |   | (4,763,100                 | )
|GAIN ON EXTINGUISHMENT OF DEBT              |   | 33,199,287                 |  
|                                            |   |                            |  
|NET INCOME FOR THE PERIOD                   | $ | 27,271,062                 |  
|NET INCOME PER SHARE:                       |   |                            |  
|Basic                                       | $ | 0.28                       |  
|Diluted                                     | $ | 0.12                       |  
|WEIGHTED AVERAGE SHARES OUTSTANDING         |   |                            |  
|Basic                                       |   | 98,318,064                 |  
|Diluted                                     |   | 183,673,129                |  

The accompanying notes are an integral part of these condensed
consolidated financial statements.

2

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|CARBIZ INC.                                    
|-----------------------------------------------
|Condensed Consolidated Statements of Cash Flows
|(unaudited)                                    

|                                                               |   | For the Three Months Ended |  
|-------------------------------------------------------------- | - | -------------------------- | -
|                                                               |   | April 30, 2009             |  
|NET INFLOW (OUTFLOW) OF CASH RELATED                           |   |                            |  
|TO THE FOLLOWING ACTIVITIES:                                   |   |                            |  
|OPERATING ACTIVITIES                                           |   |                            |  
|Net Income                                                     | $ | 27,271,062                 |  
|Items not affecting cash:                                      |   |                            |  
|Depreciation
      of property and equipment                   |   | 36,165                     |  
|(Gain)
      loss on derivative liabilities                    |   | 4,763,100                  |  
|Gain on extinguishment
      of debt                           |   | (33,199,287                | )
|Amortization
      of deferred financing costs                 |   | 13,889                     |  
|Amortization
      of debt discount                            |   | 436,868                    |  
|Share-based
      compensation                                 |   | 67,625                     |  
|Provision for
      bad debts                                  |   | 1,589,046                  |  
|Net changes in operating
      assets and liabilities:         |   |                            |  
|Accounts receivable                                            |   | 4,219                      |  
|Notes
      receivable                                         |   | 6,651,921                  |  
|Net investment
      in direct financing and sales-type leases |   | (12,059,049                | )
|Prepaids
      and other assets                                |   | (219,928                   | )
|Inventory                                                      |   | (2,866,106                 | )
|Deferred
      costs                                           |   | -                          |  
|Accounts payable
      and accrued liabilities                 |   | 1,725,581                  |  
|Deferred
      revenue                                         |   | 79,676                     |  
|NET CASH FLOWS FROM OPERATING ACTIVITIES                       |   | (5,705,218                 | )
|INVESTING ACTIVITIES                                           |   |                            |  
|Acquisition of property and equipment                          |   | (64,472                    | )
|NET CASH FLOW FROM INVESTING
      ACTIVITIES                  |   | (64,472                    | )
|FINANCING ACTIVITIES                                           |   |                            |  
|Repayment of capital leases                                    |   | (1,293                     | )
|Proceeds from credit facilities, net                           |   | 5,049,341                  |  
|Repayment of related party
      debt                          |   | (200,000                   | )
|Proceeds from exercise of warrants                             |   | 1,029,851                  |  
|NET CASH FLOWS FROM FINANCING
      ACTIVITIES                 |   | 5,877,899                  |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                        |   |                            |  
|AND CASH EQUIVALENTS                                           |   | -                          |  
|INCREASE (DECREASE) IN CASH AND                                |   |                            |  
|CASH EQUIVALENTS                                               |   | 108,209                    |  
|CASH AND CASH EQUIVALENTS,                                     |   |                            |  
|BEGINNING OF PERIOD                                            |   | 674,624                    |  
|CASH AND CASH EQUIVALENTS,                                     |   |                            |  
|END OF PERIOD                                                  | $ | 782,833                    |  

The accompanying notes are an integral part of these condensed
consolidated financial statements.

3

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|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|1. | BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING
      POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The accompanying unaudited condensed consolidated
      financial statements have been prepared in accordance with accounting
      principles generally accepted in the United States (GAAP) for interim
      financial information and with the instructions to Form 10-Q and Article
      10 of Regulation S-X. Accordingly, they do not include all of the
      information and footnotes required by GAAP for complete financial
      statements. In the opinion of management, all adjustments (consisting of
      normal recurring accruals) considered necessary for a fair presentation of
      the results of operations for the periods presented have been included.
      Operating results for the three months ended April 30, 2009 and 2008 are
      not necessarily indicative of the results that may be expected for the
      fiscal year. The balance sheet at January 31, 2009 has been derived from
      the audited financial statements at that date, but does not include all of
      the information and footnotes required by GAAP for complete financial
      statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | You should read these consolidated financial statements
      together with the historical consolidated financial statements of the
      Company for the years ended January 31, 2009, and 2008, included in our
      Annual Report on Form 10-K for the year ended January 31, 2009, filed with
      the Securities and Exchange Commission (SEC) on April 24, 2009 (the
      Annual Report).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | References to the Company or Carbiz include the Companys
      consolidated subsidiaries. All dollar figures presented in the
      consolidated financial statements are denominated in U.S. dollars unless
      otherwise indicated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Accounts and notes receivable and net investment in
      direct financing and sales-type leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Accounts and notes receivable, and net investment in
      direct financing and sales-type leases consist of balances due from
      customers related to the sale and lease of used automobiles or consulting
      and collections services, and are presented in the consolidated balance
      sheet net of an allowance for doubtful accounts and credit losses. Notes
      and lease receivables have remaining terms of 12 to 60 months requiring
      weekly, bi-weekly or monthly payments. For note receivables, interest is
      calculated weekly based on the outstanding balance. For net investment in
      leases, the interested is imputed in the lease payments.                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Allowance for credit losses and concentration of
      credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The allowance reflects the Companys best estimate of
      probable losses inherent in the accounts, notes and lease receivables. The
      Company determines the allowances based on known troubled accounts,
      historical experience, credit quality of customers and other industry and
      Company economic considerations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company initiates steps to pursue collection of
      payments for notes or lease receivables upon the customers first missed
      payment. The Company takes steps to repossess an automobile when the
      account becomes severely delinquent (14 days for weekly pay accounts, 30
      days for bi-weekly pay accounts and 60 days for monthly pay accounts).
      Notes and lease receivables for accounts held in repossession have been
      written off and are not included in Notes receivable, net, in the
      consolidated balance sheets and Net investments in direct financing and
      sales-type leases. Accounts are charged off at the earlier of the
      expiration of the applicable States statutory notice period for
      repossessed accounts (from 0 to 30 days), or when management determines
      timely collection of future payments is not probable for accounts where
      the Company has been unable to repossess the automobile. When a customers
      account becomes severely delinquent, the Company suspends accrual of
      interest income.       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company maintains an allowance for credit losses on
      an aggregate basis for the notes and lease receivable portfolio.
      Management considers the allowance for credit losses to be sufficient to
      cover estimated losses in the collection of outstanding receivables. The
      allowance is based primarily upon historical credit loss experience, with
      consideration given to recent credit loss trends, changes in loan
      characteristics (i.e., average amounts financed and terms of the notes),
      delinquency levels, collateral values, economic conditions, and
      underwriting and collection practices. The allowance for credit losses is
      periodically reviewed by management with any changes reflected in current
      operations. Although it is                                                                                                                                                                                                                                                                                                        

4

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|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|1. | BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | at least reasonably possible that events or circumstances
      could occur in the future that are not presently foreseen which could
      cause actual credit losses to be materially different from the recorded
      allowance, the Company believes that it has given appropriate
      consideration to all relevant factors and has made reasonable assumptions
      in determining the allowance.                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | For accounts where the automobile was repossessed, the
      difference between the loan or lease balance and the fair value of the
      repossessed automobile (based on the average wholesale selling price at
      auction) is charged to the allowance for credit losses. Generally,
      repossessed automobiles are sold at auction. On average, accounts are
      approximately 90 days past due at the time of write-off. For previously
      written-off accounts that are subsequently recovered, the amount of such
      recovery is credited to the allowance for credit losses.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company expenses all costs incurred in connection
      with the process of initiating, refinancing or restructuring notes or
      lease receivables to include all costs related to underwriting, securing
      collateral, closing transactions, processing loan documents, and
      determining credit worthiness.                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Inventory consists of used vehicles and is stated at the
      lower of cost or net realizable value. Cost is determined on a specific
      item basis.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Net Income (loss) per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Net Income per share was computed based on the following
      basic and diluted weighted average common shares
  outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Three months ended April 30,2009
      
      
      2008Net income attributable to common stockholders
      $
      27,271,062
      
      $
      25,310Basic:Weighted average shares outstanding
      
      98,318,064
      
      
      65,225,095Net income per common share - basic
      $
      0.28
      
      $
      0.00Diluted:Weighted average shares outstanding - basic
      
      98,318,064
      
      
      65,225,095Effect of dilutive securities
      
      85,355,065
      
      
      40,998,408Adjusted weighted average share
      
      183,673,129
      
      
      106,223,503Net Income per common share (diluted)
      $
      0.12
      
      
      ($0.02
      )


The effects of 6,821,891 stock options,
  3,185,670 common stock warrants, 2,040,000 non-vested shares from an incentive
  stock grant and 12,218,355 shares indexed to the derivative liabilities outstanding
  have been excluded from dilutive securities for the three months ended April
  30, 2009, as their effect would be anti-dilutive.

Fair value of financial assets and
liabilities

The Company measures the fair value of
financial assets and liabilities based on guidance of Financial Accounting
Standards No. 157, Fair Value Measurements (FAS 157) which defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. FAS 157 describes three levels of inputs that may
be used to measure fair value as follows:

5

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|1. | BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING
      POLICIES (continued)
|-- | -------------------------------------------------------------------------

Level 1 - quoted prices in active
markets for identical assets or liabilities; Level 2 - quoted prices for
similar assets and liabilities in active markets or inputs that are observable;
Level 3 - inputs that are unobservable (for example cash flow modeling
inputs based on assumptions).

The following table summarizes the
level of inputs used to measure certain financial instruments at fair value on a
recurring basis as of April 30, 2009:

| |                |   | Fair Value Measurements Using | 
| | -------------- | - | ----------------------------- | 
| |                |   | Level 1                       | 
| |                |   |                               | 
| | Derivative     |   |                               | 
| | liabilities at |   |                               | 
| | April 30, 2009 | $ | --                            | 

Revenue recognition

The Companys revenue is primarily
derived from the sale and leasing of used vehicles, and the sale of consulting
and collections services to dealers in the automobile industry

| | (1) | Used automobile sales:                                                                                                                                                                                                                                                                                                                          
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company recognizes revenue on the sale of automobiles
      upon execution of the sales contract, the customer taking possession of
      the automobile, and financing having been approved. Customers are required
      to meet certain underwriting guidelines in order to obtain financing of
      the automobile through the Company.

| | (2) | Used automobile leases:                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Company recognizes revenue on the lease of
      automobiles upon execution of the lease contract, the customer taking
      possession of the automobile, and lease financing having been approved.
      Customers are required to meet certain underwriting guidelines in order to
      obtain lease financing of the automobile through the Company. The Company
      accounts for all new leases as a sales-type
lease.

| | (3) | Consulting and collections
      services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company generates revenue from the sale of consulting
      and collections services. These fees include charges for training
      seminars, performance group seminars, consulting engagements and
      collection and skip tracing services to the automobile industry. Revenue
      is recognized when a signed contract has been executed, the services have
      been delivered, fees are fixed or determinable, collectability is
      reasonable assured and when all significant obligations have been
      fulfilled. Therefore, for services that extend over a period of time,
      revenue is recognized ratably over the term of the contract.

| | (4) | Consulting products                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company also generates non-recurring revenue from the
      sale of various products to automotive dealerships. Revenue is recognized
      when a signed contract is executed, the product has been delivered, fees
      are fixed or determinable, collectability is probable and when all
      significant obligations have been fulfilled. Generally, this occurs at the
      time of shipment. The Company does not offer product warranties related to
      these sales.

Lease transactions

To qualify for financing under the new
DSC financing agreement (see note 4), the Company converted a number of existing
auto note receivables to lease receivables. The Company considered these
transactions to be direct financing leases and accounted for the leases
including the minimum lease payments and the

6

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|1. | BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING
      POLICIES (continued)
|-- | -------------------------------------------------------------------------

unguaranteed residual value as the
gross investment in the lease. The difference between this gross investment and
the cost or carrying amount was recorded as unearned income. The unearned income
and initial direct costs are being amortized to income over the lease term so as
to produce a constant periodic rate of return on the net investment in the
lease. The difference between the original finance note receivable and the new
lease total of payments was recorded as a period expense and charged to income
(see note 4). The sales tax and title fees costs related to this conversion was
also taken as a period expense.

Any new leases are considered
sales-type leases and the minimum lease payments and the residual value of the
underlying auto are considered in the fair value. The revenue recognition for
sales-type leases involves recognizing both a profit element and a financing
element at the time of the lease initiation.

Transfer of Financial Assets

From time to time during the three
months ending April 30, 2009 the Company has sold portions of its previously
generated financed note receivable portfolio. All portfolio sales during this
period have met the requirements for a sale and the Company did not retain the
right to service the loan or collect those loans.

Use of estimates

In preparing the Companys consolidated
financial statements in accordance with GAAP, management is required to make
estimates and assumptions that affect the reported amount of assets,
liabilities, and the disclosure of contingent liabilities at the dates of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates. Estimates are used when accounting for items and matters such as the
allowances for doubtful accounts and loan losses, accrued liabilities,
share-based payments, derivative liabilities and contingencies.

Effect of recent accounting
pronouncements

In April 2009, the Financial Accounting
Standards Board (FASB) issued FASB Staff Position (FSP) 107-1 and APB 28-1,
Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1). FSP
107-1 amends FASB Statement No. 107 to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
in addition to the annual financial statements. FSP 107-1 also amends APB No. 28
to require those disclosures in summarized financial information at interim
reporting periods. FSP 107-1 is effective for interim periods ending after June
15, 2009. Prior period presentation is not required for comparative purposes at
initial adoption. The adoption of FSP 107-1 is not expected to have a material
impact on the Companys Consolidated Financial Statements.

In April 2009, the FASB issued FSP
115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments (FSP 115-2 and 124-2). FSP 115-2 and 124-2 amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities to
make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements. FSP 115-2 and 124-2 is effective for fiscal years and
interim periods beginning after June 15, 2009. The adoption of FSP 115-2 and
124-2 is not expected to have a material impact on the Companys Consolidated
Financial Statements.

In April 2009, the FASB issued FSP
157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That are Not Orderly (FSP 157-4). FSP 157-4 provides additional guidance for
estimating fair value in accordance with FASB Statement No. 157 when the volume
and level of activity for both financial and nonfinancial assets or liabilities
have significantly decreased. FSP 157-4 is effective for fiscal years and
interim periods beginning after July 1, 2009 and shall be applied prospectively.
Early adoption for periods ending before March 15, 2009, is not permitted. The
adoption of FSP 157-4 on July 15, 2009 is not expected to have a material impact
on the Companys Consolidated Financial Statements.

7

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|1. | BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | In May 2009, the FASB issued Statement No. 165,
      Subsequent Events which provides guidance establishing standards for
      disclosure of events that occur after the balance sheet date but before
      financial statements are issued. The Statement is effective for fiscal
      years and interim periods ending after June 15, 2009, and shall be applied
      prospectively. The adoption is not expected to have a material impact on
      the Companys Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2. | LIQUIDITY AND MANAGEMENTS PLANS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | As of April 30, 2009, the Company had $782,833 in cash
      and cash equivalents. The Company has incurred significant net losses and
      negative cash flows from operations in each of the two years ended January
      31, 2009. However, during the three months ended April 30, 2009 the
      Company recorded a $27 million net income, exclusively related to $33.2
      million gain on the forgiveness of debt. As of April 30, 2009, the Company
      had a stockholders deficit of $5.2 million, versus $34.7 million at
      January 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | In February 2009, the Company completed a restructuring
      of floor plan and receivables debt held by SWC Services LLC (SWC) with
      Dealer Services Corporation (DSC). The restructured debt agreement
      provides the Company with a maximum credit facility of $19.5 million for
      floor plan and lease financing. Although the Company had approximately
      $43.3 million of outstanding notes payable as of January 31, 2009,
      effective February 20, 2009, the Company is only obligated to repay $12.0
      million of this amount due to the restructuring with SWC and DSC. The
      $12.0 million is payable in installments over the next 24 months and is
      included in the aforementioned new credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | During the three months ending April 30, 2009 a board
      member warrant holder exercised 11,762,351 common stock warrants with
      proceeds of $1,029,851.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company’s existing cash and cash equivalents are believed by management to be sufficient to finance planned operations, debt repayment obligations and capital expenditures through the third quarter of  fiscal year 2010 (approximately October, 2009).  Therefore, additional capital may be required in order to proceed with the Company’s current plan for operations in the Buy-Here-Pay-Here and Lease-Here-Pay-Here industries.  The Company’s ability to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as business performance.  There can be no assurance that the Company will be successful in these efforts to arrange additional financing, if needed, on terms satisfactory to it or at all.  Available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding sooner than anticipated.  The failure to obtain adequate financing could result in a substantial curtailment of the Company’s operations. Accordingly, the Company anticipates that it may be required to raise additional capital through a variety of sources, including:

public equity markets; private
equity financings; public or private debt; and exercise of existing
warrants and stock options.

The recent worldwide financial and
credit crisis has strained investor liquidity and contracted credit markets. If
this environment continues or worsens, it may make the future cost of raising
funds through the debt or equity markets more expensive or make those markets
unavailable at a time when the Company requires additional financial investment.
If the Company is unable to attract additional funds it may adversely affect its
ability to achieve its development and commercialization goals, which could have
a material and adverse effect on its business, results of operations and
financial condition.

8

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|3. | ACCOUNTS RECEIVABLE, NOTES RECEIVABLE AND NET
      INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The average net balance of outstanding note receivables and investment in direct financing and sales-type leases were approximately $19.7 million and $15.6 million during the three months ended April 30, 2009 and 2008, respectively.  The Company earned approximately $1.5 million and $1.9 million of interest and lease income on note and lease receivables with an average yield of 18.5% and 19.17 during the three months ended April 30, 2009 and 2008, respectively.  Those amounts have been included as interest and lease income within revenues in these consolidated financial statements.  The Company paid an average effective interest rate of 7.5% to finance the notes receivable and net investment in direct financing and sales-type lease balances during both the three months ended April 30, 2009 and 2008.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Accounts, notes receivable and investment in direct
      financing and sales-type leases consist of the
following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                                   |   | Active Account Balances as of April 30, 2009 |  
| | --------------------------------- | - | -------------------------------------------- | -
| |                                   |   |                                              |  
| |                                   |   | Active                                       |  
| |                                   |   | Accounts                                     |  
| | Trade accounts receivable         | $ | 82,523                                       |  
| | Less: Allowance for doubtful      |   | 1,093                                        |  
| |                                   | $ | 81,430                                       |  
| |                                   |   |                                              |  
| | Notes receivable                  | $ | 9,679,584                                    |  
| | Investment in direct financing    |   |                                              |  
| | and sales-type leases             |   | 15,538,215                                   |  
| | Less: Allowance for credit losses |   | (6,051,372                                   | )
| |                                   | $ | 19,166,427                                   |  
| |                                   |   |                                              |  
| | Notes receivable, net :           |   |                                              |  
| | Current                           | $ | 2,522,717                                    |  
| | Non-current                       |   | 4,834,661                                    |  
| |                                   |   |                                              |  
| | Investment in direct financing    |   |                                              |  
| | and sales-type leases,
      net  |   |                                              |  
| | Current                           |   | 8,335,799                                    |  
| | Non-current                       |   | 3,473,250                                    |  
| |                                   | $ | 19,166,427                                   |  

| |                |  | Number of Accounts as of April 30,
      2009 | 
| | -------------- |  | --------------------------------------------- | 
| | Trade Accounts |  | 53                                            | 
| | Notes          |  | 1623                                          | 
| | Leases         |  | 2596                                          | 

Notes receivable and net investments in
direct financing and sales-type leases have an average remaining portfolio life
of 35 and 17 months, respectively.

The components of the Net investment in
direct financing and sales-type leases at April 30, 2009 are as follows:

9

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|3. | ACCOUNTS RECEIVABLE, NOTES RECEIVABLE AND NET
      INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES
  (continued)
|-- | ----------------------------------------------------------------------------------------------------------------------

| | Total future minimum lease payments                                  | $ | 17,086,460 |  
| | -------------------------------------------------------------------- | - | ---------- | -
| | Unguaranteed residual value                                          |   | 3,218,444  |  
| | Unearned income                                                      |   | (4,501,677 | )
| | Gross net investment in direct financing and sales-type
      leases | $ | 15,803,227 |  
| | Loss allowance for credit losses                                     |   | (3,994,178 | )
| |                                                                      | $ | 11,809,049 |  

The average remaining life for the
lease portfolio is 17 months, and the future expected maturities are
approximately $8.4 million in 2010 and $3.5 million in 2011.

As a result of the U.S. and the
industrys economic and financial condition, management performed a further
strategic review of the Companys collection policies and procedures and
collection efforts. Although the Company has not changed the methodology for
determining the appropriateness of the allowance for loan losses, the Company
uses a higher than historical rate for its loan loss reserve to reflect higher
expected losses due to the continued weakening of the U.S. economy and rising
unemployment in the U.S.

Allowance for loan loss activity is as
follows for the three months ended 2009 and 2008:

| |                                                 |   | Software and |   |   | Used Car         |  
| | ----------------------------------------------- | - | ------------ | - | - | ---------------- | -
| |                                                 |   | Consulting   |   |   | Sales and Leases |  
| | January 31, 2008                                | $ | 8,543        |   | $ | 7,747,188        |  
| | Provision for credit losses                     |   | 61,591       |   |   | 12,677,471       |  
| | Write-offs of
      gross notes receivable      |   | (69,041      | ) |   | (16,210,919      | )
| | Fair value of repossessed
      vehicles        |   | -            |   |   | 2,032,547        |  
| | Recoveries of
      notes receivable            |   | -            |   |   | 3,744            |  
| | January 31, 2009                                |   | 1,093        |   |   | 6,250,031        |  
| | Provision for
      credit losses               |   | -            |   |   | 1,589,046        |  
| | Write-offs of notes and lease
      receivables |   | -            |   |   | (812,989         | )
| | Fair value of
      repossessed vehicles        |   | -            |   |   | 327,131          |  
| | April 30, 2009                                  | $ | 1,093        |   | $ | 7,353,219        |  

|4. | NEW LOAN AGREEMENT  DEALER SERVICES
      CORPORATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On January 16, 2009, the Company entered into an Asset
      Purchase Agreement with Dealer Services Corporation (DSC) and the
      Chapter 7 Trustee of SWC Services LLC (SWC Trustee). Pursuant to the
      agreement, DSC agreed to purchase all of the rights and interest of SWC
      under the Companys loan agreement with SWC for $12 million.                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In connection therewith, DSC agreed to forgive all of the outstanding balance due by the Company under the SWC Loan Agreement in excess of $12,000,000.  On February 20, 2009, the Asset Purchase Agreement was consummated when the Company had a total balance of approximately $43.3 million outstanding under the SWC credit facilities. DSC forgave approximately $31.3 million dollars worth of that debt and executed a $14 million new credit facility (“New Loan Agreement”), $12 million of which represented the then remaining balance due under the SWC Loan Agreement.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Pursuant to that New Loan Agreement, the Company had to
      convert a number of outstanding notes receivable due by the Company from
      consumers into closed-end leases. The Company delivered to DSC a set of
      conversion documents, consisting of a signed closed-end lease and a bill
      of sale for each vehicle.                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Company incurred costs of approximately $4.6 million
      in connection with the conversion of these notes receivable, which include
      incentives to borrowers, sales tax, and license and title
  fees.                                                                                                                                                                                                                                                                                                                                                                   

10

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|4. | NEW LOAN AGREEMENT  DEALER SERVICES CORPORATION
      (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | All of the financial covenants contained in the prior loan agreement have been deleted from the New Loan Agreement and replaced by an obligation for the Company to maintain a minimum of $3,500,000 of accounts receivable. As was the case under the previous loan agreement, the obligation of the Company and its operating subsidiaries to pay all amounts due under the New Loan Agreement is secured by a pledge to DSC of all of the assets of the Company and its operating subsidiaries, The Company also paid DSC a loan origination fee of $120,000 and a commitment fee of  $250,000 in addition to issuing DSC warrants to purchase 9,718,289 shares of the Company’s common stock at a purchase price of $.03 per share. The warrants will expire on February 28, 2014.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In addition, on February 20, 2009, the Company issued to DSC warrants to purchase 9,718,289 shares of the Company’s common stock at a purchase price of $.03 per share when the Company and DSC began negotiating the terms of the New Loan Agreement.  The warrants will expire on February 28, 2014.  The Company has agreed to enter into a registration rights agreement on or before December 31, 2010, pursuant to which the Company will be required to register for resale by DSC the shares to be issued to DSC under the warrant, and to use its commercially reasonable efforts to obtain all necessary consents to enter into such agreement.                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Pursuant to the warrants issued to DSC in connection with the New Loan Agreement, the issuance of warrant to Ross Quigley on February 20, 2009 would have required the Company to increase the 9,718,289 shares issuable under the existing DSC Warrant to 10,222,604 shares and reduce the exercise price for all of the shares issuable from $0.03 per share to $0.02852 per share.  However, DSC agreed that in lieu of these modifications, the Company issued an additional warrant to DSC to purchase up to an additional 750,000 shares of the Company’s common stock with an exercise price of $0.08.  The warrants will expire on February 20, 2014.                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In connection with entering into the Asset Purchase
      Agreement and the New Loan Agreement, the holder of the Companys
      convertible debentures (Trafalgar  See Note 5) consented to the execution
      and delivery of the New Loan Agreement, which consent was required by a
      subordination and inter-creditor agreement with Trafalgar.                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On February 25, 2009, the Company, its operating subsidiaries and DSC further amended and restated the New Loan Agreement to provide for the inclusion of five new Carbiz subsidiaries in the credit facility. Four of these subsidiaries have been formed to carry out the business of the Company in Indiana and one has been formed to carry out the business of the Company in Nebraska. Under this amendment and the promissory notes executed by the operating subsidiaries thereunder, the amount of available credit was expanded from $14 million to $19.5 million.                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | As with the New Loan Agreement, Trafalgar also consented
      to this amendment since such consent was similarly required by the
      Trafalgar subordination and inter-creditor agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Since all of the aforementioned events relate directly to
      the debt forgiveness, all of the costs associated therewith have been
      recognized as an adjustment of the gain on debt extinguishment, as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

DSC Debt Forgiveness
    $
    31,374,909Write off of SWC Deferred Financing Costs
    
    (603,943
    )DSC Origination and Commitment Fee
    
    (370,000
    )Fair Value of DSC Warrants
    
    (1,385,815
    )Lease Conversion Costs
    
    (4,596,053
    )Gain on Debt forgiveness
    
    24,419,098Trafalgar Loan Modification (See Note 5)
    
    8,780,189Gain on Extinguishment of Debt
    $
    33,199,287


11

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|4. | NEW LOAN AGREEMENT  DEALER SERVICES CORPORATION
      (continued)                                        
|-- | ----------------------------------------------------------------------------------------------------------
|   |                                                                                                           
|   | The balance outstanding under the DSC loan facility at
      April 30, 2009 is comprised of the following:

Current
    
    
    Long-TermLiabilities
    
    
    LiabilitiesLine of Credit
    $
    4,942,282
    
    $
    4,942,281Inventory Floor Plan
    
    7,199,054Short Term Note
    
    335,725Total
    $
    12,477,061
    
    $
    4,942,281


|   | As of April 30, 2009, these loans bear an interest rate
      of 7.5%, and are payable monthly and are collateralized by all of the
      Companys assets and the Chairman of the Boards stock in the
    Company.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                     
|5. | CONVERTIBLE DEBENTURES                                                                                                                                                                                              
|   |                                                                                                                                                                                                                     
|   | Convertible debentures consist of the following as of
      April 30, 2009:                                                                                                                                         

Convertible debentures, at face valueMaturing through September 2010
    
    5,641,464Maturing December 1, 2010
    
    34,0915,675,555Less: unamortized discount
    
    (5,328,039
    )$
    347,516Current
    $
    44,689Long-term
    
    302,827$
    347,516


The Convertible Debentures were
originally sold to Trafalgar Capital Specialized Investment Fund, Luxembourg
(Trafalgar) during the fiscal year ended January 31, 2008 and modified and
extended a number of times during fiscal year ended January 31, 2009. See Note 7
to the Financial Statements in the January 31, 2009 Form 10-K.

More recently, a further modification effective on February 20, 2009 (“February 2009 modification”) was made allowing the Company to modify the terms of the Company’s other debt arrangements including the revolving line-of-credit, term and floor plan notes payable, which were also effective February 20, 2009 (See Note 4). In the February 2009 modification, Trafalgar revised the payment terms related to certain of the convertible debentures.  Debenture principal and interest payments were and are due as follows:  $250,000 in March 2009; $50,000 per month April 2009 through December 2009; $100,000 per month January 2010 through August 2010; and the remaining balance of approximately $5,100,000 will be due in September 2010, but only as long as that the Company holds consumer notes that are not in default from its Buy-Here Pay-Here business which have an aggregate balance of at least $10 million and only if cash on hand that exceeds its payables by at least $1 million. A further modification was made by Trafalgar which allowed the Company to further modify the terms of its loan agreements with DSC.  See Note 4.

The Company accounted for the
modifications to the debentures based on the provisions of EITF 96-19,
Debtors Accounting for Modification or Exchange of Debt Instruments
which establishes the criteria to determine if substantial modifications of the
terms of the debt instruments have occurred. The revisions to the terms of
certain of the outstanding debentures were considered substantial, as defined,
and therefore, for accounting purposes the debentures have been accounted for as
debt extinguishments and the revised debentures recorded at fair value on the
date of execution of the February 2009 Modification. The Company recorded a gain
on modification of debt of $8,780,189, as a result of these transactions.

12

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|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|5. | CONVERTIBLE DEBENTURES (continued)                                                                                                                                                                                                                                                                                                 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                    
|   | During the period ended April 30, 2009, the Company
      issued 11,073,419 and 1,599,494 shares of common stock in connection with
      the exercise of warrants and the conversions of convertible debentures,
      respectively, for which $888,310 and $199,419 of related derivative
      liability was credited to equity.
|   |                                                                                                                                                                                                                                                                                                                                    
|6. | STOCKHOLDERS EQUITY                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                    
|   | Stock option activity for the three months ended April
      30, 2009 is as follows:                                                                                                                                                                                                                                               

Number
      Weighted AverageOf Options
      Exercise Price (*)Outstanding, February 1, 2009
      7,421,891
      $ 0.15Options granted during the period
      -
      -Options cancelled during the period
      (600,000)
      0.25Options exercised
      during the period
      -
      -Outstanding, April 30, 2009
      6,821,891
      $ 0.14


At April 30, 2009, the outstanding
stock options had no aggregate intrinsic value.

Stock options outstanding and
exercisable as of April 30, 2009 are as follows:

April 30, 2009Options Outstanding
      Options ExercisableExercise
      
      Weighted
      
      WeightedPrice
      Number
      Average Life (Yrs)
      Number
      Average Life (Yrs)0.13
      5,600,000
      2.72
      2,240,000
      2.720.21
      1,221,891
      0.38
      1,221,891
      0.386,821,891
      2.30
      4,061,891
      1.89


(*) The 1998 series of options were
denominated in Canadian dollars. For purpose of this schedule the exercise
prices have been converted into U.S. dollars based on the foreign exchange rate
as at the end of the period.

During the three months ended April 30,
2009 and 2008, the Company recognized share-based compensation expense of
$25,200 and $20,076, respectively for stock options granted to employees, and
$32,300 and $32,300, respectively, for incentive stock granted to employees and
directors.

A summary of the Companys non-vested
stock options as of April 30, 2009, and changes during the year then ended, is
summarized as follows:

SharesNon-vested at February 1, 2009
    
    3,360,000Granted
    
    -Vested
    
    -Forfeited/Cancelled
    
    (600,000
    )Non-vested at April 30, 2009
    
    2,760,000


At April 30, 2009, the options had a
weighted average grant date fair value of $0.09 and no intrinsic value.

As of April 30, 2009, there was
approximately $274,000 of unrecognized compensation cost related to non-vested
stock options granted. These costs will be expensed over the next two years and
nine months.

13

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|6. | STOCKHOLDERS EQUITY (continued)                                                                                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                         
|   | On January 25, 2007, the Company awarded 3,400,000 common
      shares as restricted stock to certain directors, officers, and key
      employees of the Company of which 1,360,000 shares have been vested as of
      April 30, 2009.
|   |                                                                                                                                                                                                                                         
|   | Warrants classified as equity                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                         
|   | The Company has granted warrants to purchase shares of
      common stock. Warrants outstanding and exercisable at April 30, 2009 are
      as follows:                                                                                 

| |                       |  |             |  |  | Weighted     |  |  |          | 
| | --------------------- |  | ----------- |  |  | ------------ |  |  | -------- | 
| |                       |  |             |  |  | Average      |  |  | Weighted | 
| |                       |  |             |  |  | Remaining    |  |  | Average  | 
| |                       |  | Number      |  |  | Contractual  |  |  | Exercise | 
| | Exercise
      Prices |  | Outstanding |  |  | Life (Years) |  |  | Price    | 
| | $0.01                 |  | 144,334     |  |  | 1.41         |  |  | $ 0.01   | 
| | $0.08                 |  | 10,000,000  |  |  | 2.81         |  |  | $ 0.08   | 
| | $0.10                 |  | 144,334     |  |  | 1.41         |  |  | $ 0.10   | 
| | $0.15                 |  | 194,334     |  |  | 1.41         |  |  | $ 0.15   | 
| | $0.15                 |  | 1,000,000   |  |  | 1.83         |  |  | $ 0.15   | 
| | $0.20                 |  | 194,334     |  |  | 1.41         |  |  | $ 0.20   | 
| |                       |  | 11,667,366  |  |  | 2.65         |  |  | $ 0.09   | 

See Note 7 for summary of warrants
classified as liabilities.

Conversion of Trafalgar convertible
debentures

During the three months ended April 30,
2009, the Company issued 980,392 shares of common stock at a conversion price of
$0.08 in a Trafalgar Convertible Debenture conversion.

Conversion of October 1, 2007
related party convertible debentures

On February 19, 2009, a holder of
certain of the Companys October 1, 2007 convertible debentures converted
$50,000 of principal and $8,196 of accrued interest due under the debentures
into 619,102 shares of common stock of the Company. The conversion price was
$0.094. The holder is the spouse of a member of the board of directors.

Exercise of related party warrants

On February 16, 2009, 11,073,419 shares
of common stock were issued upon exercise of outstanding warrants. The Company
received proceeds of $996,578 based on the CDN$0.12 warrant exercise price.

On February 16, 2009, the Company
issued 289,332 shares of common stock upon exercise of outstanding warrants. The
Company received proceeds of $33,273 at exercise prices of $0.01 (72,333
shares), $0.10 (72,333 shares), $0.15 (72,333 shares) and $0.20 (72,333 shares).

The warrant holder is a member of the
board of directors of the Company.

Unregistered shares issued to
officers and directors for directors fees

On March 24, 2009, the board of
directors authorized the fees payable to directors for their services during the
fiscal year ended January 31, 2009 to be paid in shares of common stock.
Accordingly, on March 24, 2009 the Company issued 1,687,500 unregistered common
shares valued at $0.08 per share aggregating $135,000 in payment of this
liability, recorded at January 31, 2009.

14

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|6. | STOCKHOLDERS EQUITY (continued)                                                                                                                                                                                                                                                                                                                                                                   
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Unregistered shares issued under cross marketing
      agreement                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                    
|   | On March 24, 2009 the company issued 125,562 unregistered
      common shares valued at $0.08 per share aggregating $10,125 to Dealer
      Services Corporation as partial consideration for execution of a cross
      marketing agreement under which the Company will derive revenue from
      marketing and training services to be provided for a lease here pay here
      funding program.
|   |                                                                                                                                                                                                                                                                                                                                                                                                    
|7. | DERIVATIVE LIABILITIES                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Fair values of derivative liabilities at April 30, 2009
      were as follows:                                                                                                                                                                                                                                                                                                                     

| |                                                      |   |            |  |  | Number of  | 
| | ---------------------------------------------------- | - | ---------- |  |  | ---------- | 
| |                                                      |   |            |  |  | Indexed    | 
| |                                                      |   |            |  |  | Common     | 
| |                                                      |   | Balance    |  |  | Shares     | 
| | Compound Embedded Derivatives associated
      with: |   |            |  |  |            | 
| | Convertible debentures, $5,000,000                   |   |            |  |  |            | 
| | original face value; $5,641,464                      |   |            |  |  |            | 
| | face value plus accrued                              |   |            |  |  |            | 
| | interest as of April 30, 2009;                       |   |            |  |  |            | 
| | Due September 2010                                   | $ | 8,764,140  |  |  | 69,863,327 | 
| |                                                      |   |            |  |  |            | 
| | Convertible debentures, $800,000 original            |   |            |  |  |            | 
| | face value; $34,091 and face                         |   |            |  |  |            | 
| | value plus accrued interest as of                    |   |            |  |  |            | 
| | April 30, 2009; due December 2010                    |   | 54,565     |  |  | 349,940    | 
| | Warrant Liabilities Expiring:                        |   |            |  |  |            | 
| | October 2009                                         |   | 353,941    |  |  | 8,417,777  | 
| | October 2010                                         |   | 52,237     |  |  | 776,468    | 
| | April 2010                                           |   | 23,787     |  |  | 314,294    | 
| | October 2011                                         |   | 44,820     |  |  | 876,200    | 
| | February 2014                                        |   | 962,148    |  |  | 10,468,289 | 
| |                                                      | $ | 10,255,638 |  |  | 91,066,295 | 

Derivative liabilities are adjusted quarterly to their estimated fair values and any changes in fair value are recorded as gain (loss) on derivative liabilities in the condensed consolidated statements of operations.

Gain (loss) on derivative liabilities
consists of the following:

| |                               |   | Three Months Ended |  
| | ----------------------------- | - | ------------------ | -
| |                               |   | April 30,          |  
| |                               |   | 2009               |  
| | Compound embedded derivatives |   | (4,946,247         | )
| | Warrant derivatives           |   | 183,147            |  
| |                               | $ | (4,763,100         | )

15

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|8. | SEGMENT INFORMATION                                                                                                                                                                                                                                                    
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                        
|   | The Company operates and manages its business in two
      segments, which are its used car sales and leasing segment (CarBiz Auto
      Credit) and consulting and collections services offered to independent
      car dealerships (Consulting and Collections).
|   |                                                                                                                                                                                                                                                                        
|   | Three months ended April 30,                                                                                                                                                                                                                                           

| |                             |   |             |  |   | 2009           |   |   |            |  
| | --------------------------- | - | ----------- |  | - | -------------- | - | - | ---------- | -
| |                             |   |             |  |   |                |   |   |            |  
| |                             |   | Carbiz      |  |   | Consulting and |   |   |            |  
| |                             |   | Auto Credit |  |   | Collections    |   |   | Total      |  
| | Sales                       | $ | 8,329,975   |  | $ | 185,399        |   | $ | 8,515,374  |  
| | Cost of Sales               |   | 4,630,483   |  |   | 237,295        |   |   | 4,867,778  |  
| | Gross Profit                |   | 3,699,492   |  |   | (51,896        | ) |   | 3,647,596  |  
| | Operating Expenses (1)      |   | 3,445,221   |  |   | 355,615        |   |   | 3,800,836  |  
| | Income (Loss) From Segments |   | 254,271     |  |   | (407,511       | ) |   | (153,240   | )
| | Depreciation & Amortization |   |             |  |   |                |   |   | (50,053    | )
| | Total Operating Loss        |   |             |  |   |                |   |   | (203,293   | )
| |                             |   |             |  |   |                |   |   |            |  
| | Total Assets                | $ | 26,866,473  |  | $ | 131,715        |   | $ | 26,998,188 |  

| |                             |   |             |  |   | 2008               |   |   |            |  
| | --------------------------- | - | ----------- |  | - | ------------------ | - | - | ---------- | -
| |                             |   | Carbiz Auto |  |   | Software and Other |   |   |            |  
| |                             |   | Credit      |  |   | Products           |   |   | Total      |  
| | Sales                       | $ | 8,347,955   |  | $ | 575,317            |   | $ | 8,923,272  |  
| | Cost of Sales               |   | 4,419,361   |  |   | 380,332            |   |   | 4,799,693  |  
| | Gross Profit                |   | 3,928,594   |  |   | 194,985            |   |   | 4,123,579  |  
| | Operating Expenses (1)      |   | 3,219,640   |  |   | 959,654            |   |   | 4,179,294  |  
| | Income (Loss) From Segments |   | 708,954     |  |   | (764,669           | ) |   | (55,715    | )
| | Depreciation & Amortization |   |             |  |   |                    |   |   | (46,912    | )
| | Total Operating Loss        |   |             |  |   |                    |   |   | (102,627   | )
| |                             |   |             |  |   |                    |   |   |            |  
| | Total Assets                | $ | 30,317,006  |  | $ | 860,677            |   | $ | 31,177,683 |  

(1) Excluding depreciation and
amortization

16

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|April 30, 2009 and 2008                                 
|(unaudited)                                             

|9. | INCOME TAXES                                                 
|-- | -------------------------------------------------------------
|   |                                                              
|   | Net deferred tax assets consist of the following as
      of:

| |                                     |   | April 30, 2009 |   |   | January 31, 2009 |  
| | ----------------------------------- | - | -------------- | - | - | ---------------- | -
| | Net operating loss  United States  | $ | 10,050,000     |   | $ | 9,790,000        |  
| | Net operating loss  Canada         |   | 5,000,000      |   |   | 4,580,000        |  
| | Allowance for doubtful accounts     |   | 2,300,000      |   |   | 2,350,000        |  
| | Accrued expenses                    |   | 130,000        |   |   | 160,000          |  
| | Basis difference in debentures      |   | (1,600,000     | ) |   | (1,200,000       | )
| | Basis difference in capital assets  |   | 90,000         |   |   | 90,000           |  
| | Capital loss carry-forward  Canada |   | 80,000         |   |   | 80,000           |  
| | Extinguishment of debt              |   | (9,200,000     | ) |   | -                |  
| | Other                               |   | 180,000        |   |   | 200,000          |  
| |                                     |   | 7,030,000      |   |   | 16,050,000       |  
| | Valuation allowance                 |   | (7, 030,000    | ) |   | (16,050,000      | )
| |                                     | $ | -              |   | $ | -                |  

The provision (benefit) for income tax
varies from that which would be expected based upon applying the statutory rate
to the net losses before income tax expense for the three month ended April 30,
2009 are as follows:

Statutory federal rate
    
    34.00 %State rate
    
    3.63Permanent items
    
    (5.31
    )Change in valuation allowance
    
    (32.89
    )Other
    
    .570.00 %


As of April 30, 2009, the Company had
net operating loss carry-forwards (NOLs) of approximately $26.7 million
(expiring from 2010 through 2030) and $13.7 million (expiring 2010 through 2017)
in the United States and Canada, respectively. The use of the United States NOLs
may be limited in any given year as a result of previous changes in ownership.

The Company recorded a gain on the
extinguishment of debt of approximately $33.2 million during the three months
ended April 30, 2009 which has been included in the accompanying condensed
consolidated financial statements (Note 4). The $24.4 million of U.S. gain on
debt extinguishment has been excluded from income for income tax purposes based
on Internal Revenue Code Section 108. This amount has been accounted for as a
deferred tax liability in the accompanying condensed consolidated financial
statements. As of February 1, 2011, the Company will be required to reduce
certain U.S. tax attributes which will include the reduction of available NOLs.
The Company expects available U.S. NOLs to be reduced by approximately $24.4
million. The $8.8 million of Canadian gain on debt extinguishment is not
includable in Canadian income and has been treated as a permanent item.

17

---

Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations

The following Managements
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements concerning our revenues, operating results,
and financial condition. Such forward-looking statements include our intent to
open additional credit centers in the future; our expectations regarding the
future revenues for, and the market acceptance of, our consulting service, and
our expectations regarding future expense levels related to our credit center
business and interest expenses. The following discussion should also be read in
conjunction with the Companys interim condensed consolidated financial
statements as of April 30, 2009 and the January 31, 2009 audited consolidated
financial statements included in our January 31, 2009 Form 10-K.

Overview

The financial services industry
is facing unprecedented challenges in the face of the current national and
global economic crisis. The overall U.S. economy is experiencing significantly
reduced business activity as a result of, among other factors, disruptions in
the financial markets during the past year. During the past year, Carbiz has
been further challenged by the credit crisis due to our primary lender, SWC
Services LLC (SWC), filing bankruptcy in October 2008, which decreased our
access to operating cash flow during the period from October 2008 through
February 2009. Accordingly, these financing constraints negatively impacted our
planned revenue and operating income for the three months ended April 30, 2009.
On January 16, 2009, Carbiz Inc. and its operating subsidiaries entered into
amended financing arrangements among Dealer Services Corporation (DSC), the
trustee for SWC and certain guarantors to the SWC Loan Agreement. The agreement
provided for the transfer of SWCs interests in the Loan Documents to DSC with
the terms subject to the Trustees receipt of a final order of the United States
Bankruptcy Court for the Northern District of Illinois. The agreement also
provided that DSC would forgive approximately $31.3 million of a total of
approximately $43.3 million outstanding debt previously due to SWC and to
additionally provide future inventory floor plan financing of up to $7.5
million. We anticipate increased revenues and operating earnings due to the
increased cash flow available for operations. We will continue to seek
additional funding as necessary in order to sustain and grow our operations. A
portion of this strategy will be the packaging and sale of loan portfolios to
third parties under a variety of financing techniques.

As a result of the current economic
  conditions, many financial institutions and other lenders have tightened underwriting
  standards due to the overall deterioration in credit quality. Therefore, management
  believes that more consumers are currently moving to the sub-prime lending market
  to obtain financing. We have attracted new customers with higher credit ratings
  and the ability to purchase higher priced automobiles. Beginning in February
  2009, we commenced our leasing program which focuses on higher priced automobiles
  with average lease prices of $11,000. This program will further expand our financing
  possibilities and we will continue with this strategy in an effort to reach
  more customers and service those customers who now seek Buy Here-Pay Here (BHPH)
  financing and our newly introduced leasing program  Lease HerePay
  Here (LHPH). We will continue to pursue supplemental revenues by
  serving those customers who are no longer able to purchase automobiles and meet
  the financial requirements of traditional lenders due to the economy and in
  order to further grow our business for the future.

Loan loss estimates for notes and
lease receivable were higher than our historic figures as a result of increased
charge-offs and delinquency due to rising unemployment rates, the deteriorating
U.S. economic environment as discussed above in all geographic locations
serviced by us. Higher loss severities, particularly for less fuel efficient
vehicles, also contributed to the increase. Although the Company has not changed
the methodology for determining the appropriateness of the allowance for loan
losses, the Company will continue to use a higher loan loss ratio than what was
historically used.

Prior to fiscal 2004, we have
been a software company that has also offered business model consulting services
to the North American automobile industry. In May 2004, we entered the direct
automobile sales market utilizing our own software and business model consulting
products by opening our first credit center in Palmetto, Florida, which is a
used car dealership that offers financing on-site to customers with poor credit.

Over the past eighteen months we
have experienced significant changes in every area of our operations. In October
2007, we began a process of significant change through the acquisition of a
large Midwestern chain of automobile dealerships and a portfolio of associated
consumer loans. Subsequently, in December 2007, we purchased an additional
portfolio of consumer loans and opened our first store Houston, Texas. In July
2008 we

18

---

sold our software operations and retained our business model
consulting services. In February 2009 we began our LHPH operations and note
sales.

Critical Accounting Policies

Revenue Recognition

The Companys revenue is
primarily derived from the sale and leasing of used vehicles and consulting and
collection services to dealers in the automobile industry

| | (1) | Used automobile sales:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The Company recognizes revenue on the sale of automobiles
      upon execution of the sales contract, the customer taking possession of
      the automobile, and financing having been approved. Customers are required
      to meet certain underwriting guidelines in order to obtain financing of
      the automobile through the Company.                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (2) | Used automobile leases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The Company recognizes revenue on the lease of
      automobiles upon execution of the lease contract, the customer taking
      possession of the automobile, and lease financing having been approved.
      Customers are required to meet certain underwriting guidelines in order to
      obtain lease financing of the automobile through the Company. The Company
      accounts for all leases as a sales-type lease.                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (3) | Consulting and collection services:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The Company generates revenue from consulting and
      collections services. These fees include charges for training seminars,
      performance group seminars, consulting engagements and collection services
      to the automobile industry. Revenue is recognized when a signed contract
      has been executed, the services have been delivered, fees are fixed or
      determinable, collectability is reasonable assured and when all
      significant obligations have been fulfilled. Therefore, for services that
      extend over a period of time, revenue is recognized ratably over the term
      of the contract.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (4) | Products:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The Company also generates non-recurring revenue from the
      sale of various products to automotive dealerships. Revenue is recognized
      when a signed contract is executed, the product has been delivered, fees
      are fixed or determinable, collectability is probable and when all
      significant obligations have been fulfilled. Generally, this occurs at the
      time of shipment. The Company does not offer product warranties related to
      these sales.                                                                                                                                                   

Lease transactions

To qualify for financing under
the new DSC financing agreement, the Company converted a number of existing auto
note receivables to lease receivables. The Company considered these transactions
to be direct financing leases and accounted for the leases including the
minimum lease payments and the unguaranteed residual value as the gross
investment in the lease. The difference between this gross investment and the
cost or carrying amount was recorded as unearned income. The unearned income and
initial direct costs will be amortized to income over the lease term so as to
produce a constant periodic rate of return on the net investment in the lease.

Any new leases are considered
sales-type leases and the minimum lease payments and the residual value of the
underlying auto are considered in the fair value. The revenue recognition for
sales-type leases involves recognizing both a profit element and a financing
element.

Transfer of Financial Assets

From time to time during the
three months ending April 30, 2009, the Company has sold portions of its
previously generated auto receivable note portfolio. All portfolio sales during
this period met the requirements for a sale, and the Company did not retain the
right to service the loans.

19

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Use of Estimates

In preparing the Companys
consolidated financial statements in accordance with GAAP, management is
required to make estimates and assumptions that affect the reported amount of
assets, liabilities, and the disclosure of contingent liabilities at the dates
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ from
those estimates. Estimates are used when accounting for items and matters such
as the allowances for doubtful accounts and loan losses, accrued liabilities,
share-based payments, derivative liabilities and contingencies.

Share-Based Compensation

The Company uses the fair-value
method to determine compensation for all arrangements under which employees and
others receive shares of stock or equity instruments. The fair value of each
option award is estimated on the date of grant using the Black-Scholes valuation
model that uses assumptions for expected volatility, expected dividends,
expected term, and the risk-free interest rate. Expected volatilities are based
on the historical volatility of the Companys common stock over the expected
term of the options. The expected term of options granted to employees is
derived using the simplified method which computes expected terms as the
average of the sum of the vesting term plus the contract term. The risk-free
interest rate is based on the U.S. Treasury yield rates in effect at the time of
grant for the period of the expected term.

Derivative instruments

The Company generally does not
use derivative financial instruments to hedge exposures to cash-flow, market or
foreign-currency risks. However, the Company has entered into certain other
financial instruments and contracts, such as debt financing arrangements and
freestanding warrants with features that are either not afforded equity
classification, embody risks not clearly and closely related to host contracts,
or may be net-cash settled by the counterparty. These instruments are required
to be carried as derivative liabilities, at fair value, in the Companys
consolidated financials.

The Company estimates fair values
  of derivative financial instruments using the Black-Scholes-Merton or the Flexible
  Monte Carlo valuation models which embody all of the requisite assumptions (including
  trading volatility, estimated terms and risk free rates) necessary to fair value
  these instruments. Estimating fair values of derivative financial instruments
  requires the development of significant and subjective estimates that may, and
  are likely to, change over the duration of the instrument with related changes
  in internal and external market factors. In addition, option-based techniques
  are highly volatile and sensitive to changes in the Companys trading market
  price which has high-historical volatility. Since derivative financial instruments
  are initially and subsequently carried at fair values, the Companys income
  will reflect the volatility in these estimate and assumption changes.

Allowance for credit losses and concentration of credit risk

The allowance reflects the
Companys best estimate of probable losses inherent in the accounts, notes
receivable and investments in lease balances. The Company determines the
allowances based on known troubled accounts, historical experience, credit
quality of customers and other industry and Company economic considerations.

The Company initiates steps to
pursue collection of payments for notes or investment in leases upon the
customers first missed payment. The Company takes steps to repossess an
automobile when the account becomes severely delinquent (14 days for weekly pay
accounts, 30 days for bi-weekly pay accounts and 60 days for monthly pay
accounts). Notes and investment in lease balances for accounts held in
repossession have been written off and are not included in Notes receivable,
net, in the consolidated balance sheets and Net investments in leases. Accounts
are charged off at the earlier of the expiration of the applicable States
statutory notice period for repossessed accounts (from 0 to 30 days), or when
management determines timely collection of future payments is not probable for
accounts where the Company has been unable to repossess the automobile. When a
customers account becomes severely delinquent, the Company suspends accrual of
interest income.

The Company maintains an
allowance for credit losses on an aggregate basis for the notes receivable and
investment in lease portfolio. Management considers the allowance for credit
losses to be sufficient to cover estimated losses in the collection of
outstanding receivables. The allowance is based primarily upon historical credit
loss experience, with consideration given to recent credit loss trends, changes
in loan characteristics (i.e.,

20

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average amounts financed and terms of the notes), delinquency
levels, collateral values, economic conditions, and underwriting and collection
practices. The allowance for credit losses is periodically reviewed by
management with any changes reflected in current operations. Although it is at
least reasonably possible that events or circumstances could occur in the future
that are not presently foreseen which could cause actual credit losses to be
materially different from the recorded allowance, the Company believes that it
has given appropriate consideration to all relevant factors and has made
reasonable assumptions in determining the allowance.

For accounts where the automobile
was repossessed, the difference between the loan or investment in lease balance
and the fair value of the repossessed automobile (based on the average wholesale
selling price at auction) is charged to the allowance for credit losses.
Generally, repossessed automobiles are sold at auction. On average, accounts are
approximately 90 days past due at the time of write-off. For previously
written-off accounts that are subsequently recovered, the amount of such
recovery is credited to the allowance for credit losses.

The Company expenses all costs
incurred in connection with the process of initiating, refinancing or
restructuring notes or lease receivables to include all costs related to
underwriting, securing collateral, closing transactions, processing loan
documents, and determining credit worthiness.

Three Month Financial Information

The following summary of selected
financial information for the three month period ended April 30, 2009 and 2008
is derived from, and should be read in conjunction with, and is qualified in its
entirety by reference to, our condensed consolidated financial statements,
including the notes thereto as of and for periods ended April 30, 2009 and 2008.

Three months ended April 30, 2009 compared to the three
months ended April 30, 2008

|                                            |   | April      |   |  | % of    |   |   | April      |   |  | % of    |  
|------------------------------------------- | - | ---------- | - |  | ------- | - | - | ---------- | - |  | ------- | -
|                                            |   | 2009       |   |  | Revenue |   |   | 2008       |   |  | Revenue |  
|Revenue                                     | $ | 8,515,374  |   |  | 100.0   |   | $ | 8,923,272  |   |  | 100.0   |  
|Cost of sales                               |   | 4,867,778  |   |  | 57.2    |   |   | 4,799,693  |   |  | 53.8    |  
|Gross profit                                |   | 3,647,596  |   |  | 42.8    |   |   | 4,123,579  |   |  | 46.2    |  
|Operating expenses                          |   | 3,850,889  |   |  | 45.2    |   |   | 4,226,206  |   |  | 47.4    |  
|Operating loss                              |   | (203,293   | ) |  | (2.4    | ) |   | (102,627   | ) |  | (1.15   | )
|Interest expense                            |   | (961,832   | ) |  | 14.7    |   |   | (1,906,421 | ) |  | 21.4    |  
|Gain (loss) on derivative
      instruments |   | (4,763,100 | ) |  | 55.9    |   |   | 2,034,358  |   |  | (22.8   | )
|Gain on debt extinguishment                 |   | 31,199,287 |   |  | 443.85  |   |   | -          |   |  | -       |  
|NET INCOME                                  | $ | 27,271,062 |   |  | 316.9   |   | $ | 25,310     |   |  | 0.3     |  
|Income (loss) per common share              |   |            |   |  |         |   |   |            |   |  |         |  
|Basic                                       | $ | 0.28       |   |  |         |   | $ | 0.00       |   |  |         |  
|Diluted                                     | $ | 0.12       |   |  |         |   | $ | (0.02      | ) |  |         |  

Revenue

In the three months ended April
30, 2009, our revenues decreased by $407,898 compared to the same period ended
April 30, 2008. This decrease was primarily due to the sale of the software
division in July 2008 and the loss of that revenue. There was maturing of the
portfolio and reduction of interest revenue has also contributed to its
decline.

Total revenue from car sales and
leases during the three months ended April 30, 2009 was $6,858,201 compared to
$6,500,034 during the three months ended April 30, 2008, an increase of 5.5% .
This was a result of an increase in both the total cars sold and the average
selling price per car.

Interest and lease income for the
three months ended April 30, 2009 decreased by $376,147 compared to the previous
years three month period. During the SWC bankruptcy proceedings, October 2008
to February 2009, we were unable to replace maturing accounts in our portfolio
because the titles for our floor planed vehicles were under the control of the
bankruptcy trustee and were not released until February 20, 2009. This is the
main reason for the decrease in interest income.

21

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Cost of Sales

Our cost of sales expense
increased by $68,035 for the three months ended April 30, 2009, compared to the
previous years three month period. Used car costs increased by $211,122, due to
our purchasing of higher priced vehicles. Our Consulting and collections cost of
sales decreased by $143,037 during the three months ended April 30, 2009 due to
the sale of the software operations in July 2008, and the subsequent reduction
of staff and overhead.

Expenses

For the three months ended April
30, 2009, our personnel expenses decreased by $80,282 compared to the previous
years three month period. This was due to the planned reduction of staff at
both at the corporate level and store level. Selling expenses decreased for the
three months ended April 30, 2009 by $36,326 due to a reduction of print and
radio advertising. Professional fees decreased by $186,108, because in the prior
year, the Company hired outside consultants to assist with internal control
testing for management and the Company needed additional legal and accounting
assistance due to the Midwest and Houston acquisitions. Other operating expenses
increased by $69,394 during the three month period ended April 30, 2009, mostly
due to cost of living increases in rent and utilities.

Interest Expense

Our interest expense and other
expenses decreased by $944,589 for the three months ended April 30, 2009,
compared to the previous years three month period, due to the lower amount of
outstanding debt and the lower interest rate on that debt. The outstanding debt
was approximately $41.1 million in the prior year as compared to $17.5 million
in the current year. Interest expense associated with convertible debenture
financings is recognized based on the effective interest method, and interest
expense is therefore expected to increase due to increased carrying values. The
current line of credit balance reflects the total borrowed against the acquired
loan portfolios and newly generated sales at the Midwest and Texas
locations.

Gain/Loss on Derivative Instruments

For the three months ended April
30, 2009, we incurred a non-cash loss of $4,763,100 as a result of the fair
value adjustment of outstanding derivative instruments which is based primarily
on fluctuations in our stock price. During the three months ended April 30, 2008
we incurred a non-cash gain of $2,034,358. We expect gains and losses on
derivative instruments in the future while the convertible debentures, the host
instrument of the derivative liabilities, and related warrants remain
outstanding.

Gain on debt forgiveness

During the three months ended April 30, 2009, we had a $33.2 million gain on extinguishment of debt.  $24.7 million of the extinguishment gain came from the DSC debt forgiveness of  $31.0 less the cost of converting our financed receivables to leases of approximately $4.6 million, the fair value of the DSC warrants issued or approximately 1.4 million and the write off of deferred financing costs of approximately $600,000.   The remaining  $8.8 million gain on debt extinguishment  was derived from a modification of the Trafalgar debenture agreement. There was no such gain in the three months ended April 30, 2008.

Consulting and collections services

Through June 30, 2008, this
segment of our business consisted of new sales and monthly revenue for software
products and new sales and other related products including revenue from credit
bureau fees, supply sales, and forms programming, and new sales and monthly
revenue for consulting products. The software operation of this segment was sold
on July 2, 2008. As of July 2, 2008, our ongoing revenue stream will consist of
new sales and monthly revenue from consulting products, training products, Buy
Here-Pay Here performance groups, seminars, other one time dealer assistance,
and supply sales. In the beginning of fiscal year 2010, the Company opened a
collection facility at the corporate headquarters to provide collection services
to both our own stores and independent car dealerships.

Total consulting and collections
revenue during the three months ended April 30, 2009 decreased from the prior
years three month period by $389,918 The three month period this year included
no software revenue as compared to three months revenue in the same period last
year.

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Bad Debt Provision

As of April 30, 2009, the total
Carbiz Auto Credit loan portfolio was approximately $10.7 million and the net
investment in lease receivables was approximately $15.8 million. The allowance
for doubtful accounts at the same date was approximately $3.4 million for the
vehicle loan portfolio, and $3.99 million for the net investment in leases, a
total of $7.39 million.

Significant Financing Arrangements

Trafalgar Secured Subordinated Debenture Financings

January 2009 and subsequent modifications

In January 2009, the Company executed another debenture modification agreement with Trafalgar which terms were effective on February 20, 2009 (the “February 2009 modification”).  The February 2009 modification was made pursuant to the Company modifying the terms of the Company’s other debt arrangements including the revolving line-of-credit, term and floor plan notes payable, which were also effective February 20, 2009.   Pursuant to the February 2009 modification, Trafalgar revised the payment terms related to certain of the convertible debentures.  Debenture principal and interest payments are due as follows:  $250,000 in March 2009; $50,000 per month April 2009 through December 2009; $100,000 per month January 2010 through August 2010; and the remaining balance of approximately $5,100,000, in September 2010, so long as the Company holds consumer notes that are not in default from its BHPH business which have an aggregate balance of at least $10 million and only if cash on hand that exceeds its payables by at least $1 million.

Additional Unsecured Subordinated Debenture Financing

On April 27, 2009, the Company issued 980,392 shares to Trafalgar at a conversion price of $0.08 for a partial conversion of the Senior Convertible Debenture.  On February 19, 2009, a holder of certain of the Company’s October 1, 2007 convertible debentures converted $50,000 principal and $8,196 of accrued interest due under the debentures into 619,102 shares of common stock of the Company. The conversion price was $0.094.  The holder is the spouse of a member of the board of directors.  On February 16, 2009 11,073,419 shares of common stock were issued upon exercise, by a Company director, of outstanding warrants issued as part of the previously reported October 6, 2004 sale of convertible debentures.  The Company received proceeds of $996,578 based on the CDN$ 0.12 warrant exercise price.   On February 16, 2009, the Company issued 289,332 shares of common stock upon exercise of outstanding warrants issued as part of the October 1, 2007 convertible debenture financing.  The Company received proceeds of $33,273 at exercise prices of $0.01 (72,333 shares), $0.10 (72,333 shares), $0.15 (72,333 shares), and $0.20 (72,333 shares).  The warrant holder was a member of the board of directors.

Senior Credit Facilities

New loan agreement with Dealer Services Corporation

On January 16, 2009, we entered
into an Asset Purchase Agreement with Dealer Services Corporation (DSC) and
the bankruptcy Trustee of SWC Services LLC (Trustee), pursuant to which DSC
agreed to purchase and the Trustee agreed to transfer and assign to DSC all of
the rights and interest of SWC under the Loan Agreement and the other documents
entered into by us and the various guarantors in connection with the SWC Loan
Agreement (collectively, the Loan Documents).

The Asset Purchase Agreement
provided that, in consideration for the transfer to DSC of SWCs rights in the
Loan Documents, DSC would pay to the Trustee the sum of $12,000,000. The final
order was effective on February 20, 2009, and $12,000,000 was paid to the
Trustee, and upon receipt of such amount the Trustee transferred to DSC its
liens and encumbrances in and to our automobile inventory.

The Asset Purchase Agreement also
provided that the Loan Agreement would be amended, effective as of February 20,
2009, pursuant to the terms of the Third Amended and Restated Loan and Security
Agreement by and between us, DSC and the other parties thereto (the New Loan
Agreement). The New Loan Agreement substantially revised the terms of the Loan
Agreement, and provided that DSC would forgive all of the outstanding balance
due under the SWC Loan Agreement in excess of $12,000,000. At February 20, 2009,
there was a total balance of approximately $43.3 million borrowed under the SWC
credit facilities. The forgiveness of such amount

23

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resulted in us recognizing income in the our fiscal year 2010
for both financial reporting and federal income tax purposes in the amount of
the difference between the amount owed as of the closing date and $12,000,000,
less the amount of any costs incurred. We incurred normal transaction costs
including commitment fees and legal costs related to the restructuring of
current notes receivable as required under the New Loan Agreement. It is
anticipated that we will apply IRC Section 108 to the gain associated with the
forgiveness of SWC debt in fiscal year 2010. We believe that we have net
operating loss carry forwards (NOLs) available that will be adequate to absorb
any remaining taxable income. However, as a consequence of using IRC Section
108, these NOLs will most likely be reduced to zero in the year following the
transaction. There may also be other adjustments that we must make that would
have the effect of deferring any potential income tax liabilities. We believe
that beyond the reduction of the NOLs that these other adjustments will not have
a material impact on our consolidated financial position.

As DSC primarily provides
financing to automobile dealers who lease automotive vehicles to consumers, the
New Loan Agreement provided that we had to convert a number of outstanding notes
receivable due from consumers who have purchased vehicles from us into
closed-end leases or pay a substantial penalty to DSC. Under the New Loan
Agreement, we delivered to DSC by the Final Closing Date a set of conversion
documents, consisting of a signed closed-end lease and a bill of sale for each
vehicle, with respect to vehicles with an aggregate Floor Plan Value (as defined
below) of approximately $9,000,000. We incurred significant costs of
approximately $4.6 million in connection with the conversion of these notes
receivable, including incentives to borrowers under the notes receivables. The
New Loan Agreement provides us with floor plan financing, and generally provides
that all advances borrowed to purchase vehicles must be repaid ratably over a
two-year period, or upon the sale of the associated vehicle. For loans which are
converted to closed-end leases, the two years will commence on the date of
conversion. The total credit limit under the New Loan Agreement, as amended, is
$19,500,000, which includes the $12,000,000 paid to the Trustee under the Asset
Purchase Agreement. As amounts are repaid to DSC, we will be able to re-borrow
funds to purchase additional vehicles; provided however, that all advances under
the New Loan Agreement are at the sole discretion of DSC. The interest rate for
all advances under the floor plan facility, including the amount paid to the
Trustee for our inventory of vehicles and all vehicles subject to the conversion
documents, will be variable, based upon published rates of DSC. The rate as of
April 30, 2009 was 7.5% and our outstanding balance at April 30, 2009 is
$17,419,342.

All of the financial covenants
contained in the prior Loan Agreement have been deleted from the New Loan
Agreement and replaced by an obligation for us to maintain a minimum of
$3,500,000 of accounts receivable. As was the case under the previous Loan
Agreement, the obligation to pay all amounts due under the New Loan Agreement is
secured by a pledge to DSC of all of our assets. Also, Carl Ritter, our Chief
Executive Officer, has pledged his shares of our Companys common stock
(3,944,112 shares) to DSC as additional collateral.

In connection with entering into
the New Loan Agreement, we paid DSC a loan origination fee of $120,000 and a
commitment fee of $250,000. In addition, on February 20, 2009, we issued to DSC
warrants to purchase 9,718,289 shares of the Companys common stock at a
purchase price of $.03 per share, which was the share price in late
December/early January when the Company and DSC began negotiating the terms of
the New Loan Agreement. The warrants will expire on February 28, 2014. We have
agreed to enter into a registration rights agreement on or before December 31,
2010, pursuant to which we will be required to register for resale by DSC the
shares to be issued to DSC under the warrant, and to use our commercially
reasonable efforts to obtain all necessary consents to enter into such
agreement.

In connection with entering into
the Asset Purchase Agreement and the New Loan Agreement, we, DSC and Trafalgar
Capital Specialized Investment Fund, Luxembourg (Trafalgar), entered into a
Fifth Amendment To and Reaffirmation Of Subordination and Inter-creditor
Agreement, dated January 14, 2009, amending the Subordination and Inter-creditor
Agreement between Trafalgar and DSC, as SWCs assignee of that agreement. Under
the Fifth Amendment, Trafalgar consented to the execution and delivery of the
New Loan Agreement.

In connection with the closing of
the Asset Purchase Agreement and the New Loan Agreement, the Company requested
that Ross Quigley, a director and significant shareholder of the Company,
exercise certain warrants previously issued to him to purchase 11,073,419 shares
of Company common stock at CDN$.12 per share, 72,333 shares at US$.20 per share,
72,333 shares at US$.15 per share, 72,333 shares at US$.10 per share and 72,333
shares at US$.01 per share, in order to provide additional equity financing to
the Company. As a condition to such purchase, Mr. Quigley requested that the
Company issue to him an additional warrant to purchase up to 10 million shares
of Company common stock at any time prior to February 20, 2014 for US$.08 per
share (the New Quigley Warrant) and, upon approval of the transaction by the
Board of Directors, the Company agreed to issued such warrant to Mr. Quigley. On
February 20, 2009, Mr. Quigley delivered $750,000 of the $1,029,861 to exercise
the

24

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warrants to the Company. The remaining balance of $279,861 was
paid on March 13, and the Company issued 11,362,751 shares of common stock to
Mr. Quigley.

Under the warrant issued to DSC
in connection with the New Loan Agreement (the Existing DSC Warrant), the
issuance of the New Quigley Warrant would have required the Company to increase
the 9,718,289 shares issuable under the Existing DSC Warrant to 10,222,604
shares and reduce the exercise price for all of the shares issuable under the
Existing DSC Warrant from $0.03 per share to $0.02852 per share. However, DSC
agreed that in lieu of the Company increasing the number of shares issuable
under the Existing DSC Warrant and reducing the exercise price for all of the
shares issuable under the Existing DSC Warrant, the Company could issue to DSC a
new warrant to purchase up to 750,000 shares of Company common stock at any time
prior to February 20, 2014 for $.08 per share (the New DSC Warrant). The
Company has issued such warrant to DSC.

On February 25, 2009, the
Company, its operating subsidiaries and DSC further amended and restated the New
Loan Agreement pursuant to the terms of the Fourth Amended and Restated Loan and
Security Agreement (the Fourth Loan Agreement).

The Fourth Loan Agreement
provides for the inclusion of five new Carbiz subsidiaries in the credit
facility. Four of these subsidiaries have been formed to carry out the business
of the Company in Indiana, and one has been formed to carry out the business of
the Company in Nebraska. Under the Fourth Loan Agreement and the promissory
notes executed by the operating subsidiaries thereunder, the amount of available
credit was expanded from $14 million to $19.5 million.

In connection with entering into
the Fourth Loan Agreement, the Company, DSC and Trafalgar entered into a Sixth
Amendment To and Reaffirmation Of Subordination and Inter-creditor Agreement,
dated February 23, 2009, amending the Subordination and Inter-creditor Agreement
between Trafalgar and DSC. Under the Sixth Amendment, Trafalgar consented to the
execution and delivery of the Fourth Loan Agreement and the performance of the
terms thereof.

Liquidity and Capital Resources

As of April 30, 2009 and January
31, 2009 we had $782,833 and $674,624, respectively, in cash and cash
equivalents. During the three month period ended April 30, 2009, we decreased
our accounts payable and accrued liabilities by $525,558, which totaled
$4,001,483 at April 30, 2009. During the three months ended April 30, 2009, we
made capital lease payments totaling $1,293.

During the three months ended April 30, 2009, we issued approximately 980,392 shares at a conversion price of $0.0765 in a Trafalgar convertible debenture conversion. Approximately $19,000 of the payment was charged to interest expense, and the remaining amount went to several of the financial instrument’s derivative components.  Accordingly, no future cash will be required to pay off this portion of the debentures.

In January 2009, the Company
executed another debenture modification agreement with Trafalgar which terms are
effective on February 20, 2009 (February 2009 modification). The February 2009
modification was made pursuant to the Company modifying the terms of the
Companys other debt arrangements including the revolving line-of-credit, term
and floor plan notes payable, which were also effective February 20, 2009 (See
Note 5). Pursuant to the February 2009 modification, Trafalgar revised the
payment terms related to certain of the convertible debentures. Debenture
principal and interest payments are due as follows: $250,000 in March 2009;
$50,000 per month April 2009 through December 2009; $100,000 per month January
2010 through August 2010; and the remaining balance of approximately $5.1
million in September 2010, so long as the Company holds consumer notes that are
not in default from its BHPH business which have an aggregate balance of at
least $10 million and only if cash on hand that exceeds its payables by at least $1
million.

In February 2009, we completed a
restructuring of our floor plan and receivables financing with DSC as discussed
in Senior Credit facilities above. Our restructured debt agreement provides us
with a maximum credit facility of $7.5 million for floor plan and receivables
financing. Although we had approximately $43.3 million of outstanding notes
payable as of the date of restructuring, effective February 20, 2009, the
Company is only obligated to repay $12 million of this amount due to the
restructuring with SWC and DSC. The $12.0 million is payable in installments
over the next 24 months based upon the underlying auto lease agreements.

25

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We have incurred significant net losses and negative cash flows from operations, although the gain on debt restructuring during the three months ending April 30, 2009 offset this trend and decreased our stockholders’ deficit.  At April 30, 2009, we had a stockholders’ deficit of $5.4 million versus $34.7 million at January 31, 2009.  The continued worldwide financial and credit crisis has strained investor liquidity and contracted credit markets.  If this environment continues or worsens, it may make the future cost of raising funds through the debt or equity markets more expensive or make those markets unavailable at a time when we require additional financial investment.  If we are unable to attract additional funds it may adversely affect our ability to achieve our development and commercialization goals, which could have a material and adverse effect on our business, results of operations and financial condition.  As a result of our lack of financial liquidity and negative stockholders’ equity, there is substantial doubt about our ability to continue as a “going concern”.

Our existing cash and cash
equivalents are believed by our management to be sufficient to finance planned
operations, debt repayment obligations and capital expenditures through the
third quarter of 2010. Therefore, additional capital may be required in order to
proceed with our current plan for operations in the BHPH and LHPH industries.
Our ability to arrange such financing in the future will depend in part upon the
prevailing capital market conditions as well as our business performance.
Available resources may be consumed more rapidly than currently anticipated,
resulting in the need for additional funding. There can be no assurance that we
will be successful in our efforts to arrange additional financing, if needed, on
terms satisfactory to us or at all. The failure to obtain adequate financing
could result in a substantial curtailment of our operations. Accordingly, we
anticipate that we may be required to raise additional capital through a variety
of sources, including:

- public equity markets;
- private equity financings;
- public or private debt; and
- exercise of existing warrants and stock options.

Additional capital may be
unavailable on favorable terms, if at all. If adequate funds are not available,
we may be required to significantly reduce or refocus our operations or
potential markets, either of which could have a material adverse effect on us,
our financial condition and our results of operations in our fiscal year 2010
and beyond. To the extent that additional capital is raised through the sale of
equity or convertible debt securities, the issuance of such securities would
result in ownership dilution to existing shareholders.

As of April 30, 2009, payments
due by us over the next five fiscal years for operating and capital leases, and
long-term debt are approximately as follows:

Less Than
    
    
    One to Three
    
    
    Three to Five
    
    
    Greater thanOne Year
    
    
    Years
    
    
    Years
    
    
    Five Years
    
    
    TotalOperating Leases
    $
    1,452,000
    
    $
    1,592,000
    
    $
    942,000
    
    $
    1,378,000
    
    $
    5,364,000Capital Leases
    
    1,327
    
    
    
    
    
    
    
    
    
    
    
    1,327Long-Term Debt
    
    12,477,061
    
    
    4,942,281
    
    
    
    
    
    
    
    
    17,419,343Convertible Debentures
    
    1,002,254
    
    
    302,827
    
    
    
    
    
    
    
    
    1,305,081$
    14,932,642
    
    $
    6,837,108
    
    $
    942,000
    
    $
    1,378,000
    
    $
    24,089,751


Off-Balance Sheet Arrangements

As of April 30, 2009, we do not have any off-balance sheet
arrangements.

Item 3. Quantitative and Qualitative Disclosures about
Market Risk

Not required

Item 4T. Controls and Procedures

Disclosure Controls

Under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we evaluated the effectiveness of the design and
operation of our disclosure controls and

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procedures (as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934, as amended (the Exchange Act)) as of the last day of the
period covered by this report (the Evaluation Date). Based upon that
evaluation, the Chief Executive Officer and Chief Financial officer concluded
that, as of the Evaluation Date, our disclosure controls and procedures were
operating effectively to ensure that information required to be disclosed by us
in reports that we file or submit under the Exchange Act, is recorded,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission, and accumulated and communicated to
management, including the Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosures. Disclosure controls
and procedures include without limitations, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the exchange Act is accumulated and communicated
to the issuers management, included the Certifying Officers, to allow timely
decisions regarding required disclosures.

Internal Control Over Financial Reporting

Our management is responsible for
establishing and maintaining adequate internal control over financial reporting
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States. There were
no changes in our internal control over financial reporting occurred during our
most recent quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within the Company have
been detected. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any control design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.

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PART II  OTHER INFORMATION

Item 1. Legal Proceedings

We are not aware of any material
legal proceedings against us nor are we currently a party to any material legal
proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds

Trafalgar agreement

On April 27, 2009, the Company
issued 980,392 shares to Trafalgar at a conversion price of $0.08 for a partial
conversion of the Senior Convertible Debenture.

Conversion of October 1, 2007 convertible debentures

On February 19, 2009, a holder of
certain of the Companys October 1, 2007 convertible debentures converted
$50,000 principal and $8,196 of accrued interest due under the debentures into
619.102 shares of common stock of the Company. The conversion price was $0.094.
The holder is the spouse of a member of the board of directors.

Warrants exercised

On February 16, 2009 11,073,419
shares of common stock were issued upon exercise of outstanding warrants issued
as part of the previously reported October 6, 2004 sale of convertible
debentures. The Company received proceeds of $996,578 based on the CDN$ 0.12
warrant exercise price.

On February 16, 2009, the Company
issued 289,332 shares of common stock upon exercise of outstanding warrants
issued as part of the October 1, 2007 convertible debenture financing. The
Company received proceeds of $33,273 at exercise prices of $0.01 (72,333
shares), $0.10 (72,333 shares), $0.15 (72,333 shares), and $0.20 (72,333
shares). The warrant holder was a member of the board of directors.

Unregistered shares issued to officers and directors for
directors fees

On March 24, 2009, the
board of directors authorized the fees payable to directors for their services
during the fiscal year ended January 31, 2009 to be paid in shares of common
stock. Accordingly, on March 24, 2009 the Company issued 1,687,500 unregistered
common shares valued at $0.08 per share aggregating $135,000.

Unregistered shares issued under cross marketing agreement

On March 24, 2009 the company
issued 125,562 unregistered common shares valued at $0.08 per share aggregating
$10,125 to Dealer Services Corporation as partial consideration for execution of
a cross marketing agreement under which the Company will derive revenue from
marketing and training services to be provided for a lease here pay here funding
program.

On February 20, 2009, the Company issued to DSC warrants to purchase 9,718,289 shares of the Company’s common stock at a purchase price of $.03 per share when the Company and DSC began negotiating the terms of the New Loan Agreement.  The warrants will expire on February 28, 2014.  The Company has agreed to enter into a registration rights agreement on or before December 31, 2010, pursuant to which the Company will be required to register for resale by DSC the shares to be issued to DSC under the warrant, and to use its commercially reasonable efforts to obtain all necessary consents to enter into such agreement.

Pursuant to the warrants issued to DSC in connection with the New Loan Agreement, the issuance of warrant to Ross Quigley on February 20, 2009 (see below) would have required the Company to increase the 9,718,289 shares issuable under the Existing DSC Warrant to 10,222,604 shares and reduce the exercise price for all of the shares issuable from $0.03 per share to $0.02852 per share.  However, DSC agreed that in lieu of these modifications, the Company issued an additional warrant to DSC to purchase up to an additional 750,000 shares of the Company’s  common stock with an exercise price of $0.08.  The warrants will expire on February 20, 2014.

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In connection with the closing of the New Loan Agreement, the Company requested that Ross Quigley, a director and significant shareholder of the Company, exercise certain warrants previously issued to him to purchase 11,073,419 shares of Company common stock in order to provide additional equity financing to the Company. As a condition to such purchase, Mr. Quigley requested that the Company issue to him an additional warrant to purchase up to 10 million shares of Company common stock at any time prior to February 20, 2014 for US$.08 per share and, upon approval by the Board of Directors, the Company issued such warrant to Mr. Quigley on February 20, 2009.

All of the securities described above were issued by us in transactions that were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) of the Securities Act.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed (or
incorporated by reference herein) as part of this Form 10-Q:

Exhibit Number
      Description31.1
      Certification of Chief
        Executive Officer pursuant to Rule 13a-14(a)31.2
      Certification of Chief
        Financial Officer pursuant to Rule 13a-14(a)32.1
      Certification of Chief
        Executive Officer pursuant to 18 U.S.C. Section 135032.2
      Certification of Chief
        Financial Officer pursuant to 18 U.S.C. Section 1350


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SIGNATURES

In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                    | CARBIZ INC.                  
|------------------- | -----------------------------
|                    |                              
|                    |                              
|                    |                              
|Date: June 15, 2009 | /s/ Carl Ritter              
|                    | Carl Ritter                  
|                    | Chief Executive Officer      
|                    | (principal executive officer)

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